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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   ` 8948.00   Open: 8949.55   Today's Range 8898.70
8989.00
+9.85 (+ 0.11 %) Prev Close: 8938.15 52 Week Range 6286.05
10000.00
Year End :2017-03 

1 General Information

Maruti Suzuki India Limited (“The Company”) is a public limited company incorporated and domiciled in India, listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The address of its registered office is #1, Nelson Mandela Road, Vasant Kunj, New Delhi - 110070. The Company is a subsidiary of Suzuki Motor Corporation, Japan. The principal activities of the Company are manufacturing, purchase and sale of motor vehicles, components and spare parts. The other activities of the Company comprise facilitation of pre-owned car sales, fleet management and car financing.

2 Applicability of New and Revised Ind AS

Ind AS 7 has been amended in March 2017 to require an entity to enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The Company is evaluating the requirements of the amendment and its effect on the financial statements.

Further, the amendment to Ind AS 102 provides guidance to measurement of cash settled, modification of cash settled awards and awards that include a net settlement feature in respect of witholding taxes. This amendment is not applicable to the Company.

3.1 Notes on property, plant and equipment

1 Immovable properties having carrying value of Rs.27 million (as at 31.03.16 Rs.14 million; as at 01.04.15 Rs.14 million) are not yet registered in the name of the Company.

2 Plant and Machinery includes a Gas Turbine jointly owned by the Company with its group companies and other companies (prorata cost amounting to Rs.374 million, carrying amount as at 31st March 2017 Nil (as at 31.03.16 Nil; deemed cost as at 01.04.15 Nil).

3 A part of freehold land of the Company situated at Gurgaon, Manesar and Gujarat has been made available to its group companies / fellow subsidiary.

4 Based on technical evaluation and market considerations, the Company has, with effect from 1st April 2016, revised the estimated useful life of dies & jigs, included in plant and machinery, from 4 years to 5 years. This has resulted in depreciation expense for the current year being lower by Rs.2,411 million.

* Adjustment includes the intra-head re-grouping of amounts.

4.1 Notes on intangible assets

1 Based on technical evaluation and market considerations, the Company has, with effect from 1st April 2016, revised the estimated useful life of intangible asset from 4 years to 5 years. This has resulted in amortisation expense for the current year being lower by Rs.307 million.

5.1 The credit period generally allowed on domestic sales varies from 30 to 45 days (excluding transit period). The credit period on export sales varies on case to case basis, based on market conditions.

The cost of inventories recognised as an expense during the year in respect of continuing operations was Rs.525,920 million (previous year Rs.446,734 million)

The cost of inventories recognised as an expense includes Rs.29 million (previous year Rs.33 million) in respect of write-downs of inventory to net realisable value.

The mode of valuation of inventories has been stated in note 2.14.

6.1 Rights, preference and restriction attached to shares

The Company has one class of equity shares having a par value of Rs.5 per share. Each shareholders is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

6.2 Shares allotted as fully paid up pursuant to contract(s) without payment being received in cash (during 5 years immediately preceding 31st March 2017)

13,170,000 equity shares of Rs.5 each have been allotted as fully paid up during Financial Year 2012-13 to Suzuki Motor Corporation pursuant to the Company’s scheme of amalgamation with erstwhile Suzuki Powertrain India Limited.

The general reserve is created from time to time on transfer of profits from retained earnings. General reserve is created by transfer from one component of equity to another and is not an item of other comprehensive income, items included in general reserve will not be reclassified subsequently to profit and loss.

During the year Nil (previous year : Rs.4,571 million) has been transferred to general reserves from retained earning.

This reserve is created on the basis of the scheme of amalgamation of erstwhile Suzuki Powertrain India Limited (SPIL) with the Company as approved by the High Court of Delhi in the year ended 31st March 2013.

During the year, a dividend of Rs.35 per share, total dividend Rs.10,573 million (previous year : Rs.25 per share, total dividend Rs.7,552 million) was paid to equity shareholders.

The Board of Directors recommended a final dividend of Rs.75 per share (nominal value of Rs.5 per share) for the financial year 2016-17. This dividend is subject to approval by the shareholders at the Annual General Meeting and has not been accounted as liability in these financial statements. The total estimated dividend to be paid is Rs.27,268 million including dividend distribution tax of Rs.4,612 million.

* net of income tax of Rs.58 million (previous year Rs.38 million)

This reserves represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income, net of amount reclassified to retained earnings when those assets have been disposed of.

The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedging item.

7.1 Summary of borrowing arrangements

1. Loans from banks include:

Loan amounting to Rs.Nil (USD Nil) (as at 31.03.16: Rs.921 million (USD 13.90 million); as at 01.04.15: Rs.1,738 million (USD 27.80 million)) taken from Japan Bank of International Cooperation (JBIC) at an interest rate of LIBOR 0.125%, repayable in 2 half yearly instalments (acquired pursuant to a scheme of amalgamation). The entire outstanding amount of Rs.921 million as at 31.03.2016 (as at 01.04.15: Rs.869 million) repayable within one year has been transferred to current maturities of long term debts. The repayment of the loan was guaranteed by Suzuki Motor Corporation, Japan (the holding company). The last instalment of Rs.921 million was paid during the year.

Loan amounting to Rs.Nil (as at 31.03.16: Rs.Nil; as at 01.04.15: Rs.1,906 million) (USD 30 million) taken from banks at an average interest rate of LIBOR 1.375% and repaid in July 2015.

2. A loan amounting to Rs.Nil (USD Nil) (as at 31.03.2016: Rs.614 million (USD 9.27 million), as at 01.04.2015: Rs.1,158 million (USD 18.53 million)) taken from the holding company at an interest rate of LIBOR 0.48%, repayable in 2 half yearly instalments (acquired pursuant to a scheme of amalgamation). The entire outstanding amount of Rs.614 million as at 31.03.2016 (as at 01.04.2015: Rs.579 Million) repayable within one year has been transferred to current maturities of long term debts. The last instalment of Rs.614 million was paid during the year.

3. Loan repayable on demand from banks (Cash credit and Overdraft) amounting to Rs.4,836 million (as at 31.03.16: Rs.774 million; as at 01.04.15: Rs.354 million) at an interest rate of 7.25% to 10.50%, repayable within 0-5 days.

7.2 Breach of loan agreement

There have been no breach of covenants mentioned in the loan agreements during the reporting periods.

Provisions for employee benefits

The provision for employee benefits include compensated absences and retirement allowance.

Provision for warranty and product recall

Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled as and when warranty claims will arise. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.

Provision for litigation / disputes

In the ordinary course of business, the Company faces claims by various parties. The Company assesses such claims and monitors the legal environment on an ongoing basis, with the assistance of external legal counsel, wherever necessary. The Company records a liability for any claims where a potential loss probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Company provides disclosure in the financial statements but does not record a liability in its accounts unless the loss becomes probable (also refer to note 38).

8 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.

9 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

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 occurrence of losses relative 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 fair value of the above ULIP schemes are determined based on the Net Asset Value (NAV). Moreover, for other investments the fair value is taken as per the account statements of the insurance companies.

The average duration of the defined benefit obligation of gratuity fund at 31.03.17 is 12 years (as at 31.03.16: 12 years; as at 01.04.15: 12 years).

The group expects to make a contribution of Rs.160 million (as at 31.03.16: Rs.125 million; as at 01.04.15: Rs.150 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.410 million (increase by Rs.485 million) (as at 31.03.16: decrease by Rs.313 million (increase by Rs.368 million)) (as at 01.04.15: decrease by Rs.269 million (increase by Rs.317 million)).

If the expected salary growth rate increases (decreases) by 1%, the defined benefit obligation would increase by Rs.436 million (decrease by Rs.363 million) (as at 31.03.16: increase by Rs.315 million (decrease by Rs.259 million)) (as at 01.04.15: increase by Rs.270 million (decrease by Rs.222 million)).

If the attrition rate increases (decreases) by 50%, the defined benefit obligation would increase by Rs.20 million (decrease by Rs.21 million) (as at 31.03.16: increase by Rs.19 million (decrease by Rs.20 million)) (as at 01.04.15: increase by Rs.16 million (decrease by Rs.17 million)).

If the mortality rate increases (decreases) by 10%, the defined benefit obligation would increase by Rs.5 million (decrease by Rs.5 million) (as at 31.03.16: increase by Rs.4 million (decrease by Rs.4 million)) (as at 01.0415: increase by Rs.4 million (decrease by Rs.4 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.

9.1 Financial risk management

The Company’s activities expose it to market risk, liquidity risk and credit risk. In order to minimise 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.

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 Company’s financial assets are either impaired or past due, and there were no indications that defaults in payment obligations would occur.

(B) Liquidity risk

Liquidity risk refers to the risk that the Company can not 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 Rs.28,450 million as at 31.03.2017 (Rs.29,650 million as at 31.03.2016 and Rs.28,880 million as at 01.04.2015) to honour 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.

(i) 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) Interest rate risk

The Company had External Commercial Borrowing post merger with erstwhile Suzuki Powertrain India Limited in FY13. The interest rate risk had been mitigated through use of floating to floating Cross Currency Interest Rate Swap derivative (LIBOR to MIOIS) taken at the time of inception of the borrowing. Outstanding USD /INR floating rate cross currency swap as at 31st March 2017 is Nil (as at 31st March 2016 : USD 23.17 million; as at 1st April 2015 : USD 46.33 million).

(iii) 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 2017 would increase / decrease by Rs.365 million (for the year ended 31st March 2016: increase / decrease by Rs.247 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 31.03.2017 would increase / decrease by Rs.2,737 million (for the year ended 31.03.2016 by Rs.1,930 million as a result of the changes in fair value of mutual fund investments

9.2 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 through independent external evaluation of CRISIL Limited on a quarterly basis.

9.3 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.

10 Related Party Transactions

10.1 Description of related parties

Holding Company

Suzuki Motor Corporation

Subsidiaries

Maruti Insurance Agency Services Limited Maruti Insurance Agency Logistics Limited Maruti Insurance Distribution Services Limited Maruti Insurance Agency Network Limited Maruti Insurance Agency Solutions Limited True Value Solutions Limited Maruti Insurance Business Agency Limited Maruti Insurance Broker Limited J.J. Impex (Delhi) Private Limited

Key Management Personnel

Mr R. C. Bharagava

Mr. Kenichi Ayukawa

Mr. K. Ayabe

Mr. K. Saito

Mr. T. Suzuki

Mr. O. Suzuki

Mr. Toshiaki Hasuike

Mr. Shigetoshi Torii

Mr. Amal Ganguli

Mr. Davinder Singh Brar

Mr. Rajinder Pal Singh

Ms. Pallavi Shroff

Mr. Ajay Seth

Mr. S. Ravi Aiyar

Joint Ventures

Magneti Marelli Powertrain India Private Limited Plastic Omnium Auto Inergy Manufacturing India Private Limited (Formerly known as Inergy Automotive Systems 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

Krishna Ishizaki Auto Limited

Maruti Insurance Broking Private Limited

Manesar Steel Processing India Private Limited

Hanon Climate Systems India Private Limited

(Formerly Halla Visteon Climate Systems India Private Limited)

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

Suzuki Myanmar Motor Co. Limited

Cambodia Suzuki Motor Co. Limited

Magyar Suzuki Coproration

Pak Suzuki Motor Co. Limited

PT Suzuki IndoMobil Motor

(Formerly PT IndoMobil Suzuki International)

Suzuki (Myanmar) Motor Co. Limited Suzuki Assemblers Malaysia Sdn Bhd Suzuki Australia Pty Limited Suzuki Austria Automobile Handels GmbH Suzuki Auto South Africa(Pty) Limited Suzuki France S.A.S.

Suzuki Gb Plc

Suzuki International Europe GmbH Suzuki Italia Spa

Suzuki Malaysia Automobile Sdn Bhd Suzuki Motor (Thailand) Co. Limited Suzuki Motor de Mexico, SA de CV Suzuki Motor Gujarat Private Limited Suzuki Motor Iberica S.A.U.

Suzuki Motor Sp Z.O.O.

(Formerly Suzuki Motor Poland Limited)

Suzuki Motorcycle India Limited Suzuki New Zealand Limited Suzuki Philippines Inc.

Taiwan Suzuki Automobile Corporation Thai Suzuki Motor Co. Limited

Operating Lease Arrangements

The Company as a Lessee Leasing arrangements

The Company has entered into operating lease arrangements for various lands. 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 as a Lessor

Leasing arrangements

The Company has entered into operating lease arrangements for various lands 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:

11 Commitments Under Letter of Credit

Outstanding commitments under Letters of Credit established by the Company aggregate Rs.1,348 million (as at 31.03.2016: Rs.1,671 million, as at 01.04.2015: Rs.2,029 million)

12 Capital Commitment

Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for, amounting to Rs.27,682 million (as at 31.03.2016: Rs.30,387 million, as at 01.04.2015: Rs.20,295 million).

13 Contingent Liabilities

A) Claims against the Company disputed and not acknowledged as debts:

(i) In earlier years, pursuant to Court orders, the Haryana State Industrial & Infrastructure Development Corporation Limited (“HSIIDC”) had raised demands amounting to Rs.10,317 million towards enhanced compensation to landowners for the Company’s freehold land at Manesar, Haryana. Against this, the Company has made a payment of Rs.3,742 million under protest and capitalised it as part of the cost of land. In previous year, the Punjab & Haryana High Court (“High Court”) set aside the above orders and referred the matter back to the District Court, Gurgaon for fresh adjudication. An appeal was preferred by the land owners against the order of the High Court in the Supreme Court. The Supreme Court has set aside the order of the High Court and has remanded the case back to the High Court for fresh adjudication.

(ii) 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 31.03.2016: Rs.21 million, as at 01.04.2015: Rs.21 million) for LADT and Rs.19 million (as at 31.03.2016: Rs.19 million, as at 01.04.2015: Rs.18 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.

(iii) 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.

A) 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.

14 The Company was granted sales tax benefit in accordance with the provisions of Rule 28C of Haryana General Sales Tax Rules, 1975 for the period from 1st August, 2001 to 31st July, 2015. The ceiling amount of concession to be availed of during the entitlement period is Rs.5,644 million. Till 31st March 2017, the Company has availed of / claimed sales tax benefit amounting to Rs.2,884 million (till 31.03.2016: Rs.2,884 million, till 01.04.2015: Rs.2,626 million).

15 The Board of Directors, in its meeting held on 27th October, 2015 had approved a Scheme of Amalgamation (the “Scheme”) under Sections 391 to 394 of the Companies Act, 1956 (‘the 1956 Act’) and other applicable provisions of the 1956 Act and the applicable provisions of the Companies Act, 2013, as per pooling of interest method, between the Company and its seven wholly owned subsidiaries which were authorised to engage in the business of acting as insurance intermediaries, by the name of 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. The amalgamation is not expected to have a material impact.

The amalgamation will be effective from April 1, 2016 being the appointed date and is subject to approval of National Company Law Tribunal (NCLT).

16 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 17th December, 2015. The terms of the CMA provide for the following:

i. The CMA shall continue for a period of 15 years and automatically extend for a further period of 15 years at the end of the initial period without any further action or documentation on the part of either party, unless terminated by the parties by mutual agreement. After the expiry of an aggregate period of 30 years MSIL and SMG may mutually discuss and agree to extend the period of the CMA.

ii. MSIL will provide SMG with land (on lease) to set up the production facility. The initial lease period of this land is 15 years which will be automatically extended for a further period of 15 years unless terminated by the parties by mutual agreement.

iii. SMG shall, during the term of this agreement, manufacture the products and supply the same on an exclusive basis to MSIL in accordance with other terms and conditions in the CMA. The sales price shall be determined by mutual consent on the basis that SMG does not have any profits or losses at the end of any financial year other than any non-operating income accrued to SMG.

The Company has evaluated this arrangement with respect to the guidance given under Appendix C of Ind AS 17 “Determining Whether an Arrangement Contains a Lease” and has classified this arrangement as an operating lease. The lease charge arising out of this arrangement has been included under the purchase of stock-in-trade.

17 First Time Adoption of Ind AS

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

The effect of the Company’s transition to Ind AS is summarised in the following notes:

(i) Transition elections

(ii) Reconciliation of equity, total comprehensive income and cash flows as reported as per Ind AS, in this statement with as reported in previous years as per previous Indian GAAP

17.1 Transition elections

The Company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognised assets and liabilities. However, this principle is subject to the certain exception and certain optional exemptions availed by the Company. The Company has applied the following transition exemptions apart from mandatory exceptions in Ind-AS 101 :

1. Deemed cost of property, plant and equipment and other intangible assets

2. Leases

3. Investments in subsidiaries, joint controlled entities and associates in separate financial statements

4. Designation of equity investments at FVTOCI.

Deemed cost of property, plant and equipment and other intangible assets

In accordance with Ind-AS transitional provisions, the Company opted to consider previous GAAP carrying value of property, plant and equipment and other intangible assets as deemed cost on transition date.

Leases

In accordance with Ind-AS transitional provisions, the company opted to determine whether an arrangement existing at the date of transition contains a lease on the basis of facts and circumstances existing at the date of transition rather than at the inception of the arrangement.

Investments in subsidiaries, joint controlled entities and associates in separate financial statements

In accordance with Ind-AS transitional provisions, the company opted to consider previous GAAP carrying value of investments as deemed cost on transition date for investments in subsidiaries, joint ventures and associates in separate financial statement.

Designation of equity investments at FVTOCI

Ind AS 101 allows an entity to designate previously recognised financial instruments basis the facts and circumstances that existed as on transition date. The Company has elected to designate equity investments in Asahi India Glass Limited, Sona Koyo Steering Systems Limited and Denso India Private Limited at FVTOCI on the basis of the facts and circumstances at the date of transition to Ind AS.

17.2 Reconciliation of equity, total comprehensive income and cash flows as reported as per Ind AS, in this statement with as reported in previous years as per previous Indian GAAP Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following table represents the reconciliation from previous GAAP to Ind AS.

Note 1 : Investment in debt mutual funds and equity instruments

Under the previous GAAP, investment in equity instruments and mutual funds were classified as long-term investments or current investments based on the intended holding period and readability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value.

Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments (other than equity instruments designated as at FVTOCI) have been recognised in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended 31st March 2016. For equity instruments designated at FVTOCI resulting fair value gains and losses have been recognised in other comprehensive income.

Note 2 : Deferment of service income

Income from services including the associated selling cost is deferred over the respective years to which they pertain. Such income is recognised on straight line basis over the warranty period and the associated service claim cost is recognised as an when incurred. No provision is recognised for such cost.

Note 3 : Proposed dividend and related distribution tax

Under the previous GAAP, dividend proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend and related corporate dividend tax were recognised as a liability. Under Ind AS, such dividends and related corporate dividend tax are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend as at 1st April 2015 and 31st March 2016 included under provisions as per previous GAAP have been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by the amount of proposed dividend and related corporate dividend tax.

Note 4 : Actuarial gain / loss on defined benefit plans

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.

Note 5 : Gains / losses on cash flow hedges

Under Ind AS, effective portion of fair value gains and losses of hedging instruments designated in a cash flow hedge relationship is recognised in other comprehensive income and taken to FVTOCI reserve in equity, whereas under previous GAAP there was no such concept of other comprehensive income and all such gains and losses were directly recognised in cash flow hedge reserves in equity.

Note 6 : Deferred tax adjustments

Deferred tax have been recognised on the adjustments made on transition to Ind AS. Also deferred tax is recognised on brought forward capital losses and cash flow hedge reserve recognised earlier in books on which no deferred tax was created under previous GAAP.

18 The financial statements were approved by the Board of Directors and authorised for issue on 27th April 2017.