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Godrej Industries

BSE: 500164|NSE: GODREJIND|ISIN: INE233A01035|SECTOR: Personal Care
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Notes to Accounts Year End : Mar '19

Note 1 : General Information

1 Corporate Information

Godrej Industries Limited (“the Company”) was incorporated under the Companies Act, 1956 on March 7, 1988 under the name of Gujarat-Godrej Innovative Chemicals Limited. The business and undertaking of the erstwhile Godrej Soaps Limited was transferred to the Company under a Scheme of Amalgamation with effect from April 1, 1994 and the Company’s name was changed to Godrej Soaps Limited. Subsequently, under a Scheme of Arrangement the Consumer Products division of the Company was demerged with effect from April 1, 2001 into a separate company, Godrej Consumer Products Limited (GCPL).

The Company’s name was changed to Godrej Industries Limited on April 2, 2001. The Vegetable Oils and Processed Foods Manufacturing business of Godrej Foods Limited was transferred to the Company with effect from June 30, 2001. The Foods division (except Wadala factory) was then sold to Godrej Hershey Limited, on March 31, 2006. Swadeshi Detergents Limited, 100% subsidiary of the Company, was amalgamated with the Company effective from April 01, 2013. Wadala Commodities Limited was amalgamated with the Company effective from April 01, 2014. Vora Soaps Limited was amalgamated with the Company effective from December 14, 2017.

The Company is domiciled in India and is listed on BSE Limited (BSE) and The National Stock Exchange of India Limited (NSE). The Company’s registered office is at Godrej One, Pirojshanagar, Eastern Express Highway, Vikhroli (east), Mumbai - 400 079. The Company is engaged in the businesses of manufacture and marketing of oleo-chemicals, their precursors and derivatives, bulk edible oils, estate management and investment activities.

2 Basis of preparation

These standalone financial statements have been prepared on accrual basis to comply in all material aspects with the Indian Accounting Standards (hereinafter referred to as the “Ind As”) as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 and other generally accepted accounting principles in India.

The financial statements have been prepared on a going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements. All assets and liabilities have been classified as current or non current as per the Company’s normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and services and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

The standalone financial statements of the Company for the year ended March 31, 2019 were approved for issue in accordance with the resolution of the Board of Directors on May 13, 2019.

3 Functional and presentation currency

The standalone financial statements are presented in Indian rupees, which is the Company’s functional currency. All amounts have been rounded to the nearest crore, unless otherwise indicated.

4 Key estimates and assumptions

The preparation of financial statements requires Management to make judgments, estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Continuous evaluation is done on the estimation and judgments based on historical experience and other factors, including expectations of future events that are believed to be reasonable.

Information about critical judgments in applying accounting policies are in respect of leases (determining) whether an arrangement contain a lease (Refer Note 37) that have the most significant effect on the carrying amounts of assets and liabilities and in respect of assumptions and estimates on uncertainties are as follows

- Determination of the estimated useful lives of tangible assets and the assessment as to which components of the cost may be capitalized.

- Impairment of Property, Plant and Equipments and Investments

- Recognition and measurement of defined benefit obligations

- Recognition of deferred tax assets

- Fair valuation of employee share options

- Discounting of long-term financial liabilities

- Fair value of financial instruments

- Provisions and Contingent Liabilities

5 Standards issued but not yet effective

Ministry of Corporate Affairs (“MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new standards and amendments to Ind ASs which the Company has not applied as they are effective for annual periods beginning on or after April 1, 2019:

(a) Ind AS 116 Leases

Ind AS 116 is applicable for financial reporting periods beginning on or after April 1, 2019 and replaces existing lease accounting guidance, namely Ind AS 17. Ind AS 116 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use (“ROU”) asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The nature of expenses related to those leases will change as Ind AS 116 replaces the operating lease expense (i.e., rent) with depreciation charge for ROU assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard - i.e. lessors continue to classify leases as finance or operating leases. The Group is in the process of analysing the impact of new lease standard on its financial statements.

The Company is proposing to use the “Modified Retrospective Approach” for transitioning to Ind AS 116. Accordingly, comparatives for the year ended March 31, 2019 will not be retrospectively adjusted.

(b) Ind AS 12 - Income taxes (amendments relating to income tax consequences of dividend and uncertainty over income tax treatments)

The amendment relating to income tax consequences of dividend clarify that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. The Company does not expect any impact from this pronouncement. It is relevant to note that the amendment does not amend situations where the entity pays a tax on dividend which is effectively a portion of dividends paid to taxation authorities on behalf of shareholders. Such amount paid or payable to taxation authorities continues to be charged to equity as part of dividend, in accordance with Ind AS 12.

The amendment to Appendix C of Ind AS 12 specifies that the amendment is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. It outlines the following: (1) the entity has to use judgement, to determine whether each tax treatment should be considered separately or whether some can be considered together. The decision should be based on the approach which provides better predictions of the resolution of the uncertainty (2) the entity is to assume that the taxation authority will have full knowledge of all relevant information while examining any amount (3) entity has to consider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates would depend upon the probability. The Company does not expect any significant impact of the amendment on its financial statements.

(c) Ind AS 109 - Prepayment Features with Negative Compensation

The amendments relate to the existing requirements in Ind AS 109 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. The Company does not expect this amendment to have any impact on its financial statements.

(d) Ind AS 19 - Plan Amendment, Curtailment or Settlement

The amendments clarify that if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the re-measurement. In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Company does not expect this amendment to have any significant impact on its financial statements.

(e) Ind AS 23 - Borrowing Costs

The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. The Company does not expect any impact from this amendment.

(f) Ind AS 28 - Long-term Interests in Associates and Joint Ventures

The amendments clarify that an entity applies Ind AS 109 Financial Instruments, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. The Company does not currently have any long-term interests in associates and joint ventures to which equity method is not applied.

(g) Ind AS 103 - Business Combinations and Ind AS 111 - Joint Arrangements

The amendments to Ind AS 103 relating to re-measurement clarify that when an entity obtains control of a business that is a joint operation, it re-measures previously held interests in that business. The amendments to Ind AS 111 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not re-measure previously held interests in that business. The Company will apply the pronouncement if and when it obtains control / joint control of a business that is a joint operation.

6 Measurement of fair values

The Company’s accounting policies and disclosures require the measurement of fair values for financial instruments.

The Company has an established control framework with respect to the measurement of fair values. The Management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.

When measuring the fair value of a financial asset or a financial liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2: inputs other than quoted prices included in 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 asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

1. The Company’s investment properties consist of 15 properties in India. The Management has determined that the investment property consists of two classes of assets - Land and Building - based on the nature, characteristics and risks of each property.

2. The Company has no restriction on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

3. The fair valuation is based on current prices in the active market for similar properties. The main inputs used are quantum, area, location, demand, age of building and trend of fair market rent in the location of the property.

The fair value is based on valuation performed by an accredited independent valuer. Fair valuation is based on replacement cost method. The fair value measurement is categorised in level 2 fair value hierarchy.

Notes

a During the previous year, the Company participated in Godrej Agrovet Limited (GAVL) IPO and sold 65,21,739 shares and earned a profit of ‘267.38 crore on sale of shares. The Company, however, continues to hold a controlling stake in GAVL (Refer Note No. 34)

b The Board of Directors of the Company have approved the demerger of the Investment Business of Ensemble Holdings and Finance Limited (a subsidiary of the Company) into the Company and the related Scheme of Arrangement (‘Scheme’) between Ensemble Holdings and Finance Limited and the Company. The Scheme has been filed with NSE and BSE and the Company will proceed with other necessary formalities in this regard, pending which no effects have been given in these Standalone Financial Statements.

c The Company has recorded an impairment loss of Rs. 243.79 crore on an investment in a subsidiary being the excess of its carrying amount over the estimated recoverable amount considering the current and future business outlook.(Refer Note No. 34)

Notes

1 There are no loans which have significant increase in credit risk.

2 The Company had advanced an amount of Rs. 10.33 crore to certain individuals who also pledged certain equity shares as security against the said advance. The Company has enforced its security and lodged the shares for transfer in its name. The said transfer application was rejected and Company has preferred an appeal to the Company Law Board (CLB). The CLB rejected the application and advised the parties to approach the High Court. The Company had filed an appeal before the Honorable High Court against the order of the Company Law Board under section 10 F of the Companies Act, 1956 which was disposed of with the direction to keep the transfer of shares in abeyance till the arbitration proceedings between the parties are on. The Honorable Bombay High Court passed an interim order dated September 18, 2012, restraining the Company from interalia, dealing, selling or creating third party rights, etc. in the pledged shares and referred the matter to arbitration. The Company had filed a Special Leave Petition (SLP) before the Supreme Court against this interim order of the Honorable Bombay High Court which the Supreme Court has dismissed and the matter is presently before the Arbitrator. Pleadings have been completed and the Award is awaited.

The Management is confident of recovery of this amount as underlying value of the said shares is substantially greater than the amount of loan and interest thereon. However, on a conservative basis, the Company has provided for the entire amount of Rs. 10.33 crore in the books of account.

3 Details of Loans under section 186 (4) of Companies Act, 2013.

Notes

1 Inventories are valued at lower of cost and net realisable value. Cost is computed on weighted average basis and is net of Cenvat.

2 Working capital facilities sanctioned by banks under consortium arrangement are secured by hypothecation of stocks.

Notes

a The Optionally Convertible Promissory Notes (15%) of Boston Analytics Inc. in respect of which the Company did not exercise the conversion option and Boston Analytics Inc. promissory notes (20%) where there was a partial conversion option which the Company did not exercise, were due for redemption on June 30, 2009 and August 21, 2009, respectively. The said promissory notes have not been redeemed as of the Balance Sheet date and have been fully provided for.

b 12% promissory notes were repayable on or before December 31, 2011, along with interest on maturity. The said promissory notes have not been redeemed as of the Balance Sheet date and have been fully provided for.

Notes

1 On December 14, 2018, the National Company Law Tribunal (“NCLT”), Mumbai bench vide its Order approved the Scheme of Amalgamation of Vora Soaps Limited (VSL) with the Company. Consequent to the said Order and filing of the final certified Orders with the Registrar of Companies, Maharashtra on December 24, 2018, the Scheme has become effective from the Appointed Date of December 14, 2017. According to the Scheme, the Company cancelled 19,39,04,681 equity shares held by VSL and issued 19,39,04,681 fully paid Equity Shares as a consideration to the Equity and Preference shareholders of Vora Soaps Limited. (Refer Note 46)

2 In the FY 2014-15, the Honourable Bombay High Court and High Court of Madhya Pradesh, Indore Bench, approved a Scheme of Amalgamation (“Scheme”) of Wadala Commodities Limited (WCL) with the Company effective from April 1, 2014, being the appointed date. The Effective Date was November 21, 2014, being the date of filing the approval of the Respective High Courts with the ROC. Accordingly, the Company had issued 200,243 equity shares of the Company in lieu of the equity shares in WCL and 10 equity shares of the Company in lieu of the preference shares in WCL held by the shareholders of the erstwhile WCL and also issued 67,504 bonus equity shares of the Company to the non-promoter shareholders of the Company.

Refer Statement of Changes in Equity for detailed movement in Other Equity balances B Nature and purpose of reserve

1 Capital Redemption Reserve : The Company recognised Capital Redemption Reserve on buyback of equity shares from its retained earnings.

2 Securities Premium Account : The amount received in excess of face value of the equity shares is recognised in Securities Premium Account. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium account. This reserve is utilised in accordance with the Section 52 of The Companies Act, 2013.

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

4 Employee Stock Grants Outstanding : The fair value of the equity-settled share based payment transactions with employees is recognised in Statement of Profit and Loss with corresponding credit to Employee Stock Options Outstanding Account.

5 General Reserve : The Company has transferred a portion of the net profit of the Company before declaring dividend to general reserve pursuant to the earlier provisions of Companies Act 1956. Mandatory transfer to general reserve is not required under the Companies Act 2013.

6 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

1 There are no Micro, Small and Medium Enterprises, to whom the Company owes dues (principal and/or interest), which are outstanding for more than 45 days as at the balance sheet date. During the year, there have been no payments made to Micro, Small and Medium Enterprises beyond 45 days. There were no amounts on account of interest due that were payable for the period where the principal has been paid but interest under the MSMED Act, 2006 not paid. Further, there were no amounts towards interest accrued that were remaining unpaid at the end of accounting year. Accordingly, there were no amounts due to further interest due and payable in the succeeding years. The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.

Notes

1 Detail of Guarantee given covered under section 186 (4) of the Companies Act, 2013 :

The Corporate surety bond of Rs. 33.11 crore ( previous year Rs. 26.88 crore) is in respect of refund received from excise authority for exempted units (North East) of Godrej Consumer Products Limited, an associate company.

2 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.

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

Notes

1 The Government of India introduced the Goods and Service Tax (GST) with effect from July 01, 2017, consequently revenue from operations for the period July 01, 2017 to March 31, 2018 is net of GST. However, revenue for the period April 01, 2017 to June 30, 2017 is inclusive of Excise Duty and hence, total revenue from operations for the year ended March 31, 2019 and year ended March 31, 2018 are not comparable.

2 Dividend Income has been disclosed under Revenue from Operations since Finance and Investments is an Operating Business Segment for the Company.

3 Disaggregation of revenue from contracts with customers

The Company derives revenue from the sale of products in the following major segments:

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Significant Management judgment is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income in which the relevant entity operates and the period over which deferred income tax assets will be recovered.

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Details of unused tax losses and unused tax credit is given in note 5 & 6 below

As the Company does not have any intention to dispose off investments in subsidiaries and associates in the foreseeable future, deferred tax asset on indexation benefit in relation to such investments has not been recognised.

During the year, the Company has not accounted for tax credits in respect of Minimum Alternate Tax (MAT credit) of Rs. Nil crore (previous year Rs. 4.32 crores). The Company is not reasonably certain of availing the said MAT credit in future years against the normal tax expected to be paid in those years and accordingly has not recognised a deferred tax asset for the same.

Note 7 : Leases

Operating Leases Granted by the Company

The Company has entered into Leave and Licence agreements in respect of its commercial and residential premises. The non-cancelable portion of the leases range between 3 months to 60 months and are renewable by mutual consent on mutually acceptable terms. Leave and Licence arrangements are similar in substance to operating leases. The Company has also granted lease for freehold land. The aggregate future minimum lease receipts are as under :

Lease Taken by the Company

The Company’s significant leasing arrangements are in respect of operating lease for land, office premises, residential premises, machinery and storage tanks. The aggregate lease rentals paid by the Company are charged to the Statement of Profit and Loss.

Note 8 : Employee Benefits

1 DEFINED CONTRIBUTION PLAN Provident Fund :

The contributions to the Provident Fund and Family Pension Fund of certain employees are made to a Government administered Provident Fund and there are no further obligations beyond making such contributions.

2 DEFINED BENEFIT PLAN Gratuity :

The Company participates in the Employees’ Group Gratuity-cum-Life Assurance Scheme of ICICI Prudential Life Insurance Co. Ltd, HDFC Standard Life Insurance Co. Ltd. and SBI Life Insurance Co. Ltd, a funded defined benefit plan for qualifying employees. Gratuity is payable to all eligible employees on death or on separation / termination in terms of the provisions of the Payment of Gratuity (Amendment) Act, 1997, or as per the Company’s scheme whichever is more beneficial to the employees.

The liability for the Defined Benefit Plan is provided on the basis of a valuation, using the Projected Unit Credit Method, as at the Balance Sheet date, carried out by an independent actuary.

Provident Fund :

The Company manages the Provident Fund plan through a Provident Fund Trust for a majority of its employees which is permitted under The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. The plan envisages contribution by the employer and employees and guarantees interest at the rate notified by the Provident Fund authority. The contribution by employer and employee, together with interest, are payable at the time of separation from service or retirement, whichever is earlier.

The Company has an obligation to fund any shortfall on the yield of the trust’s investments over the administered interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and the actual return earned by the Company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumptions there is no shortfall as at March 31, 2019.

Pension :

The Company has Pension plan for eligible employees. The liability for the Defined Benefit Plan is provided on the basis of a valuation, using the Projected Unit Credit Method, as at the Balance Sheet date, carried out by an independent actuary.

3 Basis Used to Determine Expected Rate of Return on Assets :

The expected return on plan assets of 7.79% p.a. has been considered based on the current investment pattern in Government securities.

4 Amounts Recognised as Expense :

i) Defined Contribution Plan

Employer’s Contribution to Provident Fund amounting to Rs. 3.14 crore (previous year Rs. 2.96 crore) has been included in Note 31 Employee Benefits Expenses

ii) Defined Benefit Plan

Gratuity cost amounting to Rs. 1.8 crore (previous year Rs. 1.69 crore) has been included in Note 31 Employee Benefits Expenses.

Employer’s Contribution to Provident Fund amounting to Rs. 1.58 crore (previous year Rs. 2.04 crore) has been included in Note 31 Employee Benefits Expenses.

Pension cost amounting to ‘ 0.11 crore (previous year ‘ 0.10 crore) has been included in Note 31 Employee Benefits Expenses.

5 The amounts recognised in the Company’s financial statements as at the year end are as under :

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

6 Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

The sensitivity analysis above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting year.

7 Expected future benefit payments of Gratuity from the date of reporting

Note 9 : Employee Stock Benefit Plans

1 Employee Stock Option Plans

In December 2005, the Company had instituted an Employee Stock Option Plan I (GIL ESOP I) as approved by the Board of Directors and the Shareholders, for the allotment of 15,00,000 options, increased to 90,00,000 options on split of shares convertible into 90,00,000 equity shares of ‘1 each to eligible employees of participating companies. The maximum number of options that may be granted per employee per year shall not exceed 600,000 options.

In July 2009, the Company had instituted an Employee Stock Option Plan II (GIL ESOP II) as approved by the Board of Directors and the Shareholders, for the allotment of 90,00,000 options convertible into 90,00,000 shares of ‘1 each to eligible employees of participating companies. The maximum number of options that may be granted per employee per year shall not exceed 1,000,000 options.

The Plans are administered by an independent ESOP Trust created with IL&FS Trust Co. Ltd which purchased from the market shares equivalent to the number of options granted by the Compensation Committee. Pursuant to SEBI notification dated January 17, 2013, no further securities of the Company will be purchased from the open market. The particulars of the plans and movements during the year are as under:

(*) The weighted average exercise price stated above is the price of the equity shares on the grant date increased by the interest cost to the ESOP Trust at the prevailing rates upto March 31, 2012.

The total excess shares at the year end are Nil (Previous year NIL).

The weighted average balance life of ESOP I options outstanding as on March 31, 2019 is Nil years.

The Options granted shall vest after three / five years from the date of grant of option, provided the employee continues to be in employment and the option is exercisable within two / four years after vesting.

2 Employee Stock Grant Scheme

(a) The Company had set up the Employees Stock Grant Scheme 2011 (ESGS) pursuant to the approval by the Shareholders at their Meeting held on January 17, 2011.

(b) The ESGS Scheme is effective from April 1, 2011, (the “Effective Date”) and shall continue to be in force until (i) its termination by the Board or (ii) the date on which all of the shares to be vested under Employee Stock Grant Scheme 2011 have been vested in the Eligible Employees and all restrictions on such Stock Grants awarded under the terms of ESGS Scheme, if any, have lapsed, whichever is earlier.

(c) The Scheme applies to the Eligible Employees who are in whole time employment of the Company or its Subsidiary Companies. The entitlement of each employee would be decided by the Compensation Committee of the respective Company based on the employee’s performance, level, grade, etc.

(d) The total number of Stock Grants to be awarded under the ESGS Scheme are restricted to 25,00,000 (Twenty Five Lac) fully paid up equity shares of the Company. Not more than 5,00,000 (Five Lac) fully paid up equity shares or 1% of the issued equity share capital at the time of awarding the Stock Grant, whichever is lower, can be awarded to any one employee in any one year.

(e) The Stock Grants shall vest in the Eligible Employees pursuant to the ESGS Scheme in the proportion of 1/3rd at the end of each year from the date on which the Stock Grants are awarded for a period of three consecutive years, or as may be determined by Compensation Committee, subject to the condition that the Eligible Employee continues to be in employment of the Company or the Subsidiary company as the case may be.

(f) The Eligible Employee shall exercise her / his right to acquire the shares vested in her / him all at one time within 1 month from the date on which the shares vested in her / him or such other period as may be determined by the Compensation Committee.

(g) The Exercise Price of the shares has been fixed at ‘1 per share. The fair value of the employee share options has been measured using the Black-Scholes Option Pricing Model and charged to the Statement of Profit and Loss. The value of the options is treated as a part of employee compensation in the financial statements and is amortised over the vesting period.

Following table lists the average inputs to the model used for the plan for the year ended March 31, 2019:

(i) The weighted average exercise price of the options outstanding as on March 31, 2019 is Rs. 1 (previous year Rs. 1 per share) and the weighted average remaining contractual life of the options outstanding as on March 31, 2018 is 0.73 years (previous year 0.79 years)

Note 10: Related Party Information

a) Names of related parties and description of relationship Parties where control exists

1 Vora Soaps Limited (Holding Co.) (up to 24.12.2018)

2 Godrej Agrovet Limited - Subsidiary Co.

2.1 Godvet Agrochem Limited

2.2 Astec LifeSciences Limited (including its following wholly owned subsidiaries)

2.2.1 Behram Chemicals Private Limited

2.2.2 Astec Europe Sprl

2.2.3 Comercializadora Agricola Agroastrachem Cia Ltda

2.3 Creamline Dairy Products Limited

2.3.1 Nagavalli Milkline Private Limited

2.4 Godrej Tyson Foods Limited (w.e.f. March 27, 2019)

2.5 Godrej Maxximilk Private Limited (w.e.f. March 27, 2019)

Joint Venture

2.6 ACI Godrej Agrovet Private Limited, Bangladesh Associates

2.7 Godrej Tyson Foods Limited ( up to March 26, 2019)

2.8 Alrahba International Trading LLC, UAE

2.9 Godrej Maxximilk Private Limited ( up to March 26, 2019)

3 Godrej Properties Limited - Subsidiary Co.

3.1 Godrej Project Development Limited

3.2 Godrej Buildcon Private Limited

3.3 Godrej Garden City Properties Private Limited

3.4 Godrej Home Developers Private Limited

3.5 Godrej Hill Side Properties Private Limited

3.6 Mahalunge Township Developers LLP (Erstwhile known as Godrej Land Developers LLP)

3.7 Godrej Highrises Realty LLP

3.8 Godrej Prakriti Facilities Private Limited

3.9 Godrej Project Developers & Properties LLP

3.10 Godrej Highrises Properties Private Limited

3.11 Godrej Genesis Facilities Management Private Limited

3.12 Prakritiplaza Facilities Management Private Limited

3.13 City Star Infraprojects Limited

3.14 Godrej Residency Private Limited

3.15 Godrej Skyview LLP

3.16 Godrej Green Properties LLP

3.17 Godrej Projects (Soma) LLP

3.18 Godrej Projects North LLP (Formerly Known as Godrej Projects (Bluejay) LLP)

3.19 Godrej Athenmark LLP

3.20 Godrej Vestamark LLP

3.21 Godrej Properties Worldwide Inc, USA

3.22 Suncity Infrastructures (Mumbai ) LLP

3.23 Embellish Houses LLP

3.24 Godrej City Facilities Management LLP

3.25 Godrej Landmark Redevelopers Private Limited (up to March 19, 2019)

3.26 Godrej Skyline Developers Private Limited (effective from September 29, 2017) Joint Venture

3.27 Godrej Realty Private Limited

3.28 Godrej Landmark Redevelopers Private Limited

3.29 Godrej Redevelopers (Mumbai) Private Limited

3.30 Wonder Space Properties Private Limited

3.31 Wonder City Buildcon Private Limited

3.32 Godrej Home Constructions Private Limited

3.33 Godrej Greenview Housing Private Limited

3.34 Wonder Projects Development Private Limited

3.35 Godrej Real View Developers Private Limited

3.36 Pearlite Real Properties Private Limited

3.37 Godrej Skyline Developers Private Limited

3.38 Godrej Green Homes Limited (effective from March 17, 2018)

3.39 Godrej Property Developers LLP

3.40 Mosiac Landmarks LLP

3.41 Dream World Landmarks LLP

3.42 Oxford Realty LLP

3.43 Godrej SSPDL Green Acres LLP

3.44 Oasis Landmarks LLP

3.45 M S Ramaiah Ventures LLP

3.46 Caroa Properties LLP

3.47 Godrej Constructions Projects LLP

3.48 Godrej Housing Projects LLP

3.49 Amitis Developers LLP

3.50 A R Landcraft LLP

3.51 Prakhhyat Dwellings LLP

3.52 Bavdhan Realty @ Pune 21 LLP

3.53 Godrej Highview LLP (effective from June 15, 2017)

3.54 Godrej Irismark LLP (effective from Janurary 24, 2017)

3.55 Godrej Projects North Star LLP (formerly known as Godrej Projects (Century) LLP) (effective from September 27, 2017)

3.56 Godrej Developers & Properties LLP (effective from October 30, 2017)

3.57 Sai Srushti Onehub Projects LLP (effective from January 31, 2018)

3.58 Maan-Hinje Township Developers LLP (Formerly Known as Godrej Projects (Pune) LLP)

3.59 Manjari Housing Projects LLP (Formerly Known as Godrej Avamark LLP)

3.60 Ashank Macbricks Private Limited (effective August 3, 2018)

3.61 Suncity Infrastructures (Mumbai) LLP (effective October 10, 2018)

3.62 Mahalunge Township Developers LLP (formerly known as Godrej Land Developers LLP) (Classified as Joint Venture effective February 1, 2019)

3.63 Rosebery Estate LLP

4 Natures Basket Limited - Subsidiary Co.

5 Godrej International Limited - Subsidiary Co.

6 Godrej International Trading & Investments Pte Limited - Subsidiary Co

7 Ensemble Holdings & Finance Limited - Subsidiary Co.

8 Godrej One Premises Management Private Limited - Subsidiary Co.

9 Godrej Industries Limited Employee Stock Option Trust - Subsidiary Co.

Associates

10 Godrej Consumer Products Limited and its stepdown subsidiaries

10.1 Godrej Global Mideast FZE, Sharjah

10.2 PT Megasari Makmur, Indonesia

10.3 Strength of Nature LLC, USA

10.4 Godrej Household Products Bangladesh Private Limited, Bangladesh

10.5 Godrej Household Products Bangladesh Private Limited, Sri Lanka

10.6 Bhabhani Blunt Hairdressing Private Limited

11 Companies under common ownership

11.1 Godrej & Boyce Manufacturing Company Limited

11.2 Godrej Seeds & Genetics Limited

11.3 Godrej South Africa Pty Limited

11.4 Laboratoria Cuenca S.A.

12 Key Management Personnel

12.1 Mr. A. B. Godrej - Chairman

12.2 Mr. N. B. Godrej - Managing Director

12.3 Ms. T. A. Dubash - Executive Director & Chief Brand Officer

12.4 Mr. N. S. Nabar - Executive Director & President (Chemicals)

12.5 Mr. C. G. Pinto - Chief Financial Officer

12.6 Ms. Nilufer Shekhawat - Company Secretary (up to October 31, 2018)

12.7 Ms. Tejal Jariwala - Company Secretary (effective from November 12, 2018)

13 Non-Executive Directors

13.1 Mr. J.N. Godrej

13.2 Mr. V.M. Crishna

13.3 Mr. K.K. Dastur

13.4 Mr. K.M. Elavia

13.5 Mr. K.N. Petigara

13.6 Mr. S.A. Ahmadullah

13.7 Mr. A.B. Choudhury

13.8 Mr. A.D. Cooper

13.9 Ms. Rashmi Joshi (effective from March 15, 2019)

14 Relatives of Key Management Personnel

14.1 Ms. N. A. Godrej - Daughter of Mr. A. B. Godrej

14.2 Mr. P. A. Godrej - Son of Mr. A. B. Godrej

14.3 Ms. R. N. Godrej - Wife of Mr. N. B. Godrej

14.4 Mr. B. N. Godrej - Son of Mr. N. B. Godrej

14.5 Mr. S. N. Godrej - Son of Mr. N. B. Godrej

14.6 Mr. H. N. Godrej - Son of Mr. N. B. Godrej

14.7 Mr. A. D. Dubash - Husband of Ms. Tanya Dubash

14.8 Master A. A. Dubash - Son of Ms. Tanya Dubash

14.9 Master A. A. Dubash - Son of Ms. Tanya Dubash

14.10 Ms. N. N. Nabar - Wife of Mr. N. S. Nabar

15 Enterprises over which key management personnel exercise significant influence

15.1 Anamudi Real Estates LLP

15.2 Godrej Investments Private Limited

15.3 Innovia Multiventures Private Limited

15.4 TAD Family Trust

16 Enterprises over which relative of key management personnel exercise significant influence

16.1 Shata Trading & Finance Private Limited

16.2 Shilawati Trading & Finance Private Limited

16.3 NG Family Trust

16.4 PG Family Trust

16.5 HNG Family Trust

16.6 Godrej Investment Advisers Private Limited

16.7 Godrej Housing Finance Limited

16.8 Mukteshwar Realty Private Limited

16.9 Karukachal Developers Private Limited

16.10 Eranthus Developers Private Limited

16.11 Praviz Developers Private Limited

17 Post Employement Benefit Trust where reporting entity exercises significant influence

17.1 Godrej Industries Employees Provident Fund

17.2 Godrej Industries Ltd Group Gratuity Trust

Note 11 : Fair Value Measurement

Refer Note 2 sub note 9 & 10 for accounting policy on Financial Instruments.

The fair values of the financial assets and liabilities are 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.

1 Accounting classification and fair values

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are as follows.

* The fair value in respect of the unquoted equity investments cannot be reliably estimated. The Company has currently measured them at net book value as per the latest audited financial statements available.

The Fair value of cash and cash equivalents, other bank balances, trade receivables, trade payables approximated their carrying value largely due to short term maturities of these instruments.

Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.

2 Measurement of fair values

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.

Note 12 : Financial Risk Management

1 Financial Risk Management objectives and policies

The Company’s business activities are exposed to a variety of financial risks, namely Credit risk, Liquidity risk, Currency risk, Interest risks and Commodity price risk. The Company’s Senior Management has the 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 committee reports regularly to the Board of Directors on its activities.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The audit committee oversees how Management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

2 Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and loans and advances and Bank balances.

The carrying amount of following financial assets represents the maximum credit exposure:

Trade receivables and loans and advances.

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer and the geography in which it operates. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

The Company has a policy under which each new customer is analysed individually for creditworthiness before offering credit period and delivery terms and conditions. The Company’s export sales are backed by letters of credit and insured through Export Credit Guarantee Corporation. The Company bifurcates the Domestic Customers into Large Corporates, Distributors and others for Credit monitoring.

The Company maintains adequate security deposits for sales made to its distributors. For other trade receivables, the Company individually monitors the sanctioned credit limits as against the outstanding balances. Accordingly, the Company makes specific provisions against such trade receivables wherever required and monitors the same at periodic intervals.

The Company monitors each loans and advances given and makes any specific provision wherever required.

Based on prior experience and an assessment of the current economic environment, Management believes there is no credit risk provision required. Also Company does not have any significant concentration of credit risk.

The ageing of trade receivables that were not impaired was as follows:

Bank Balances.

Bank Accounts are maintained with Banks having high credit ratings

3 Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Management monitors rolling forecasts of the Company’s liquidity position on the basis of expected cash flows. This monitoring includes financial ratios and takes into account the accessibility of cash and cash equivalents.

The Company has access to funds from debt markets through loan from banks, commercial papers, fixed deposits from public and other Debt instrument. The Company invests its surplus funds in bank fixed deposits and debt based mutual funds.

4 Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates - will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. The Company’s exposure to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of investments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(i) Currency risk

The Company is exposed to currency risk on account of its borrowings, Receivables for Exports and Payables for Imports in foreign currency. The functional currency of the Company is Indian Rupee. The Company manages currency exposures within prescribed limits, through use of forward exchange contracts. Foreign exchange transactions are covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time.

Uncovered Foreign Exchange Exposure on Long Term Borrowings as at balance sheet dates includes External Commercial Borrowings (ECB) and Foreign Currency Term Loan (FCTL) taken for Capital Expenditure. Impact of fluctuation in Foreign Currency Rates on these borrowings relating to Capital Expenditure will be capitalised to Fixed Assets and would not impact the Statement of Profit and Loss.

Sensitivity analysis

A reasonably possible strengthening / (weakening) of the Indian Rupee against the foreign currencies at March 31 would have affected the measurement of financial instruments denominated in foreign currencies and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

(ii) 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. Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

The Management is responsible for the monitoring of the Company’s interest rate position. Various variables are considered by the Management in structuring the Company’s borrowings to achieve a reasonable, competitive, cost of funding.

Exposure to interest rate risk

Company’s interest rate risk arises from borrowings. The interest rate profile of the Company’s interest-bearing financial instruments as reported to the Management of the Company is as follows:

Fair value sensitivity analysis for fixed-rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 100 basis points in interest rate would have resulted in variation in the interest expense for the Company by the amounts indicated in the table below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The year end balances are not necessarily representative of the average debt outstanding during the period.

Note 13 : Capital Management

For the purpose of the Company’s capital management, capital includes issued capital and other equity reserves. The primary objective of the Company’s Capital Management is to maximise shareholders value. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants.

The Company monitors capital using Adjusted net debt to equity ratio. For this purpose, adjusted net debt is defined as total debt less cash and bank balances.

Note 14 : Master netting or similar agreements

The following table presents the recognised financial instruments that are offset, or subject to enforceable master netting arrangements and other similar agreements but not offset, as at Balance Sheet Dates:

Derivatives

The Company enters into derivative contracts for hedging foreign exchange exposures. In general, under such agreements, the amounts owed by each counterparty on a single day in respect of all the transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other.

Note 15 : Amalgamation of Vora Soaps Limited with the Company

On December 14, 2018, the National Company Law Tribunal (“NCLT”), Mumbai bench vide its Order approved the Scheme of Amalgamation of Vora Soaps Limited (VSL) with the Company. Consequent to the said Order and filing of the final certified Orders with the Registrar of Companies, Maharashtra on December 24, 2018, the Scheme has become effective from the Appointed Date of December 14, 2017.

The Financial Statements for the previous year ended March 31, 2018 have been restated pursuant to the wordings of the Scheme with effect from the Appointed date of December 14, 2017.

The effects of restatement on the Total Comprehensive Income, Equity and Cash flows have been given in the tables below.

(a) Purchase Consideration

The Company has issued 19,39,04,681 fully paid Equity Shares as a consideration to the Equity and Preference shareholders of Vora Soaps Limited.

(b) Identifiable assets acquired and liabilities assumed

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition

Note : 16

Managerial Remuneration to the directors paid for the current year ended March 31, 2019 exceeded the permissible limits as prescribed under section 197 read with Schedule V of the Companies Act, 2013 by Rs. 7.96 crore. The Company is in the process of obtaining approval from its shareholders at the forthcoming annual general meeting for such excess remuneration paid. Managerial Remuneration paid for the previous year ended March 31, 2018 exceeded the permissible limits as prescribed under Schedule V of the Companies Act 2013 by Rs. 7.48 crore (March 31, 2017 Rs. 4.54 crore). Post notification of Section 67 of the Companies (Amendment) Act, 2017 (which corresponds to Section 197 of the Companies Act, 2013), the Company has obtained approval of the shareholders by a special resolution for payment of the excess remuneration.

Note : 17

The Company has presented segment information in the consolidated financial statements which are presented in the same financial report. Accordingly, in terms of Ind AS 108 ‘Operating Segments’, no disclosures related to segments are presented in these standalone financial statements.

Note : 18

Corporate Social Responsibility contribution required to be made as per provisions of Section 135 of the Companies Act, 2013 is NIL for the current year and previous year.

Note 19 :

There are no significant subsequent events that would require adjustments or disclosures in the standalone financial statements as on the balance sheet date.

Source : Dion Global Solutions Limited
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