Notes to Accounts of Harita Seating Systems Ltd.

Mar 31, 2018

Nature and purpose of reserves

i) General reserve: Partof retaindd earnings was earlier utilised for daclaration of dividends ass per the erstwhile Companies Act, 1956i This is available for distribution to shareholders.

ii) Retained earnings: Company’s cumulative earnings since its formation minus the dividends/capitalisation and earnings transferred to general reserve

iii) Securities Premium: Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act 2013.

(ii) Gratuity

The Company extends defined benefit plans in the form of gratuity to employees. The Company has formed “Harita Seating Systems Limited Employees Group Gratuity Scheme” with Life Insurance Corporation of India (LIC). Contribution to gratuity is made to LIC in accordance with the scheme framed by the corporation. The Company has made contribution towards Gratuity based on the actuarial valuation.

(iii) Defined contribution plans

Contribution to provident fund is in the nature of defined contribution plan and are made to provident fund account maintained by the Government on its account.

Assumptions regarding future mortality for pension and medical benefits are set based on actuarial advice in accordance with published statistics and experience. These assumptions translate into an average life expectancy in years for a pensioner retiring at age :58 Years

(v) Sensitivity analysis

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

(vi) Risk exposure

Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility

The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit.

Changes in bond yields

A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.

Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.

There are no transfers between levels 1 and 2 during the year.

The company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

The carrying amounts of trade receivables, trade payables, loans, deposits, advances, borrowings, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.

1 FINANCIAL RISK MANAGEMENT

The company’s activities expose it to market risk, liquidity risk and credit risk.

(A) Credit risk

Company faces credit risk from cash and cash equivalents, deposits with banks and financial institutions and unsecured trade receivables. The company doesn’t face any credit risk with other financial assets

(i) Credit risk management

Credit risk on deposit is mitigated by the depositing the funds in reputed private sector bank.

For trade receivables, the primary source of credit risk is that these are unsecured.The Company sells the products to customers only when the collection of trade receivables is certain and whether there has been a significant increase in the credit risk on an on-going basis is monitored throughout each reporting period. As at the balance sheet date, based on the credit assessment the historical trend of low default is expected to continue. An impairment analysis is performed at each reporting date on an individual basis for major clients. Any recoverability of receivables is provided for based on the impairment assessment. Historical trends showed as at the transition date and 31^st March 2016 company had no significant credit risk.

(ii) Provision for expected credit losses for trade receivables

The company provides for expected credit loss based on the following: Position as at 01^st April 2016:

Expected credit loss for trade receivables under simplified approach

(B) Liquidity risk

Objective of liquidity risk management is to maintain sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Management monitors rolling forecasts of The company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. The company’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal requirements.

(i) Financing arrangements

The company had access to the following undrawn borrowing facilities at the end of the reporting period:

The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and have an average maturity of 1 year

(ii) Maturities of financial liabilities

The tables below analyse The company’s financial liabilities into relevant maturity groupings based on their contractual maturities for:

a) all non-derivative financial liabilities, and

b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.”

(C) Market risk

(i) Foreign currency risk

The company activities exposes it to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD and EURO Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows.

The company’s exposure to foreign currency risk at the end of the reporting period expressed in INR, are as follows

2 CAPITAL MANAGEMENT

(a) Risk management

The company’s objectives when managing capital are to

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, The company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Company is debt free currently and it intends to maintain a optimal gearing ratio for optimising shareholder value.

3 RELATED PARTY DISCLOSURE

Disclosure is made as per the requirements of the standard and the same is furnished below:

A) List of Related Parties where control exists

Reporting entity : Harita Seating Systems Ltd

Holding Company : Nil

Subsidiary Company : Harita Fehrer Limited

4 SEGMENT INFORMATION

(a) Description of segments

The Board of Directors of the Company has been identified as the Chief Operating Decision Maker (CODM). They evaluate the Company performance allocate resources based on the analysis of various performance indicators of the Company as a single unit. Therefore there is no reportable segment for the company. The Company is domiciled in India.

(b) Entity wise disclosures

(i) Revenue from geographical areas

The entire revenue from operation are derived from India All non current assets are with in India.

(ii) Information about major customers

Revenues of approximately FIs.6980 Lakhs (31^st March 2017 - Rs.5580 LakhSi) are derived from a single externol customer.

5 FIRST-TIME ADOPTION OF IND AS Transition to Ind AS

These are the Company’s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet at 1 April 2015 (The company’s date of transition). In preparing its opening Ind AS balance sheet, The company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).

An explanation of how the transition from previous GAAP to Ind AS has affected The company’s financial position, financial performance and cash flows is set out in the following tables and notes.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A.1 Ind AS optional exemptions

A.1.1 Deemed cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties.

Accordingly, The company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their previous GAAP carrying value.

A.2 Ind AS mandatory exceptions

A.2.1 Estimates

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Impairment of financial assets based on expected credit loss model.

B. Notes to first- time adoption:

B.1 Security deposits

Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, The company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent. Consequent to this change, the amount of security deposits decreased by INR 12.30 as at 31 March 2017 (1 April 2016 - INR 14.40). The prepaid rent increased by INR 11.13 as at 31 March 2017 (1 April 2016 - INR 13.47). Total equity decreased by INR 1.00 as on 1 April 2016. The profit for the year and total equity as at 31 March 2017 decreased by INR 0.25 due to amortisation of the prepaid rent of INR 4.57 which is partially off-set by the notional interest income of INR 4.33 recognised on security deposits.

B.2 Fair valuation of investments

Under Previous GAAP, investment in annuity fund were carried at nominal value, under the Ind-AS same investments are carried at day one fair valuation was done and subsequently carried at amortised cost, Consequent to this change, the amount of investments decreased by INR 37.53 as at 31 March 2017 (1 April 2016 - INR 44.21). The profit for the year 31 March 2017 increased by INR 6.57

B.3 Captialisation of Spares

Under Previous GAAP, certain non critical spares were treated as inventory, Under Ind-AS the same has been recognised as PPE, correspondingly the amount of inventory decreased by INR 20.00 as at 31 March 2017 (1 April 2016 - INR 20.00) and PPE increased by INR 13.16 as at 31 March 2017 (1 April 2016 - INR 17.54) The profit for the year 31 March 2017 decreased by INR 4.38 and equity reduced by INR 6.83 as at 31 March 2017 (1 April 2016 by 2.45)

B.4 Mark to Market of Forward contracts

Under previous GAAP premium on forward contracts were amortised over the tenor, under Ind AS the forward contracts are marked to market, Profit for the year 31 March 2017 decreased by INR 6.70 and equity reduced by INR 8.17 as at 31 March 2017 (1 April 2016 by 1.47)

B.5 Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. There is no impact on the total equity as at 31 March 2016.

B.6 Deferred tax

Deferred tax have been recognised on the adjustments made on transition to Ind AS.

---

Mar 31, 2014

Rs. in Lakhs As at/year ended As at/year ended 31.03.2014 31.03.2013

ACCOUNTING STANDARD (29) - Provisions, contingent liabilities and contingent assets

1. Provisions

In respect of warranty obligations provision is made inaccordance with the terms of sale of seat assemblies. Provision for warranty at the beginning of the year 116.30 43.43 Provided during the year 36.10 72.87 Total 152.40 116.30 Reversed during the year 55.08 – Net Provision as on Balance Sheet date 97.32 116.30

2. Contingent liabilities The amount for which the Company is contingently liable are disclosed in Note No. 2

3. Contingent assets Contingent assets which are likely to give rise to the possibility of inflow of economic benefits Nil Nil

4. Contested liabilities Contested liabilities are detailed in Note No.3

ACCOUNTING STANDARD (30) - Financial instruments

The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuation relating to import of raw materials. Only net exposure is hedged. The Company has no contracts for import of capital goods. The Company also does not hold derivatives for speculation purposes. The foreign e xchange liabilities are restated at the prevailing rates at the year end.

2. Contingent liabilities not provided for

a. On counter guarantee furnished to bank 328.59 341.20 b. On account of bill discounting 110.94 20.31 c. Customs duty under Export Promotion Capital Goods Scheme 189.13 189.13 d. Contracts remaining to be executed on Capital Account and not provided for 152.58 34.40

3. Sundry creditors include

c) Information required under the Micro, Small and Medium Enterprises Development Act, 2006:

The Company has written to all suppliers to ascertain if they are covered by the said Act. No information has been received in reply.

However, the suppliers'' credit terms are generally 45 days within which all payments are made. Hence, the question of payment of interest or provision thereof for belated payments does not arise.

4. Other expenses include

No individual head of expense is in excess of 1% of the Revenue from operations or Rs.1,00,000/- whichever is higher.

5. Expenses, wherever applicable are inclusive of service tax at appropriate rates and net of service tax set off permissible.

6. Last year''s figures have been regrouped wherever necessary to conform to this year''s classification.

---

Mar 31, 2013

1. Provisions

In respect of warranty obligations provision is made in accordance with the terms of sale of seat assemblies. Provision for warranty at beginning of the year 43.43 53.42 Provided during the year 72.87 43.43 Total 116.30 96.85

Reversed during the year – 53.42

Net Provision as on Balance Sheet date 116.30 43.43

2. Contingent liabilities

The amount for which the Company is contingently liable are disclosed in Note No. 2

3. Contingent assets

Contingent assets which are likely to give rise to the possibility of inflow of economic benefits Nil Nil

4. Contested liabilities

Contested liabilities are detailed in Note No.3

ACCOUNTING STANDARD (30) - Financial instruments

The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuation relating to import of raw materials. Only net exposure is hedged. The Company has no contracts for import of capital goods. The Company also does not hold derivatives for speculation purposes. The foreign exchange liabilities are restated at the prevailing rates at the year end.

5. Other expenses include

No individual expense is in excess of 1% of the Revenue from operations or Rs.1,00,000/- whichever is higher.

6. Expenses, wherever applicable are inclusive of service tax at appropriate rates and net of service tax set off permissible.

7. Last year''s figures have been regrouped wherever necessary to conform to this year''s classification.

---

Mar 31, 2012

Rights attached to Equity Shares : Shareholders are entitled to such rights as to attend meetings of the shareholders, to receive dividend distributable and also have a right in residual interest in the assets of the Company. Further shareholders are entitled to right of inspection of the documents as provided in Companies Act, 1956.

1. Contingent liabilities not provided for

a. On counter guarantee furnished to bank 403.74 327.15

b. On account of bill discounting 91.80 93.70

c. Customs duty under Export Promotion Capital Goods Scheme 189.13 189.13

d. Contracts remaining to be executed on Capital Account and not provided for 100.47 -

2. Managerial Remuneration

The shareholders have approved at the annual general meeting held on 7th September, 2009 remuneration to Mr A G Giridharan, Manager, up to 5% of the net profits of the Company, subject to a ceiling of Rs.48 lakhs per annum. However, based on the profitability for the year ended 31st March 2012, he was paid Rs.51.47 lakhs, which was approved by Board of Directors, subject, of course, to the final approval by the shareholders vide item no.5 of notice of even date for the ensuing annual general meeting.

3. Other expenses include

No individual expense is in excess of 1% of the Revenue from operations or Rs.1,00,000/- whichever is higher.

4. Expenses, wherever applicable are inclusive of service tax at appropriate rates and net of service tax set off permissible.

5. Dividend - Interim Dividend payable: The amount proposed to be distributed to the shareholders on 77,69,040 Equity Shares is at Rs.3.50/- per share amounting to Rs.271.92 lakhs.

6. Last year's figures have been regrouped wherever necessary to conform to this year's classification.

Note: 1) The above statement has been prepared in indirect method except in case of dividend, interest, direct tax, purchase and sale of investments, which have been considered on the basis of actual movement of cash.

2) Cash and Cash equivalent represents cash and bank balances

---

Mar 31, 2011

ACCOUNTING STANDARD (29) - Provisions, contingent liabilities and contingent assets

1. Provisions

In respect of warranty obligations provision is made in accordance with terms of sale of seat assemblies. (Refer schedule no. XIV of the Balance Sheet)

2. Contingent liabilities

The amount for which the company is contingently liable are disclosed in Note No. 2.

3. Contingent assets

Contingent assets which are likely to give rise to the

possibility of inflow of economic benefits. Nil Nil

4. Contested liabilities

Contested liabilities are detailed in Note No.3.

2. Contingent liabilities not provided for

a. On counter guarantee furnished to bank 327.15 517.23

b. On account of bill discounting 93.70 64.80

c. Customs duty under EPCG scheme 189.13 189.13

5. Sundry creditors include

c) Information required under the Micro, Small and Medium Enterprises Development Act, 2006

The Company has written to all suppliers to ascertain if they are covered by the said Act. No information has been received in reply.

However, the suppliers' credit terms are generally 45 days within which all payments are made. Hence, the question of payment of interest or provision thereof for belated payments does not arise.

6. Previous year's figures have been regrouped wherever necessary to conform to this year's classification.

7. Information pursuant to the provisions of Part II of Schedule VI of the Companies Act, 1956 (Vide Notification dated 30th October 1973 of the Ministry of Corporate Affairs, Government of India).

The Board of Directors have given their consent to avail exemption from disclosing quantitative details of raw materials and components, opening and closing stock of finished goods and sale by class of goods constituting less than 10% of the total value in line with notification no SO 301(E) dated 8th February 2011 issued by the Ministry of Corporate Affairs.

VI SALE BY CLASS OF GOODS

Note : Two Wheeler Seats, Long Fibre Injection, Micro Cellular Urethane business has been transferred to Harita Fehrer Limited, Chennai from 22nd January, 2010.

VII LICENSED AND INSTALLED CAPACITY

Information is not furnished in view of abolition of industrial licensing requirements for the products manufactured by the company

b. Spares

Quantitative details are not furnished as the income from sales is individually less than ten percent of total income.

---

Mar 31, 2010

1. During the year, on 22.01.2010 the Company has transferred fixed assets like land, building, plant and machinery, office equipment and also current assets like inventories, receivables net of current liabilities to the subsidiary company namely Harita Fehrer Limited, Chennai, as approved by the shareholders of the Company through Postal Ballot.

2. Contingent liabilities not provided for

As at year ended As at year ended

a) On counter guarantee furnished to bank 517.23 417.41

b) On letters of credit opened with bank - 192.00

c) On account of bill discounting 64.80 -

d) Customs duty under EPCG scheme 189.13 -

6. Sundry creditors include:

c) Information required under the Micro, Small and Medium Enterprises Development Act, 2006:

The Company has written to all suppliers to ascertain if they are covered by the said Act. No information has been received in reply.

However, the suppliers credit terms are generally 45 days within which all payments are made. Hence, the question of payment of interest or provision thereof for belated payments does not arise.

3. Expenses, wherever applicable are inclusive of service tax at appropriate rates and net off service tax set off permissible.

4. Sundry debtors - other debts includes Rs.5.69 lakhs due from a company under the same management viz Sundaram Auto Components Limited, Chennal.

5. Previous years figures have been regrouped wherever necessary to conform to the current years classification.