Final Information Memorandum Dated March 19, 2020 ABB POWER PRODUCTS AND SYSTEMS INDIA LIMITED ABB Power Products and Systems India Limited was incorporated on February 19, 2019 at Bengaluru as a public limited company under the Companies Act, 2013, and was granted the certificate of incorporation by the Registrar of Companies, Bangalore (“RoC”). For further details, see “History and Certain Corporate Matters” beginning on page 37. Registered Office: 8th Floor, Brigade Opus, 70/401, Kodigehalli Main Road, Bengaluru 560 092, Karnataka, India Tel: +91 80 2204 1800 Email: [email protected]; Website: https://new.abb.com/grid/appsil Contact Person: Poovanna Ammatanda, General Counsel, Company Secretary and Compliance Officer CIN: U31904KA2019PLC121597 INFORMATION MEMORANDUM FOR LISTING OF 42,381,675 EQUITY SHARES OF FACE VALUE OF ₹2 EACH NO EQUITY SHARES ARE PROPOSED TO BE SOLD OR OFFERED PURSUANT TO THIS INFORMATION MEMORANDUM OUR PROMOTER: ABB ASEA BROWN BOVERI LTD GENERAL RISK Investments in equity and equity related securities involve a degree of risk and investors should not invest in any equity shares of our Company unless they can afford to take the risk of losing their entire investment. Investors are advised to read the risk factors carefully before taking a decision to invest in the equity shares of our Company. For taking an investment decision, investors must rely on their own examination of our Company, including the risks involved. Specific attention of the investors is invited to “Risk Factors” on page 6. COMPANY’S ABSOLUTE RESPONSIBILITY Our Company, having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to our Company, which is material in the context of the issue of equity shares pursuant to the Scheme, that the information contained in this Information Memorandum is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Information Memorandum as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. This Information Memorandum is filed pursuant to the Scheme, and is not an offer to the public at large. LISTING The Equity Shares of the Company are proposed to be listed on the BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”). For the purpose of this listing, the Designated Stock Exchange is BSE. The Company has submitted this Information Memorandum with BSE and NSE and the same has been made available on the Company’s website, https://new.abb.com/grid/appsil. The Information Memorandum would also be made available on the website of BSE (www.bseindia.com) and NSE (www.nseindia.com). REGISTRAR AND SHARE TRANSFER AGENT KFin Technologies Private Limited* Selenium, Tower B Plot 31-32, Gachibowli Financial District, Nanakramguda Serilingampally Mandal Hyderabad 500 032 Telangana *Formerly known as Karvy Fintech Private Limited Tel: +91 40 6716 2222 Fax: +91 40 2342 0814 Email: [email protected]Investor Grievance Email: [email protected]Website: www.kfintech.com Contact Person: N. Shiva Kumar SEBI Registration: INR000000221
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Final Information Memorandum
Dated March 19, 2020
ABB POWER PRODUCTS AND SYSTEMS INDIA LIMITED
ABB Power Products and Systems India Limited was incorporated on February 19, 2019 at Bengaluru as a public limited
company under the Companies Act, 2013, and was granted the certificate of incorporation by the Registrar of Companies,
Bangalore (“RoC”). For further details, see “History and Certain Corporate Matters” beginning on page 37.
Registered Office: 8th Floor, Brigade Opus, 70/401, Kodigehalli Main Road, Bengaluru 560 092, Karnataka, India
SECTION I: GENERAL ................................................................................................................................................ 1
DEFINITIONS, ABBREVIATIONS AND INDUSTRY RELATED TERMS .......................................................... 1 CERTAIN CONVENTIONS, PRESENTATION OF FINANCIAL AND MARKET DATA ................................. 4 FORWARD-LOOKING STATEMENTS .................................................................................................................... 5
GENERAL INFORMATION ...................................................................................................................................... 18 CAPITAL STRUCTURE ............................................................................................................................................. 20 SCHEME OF ARRANGEMENT ............................................................................................................................... 24 STATEMENT OF TAX BENEFITS ........................................................................................................................... 28
SECTION IV: ABOUT OUR COMPANY ................................................................................................................. 30
OUR BUSINESS ........................................................................................................................................................... 30 HISTORY AND CERTAIN CORPORATE MATTERS .......................................................................................... 37 OUR MANAGEMENT ................................................................................................................................................ 40 OUR PROMOTER, PROMOTER GROUP AND GROUP COMPANIES ............................................................ 45
SECTION VI: LEGAL AND OTHER INFORMATION ........................................................................................ 118
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ............................................................ 118 OTHER REGULATORY AND STATUTORY DISCLOSURES .......................................................................... 121
SECTION VII: OTHER INFORMATION............................................................................................................... 123
MAIN PROVISIONS OF ARTICLES OF ASSOCIATION .................................................................................. 123 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ............................................................... 128 DECLARATION ........................................................................................................................................................ 129
1
SECTION I: GENERAL
DEFINITIONS, ABBREVIATIONS AND INDUSTRY RELATED TERMS
This Information Memorandum uses certain definitions and abbreviations which, unless the context otherwise indicates or
implies, shall have the meaning as provided below. References to any legislation, act, regulation, rules, guidelines or
policies shall be to such legislation, act, regulation, rules, guidelines or policies as amended, supplemented or re-enacted
from time to time, and any reference to a statutory provision shall include any subordinate legislation made from time to
time under that provision.
General Terms
Term Description
“our Company”, “the Company”,
“APPSIL” or “Resulting Company”
ABB Power Products and Systems India Limited, a company incorporated under the
Companies Act, 2013 and having its registered office at 8th Floor, Brigade Opus, 70/401,
Kodigehalli Main Road, Bengaluru 560 092, Karnataka, India
“We”, “us” or “our” Unless the context otherwise indicates or implies, refers to our Company
Company Related Terms
Term Description
Appointed Date April 1, 2019
Articles of Association/ AoA The Articles of Association of our Company, as amended from time to time
Auditor The Statutory Auditors of our Company, namely, B S R & Co. LLP
Board Board of directors of our Company
INABB/ Transferor ABB India Limited
Share capital Share capital of the Company
Director(s) Director(s) of our Company
Demerged Undertaking All the businesses, undertakings, assets, liabilities, properties, operations and properties, of
whatsoever nature and kind and wheresoever situated, forming part of the Power Grid Business
as a going concern
Demerger The demerger of the Demerged Undertaking and subsequent transfer to our Company pursuant
to the Scheme with effect from Effective Date
Designated Stock Exchange BSE
Effective Date December 1, 2019
Equity Shares Equity shares of the Company having a face value of ₹2 each
Information Memorandum/ IM This Final Information Memorandum dated March 19, 2020 filed with the Stock Exchanges for
listing of Equity Shares and referred to as the Information Memorandum or IM
“Key Managerial Personnel” or
“KMP”
Key managerial personnel of our Company in accordance with Regulation 2(1)(bb) of the SEBI
ICDR Regulations as described in “Our Management” on page 40
Memorandum of Association/ MoA The Memorandum of Association of our Company, as amended
NCLT National Company Law Tribunal, Bengaluru Bench
Power Grids Business The development, engineering, manufacturing and sale of products, systems and projects that
relate to the business of: (a) power grids automation; (b) power grids integration; (c) high
voltage products; and (d) transformers, in each case, which were carried on by the Transferor.
Promoter The promoter of our Company, ABB Asea Brown Boveri Ltd
Promoter Group Persons and entities constituting the promoter group of our Company in terms of Regulation
2(1)(pp) of the SEBI ICDR Regulations. For details, see section “Our Promoter, Promoter
Group and Group Companies” on page 45
Record Date December 23, 2019
Registered Office Registered office of the Company located at 8th Floor, Brigade Opus, 70/401, Kodigehalli Main
Road, Bengaluru 560 092, Karnataka, India
Registrar and Transfer Agent KFin Technologies Private Limited (formerly known as Karvy Fintech Private Limited)
Registrar of Companies/ RoC Unless specified otherwise, the Registrar of Companies, Bangalore
Scheme/ Scheme of Arrangement Scheme of arrangement between INABB and the Company and their respective shareholders
and creditors as approved by the National Company Law Tribunal, Bengaluru Bench on
November 27, 2019
Share Entitlement Ratio Share entitlement ratio as set out under the Scheme being one fully paid-up Equity Share of
face value ₹2 each in the Company for every five fully paid up equity share(s) of face value ₹2
each of INABB
Stock Exchanges BSE and NSE
2
Technical/ Industry Related Terms/ Abbreviations
Term Description
AC Alternating current
API Application programming interface
CIGRE International Council on Large Electric Systems
CII Confederation of Indian Industry
CMM Coordinate-measuring machine
DC Direct current
EPC Engineering procurement construction
ERP Enterprise resource planning
FICCI Federation of Indian Chambers of Commerce and Industry
HVDC High-voltage direct current
IEEMA Indian Electrical And Electronic Manufacturer Association
kV kiloVolt
LV Low voltage
NABL National Accreditation Board for Testing and Calibration Laboratories
OEM Original equipment manufacturer
R&D Research and development
SCADA Supervisory control and data acquisition
T&D Transmission and distribution
TEC Telecommunication Engineering Center
TLC Technical lead centre
TOSA Trolley Bus Optimisation Systeme Alimentation
UHVDC Ultra high voltage direct current
Conventional and General Terms / Abbreviations
Term Description
₹/Rs./Rupees/INR Indian Rupees
BSE BSE Limited
CCI Competition Commission of India
CDSL Central Depository Services (India) Limited
CHF Swiss franc
CIN Corporate Identity Number
Companies Act, 2013 Companies Act, 2013, along with the relevant rules made thereunder
Depositories NSDL and CDSL
Depositories Act Depositories Act, 1996
DIN Director Identification Number
EPS Earnings Per Share
FEMA Foreign Exchange Management Act, 1999, read with rules and regulations there under
FEMA Regulations The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, the Foreign
Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments)
Regulations, 2019 or the Foreign Exchange Management (Debt Instruments) Regulations,
2019, as applicable
Financial Year/ Fiscal/ FY Unless stated otherwise, the period of 12 months ending December 31 of that particular year
GoI or Government or Central
Government
Government of India
GST Goods and Services Tax
India Republic of India
IT Information Technology
KYC Know your customer
Listing Regulations Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)
Equity Share capital of our Company prior to the consummation of the Scheme is as set forth below:
Particulars Amount (in ₹)
Authorised Share Capital
250,000 Equity Shares of ₹2 each 500,000
Issued, Subscribed and Paid-up Share Capital
50,000 Equity Shares of ₹2 each fully paid up 100,000
Securities Premium Nil
Equity Share capital of our Company upon consummation of the Scheme is as set forth below:
Particulars Amount (in ₹)
Authorised Share Capital
50,000,000 Equity shares of ₹2 each 100,000,000
Issued, Subscribed and Paid-up Share Capital
42,381,675(1)(2) Equity Shares of ₹2 each fully paid up 84,763,350
Securities Premium Nil (1) Pursuant to the Scheme, 42,381,675 Equity Shares were issued and allotted to the shareholders of INABB as per the Share Entitlement Ratio as
consideration for the Demerger (2) Includes 9,266 Equity Shares issued to the APPSIL Fractional Shares Trust 2019 pursuant to consolidation of fractional entitlements as per the
terms of the Scheme
1. Changes in the Authorised Capital
Set out below are the changes in the authorised capital since the incorporation of our Company.
Effective Date Particulars
December 12, 2019* The authorised share capital of ₹500,000 divided into 250,000 Equity Shares of ₹2 each was
increased to ₹100,000,000 divided into 50,000,000 Equity Shares of ₹2 each pursuant to
Clause 20.1(a) of the Scheme * Form SH-7 was filed with the RoC on December 11, 2019.
Notes to the Capital Structure
2. Share Capital History of our Company
a. The history of the Equity Share capital of our Company is provided in the following table:
Date of Allotment No. of Equity
Shares
Allotted
Face
value
(₹)
Issue Price per
Equity Share (₹)
Nature of
Consideration
Nature of
Allotment
Cumulative
number of
Equity Shares
February 19, 2019 50,000 2 2 Cash Initial subscribers
to the MoA(1)
50,000
December 24, 2019 42,381,675 2 NA Consideration
other than Cash
Pursuant to the
Scheme(2)
42,431,675
December 24, 2019 (50,000) 2 NA NA Cancelled
pursuant to the
Scheme(3)
42,381,675
(1) Allotment of 49,994 Equity Shares to INABB (represented by its authorised representative, Tyagavalli Krishnaswam Sridhar) and one Equity Share each to Sunil Laxman Naik, Bhanutej Keshavrao Patil, Choodamani Nurani Kumar, Eluppai Asthagiri Karthikeyan,
Jayanta Kumar Chatterjee and Harshavardhan Satishrao Nalawade who held such Equity Shares as nominees on behalf INABB, who
is the beneficial owner of such Equity Shares (2) Allotment to shareholders of INABB as on the Record Date, as per the Share Entitlement Ratio, and includes 9,266 Equity Shares issued
to the APPSIL Fractional Shares Trust 2019 pursuant to consolidation of fractional entitlements as per the terms of the Scheme, which
was credited to the demat account of the APPSIL Fractional Shares Trust 2019 on February 24, 2020 (3) Pursuant to the Scheme the allotment of 50,000 Equity Shares made to the initial subscribers to the MoA was cancelled
3. Issue of Shares for consideration other than cash
a. Our Company has not issued any Equity Shares out of revaluation of reserves or unrealized profits.
b. Other than the allotment of Equity Shares pursuant to the Scheme, our Company has not issued Equity
Shares for consideration other than cash as on date of this Information Memorandum.
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4. History of the Equity Share Capital held by our Promoter
Upon consummation of the Scheme, our Promoter, ABB Asea Brown Boveri Ltd, holds 31,786,256 Equity Shares,
equivalent to 75% of the issued, subscribed and paid-up Equity Share capital of our Company.
a. Build-up of our Promoter’s shareholding in our Company
Set forth below is the build-up of the shareholding of our Promoter since incorporation of our Company:
Date of
allotment/
Transfer
Nature of
allotment
No. of
Equity
Shares
Nature of
consideration
Face
value
per
Equity
Share
Issue
price/
Transfer
Price per
Equity
Share
Percentage
of the pre-
Scheme
capital
(%)
Percentage
of the
post-
Scheme
capital
(%)
ABB Asea Brown Boveri Ltd
December
24, 2019
Allotment
pursuant to
the Scheme
31,786,256 Consideration
other than cash
2 NA Nil 75
b. Shareholding of our Promoter and Promoter Group
Other than our Promoter, our Promoter Group members do not hold any Equity Shares.
c. Details of Lock-in
In accordance with paragraph (III)(A)(3) of Annexure 1 of the SEBI circular bearing no.
CFD/DIL3/CIR/2017/21 as amended by SEBI circular bearing no. CFD/DIL3/CIR/2018/2 dated January 3,
2018, the shareholding of our Promoter and the shareholders of our Company is exempt from lock-in, since
the shareholding of our Company post effectiveness of the Scheme is exactly similar to the shareholding
pattern of INABB i.e., the Transferor under the Scheme.
5. Employee Stock Options
As on the date of this Information Memorandum, our Company does not have any employee stock option scheme.
22
6. Shareholding Pattern of our Company
The table below presents the shareholding of our Company as on the date of this Information Memorandum:
ABB Power Products and Systems India LimitedBalance sheet as at December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
Current liabilities Financial liabilities Borrowings 17 347.62 Trade payables
18 6.4618 1,269.05
Other financial liabilities 15 254.70 Other current liabilites 19 626.28 Provisions 20 139.46
2,643.57
Total Equity and liabilities 3,488.73
Summary of significant accounting policies 2
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the Board of Directors ofChartered Accountants ABB Power Products and Systems India LimitedICAI Firm Registration No.: 101248W/W-100022 Corporate identity number (CIN) : U31904KA2019PLC121597
Amrit Bhansali Frank Duggan Venu Nuguri Mukesh Hari ButaniPartner Chairman Managing Director DirectorMembership no.: 065155 DIN: 02937233 DIN: 07032076 DIN: 01452839
Ajay Singh Poovanna C AmmatandaChief financial officer General Counsel &
Company SecretaryPlace: Bengaluru Mumbai (FCS4741)Date: February 28, 2020 February 28, 2020
The accompanying notes are an integral part of the financial statements
Total outstanding dues to micro enterprises and small enterprisesTotal outstanding dues to creditors other than micro enterprisesand small enterprises
63
ABB Power Products and Systems India LimitedStatement of profit and loss for the period from February 19, 2019 to December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
Notes For the period fromFebruary 19, 2019 to
December 31, 2019
IncomeRevenue from operations 21 3,230.74Other income 22 0.47
Total income 3,231.21
ExpensesCost of raw materials, components consumed andproject bought outs
23 1,752.22
(Increase)/ decrease in inventories of finished goods,work-in-progress and traded goods
ABB Power Products and Systems India LimitedStatement of profit and loss for the period from February 19, 2019 to December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
Other comprehensive incomeItems that will not be reclassified to profit or loss in subsequent periods:Re-measurement income on defined benefit plan 0.67Income tax effect 16 (0.17)Other comprehensive income for the period, net of income tax 0.50
Total comprehensive income for the period, net of income tax 165.89
Earnings per equity share of face value of `2 each 29Basic 44.69Diluted 44.69
Summary of significant accounting policies 2
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the Board of Directors ofChartered Accountants ABB Power Products and Systems India LimitedICAI Firm Registration No.: 101248W/W-100022 Corporate identity number (CIN) : U31904KA2019PLC121597
Amrit Bhansali Frank DugganPartner Chairman Managing Director DirectorMembership no.: 065155 DIN: 02937233 DIN: 07032076 DIN: 01452839
Ajay Singh Poovanna C AmmatandaChief financial officer General Counsel &
Company SecretaryPlace: Bengaluru Mumbai (FCS4741)Date: February 28, 2020 February 28, 2020
The accompanying notes are an integral part of the financial statements
Venu Nuguri Mukesh Hari Butani
65
ABB Power Products and Systems India LimitedStatement of Cash flows for the period from February 19, 2019 to December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
For the period fromFebruary 19, 2019 to
December 31, 2019
A. Cash flows from operating activities
Profit before tax 220.65
Adjustments to reconcile profit before tax to net cash flows provided by operating activitiesDepreciation and amortisation expense 48.41Unrealised exchange loss / (gains) (net) (0.71)Mark to market change in forward and commodity contracts (20.56)(Profit) / loss on sale of fixed assets (net) 0.34Provision for doubtful debts and advances / Bad debts / advances written off 5.21Interest income (0.47)Interest expense 26.38Operating profit before working capital changes 279.25
Movement in working capitalIncrease / (decrease) in trade payables 192.93Increase / (decrease) in other financial liabilities (44.97)Increase / (decrease) in other liabilities and provisions 14.72(Increase) / decrease in trade receivables (379.00)(Increase) / decrease in inventories (23.62)(Increase) / decrease in other financial assets 123.82(Increase) / decrease in loans and other assets (162.06)Cash generated from operations 1.07Direct taxes paid (net of refunds) (73.73)Net cash flow used in operating activities (72.66)
B. Cash flows from investing activitiesPurchase of property, plant and equipment (79.28)Proceeds from sale of property, plant and equipment 0.08Purchase of intangible assets (0.28)Decrease in capital advances 6.24Interest received 0.47Net cash flow used in investing activities (72.77)
66
ABB Power Products and Systems India LimitedStatement of Cash flows for the period from February 19, 2019 to December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
For the period fromFebruary 19, 2019 to
December 31, 2019C. Cash flows from financing activities
Proceeds from borrowings 347.62Interest paid (14.15)Net cash flow from financing activities 333.47
Net (decrease) / increase in cash and cash equivalents (A+B+C) 188.04Effect of exchange (loss) / gain on cash and cash equivalents -Cash and cash equivalents at the beginning of the period -Cash and cash equivalents at the end of the period (Refer note 10) 188.04
Components of cash and cash equivalentsCash and bank balances 188.04
188.04Notes:
2) Cash flow statement is made using the indirect method.
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the Board of Directors ofChartered Accountants ABB Power Products and Systems India LimitedICAI Firm Registration No.: 101248W/W-100022 Corporate identity number (CIN) : U31904KA2019PLC121597
Amrit Bhansali Frank Duggan Venu Nuguri Mukesh Hari ButaniPartner Chairman Managing Director DirectorMembership no.: 065155 DIN: 02937233 DIN: 07032076 DIN: 01452839
Ajay Singh Poovanna C AmmatandaChief financial officer General Counsel &
Company SecretaryPlace: Bengaluru Mumbai (FCS4741)Date: February 28, 2020 February 28, 2020
The accompanying notes are an integral part of the financial statements
1) Cash and cash equivalents at the end of the year represent cash and cheques on hand / remittence in transit and cash anddeposits with banks.
67
ABB Power Products and Systems India LimitedStatement of changes in equity for the period from February 19, 2019 to December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
a. Equity share capital:
Equity shares of ` 2 each issued, subscribed and fully paidNumber of shares Amount
As at February 19, 2019 50,000 0.01Changes in equity share capital 42,331,675 8.47As at December 31, 2019 42,381,675 8.48
b. Other equity :
Securities Premium General reserve Retained earnings Capital ReserveAmalgamation
adjustment deficitaccount
As at February 19, 2019 - - - - - -Transfer pursuant to scheme of arrangement (Refer note 37) 9.80 507.10 149.93 0.18 (1.56) 665.45Profit for the period - - 165.39 - - 165.39Other comprehensive income (net of tax) - - 0.50 - - 0.50As at December 31, 2019 9.80 507.10 315.82 0.18 (1.56) 831.34
Summary of significant accounting policies 2
The accompanying notes are an integral part of the financial statements
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the Board of Directors ofChartered Accountants ABB Power Products and Systems India LimitedICAI Firm Registration No.: 101248W/W-100022 Corporate identity number (CIN) : U31904KA2019PLC121597
Amrit Bhansali Frank Duggan Venu Nuguri Mukesh Hari ButaniPartner Director Director DirectorMembership no.: 065155 DIN: 02937233 DIN: 07032076 DIN: 01452839
Ajay Singh Poovanna C AmmatandaChief financial officer General Counsel & Company Secretary
(FCS4741)Place: Bengaluru MumbaiDate: February 28, 2020 February 28, 2020
Particulars Total equity
Reserves and surplus
68
ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
1 Corporate Information
2 Significant accounting policies2.1 Basis of preparation of financial statementsA Statement of compliance
B Functional and presentation currency
C Basis of measurement
2.2 Use of estimates
2.3 Critical accounting estimates and judgements2.3.1 Estimates
The financial statements have been prepared on the historical cost convention and on accrual basis, except for certain financialinstruments (refer accounting policy regarding financial instruments) , which are measured at fair values at the end of each reporting period, asexplained in the accounting policies below.
ABB Power Products and Systems India Limited (‘the Company’) is a public limited company domiciled in India and incorporatedunder the provisions of the Indian Companies Act, 2013 on February 19, 2019. The registered office is located at Bengaluru. TheCompany will serve utility and industry customers, with the complete range of engineering, products, solutions and services in areas ofPower technology. The Company has extensive installed base for manufacturing and a countrywide marketing and service presence.Besides catering to Indian domestic market, the Company is also playing an increasing role in the global market.The Company has applied for listing its equity shares in India and its application is under consideration with Securities Exchange Boardof India (SEBI). Once the Company is listed, its shares will be listed on Bombay Stock Exchange (BSE) and National Stock Exchange(NSE).The financial statements are prepared from the date of incorporation i.e. February 19, 2019 to December 31, 2019 ('the period') and thesame has been approved for issue by the Company's Board of Directors on February 28, 2020.
These financial statements are prepared and presented in accordance with Indian Accounting Standards ("Ind AS") notified under theCompanies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 andother relevant provision of the Act as amended from time to time.
The financial statements are presented in Indian Rupees crores, rounded off to two decimal places, except where otherwise indicated.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services as at the date ofrespective transactions.
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments andassumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts ofassets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts ofrevenues and expenses during the period. Application of accounting policies that require critical accounting estimates involvingcomplex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 2.3.Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes inestimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates arereflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes tothe financial statements.
a. Property, plant and equipmentProperty, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodicdepreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of itslife. The useful lives and residual values of Company's assets are determined by management at the time the asset is acquired andreviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well asanticipation of future events, which may impact their life, such as changes in technology.
69
ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
2.3.2 Judgements
2.4
Deferred tax assets and liabilities are classified as non-current assets and liabilities.The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
• Expected to be realised or intended to be sold or consumed in normal operating cycle;
b. Employee benefitsThe cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations.An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include thedetermination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and itslong-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at eachreporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plansoperated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of thepost-employment benefit obligation. The mortality rate is based on publicly available mortality tables. Those mortality tables tend tochange only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected futureinflation rate and past trends. Further details about gratuity obligations are given in Note 30.
Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised inthe financial statements is included in the following notes
- Note 34(b) - leases: whether an arrangement contains a lease; and- Note 34(b) - lease classification;
Current and non-current classificationThe Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated ascurrent when it is:
c. Provision for litigations and contingenciesThe provision for litigations and contingencies are determined based on evaluation made by the management of the present obligationarising from past events the settlement of which is expected to result in outflow of resources embodying economic benefits, whichinvolves judgements around estimating the ultimate outcome of such past events and measurement of the obligation amount. Due tothe judgements involved in such estimations the provisions are sensitive to the actual outcome in future periods.
d. Project revenue and costsThe Company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or coststo be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationshipbetween input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in whichsuch losses become probable based on the expected contract estimates at the reporting date.
• It is expected to be settled in normal operating cycle;• It is held primarily for the purpose of trading;• It is due to be settled within twelve months after the reporting period; or
• Held primarily for the purpose of trading;
All other assets are classified as non-current.
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after thereporting period.
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period;
The Company classifies all other liabilities as non-current;
• Expected to be realised within twelve months after the reporting period; or
All assets and liabilities have been classified as current or non- current as per the Company’s operating cycle and other criteria set out inSchedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets forprocessing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for thepurpose of current and non- current classification of assets and liabilities, except for projects business. The projects business compriseslong-term contracts which have an operating cycle exceeding one year. For classification of current assets and liabilities related toprojects business, the Company uses the duration of the individual life cycle of the contract as its operating cycle.
A liability is current when:
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
2.5 Foreign Currency
2.6 Revenue Recognition
2.7 Income taxes
Commission income is recognized as per contract terms and when accrued.
Dividend income is recognised when the Company’s right to receive the payment is established, which is generally when shareholdersapprove the dividend.Interest income is recognised on time proportion basis.
The Company has adopted Ind AS 115, “Revenue from Contracts with Customers”. Revenue is recognised to the extent that it isprobable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when thepayment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into accountcontractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company hasconcluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as ithas pricing latitude and is also exposed to inventory and credit risks.
Revenue are stated exclusive of goods and service tax and net of trade and quantity discount.Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to thebuyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received orreceivable, net of returns and allowances, trade discounts and volume rebates.
In case of large transformers, revenue is recognized on achievement of contractual milestone. Revenue recognized in excess of billinghas been reflected under “Other financial assets” as unbilled revenue.
Revenues from long-term contracts are recognized on the percentage of completion method, in proportion that the contract costsincurred for work performed up to the reporting date bear to the estimated total contract costs. Contract revenue earned in excess ofbilling has been reflected under “Other current assets” and billing in excess of contract revenue has been reflected under “Othercurrent liabilities” in the balance sheet. Full provision is made for any loss in the year in which it is first foreseen.
Liquidated damages / penalties are provided for as per the contract terms wherever there is a delayed delivery attributable to theCompany.Revenue from the development services is recognised as per the contract terms and when accrued. When the contract outcome cannotbe measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.
Functional currencyThe functional currency of the Company is the Indian Rupee.
Transactions and translationsInitial recognition transactions in foreign currencies are recorded by the Company at their respective functional currency spot rates atthe date the transaction first qualifies for recognition.Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at thereporting date. The gains or losses resulting from such translations are recognised in the statement of profit and loss.
Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at theexchange rate prevalent at the date when the fair value was measured. Non-monetary assets and non-monetary liabilities denominatedin a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for theperiod in which the transaction is settled. Revenue, expense and cash flow items denominated in foreign currencies are translated intothe relevant functional currencies using the exchange rate in effect on the date of the transaction.
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement ofprofit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in othercomprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to orrecovered from the tax authorities, using the tax rates and tax laws that have been enacted. Deferred income tax assets and liabilities arerecognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financialstatements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that therelated tax benefit will be realized.
71
ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
2.8 Property, plant and equipment
Particulars YearsLeasehold land 98Leasehold improvements 1-10Factory buildings 15-30Other buildings 3-60Furniture and fixtures 10Office equipments 3-5Plant and equipment 2-21Vehicles 5
2.9 Intangible assets
Particulars Years3-103-5
Useful lives estimated by the management in years:
Depreciation methods, useful lives and residual values are reviewed periodically, at each reporting date.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets arecarried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excludingcapitalised development costs, are not capitalised and the related expenditure is reflected in the statement of profit and loss in theperiod in which the expenditure is incurred.
AmortisationAmortisation is recognised in the statement of profit and loss on a straight line basis over the estimated useful lives of the intangibleassets.The estimated useful life of assets are as follows:
Technical know-how fees
The useful lives of intangible assets are assessed as either finite or indefinite.
Capitalized software costsGoodwill on business acquisition is not amortized but tested for impairment.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted bythe balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expensein the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extentthat it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can beutilized. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off therecognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Recognition and measurementFreehold Land is carried at historical cost, all other item of property, plant and equipment is measured at cost, net of accumulateddepreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition ofthe asset. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term constructionprojects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced atintervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed,its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.
All other repair and maintenance costs are recognised in statement of profit or loss as incurred. The Company identifies and determinescost of each component/ part of Property, plant and equipment separately, if the component/ part has a cost which is significant to thetotal cost of the Property, plant and equipment and has useful life that is materially different from that of the remaining asset.Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capitaladvances and cost of assets not ready for use at the balance sheet date are disclosed under capital work- in- progress.
DepreciationThe Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. Leaseholdassets are depreciated lower of lease period or life of the assets. The estimated useful lives of assets are as follows:
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
Provision for obsolescence is made wherever necessary.
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of theinstrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which areinitially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets andfinancial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition.
(i) Financial assets carried at amortised costA financial asset is subsequently measured at amortised cost if it is held within a business where the objective is to hold the asset inorder to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal amount outstanding.
Cost includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringingthem to their existing location and condition.
The factors that the Company considers in determining the provision for slow moving, obsolete and other non-saleable inventoryinclude estimated shelf life, planned product discontinuances, price changes, ageing of inventory and introduction of competitive newproducts, to the extent each of these factors impact the Company’s business and markets. The Company considers all these factors andadjusts the inventory provision to reflect its actual experience on a periodic basis.
Inventories consist of raw materials, work-in-progress, finished goods, traded goods and stores an spares. Inventories are measured atthe lower of cost and net realisable value.The cost of various categories of inventories is arrived at as follows:
Stores, spares, raw materials, components and traded goods - at rates determined on the moving weighted average method.
Goods in Transit – at actual cost.
Work-in-progress and finished goods - at full absorption cost method which includes direct materials, direct labour andmanufacturing overheads. Cost is determined on weighted average method.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial periodof time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed inthe period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with theborrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is anindication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with afinite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern ofconsumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, asappropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives isrecognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to besupportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Whenacquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease,whichever is lower.Lease payments under operating leases are charged to statement of profit and loss on straight line basis over the period of the lease,unless the payments are structured to increase in line with expected general inflation to compensate for the lessor's expectedinflationary cost increases.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and theestimated costs necessary to make the sale.
De-recognitionIntangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Gains orlosses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and thecarrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
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ABB Power Products and Systems India Limited Notes to the financial statements for the period from February 19, 2019 to December 31, 2019
2.14 Fair value of financial instruments
b. Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk ofchanges in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carryingamount of the asset and the maximum amount of consideration that the Company could be required to repay.
(ii) Financial assets at fair value through other comprehensive incomeA financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business where theobjective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial assetgive rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. TheCompany has made an irrevocable election for its investments which are classified as equity instruments to present the subsequentchanges in fair value in other comprehensive income based on its business model. Further, in cases where the Company has made anirrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changesin fair value are recognized in other comprehensive income.
(iii) Financial assets at fair value through profit or lossA financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
Financial assets or financial liabilities, at fair value through profit or loss.This category has derivative financial assets or liabilities which are not designated as hedges.
(iv) Financial liabilitiesFinancial liabilities are subsequently carried at amortized cost using the effective interest method, For trade and other payables maturingwithin one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of theseinstruments.
Certain commercial contracts may grant rights to the Company or the counterparties, or contain other provisions that are considered tobe derivatives. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics, accountedfor as separate derivative instruments and shown at their fair value in the balance sheet with changes in their fair value recognizedthrough profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in thestatement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profitor loss and the resulting exchange gains or losses are included in other income / expenses. Assets/ liabilities in this category arepresented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after thebalance sheet date.
(v) DerecognitionA financial asset is primarily derecognised when:• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cashflows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferredsubstantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks andrewards of the asset, but has transferred control of the asset.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedgeaccounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but isineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Fair value hierarchy: All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair valuehierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilitiesLevel 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectlyobservableLevel 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfershave occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fairvalue measurement as a whole) at the end of each reporting period.
74
ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
2.15 Cash flow statement
2.16 Other incomeOther income is comprised primarily of interest income. Interest income is recognized using the effective interest method.
2.17 Finance costs
2.18 Provisions & Contingent liability and contingent assets
2.19 Impairmenta Financial assets
b Non-financial assetsIntangible assets and property, plant and equipment
Borrowing costs are recognised in the statement of profit and loss using the effective interest method. The associated cash flows areclassified as financing activities in the statement of cash flows.
GeneralA provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that is reasonablyestimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of time value ofmoney is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current marketassessments of the time value of money and the risks specific to the liability.Where discounting is used, the increase in the provisiondue to the passage of time is recognised as a finance cost.
Warranty provisionsProvisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on historicalexperience. The initial estimate of warranty-related costs is revised annually.
Contingent LiabilityA contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognizedbecause it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises inextremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does notrecognize a contingent liability but discloses its existence in the financial statements.
Contingent assetsContingent assets are not recognised or disclosed in financial statements since this may result in the recognition of income that maynever be realised. However, when the realisation of income is virtually certain, then the relatedasset is not a contingent asset and isrecognised.
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, orwhen annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverableamount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverableamount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those fromother assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is consideredimpaired and is written down to its recoverable amount.
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstancesindicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. thehigher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generatecash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU towhich the asset belongs.
Financial assets (other than at fair value) The Company assesses at each date of balance sheet whether a financial asset or a group offinancial assets is impaired. Ind AS 109 (‘Financial Instruments’) requires expected credit losses to be measured through a lossallowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute afinancing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month expectedcredit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increasedsignificantly since initial recognition. The Company provides for impairment upon the occurrence of the triggering event.
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associatedwith investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
75
ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
2.20 Earnings per share
2.21 Employee benefits2.21.1 Gratuity & Provident Fund - Defined benefit plans
2.21.2 Superannuation - Defined contribution scheme
2.21.3 Compensated absences
2.22 Cash and cash equivalents
The Company presents basic and diluted Earnings per share for its ordinary shares. Basic earnings per equity share is computed bydividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstandingduring the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of theCompany by the weighted average number of equity shares considered for deriving basic earnings per equity share and also theweighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Thedilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. theaverage market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of theperiod, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
• Service cost including current service cost, past service cost and gains and losses on curtailments and settlements; and• Net interest expense or income.
Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interestrate risk are required to be met by the Company.
Contribution to Superannuation Fund, is made at pre-determined rates to the Superannuation Fund Trust and is charged to thestatement of profit and loss during the period in which the employee renders the related services. There are no other obligations otherthan the contribution payable to the Superannuation Fund Trust. The Company is in process of setting up the Superannuation FundTrust.
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefits. TheCompany measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unusedentitlement that has accumulated at the reporting date. The Company presents the entire accumulated leave as a current liability in thebalance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by theamount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversedin the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. Animpairment loss in case of goodwill is not reversed.The carrying amount of the asset is increased to its revised recoverable amount,provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortizationor depreciation) had no impairment loss been recognized for the asset in prior years.
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity ofthree months or less, which are subject to an insignificant risk of changes in value.For the purpose of statement of cash flows, cash and cash equivalents consist of cash and cheque at hand / remittance in transit andcash and deposit with bank.
The present value of the obligation under defined benefit plans are determined based on actuarial valuation using the Projected UnitCredit Method. In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefitplans to recognize the obligation on a net basis.The Company is in process of setting up trust for Gratuity and provident fund.
Remeasurement comprising of actuarial gains and losses is recognized in other comprehensive income (OCI) and is reflected in reservesand surplus as part of equity and is not eligible to be reclassified to profit or loss.
The Company recognises the following changes in the net defined benefit obligation as an expense in statement of profit and loss:
76
ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
2.23
Ind AS 116 - Leases
Recent Indian Accounting Standards (Ind AS)
Ind AS 116, LeasesThe Company is required to adopt Ind AS 116 Leases from January 1, 2020. Ind AS 116 replaces existing leases guidance, including IndAS 17 Leases. Ind AS 116 introduces a single Balance sheet lease accounting model for lessees. A lessee recognises a right-of-use assetrepresenting its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There arerecognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard –i.e. lessors continue to classify leases as finance or operating leases.
The following new standards and amendment to Ind AS have not been applied by the Company as they are effective for annual periodsbeginning on or after January 1, 2020:
ii. Leases in which the Company is a lessorNo impact is expected for leases in which the Company is a lessor.
iii. TransitionThe Company is currently evaluating the implication of Ind AS 116 on the financial statements.
Ind AS 12 – Income taxes (amendments relating to income tax consequences of dividend and uncertainty over income taxtreatments)An entity shall recognise the income tax consequences of dividends when it recognises a liability to pay a dividend. Therefore, the entityshall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to wherethe entity originally recognised those past transactions or events. The Company does not expect any significant impact of thisamendment on its financial statements.
Standards issued but not effective on Balance Sheet date:
The Company does not expect any significant impact of this amendment on its financial statements.
i. Leases in which the Company is a lesseeUnder the new standard, the Company will be required to recognise new assets and liabilities for its operating leases. The nature ofexpenses related to those leases will now change because the Company will recognise a depreciation charge for right-of-use assets andinterest expense on lease liabilities. Previously, the Company recognised operating lease expense on a straight-line basis over the term ofthe lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments andthe expense recognised. The Company is in the process of evaluating the potential impact of the adoption of Ind AS 116 on accountingpolicies followed in its financial statements. The quantitative impact of adoption of Ind AS 116 on the financial statements in the periodof initial application is not reasonably estimatable as at present.
a. whether an entity considers uncertain tax treatments separately - The entity shall use judgement to determine whether each taxtreatment should be considered separately or together with one or more other uncertain tax treatments based on which approach betterpredicts the resolution of the uncertainty and in determining the approach an entity might consider how it prepares its income taxfilings and supports tax treatments; or how the entity expects the taxation authority to make its examination and resolve issues thatmight arise from that examination.b. the assumptions an entity makes about the examination of tax treatments by taxation authorities- The entity shall assume that ataxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making thoseexaminations.c. how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates - The entity shallconsider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss),tax bases, unused tax losses, unused tax credits and tax rates would depend upon the aforesaid probability.
The amendment to Appendix C of Ind AS 12 outlines the following:
77
ABB Power Products and Systems India LimitedNotes to the financial statements for the period from February 19, 2019 to December 31, 2019
Ind AS 103 – Business Combinations and Ind AS 111 - Joint ArrangementsThe amendment to Ind AS 103 relating to re-measurement clarify that when an entity obtains control of a business that is a jointoperation and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisitiondate, the transaction is a business combination achieved in stages and the entity shall re-measure its previously held interests in thatbusiness. The amendment to Ind AS 111 clarifies that when an entity obtains joint control of a business that is a joint operation, theentity does not re-measure previously held interests in that business. The Company will apply the amendment if and when it obtainscontrol / joint control of a business that is a joint operation.
Ind AS 19 – Plan Amendment, Curtailment or SettlementThe amendment clarifies that when determining past service cost, or a gain or loss on settlement due to plan amendment, curtailmentor settlement, an entity shall remeasure the net defined benefit liability (asset) using the current fair value of plan assets and currentactuarial assumptions, including current market interest rates and other current market prices, reflecting:
b. the benefits offered under the plan and the plan assets before the plan amendment, curtailment or settlement; and
The Company does not expect any significant impact of this amendment on its financial statements.
Further, if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for theperiod after the re-measurement are determined using the assumptions used for the re-measurement. In addition, amendments havebeen included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.
a. the benefits offered under the plan and the plan assets before the plan amendment, curtailment or settlement; and
78
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
3 Property, plant and equipment and capital work-in-progress
Freehold Leasehold Leasehold Factory Other Plant and Office Furniture Vehiclesland land improvements buildings buildings equipment equipments and fixtures
As at December 31, 2019 13.71 9.53 0.36 138.11 27.66 522.44 6.05 13.73 0.31 731.90
Accumulated depreciationAs at February 19, 2019 - - - - - - - - - -Transfer pursuant to scheme of arrangement (Refer note 37) - 0.71 0.17 2.89 1.24 144.07 1.81 2.42 0.18 153.49Depreciation charge for the period - 0.07 0.03 4.42 2.20 35.39 0.51 0.99 0.04 43.65Disposals - - - - - (4.69) (0.03) (0.22) (0.01) (4.95)As at December 31, 2019 - 0.78 0.20 7.31 3.44 174.77 2.29 3.19 0.21 192.19
Net carrying value as at December 31, 2019 13.71 8.75 0.16 130.80 24.22 347.67 3.76 10.54 0.10 539.71
Capital work in progress as at December 31, 2019 56.69
Notes:1) There are no tangible assets given on operating lease.
Total
2) Freehold land, Leasehold land, Factory buildings and other buildings transferred to the Company, pursuant to the scheme of arrangement, as detailed in note 37 is in the process of being registered in the name ofthe Company.
79
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
4 Intangible assets
Technical Capitalised TotalKnow-how fees Software
Gross carrying valueAs at February 19, 2019 - - - -Transfer pursuant to scheme of arrangement (Refer note 37) 31.80 33.36 2.41 35.77Additions - - 0.28 0.28As at December 31, 2019 31.80 33.36 2.69 36.05
Accumulated amortisation / impairmentAs at February 19, 2019 - - - -Transfer pursuant to scheme of arrangement (Refer note 37) - 22.18 1.17 23.35Amortisation charge for the period - 4.46 0.30 4.76As at December 31, 2019 - 26.64 1.47 28.11
Net carrying value as at December 31, 2019 31.80 6.72 1.22 7.94
The carrying amount of goodwill was allocated to the cash generating units as follows: December 31, 2019
The Company tests whether goodwill has suffered any impairment on an annual basis as at December 31. The recoverable amount of aCash Generating Unit (‘CGU’) is determined based on value-in-use calculations which require the use of assumptions. The calculations usepre-tax cash flow projections based on financial budgets approved by the management. An average of the range of each assumption used ismentioned below.
The above discount rate is based on the Weighted Average Cost of Capital (WACC) which represents the weighted average returnattributable to all the assets of the CGU. These estimates are likely to differ from future actual results of operations and cash flows.Based on the above assessment, there has been no impairment of goodwill.
GoodwillOther intangible assets
80
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
Non-current CurrentDecember 31, 2019 December 31, 2019
5 Loans(Unsecured considered good, unless otherwise stated)
Security deposits 4.58 4.50Loans to employees - 3.80
4.58 8.30
81
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 2019
6 Non-current tax asset (net)Advance income-tax (net of provision for tax) 11.53
11.53
82
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 2019
7 Other non-current assetsCapital advances 1.85
Advances recoverable in cash or kind (considered doubtful) 1.94Less: Provision for doubtful advances 1.94
-
Taxes and duties recoverable 0.70Prepaid rent 0.24
2.79
83
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 20198 Inventories (valued at lower of cost and net reliasable value)
Raw materials and components (includes goods in transit goods of `109.08) 332.88Work-in-progress 146.42Finished goods 12.15Traded goods 0.49Stores and spares 1.26
493.20
During the period ended December 31, 2019, `1.71 crores was recognised as an expense in relation to inventory obsolescence.
84
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
Non-current CurrentDecember 31, 2019 December 31, 2019
9 Trade receivables
UnsecuredConsidered good - 1,792.85Considered doubtful - 107.91Credit impaired 78.73 -
78.73 1,900.76Less:Loss allowance on doubtful trade receivable 78.73 107.91
- 1,792.85
85
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 2019
10 Cash and cash equivalents
Balances with banks- in current accounts 188.04
188.04Cash and cash equivalents in the balance sheet and statement of cash flows
86
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 2019
11 Other current financial assets(Unsecured considered good, unless otherwise stated)
Deposits with customers 11.88Contract revenue in excess of billing / unbilled revenue 66.45Other receivables 22.95Mark to market gain on forward contracts* 13.01Mark to market gain on embedded derivatives* 11.29
125.58
* Mark to maket gain is identified and accounted based on the underlying contracts. The derivativies are recognised at fair value throughstatement of profit & loss.
87
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 201912 Other current assets
Prepaid expenses 1.70Contract assets (refer note 36) 171.08Advances recoverable in cash or kind 42.57Balance with government authorities 10.37
225.72
88
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
13 Equity
Share capital
Number of shares AmountAuthorised share capitalAt February 19, 2019 250,000 0.05Increase during the period 49,750,000 9.95At December 31, 2019 50,000,000 10.00
Issued equity share capitalEquity shares of `2 each issued, subscribed and fully paid up Number of shares AmountAt February 19, 2019* 50,000 0.01Changes in equity share capital ** 42,331,675 8.47At December 31, 2019 42,381,675 8.48
Terms/rights attached to equity shares
Details of shareholders holding more than 5% of the shares in the Company
Name of the shareholders Number of shares % of holding
ABB Asea Brown Boveri Limited - the holding company 3,17,86,256 75.00%
Shares held by holding / ultimate holding company Number of shares Amount
ABB Asea Brown Boveri Limited - the holding company 31,786,256 6.3631,786,256 6.36
Equity shares
As at December 31, 2019
As per records of the Company and other declarations received from shareholders, the above shareholding represents both legal andbeneficial ownerships of shares.
*On incorporation of the Company, pursuant to the scheme of arrangement, the equity shares were held by ABB India Limited. (Refer note37).
**On December 24, 2019 , the Company issued 42,381,675 number of fully paid equity shares having face value of `2 each to the existingequity shareholders of ABB India Limited in the proportion of 1 share for every 5 shares held, pursuant to the scheme of arrangement.Further, 50,000 number of shares issued to the ABB India Limited at the time of incorporation of the Company has been cancelled as perthe aforesaid scheme. (Refer note 37)
The Company has only one class of equity shares having a par value of `2/- per share. Each holder of equity shares is entitled to one voteper share. The Company declares and pays dividends in Indian Rupees.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, afterdistribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
89
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 201914 Other equity
a) Securities premiumTransfer pursuant to scheme of arrangement (Refer note 37) 9.80Closing balance 9.80
b) Retained earningsTransfer pursuant to scheme of arrangement (Refer note 37) 149.93Net profit for the period 165.39Other comprehensive income (net of tax) 0.50Closing balance 315.82
c) Amalgation adjustment deficit accountTransfer pursuant to scheme of arrangement (Refer note 37) (1.56)Closing balance (1.56)
d) Capital reserveTransfer pursuant to scheme of arrangement (Refer note 37) 0.18Closing balance 0.18
e) General reserveTransfer pursuant to scheme of arrangement (Refer note 37) 507.10Closing balance 507.10
Total other equity 831.34
Nature and purpose of other reservesa) Securities premium
b) Amalgation adjustment deficit account
c) Capital reserveCapital reserve acquired pursuant to scheme of arrangement.
d) General reserveGeneral reserve acquired pursuant to scheme of arrangement. The Company can use this reserve for payment of dividend and issue offully paid-up shares. As General reserve is created by transfer of one component of equity to another and is not an item of othercomprehensive income, items included in the General reserve will not be subsequently reclassified to statement of profit and loss.
Securities premium acquired pursuant to scheme of arrangement and shall be utilised in accordance with the provisions of CompaniesAct, 2013.
Amalgamation adjustment deficit account is the deficit between the carrying value of assets, liabilities and reserves transferred to theCompany and the consideration discharged by way of the New Equity Shares issued to the shareholders of ABB India Limited pursuantto the demerger of Power Grid Business from ABB India Limited.
90
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
Non-current CurrentDecember 31, 2019 December 31, 2019
15 Other financial liabilities
Security deposits received 1.18 0.01Payable towards purchase of fixed assets - 39.25Employee related payables - 37.44Interest accrued but not due - 12.23Mark to market loss on embeded derivatives* - 8.98Mark to market loss on forward contracts* - 9.07Other payables - 147.72
1.18 254.70
* Mark to maket gain is identified and accounted based on the underlying contracts. The derivativies are recognised at fair value throughstatement of profit & loss.
91
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 2019
16 Income taxThe major components of income tax expense for the periodStatement of profit and loss:
Current tax 62.20Deferred tax (6.94)
Income tax expense reported in the statement of profit and loss 55.26
Other comprehensive incomeDeferred tax related to items recognised in OCI during the year: (0.17)
Income tax expense charged to OCI (0.17)
Reconciliation of tax expense and the accounting profit multiplied by India’s domestic tax rateAccounting profit before income tax 220.65At India's statutory tax rate of 25.17% for the period ended December 31, 2019 55.54
Adjustments in respect of current income taxNon-deductible expenses for tax purposes 0.34Change in Income tax rate (3.06)Other deductible expenses for tax purpose 2.44
Income tax expense at effective tax rate of 25.04% 55.26Deferred tax assets/(liabilities) relates to the following:
Property, plant and equipment (59.21)Intangible assets and goodwill (8.76)Provision for doubtful debts and advances 47.47Demerger related expenses 7.49Expenditure debited to the statement of profit and loss but allowable for tax purpose in subsequent years 8.85
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 201917 Borrowings
(At amortized cost)
Loans from related party (Unsecured)Payable to ABB India Limited 347.62
347.62
The above said loan is subsequently repaid on February 11, 2020.
93
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 2019
18 Trade PayablesDues to micro and small enterprises * 6.46
6.46
Dues to creditors other than micro and small enterprisesAcceptances 213.65Other trade payables 1,055.40
1,269.05
1,275.51
*
(i) The principal amount and the interest due thereon remaining unpaid to any supplier as at December 31, 2019Principal amount 4.76Interest 0.87
(ii) The amount of interest paid by the Company along with the amounts of the payment made to the supplier beyond theappointed day for the period ended December 31, 2019Principal amount -Interest -
(iii) The amount of interest due and payable for the period of delay in making payment (beyond the appointed day duringthe year) 0.83
(iv) The amount of interest accrued and remaining unpaid for the period ended December 31, 2019 1.70
(v) The amount of further interest remaining due and payable for the earlier years. -
(vi) The amount (including interest) due as at December 31, 2019 6.46
The Company has amounts due to Micro and Small Enterprises under The Micro, Small and Medium Enterprises Development Act, 2006(MSMED Act) as at December 31, 2019.
The above disclosures are provided by the Company based on the information available with the Company in respect of the registration status of itsvendors/suppliers.
94
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 2019
19 Other current liabilities
Billing in excess of contract revenue (Refer note 36) 280.83Statutory dues payable 31.86Advance from customer 313.59
626.28
95
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
CurrentDecember 31, 2019
20 Provisions
Provisions for employee benefitsGratuity (Refer note 30) 3.76Provident fund 0.12Leave benefits 20.42
Other provisionsWarranties 92.43Loss orders 22.73
139.46
Nature of provisions:
i)
ii)
Details of changes in provisions during the period ended December 31, 2019
Class of provisions Transfer pursuant toscheme of
arrangement
Additions Amounts used Unused Amountsreversed
As atDecember 31, 2019
Warranties 84.84 18.08 7.19 3.30 92.43
Loss orders 30.09 12.57 19.910.02 22.73
Warranties: The Company provides warranties for its products, systems and services, undertaking to repair or replace the items that fail toperform satisfactorily during the warranty period. Provision made as at December 31, 2019 represents the amount of the expected cost based ontechnical evaluation and past experience of meeting such obligations. It is expected that this expenditure will be incurred over the contractualwarranty period.
Loss orders: A provision for expected loss on construction contracts is recognised when it is probable that the contract costs will exceed totalcontract revenue. For all other contracts loss order provisions are made when the unavoidable costs of meeting the obligation under the contractexceed the currently estimated economic benefits.
96
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
For the period fromFebruary 19, 2019 to
December 31, 2019
21 Revenue from operations (net)
Sale of products and servicesSale of products 2,483.24Sale of services 706.58
3,189.82Other operating revenues Scrap sales 10.25 Commission income 1.20 Income from development services 26.93 Miscellaneous income 2.54
40.92
Revenue from operations (net) 3,230.74
22 Other income
Finance incomeInterest income: Interest on security deposit 0.07
0.07Other income Interest income 0.40
0.40
0.47
97
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
For the period fromFebruary 19, 2019 to
December 31, 2019
23 Cost of raw materials, components consumed and project bought outs
Raw material and components consumedInventory at the beginning of the period (Transfer pursuant to scheme of arrangement) 254.22Add : Purchases during the period 1,830.88Less : Inventory at the end of the period 332.88
Cost of raw materials consumed 1,752.22
24 (Increase)/ decrease in inventories of finished goods, work-in-progress and traded goods
Transfer pursuant to scheme of arrangement- Finished goods 13.28- Work-in-progress 200.86- Traded goods 0.47
Salaries, wages and bonus 223.01Gratuity expense (Refer note 30) 4.70Provident fund expense (Refer note 30) 3.45Contribution to superannuation and other funds 7.25Staff welfare expenses 11.08Training, recruitment and transfer expenses 0.27
249.76
26 Depreciation and amortisation expense
Depreciation of tangible assets 43.65Amortisation of intangible assets 4.76
48.41
98
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
For the period fromFebruary 19, 2019 to
December 31, 201927 Finance costs
Interest expenses 18.80Bill discounting and other charges 7.26Interest expense on provisions measured at amortised cost 0.32
26.38
28 Other expenses
Consumption of stores and spares 18.21Packing expenses 7.96Royalty and technology fees 129.92Freight and forwarding 79.59Postage and telephone 0.94Commission (other than sole selling agent) 3.42Power and fuel 42.58Travelling and conveyance 35.83Insurance 15.95Rates and taxes (net) 3.15Rent 9.76Repairs and maintenance: Buildings 1.33 Plant and machinery 15.27 Others 2.65Provision for doubtful debts and advances / Bad debts / advances written off 5.21Loss on sale of fixed assets (net) 0.34Printing and stationery 1.09Bank charges 1.39Legal and professional* 12.88Trade-mark fees 35.26Information technology expenses 6.88Exchange and commodity rate difference (net) 2.01Services from third parties 29.30Testing and inspection charges 8.26Seminar and publicity expenses 3.09Group management fees 66.03Miscellaneous 29.67
567.97
* Includes auditor's remuneration towards the following:Statutory audit and Group audit fees 1.58
99
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
For the period fromFebruary 19, 2019 to
December 31, 2019
29 Earning per share (EPS)The following reflects the income and share data used in the basic and diluted EPS computations
EarningsProfit attributable to equity shareholders 165.39
SharesWeighted average number of Equity Shares outstanding during the period - basic 3,70,06,224Dilutive effect on shares -Weighted average number of Equity Shares outstanding during the period - diluted 3,70,06,224
Earnings per share of par value ` 2/- each - Basic and diluted (in `) 44.69
100
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
30 Gratuity and other post-employment benefit plans
Provident fund plan
December 31, 2019A Gratuity
Gratuity provision 3.76Total 3.76
i) Changes in the defined benefit obligation and fair value of plan assets as at Deccember 31, 2019:
Defined benefitobligation
Fair value ofplan assets
Benefit liability
As at February 19, 2019 - - -Transfer pursuant to scheme of arrangement 61.81 55.32 6.49
Gratuity cost charged to profit or loss:Service cost 3.54 - 3.54Net interest expense 3.35 2.19 1.16Total amount recognised in statement of profit and loss (Note 25) 6.89 2.19 4.70
Remeasurement (gains)/losses in other comprehensive income:- 4.13 (4.13)
Actuarial changes arising from changes in financial assumptions 2.12 - 2.12Experience adjustments 1.34 - 1.34Total amount recognised in other comprehensive income 3.46 4.13 (0.67)
Contributions by employer - 6.77 (6.77)Benefits paid (2.81) (2.82) 0.01As at December 31, 2019 69.35 65.59 3.76
ii) Amount recognized in balance sheetDecember 31, 2019
Present value of funded obligations 69.35Fair value of plan assets 65.59Net funded obligation (3.76)Net defined benefit liability recognised in balance sheet (3.76)
The Company has a defined benefit gratuity plan and provident fund plan and is in process of setting up the trusts to manage theaforesaid plans.
Gratuity plan :Gratuity is payable to all eligible employees of the Company as per the provisions of the Payment of Gratuity Act, 1972 or as perthe Company’s scheme, whichever is higher. The plan assets are held by Asea Brown Boveri Ltd Employees Gratuity Fundon behalf of the Company.
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under theProvident Fund and Miscellaneous Provisions Act, 1952. The plan assets are held by ABB India Employees’ Provident FundTrust on behalf of the Company till the period November 30, 2019 and subsequently it has been remiited to the Regionalprovident fund organisation. The Contribution by employee and employer together with interest are payable at the time ofseparation from service or retirement whichever is earlier.
Assumptions relating to future salary increases, attrition, interest rate for discount and overall expected rate of return on assetshave been considered based on relevant economic factors such as inflation, market growth and other factors applicable to theperiod over which the obligation is expected to be settled.
The following table sets out movement in defined benefits liability and the amount recognised in thefinancial statements:
Return on plan assets (excluding amounts included in net interestexpense)
101
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
iii) Expense recognised in profit or loss December 31, 2019
Current Service Cost 3.54Interest Cost 1.16
4.70
iv) Remeasurements recognised in other comprehensive income
Actuarial loss on defined benefit obligation 3.46Return on plan assets excluding interest income (4.13)
(0.67)
v) The major categories of plan assets of the fair value of the total plan assets are as follows:
Investments quoted in active marketsGovernment of India Securities (Central and State) 8.28%High quality corporate bonds (including Public Sector Bonds) 6.45%Cash 17.49%Scheme of insurance - Conventional products 67.78%Total 100.00%
vi) The principal assumptions used in determining gratuity obligations are shown below:
Discount rate 6.90%Future salary increases 7.75%
vii) The following payments are expected contributions to the defined benefit plan in future years
Within the next 12 months (next annual reporting period) 3.46Between 2 and 5 years 31.38Beyond 5 years 45.07Total expected payments 79.91
viii) A quantitative sensitivity analysis for significant assumption as at December 31, 2019 is as shown below:
The average duration of the defined benefit plan obligation at the end of the reporting period is 10 years.
December 31, 2019
The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligationas a result of reasonable changes in key assumptions occurring at the end of the reporting period.
102
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
B Provident fund
Defined benefitobligation
Fair value ofplan assets
Benefit liability
i)
As at February 19, 2019 - - -Transfer pursuant to scheme of arrangement 208.18 204.63 3.55Current service cost 31.57 - 31.57Interest expense 19.97 19.77 0.20Return on plan assets - 14.25 (14.25)Contributions - 30.94 (30.94)Benefit payments (17.73) (17.73) -Actuarial loss 9.99 - 9.99As at December 31, 2019 251.98 251.86 0.12
ii) Amount recognized in balance sheetDecember 31, 2019
Present value of funded obligations 251.98Fair value of plan assets 251.86Net funded obligation (0.12)Net defined benefit liability recognised in balance sheet (0.12)
iii) The principal assumptions are shown below: December 31, 2019Discount rate 6.90%Expected return on EPFO
iv) A quantitative sensitivity analysis for significant assumption as at December 31, 2019 is as shown below:0.5% increase in discount rate (5.22)0.5% decrease in discount rate 8.92
Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach
v) The major categories of plan assets of the fair value of the total plan assets are as follows:
Investments quoted in active marketsGovernment of India Securities (Central and State) 52.14%High quality corporate bonds (including Public Sector Bonds) 34.20%Cash (including Special Deposits) 13.66%Total 100.00%
vii)
viii)The company contributed `3.45 Crores towards employer's contribution for provident fund during the period December 2019.
8.65% for the first year and 8.60% thereafter
The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreigndefined benefit plans.
The sensitivity results above determine their individual impact on the plan's end of year defined benefit obligation. In reality, theplan is subject to multiple external experience items which may move the defined benefit obligation in similar or oppositedirection, while the plan's sensitivity to such changes can vary over time
Changes in the defined benefit obligation and fair value of planassets
103
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
31 Financial InstrumentsA Fair value of financial assets and financial liabilities
Particulars December 31, 2019Financial Assets at fair value/amortised cost :Loans (refer note 5) 12.88Trade and other receivables (refer note 9) 1,792.85Cash and cash equivalents (refer note 10) 188.04Other financial assets (refer note 11) 101.28
Financial assets at fair value through profit and loss :Derivative instruments (refer note 11) 24.30
Financial assets at fair value through profit and loss :Derivative instruments (refer note 15) 18.05
1,879.01
B Fair value Hierarchy
Particulars Amount Level 1 Level 2 Level 3
Financial assets at fair value through profit and loss :Derivative instruments (refer note 11) 24.30 - 24.30 -
Financial liabilities at fair value through profit and loss :Derivative instruments (refer note 15) 18.05 - 18.05 -
Valuation techniques and significant unobservable inputs
There were no transfers between Level 1, Level 2 and Level 3 during the period
The Company’s assets and liabilities which are measured at amortised cost for which fair values are disclosed at December 31, 2019
Total financial liabilities
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 financialstatements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified itsfinancial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneaththe table.
The management assessed that the carrying value of trade receivables, loans, trade payables, other financial assets and liabilities andcash and cash equivalents approximate their fair values, due to the short term maturities of these instruments.
The fair value of financial assets and liabilities is included at the amount at which the instruments could be exchanged in a currenttransaction between willing parties other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
The following table presents the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as at December31, 2019:
The Company enters into derivative financial instruments with banks/ financial institutions. Foreign currency forward contracts arevalued using valuation techniques which employs the use of market observable inputs using present value calculations. The modelincorporates various inputs including the deal specific fundamental, market conditions, maturity period, transaction size, comparabletrades, foreign currency spot and forward rates.
104
C Financial risk management
(i) Market risk
Commodity contracts
Buy /Sell
BuyBuy
(ii) Foreign currency risk
a) Unhedged in foreign currency exposure
The following table analyses the unhedged portion of foreign currency exposure as at December 31, 2019:Particulars SEK BDT BTN CNY OthersTrade receivables (` in Crores) 55.83 4.00 7.68 - 4.181% increase 0.56 0.04 0.08 - 0.041% decrease (0.56) (0.04) (0.08) - (0.04)
The Company uses commodity future contracts to hedge risk against fluctuation in commodity prices. The following are outstandingfuture contracts entered into by the Company as on December 31, 2019.
Year Commodity Number of contracts Contractualquantity
The Company’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of thesefinancial liabilities is to support its operations. The Company’s principal financial assets include trade and other receivables, and cashand cash equivalents that derive directly from its operations.
The Company is exposed to market risk, liquidity risk and credit risk. The Company’s senior management oversees the managementof these risks. The Company’s senior management is supported by a Risk management committee that advises on financial risks andthe appropriate financial risk governance framework for the Company. The Risk management committee provides assurance to theCompany’s senior management that the Company’s financial risk activities are governed by appropriate policies and procedures andthat financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. All derivativeactivities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision.It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviewsand agrees policies for managing each of these risks, which are summarised below.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in marketprices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk andcommodity risk. Financial instruments affected by market risk include loans and borrowings, trade payables, deposits and investments.
The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarilywith respect to the SEK. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilitiesdenominated in a currency that is not Company’s functional currency (INR).
December 31, 2019Balance at the beginning of the period -Transfer as part of scheme of arrangement 190.92Add: Additional ECL provision/(reversal) (2.98)Add: Additional provision 20.67Less: Utilisation/reversal 21.97Balance at the end of the period 186.64
b) Other than trade receivables
The Company's exposure to changes in interest rates relates primarily to the Company's outstanding Payable to ABB India Limited.
Payable to ABB India Limited
The above loan carries an interest rate of 10%. The interest rate is fixed, hence there is no interest rate risk applicable for theCompany. Further, the aforementioned loan has been subsequently repaid on February 11, 2020.
ParticularsReconciliation of loss allowance
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provisionmatrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forwardlooking estimates. At year end, the historical observed default rates are updated and changes in the forward-looking estimates areanalyzed.Individual receivables which are known to be uncollectible are written off by reducing the carrying amount of trade receivable and theamount of the loss is recognised in the statement of profit and loss within other expenses.
Specific allowance for loss is also been provided by the management based on expected recovery on individual customers.The provision provided in books for trade receivables overdue:
Trade receivables consists of a large number of customers spread across diverse industries.The Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivable. Under the simplifiedapproach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLsat each reporting date, right from initial recognition.
The exposure of the Company’s borrowing to interest rate changes at the end of the reporting period are asfollows:
Management believes that the parties from which the receivables are due have strong capacity to meet the obligations and risk ofdefault is negligible or nil and accordingly no provision for expected credit loss has been recorded.
Management does not expect any significant loss from non-performance by counterparties on credit granted during the financial yearthat has not been provided for.
Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to clients, including outstandingaccounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective ofmanaging counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of thecounterparties, taking into account their financial position, past experience and other factors.
Particulars December 31, 2019Borrowings 347.62Trade payables 1,275.51Other financial liabilities 255.88
188.04Net Debt 1,690.97
Total equity 839.82
Capital and net debt 2,530.79
Gearing ratio 67%
December 31, 2019
Less: Cash and cash
For the purpose of the Company’s capital management, capital includes issued equity capital, securities premium and all other equityreserves attributable to the equity holders of the parent. The primary objective of the Company’s capital management is to maximisethe shareholder value.The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirementsof the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders,return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided bytotal capital plus net debt.
The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdraftsand debentures. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability offunding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions.Due to the dynamic nature of the underlying businesses, Company maintains flexibility in funding by maintaining availability undercommitted credit lines.
The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.
December 31, 2019
In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meetsfinancial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. No changes weremade in the objectives, policies or processes for managing capital during the period ended December 31, 2019.
107
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
December 31, 201933 Contingent liabilities and contingent assets
Contingent liabilities (Claims against the Company not acknowledged as debts)
Other matters 55.92-
55.92The Company does not have any contingent assets at the balance sheet date.
34 Commitments
(a) Capital commitments
50.66
(b) Non-cancellable operating leases
The schedule of future minimum lease payments in respect of non cancellable operating leases is set out below:ParticularsWithin one year 9.45Later than one year but not later than five years 26.62Later than five years -
-Total 36.07
(c) Finance leaseThere are no assets taken on finance lease as on December 31, 2019.
The Company has taken several premises and vehicles under cancellable and non-cancellable operating leases. These leaseagreements are normally for one to five years and have option of renewal on expiry of lease period based on mutual agreement.
Some of the lease agreements have escalation clause ranging from 5% to 15%. There are no exceptional/restrictive covenants in thelease agreement. There are no assets given on operating lease.
Rental expenses towards cancellable and non-cancellable operating lease charged to the statement of profit and loss amounts toRs.9.76 crores for the period ended December 31, 2019.
December 31, 2019
The Company is contesting the demands and the management believes that its position will likely be upheld in the various appellateauthorities/courts. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect onthe Company's financial position.
In respect of the above contingent liabilities, the future cash outflows are determinable only on receipt of judgement pending atvarious forums / authorities.
Estimated amount of contracts remaining to be executed on account of capital commitmentsand not provided for (net of advances)
108
ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
35 Segment information
(i) The entity wide disclosures as required by Ind AS-108 are as follows:
Description For the period fromFebruary 19, 2019 to
December 31, 2019
Sale of products 2,483.24Sale of services 706.58Other operating revenues 40.92Revenue from operations 3,230.74
(ii) Geographical information
Revenue from customers For the period fromFebruary 19, 2019 to
December 31, 2019India 2,699.97Other countries* 530.77
3,230.74*Exports to any single country are not material to be disclosed
Non-current assets** December 31, 2019India 638.93Other countries* -
638.93** Non current assets does not include deferred tax assets, financial instruments and non-current tax assets.
36 Revenue from contracts with customersa) Disaggregated revenue information
Revenue by geography For the period fromFebruary 19, 2019 to
December 31, 2019 2,699.97
530.773,230.74
An operating segment is a component that engages in business activities from which it may earn revenues and incur expenses, includingrevenues and expenses that relate to transactions with any of the other components, and for which discrete financial information isavailable. The company is engaged in the business relating to products, projects and services for electricity transmission and relatedactivities. Accordingly, the Company's activities and business is reviewed regularly by the chief operating decision maker from an overallbusiness perspective, rather than reviewing its products/services as individual standalone components. Thus, the Company has only oneoperating segment, and has no reportable segment in accordance with Ind AS- 108 'Operating Segments'.
IndiaOther countries*
* Exports to any single country are not material to be disclosed.
(iii) Power Grid Corporation of India Limited accounts more than 10% of Company's total revenue from operations.
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
Revenue by offerings For the period fromFebruary 19, 2019 to
December 31, 2019Sale of products 2483.24Sale of services 706.58Other operating revenue 40.92
3,230.74
b) Contract balances December 31, 2019Trade receivables 1,792.85Advance from customers (Contract liabilities) 313.59Billing in excess of contract revenue 280.83Contract assets 171.08Contract revenue in excess of billing / unbilled revenue 66.45
During the period, the company has recognised of ` 173.04 crores arising from opening deferred income as of April 1, 2019.
d) Performance ObligationInformation about the Company’s performance obligations are summarised below:
Execution of long term contract for projectsi.)
ii.)
A contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer andhence is not a financial instrument. In Company’s contracts with customers, since the contractual right to payment arises only uponachievement of milestones specified in the contract, it is believed that the performance completed until the achievement of a particularmilestone should be recorded as a contract asset under non-financial assets.
During the period ` 54.93 crores of contract assets pertaining to the long term contracts as of April 1, 2019 has been reclassified to tradereceivables upon billing to customers on completion of milestones.
c) No significant adjustment expected in contract price for revenue recognised in statement of profit and loss.
Long term (Construction type) contracts - The long term contracts are ordinarily presumed to consist of combined obligations whichare not distinct in the context of the contract (i.e., single performance obligation). This is highly attributed to the long-term constructionnature of the projects, whereby deliverables are typically highly interrelated and combined. The typical scope of turnkey contractsarrangements includes Engineering, manufacturing, shipment, delivery installation, testing, erection and commissioning and civil works.Although there are several components to the overall scope of the contract, the turnkey contracts are generally considered oneperformance obligation.
Products manufacturing and erection, commissioning and installation contracts - These contracts comprising of two performanceobligations of supply of products and erection and commissioning thereof. When the manufacturing stage is complete, factory acceptancetesting procedures are performed to ensure the equipment meets customer specifications and may involve the customer physicallyobserving the testing procedures. Revenue from contracts, where the performance obligations are satisfied over time and otherconsideration, is recognized as per the percentage of completion method. The Company uses the percentage of completion method basedon the costs expended to the date as a proportion of the total costs to be expended.
For certain products like transformers and Gas insulated switchgears, percentage of completion is followed basis acceptance of"Factory Acceptance test" (FAT) carried by the customer basis the Company's assessment that these products being manufacturedhave an alternative use till the time FAT is carried out.
Company as part of its contracts, provides warranties of the equipment for defects arising out of poor workmanship, inferior materialor manufacturing. Such warranty provided is in the nature of assurance warranty and is not accounted for as a separated performanceobligation.
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at theend of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue.
The aggregate value of performance obligations that are completely or partially unsatisfied as at December 31, 2019 is ` 5,100.65crores. The conversion to revenue is highly dependent on meeting the delivery schedules, contractual terms and conditions withcustomers, availability of customer sites, changes/ variation in scope/ prices etc. In view of these, it is not practical to define theaccurate percentage of conversion to revenue. However, it will be in a range of 1 to 3 years.
There was no revenue recognised in the current year ended December 31, 2019 from performance obligations satisfied (or partiallysatisfied) in previous periods due to no significant changes in transaction price.
The Board of directors of ABB India Limited on March 5, 2019 granted in-principle approval for the Scheme of Arrangement underSections 230-232 and other applicable provisions of the Companies Act, 2013 (‘the Scheme’) between ABB India Limited ("‘DemergedCompany’), ABB Power Products and Systems India Limited ("‘Resulting Company’ or 'APPSIL'") and their respective shareholders andcreditors for the demerger of Power Grid business from ABB India Limited into APPSIL. The Scheme of Arrangement for Demerger wassubmitted to National Company Law Tribunal (NCLT), Bengaluru Bench for approval. In principal approval of the Demerger Schemewas obtained from NCLT on November 27, 2019 and a certified copy has been filed by the Company with the Registrar of Companies,Bangalore, on December 1, 2019. The financial statements of the Company have been prepared considering the effect of the scheme ofarrangement from the Appointed date ie., April 01, 2019. The scheme has been considered in these financial statements by transferring theassets and liabilities as identified by the management as pertaining to the Power Grid business of ABB India Limited to APPSIL witheffect from the" Appointed Date" at their respective book values as follows:
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019All amount in Indian Rupees in crores, except as stated otherwise
As consideration for the value of net assets transferred, the Company has issued 1 (One) fully paid up equity share of `2 each for every 5(Five) Equity shares of `2 each held by existing shareholders in ABB India Limited. There is no contingent consideration payablepursuant to this acquisition.
As per the applicable accounting standard Ind AS 103 (‘standard’), since this demerger is a common control business combination, thefinancial information necessitates restatement by the Company at carrying amounts not from the appointed date but from the beginningof the preceding period in the financial statements which happens to be the date of incorporation ie February 19, 2019. Consequentially,the Company is required to give effect to the business combination from February 19, 2019 (date of its incorporation). However, theCompany has recognised the impact of the business combination only from April 1, 2019 (i.e. the appointed date specified in the scheme).The management believes that due to incoherence between the appointed date i.e., April 1, 2019 and date of incorporation i.e. February 19,2019 and requirements of Ind AS 103 such a one off situation has arisen. Thus, the statement of profit and loss (including othercomprehensive income), statement of changes in equity and statement of cash flows for the period do not contain the impact of thetransactions of the demerged undertaking from February 19, 2019 to March 31, 2019. However, there is no impact of the same on theCompany’s balance sheet as at December 31, 2019.
Further, the Company has incurred the following cost due to the demerger which has been classified as exceptional items in the statementof profit and loss:
Further, as per the Scheme, the deficit, if any, between the carrying value of assets, liabilities and reserves transferred to the "ResultingCompany" and the consideration discharged by way of the New Equity Shares issued to the shareholders of the "Demerged Company" inlieu of the Demerged Undertaking has been recorded as ‘Amalgamation Adjustment Deficit Account’ in the books of the "‘ResultingCompany".
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019
38 Related party disclosures
Party where control exists:ABB Limited, Zurich, Switzerland (Ultimate Holding Company)ABB Asea Brown Boveri Limited, Zurich, Switzerland (Holding Company)Entities under common control
Name of the Fellow subsidiaries:
ABB (China) Ltd., Beijing, China ABB Management Services Ltd., Zurich, SwitzerlandABB Mexico S.A. de C.V., San Luis Potosi SLP, Mexico
ABB (Namibia) (Pty) Ltd., Windhoek, Namibia ABB N.V., Zaventem, BelgiumABB (Private) Ltd.; Harare; Zimbabwe ABB Near East Trading Ltd., Amman, JordanABB (Pty) Ltd., Gaborone, Botswana ABB Oy, Helsinki, FinlandABB A/S, Skovlunde, Denmark ABB PG Muscat LLC; Muscat, Oman.; OmanABB AB, Västerås, SwedenABB AG, Mannheim, Germany ABB Power Grids Australia Pty Ltd, Brisbane, Queensland, AustraliaABB AS, Billingstad, Norway ABB Power Grids Bulgaria EOOD, Sevlievo, BulgariaABB Asea Brown Boveri Ltd, Zurich, Switzerland ABB Power Grids Canada Inc, Saint-Laurent, Quebec, CanadaABB Australia Pty Limited, Moorebank, NSW, Australia ABB Power Grids Chile SA, Santiago, ChileABB Automation GmbH, Mannheim, Germany ABB Power Grids Colombia Ltda, Bogotá, ColombiaABB B.V., Rotterdam, Netherlands ABB Power Grids Denmark A/S, Skovlunde, DenmarkABB Beijing Switchgear Limited, BeiJing, China ABB Power Grids Germany AG, Mannheim, GermanyABB Bulgaria EOOD, Sofia, Bulgaria ABB Power Grids Greece Single Member SA; Metamorphossis Attica ; Greece
ABB Business Services Sp. z o.o., Warsaw, PolandABB Contracting Company Ltd., Riyadh, Saudi Arabia ABB Power Grids Italy S.p.A., Milano, ItalyABB Ecuador S.A., Quito, Ecuador ABB Power Grids Ltd., Moscow, Russian FederationABB Electrical Equipment (Xiamen) Co., Ltd., Xiamen, China ABB Power Grids Malaysia Sdn Bhd, Kuala Lumpur, MalaysiaABB Electrical Industries Co. Ltd., Riyadh, Saudi Arabia ABB Power Grids Peru S. A., Lima, Peru
ABB Elektrik Sanayi A.S., Istanbul, Turkey ABB Power Grids Poland Sp. z o.o., Warsaw, PolandABB Engg. Technologies Co. (KSCC), Safat, Kuwait ABB Power Grids Singapore Pte. Ltd., Singapore , Singapore
ABB Power Grids South Africa (Pty) Ltd, Johannesburg, South Africa
ABB Enterprise Software Inc., Atlanta, GA, United States ABB Power Grids Sweden AB, Västerås, SwedenABB for Electrical Industries (ABB ARAB) S.A.E., Cairo, Egypt ABB Power Grids Switzerland Ltd, Baden, SwitzerlandABB Global Industries and Services Private Limited, Bangalore, India ABB Power Products And Systems India Limited, Bengaluru, IndiaABB Global Marketing FZ LLC, Dubai, United Arab Emirates ABB Pte. Ltd., Singapore, SingaporeABB High Voltage Switchgear (Xiamen) Company Ltd., Xiamen, China ABB S.A., Buenos Aires, ArgentinaABB High Voltage Switchgear Co., Ltd. Beijing, Beijing, China ABB S.A., Casablanca, MoroccoABB Inc., Cary, NC, United States ABB S.A., Lima, PeruABB Inc., Saint-Laurent, Quebec, Canada ABB S.A., Santiago, ChileABB India Limited, Bangalore, India ABB S.p.A., Milan, ItalyABB Industries (L.L.C.), Dubai, United Arab Emirates ABB s.r.o., Prague, Czech RepublicABB Industries FZ, Dubai, United Arab Emirates ABB SARL, Kinshasa Gombe, Congo, Democratic Republic of theABB Information Systems Ltd., Zurich, Switzerland ABB Schweiz AG, Baden, Switzerland
ABB Sécheron S.A., Satigny, Switzerland
ABB K.K., Tokyo, Japan ABB Sifang Power System Co. Ltd.; Beijing; ChinaABB Limitada, Maputo, Mozambique ABB South Africa (Pty) Ltd., Modderfontein, South AfricaABB Limited/Jordan LLC., Amman, Jordan ABB Sp. z o.o., Warsaw, PolandABB Limited, Auckland, New Zealand ABB Asea Brown Boveri SRL, BUCHAREST, RomaniaABB Limited, Bangkok, ThailandABB Limited, Dar Es Salaam, Tanzania, United Republic of ABB Supply Operations Ltd., Baden, SwitzerlandABB Limited, Dhaka, Bangladesh ABB Technologies Ltd., Haifa, Israel
ABB (Hong Kong) Ltd., Hong Kong, Hong Kong Special AdministrativeRegion of China
ABB Enterprise Software (PGHV US non-legal entity), Mt. Pleasant, PA,United States
ABB Power Grids Argentina S.A.U., Ciudad Autonoma de Buenos Aires, Argentina
ABB Substations Contracting India Private Limited, Banglore, India
ABB Power Grids Hong Kong Limited, Hong Kong, Hong Kong SpecialAdministrative Region of China
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019
ABB Limited, Dublin, Ireland ABB Technology SA, Abidjan, Cote d'IvoireABB Limited, Nairobi, KenyaABB Limited, Warrington, United Kingdom ABB Xi'an Power Capacitor Company Limited, Xi'an, ChinaABB LLC,, Muscat, Oman ABB, Inc., Paranaque, Metro Manila, PhilippinesABB LLC, Doha, Qatar ABBNG Limited, Lagos, NigeriaABB Ltd., Hanoi, Viet Nam Asea Brown Boveri Lanka (Private) Limited, Colombo, Sri LankaABB Ltd., Lusaka, Zambia Asea Brown Boveri Ltd., Moka, MauritiusABB Ltd., Moscow, Russian Federation Asea Brown Boveri S.A., Madrid, SpainABB Ltd., Seoul, Korea, Republic of PT ABB Sakti Industri, Jakarta, IndonesiaABB Ltd., Taipei, Taiwan (Chinese Taipei) Pucaro Elektro-Isolierstoffe GmbH, Roigheim, GermanyABB Ltda., São Paulo, Brazil Sucursal Panama de ABB SA, Panama, PanamaABB Malaysia Sdn Bhd., Subang Jaya, Malaysia Trasfor SA; Monteggio; SwitzerlandABB Management Holding Ltd., Zürich, Switzerland
Key managerial personnel :(a) Managing Director Venu Nuguri(b) Non-Executive Director Sanjeev Sharma
(c) Non-Executive cum Independent DirectorsAkhila KrishnakumarNishi VasudevaMukesh Hari ButaniFrank Duggan
(d) Chief Financial Officer Ajay Singh(e) Company Secretary Poovanna C Ammatanda
Transactions with related parties
For the period fromFebruary 19, 2019 to
December 31, 2019
i) Revenue from operationsFellow Subsidiaries- ABB India Limited; Bangalore; India 453.19- ABB Schweiz AG, Baden, Switzerland 90.86- Other fellow subsidiaries 279.04
823.09
ii) Purchases of raw materials, components , project items and traded goods
229.1786.13
159.41474.71
Transaction value in excess of 10% with a fellow subsidiary has been individually disclosed below. All other cases have been grouped and disclosedas 'other fellow subsidiaries'.
Fellow Subsidiaries- ABB India Limited; Bangalore; India- ABB Power Grids Sweden AB; Västerås;- Other fellow subsidiaries
ABB Transmission & Distribution Limited LLC, Abu Dhabi, United Arab Emirates
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019
iii) Expenditure on royalty, technology and trade-mark feesHolding Company 35.26
129.640.28
165.18
iv) Expenditure on information technology, engineering, management and other servicesUltimate Holding Company 0.09
55.8224.6229.54
110.07
v) Expenses recovered from group companies
- ABB Power Grids Chile SA; Santiago; Chile 2.342.161.861.817.76
15.93
vi Other capital expenditureFellow Subsidiaries- ABB India Limited; Bangalore; India 2.96- ABB Power Grids Sweden AB; Västerås; Sweden 0.97- ABB Schweiz AG; Baden; Switzerland 0.61
0.274.81
vii) Interest expenses
Fellow Subsidiaries12.23
viii) Loan taken- ABB India Limited; Bengaluru; India 347.62
ix) Remuneration to key managerial personnel
ParticularsShort term employee benefits 0.32Post employment benefits# 0.02Directors' Sitting fees -Commission to Directors -
Total
- Other fellow subsidiaries
- PT ABB Sakti Industri; Jakarta; Indonesia- ABB Power Grids Argentina S.A.U.; Ciudad Autonoma de
Fellow Subsidiaries- ABB Management Holding Ltd.; Zürich; Switzerland- ABB India Limited; Bangalore; India
Fellow Subsidiaries- ABB Schweiz AG, Baden, Switzerland- Other fellow subsidiaries
- Other fellow subsidiaries
- Other fellow subsidiaries
- ABB India Limited; Bangalore; India
The remuneration of key management personnel and a relative of key management personnel of the company are setout below in aggregate for each of the categories specified in Ind AS 24 Related party disclosures
# Does not include gratuity and compensated absences as these are provided in the books of accounts on the basis of actuarial valuation
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019
c) Amount due to / from related parties
As atDecember 31, 2019
i) Trade receivablesFellow Subsidiaries
589.34- Other fellow subsidiaries 123.36
712.70- Add/ (Less ) :Impact of foreign currency restatement 1.11
713.81
ii) Other financial assetsFellow Subsidiaries
18.9112.03
- Other fellow subsidiaries 6.5837.52
- Add/ (Less ) :Impact of foreign currency restatement -37.52
iii) Other current assetsFellow Subsidiaries
6.461.42
- Other fellow subsidiaries 0.408.28
- Add/ (Less ) :Impact of foreign currency restatement 0.298.57
iv) Trade payablesFellow Subsidiaries
243.1365.03
- Other fellow subsidiaries 96.90405.06
- Add/ (Less ) :Impact of foreign currency restatement 2.48407.54
v)4.39
Fellow Subsidiaries0.68
- Other fellow subsidiaries 1.206.27
- Add/ (Less ) :Impact of foreign currency restatement 0.066.33
- ABB South Africa (Pty) Ltd.; Modderfontein; South Africa
ABB India Limited; Bangalore; India
- ABB Schweiz AG; Baden; Switzerland
- ABB Power Grids Sweden AB; Västerås; Sweden
- ABB Power Grids Sweden AB; Västerås; Sweden
- ABB India Limited; Bangalore; India
Balances in excess of 10% with a fellow subsidiary has been individually disclosed below. All other cases have beengrouped and disclosed as 'other fellow subsidiaries.
- ABB India Limited; Bangalore; India
Other financial liabilities
- ABB Schweiz AG, Baden, Switzerland
- ABB India Limited; Bangalore; India
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ABB Power Products and Systems India LimitedNotes to the financial statements for the period ended December 31, 2019
vi) Other current liabilities
Fellow Subsidiaries22.812.59
- Other fellow subsidiaries 3.4028.80
- Add/ (Less ) :Impact of foreign currency restatement 0.1628.96
As per our report of even date attached
for B S R & Co. LLP for and on behalf of the Board of Directors ofChartered Accountants ABB Power Products and Systems India LimitedICAI Firm Registration No.: 101248W/W-100022 Corporate identity number (CIN) : U31904KA2019PLC121597
Amrit Bhansali Frank Duggan Venu Nuguri Mukesh Hari ButaniPartner Chairman Managing Director DirectorMembership no.: 065155 DIN: 02937233 DIN: 07032076 DIN: 01452839
Ajay Singh Poovanna C AmmatandaChief financial officer General Counsel
& Company Secretary(FCS4741)
Place: Bengaluru Place: MumbaiDate: February 28, 2020 Date: February 28, 2020
- ABB Schweiz AG, Baden, Switzerland- ABB South Africa (Pty) Ltd.; Modderfontein; South Africa
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SECTION VI: LEGAL AND OTHER INFORMATION
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS
Except as disclosed in this section, there is no outstanding (i) criminal proceeding; (ii) action taken by regulatory or
statutory authorities; (iii) claim related to direct and indirect taxes (in a consolidated manner); and (iv) other pending
litigation whose outcome could have a material adverse effect on the position of our Company, in each case involving our
Company, its Promoter and Directors. Further, except as disclosed in this section, there are no disciplinary actions
including penalties imposed by SEBI or the Stock Exchanges against our Promoter in the last five financial years including
any outstanding action.
All outstanding litigation, including any litigation involving our Company, its Promoter and Directors, other than criminal
proceedings, actions by regulatory authorities and statutory authorities, disciplinary action including penalty imposed by
SEBI or stock exchanges against the Promoter in the last five financial years including any outstanding action and tax
matters (direct or indirect), would be considered ‘material’ if: (i) the monetary amount of claim by or against the entity or
person in any such pending proceeding is in excess of ₹331.19 million, which is 5% of the total net worth of the Power
Grids Business post-Scheme; or (ii) where monetary liability is not quantifiable, however, the outcome of any such pending
proceedings may have a material bearing on the business, operations, performance, prospects or reputation of the
Company .
Litigation involving our Company
With effect from the Appointed Date, litigations involving the Demerged Undertaking whether pending on the Appointed
Date or which were instituted any time thereafter, have continued to be prosecuted or enforced, as the case maybe, against
our Company. Details of the said litigations, are set forth below:
Civil Litigation against our Company
As of the date of this Information Memorandum, there are no material outstanding civil litigation instituted against our
Company which involve a monetary liability of ₹331.19 million or more, nor any outstanding litigation wherein monetary
liability is not quantifiable, the outcome of which a material bearing on the business, operations, performance, prospects
or reputation of the Company, other than as disclosed below.
Civil Litigation by our Company
Except as disclosed below, there are no outstanding civil litigation by our Company:
1. INABB had initiated arbitration proceedings against the Telangana State Central Power Distribution Corporation
Limited (“TSCPDCL”) for recovery of dues aggregating ₹86.56 million and interest under a contract in relation to
the ‘Andhra Pradesh Energy Efficiency Project – Hyderabad Integrated SCADA Project’. In the said proceedings,
TSCPDCL had claimed an amount of ₹472.49 million as counter claim. The arbitral tribunal pursuant to its award
dated December 30, 2015 (“Award”) partially allowed the claim of INABB and rejected the counter claim of
TSCPDCL. Aggrieved by the Award, TSCPDCL filed two applications under Section 34 of the Arbitration and
Conciliation Act, 1996 before the City Civil Court, Hyderabad, one to challenge the award rejecting its counter claim
(O.P. 66 of 2016) and another to challenge the Award passed in favour INABB (O.P. 1623 2016 changed to C.O.P.
No. 22/2018). In addition, INABB has also filed an application under Section 34 of the Arbitration and Conciliation
Act, 1996 before the said Court, challenging the Award partially allowing its claim (O.P. 916/2016 changed to COP
178/2017). All these matters are currently pending.
2. INABB has filed a suit dated October 11, 2019 (bearing no. Com. O.S. 296/2019) before the Principal City Civil and
Sessions Judge, Bengaluru against Karnataka Power Transmission Corporate Limited (“KPTCL”) and three electricity
supply companies (collectively, the “Defendants”) praying, inter alia, (a) for the issuance of the declaration of date
of commercial operation certificate (“DOC”) pursuant to completion of INABB’s obligations under the contract
entered into between the Defendants and INABB (“Contract”); and (b) for payment of an amount aggregating
₹1,041.69 million to INABB by KPTCL as per the Contract. Pursuant to the terms of the Contract entered into between
INABB and the Defendants, INABB was awarded the contract in two phases in 2007 and 2009, to set up an integrated
extended supervisory control and data acquisition system i.e., SCADA System, including annual maintenance contract
for two years after declaration of the DOC by KPTCL. INABB alleged that upon completion of its contractual
obligations under the Contract, KPTCL refused to issue the DOC and an release an amount of ₹1,041.69 million
payable to INABB pursuant to the terms of the Contract. Aggrieved by the said facts, INABB filed the present suit.
Further, INABB filed an interlocutory application before the Principal City Civil and Sessions Judge, Bengaluru
119
seeking an interim stay to restrain KPTCL from invoking bank guarantees aggregating ₹719 million. The Principal
City Civil and Sessions Judge, Bengaluru pursuant to its order dated October 14, 2019, granted an ex-parte ad-interim
order in favour of INABB restraining KPTCL from invoking the said bank guarantees. This matter is currently
pending.
Criminal Litigation against our Company
As of the date of this Information Memorandum, there are no outstanding criminal litigation against our Company.
Criminal Litigation by our Company
Other than as disclosed below, there are no outstanding criminal litigation initiated by our Company as of the date of this
Information Memorandum.
There are 16 cases filed by our Company against various individuals under the provisions of the Negotiable Instruments
Act, 1881 and the Code of Criminal Procedure, 1973. All these cases have been filed in order to recover sums due to our
Company for which cheques issued in favour of our Bank have been dishonoured. The total pecuniary value involved in
all these matters is ₹45.91 million.
Actions by statutory/ regulatory authorities against our Company
As of the date of this Information Memorandum, there are no actions taken by any statutory or regulatory authority against
our Company.
Material Frauds against our Company
There have been no material frauds committed against our Company in the five years preceding the date of this Information
Memorandum.
Proceedings initiated against our Company for economic offences
As of the date of this Information Memorandum, there are no pending proceedings initiated against our Company for any
economic offences.
Statutory Dues
As of the date of this Information Memorandum, there have been no: (i) instances of non-payment or defaults in payment
of statutory dues by our Company, (ii) overdues to companies or financial institutions by our Company, or (iii) defaults
against companies or financial institutions by our Company.
Outstanding dues to creditors
As of December 31, 2019, the total number of creditors of our Company was 2,978 and the total outstanding dues to these
creditors by our Company was `11,199.52 million.
Litigation involving our Promoter
Civil litigation against ABB Asea Brown Boveri Ltd
As of the date of this Information, there are no material outstanding civil litigation against our Promoter.
Civil litigation by ABB Asea Brown Boveri Ltd
As of the date of this Information, there are no material outstanding civil litigation instituted by our Promoter.
Criminal litigation against ABB Asea Brown Boveri Ltd
As of the date of this Information, there are no outstanding criminal litigation against our Promoter.
Criminal litigation by ABB Asea Brown Boveri Ltd
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As of the date of this Information, there are no outstanding criminal litigation by our Promoter.
Actions by statutory/ regulatory authorities against ABB Asea Brown Boveri Ltd
As of the date of this Information, there are no pending actions by regulatory and statutory authorities against our Promoter.
Litigation involving our Directors
Civil Litigation against our Directors
As of the date of this Information, there are no material outstanding civil litigation against any of our Directors.
Civil Litigation by our Directors
As of the date of this Information, there are no material outstanding civil litigation against any of our Directors.
Criminal Litigation against our Directors
As of the date of this Information, there are no outstanding criminal litigation against any of our Directors.
Criminal Litigation by our Directors
As of the date of this Information, there are no outstanding criminal litigation by any of our Directors.
Actions by statutory or regulatory authorities against our Directors
As of the date of this Information, there are no pending actions by regulatory and statutory authorities against any of our
Directors.
Litigation involving our Group Companies
Our Group Companies are not involved in any litigation which have a material impact on our Company.
Tax claims
As of the date of this Information Memorandum, there are no claims related to direct and indirect taxes, involving our
Company, Directors and Promoter.
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OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority for Listing
The NCLT, vide its order delivered on November 27, 2019 has approved the Scheme of Arrangement between INABB and
the Company and their respective shareholders and creditors. Pursuant to the Scheme, the Demerged Undertaking of the
INABB has been transferred to and vested with our Company on with effect from the Appointed Date, in accordance with
Sections 230 to 232 of the Companies Act, 2013 and applicable laws.
In accordance with the Scheme, the Equity Shares of our Company issued pursuant to the Scheme shall be listed and
admitted for trading on BSE and NSE. Such listing and admission for trading is not automatic and will be subject to
fulfilment by the Company of the listing criteria of BSE and NSE and also subject to such other terms and conditions as
may be prescribed by BSE and NSE at the time of the application by our Company seeking listing. BSE and NSE have,
pursuant to their letters dated February 27, 2020 and February 28, 2020, respectively, granted our Company in-principle
approval for listing of 42,381,675 Equity Shares.
Eligibility Criteria
There being no initial public offering or rights issue, the eligibility criteria in terms of the SEBI ICDR Regulations are not
applicable. Pursuant to the SEBI Circular, our Company filed an exemption application with the Stock Exchanges for
exemption under Rule 19(7) of the SCRR, from the strict enforcement of the requirement of Rule 19(2)(b) of the SCRR
for the purpose of listing of shares of the Company, from SEBI. The SEBI has, pursuant to a letter dated March 13, 2020,
granted our Company relaxation from the applicability of 19(2)(b) of the SCRR, subject to compliance with the following
conditions:
• Clauses 5 and 7 of the SEBI circular no. CFD/DIL3/CIR/2018/2 dated January 3, 2018, if applicable
• There is no variation or deviation from conditions of the Scheme sanctioned by the NCLT
• There is no change in the information/ facts submitted in the application till the date of listing of the Equity Shares of
the Company
The Company shall publish, an advertisement in one English and one Hindi newspaper each with nationwide circulation
and one Kannada newspaper with wide circulation since the Registered Office of the Company is located in Bengaluru,
Karnataka, containing details in accordance with the requirements set out in the SEBI Circular. The advertisement shall
draw specific reference to the availability of this Information Memorandum on our Company’s website.
Prohibition by SEBI
Our Company, Promoter, Directors, the persons in control of the Company and the persons in control of our Promoter are
not prohibited from accessing the capital market or debarred from buying, selling or dealing in securities under any order
or direction passed by SEBI or any securities market regulator in any other jurisdiction or any other authority/court.
None of the companies with which our Promoter, Directors or persons in control of our Company are promoter, directors
or persons in control have been debarred from accessing capital markets under any order or direction passed by SEBI or
any other authorities.
None of our Directors are associated with securities market related business, in any manner and there has been no
outstanding actions initiated by SEBI against our Directors in the five years preceding the date of this Information
Memorandum.
Our Company, Promoter or Directors have not been declared as wilful defaulters by any bank or financial institution or
consortium thereof in accordance with the guidelines on wilful defaulters issued by the RBI.
Our Promoter or Directors have not been declared as fugitive economic offenders.
Confirmation under Companies (Significant Beneficial Ownership) Rules, 2018
Our Company and Promoter are in compliance with the Companies (Significant Beneficial Ownership) Rules, 2018, to the
extent applicable, as on the date of this Information Memorandum.
Disclaimer of BSE
A copy of this Information Memorandum has been submitted to BSE.
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The BSE had through its letters dated May 28, 2019 issued to INABB given its ‘No Objection’ in accordance with the
provisions of the Listing Regulations and by virtue of that No Objection, BSE’s name in this Information Memorandum
has been used as one of the Stock Exchanges on which our Company’s securities are proposed to be listed.
Disclaimer of NSE
A copy of this Information Memorandum has been submitted to NSE.
The NSE had through its letters dated May 28, 2019 issued to INABB had given its ‘No Objection’ in accordance with the
provisions of the Listing Regulations and by virtue of that No Objection, NSE’s name in this Information Memorandum
has been used as one of the Stock Exchanges on which our Company’s securities are proposed to be listed.
General Disclaimer from the Company
The Company accepts no responsibility for statements made otherwise than in the Information Memorandum or in the
advertisements published in accordance with legal requirements mentioned in the SEBI Circular or any other material
issued by or at the instance of our Company and anyone placing reliance on any other source of information would be
doing so at his or her own risk. All information shall be made available by our Company to the public and investors at large
and no selective or additional information would be available for a section of the investors in any manner.
Listing
BSE and NSE have, pursuant to their letters dated February 27, 2020 and February 28, 2020, respectively, granted our
Company in-principle approval for listing of 42,381,675 Equity Shares. INABB has nominated BSE as the Designated
Stock Exchange for the aforesaid listing of the Equity Shares. The Company has taken steps for completion of necessary
formalities for listing and commencement of trading at BSE and NSE.
Outstanding debenture or bonds and redeemable preference shares and other instruments issued by our Company
There are no outstanding debentures, bonds or redeemable preference shares as of the date of this Information
Memorandum.
Stock Market Data for Equity Shares of our Company
The shares of our Company are not listed on any stock exchanges. Through this Information Memorandum, our Company
is seeking approval for listing of its Equity Shares on BSE and NSE.
Disposal of Investor Grievances
KFin Technologies Private Limited is the Registrar and Share Transfer Agent to our Company, who can be contacted at
the following email id for addressing investors’ grievances: [email protected]
General Counsel, Company Secretary and Compliance Officer
The contact details of Poovanna Ammatanda, our General Counsel, Company Secretary and Compliance Officer are as
follows:
8th Floor, Brigade Opus
70/401, Kodigehalli Main Road
Bengaluru 560 092
Karnataka, India
Tel: +91 80 2204 1800
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SECTION VII: OTHER INFORMATION
MAIN PROVISIONS OF ARTICLES OF ASSOCIATION
Authorised share capital
The Authorised Capital of the Company is or shall be such amount as stated in Clause V of the Memorandum of Association
of the Company, for the time being or as may be varied, from time to time, under the provisions of the Companies Act,
2013 and these Articles, and divided into such numbers, classes and descriptions of shares and into such denominations as
stated therein.
Alteration of capital
Subject to the provisions of the Act, the Company may, from time to time, by ordinary resolution increase the share capital
by such sum, to be divided into shares of such amount, as may be specified in the resolution.
Subject to the provisions of Section 61 of the Act, the Company may, by ordinary resolution:
a) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;
b) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any
denomination;
c) sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the memorandum;
d) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any
person.
Shares in the Capital of the Company shall be under the control of the Directors
Subject to the provisions of the Act and these Articles, the Shares in the capital of the Company shall be under the control
of the Directors who may issue, allot or otherwise dispose of the same or any of them to such persons, in such proportion
and on such terms and conditions and either at a premium or at par or subject to compliance with the provisions of the Act
at a discount and at such time as they may from time to time think fit.
Forfeiture of Shares
If a member fails to pay any call, or installment of a call, on the day appointed for payment thereof, the Board of Directors
may, at any time thereafter during such time as any part of the call or installment remains unpaid, serve a notice on him
requiring payment of so much of the call or installment as is unpaid, together with any interest which may have accrued.
Lien
(i) The Company shall have a first and paramount lien:
a) on every share (not being a fully paid share), for all monies (whether presently payable or not) called, or payable
at a fixed time, in respect of that share; and
b) on all shares (not being fully paid shares) standing registered in the name of a single person, for all monies
presently payable by him or his estate to the Company:
Provided that the Board of Directors may at any time declare any share to be wholly or in part exempt from the provisions
of this Article.
(ii) The Company's lien, if any, on a share shall extend to all dividends payable and bonuses declared from time to time in
respect of such shares.
The Company may sell, in such manner as the Board thinks fit, any shares on which the Company has a lien:
Provided that no sale shall be made:
(i) unless a sum in respect of which the lien exists is presently payable; or
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(ii) until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount
in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the
share or the person entitled thereto by reason of his death or insolvency.
Shares
The Company, subject to applicable provisions of the Act and shareholder’s approval by way of special resolution, is
authorized to issue shares on preferential basis. Further, the Board of the Company may subject to provision of Section 43
of the Act, issue shares with differential rights as to dividend, voting or otherwise. Subject to the provisions of the Act and
these Articles, the shares in the capital of the Company shall be under the control of the directors of the Company who may
issue, allot or otherwise dispose of the same or any of them to such persons, in such proportion and on such terms and
conditions and either at a premium or at par and at such time as they may from time to time think fit and with sanction of
the Company in the general meeting to give to any person or persons the option or right to call for any shares either at par
or discount or premium, subject to compliance with the provisions of the Act, during such time and for such consideration
as the Board thinks fit. Provided that the option or right to call of shares shall not be given to any person or persons except
with the sanction of the Company in general meeting.
Transfer and transmission of shares
a) The instrument of transfer of any share in the Company shall be executed by or on behalf of both the transferor and
transferee.
b) The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register
of members in respect thereof.
c) The instrument of transfer shall be in writing and all provisions of Section 56 of the Act and statutory modification
thereof for the time being shall be duly complied with in respect of all transfer of shares and registration thereof.
The Board may, subject to the provisions of the Act, decline to register:
a) the transfer of a share, not being a fully paid share, to a person of whom they do not approve; or
b) any transfer of shares on which the Company has a lien.
On the death of a member, the survivor or survivors where the member was a joint holder, and his nominee or nominees or
legal representatives where he was a sole holder, shall be the only persons recognised by the Company as having any title
to his interest in the Shares. Any person becoming entitled to a Share in consequence of the death or insolvency of a member
may, upon such evidence being produced as may from time to time properly be required by the Board of Directors to elect
either:
(a) to be registered himself as holder of the Share; or
(b) to make such transfer of the Share as the deceased or insolvent member could have made.
Buyback
Notwithstanding anything contained in these Articles but subject to the provisions of the Act or any other law for the time
being in force, the Company may purchase its own Shares or other specified securities.
Borrowing powers
Subject to the provisions of the Act, the directors may either themselves pay or may from time to time at their discretion
accepts deposits from member, either in advance of calls or otherwise and generally raise or borrow or secure payment of
any sums of money for purposes of the Company. The payment or re-payment of such moneys may be secured in such
manner and upon such manner and upon such terms and conditions in all respects as the directors may think fit and in
particular by the issue of redeemable debentures or debenture stock of the Company or any mortgage or change or other
security charged upon all or any part of the property of the Company, (both present and future) including its uncalled capital
for the time being and other securities may be made assignable free from equities between the Company and the person to
whom the same may be issued.
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General Meetings
All General Meeting other than Annual General Meeting shall be called Extra-Ordinary General Meeting. The Board of
Directors may, whenever it thinks fit, call an extraordinary General Meeting. No business shall be transacted at any General
Meeting unless a quorum of members is present at the time when the Meeting proceeds to business.
Meetings of Directors
a) The Board of Directors may meet for the conduct of business, adjourn and otherwise regulate its meetings, as it thinks
fit.
b) A director may, and the manager or secretary on the requisition of a director shall, at any time, summon a meeting of
the Board.
c) Quorum for the Board meeting shall be two directors or one third of the total strength of the Board, whichever is
higher.
A meeting of the Board shall be called by giving not less than seven days’ notice in writing to every director at his address
registered with the Company and such notice shall be sent by hand delivery or by post or by electronic means, unless a
meeting of the Board is called at shorter notice to transact urgent business subject to the condition that at least one
independent director, if any, shall be present at the meeting. In case of absence of independent directors from such a meeting
of the Board, decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification
thereof by at least one independent director, if any. In case the Company does not have an Independent Director, the
decisions shall be final only on ratification thereof by a majority of the Directors of the Company, unless such decisions
were approved at the Meeting itself by a majority of Directors of the Company.
In accordance with the Act, the participation of directors in a meeting of the Board may be either in person or through
video conferencing or other audio visual means, which are capable of recording and recognising the participation of the
directors and of recording and storing the proceedings of such meetings along with date and time.
Managing Directors/ Whole-Time Director
Subject to the provisions of the Act, the Board may from time to time appoint one or more directors to be managing
directors or whole time directors for such terms, and at such remuneration (whether by way of salary or commission or
participation in profits or partly in one way and partly in another) as it may think fit, and a director so appointed shall not,
while holding that office, be subject to retirement by rotation. But his appointment shall be subject to determination ipso
facto if he ceases from any cause to be a director of the Company or general meeting resolves that his tenure of office of
managing director/whole time director be determined.
Appointment of Directors
Subject to the provisions of Section 149 and Section 161 of the Act, the Board shall have the power at any time, and from
time to time, to appoint a person as an additional director, provided the number of the directors and additional directors
together shall not at any time exceed the maximum strength fixed for the Board under these Articles. Such person shall
hold office only up to the date of the next annual general meeting of the Company but shall be eligible for appointment by
the Company as a director at that meeting subject to the provisions of the Act.
Subject to the provisions of Section 161 of the Act, the Board shall have power at any time, and from time to time or by a
resolution passed by the Company in general meeting, appoint a person, not being a person holding any alternate
directorship for any other director in the Company (or holding directorship in the same company), to act as an alternate
director for a director during his absence for a period of not less than three months from India:
Provided that no person shall be appointed as an alternate director for an independent director unless he is qualified to be
appointed as an independent director under the provisions of this Act;
Provided further that an alternate director shall not hold office for a period longer than that permissible to the director in
whose place he has been appointed and shall vacate the office if and when the director in whose place he has been appointed
returns to India;
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Provided also that if the term of office of the original director is determined before he so returns to India, any provision for
the automatic re-appointment of retiring directors in default of another appointment shall apply to the original director, and
not to the alternate director.
If the office of any director appointed by the Company in general meeting is vacated before his term of office expires in
the normal course, the resulting casual vacancy may, in default of, and subject to any regulations in these Articles, be filled
by the Board of Directors at a meeting of the Board which shall be subsequently approved by members in the immediate
next general meeting.
Provided that any person so appointed shall hold office only up to the date up to which the director in whose place he is
appointed would have held office if it had not been vacated.
If at any time the Company obtains any loans or any assistance in connection therewith by way of guarantee or otherwise
from any person, firm, body corporate, local authority, or public body (hereinafter called “the Institution”) debentures or
debenture-stock and enters into any contract or arrangement with the Institution whereby the Institution subscribes for or
underwrites the issue of the Company’s shares or debentures or debenture-stock or provides any assistance to the Company
in any manner whatsoever and it is a term of the relative loan, assistance, or contract or arrangement that the Institution
shall have the right to appoint one or more director or directors (“Nominee Directors”) to the Board of the Company, then
subject to Section 152 and other provisions of the Act, and subject to the terms and conditions of such loan, assistance,
contract or arrangement the Institution shall be entitled to appoint one or more Nominee Directors, as the case may be, to
the Board of the Company, and to remove from office any director so appointed and to appoint another in his place or in
the place a director so appointed who resigns or otherwise vacates his office. Any such appointment or removal shall be
made in writing and shall be served at the office of the Company. The Nominee Director(s) so appointed shall neither be
required to hold any qualification share nor be liable to retire by rotation and shall continue in office for so long as the
relative loan, assistance, contract or arrangement, as the case may be, subsists or so long as the Institution holds any shares
of the Company in terms thereof.
Votes of Members
Subject to the provisions of the Act, votes may be given either personally or by Proxy or, in the case of a body corporate,
by a representative duly authorised under Section 113 of the Act. A member may exercise his vote at a meeting by electronic
means in accordance with section 108 and shall vote only once.
Subject to any rights or restrictions for the time being attached to any class or classes of shares, (i) on a show of hands,
every member present in person shall have one vote; and (ii) on a poll, the voting rights of members shall be in proportion
to his share in paid-up equity share capital.
Any member of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint any other
person (whether a member or not) as his Proxy to attend and vote instead of himself, but a Proxy so appointed shall not
have any right to speak at the meeting.
No member shall be entitled to vote at any General Meeting unless all calls or other sums presently payable by him in
respect of Shares in the Company have been paid.
Dividend
The Company in General Meeting may declare dividend and no dividend shall exceed the amount recommended by the
Board. Subject to the provisions of the Act, the profits of the Company subject to any special rights relating to those to be
created or authorized by these Articles and subject to the provisions herein shall be divisible among the shareholders in
proportion to the amount of capital called upon the Securities held by them respectively.
Subject to the provisions of the Act, the Board may from time to time pay to the member such interim dividend as appear
to it to be justified by the profits of the Company
No Dividend shall bear interest against the Company. All Dividends shall be apportioned and paid proportionately to the
amounts paid or credited as paid on the Shares during any portion or portions of the period in respect of which the Dividend
is paid; but if any Share is issued on terms providing that it shall rank for Dividend as from a particular date such Share
shall rank for Dividend accordingly. The Board of Directors may deduct from any Dividend payable to any member all
sums of money, if any, presently payable by him to the Company on account of calls or otherwise in relation to the Shares
of the Company.
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Winding Up
The Company may be wound up in accordance with the Act and the Insolvency and Bankruptcy Code, 2016 (to the extent
applicable).
Indemnity
Every officer of the Company shall be indemnified out of the assets of the Company against any liability incurred by him
in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted
or in which relief is granted to him by the court or the tribunal.
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MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
Copies of the following documents will be available for inspection at the Registered Office of our Company on any working
day (i.e. Monday to Friday and not being a bank holiday in Bengaluru) between 10.00 am and 5.00 pm from the date of
filing of the Information Memorandum with the Stock Exchanges until the listing of Equity Shares on the Stock Exchanges:
• Memorandum and Articles of Association of the Company, as amended till date.
• Certificate of incorporation of our Company dated February 19, 2019.
• Scheme of Arrangement between INABB and the Company and their respective shareholders and creditors as
approved by the National Company Law Tribunal, Bengaluru Bench delivered on November 27, 2019
• Tripartite Agreement with NSDL, Registrar and Transfer Agent and the Company dated May 9, 2019.
• Tripartite Agreement with CDSL, Registrar and Transfer Agent and the Company dated January 7, 2020.
• Statement of tax benefits dated March 18, 2020 from M K Tyagi & Co.