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Moneycontrol.com India | Notes to Account > Textiles - Readymade Apparels > Notes to Account from Celebrity Fashions - BSE: 532695, NSE: CELEBRITY
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Celebrity Fashions

BSE: 532695|NSE: CELEBRITY|ISIN: INE185H01016|SECTOR: Textiles - Readymade Apparels
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Notes to Accounts Year End : Mar '18

c Rights, Preferences and Restrictions attached to equity Shares

Equity Shares having a par value of Rs.10/- each with voting rights. Each holder of Equity Shares is entitled to one vote per share.

In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive any of the remaining assets of the Company in proportion to the number of Equity Shares held by the shareholders, after distribution of all preferential amounts.

Securities Premium: Reserve represent the premium received on issues of securities, the same is available for use as per Companies Act, 2013.

Retained earnings: Company’s cumulative earnings since its formation minus the dividends/capitalisation and earnings transferred to general reserve.

The shareholders of the Company vide resolution dated 12th February 2017 have approved the issue of Convertible Warrants on Preferential basis to the Promoter Directors / Director of the Company.

Accordingly, the Company had issued 5,696,756 (Fifty Six Lakh Ninety Six Thousand Seven Hundred and Fifty Six) Warrants Convertible into Equity Shares, to the Promoter Directors / Director of the Company on preferential basis, Each Warrant is convertible into one equity share at a conversion price of Rs.11.41 per share, including a premium of Rs.1.41 on each share of Face Value of Rs.10/-. The right vested shall be exercised not later than 18 months from the date of allotment in accordance with the SEBI (ICDR) Regulations, 2015. The prospective allottees had paid Rs.16,250,000 towards 25% value of total consideration payable for the Warrants. In case of non exercise of warrants within the period of 18 months, the same shall stand forfeited and the money received against the same shall not be refunded by the Company.

a Rights, Preferences and Restrictions attached to Preference shares

The Cumulative Redeemable Preference Shares carry a dividend of 1% p.a. and will be redeemed in 5 equal annual installments starting with the financial year 2022.

The Company has not received any Memorandum (as required to be filed by the Supplier with the notified authority under the Micro, Small and Medium Enterprises Development Act, 2006) claiming their status as on 31st March 2018 as Micro, Small or Medium Enterprises (MSME).

Consequently the amount payable to these enterprises during the year is Rs.NIL (Previous Year Rs.NIL). There are no interest due or outstanding on the same.

Others include Bills Acceptances of Rs.14.03 crs (Previous Year Rs.7.21 crs)

Auditors'' Remuneration includes Rs.4.50 lakhs (Previous Year Rs.5.10 lakhs) against Statutory Audit, Rs.0.70 lakhs (Previous Year Rs.0.70 lakhs) against Tax Audit. Secretarial Audit Fee Rs.1.00 lakhs (Previous year Rs.1.00 lakhs)

An amount of Rs.0.40 lakhs (Previous Year Rs.5.93 lakhs) was paid to the Auditors towards certification, out-of-pocket expenses and for representation in taxation matters and Tax Audit and the same is classified under Consultancy Charges.

Directors Sitting Fee of Rs.0.65 lakhs (Previous year Rs.0.59 lakhs ) is grouped under Other Miscellaneous expenses.

Expense:

The Minimum Wages revision by the Tamilnadu Government effective December 2014 was upheld by the Hon’ble High Court of Madras and accordingly the Company has paid Rs.5.78 crs as arrears wages during the previous year. The same has been excluded from the above Employee expenses and has been grouped under Exceptional Items in the Statement of Profit and Loss.

Interest rates on Term Loans was reset by Company’s lender during the previous year. This has resulted in the Company being liable for an interest differential amounting to Rs.2.44 crs on Term Loans availed upto March 31, 2016. This was as a consequence of the Bank levying interest above the rates specified in the restructuring package sanctioned to the Company in November 2012.

1. The company has significant accumulated losses. In this connection, the company has implemented various initiatives to improve on the efficiencies and control the losses.

In view of the various strategic initiatives that the Company is exploring, it is confident of being able to continue and operate the business on a “Going Concern” basis and accordingly the financial statements have been prepared on the same lines

2. Some balances of Trade/Other receivables, Trade/Other Payables and Loans and Advances are subject to confirmation/reconciliation. Adjustments (if any) will be accounted for on confirmation/reconciliation of the same. In the opinion of the Board of Directors this will not have a material adverse impact on the Company’s financial position and results of operations.

Note :-

The Company has not received any memorandum from (as required to be filed by the supplier with the notified authority under the Micro, Small and Medium Enterprises Development Act, 2006) claiming their status as on 31st March 2018 as Micro, Small or Medium Enterprises. Consequently, the Company has no amounts payable to Micro and Small enterprises as defined in section 7(1) of the Micro, Small and Medium Enterprises Development Act ,2006, to the extent such parties have been identified on the basis of information collected by the management. This has been relied upon by the auditors.

3. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

Based on the decisions of the appellate authorities for the earlier years and interpretations of other relevant provisions, the Company is of the opinion that the demands are likely to be deleted and consequently no provision has been made for such demands. The Management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position and results of operations.

d The Banks have extended concessional interest rate for the credit facilities sanctioned to the Company for the period upto 31st March 2017. As per the terms of the Sanction letter, Banks have the right to be recompensated in future for the sacrifice extended.

4. In respect of amounts mentioned under section 125 of the Companies Act, 2013 there are no dues that are required to be transferred to Investor Education and Protection Fund as at March 31, 2018 (March 31, 2017 Rs. NIL)

5. EMPLOYEE BENEFIT PLAN - GRATUITY

The employees’ gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on the actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

6. SEGMENT REPORTING

The Company has considered business segment as the primary segment for disclosure. The Company is primarily engaged in a single segment business of manufacture and sale of garments and is managed as one entity for its sale and is governed by a similar set of risks and return. Hence, no additional disclosures are required, other than those already given in the Financial Statements.

The Company has identified Geographical Segment as the secondary segment which consists of:

a) Domestic (Sales to customers located in India)

b) International (Sales to customers located outside India)

Revenue directly attributable to segments is reported based on items that are individually identifiable to that segment. The Company believes that it is not practical to allocate segment expenses, segment results, assets used, except trade receivables, in the Company’s business or liabilities contracted since the resources/ services/ assets are used interchangeably within the segments. All fixed assets are located in India. Accordingly, no secondary segmental information is disclosed.

b Previous year figures have been regrouped, reworked and reclassified wherever necessary to conform to current year classification.

c In the opinion of the Management , Current Assets, Loans and Advances have a value of at least equal to the amounts shown in the Balance Sheet, if realized in the due course of the business. The provision for all liabilities is adequate and not in excess of the amount reasonably necessary.

(i) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) 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 (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. 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. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.

There are no transfers between levels 1 and 2 during the year.

The company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

(ii) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include the use of quoted market prices or dealer quotes for similar instruments The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.

Capital management

(a) Risk management

The company’s objectives when managing capital are to

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

-maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, The company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Financial risk management

The company’s activities expose it to market risk, liquidity risk and credit risk.

A. Credit risk

Company faces credit risk from cash and cash equivalents, deposits with banks and financial institutions and unsecured trade receivables. The company doesn’t face any credit risk with other financial assets.

(i) Credit risk management

Credit risk on deposit is mitigated by depositing the funds in reputed private sector bank. For trade receivables, the primary source of credit risk is that these are unsecured. The Company sells the products to customers only when the collection of trade receivables is certain and whether there has been a significant increase in the credit risk on an on-going basis is monitored throughout each reporting period. As at the balance sheet date, based on the credit assessment the historical trend of low default is expected to continue. An impairment analysis is performed at each reporting date on an individual basis for major clients. Any recoverability of receivables is provided for based on the impairment assessment. Historical trends showed as at the transition date and 31st March 2017 company had no significant credit.

B. Liquidity risk

Objective of liquidity risk management is to maintain sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Management monitors rolling forecasts of The company’s liquidity position and cash and cash equivalents on the basis of expected cash flows.

(ii) Maturities of financial liabilities

The tables below analyse The company’s financial liabilities into relevant maturity groupings based on their contractual maturities for:

a) all non-derivative financial liabilities, and

b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.

Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

C. Market risk

(i) Foreign currency risk

The company activities exposes it to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD and EURO Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows. The company’s exposure to foreign currency risk at the end of the reporting period expressed in INR, are as follows:

Segment Information

The company is primarily is in the business of manufacturing and export of garments to reputed multinational brand. Chief Operating Decision Makers (CODM) evaluates the company’s performance and allocate resources based on the analysis of various performance indicators of the company as single unit. Therefore there is only single reportable segment for the Company. Company is domiciled in India.

First-time adoption of Ind AS 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 1 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). In preparing its opening Ind AS balance sheet, The company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).

An explanation of how the transition from previous GAAP to Ind AS has affected The company’s financial position, financial performance and cash flows is set out in the following tables and notes.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A.1 Ind AS optional exemptions A.1.1 Deemed cost

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 for de-commissioning liabilities.

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

A.1.2 Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS. The company has elected to apply this exemption for its investment in equity investments.

A.2 Ind AS mandatory exceptions

A.2.1 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:

Estimation of expected credit loss

A.2.2 De-recognition of financial assets and liabilities

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.

The company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

A.2.3 Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

C: Notes to first-time adoption:

Note 1: Investment Property

Under the previous GAAP, investment properties were presented as part of non-current investments. Under Ind AS, investment properties are required to be separately presented on the face of the balance sheet. There is no impact on the total equity or profit as a result of this adjustment.

Note 2: Preference shares

Under the previous GAAP, Cumulative redeemable preference shares were classified as part of equity, under Ind-AS 109, the same has been classified as borrowings, Consequent to this equity has reduced by Rs.25.10 crores as at April 1, 2016 and March 31, 2017.

Note 3: Interest accounted on EIR basis on Preference shares

Under the previous GAAP, un-declared dividend was shown as contingent liability, consequent change in classification of preference shares interest has been accounted as per effective interest rate method. The above reduced the equity by Rs.0.88 crores as at 31 March 2017 (April 1, 2016 Rs.0.63 crores).

Note 4: Revenue

On adoption offf Ind AS, company has reassessed it revenue recognition and has de-recognised where it had continuing managerial involvement post the sale. Consequently, the total equity as at 31 March 2017 decreased by Rs.32. 29 (1 April 2016 Rs.14.71) and profit for the year ended 31 March 2017 decreased by Rs.19.51.

Note 5: Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. There is no impact in overall equity due to above adjustment.

Note 6: Mark to Market of Forward contracts

Under previous GAAP premium on forward contracts were amortised over the tenor, under Ind AS the forward contracts are marked to market, Profit for the year 31 March 2017 decreased by Rs.0.03 and equity reduced by NIL as at 31 March 2017, equity increased by Rs.0.03 as at 1 April, 2016.

Source : Dion Global Solutions Limited
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