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Apcotex Industries

BSE: 523694|NSE: APCOTEXIND|ISIN: INE116A01024|SECTOR: Rubber
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Notes to Accounts Year End : Mar '18

NOTE: 1 1.1 COMPANY INFORMATION:

Apcotex Industries Ltd. is one of the leading producers of Synthetic Lattices (VP Latex, Acrylic Latex, Nitrile Latex) and Synthetic Rubber (HSR, SBR) in India. The Company has one of the broadest ranges of products based on STYRENE -BUTADIENE CHEMISTRY available in the market today. Company’s product range is used, among other applications, for TYRE CORD DIPPING, PAPER/PAPER BOARD COATING, CONCRETE MODIFICATION/WATER PROOFING, PAINT EMULSIONS, TEXTILE FINISHING etc. The various grades of Synthetic Rubber find application in products such as Footwear, Automotive components, V-belts, Conveyor belts and hoses.

1.2 BASIS OF PREPARATION

(a) Compliance with IND AS

These financial statements have been prepared in accordance with the Indian Accounting Standards(herein referred to as ‘IND AS’) as notified by Ministry of Corporate Affairs pursuant to Section 133 of Companies Act 2013, read with Rule 3 of Companies (Indian Accounting Standards) Rules 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

These financial statements fo r the period ended 31st March, 2018 are the first financial statements the company has prepared under IND AS. For all periods upto and including 31st March, 2017 the company has prepared the financial statements on accrual basis under the historical cost convention and ongoing concern basis in accordance with the Generally Accepted Accounting Principles in India (‘Indian GAAP’) to comply with the Accounting Standards specified under section 133 of The Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of The Companies Act, 2013 (‘the Act’) / The Companies Act, 1956, as applicable.

The financial statements for the year ended 31st March, 2017 and the opening Balance Sheet as at 1st April, 2016 have been restated in accordance with IND AS for comparative information. Reconciliations and explanations of the effect of transition from previous GAAP to IND AS on the Company’s Balance Sheet, Profit and Loss A/c and Statement of Cash Flows is provided in Note 1.4.

The financial statements have been prepared on accrual and going concern basis except certain financial asset and liabilities (including derivative financial instruments) measured at fair value, defined benefit plans-plan asset measured at fair value, fair value of investments. The Accounting policies are applied consistently to all the periods presented in the financial statements, including the preparation of opening IND AS Balance Sheet as on 1st April, 2016.

The classification of assets and liabilities of the Company into current or non-current is based on the criterion specified in the Schedule III to the Companies Act, 2013. The Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

(b) Functional and Presentation currency:

The financial statements are prepared in Indian Rupees, which is the functional and Presentation currency for the Company.

(c) Use of Estimates:

The preparation of Financial Statement in accordance with IND AS requires use of estimates and assumptions for some items, which might have effect on their recognition and measurement in the Balance Sheet and statement of Profit and Loss. The actual amounts realized may differ from these estimates. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as Management becomes aware of changes in circumstances surrounding the estimates. Differences between the actual results and estimates are recognized in the period in which the results are known / materialized, and if material, their effects are disclosed in the notes to financial statements.

Estimates and assumptions are required for:

i. Useful life of PPE:

Determination of estimated useful life of tangible assets and the assessments as to which components of cost may be capitalized. Useful life of tangible fixed assets is based on life prescribed in Schedule II of the Companies Act, 2013. Assumptions also need to be made, when the Company assesses, whether an asset may be capitalized and which components of the cost of the asset may be capitalized.

ii. Recognition and measurement of defined benefit obligations:

The obligation arising from the defined benefit plan is determined on basis of actuarial assumptions. Key actuarial assumptions include discount rate, salary escalation rate, attrition rate, and life expectancy. The discount rate is determined with reference to market yields at the end of reporting period on the government bonds.

iii. Recognition of deferred tax assets:

A deferred tax asset is recognized for all the deductible temporary differences to the extent that is probable that taxable profits will be available against which the deductible temporary difference can be utilized. The management assumes that taxable profits will be available while recognizing deferred tax assets.

iv. Recognition and measurement of other provisions:

The recognition and measurement of other provisions are based on the assessment of the probability of an outflow of resources and on past experience and circumstances known at the Balance Sheet date. The actual outflow of resources at future date may vary from the figure included in other provisions.

v. Discounting of long-term financial liabilities:

All financial liabilities are req uired to be measured at fair value on initial recognition. In case of financial liabilities, which are subsequently measured at amortised cost, interest is accrued using the effective interest method.

vi. Determining whether an arrangement contains a lease:

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease. At the inception or an reassessment of an arrangement that contains a lease, the Company separates payments and other consideration required by the arrangement into those for the lease and those for the other elements on the basis of their relative fair values. If the company concludes for a finance lease that it is impracticable to separate the payments reliably then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset; subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Company’s incremental borrowing rate. In case of operating lease, the Company treats all payments under the arrangement as lease payments.

vii. Fair value of financial instruments:

Derivatives are carried at fair value. Derivatives include Foreign Currency Forward Contracts. Fair value of Foreign Currency Forward Contracts is determined using the rates published by Reserve Bank of India / State Bank of India.

viii. Current vs Non Current classification:

I. An asset is classified as current when it is:

1. Expected to be realized or intended to be sold or consumed in normal operating cycle

2. Held primarily for purpose of trading

3. Expected to be realized within twelve months after the reporting period or

4. Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non current

II. A liability is classified as current when it is:

1. Expected to be settled in normal operating cycle

2. Held primarily for purpose of trading

3. Due to be settled within twelve months after the reporting period or

4. There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

All other liabilities are treated as non current.

III. Deferred tax assets and liabilities are classified as non-current assets and liabilities.

1.3 FIRST TIME ADOPTION OF 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, 2016, the date of transition to IND AS.

In preparing these IND AS financial statements, the Company has availed certain exemptions and exceptions in accordance with IND AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under IND AS and Previous GAAP have been recognized directly in equity (retained earnings or another appropriate category of equity). This note explains the adjustments made by the Company in restating its financial statements prepared under previous GAAP, including the Balance Sheet as at 1st April, 2016 and the financial statements as at and for the year ended 31st March, 2017.

A. Optional Exemptions from retrospective application

IND AS 101 permits first-time adopters certain exemptions from retrospective application of certain requirements under IND AS. The Company has elected to apply the following optional exemptions from retrospective application:

(i) Business combinations

IND AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, or of interests in associates and joint ventures and transactions which are considered businesses for IND AS, that occurred before 1st April, 2016. The carrying amounts of assets and liabilities in accordance with Previous GAAP are considered as their deemed cost at the date of acquisition.

(ii) Deemed cost for property, plant and equipment and intangible assets:

The Company has elected to measure all its property, plant and equipment and intangible assets at the Previous GAAP carrying amount as its deemed cost on the date of transition to IND AS.

B. Mandatory Exceptions from retrospective application

The Company has applied the following exceptions to the retrospective application of IND AS mandatorily required under IND AS 101:

(i) Estimates:

On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under IND AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under IND AS but not required under Previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date.

(ii) Classification and measurement of financial assets

The classification of financial assets to be measured at amortized cost or fair value through other comprehensive income is made on the basis of the facts and circumstances that existed on the date of transition to IND AS.

C. Transition to IND AS - Reconciliations

The following reconciliations provide the explanations and quantification of the differences arising from the transition from Previous GAAP to IND AS in accordance with IND AS 101:

I. Reconciliation of Equity as at 1st April, 2016

II. A Reconciliation of Equity as at 31st March, 2017

B. Reconciliation of Statement of Profit and Loss for the year ended 31st March, 2017

III. Adjustments to Statement of Cash Flows for the year ended 31st March, 2017

Previous GAAP figures have been reclassified/regrouped wherever necessary to conform with financial statements prepared under IND AS.

Note No 1.4.III) - Adjustments to Statement of Cash Flows

There were no material differences between the Statement of Cash Flows presented under IND AS and the previous GAAP

Notes to the Reconciliations Current Investments a Investments in Equities, Mutual Funds

Under previous GAAP, Investments in Equities, Mutual Funds were valued at Cost or Market Value whichever is lower. Under IND AS, the Company has designated these Investments as Fair Value Through Profit and Loss (FVTPL). Accordingly these Investments are required to be measured at Fair Value. At the date of transition to IND AS, difference between the Fair Value of the instruments and the carrying value under Previous GAAP has been recognised in retained earnings. Fair Value changes are recognised in the Statement of Profit and Loss.

c Other Non-Current Assets / Liabilities:

Under previous GAAP, interest free security deposits were recorded at their transaction value. Under IND AS, all financial liabilities/assets are required to be recognised at fair value. Accordingly the Company has fair valued these security deposits under IND AS. This led to a change in the value of non-current liabilities on the date of transition which was adjusted against retained earnings. IND AS also provides that where discounting is used, the carrying amount of the liability increases in each period to reflect the passage of time. This increase is recognised as finance cost. The interest cost on unwinding of discount and impact of change in discount rate are recognised in the Statement of Profit and Loss under ‘other Income’, ‘interest expenses’ and ‘other expenses’ respectively for the year ended 31st March, 2017.

d Trade Receivables:

Under previous GAAP, provision for bad and doubtful debts has been made as per Company’s policy under incurred loss method. Under IND AS, trade receivables are required to be tested for expected credit loss, if any. Accordingly an impairment allowance has been determined based on Expected Credit Loss model ( ECL). At the date of transition to IND AS the impairment allowance calculated based on ECL model has been recognised in retained earnings. This is reviewed at each reporting period, with corresponding effect given in profit and loss account.

e Excise duty:

Under Previous GAAP, excise duty was netted off against sale of goods. However, under Ind AS, excise duty is included in sale of goods and is separately presented as expense on the face of Statement of Profit and Loss. Thus, sale of goods under Ind AS has increased with a corresponding increase in expenses.

f Revenue from sale of goods:

Under Previous GAAP, revenue was recognised net of trade discounts, rebates, sales taxes and excise duties. Under Ind AS, revenue is recognised at the fair value of the consideration received or receivable, after deduction of any trade discounts, volume rebates and any taxes or duties collected on behalf of the government such as sales tax and value added tax except excise duty. Discounts given include rebates, and incentives given to customers which have been reclassified from ‘advertising and sales promotion’ within other expenses under Previous GAAP and netted from revenue under Ind AS.

g Defined benefit obligation:

Under Previous GAAP and IND AS, the Company recognised costs related to its post-employment defined benefit plan on Actuarial basis. Under previous GAAP, the entire cost, including actuarial gains and losses, are charged to statement of profit and loss account. Under IND AS, remeasurements are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI.

Note:

The Company’s Investment properties consist of commercial property given on rentals.

As at 31st March, 2018, 31st March, 2017 and 1st April, 2016 the fair value of this property is Rs.756.04 Lacs, Rs.737.60 Lacs and Rs.663.84 Lacs respectively. These valuations are based on valuations performed by Chartered Surveyors - Yardi Prabhu Consultants & Valuers, an accredited independent valuer.

The fair value was derived using the market comparable approach based on recent market price without any significant adjustments beings made to the market observable data in the neighbourhood. Observed by the valuers for similar properties in the locality and adjusted basis on the valuer’s knowledge of the factors specification to the respective properties. Fair valuation is based on 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. In estimating the fair value of properties, the highest and best use of the properties is their current use.

Note:

* Pursuant to approval of Scheme of Amalgamation between Saldhar Investments and Trading Company Private Limited (Saldhar) with the Company as approved by the Hon’ble National Company Law Tribunal, Mumbai Bench vide its order dated 1st February 2018, which was made effective from 13th February 2018, 10724300 equity shares of Rs.5 each fully paid up held by Saldhar were cancelled and the same no. of shares were allotted to the shareholders of Saldhar in the proportion of their holding in Saldhar in the Board Meeting held on 24th February 2018

c) Rights, Preference & Restrictions attached to Equity Shares

The Company has one class of share having a par value of 5 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

Note:

Refer Statement of Changes in Equity for detailed breakup._

Nature and purpose of reserves :

(a) Capital Reserve : During amalgamation, the excess of net assets taken, over the cost of consideration paid is treated as capital reserve.

(b) Capital Redemption Reserve : The Company has recognised Capital Redemption Reserve on buyback of equity shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the equity shares bought back.

(c) Securities Premium Account : The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. In case of Equity settled based payment transactions,the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve.

(d) General Reserve : The General Reserve is used from time to time to record transfer of profit from retained earnings, for appropriation purposes. As general reserve is created by transfer of one component of equity to another and it is not an item of other comprehensive income, included in the General Reserve, it will not be reclassified subsequently to Profit or Loss.

(e) Retained Earnings : Retained earnings are the profits that the Company has earned till date,less any transfers to general reserve , dividends or other distributions paid to shareholders_

Note:

* Cash Credit and Working Capital Demand Loans from banks are secured by hypothecation of Inventories, Account Receivables on parri passu basis and exclusive charge on land and building and second parri passu charge on plant and machinery. The credit facilities availed by the Company carry interest in the range of 9.00 % p.a. to 11 % p.a.

ii. Dues to micro enterprises and small enterprises:

Micro & Small enterprises as defined under the Micro, Small and Medium Enter-prises Development Act, 2006 (MSMED Act) have been identified by the Company on the basis of the information available with the Company and the auditors have relied on the same. Sundry creditors include total outstanding dues of micro enterprises and small enterprises amounting to Rs.117.14 (Previous Year: Rs.238.27). The disclosure pursuant to MSMED Act based on the books of account is as under:

Note:

1. Balances as on 31st Mar 2018 includes Net gain on financial assets measured at fair value pertaining to Saldhar Investment & Trading Co Pvt Ltd on account of its merger Rs.25.23 lacs ( for the year ended 31st Mar 2017, Rs.2.07 lacs )

2. Balances as on 31st Mar 2018 includes Net gain on sale of Investments pertaining to Saldhar Investment & Trading Co Pvt Ltd on account of its merger Rs.10.76 lacs ( for year ended 31st Mar 2017, Rs.1967.29 lacs )

NOTE 2.1: The Company was required to spend an amount of Rs.60.33 Lacs (Previous Year Rs.56.63 lacs) being 2% of the average net profits of the three immediately preceding financial years on CSR as per the provisions of section 135 of the Companies Act, 2013. The Company has during the year spent Rs.63.87 Lacs.

The Concerned Expenditure has been debited to the following Heads as below :

Notes:

i. It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above contingent liabilities pending resolution of the respective proceedings, as it is determinable only on receipt of judgements/decisions pending with various forums/authorities.

ii. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.

iii. Income tax liability of Rs.656.10 lacs (FY 15-16 Rs.656.10 lacs) is in respect of certain disallowances/transfer pricing adjustments by Income tax authorities and Rs.230.37 lacs ( FY 15-16 Rs.230.37 lacs ) is in respect of certain disallowances for R & D by Income tax authorities, both disputed by the Company.

iv. Customs authorities have raised vide notice dated 22-07-2005 a demand and penalty of Rs.142.09 lacs each for a dispute regarding high seas sale. The Company has paid the demand of Rs.142.09 lacs in the FY 2011-12 and has claimed as deduction in the FY 2011-12. Balance penalty of Rs.142.09 has been disclosed as contingent.

NOTE 3: Segment Information

Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Managing Director of the Company. The CODM examines the company’s performance from a geographical perspective and has identified two of its following business as identifiable segments:

a. India

b. Outside India.

The amount of the Company’s revenue and Trade Receivable is shown in the table below:

NOTE 4: Related Party Transaction Disclosures

(I) Disclosures under IND AS 24 on Related PartyTransactions:

A. Names of Related Parties and nature of relationship

(Related Parties and the transactions with Related Parties are identified by the management and relied upon by Auditors)

(i) Person(s) having controlling interest

a) Shri Atul C. Choksey - Chairman & Non-Executive Director

(ii) Enterprises over which the Company’s Directors Exercise significant influence

a) Abhiraj Trading & Investments Pvt. Limited

b) Aeonian Investments Company Limited

c) Amisha Buildcon Private Limited

d) Apco Enterprises Limited

e) Aquamarine Trading & Investments Pvt. Limited

f) Aquamarine Investment Managers LLP

g) Balasesh Leafin Limited

h) Bhuvantray Investments & Trading Co. Pvt. Limited

i) Choksey Chemical Pvt. Limited

j) Cons Holdings Limited

k) Cybele Paradise Pvt Ltd

l) Forest Hills Trading & Investments Pvt. Limited

m) Gauriputra Investments & Trading Co. Pvt. Limited

n) Haridwar Trading & Investments Pvt. Limited

o) HMP Mineral Pvt. Limited

p) Joshimath Trading & Investments Pvt. Limited

q) Mazda Colours Limited

r) Colortek India Ltd

s) Sammelan Investments & Trading Limited

t) Shyamal Finvest ( In dia) Limited

u) Hindustan Mineral Products Co. Limited

(iii) Key Management Personnel and their relatives :

a) Shri. Abhiraj A. Choksey - Managing Director - Key Management Personnel

NOTE 5: Employee Benefit

a) Contribution to Defined Contribution Plan

i) Payment for Employers Contribution to Provident Fund, recognized as Expenses is ‘68.55 Lakhs

ii) Leave Encashment

The Company provides for encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment.

The liability is provided based on the number of days of unutilized leave at each Balance Sheet date on the basis of an independent actuarial valuation.

iii) Superannuation

The Company makes contribution to Superannuation Scheme, a defined contribution scheme administered by Insurance Companies. The Company has no obligation to the scheme beyond its annual contribution.

b) Contribution to Defined Benefit Plans:

i Gratuity:

The Company provides for gratuity as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. Amount of gratuity payable on retirement /termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied by number of years of service. The Company accounts for the liability for gratuity benefits payable in future based on an actuarial valuation.

These plans typically expose the Company to actuarial risks such as Investment risk, Interest rate risk, longevity risk, salary rate increase risk.

a) Investment risk:

The present value of defined benefit plan liability is calculated using a discount rate determined by reference to the market yields on government bonds denominated in Indian rupees. If the actual return on plan asset is below this rate, it will create a plan deficit.

b) Interest rate risk:

A decrease in the bond interest rate will increase the plan liability. However this will be partially offset by an increase in the return on plans debt investments.

c) Longevity risk:

The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment.

An increase in the life expectancy of the plan participants will increase the plan’s liability.

d) Salary rate increase risk:

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As an increase in the salary of plan participants will increase the plans liability.

The following table sets out the status of the Gratuity Plan as required under IND AS 19.

The principal assumption used for the purposes of the actuarial valuation are as follows:

The plan does not invest directly in any property occupied by the Company or in any financial securities issued by the Company.

The estimates of future salary increases, considered in actuarial valuations taking into account inflation, seniority, promotions and other relevant factors such as supply demand in the employment market.

The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to change in market scenario.

NOTES TO THE FINANCIAL STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 2018

NOTE 6: Acquisition and amalgamation of holding company

The Board of Directors of Apcotex Industries Limited, at their meeting held on 31st March 2017, approved the scheme of Amalgamation of Saldhar Investments and Trading Company Private Limited with Apcotex Industries Limited. The Scheme was subject to approval / Sanction by National Company Law Tribunal, Mumbai Bench and such other authorities as may be necessary.

On 01st February 2018, The Honorable National Company Law Tribunal, Mumbai Bench has approved a scheme of amalgamation of Saldhar Investments and Trading Company Private Limited (Saldhar), the holding company, with the Company with effect from 01st April 2017, which had been filed with Ministry of Corporate Affairs on 13th February 2018 and same has been effective from that date. As per the scheme of Amalgamation the Company shall account for amalgamation of Saldhar in its books of accounts with effect from the appointed date (i.e. 01st April, 2017) as per the “Pooling of Interest Method”, as prescribed in Indian Accounting Standard-103 “Business Combination” specified under section 133 of The Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of The Companies Act, 2013 (‘the Act’) as applicable. As per IND AS 103 “Saldhar” & Apcotex Industries Limited are commonly controlled entities, hence the financial statements of Apcotex Industries Limited are restated as if the business combination had occurred from the beginning of the preceding period i.e. from 1st April 2016 for the purpose of disclosure.

All assets and liabilities of Saldhar were transferred to Apcotex Industries in the same form as appearing in Saldhar. Reserves of Saldhar are taken over at same value and nomenclature. Difference between Assets and Liabilities of Saldhar transferred and recorded by Apcotex shall be adjusted against Capital Reserve.

The details of Assets and liabilities are given below:

NOTE 7: Financial Risk Management

The Company’s business activities are exposed to a variety of financial risks i.e. Liquidity risk, market risks and credit risk. The Company’s senior management has overall responsibility for establishing and governing the Company’s risk management framework.

The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board of the Company.

a) Liquidity Risk:

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. 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 limits from its bankers.

The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet its daily operational needs. Any short-term surplus cash generated, over and above the normal requirement for working capital is invested in Bank Fixed deposits and Mutual funds, which carry minimal mark to market risks.

The below table summarizes the maturity profile at the balance sheet date for its non-derivative financial liabilities based on undiscounted cash flows:

b) Market Risks:

Market risk is the risk of changes in market prices, liquidity and other factors that could have an adverse effect on realizable fair values or future cash flows to the Company. The Company’s activities expose it to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.

c) Foreign currency risk:

i) Potential impact of risk:

The Company undertakes transactions denominated in foreign currency and is thus exposed to foreign currency risk from transactions and translation.

A. Management policy

The Company manages currency exposures within prescribed limits, through use of forward exchange contracts. The use of derivative instruments is subject to limits and regular monitoring by Management.

B. Sensitivity to risk

The sensitivity of profit and loss to changes in the exchange rates arises mainly from unhedged foreign currency denominated financial instruments. The foreign exchange rate sensitivity is calculated for each currency by aggregation of the net foreign exchange rate exposure of currency and a parallel foreign exchange rates shift in the foreign exchange rates of each currency by 5% which represents Managements assessment of the reasonably possible change in foreign exchange rates.

A 5% weakening of the INR against these currencies would have led to an equal but opposite effect

d) Price risk:

i) Potential impact of risk:

The Company is mainly exposed to the price risk due to its investments in equities & mutual funds. The price risk arises due to uncertainties about the future market value of these investments.

As at 31st March 2018, the investments in equities & mutual funds amounts to Rs.4,990.70 lacs (as at 31st March 2017, Rs.3,978.19 lacs, 1st April 2016, Rs.8,980.10 lacs) which are exposed to price risk.

ii) Management policy:

The Company has laid policies and guidelines which it adheres to in order to minimize price risk arising from Investments in Equities & Mutual funds.

iii) Sensitivity to risk:

A 5% increase in prices would have led to approximately an additional Rs.249.54 lacs gain in the statement of Profit and Loss for the year ended 31st March 2018 (For the year ended 31st March 2017, Rs.198.91 lacs). A 5% decrease in prices would have led to an equal but opposite effect.

e) Interest rate risk:

i) Potential impact of risk:

Interest rate risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk because of changes in fixed interest rate.

As at 31st March 2018, the Company has variable rate borrowings to the extent of Rs.1,891.92 lacs (As at 31st March 2017, Rs.3,612.67 lacs, As at 1st April 2016, Rs.3,294.67).These are exposed to Interest rate risk.

ii) Management policy:

The risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings. The Company has laid policies and guidelines which it adheres to in order to minimize the interest rate risk.

iii) Sensitivity to risk:

The sensitivity analysis has been determined based on exposure to interest rates at the end of reporting period. For floating rate liabilities, the analysis is prepared assuming that the amount of liability as on the end of reporting period was outstanding for the entire year. A 25 basis point increase or decrease is used when reporting interest rate risk internally and represents Management’s assessment of the reasonable possible change in interest rates.

If Interest rates had been 25 basis point higher, the Company’s profit would decrease by approximate Rs.3.30 lacs for the year ended 31st March, 2018 (For the year ended 31st March 2017, profit would decrease by Rs.7.39 lacs). A 25 basis point decrease in Interest rates would have led to an equal but opposite effect.

f) Credit Risk:

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of dealing with creditworthy counterparties and obtaining sufficient collateral, wherever appropriate, as a means of mitigating the risk of financial loss from defaults. Trade receivables consist of a large number of customers, across geographies, hence is not exposed to concentration risk. Ongoing credit evaluation is performed on the financial condition of its customers.

The Company makes an allowance for doubtful debts using Expected Credit Loss (ECL) model.

NOTE 8: Fair Value Measurement

The Management has assessed that its financial assets and liabilities like cash and cash equivalents, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying values largely due to the short-term maturities of these instruments.

The carrying amounts and fair values of financial instruments by class are as follows:

(i) Fair Value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial statements that are (a) recoginsed and measured at fair value and (b) measured at amortised cost. To provide an indication about the reliability of the inputs used in determining the fair value, the Company has classified its financial instruments into three levels prescribed under accounting standard. An explanation of each level follows the underneath table:

Level 1: Level 1 hierarchy included financial instruments measured using quoted prices. This included listed equity instruments and mutual funds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.

Level 2: The fair value of financial instruments that are not traded in an active market are determined using valuation techniques which maximize the use of observable market data. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

NOTE 9: Standard Issued but not effective Ind AS 115 Revenue from Contracts with Customers:

On 28th March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying Ind AS 115, ‘Revenue from Contracts with Customers’. The Standard is applicable to the Company with effect from 1st April, 2018.

Revenue from Contracts with Customers IND AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IND AS 115 will supersede the current revenue recognition standard IND AS 18 Revenue, IND AS 11 Construction Contracts when it becomes effective.

The core principle of IND AS 115 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:

- Step 1: Identify the contract(s) with a customer

- Step 2: Identify the performance obligation in contract

- Step 3: Determine the transaction price

- Step 4: Allocate the transaction price to the performance obligations in the contract

- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. The Company has completed its evaluation of the possible impact of Ind AS 115 and will adopt the standard from 1st April, 2018.

NOTE 10: Capital Management

The Company manages its capital to ensure that it will be able to continue as going concern while maximizing the returns to stakeholders through optimization of debt and equity ratios.

The Company determines the amount of capital required on the basis of annual budgets and three years corporate plan for working capital, capital outlay and long-term strategies. The funding requirements are met through internal accruals and a combination of long-term and short-term borrowings.

The Company monitors the capital structure on the basis of total debt to equity and maturity profile of the overall debt portfolio of the Company.

NOTE 11: Previous year’s figures have b een have been regrouped / restated wherever necessary to confirm to current year’s presentation.

Source : Dion Global Solutions Limited
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