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TRF

BSE: 505854|NSE: TRF|ISIN: INE391D01019|SECTOR: Engineering - Heavy
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Notes to Accounts Year End : Mar '17

1. Above includes Rs. 24,903.02 lakhs (31.03.2016 Rs 25,519.10, 01.04.2015 Rs. 27,639.92 lakhs) retention money which are recoverable on completion of the project as per the terms of the relevant contract.

2. Above also includes retention money recoverable amounting to Rs 1,928.53 lakhs [31.03.2016 Rs. 1,928.53, 01.04.2015 Rs. NIL] which are not due as per the terms of relevant contract and have been collected against submission of Bank guarantee. Corresponding liability is disclosed as ''Advance received from customers under ''note no-28(a)''

3. For details of carrying amount of trade receivables pledged as security for secured borrowings refer note 20.

4. The credit period given to customers range from 0 to 30 days. No interest is charged on the overdue amounts.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The expected credit loss allowance for trade receivable due for more than 12 months, 24 months and 36 months provision is recorded at 25%, 50% and 100% respectively. For Retention receivable due for more than 12 months and 24 months provision is recorded at 50% and 100% respectively.

5. Information about major customers

Included in revenue arising from direct sales of goods and services of(excluding excise duty) Rs 50,583.46 lakhs (March 31, 2016: Rs 54,044.98 lakhs) are revenues of approximately Rs. 30,200.50 lakhs (March 31, 2016: Rs 31,969.55 lakhs) which arose of the sale to the company''s top three customers. No other single customer contributed 10% or more of the Company''s revenue for both 2016-2017 and 2015-2016

6. Employee benefit plans

7. Defined contribution plans

The Company provide Provident Fund facility to all employees. The Company provides superannuation benefits to selected employees. The assets of the plans are held separately from those of the Company in funds under the control of the trustees in case of trust or of the employees provident fund organization. The contributions are expensed as they are incurred in line with the treatment of wages and salaries. The Company''s Provident Fund is exempted under section 17 of Employees'' Provident Fund and Miscellaneous Provision Act, 1952. Conditions for exemption stipulate that the Company shall make good deficiency, if any, in the interest rate declared by the trust vis-a-vis interest rate declared by the Employees ‘Provident Fund Organization. The liability as on the balance sheet is ascertained by an independent actuarial valuation.

The Company has recognized an amount of Rs. 507.92 lakhs as expenses for the year ended March 31,2017 (For the year ended March 31,2016: Rs.501.21 lakhs) towards contribution to the following defined contribution plans.

8. Defined benefit plans

The Company provides Gratuity benefit to all employees. The Company provides post retirement pension for retired whole-time directors. The assets of the gratuity plans are held separately from those of the Company in funds under the control of the trustees of the independent trusts or with the life insurance companies. The board of trustees of the gratuity fund composed of an equal number of representatives from both employees and employers. The board of the Fund is required by law and by the trust deed to act in the interest of the Fund and of all relevant stakeholders in the scheme. The board of trustee of the fund and management of life insurance company is responsible for the investment policy with regard to the assets of the Fund. Post retirement pension plan is not funded.

Under the gratuity plan, the employees with minimum five years of continuous service are entitled to lump sum payment at the time of separation calculated based on the last drawn salary and number of years of service rendered with the Company. Under the post retirement pension, the Company pays monthly pension to retired whole-time directors as decided by the board of directors.

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase attrition and mortality. The sensitivity analysis given below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

- If the discount rate is 100 basis points higher (lower), the defined benefit obligation would decrease by Rs. 130.13 lakhs (increase by Rs. 154.55 lakhs) [as at March 31, 2016: decrease by Rs. 107.92 lakhs (increase by Rs. 125.53 lakhs)]

- If the expected salary increase growth increases (decreases) by 1%, the defined benefit obligation would increase by Rs. 151.48 lakhs (decrease by Rs. 130.15 lakhs) [as at March 31, 2016: increase by Rs. 125.53 lakhs (decrease by Rs. 108.64 lakhs)]

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is likely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is same as applied in calculating the defined benefit obligation liability recognized in the balance sheet. There was no change in the method and assumptions used in preparing the sensitivity analysis from prior years.

- If the expected pension increase growth increases (decreases) by 1%, the defined benefit obligation would increase by Rs. 58.19 lakhs (decrease by Rs. 51.78 lakhs) [ as at March 31, 2016: increase by Rs. 107.46 lakhs (decrease by Rs. 94.56 lakhs)] The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is likely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is same as applied in calculating the defined benefit obligation liability recognized in the balance sheet. There was no change in the method and assumptions used in preparing the sensitivity analysis from prior years.

9. Financial instruments

10. Capital management

The Company manages its capital to ensure that entities will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Capital structure of the Company consists of net debt (borrowings as detailed in notes 20 and 25 offset by cash and bank balances) and the total equity of the Company.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of 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 by total capital plus net debt. The Company includes within net debt, long term borrowings, short-term borrowings, less cash and short-term deposits.

11. Financial risk management objectives and policies

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The Company''s principal financial assets include loans, trade and other receivables, and cash and short-term deposits that derive directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions. The Company is exposed to market risk( including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company''s policies approved by the board of directors, which provide written principles on foreign exchange risks, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments. The Company does not enter into or trade financial instruments including derivative financial instruments, for speculative purposes.

The corporate treasury management reports on quarterly basis to the board of directors that monitors risks and policies implemented to mitigate risk exposures.

12. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company''s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Company enters into derivative financial instruments to manage _ its exposure to foreign currency risk and interest rate risk.

13. Foreign currency risk management

The Company enter into sale and purchase transactions and borrowings denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise.

Foreign currency sensitivity analysis

The following table details the Company''s sensitivity to a 10% increase and decrease in exchange rate between the pairs of currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for 10% change in foreign currency rates. The sensitivity analysis includes trade payables, receivables, external loans as well as loans to foreign operations within the Group where the denomination of the monetary item is in a currency other than the functional currency of the lender or the borrower. The sensitivity analysis has been undertaken on net unhedged exposure in foreign currency.

14. Interest rate risk management

Interest rate risk is the risk that the fair value of future cash flows of financial instrument will fluctuate because of change in market interest rates.The company''s exposure to the risk of changes in market interest rates relates primarily to the company''s long -term debt obligations with floating interest rates.

Interest rate sensitivity analysis

The company manages its interest rate risk by entering into interest rate swap contracts to swap floating interest rates for fixed interest rates over the duration of its borrowings for all its foreign currency long term loans. As at 31 March 2017, for all the long term foreign currency loans, the company has an interest rate swap, wherein the floating interest rates are converted into fixed interest rates.

The sensitivity analysis given below have been determined based on the exposure to interest rates at the end of the reporting period. For floating rate liabilities the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management''s assessment of the reasonably possible change in interest rates.

- Profit for the year ended March 31,2017 would decrease/increase by Rs. 68.45 lakhs (for the year ended March 31,2016: decrease/increase by Rs. 19.53 lakhs)

The Company''s sensitivity to interest rates has decreased/increased during the current year mainly due to repayment of loan installments matured during the year.

Interest rate swap contracts

The Company enters into interest rate swaps to hedge interest rate risks. Under the interest rate swap contracts, the Company exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Company to mitigate the risk of changing interest rates on the fair value of fixed rate debt and cash flow exposures on variable rate debt. The fair value of interest rate swaps at the end of the reporting period is determined by discounting the future cash flows using the curves at the end of the reporting period and credit risk inherent in the contract. _

15. Credit risk management

Credit risks refers to risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk encompasses both the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks. The Company''s Board approved financial risk policies comprise liquidity, currency, interest rate and counterparty risk. Financial instruments that are subject to concentrations of credit risk, principally consist of trade receivables, finance receivables, loans and advances and derivative financial instruments. None of the financial instruments of the Company result in material concentrations of credit risks. The Company does not engage in speculative treasury activity but seeks to manage risk and optimize interest and commodity pricing through proven financial instruments.

The credit risk on bank balances and derivative financial instruments is limited because the counterparties are banks with high credit ratings.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

The credit risk on bank balances and derivative financial instruments is limited because the counterparties are banks with high credit ratings.

16. Liquidity risk management

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company has obtained fund and non-fund based working capital lines from various banks. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecasts and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Liquidity and interest risk tables

The following tables detail the maturity profile of Company''s non-derivative financial liabilities with agreed repayment period. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay.

-Level 3 - Inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. The investments included in Level 2 of fair value hierarchy have been valued using quotes available for similar assets and liabilities in the active market. The investments included in Level 3 of fair value hierarchy have been valued using the cost approach to arrive at their fair value. The cost of unquoted investments approximate the fair value because there is a wide range of possible fair value measurements and the cost represents estimate of fair value within that range.

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):

17. The Company has incurred loss of Rs. 2,691.10 lakhs during the year ended March 31,2017(March 31,2016: Loss of Rs 993.58 lakhs) and the accumulated losses as of the balance sheet date amounting to Rs. 20,434.96 lakhs has eroded the net worth of the Company. The Company expects to generate cash flows from liquidating retention moneys relating to contracts that are in advanced stage of completion and expected dividend remittances from its wholly owned subsidiaries, which will be sufficient to meet future obligations of the Company in the next twelve months from the balance sheet date. Accordingly, the financial statements have been prepared on a going concern basis.

18. No provision has been made for liquidated damages and other claims by certain customers, wherever these have been refuted by the Company and the management expects to settle them without any loss. Pending settlement of these claims, they have been disclosed under contingent liabilities as Claims against the Company not acknowledged as debt. [Refer Note 44.(e)]. The related sundry debtors balances have been considered in the financial statements as fully recoverable.

19. Scrap and off-cuts generated at the contract sites are being accounted on cash basis, since segregation and quantification of such items at the financial year end are not practicable in view of the contracts being in progress.

20. Revision in projected profit/(loss) on contracts arising from change in estimates of cost to completion of contracts are reflected during the course of the work in each accounting year. These have not been disclosed separately in the Financial Statements as the effect cannot be accurately determined.

21. Operating lease

The Company''s significant leasing arrangements are in respect of operating leases for premises (residential, office, warehouse etc). The leasing arrangements which normally have a tenure of eleven months to three years are cancellable with a reasonable notice, and are renewable by mutual consent at agreed terms. Lease rentals aggregating to Rs 306.84 lakhs are charged as rent to the statement of profit and loss (for the year March 31, 2016 Rs 355.39 lakhs)

22. Under Previous GAAP, non-current investments were stated at cost less provision for diminution in value of investments, if any. Under Ind AS, financial assets in equity instruments, other than equity instruments in Subsidiaries and Joint venture, have been classified as Fair Value through Other Comprehensive Income (FVTOCI) through an irrevocable election at the date of transition.

23. Under previous GAAP, the net mark-to market losses on short term derivative financial instruments, as the Balance Sheet Date, were recognized in statement of profit and loss and the net gains, if any, were ignored. In case of long term derivative contracts, the exchange difference were recognized to statement of profit and loss through foreign currency long term monetary items. Under Ind AS, such derivative financial instruments are to be recognized at fair value and the movement is recognized in statement of profit and loss.

24. Loan processing fees/transaction cost under Ind AS is considered for calculating effective interest rate. The impact for the period subsequent to the date of transition is accounted in the statement of profit and loss.

25. On the date of transition, deferred tax impact on transition provision has been accounted in the Reserves, and consequential impact is accounted in the statement of profit and loss for the subsequent periods.

26. Defined benefit plans-under Ind AS, actuarial gain or losses arising on defined benefit plans are recognized in other comprehensive income, whereas under previous GAAP same was being charged to the statement of profit and loss.

27. Under the Previous GAAP, total comprehensive income was not reported therefore, the above reconciliation starts with profit under previous GAAP.

28. Reconciliation of Statement of Cash Flow

There are no material adjustments to the Statement of Cash Flows as reported under the Previous GAAP.

29. Previous year''s figures have been regrouped / reclassified where necessary to correspond with the current year''s classification / disclosure.

30. Approval of financial statements

The financial statements were approved for issue by the board of directors on May 23,2017.

Source :
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