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Butterfly Gandhimathi Appliances

BSE: 517421|NSE: BUTTERFLY|ISIN: INE295F01017|SECTOR: Domestic Appliances
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Notes to Accounts Year End : Mar '18

* Tax payable under the normal provisions is Nil for the year ended 31.03.2018 after setting of the unabsorbed accumulated losses. Hence reconciliation of effective tax rate under normal tax computation does not arise.

** As the Company is liable to pay tax under section 115JB of the Income Tax Act 1961. The effective tax rate reconciliation is provided as per the rate applicable for MAT.

1.1 Terms / Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs..10/- per share. The holders of the equity shares are entitled to receive dividends as declared from time to time, and are entitled to voting rights proportionate to their share holding at the meetings of shareholders.

Terms of Payment:

i. Term Loan from Banks (including vehicle loans) are repayable over a period of 3 to 6 years.

ii. Term Loan from Others (including vehicle loans) are repayable over a period of 5 to 15 years.

Security Provided:

a. Term Loan from Banks are Secured

i. By first charge by way of hypothecation of specific Plant and Machinery and Other Fixed Assets / Vehicles acquired out of loan and Equitable Mortgage of certain Land and Building of the Company at Pudupakkam.

ii. Retention money held by Tamil Nadu Civil Supplies corporation (TNCSC) and collateral security of Land and Structure thereon at Pudupakkam.

iii. Personal Guarantee of the Promoter Directors.

b. Other Term Loans:

a. Vehicle Loans are Secured by hypothecation of vehicles purchased out of such loan.

b. Other Term Loans are Secured by Equitable Mortgage of Undivided Land and office complex Building at Egattur.

2.1 Secured by hypothecation by way of first charge on Inventories, book debts, present and future excluding Retention Money receivable from Tamil Nadu Civil Supplies Corporation (TNCSC) and collateral paripassu charge of Land and Buildings, the title deeds of which are in the course of transfer in the Company’s name and also by the paripassu second charge on other Fixed Assets of the Company at Pudupakkam along with personal Guarantee of Promoter Directors.

3.1 Details with respect to Related Parties details are disclosed in note no 45

3.2 No interest due on these outstandings under MSME Act, 2006.

4 - Corporate Information:

Gandhimathi Appliances Limited’, was originally incorporated as Private Limited Company on 24th February 1986 and was converted into a Public Limited Company on 25th April 1990. The name of the Company was changed to ‘Butterfly Gandhimathi Appliances Limited’ (BGMAL), with effect from 25th October 2011. BGMAL is listed with Bombay Stock Exchange Limited (BSE) and National Stock Exchange Limited (NSE). BGMAL is involved in manufacturing and Trading of a wide range of domestic kitchen and electrical appliances under the brand ‘BUTTERFLY’

5 - Transition to IND AS

These are the Company’s first Financial Statements prepared in accordance with Ind AS. The Accounting Policies set out in note 34 have been applied in preparing the Financial Statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (The Company’s date of transition).

5.1 - In preparing its first Ind AS financial statements in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standards, the Company has applied the relevant mandatory exceptions and certain optional exemptions from full retrospective application of Ind AS. Material optional exemptions applied by the Company and applicable mandatory exceptions for the Company are as follows:

5.2 - A: Ind AS optional exemptions and mandatory exceptions availed

1. Deemed cost of Property Plant and Equipment

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments as required to be made as per para 10 of Ind AS 101.

The Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

2. Evaluation of arrangements in the nature of Lease

Ind AS 101 allows an entity to determine whether an arrangement existing at the date of transition to Ind ASs contains a lease on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material. The Company has elected to determine whether the arrangements existing contains a lease on the basis of the facts existing on transition date.

3. Revenue from Contracts with Customers

A first-time adopter is not required to restate contracts that were completed before the earliest period presented. A completed contract is a contract for which the entity has transferred all of the goods or services identified in accordance with previous GAAP. Accordingly the Company has not restated the contracts completed in accordance with the previous GAAP as at the transition date.

5.2 - B: Ind AS mandatory exceptions

1. Estimates

An entity’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Investment in Mutual fund carried at FVPL

- Impairment of financial assets based on Expected Credit Loss model.

2. Classification and measurement of Financial Assets

As required under Ind AS 101, the Company has assessed the classification and measurement of financial assets based on the facts and circumstances that existed at the date of transition to Ind AS.

6 - Disclosures in respect of Ind AS 107 - Financial Instruments

6.1 - Financial Instruments by Categories

The carrying value and fair value of financial instruments by categories were as follows:

6.2 - Fair Value Hierarchy

- Level 1 - Quoted prices (unadjusted) in active markets for identical Assets or Liabilities.

- Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

6.3 - Valuation Technique used to determine Fair Value:

Specific valuation techniques used to value financial instruments include:

- Use of quoted market prices for Listed instruments

7 - Financial Risk Management

The Company is primarily exposed to fluctuation in Market risk, Credit risk and Liquidity risk. The Company has a risk management policy which addresses the risk associated with the financial asset and liabilities.

7.1 - Market Risk

Market risk is the risk of fluctuation in future cash flow of financial instruments due to change in market prices arising on account of currency risk and Interest rate risk.

7.1.1 - Foreign Currency Exchange Rate Risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity.

The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. Currently the Company follows a policy of hedging 100% of its trade payables. On an overall basis, the Company has hedged 90% of its foreign exchange exposure thus minimising the currency risk.

Sensitivity analysis of foreign currency risk for as estimated fluctuation of /- 5% to the outstanding foreign currency exposure is provided below.

Amount in bracket represents additional cash outflow. Other amounts represents additional cash inflow.

7.1.2 - Interest Rate Risk

Company is exposed to short term and long term borrowings. Long term borrowing’s interest rates are fixed and not subject to any interest rate risk. Short term borrowings being working capital loans are subject to interest rate fluctuation based on the performance and external credit rating of the Company

At the reporting date the interest rate profile of the Company’s interest - bearing financial instruments as follows:

The interest expenses and impact on account of Increase/decrease of 100 basis points in interest rates at the balance sheet date is provided in table below:

7.2 - Credit Risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. It principally arises from the Company’s Trade Receivables.

Trade Receivables

The Company has outstanding trade receivables amounting to Rs. 13,055.76 lakhs and Rs. 8,796.10 lakhs as of March 31, 2018 and March 31, 2017, respectively.

Trade receivables are unsecured in nature, except to the extent of security deposits received from the distributors. Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company is not exposed to concentration of credit risk to any one single customer. Default on account of Trade Receivables happens when the counterparty fails to make contractual payment when they fall due.

Credit risk is managed by the Company by continuous monitoring of overdue receivables and also by making adequate provision towards expected credit loss in the books of account as per the simplified approach stated in the accounting policy. With respect to retention money no credit risk is estimated as per terms of the arrangement and accordingly management has not provided for credit loss for the retention money.

7.3 - Liquidity Risk

Liquidity needs of the Company are monitored on the basis of monthly and yearly projections. The Company’s principal sources of liquidity are cash and cash equivalents, cash generated from the operations and bank borrowings.

We manage our liquidity needs by continuously monitoring cash inflows and by maintaining adequate cash and cash equivalents. Net cash requirements are compared to available cash in order to determine any shortfalls.

Short term liquidity requirements consist mainly of sundry creditors, expense payable, employee dues and repayment of loans arising during the normal course of business as of each reporting date. We maintain a sufficient balance in cash and cash equivalents to meet our short-term liquidity requirements.

We assess long term liquidity requirements on a periodical basis and manage them through internal accruals and bank borrowings.

The table below provides details regarding the contractual cash outflow for financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company is required to pay.

8 - Capital Management

The Company’s capital comprises equity share capital, retained earnings and other equity attributable to equity holders. The primary objective of Company’s capital management is to maximize shareholders value. The Company manages its capital and makes adjustment to it in light of the changes in economic and market conditions. The total capital as on March 31, 2018 is Rs. 18,021 Lakhs. (Previous Year: Rs. 17,516 Lakhs ).

9 - Disclosure in respect of Indian Accounting Standard (Ind AS)-19 “Employee Benefits”

9.1 - General description of various defined employee’s benefits schemes are as under:

a) Provident Fund:

The Company’s Provident Fund (defined contribution fund) is managed by Regional Provident Fund Commissioner. The Company pays fixed contribution to provident fund at pre-determined rate.

b) Gratuity:

Gratuity is a defined benefit plan, in respect of past services provided by the employees is quantified based on the actuarial valuation.

The scheme is funded by the Company and the liability is recognized on the basis of contribution payable to the insurer. Disclosure of information as required under Ind AS-19 have been made in accordance with the actuarial valuation.

9.2 The summarized position of various defined benefits recognized in the Statement of Profit and Loss, Other Comprehensive Income(OCI) and Balance Sheet and other disclosures are as under:

10 - Disclosure in respect of Indian Accounting standard (Ind AS)-108: “Operating Segments”

Since the Company primarily operates in one segment -Domestic appliances and there is no reportable Geographical segment either.

The Company has not derived revenues from any customer which amount to 10 per cent or more of Company’s revenues.

11 - Disclosure in respect of Indian Accounting Standard (Ind AS)-33 “Earnings Per Share(EPS)”

a) Basic EPS

The earnings and weighted average number of ordinary shares used in the calculation of Basic EPS is as follows:

b) Diluted EPS

The earnings and weighted average number of ordinary shares used in the calculation of Diluted EPS is as follows:

12 - Disclosure in respect of Indian Accounting Standard (Ind AS)-37 “Provisions, Contingent Liabilities and Contingent Assets” Warranty:

Provision is made for estimated warranty in respect of products sold which are still under warranty period at the end of the reporting period.

13 - Disclosure in respect of Indian Accounting Standard 24 “Related Parties Disclosures”

Key Managerial Personnel

Mr.V.M.Lakshminarayanan, Chairman & Managing Director

Mr.V.M.Balasubramaniam, Vice-Chairman & Managing Director

Mr.V.M.Seshadri, Managing Director

Mr.V.M.Gangadharam, Executive Director

Mr.V.M.Kumaresan, Executive Director-Technical

Mr.K.S. Ramakrishnan - Company Secretary & General Manager (Legal) (CS)

Mr. Prakash Iyer - Chief Executive Officer (CEO)

Mr. R. Nagarajan - Chief Financial Officer (CFO)

Relatives of Key Managerial Personnel:

Mr. V.M.L.Karthikeyan Mr. G.Viswanathan Mr. V.M.L.Senthilnathan Mr. V.M.L.Ganesan Mr. V.M.G.Mayuresan

13.1 - Related Parties:

Enterprises owned or significantly influenced by Key Management Personnel or their Relatives

LLM Appliances Private Limited

V.M.Chettiar & Sons LLP

Butterfly Quality Centre Private Limited

Butterfly Industrial Designs Private Limited

Swaminathan Enterprises Private Limited

Sivagurunathan Industries

East West Combined Industries

Mrinalini Industries

Bean and Leaf Beverages Private Limited H&S Supply Chain Solution Private Limited Chrysalis Home Needs Private Limited Wintronix (HK) Holdings Limited

During the year Company spent Rs. 30.19 Lakhs towards CSR obligations of an earlier financial year.

14 - Disclosure in respect of Indian Accounting Standard (Ind AS)-8 “Accounting Policies, Changes in Accounting Estimates and Errors”

Consequent to the Order passed under the provisions of Chapter XIX - A of the Income-tax Act, 1961, income amounting to Rs.. 2.06 crores and tax liability amounting to Rs.. 5.72 crores (including interest element of Rs.. 1.90 crores) pertaining to earlier years to earliest reporting period presented had been reckoned in Retained Earnings as at April 01, 2016 and Rs.. 0.15 crores relating to Interest for the f.y. 2016-17 is reckoned under Finance cost in that financial year.

(i) Investments in Quoted Instruments:

Under the previous GAAP, investments in mutual funds were classified as long-term investments or current investments based on the intended holding period. Long-term investments were carried at cost less provision for permanent diminution in the value of such investments. Current investments were carried at lower of cost and market value.

Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes subsequently accounted in the statement of profit or loss for the year ended 31 March 2017. Consequent to the above, the total equity as at 31 March 2017 increased by Rs. 0.08 Lakhs and profit for the year ended 31 March 2017 increased by Rs. 0.08 Lakhs.

(ii) Trade Receivables:

Under the previous GAAP, Provisions for bad and doubtful debts made only when the Company incurred credit loss.

Under Ind AS, Trade Receivables are recognized initially at fair value and subsequently measured at amortized cost using effective Interest method, less allowance for Impairment. Expected credit loss has been provided based on the simplified approach. Amount of provisions made over and above the existing provisions are Rs. 260.30 Lakhs and Rs. 16.09 Lakhs as on 1st April 2016 and 31st March 2017 respectively.

(iii) Retention Receivables:

The Company has retention receivables from its debtors which are interest-free. Under Ind AS, these receivables being Financial Assets have been stated at Fair value on Initial Recognition and subsequently measured at Amortized Cost using Effective rate of Interest. Difference between transaction value and amortized cost has been adjusted in the carrying value of such balances and accounted as prepayment Rs. 125.07 Lakhs as on April 01, 2016 & Rs. 73.16 Lakhs which will be unwound over the period of retention.

(iv) Deferred Tax:

Under previous GAAP, deferred tax asset/liabilities were recognised on temporary timing difference between taxable income and accounting income.

Under Ind AS, Company has recognized Deferred Tax Assets/ Liability being the difference between tax base and carrying value and also Unutilised MAT Credit entitlements has been regrouped as per requirement of IND AS . The Company has created Deferred Tax Liability for difference in carrying value of PPE between books and Income tax and Deferred Tax Assets in case of Re-measurement of Defined Benefit Obligations, losses carried forward.

Due to the Ind AS adjustments as at the date of transition and for the year ended 31 March 2017, deferred tax asset created for Rs. 274.17 Lakhs (1 April 2016 - Rs. 260.10 Lakhs). As a result, total equity increased by Rs. 274.17 Lakhs as at 31 March 2017 (1 April 2016 - Rs. 260.10 Lakhs)

(v) Proposed Dividend:

Under previous GAAP, proposed dividend is recognized as liability in the period to which it relates. Under Ind AS, Dividend is adjusted directly in equity in the period in which it is paid, irrespective of the period to which it relates. Accordingly, an amount of 268.99 Lakhs towards proposed dividend (including Dividend distribution tax) recognised as liability in F.Y. 2015-16 as per previous GAAP has been reversed & the same is adjusted in Equity in the F.Y. 2016-17, when distributed.

(vi) Long Term Borrowings:

Under previous GAAP, the Company recognized the processing fee incurred for availing term loan as an expense, in the respective Financial Years.

Under Ind AS, the issue expenses have been net-off against the Loan proceeds and the Effective Interest rates (EIR) have been recomputed based on the cash flows. Interest has been recomputed in line with the Effective Interest rates and accounted under Ind AS. The Processing fee adjusted against retained earnings Rs.. 20.24 Lakhs in 2016-17 (01 April, 2016 - Rs.. 24.93 Lakhs). Additional Interest expenses recognized under Ind AS, applying EIR for the F.Y. 2016-17 - Rs.. 33.50 Lakhs.

(vii) Other Equity:

Note on Ind AS Adjustments which impact the Equity, are provided separately under the respective heads.

(viii) Provisions:

Provisions for warranty have been recomputed by revisiting the assumptions thereupon, the impact of same in the retained earnings is Rs. 148.24 Lakhs for the FY 2016-17 (01 April 2016 - Rs. 488.37 Lakhs).

15.1 - Explanations for Reconciliation of Statement of Profit & Loss as previously reported under IGAAP to IND AS

(i) Other Income:

Under the IND AS, financial assets and financial liabilities are measured at fair value on transition date; Impact of subsequent re-measurement of financial asset using effective interest rate is included under Other Income amounting to 108.93 Lakhs

(ii) Employee Benefits/OCI:

As per previous GAAP, gains and losses on re-measurement of net defined benefit liability are recognized in Statement of Profit & Loss, whereas as per Ind AS, the same shall be recognized in Other Comprehensive Income, by accumulating in a separate component of Equity. An amount of 42.64 Lakhs has been recognized as gain on re-measurement of net defined benefit liability for the F.Y. 2016-17.

(iii) Finance Cost

Under the IND AS, financial assets and financial liabilities are measured at fair value on transition date; Impact of subsequent measurement of financial liability using effective interest rate and unwinding of discount on financial asset is included under finance cost of Rs. 121.22 Lakhs

(iv) Other Expenses

Impact on account of expected credit loss, warranty and cash discount amounting to Rs. 413.88 Lakhs grouped under other expenses.

16 - The previous year’s figures have been regrouped and reclassified wherever necessary to conform to the current year classification / presentation.

Source : Dion Global Solutions Limited
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