Geometric Ltd.
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ISIN No INE797A01021 52Wk High (Rs.) 0 BV (Rs.) 70.90 FV (Rs.) 2.00
Bookclosure 23/03/2016 52Wk Low (Rs.) 0 EPS (Rs.) 15.75 P/E (X) 16.64
Mkt Cap. (Rs. Cr.) 1,754.05 P/BV (X) 3.70 Div Yield (%) 0.00 Mkt Lot 1
2016-03

1. Scheme of Arrangement

On April 1, 2016, the Board of Director of Geometric Limited approved the Composite Scheme of Arrangement and Amalgamation between Geometric Limited ('GL' or "the Company"), HCL Technologies Limited ('HCL') and 3D PLM Software Solutions Limited ('3D PLM') and their respective shareholders and creditors pursuant to the provisions of Sections 391 to 394 read with Section 100 of the Companies Act, 1956 or under Section 230 to 234 of the Companies Act, 2013 and other applicable provisions if any, of the Companies Act, 1956 and/ or Companies Act, 2013 & the relevant provisions made there under ('the Scheme').

Pursuant to the scheme, the IT enabled engineering services, PLM services and engineering design productivity software tools of the Company including its overseas subsidiaries (but excluding the shares held by the Company in 3D PLM) ("Demerged Business Undertaking") will be transferred to HCL.

In consideration for the transfer and vesting of the Demerged Business Undertaking, HCL shall issue and allot 10 equity shares of Rs.2 each fully paid-up of HCL Technologies Ltd for every 43 equity shares of the face value of Rs.2 each held by equity shareholders of the Company on the record date.

Thereafter, the Company, comprising the shares held by it in 3D PLM ("Remaining Undertaking") shall be merged and amalgamated with 3D PLM. In consideration of the amalgamation, 3D PLM shall issue and allot to each resident shareholder of the Company and, subject to approval by the Reserve Bank of India ('RBI'), all non-resident shareholders of the Company, 1 (one) fully paid up redeemable preference share of '68 each ("Redeemable Preference Share") in 3D PLM for every 1 (one) fully paid up equity share each of the Company. In case, the approval of the RBI is not received, such shareholders shall be issued and allotted 24 fully paid unlisted equity shares of Rs.10 each of 3D PLM for every 1793 fully paid up equity shares of Rs.2 each of the Company held by such shareholders which shall be compulsorily purchased by Dassault Systems and/or its nominees immediately on issuance at a price of Rs.5,080.30 per equity share.

The Redeemable Preference Shares issued by 3D PLM pursuant to the Amalgamation are proposed to be listed on the BSE.

The Scheme shall be subject to the approval of the shareholders and such other persons as may be required under applicable law, the stock exchanges where the shares of the Companies are listed, Securities and Exchange Board of India, the Hon'ble High Court of Judicature at Bombay, Hon'ble High Court of Judicature at New Delhi and / or such other competent statutory /regulatory authorities as may be required under applicable law. The Appointed Date of the Scheme is 31 March 2016.

The parties have executed appropriate transaction documents which include a Framework Agreement between HCL and the Company that sets out certain covenants and obligations in relation to the transaction until completion.

2. Loan to Subsidiary Companies

(a) During the financial year 2011-12, the Company had given an unsecured loan of USD 10 million to its wholly owned subsidiary, Geometric Americas Inc., primarily to meet the subsidiary's working capital requirements. The loan originally carried an interest rate of 8.5% p.a. and had been repaid to the extent of USD 5.5 million during the financial year 2013-14 and USD 4.5 million during the financial year 2015-16. The outstanding loan balance as on 31 March 2016 is USD Nil (31 March 2016 USD 4.5 million equivalent to '281 million), bearing a revised interest rate of 6% 3 months LIBOR p.a. with effect from 1 April 2014.

(b) During the financial year 2012-13 and 2013-14, the Company had given unsecured loans aggregating to Euro 7.5 million to its wholly owned subsidiary, Geometric Europe GmbH, primarily for the subsidiary's working capital requirements and for funding the acquisition costs of Geometric GMBH (wholly owned subsidiary of the Geometric Europe GmbH and a step down subsidiary of the Company). The loan has been repaid to the extent of Euro 0.9 million during the financial year 2013-14 and the outstanding loan balance as on 31 March 2016 is EURO 6.65 million equivalent to Rs.498 million (31 March 2015 Euro 6.65 million equivalent to Rs.448 million). The interest on the said loan has been revised from 6.5 % LIBOR p.a. to 4% 3 months LIBOR p.a., with effect from 1 April 2014.

The Board of Directors of the Company with effect from 1 January 2015 reclassified the above loan of EUR 6.65 million as a long term loan forming part of the Company's net investment in a non integral foreign operation. Consequently, the foreign exchange loss on translation of the loan as at the balance sheet date amounting to Rs.14 million (31 March 2015 ' 64 million) has been accumulated in the Foreign Currency Translation Reserve in accordance with Accounting Standard 11 - The Effects of Changes in Foreign Exchange Rates. The profit before tax of the Company for the year ended 31 March 2016 is higher to that extent.

3. Employee Benefits (Currency: Indian Rs.in Millions)

(a) Defined Contribution Plans i) Provident Fund:

The Company makes contributions of a specified percentage of a payroll costs towards the retirement benefit plan of its employees. The Company has no obligation other than to make specified contribution. The contribution are charged to the statement of profit and loss as they accrue.

The Nomination and Remuneration committee of Directors of Geometric Limited evaluates the performance and other criteria of employees and approves the grant of options. These options vest with employees over a specified period. Upon vesting, employees are eligible to apply and secure allotment of the Company's share at market price on the date of grant of options. The employee share based payment plans have been accounted based on the intrinsic value method and no compensation expense has been recognized since the market price of the underlying share at the grant date is the same/ less than the exercise price of the option, the intrinsic value thereof being Nil. All the options granted are equity settled stock options.

In the event of any further rights or bonus issue of equity shares prior to conversion, the entitlement of shares shall be suitably revised. In the event of a bonus issue, the number of shares shall be increased proportionately and the price revised downwards.

Accounting Standard - 17 'Segment Reporting' issued by the Institute of Chartered Accountants of India prescribes that where a financial report contains both consolidated financial statements and the separate financial statements of the parent, segment information need be presented only on the basis of the consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.

The amount of dues owed to Micro, Small and Medium Enterprises as on 31 March 2016 amounted to ' 1 million (31 March 2015 : Rs.1 million). This amount has not been outstanding for more than 45 days at the balance sheet date. The information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.

4. Capital and other commitments

(a) Tangible assets:

Estimated amount of contracts remaining to be executed on capital account to the extent not provided for (net of advances) Rs.4 million (31 March 2015 Rs.22 million)

(b) Intangible assets:

Estimated amount of contracts remaining to be executed on capital account to the extent not provided for (net of advances) Rs.Nil (31 March 2015 Rs.8 million)

5. Corporate Social Responsibility

As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.

The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief and rural development projects. A CSR committee has been formed by the company as per the Act. The gross amount required to be spent by the Company during the year is Rs.10 million.

6. The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/ accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.

Note a:

The Company has issued Corporate guarantees of USD 7 million equivalent to Rs.463 million (31 March 2015 USD 7 million equivalent to Rs.437 million) and Euro 1.5 million equivalent to Rs.112 million (31 March 2015 Euro 1.5 million equivalent to Rs.101 million) in respect of working capital loan availed by Geometric Americas Inc. and term loans availed by Geometric Europe GmbH respectively, both wholly owned subsidiaries of the Company. The loans are secured by mortgage of current assets of Geometric Americas Inc. and Geometric Europe GmbH in favour of Citibank and ING Vyasa Bank respectively.

Note b:

(i) The Company has a law suit filed against it by another company concerning employment of a staff for damages to the tune of for Rs.1,118 million along with interest of 18% per annum (31 March 2015 Rs.1,118 million) for alleged breach of contractual terms of a Non- Disclosure Agreement entered into between both the companies. Geometric Limited is in the process of defending the case. The Company's management, in consultation with its lawyers believes that the claim is frivolous and the Company has a good case on merits and has good grounds for its defense. Accordingly no provision is considered necessary.

7. Contingent liabilities (Contd.) (Currency: Indian Rs.in Millions)

(ii) The Company has filed appeals with the Sales Tax authorities for Rs.13 million (31 March 2015 Rs.8 million) for years 2002-03, 2004-05, 2009-10 and 2011-12 with regard to dispute on sales tax to be levied on software sales. The management, in consultation with its consultant and basis its evaluation is of the view that these demands are not tenable and hence no provision is required.

(iii) The Company has received notice for payment of interest and penalties of Rs.43 million (31 March 2015 Rs.43 million) for delay in transfer of accumulated contributions of provident fund, up to 31 May 2007 for employees who opted to move from company PF trust to Government PF trust. The Company moved to High Court Bombay for seeking stay and high court granted the Company permission to file an Appeal before EPFO Appellate Tribunal. The Company has filed the Appeal before the Appellate Tribunal and deposited Rs.13 million for admission of the Appeal. The amount paid is shown under other assets. The management, in consultation with its consultant believes that the claim is not tenable in law and accordingly no provision is required.

(iv) The Company has not provided for disputed Indian income tax liabilities aggregating to Rs.472 million (31 March 2015 Rs.509 millions) for the assessment year 2006-07 to 2013-14. The Company has filed appeal with the Income Tax Appellate Tribunal ("ITAT") for tax matters related to these years. Management, in consultation with the Company's tax consultants, believes that the Company's appeal will be decided in its favour and, therefore, no accrual for a liability is considered necessary.

(v) The Company has disputes outstanding dues for the year 1997-98 to 1999-2000, 2007-08 and 2009-10 to 2013-14 with the Office of Assistant Commissioner of Customs and Excise in respect of wrongful a ailment of duty exemption, service tax on import of services and penalties and interest thereon. The total demand outstanding for various years amounts to Rs.53 million (31 March 2015 Rs.26 million). The management, in consultation with its consultant and basis its evaluation is of the view that the Company has a favorable position and no provision is required.

8. Indian Accounting Standard

'The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazette dated 16 February 2015 notified the Indian Accounting Standards (Ind AS) applicable to certain classes of companies. Ind AS will replace the existing Indian GAAP prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. For Geometric and its subsidiaries, Ind AS will be applicable for the accounting periods beginning 1 April 2016, with a transition date of 1 April 2015.

The Company has evaluated the effect of transition from Indian GAAP to Ind AS. Adoption of Ind AS is expected to have accounting and / or disclosure impact with respect to the following, amongst others:

- Fair valuation of certain financial instruments

- Employee costs pertaining to defined benefit obligations

- Accounting for out of pocket expenses received from customers

- Accounting for share based payments

Further, there will also be changes in the presentation of financial statements including some additional disclosures.

9. Previous year's financial statements were audited by a firm of Chartered Accountants other than B S R & Co. LLP.

10. Figures for the previous year have been regrouped / restated wherever necessary to conform to current period's classification.

(viii) The Company has not defaulted in repayment of loans or borrowings to a financial institution.

(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable.

(x) According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.