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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 532500ISIN: INE585B01010INDUSTRY: Auto - Cars & Jeeps

BSE   ` 7654.10   Open: 7671.00   Today's Range 7551.95
7684.45
-9.65 ( -0.13 %) Prev Close: 7663.75 52 Week Range 6501.65
10000.00
Year End :2018-03 

Note:

The Company pays its vendors within 30 days and no interest during the year has been paid or is payable under the terms of the Micro, Small and Medium Enterprises Development Act, 2006.

*Dues to micro, small and medium enterprises have been determined to the extent such parties have been identified on the basis of intimation received from the “suppliers” regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006.

30. Segment Information

The Company is primarily in the business of manufacturing, purchase and sale of motor vehicles, components and spare parts ("automobiles"). The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing. The income from these activities is not material in financial terms but such activities contribute significantly in generating demand for the products of the Company.

The Board of Directors of the Company, which has been identified as being the chief operating decision maker (CODM), evaluates the Company's performance, allocate resources based on the analysis of the various performance indicator of the Company as a single unit. Therefore there is no reportable segment for the Company.

a) Domestic information includes sales and services to customers located in India.

b) Overseas information includes sales and services rendered to customers located outside India.

c) Non-current segment assets includes property, plant and equipment, capital work in progress, intangible assets and capital advances

32. Employee Benefit Plans

The various benefits provided to employees by the Company are as under:

A. Defined contribution plans

a) Superannuation fund

b) Post employment medical assistance scheme

c) Employers contribution to Employee State Insurance Act 1948

d) Employers contribution to Employee's Pension Scheme 1995

B. Defined benefit plans and other long term benefits

a) Contribution to Gratuity Funds - Employee's Gratuity Fund

b) Leave encashment / compensated absence

c) Retirement allowance

d) Provident fund

These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

Investment risk

The probability or likelihood of lower returns as compared to the expected return on any particular investment.

Interest risk

The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability.

Longevity risk

The present value of defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after employment. An increase in the life expectancy of the plan participants will increase the plan's liability.

Salary risk

The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.

The Company expects to make a contribution of ' 173 million (as at 31.03.17: ' 160 million) to the defined benefit plans during the next financial year.

Sensitivity analysis

Significant actuarial assumption for the determination of defined obligation are discount rate, expected salary growth rate, attrition rate and mortality rate. The sensitivity analysis below have been determined based on reasonably possible changes in respective assumption occurring at the end of reporting period, while holding all other assumptions constant.

If the discount rate increases (decreases) by 1%, the defined benefit obligation would decrease by Rs, 508 million (increase by Rs, 604 million) (as at 31.03.17: decrease by Rs, 410 million (increase by Rs, 485 million)).

If the expected salary growth rate increases (decreases) by 1%, the defined benefit obligation would increase by Rs, 567 million (decrease by Rs, 490 million) (as at 31.03.17: increase by Rs, 436 million (decrease by Rs, 363 million)).

Level 1: Quoted prices in the active market. This level of hierarchy includes financial assets that are measured by reference to quoted prices in the active market. This category consists of quoted equity shares and debt based open ended mutual funds.

Level 2: Valuation techniques with observable inputs. This level of hierarchy includes items measured using inputs other than quoted prices included within Level 1 that are observable for such items, either directly or indirectly. This level of hierarchy consists of debt based close ended mutual fund investments and over the counter (OTC) derivative contracts.

Level 3: Valuation techniques with unobservable inputs. This level of hierarchy includes items measured using inputs that are not based on observable market data (unobservable inputs). Fair value determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instruments nor based on available market data. The main item in this category are unquoted equity instruments.

The fair value of the financial assets are determined at the amount that would be received to sell an asset in an orderly transaction between market participants. The following methods and assumptions were used to estimate the fair values:

Investments in debt mutual funds: Fair value is determined by reference to quotes from the financial institutions, i.e. net asset value (NAV) for investments in mutual funds declared by mutual fund house.

Derivative contracts: The Company has entered into variety of foreign currency and commodity forward contracts and swaps to manage its exposure to fluctuations in foreign exchange rates and commodity price risk. These financial exposures are managed in accordance with the Company’s risk management policies and procedures. Fair value of derivative financial instruments are determined using valuation techniques based on information derived from observable market data.

Quoted equity investments: Fair value is derived from quoted market prices in active markets.

Unquoted equity investments: Fair value is derived on the basis of income approach, in this approach the discounted cash flow method is used to capture the present value of the expected future economic benefits to be derived from the ownership of these investments.

33.2 Financial risk management

The Company's activities expose it to market risk, liquidity risk and credit risk. In order to minimize any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts, foreign currency option contracts are entered to hedge certain foreign currency risk exposures and interest rate swaps to hedge variable interest rate exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements.

The financial risk management of the Company is carried out under the policies approved by the Board of Directors. Within these policies, the Board provides written principles for overall risk management including policies covering specific areas, such as foreign exchange risk management, commodity risk management and investment of funds.

(A) Credit risk

Credit risk arises from the possibility that the counter party may not be able to settle their obligations. To manage trade receivable, the Company periodically assesses the financial reliability of customers, taking into account the financial conditions, economic trends, analysis of historical bad debts and aging of such receivables.

Financial instruments that are subject to such risk, principally consist of investments, trade receivables, loans and advances and derivative instruments. None of the financial instruments of the Company results in material concentration of credit risks.

Other than financial assets mentioned above, none of the financial assets were impaired and there were no indications that defaults in payment obligations would occur.

(B) Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and to ensure funds are available for use as per the requirements.

The Company operates with a low Debt Equity ratio. The Company raises short term rupee borrowings for cash flow mismatches and hence carries no significant liquidity risk. The Company has access to the borrowing facilities of ' 29,850 million as at 31.03.2018 (' 28,450 million as at 31.03.2017) to honor any liquidity requirements arising for business needs. The Company has large investments in debt mutual funds which can be redeemed on a very short notice and hence carries negligible liquidity risk.

(ii) Maturities of financial liabilities

The tables below analyse the Company's financial liabilities into relevant maturity groupings based on their contractual maturities:

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 has exposure to foreign currency risk on account of its payables and receivables in foreign currency which are mitigated through the guidelines under the foreign currency risk management policy approved by the Board of Directors. The Company enters into derivative financial instruments to mitigate the foreign currency risk and interest rate risk including,

a) forward foreign exchange and options contracts for foreign currency risk mitigation

b) foreign currency interest rate swaps to mitigate foreign currency & interest rate risk on foreign currency loan.

Foreign currency sensitivity analysis

The Company is mainly exposed to JPY, USD and EURO.

The following table details the Company's sensitivity to a 10% increase and decrease in the INR against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items as tabulated above and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans. A positive number below indicates an increase in profit or equity and vice-versa.

(ii) Security price risk Exposure in equity

The Company is exposed to equity price risks arising from equity investments held by the Company and classified in the balance sheet as fair value through OCI.

Equity price sensitivity analysis

The sensitivity analysis below have been determined based on the exposure to equity price risks at the end of the reporting period.

If the equity prices had been 5% higher / lower:

Other comprehensive income for the year ended 31st March 2018 would increase / decrease by ' 539 million (for the year ended 31st March 2017: increase / decrease by ' 365 million) as a result of the change in fair value of equity investment measured at FVTOCI.

Exposure in mutual funds

The Company manages the surplus funds majorly through investments in debt based mutual fund schemes. The price of investment in these mutual fund schemes is reflected though Net Asset Value (NAV) decleared by the Asset Management Company on daily basis as reflected by the movement in the NAV of invested schemes. The Company is exposed to price risk on such Investments.

Mutual fund price sensitivity analysis

The sensitivity analysis below have been determined based on Mutual Fund Investment at the end of the reporting period.

If NAV has been 1% higher / lower:

Profit for year ended 31.03.2018 would increase / decrease by ' 3,408 million (for the year ended 31.03.2017 by ' 2,762 million) as a result of the changes in fair value of mutual fund investments.

33.3 Capital 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 or issue new shares.

The Company has large investments in debt mutual fund schemes wherein underlying portfolio is spread across securities issued by different issuers having different credit ratings. The credit risk of investments in debt mutual fund schemes is managed through investment policies and guidelines requiring adherence to stringent credit control norms based on external credit ratings. The credit quality of the entire portfolio investments is monitored on a quarterly basis. The Company's overall strategy remains unchanged from previous year.

The Company is not subject to any externally imposed capital requirements.

33.4 Foreign exchange derivative contracts

The Company follows a consistent policy of mitigating foreign exchange risk by entering into appropriate hedging instruments as considered necessary from time to time. Depending on the future outlook on currencies, the Company may keep the exposures unhedged or hedged only as a part of the total exposure. - -

The Company does not enter into a foreign exchange derivative transactions for speculative purposes.

The following table details the foreign currency derivative contracts outstanding at the end of the reporting period:

34. Related Party Transactions

34.1 Description of related parties Holding Company

Suzuki Motor Corporation, Japan (SMC)

Subsidiaries

J.J. Impex (Delhi) Private Limited

True Value Solutions Limited

Maruti Insurance Distribution Services Limited *

Maruti Insurance Agency Network Limited *

Maruti Insurance Agency Solutions Limited *

Maruti Insurance Business Agency Limited *

Maruti Insurance Broker Limited *

Maruti Insurance Agency Logistics Limited *

Maruti Insurance Agency Services Limited *

Joint Ventures

Magneti Marelli Powertrain India Private Limited

Plastic Omnium Auto Inergy Manufacturing India Private Limited

Associates

Bharat Seats Limited

Caparo Maruti Limited

Jay Bharat Maruti Limited

Krishna Maruti Limited

Machino Plastics Limited

SKH Metals Limited

Nippon Thermostat (India) Limited

Bellsonica Auto Component India Private Limited

Mark Exhaust Systems Limited

FMI Automotive Components Private Limited

Maruti Insurance Broking Private Limited

Manesar Steel Processing India Private Limited

Hanon Climate Systems India Private Limited

Fellow Subsidiaries (only with whom the Company had transactions during the current year)

Magyar Suzuki Corporation Ltd.

Suzuki Motor Gujarat Private Limited Suzuki Assemblers Malaysia Sdn.Bhd Cambodia Suzuki Motor Co. Ltd.

Suzuki Motor De Mexico

Vietnam Suzuki Corporation

Suzuki International Europe G.M.B.H.

Suzuki Australia Pty. Ltd.

Suzuki Motor Poland Sp. Z.O.O.

Suzuki Gb Plc

Suzuki Auto South Africa (Pty) Ltd Suzuki Philippines Inc.

Taiwan Suzuki Automobile Corporation Suzuki Motor (Thailand) Co., Ltd.

Suzuki Thilawa Motor Co. Ltd Suzuki Motorcycle India Ltd.

Thai Suzuki Motor Co., Ltd.

Suzuki (Myanmar) Motor Co., Ltd.

Suzuki Malaysia Automobile Sdn. Bhd.

Suzuki New Zealand Ltd.

Pt Suzuki Indomobil Motor

Suzuki Austria Automobile Handels G.M.B.H.

Suzuki France S.A.S.

Suzuki Italia S.P.A.

Suzuki Motor Iberica, S.A.U.

Key Management Personnel (KMP)

Mr R. C. Bharagava

Chairman

Mr. Kenichi Ayukawa

Managing Director & CEO

Mr. Kazunari Yamaguchi

Director (w.e.f. January 26, 2018)

Mr. O. Suzuki

Director

Mr. T. Suzuki

Director

Mr. Toshiaki Hasuike

Director

Mr. Shigetoshi Torii

Director (till January 25, 2018)

Mr. K. Ay a be

Director

Mr. K. Saito

Director

Mr. Davinder Singh Brar

Independent Director

Mr. Rajinder Pal Singh

Independent Director

Ms. Pallavi Shroff

Independent Director

Ms. Renu Sud Karnad

Independent Director

Mr. Ajay Seth

Chief Financial Officer

Mr. S. Ravi Aiyar

Company Secretary (till February 28, 2018) Mr. Sanjeev Grover

Company Secretary (w.e.f. March 21, 2018)

Late Mr. Amal Ganguli (till May 7, 2017)

Independent Director

1. Operating Lease Arrangements

The Company as a Lessee Leasing arrangements

The Company has entered into operating lease arrangements for various land. These arrangements are non-cancellable in nature and range between fifteen to ninty nine years. Lease rental expense is set out in note 28 as 'Rent' in 'Other expenses'. The future minimum lease commitments under non-cancellable operating leases are as under:

The Company has entered into operating lease arrangements for various land and premises. These arrangements are both cancellable and non-cancellable in nature and range between three to fifteen years. Lease rental income earned by the Company is set out in Note 22 as ‘Rental income’. The future minimum lease receivables under non-cancellable operating leases are as under:

2. Export Promotion Capital Goods (EPCG)

Export Promotion Capital Goods (EPCG) allows import of capital goods including spares for pre-production, production and post production at zero duty subject to an export obligation of 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from authorization issue date.

The Company has been availing the benefit and has been importing capital goods under the scheme at zero custom duty. The Company has accounted for the benefits received in accordance with the Ind AS 20- Accounting for Government Grants and Disclosure of Government Assistance.

The benefits (saving of custom duty) obtained from government has been treated as a Government Grant, which has been accounted for as deferred benefit under other current liabilities in note no 19 and recognized as a cost of property, plant and equipment. As per the EPCG scheme, the Company has an export obligation equivalent to 6 times of duty saved. The deferred benefit accounted for, shall be credited to statement of profit and loss on a pro-rata basis as and when the export obligation is fulfilled.

*Refer Note-40.3

(vii) In earlier years, pursuant to Court orders, the Haryana State Industrial & Infrastructure Development Corporation Limited (""HSIIDC"") had raised demands on the company amounting to ' 10,317 million towards payment of enhanced compensation to landowners for the Company’s freehold land at Manesar, Haryana. During the year HSIIDC has revised the demands to ' 9,717 million after adjusting ' 3,742 million paid by the Company under protest in earlier years.

Against the above demands and pursuant to a scheme notified by HSIIDC (for all allottees) to clear outstanding dues of enhanced compensation in one-go (with partial relief in interest), the Company during the current period cleared the above demands by paying Rs, 9,234 million. This includes principal amounting to Rs, 5,949 million and interest of Rs, 3,285 million (Rs, 2,507 million, has been provided for during the current year) which has been debited towards cost of land and charged off to the statement of profit and loss respectively.

(viii) In respect of disputed Local Area Development Tax (LADT) (upto April 15, 2008) / Entry Tax, the amounts under dispute are Rs, 21 million (as at 31.03.2017: Rs, 21 million) for LADT and Rs, 20 million (as at 31.03.2017: Rs, 19 million) for Entry Tax. The State Government of Haryana has repealed the LADT effective from April 16, 2008 and introduced the Haryana Tax on Entry of Goods into Local Area Act, 2008 with effect from the same date.

(ix) The Competition Commission of India (“CCI”) had passed an order dated August 25, 2014 stating that the Company has violated certain sections of the Competition Act, 2002 and has imposed a penalty of Rs, 4,712 million. An interim stay is in operation on the above order of the CCI pursuant to the writ petition filed by the Company before the Delhi High Court.

B) The amounts shown in the item (A) represent the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately or relate to a present obligations that arise from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate cannot be made. The Company engages reputed professional advisors to protect its interests and has been advised that it has strong legal positions against such disputes.

3. Excise Duty

Consequent to the introduction of Goods and Services Tax (GST) with effect from July 01, 2017; Central Excise, Value Added Tax (VAT) etc. have been subsumed into GST. In accordance with Ind AS - 18 on Revenue Recognition and Schedule III of the Companies Act, 2013, unlike Excise Duty, levies like GST, VAT etc. are not part of revenue. Accordingly, the figure for the period ending Mar 18 is not comparable with period ending Mar 17. The following additional information is being provided to facilitate such understanding:

4. Scheme of Amalgamation

40.1The Scheme of Amalgamation ('the Scheme') between the Company (Amalgamated Company) and its seven wholly owned subsidiaries (Amalgamating Companies), by the name Maruti Insurance Business Agency Limited, Maruti Insurance Distribution Services Limited, Maruti Insurance Agency Network Limited, Maruti Insurance Agency Solutions Limited, Maruti Insurance

Agency Services Limited, Maruti Insurance Agency Logistics Limited and Maruti Insurance Broker Limited as approved by the National Company Law Tribunal became effective w.e.f. the appointed date, i.e., April 1, 2016 on completion of all required formalities on July 11, 2017.The Scheme envisages transfer of all properties, rights, powers, liabilities and duties of the Amalgamating Companies to the Amalgamated Company.

5 Pu rsuant to the Scheme, the amalgamation has been accounted in accordance with the Ind AS 103 “Business Combinations and the assets, liabilities and reserves of the Amalgamating Companies have been accounted for at their book value, in the books of the Amalgamated Company. The share capital of the Amalgamating Companies have been cancelled with the Amalgamated Company’s investment in the Amalgamating Companies. The net assets and reserves taken over as at April 1, 2016 amounted to ' 2,489 million and ' 2,475 million respectively.

6. Previous year figures have been restated to give effect to amalgamation as mentioned above.

7. The Company entered into a ‘Contract Manufacturing Agreement’ (CMA) with Suzuki Motor Gujarat Private Limited (SMG), a fellow subsidiary of Suzuki Motor Corporation (SMC) on December 17, 2015 for a period of 15 years which automatically extends for a further period of 15 years, unless terminated by mutual agreement. SMG during the term of this agreement, shall manufacture and supply vehicles on an exclusive basis to MSIL in accordance with the terms of the CMA . Accordingly, expenses recorded during the year includes ' 2,921 million (previous year ' 396 million) towards the lease of specific Property, Plant & Equipment.