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CHD Developers

BSE: 526917|ISIN: INE659B01021|SECTOR: Construction & Contracting - Civil
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Mar 16
Notes to Accounts Year End : Mar '18

2.3 Standards Issued but not Effective

On March 28, 2018, the Ministry of Corporate Affairs (MCA) has notified Ind AS 115 - Revenue from Contract with Customers and certain amendment to existing Ind AS. These amendments shall be applicable to the Company from April 01, 2018.

(a) Issue of Ind AS 115 - Revenue from Contracts with Customers

Ind AS 115 will supersede the current revenue recognition guidance including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and the related interpretations. Ind AS 115 provides a single model of accounting for revenue arising from contracts with customers based on the identification and satisfaction of performance obligations.

(b) Amendment to Existing issued Ind AS

The MCA has also carried out amendments of the following accounting standards:

i. Ind AS 12 - Income Taxes and

ii. Ind AS 112 - Disclosure of Interests in Other Entities

Application of above standards is not expected to have any significant impact on the Company''s Financial Statements.

2.4 Significant management judgment in applying accounting policies and estimation uncertainty

The preparation of the Company''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the related disclosures.

- Significant management judgments Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the future taxable income against which the deferred tax assets can be utilized.

- Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.

- Classification of leases - The Company enters into leasing arrangements for various assets. The classification of the leasing arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer

of ownership of leased asset at end of lease term, lessee''s option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset''s economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.

- Impairment of financial assets - At each balance sheet date, based on historical default rates observed over expected life, the management assesses the expected credit loss on outstanding financial assets.

- Provisions - At each balance sheet date basis the management judgment, changes in facts and legal aspects, the Company assesses the requirement of provisions against the outstanding contingent liabilities. However, the actual future outcome may be different from this judgment.

- Revenue and inventories- The Company recognizes revenue using the percentage of completion method. This requires forecasts to be made of total budgeted cost with the outcomes of underlying construction and service contracts, which require assessments and judgments to be made on changes in work scopes, claims (compensation, rebates etc.) and other payments to the extent they are probable and they are capable of being reliably measured. For the purpose of making estimates for claims, the Company used the available contractual and historical information.

- Useful lives of depreciable/ amortizable assets - Management reviews its estimate of the useful lives of depreciable/amortizable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of assets.

- Valuation of investment property - Investment property is stated at cost. However, as per Ind AS 40, there is a requirement to disclose fair value as at the balance sheet date. The Group engaged independent valuation specialists to determine the fair value of its investment property as at reporting date. The determination of the fair value of investment properties requires the use of estimates such as future cash flows from the assets (such as lettings, future revenue streams, capital values of fixtures and fittings, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. In addition, development risks (such as construction and letting risk) are also taken into consideration when determining the fair value of the properties under construction. These estimates are based on local market conditions existing at the balance sheet date

- Defined benefit obligation (DBO) - Management''s estimate of the DBO is based on a number of underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.

- Fair value measurements - Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available). This involves developing estimates and assumptions consistent with how market participants would price the instrument.

Term Loans

Repayment terms ( excluding current maturities) and security for the outstanding long term borrowings as on 31st March, 2018 From Banks

i) Facility of '' 5749.55 lac with interest rate @ 11.50%, balance amount is repayable in 10 equal Quarterly installments starting from April 2019. The Loan is secured by way of :

(a) First & Exclusive charge by way of equitable mortgage on land and building of Golf Avenue 106, CHD Vann & CHD Resortico Project.

(b) First charge by way of hypothecation of receivables, Current assets and movable fixed assets of Golf Avenue 106, CHD Vann & CHD Resortico Project.

(c) Personal Guarantee of two directors of the company .

(d) Corporate Guarantee of one subsidiary company.

ii) Facility of '' 969.22 lac with interest rate @ 12.75%, balance amount is repayble in 24 equal Monthly installments starting from Feb. 2020. The Loan is secured by way of :

(a) Equitable mortgage of land and building of M/s. International Infratech Pvt. Ltd. Situated at Sector-109, village Chauma, Gurgaon

(b) First & Exclusive charge on sold and unsold receivables of commercial project “ CHD Eway Towers and structure present and future.

(c) Personal Guarantee of two directors of the company.

(d) Corporate Guarantee of two subsidiary companies.

Bank Overdrafts

i) Facility of '' 3384.79 lac with interest rate @ 11.05%, balance amount is repayble in 29 equal Monthly installment starting from April, 2019. The Loan is secured by way of :

(a) An exclusive charge on project land (33.90 Acres) at NH-1, Village Uchana, Sector-45, Karnal

(b) Personal Guarantee of two directors of the company .

ii) Facility of '' 2240.00 lac with interest rate @ 11.50%, balance amount is repayble in 10 equal Quarterly installments starting from April

2019. The Loan is secured by way of :

(a) First & Exclusive charge by way of equitable mortgage on land and building of Golf Avenue 106, CHD Vann & CHD Resortico Project.

(b) First charge by way of hypothecation of receivables, Current assets and movable fixed assets of Golf Avenue 106, CHD Vann & CHD Resortico Project.

(c) Personal Guarantee of two directors of the company .

(d) Corporate Guarantee of one subsidiary company.

From Others

i) Facility of '' 437.79 lac with interest rate @ 16.00%, balance amount is repayble in 19 Monthly installment starting from April, 2019. The Loan is secured by way of :

(a) Inventory of project “Lifestyle Prime floors, Lifestyle Grand floors and silver county villas located at CHD City, Village Uchana, Sector 45, Karnal.

(b) An exclusive charge by way of hypothecation of scheduled receivables both present and future .

(c) Personal Guarantee of two directors of the company.

ii) Facility of Rs, 2649.59 lac with interest rate @ 15.75%, balance amount is repayble in 25 Monthly installments startinng from April.2019. The Loan is secured by way of :

(a) An exclusive charge on project land (38.32 Acre) together with all building and structures thereon, both present and future at NH-1, Village Uchana, Sector-45, Karnal

(b) An exclusive charge by way of hypothecation of scheduled receivables both present and future .

(c) Personal Guarantee of two directors of the company .

Vehicle Loan

Vehicle loan of Rs, 35.00 lac with interest rate @ 11.05% is availed for car for period of three years paid monthly and secured against hypothecation of vehicle. First Installment of Rs, 1.08 lac starts from 18th Sep, 2017.

Cost of Construction of projects Basis of calculation

Cost of construction includes cost of land (including cost of development rights/land under agreements to purchase), estimated internal development costs, external development charges, borrowing costs, overheads,construction costs and development/ Construction materials, which is charged to the statement of profit and loss based on the revenue recognized as explained in accounting policy for revenue from real estate projects above, in consonance with the concept of matching costs and revenue. Final adjustment is made on completion of the specific project.

As the Company does not have any plan assets, the movement of present value of defined benefit obligation and fair value of plan assets has not been presented.These assumptions were developed by management with the assistance of independent actuarial appraisers. Discount factors are determined close to each year-end by reference to government bonds of relevant economic markets and that have terms to maturity approximating to the terms of the related obligation. Other assumptions are based on management''s historical experience.

The Company has spent INR 55 lacs during the financial year as per the provisions of section 135 of the Companies Act, 2013 towards Corporate Social Responsibility (CSR) activities grouped under “other expenses and was required to spend Rs, 22.45 towards CSR Activities during the year 2017-18.

Further in the year 2016-17 the Company was not able to spent Rs, 28.55 lacs towards CSR Expenditure and the reasons for the same was disclosed in the director report of the Company also the Board then decided to spend all the unspent amount in the financial year 2017-18. Now in the year 2017-18 the Company have spent the CSR Expenditure of Rs, 28.55 lacs which was to be spent in the year 2016-17.

(32) Segment Reporting

In line with the provisions of Ind AS 108 - operating segments and basis the review of operations being done by the Board and the management, the operations of the Group fall under colonization and real estate business, which is considered to be the only reportable segment. The Group derives its major revenues from construction and development of real estate projects and its customers are widespread. The Group is operating in India which is considered as a single geographical segment.

(33) Related Parties Disclosures:

As per Indian Accounting Standard (Ind AS) 24 “Related Party Disclosure the disclosure of transactions with the related parties are given below :

i) List of Related parties where control exists and related parties with whom transactions have taken place and relationships :

(36) a. Donation Expense :

During the year, the Company has donated Rs, 1.04 lacs (P.Y. 1.03 lacs) to various institutions/ parties.

(36) b. Contribution to Political Parties :

During the year, the Company has made contribution of Rs, 75 lacs (P.Y. 100 lacs) to political parties.

(37) Remittance in Foreign Currencies for dividends

The Company has remitted Rs, Nil (March 31,2017 :Rs, Nil) in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittance,if any ,in foreign currencies on accunt of dividens have been made by/on behalf of non resident shareholders.

(38) First time adoption of Ind AS

These financial statements, for the year ended March 31, 2018, are the first, the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of, the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1 April 2016, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

A) Exemptions and exceptions applied

a) Ind AS optional exemptions

i) Ind AS 101 allows a first-time adopter to continue with the carrying value for all of its property, plant and equipment as recognized in the previous GAAP financial statement as deemed cost at the transition date. This exemption can also be used for intangible assets covered by Ind AS 38. Accordingly, the Company has elected to measure property, plant and equipment and other intangible assets at their previous GAAP carrying value.

ii) Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangements based for embedded leases based on conditions in place as at the date of transition.

b) Ind AS mandatory exemptions

The estimates at 1 April 2016 and at 31 March 2017 are consistent with those made for the same dates in accordance with previous GAAP (after adjustments to reflect any differences in accounting policies), unless there is objective evidence that those estimates were in error.

I) Defined benefit liabilities

Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability) are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus the employee benefit cost is reduced by INR 7.99 lakhs and remeasurement gains/ losses on defined benefit plans has been recognized in the OCI net of tax.

II) Deferred tax

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity. On the date of transition, the net impact on deferred tax liabilities is of '' 3.03 lakhs (31 March 2017: ''-2.05 lakhs).

III) Other comprehensive income

Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit or profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.

IV) Statement of cash flows

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

39. Standards issued but not yet effective

The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company''s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standard:

Ind AS 115- Revenue from Contracts with Customers

Ind AS 115 was notified on 28 March 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under Ind AS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 April 2018. The Company will adopt the new standard on the required effective date using the modified retrospective method. The Company is in the process of implementing Ind AS 115 relating to the recognition of revenue from contracts with customers and continues to evaluate the changes to accounting system and processes, and additional disclosure requirements that may be necessary. A reliable estimate of the quantitative impact of Ind AS 115 on the financial statements will only be possible once the implementation project has been completed.

(40) Financial Risk Management objectives and policies

The Company''s principal financial liabilities comprise of borrowings, trade and other payables, security deposits received from dealers/ customer. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include investments, security deposits, trade receivables, loan to employee, other receivables and cash and cash equivalents that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. The Company''s senior management is supported by Finance department that advises on financial risks and the appropriate financial risk governance framework for the Company. The Finance department provides assurance to the Company''s senior management that the Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.

The Audit Committee oversees how management monitors compliance with risk management policy and procedures and procedures, and reviews the adequacy of risk management framework in relation to the risk faced by the Company. The Audit Committee is assisted in its role by Internal Audit.

a) 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. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include borrowings, deposits and FVTPL investments.

The sensitivity analysis in the following sections relate to the position as at 31 March 2018 and 31 March 2017. The analysis exclude the impact of movements in market variables on: the carrying values of post-retirement obligations and provisions.

The following assumptions have been made in calculating the sensitivity analysis:

The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 March 2018 and 31 March 2017.

i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

ii) Interest rate sensitivity

The Company is not exposed to the risk of changes in market interest rates, since the rate of interest for the loans availed by the Company is fixed rate interest.

iii) Price risk Commodity price risk:

As the Company is not engaged in business of commodities which are traded in recognized commodity exchanges, commodity risk is not applicable.

Equity price risk:

Since the Company has not made any investment in any listed/ unlisted securities during the year or at the year end, equity price risk is not applicable.

iv) Foreign Currency Risk

The Company has “Nil international transactions and is not exposed to foreign exchange risk arising from foreign currency transactions.

b) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including balances lying with banks and financial institutions, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

Based on the past trend of recoverability of outstanding trade receivables, the Company has not incurred material

losses on account of bad debts. Hence, no adjustment has been made on account of Expected Credit Loss (ECL) model.

Financial instruments and cash deposits

Credit risk from balances with banks is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with approved counterparties. Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits/ mutual funds with the Banks/ financial institutions with high credit ratings assigned by the international/ domestic credit rating agencies.

(41) Capital management

a) For the purpose of the Company''s capital management, capital includes issued equity capital, and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximize the shareholder value.

b) 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, borrowings, trade and other payables, less cash and cash equivalents.

c) Credit Analysis & Research Limited has assigned the following credit rating.

1. CARE BBB (FD) for the Fixed Deposit Programme of the Company for an amount of Rs, 38.15 Crores.

2. CARE BBB for the long term bank facilities of Company amounting to Rs, 128 Crores.

* Net debt = non-current borrowings current borrowings current maturities of non-current borrowings interest accrued - cash and cash equivalents.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2017 and 31 March 2018

(3) (i) Fair value

Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:

The management assessed that cash and cash equivalent, trade receivables, trade payables, other liabilities, other assets and borrowings approximates their carrying amount at fair value.

The fair value of Current Financial Assets and Liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following method and assumptions were used to estimate the fair value :

(4) The accompanying notes are an integral part of the standalone financial statements.

(5) The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

(6) Company has transferred Rs, 92,492 /- (P.Y. Rs, 16,352/- ) to the Investor Education and Protection Fund during the F.Y. 2017-18. However, there is no amount pending to be transferred to Inverstor Education and Protection Fund as on 31.03.2018.

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

(8) Some of the Balances of the Debtors, Creditors, Advances and loan are Subject to Confirmation/ Reconciliation.

(9) Previous year''s figures have been regrouped/rearranged, wherever necessary, to confirm this year''s classifications.

Source : Dion Global Solutions Limited
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