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Asian Star

BSE: 531847|ISIN: INE194D01017|SECTOR: Diamond Cutting & Jewellery & Precious Metals
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Asian Star is not listed on NSE
Mar 16
Notes to Accounts Year End : Mar '17

A. CORPORATE INFORMATION

Asian Star Company Limited (The Company) is a public Limited company domiciled and incorporated in India. Its shares are listed on the Bombay stock exchange in India. The Company is one of the world’s leading diamantaires primarily engaged in the business of diamond cutting and polishing, jewellery manufacturing and retailing. The Company is also engaged in generation of electricity through wind power in India.

B. SIGNIFICANT ACCOUNTING POLICIES

1. Basis of preparation

These financial statements of the Company have been prepared in accordance with IFRS converged Indian Accounting Standards (IndAS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (“IndAS”).

Up to the year ended March31st, 2015, the Company prepared its financial statements in accordance with generally accepted accounting principles in India, including accounting standards read with Section 133 of the Companies Act, 2013 notified under Companies (Accounting Standards) Rules, 2006 (“Previous GAAP”). The Financial Statements for the year ended on March31st, 2017 are the first to have been prepared in accordance with the IndAS . The date of transition to IndAS is April 1st, 2015. Accordingly, opening balances as on April 1st, 2015 and March 31st, 2016, have been presented comparatively.

These financial statements are in compliance with IndAS 101, “First Time Adoption of Indian Accounting Standards”. Refer note 5 for the details of first time adoption exemptions availed as well as Reconciliations upon Transition.

All the assets and liabilities have been classified as current and non-current as per the Company’s normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of business operations, the Company has ascertained its operating cycle as 12 months for the purpose of current and non- current classification of assets and liabilities.

2. Accounting policies requiring management judgement and key sources of estimation uncertainty

The accounting policies which have the most significant effect on the figures disclosed in these financial statements are mentioned below and these should be read in conjunction with the disclosure of the significant IndAS accounting policies provided below:

i. Revenue recognition

Revenue recognition requires management judgement of deciding the most appropriate basis for presenting revenue or costs of revenue after reviewing both the legal form and substance of the agreement. Determining the amount of revenue to be recognized for multiple element arrangements also requires management judgement.

ii. Useful life of Property, Plant and Equipment

The assessment of the useful life of each asset by considering the historical experience and expectations regarding future operations and expected usage, estimated technical obsolescence, residual value, physical wear and tear and the operating environment in which the asset is located needs significant judgement by the management.

iii. Income Taxes

The calculation of income taxes requires judgement in interpreting tax rules and regulations. Management judgement is used to determine the amounts of deferred tax assets and liabilities and future tax liabilities to be recognized.

iv. Fair Value

Certain financial instruments, such as investments in equity securities, derivative financial instruments and certain elements of borrowings, are carried in the financial statements at fair value, with changes in fair value reflected in the income statements. Fair values are estimated by reference to published price quotations or by using other valuation techniques that may include inputs that are not based on observable market data, such as discounted cash flows analysis.

3. First Time Adoption of IndAS

The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from 1st April, 2016, with a transition date of 1st April, 2015. These financial statements for the year ended 31st March, 2017 are the first financial statements the Company has prepared under Ind AS. The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared financial statements which comply with Ind AS for year ended 31st March, 2017, together with the comparative information as at and for the year ended 31st March, 2016 and the opening Ind AS Balance Sheet as at 1st April, 2015, the date of transition to Ind AS.

Optional exemptions adopted as per IndAS

In preparing these Ind AS financial statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101, as explained below.

Property, plant and equipment (PPE), investment properties and intangible assets: The Company has availed of the option to use either “the Fair Value of the asset at the date of transition” or the “Previous GAAP revaluation at or before the date of transition” as its deemed cost.

Investments in subsidiaries, joint ventures and associates: The Company has adopted to value its investments in subsidiaries, joint ventures and associates at deemed cost, which is the previous GAAP carrying amount at the date of transition.

Mandatory exceptions from retrospective application of IndAS

In addition to the optional exceptions discussed above. The Company has applied the following mandatory exceptions under IndAS 101:

Estimates: The estimates made under previous GAAP (Indian GAAP) have not been changed by using subsequent information at the IndAS transition date except change in the estimates of useful lives of Land & building. The other estimates as per IGAAP can be changed in future only in case of an error or if the estimates not earlier required under Indian GAAP would be required under IndAS.

Classification and measurement of financial assets: The classification of financial assets to be measured at amortised cost or fair value through other comprehensive income is made considering whether the conditions of IndAS 109 are met on the basis of the facts and circumstances that existed on the date of transition to IndAS.

4. First time IndAS adoption Reconciliations:

The difference between the carrying amounts of the assets and liabilities in the financial statements under both IndAS and Previous GAAP as of the Transition date have been recognized directly in “Retained Earnings” at the Transition date. This note explains the adjustments made by the Company in restating its financial statements prepared under previous GAAP, including the Balance Sheet as at Aprillst, 2015 and the financial statements as at and for the year ended March31st, 2016.

The following reconciliations provide a quantification of the effect of significant differences arising from the transition from Previous GAAP to IndAS in accordance with IndAS 101:

Equity as at April 1st, 2015

Equity as at March 31st, 2016

Profit for the year ended March 31st, 2016

Explanation of material adjustments to cash flow statements

In the reconciliations mentioned above, certain reclassifications have been made to Previous GAAP financial information to align with the IndAS presentation

Notes to the Reconciliations:

1. Property Plant & Equipment:

As per ‘the deemed cost’ exception given in paragraphs D5 and D6 to IndAS 101, any item of property, plant and equipment can be measured at the date of transition to Ind AS at its fair value or at revalued amount. The Previous GAAP revalued amount can be considered as deemed cost if the revaluation was, at the date of the revaluation, broadly comparable to either the fair value or cost or depreciated cost in accordance with IndAS.

In accordance with above, upon transition to IndAS, the various items of Fixed Tangible Assets have been valued as follows:

- Land & Buildings amounting to Rs. 2,991 Lacs have been measured at Fair Market Value on transition date and the fair market value of Rs.12,811 Lacs has been considered to be the ‘deemed cost’ of these assets.

- Assets amounting to Rs. 12,988 Lacs have been revalued in accordance with IndAS and the Previous IGAAP revalued amounts have been considered to be the ‘deemed cost’ of these assets.

- The above changes have led to an increase in the total value of PPE to the tune of Rs.9,820 Lacs as on the transition date, which has been recognised in Equity as a part of “Retained Earnings”.

- The estimates of useful lives of Land and Buildings have been revised upon fair market valuation and accordingly the revised depreciation has been calculated. In the first year of transition the additional differential depreciation as per IndAS amounted to Rs.59 Lacs.

- For import of machinery under EPCG license, the custom duty saved in the FY 2015-2016 amounted to Rs.174 Lacs. This has led to increase in PPE account and since the benefits of this would be available in subsequent years, it has been credited to “Other non-current Liabilities” account in FY 2015-2016.

- The impact of ‘deemed cost’ as well as revised depreciation and custom duty savings on the PPE for the FY 2015-2016 was Rs. 9,935 Lacs.

2. Non-Current Investments & Other Non-Current Liabilities:

As per Indian GAAP, Non-Current investments are carried at cost. However the same need to be fair valued as per IndAS 109. Non-current investments of the Company are the investments made in equity instruments in wholly owned subsidiaries. Provision of Financial Guarantees on behalf of subsidiaries is accounted in accordance with IndAS 109 at fair value on transition date and at subsequently at amortised cost using the effective interest method.

As on April 1st, 2015, the Financial Guarantees given by the Holding company to different financial institutions favouring its subsidiaries namely Asian Star Trading (Hongkong) Ltd, Asian Star Jewels Pvt. Ltd and Asian Star DMCC have been fair valued in accordance with IndAS 109 at Rs.173 Lacs. This has led to an increase in the value of “Non-current investments” to the tune of Rs.173 Lacs as on 1/4/2015. The inception dates of these guarantees were before the transition date, hence the value upto the date of transition of Rs. 38 Lacs has been adjusted in Equity as a part of “Retained Earnings”. And the balance amount (after transition date till the end of tenure of the guarantees), which will be recognised as income in subsequent years of Rs.135 Lacs has been transferred to “Deferred Income” and is reflected under “Other Non-Current Liabilities” as on 1/4/2015.

Out of the above Deferred Income, the guarantee commission income pertaining to the FY 2015-2016 calculated based on effective interest method amounted to Rs. 37 Lacs. This amount is recognized as income and it has been recognized as a deduction from “Other expenses” account in the Profit & Loss Statement and as a deduction from “Deferred Income” from “Other Non-Current Liabilities”.

During the FY 2015-2016, additional guarantee was issued in favour of Asian Star Trading (Hongkong) Ltd, this has led to increase in the value of Non-Current Assets and Other Non-Current Liabilities by additional 36 Lacs.

The changes to the Non-Current Investments & Other Non-Current Liabilities as on the transition date and as at the end of first year of transition have been summarized as follows:

3. Long Term Loans & Advances:

As per Indian GAAP, the Loans given to Subsidiary Companies were being carried at Historical Costs less repayments. However, as per IndAS 109, these Loans need to be fair valued on the transition date and subsequently carried at amortised cost using effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

As on April 1st, 2015, the Long Term Loans and Advances as per Indian GAAP were Rs. 565 Lacs. As per IndAS the fair value is Rs. 461 Lacs. The above difference of Rs. 104 Lacs has been deducted from Equity as part of “Retained Earnings”. Similarly, Rs. 72 Lacs of interest on loan to subsidiary are deducted from Finance costs for 31/03/2016.

4. Current Investments

The Aggregate carrying value of quoted investments as per Indian GAAP as on April 1st, 2015 was Rs. 129 Lacs. However the Fair Market value of these investments as on the same date was Rs. 149 Lacs. Hence, the value of Current investments has increased as per IndAS to the extent of this difference of Rs. 19.96 Lacs. This difference has also been recognised in Equity as part of “Retained Earnings”.

5. Trade Receivables and Current Loans & Advances

As per IndAS, the assets and liabilities needed to be regrouped. These regrouping entries in Trade Receivables account and Current Loans & Advances account amounted to Rs. 46 Lacs as on the transition date and corresponding impact is in “Retained Earnings” and for 31/03/2016, the regrouping entries in Trade Receivables account and Current Loans & Advances account amounted to Rs. 632 Lacs with corresponding impact in “Other Financial Assets” and the difference on account of correct FVTPL accounting of financial instruments as per IndAS amounted to Rs. 85 Lacs, which has been reflected in “Revenue from Operations & Cost of Material Consumed.”

6. Other Financial Assets and Other Financial Liabilities

The derivatives related receivables and payables were being grouped under different accounting heads under IGAAP. However, in accordance with IndAS 32 and lndAS109, these have been reclassified into “Other Financial Assets and Other Financial Liabilities accounts”. The accounting methodology adopted as per IndAS is calculation of MTM gains/losses, which are valued at Fair market value. Accordingly these adjustments have been made in “Retained Earnings” to the tune of Rs. 4 Lacs on the transition date and for 31/03/2016, adjustment of Rs. 494 Lacs have been made to “Revenue from Operations & Cost of Materials Consumed”.

7. Other Equity

As on April 1,2015, the “Other Equity” amount as per Indian GAAP was Rs. 48,529 Lacs. With the adoption of various IndAS as on the Transition date, the amounts of Various Assets and Liabilities have undergone adjustments. These adjustments have been detailed in the various explanatory notes forming part of this report. All these adjustments have cumulatively impacted the “Other Equity” and are disclosed separately under the heading “Retained Earnings”. The impact on “Retained Earnings” is Rs. 7,095 Lacs as on the transition date as follows:

Similarly for 31/03/2016, adjustments have cumulatively impacted the “Other Equity” by Rs. 7,049 Lacs. Rs. 7,095 Lacs as above less Rs. 46 Lacs as per reconciliation of total comprehensive income as shown above.

8. Long Term & Short Term Borrowings

Promoters loans have been fair valued as per IndAS 109 using effective interest method, due to which reclassification from long term category to short term category has been made to the tune of Rs. 2,180 Lacs and Rs. 468 Lacs have been adjusted to “retained earnings” as on the transition date and for 31/03/2016, Rs. 2,738 Lacs have been reclassified from long term category to short term category and Rs. 246 Lacs have been adjusted to “Finance Costs”.

9. Deferred Tax Liabilities (net)

Deferred tax is provided in full for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

As on April 1st, 2015 the deferred tax liability already calculated on timing differences between depreciation as per Companies Act compared to depreciation allowable as per Income Tax Act was Rs. 2,224 Lacs. With the adoption of IndAS, there are various adjustments to the amounts of assets and liabilities (which have been identified under various notes in this document). These adjustments will also have an impact on the tax of the Company as per Indian Income Tax laws. The identified difference between the IndAS balance sheet amounts as compared to the Income Tax Balance Sheet amounts as on April 1,2015 is Rs. 5,618 Lacs. This would impact the deferred tax liability to the extent of Rs. 3,393 Lacs. This has been deducted from Equity as part of “Retained Earnings”. Similarly for 2015-16, the reworked deferred tax liability based on IndAS caused a reduction in the liability amount to the tune of Rs. 363 Lacs. Hence the cummulative impact in 2015 -16 is Rs. 3,032 Lacs.

10. Other Current Liabilities

As per IndAS 10, if an entity declares dividends to holders of equity instruments (as defined in IndAS 32, Financial Instruments: Presentation), after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period. The dividends, declared after the reporting period but before the financial statements are approved for issue, are not recognised as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are however, disclosed in the notes in accordance with IndAS 1, Presentation of Financial Statements.

Under IGAAP, dividend proposed after the date of the financial statements but prior to the approval of financial statements is considered as an adjusting event, and a provision for dividend payment is recognised in the financial statements of the period to which the dividend relates. Under IndAS, dividend declaration is considered as a non-adjusting subsequent event and provision for dividends is recognised only in the period when the dividend is declared and approved.

As on April 1,2015, the Proposed Equity dividend was 240 lacs and the tax on proposed equity dividend was Rs. 50 Lacs. This total amount of Rs. 290 Lacs has been reduced from Other Current Liabilities and correspondingly in Equity as part of “Retained Earnings”. Similar adjustment of Rs. 290 Lacs has been made for 31/03/2016.

11. Revenue from Operations & Cost of Materials Consumed

The gains / losses on account of Financial instruments valued at FVTPL as per IndAS has led to transition differences of Rs. 138 Lacs and Rs. 318 Lacs respectively in revenue from Operations & cost of material consumed in the first year of transition.

12. Other Income

Net losses on account of fair market valuation of investments amounted to Rs. 20 lacs & benefit of custom duty amounted to Rs. 3 Lacs in the first year of transition.

13. Employee benefits expense & other Comprehensive Income

Actuarial Loss on plan assets for gratuity as on 31.03.2016 as per IndAS amounted to Rs. 203 Lacs, which has been deducted from P&L Statement and transferred to other Comprehensive Income.

14. Finance costs

The IndAS transition adjustment of Rs. 189 Lacs in the first year of transition consists of interest income on Loans given to Subsidiary and interest expense on loans availed from Promotors as per IndAS 109 calculated as per effective interest method

EXPLANATION OF MATERIAL ADJUSTMENTS TO THE STANDALONE CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31st, 2016

The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.

5. During the year, Company has recognized the following amounts in the financial statements:

a) Defined Contribution Plan

Contribution to Defined Contribution Plan, recognized as expenses for the year are as under:

b) Defined Benefit Plan:

Defined benefits plan as per actuarial valuation as on March 31st, 2017 and recognized in the financial statement in respect of Employee Benefits Scheme:

6. Events after the reporting period

The Board of Directors have recommended dividend of Rs. 1.50 per fully paid up equity share of Rs. 10/- each, aggregating to Rs. 290 Lacs, including Rs. 50 Lacs dividend distribution tax for the financial year 2016-2017, which is based on relevant share capital as on March 31st, 2017. The actual dividend amount will be dependent on the relevant share capital outstanding on the record date / book closure.

7.Corporate Social Responsibility (CSR):

a) Gross amount required to be spent during the year: Rs. 116 Lacs

b) Amount spent during the year:

8. a) The Company has given guarantee of Rs. 237.52 Crores (For F.Y. 2015-16 it was Rs. 242.00 Crores) to Banks for facilities availed by its subsidiary companies.

b) The Company has disputed service tax liability of Rs. 4.46 Crores (For F.Y. 2015-16 it was Rs. 4.46 Crores).

c) The Company has disputed liability of Rs. 3.32 Crores (For F.Y. 2015-16 it was Rs. 3.32 Crores) in respect of Customs duty raised by Commissioner of Customs.

The Company is of the opinion that the demand raised by Service Tax Department & Commissioner of Customs is not tenable and has made appropriate submission to the departments. The Company has received stay order form Gujarat High Court against the demand of Custom Duty. The same shall be charged to Profit & Loss statement, if required, on disposal of the matter.

9. The details of amounts outstanding to Micro, Small and Medium Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), based on the information available with the Company are as under:

Note: For Financial assets and financial liabilities that are measured at Fair Value, the carrying amounts are equal to their fair values.

Fair Value Related Disclosures:

Fair Value measurement:

Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarized in the following notes.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or in the absence of a principal market, in the most advantageous market for the asset or market for the asset or liability the principal or the most advantageous market must be accessible by Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

Valuation Techniques and Inputs used

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

i. Long-term receivables/borrowings are evaluated by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses, if any, of these receivables.

ii. The fair values of the quoted equity shares are based on price quotations at the reporting date (Level 1 inputs).

iii. The Company enters into derivative financial instruments in the form of Foreign exchange Forwards & Options contracts. The counterparties of these contracts are Banks. These derivatives constitute hedge from an economic perspective and are carried as financial asset when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arrising from changes in the fair value of derivatives are taken directly to statement of profit and loss. Foreign exchange forward and option contracts are valued using valuaition technique, which employ use of market observable inputs. The valuation technique applied is the use of “Quoted prices in active market”

iv. The fair values of the Group’s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period.

Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, 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 liabilities.

- Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

- Level 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, Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Comparision by class of carrying amount and fair value of fanancial instruments.

The management assessed that for all Financial Assets and Liabilities, the carrying amounts are equal to the fair value.

Note 1. Trade Receivables and Trade Payables have been measured at amortised cost but for the purpose of disclosing their fair value related information as per IndAS 113.97, they have been categorised into Level 1 because their carrying values are approximately same as their level 1 based fair value (based on observable market inputs).

Note 2. Borrowings and Loans have been measured at amortised cost but for the purpose of disclosing their fair value related information as per IndAS 113.97, they have been categorised into Level 2 (as per IndAS 113.82) because they have a specified (contractual) term and the inputs are based on quoted prices for similar assets or liabilities in active markets or based on market-corroborated inputs.

Note 3. Other financial assets have been measured at amortised cost but for the purpose of disclosing their fair value related information as per IndAS 113.97, they have been categorized into level 1, because their carrying values would be same as fair value or transaction price.

Other Fair Value related Disclosures

Recurring/ non-recurring classification of fair value:

All fair value measurements for the period ended 31/3/2017, 31/3/2016 and 1/4/2015 are recurring in nature and there are no Non-recurring fair value measurements of assets or liabilities in these periods.

Level 3 inputs related disclosure

There are no recurring fair value measurements using significant unobservable inputs (Level 3) in the reporting periods and hence there is no effect of the measurements on profit or loss or other comprehensive income for the period.

Transfers between Level 1 and Level 2

There have been no transfers between Level 1 and Level 2 of the fair value hierarchy for all assets and liabilities held at the end of the reporting period that are measured at fair value on a recurring basis.

Change in Valuation techniques, if any

There has been no change in the valuation techniques in the reporting periods.

Financial risk factors

The Company is exposed to a variety of financial risks such as credit risk, liquidity risk and market risk.

Financial risk management is carried out by a finance committee under policies approved and delegated by the Board of Directors. The Board provides written principles for risk management.

The following table outlines the sources and exposure to risks and how the company manages these risks:

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for credit losses and impairment that represents its estimate of expected losses in respect of trade and other receivables and investments.

The Company periodically assesses the financial reliability of customers / corporates taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable and loans receivable. These include customers / corporates, which have high credit-ratings assigned by international and domestic credit-rating agencies. Individual risk limits are set accordingly.

On account of adoption of Ind AS 109, the Company uses Expected Credit Loss (ECL) model for assessing the impairment loss. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers.

None of the Company’s cash equivalents, including term deposits with banks, were past due or impaired as at March 31st, 2017. Of the total trade receivables Rs. 53,620 Lacs as at March 31, 2017 and Rs. 61,039 Lacs as at March 31st, 2016 consisted of customer balances that were neither past due nor impaired. The Company’s Credit risk management policies include categorizing the loans and trade receivables based on estimates of Probability of Default and calculation of Expected Credit Losses (ECL).

Loans and advances include loans given to staff Rs. 25 lacs as at March 31st, 2017 and Rs. 28 lacs as at March 31st,2016 which the company perceives no impairment loss to be provided for.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.

The Company finances its operations by a combination of retained profits, disposals of assets, bank borrowings, etc. Liquidity risk is managed by short-term and long-term cash flow forecasts.

The table below provides details regarding the contractual maturities of significant financial liabilities as at 31st, March 2017:

Market Risk

Market risks include Interest Rate Risk and foreign Currency Risk. There are no identifiable Commodity Price Risks or Equity Price Risks foreseen in the current reporting period.

Interest Rate Risk

The Company is mainly exposed to the interest rate risk due to its variable and fixed rate domestic and foreign borrowings. The interest rate risk arises due to uncertainties about the future market interest rate on these borrowings.

Foreign Exchange Risk

The Company is exposed to foreign exchange risk principally via:

- transactional exposure that arises from the sales / receivables denominated in a currency other than the functional currency of the company.

- transactional exposure that arises from the cost of goods sold / payables denominated in a currency other than the functional currency of the Company.

- Foreign currency exposure that arises from foreign currency term loans / Working Capital loans (including interest payable) denominated in a currency other than the functional currency of the Company.

Commodity Risk

The Company is exposed to the commodity rate risk due to uncertainities in availibility of gold and silver for it’s jewellery oprations. Forward contracts for sale of gold entered into by the company and outstanding as on 31st march 2017 corers 63 Kgs. (for F.Y - 2015-2016 it was for sale of gold 50 Kgs and for purchase of silver 60 Kgs). Sencivity analysis for commodity risk is not done as it is not material.

Sensitivity analysis

The sensitivity analysis reflects the impact on income and equity due to financial instruments held at the balance sheet date. It does not reflect any change in sales or costs that may result from changing interest or exchange rates.

10. Capital Management

The Company’s objectives when managing capital (defined as net debt plus equity) are to safeguard the Company’s ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders, while protecting and strengthening the balance sheet through the appropriate balance of debt and equity funding. The Company manages its capital structure and makes adjustments to it, in light of changes to economic conditions and the strategic objectives of the Company. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, buy back shares and cancel them, or issue new shares. The Company finances its operations by a combination of retained profit, bank borrowings, disposals of property assets, etc. The Company uses borrowing facilities to meet the Company’s business requirements of each local business.

The Company monitors capital using gearing ratio, which is total debt divided by total capital plus debt.

The capital gearing ratio as on March 31st, 2017 and March 31st, 2016 was 55% and 57%, respectively.

11. Collaterals

The Company has obtained working capital loan from banks which are secured by:

- Fixed deposits - Value Rs. 14,514 lacs

- Hypothecation of Stock in trade and Trade receivables - Value Rs. 1,20,058 lacs

- Mortgage of premises at Mumbai & Surat - Value Rs. 15,371 lacs.

Defaults

For loans payable recognised at the end of the reporting period, there have been no defaults.

12. Investment Property

As on 31/3/2017, the Company has transferred one property from “owner-occupied property” to investment property in accordance with IndAS 40. The accounting policy adopted by the Company for measuring this property is the cost model as prescribed in IndAS 40. There are no direct operating expenses or rental income from this property in the current reporting period. There are no restrictions on the realisability of this property or the remittance of income and proceeds of disposal nor any contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

Though the Company measures investment property using cost based measurement, the fair value of investment property is Rs. 5,084 Lacs. Fair values are determined based on an annual evaluation performed by applying a valuation model by an accredited external independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued.

13. The figures of previous year have been regrouped / reclassified wherever necessary and possible so as to confirm with the figures of the current year.

Source : Dion Global Solutions Limited
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