Annual Report 2010-2011 - Gammon India

(b) In respect of currency swap derivative contracts entered into by the Company, the Company has Marked to Market (Gain)/Loss of ` 2.36
Crores (Previous year ` 3.92 Crores) as at 31st March, 2010 based on the valuation given by the bankers. Following the principle of prudence
and in accordance with the announcement of the ICAI, the Company has made a provision for the same. Since the same was entered into
to reduce the cost of borrowings, the said MTM loss is included under Financial Costs.
(c) The breakup of the outstanding derivative position of the overseas subsidiaries is tabulated hereunder.
(` in Crores)
Particulars As at 31st December, 2010 As at 31st December, 2009
Assets Liabilities Assets Liabilities
Derivatives on exchange rates 0.22 4.55 0.11 1.98
Derivatives on interest rates 1.79 1.88 — 0.54
Total non-current derivatives 2.01 6.43 0.11 2.52
(d) In line with notification of the Companies (Accounting Standards) Amendment Rules 2009 issued by Ministry of Corporate Affairs on
31st March, 2009 amending Accounting Standard-11 (AS-11) “The Effects of Changes in Foreign Exchange Rates (revised 2003)”, some of
the overseas subsidiaries who have prepared the accounts as per Indian GAAP for the purposes of consolidation have chosen to exercise
the option under para 46 inserted in the standard by the notification.
• During the year ` 4.71 Crores has been credited (P.Y. ` 38.76 Crores debited) to the profit and loss account out of Foreign Currency
Monetary Item translation Difference Account.
• ` 4.71 Crores (credit) (P.Y. ` 23.69 Crores (debit)) accumulated in the “Foreign Currency Monetary Item translation Difference
Account”, being the amount remaining to be realized as at 31st March, 2011.
25. Diminution in the Value of Investments
A. The Company through its Special Purpose Investment Vehicle holds the following stakes:
(1) Franco Tosi Meccanica S.p.A., Italy
(2) Sofinter, Italy
(3) Sadelmi, Italy
(4) SAE Powerline S.r.l., Italy
B. The Company has carried out its impairment test of the investments of Franco Tosi Meccanica, Sofinter and SAE Italy. Considering the
business plans of these entities and the results of the tests and the fact that all these entities have healthy order book positions and
adequate references in international markets notwithstanding the turbulent market conditions in Europe, the management is of the view
that there is no impairment in its investments in these companies.
C. The Company through its step down subsidiary P. Van Eerd Beheersmaatschappij B. V, Netherlands (PVAN) held a 50% shareholding
in Sadelmi S.p.A for Euro 7.5 Million., Italy (Sadelmi) with the remaining 50% held by Busi Impianti S.p.A, Italy since April 2008. Due
to the economic conditions prevailing in different parts of the world where Sadelmi was present some of the projects under execution
encountered serious contractual problems. Sadelmi therefore sought creditors’ protection through a Court in Italy and simultaneously,
as part of scheme, applied for transferring the remaining projects and leased all references standing in its name since inception to a new
Company Busi Power S.r.l. wholly held by Busi Group. By an Agreement dated 2nd March, 2009, Busi Group agreed to give PVAN 50% stake
in lieu of its stake in Sadelmi for a consideration of Euro 1 and convert the S.r.l. status into an S.p.A. to facilitate the same. Consequently
PVAN will cease to be a shareholder of Sadelmi from that date and will become a shareholder of Busi Power. The compliances is expected
to be reached in ensuing year, at which time Busi Group will duly capitalize its wholly owned subsidiary in India with an equity infusion
of Euro 2.5 Million and will also permit it to freely draw up the references to undertake future projects in India, as was mentioned in
the previous year consequent upon this arrangement. The management’s assessments of the references indicate that the value of such
references and the infusion of Euro 2.5 Million by Busi group would be in excess of the acquisition cost of such stake.
Consequent upon this arrangement, Busi Group will be wholly responsible for the operations and all future funding of Busi Power S.r.l. and
Gammon will be wholly responsible for the operations and future funding of the Indian subsidiary for the projects undertaken by them in
the territories identified respectively for them. The results of these operations will be consolidated in the Company after the Court scheme
is given effect to and the fresh set of financial are drawn up.
26. CONTINGENT LIABILITIES:
Sr.
No.
Particulars As at
31 st March, 2011
A NNUAL R EPORT I 2010/11
(` in Crores)
As at
31 st March, 2010
(i) Liability on contracts remaining to be executed on capital accounts 3,871.45 4,084.52
(ii) Counter Guarantees given to Bankers for Guarantees given by them and Corporate
Guarantees, on behalf of subsidiary,erstwhile subsidiary, associate companies stand at 4,822.69 4,274.14
(iii) Corporate Guarantees and Counter Guarantees given to Bankers towards Company’s share
in the joint Ventures for guarantees given by them to the Joint Venture Project Clients 626.82 468.14
(iv) Corporate Guarantees and Counter Guarantees given to Bankers by a step down subsidiary
& Joint Venture for their Projects 1,237.60 1,417.72
(v) Disputed Sales Tax liability for which the Company has gone into Appeal 25.71 23.88
(vi) Claims against the Company not acknowledged as debt 78.09 4.81
(vii) Disputed Excise Duty liability 0.03 0.03
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