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Ircon International

BSE: 541956|NSE: IRCON|ISIN: INE962Y01013|SECTOR: Engineering - Heavy
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Notes to Accounts Year End : Mar '18

1. Corporate Information

Ircon International Limited is a public sector construction company domiciled in India (CIN :U45203DL1976GOI008171) and is incorporated under the provisions of the Companies Act applicable in India with specialization in execution of Railway projects on turnkey basis and otherwise. After commencing business as a railway construction company it diversified progressively to roads, buildings, electrical substation and distribution, airport construction, commercial complexes, as well as metro rail works. The Company caters to both domestic and international markets. The Company is an ISO certified Company for Quality, Environment and Occupational Health and Safety Management systems; a Schedule ‘A’ public sector company and a Mini Ratna-Category I. The registered office of the company is located at C-4, District Centre, Saket, New Delhi- 110017.

i) Includes lease hold building on Railways land for 30 years lease (Gross value Rs. 5.30 crore) for which agreement is yet to be finalised.

ii) Lease hold land includes land at Greater Noida Industrial Development Authority (GNIDA) for construction of proposed Central Inspection Cell (CIC) by the Company (Gross value Rs.0.82 crore). The request for time extension for construction of Building has been submitted to the appropriate authority.

iii) Furniture & Fixtures includes Furnishings also.

ivi Depreciation and impairment : Includes Foreign Exchange Loss as on 31st March 2018 for Rs. 15.36 crore (as on 31st March 2017 : Rs. 0.47 crore).

Description of valuation techniques used by valuer:

Cost Approach:

Under this approach, market value of the land has been estimated using Direct Comparison Approach (Market Approach). The building value has been estimated used Depreciated Replacement Cost (as if new). Within the Cost Approach, the land value is being estimated on the assumption that it is vacant and free of all encumbrances. It is added to the cost of the improvements derived by using the depreciated Replacement Cost method. Replacement cost implies “The current cost of replacement of an asset with a similar utility as if new.” Building costs would include the cost of the building components and other improvements. Appropriate depreciation is being applied to the same to estimate the value.

Income Approach (DCF):

DCF analysis is the process of valuing an investment property or asset by undertaking an estimation of future cash flows and taking into account the time value of money. Under this technique, the income is projected over the investment cycle and the net income is calculated after the deduction of capital, operating, and other necessary expenses.

Foot Note (i) :

(a) Out of 6,38,70,000 equity shares of ISTPL held by the company, 30 % shares (1,91,61,000 numbers) were pledged with Punjab National Bank against the loan drawn by ISTPL outstanding as on 31.03.2018 is Rs. Nil (as on 31.03.2017 Rs. 126.78 crores).

(b) As per Articles of Association (Article V) of ISTPL, shareholders can transfer their shareholding subject to Concession Agreement dated 28th September 2005 signed with NHAI which provides for equity holding of not less than 51% by Consortium members in ISTPL during the construction period and three years following Commercial Operation Date, which was achieved on 19.04.2010. Thereafter, the aforesaid shareholding can be diluted to 26% subject to the pre-emption right of the other shareholders.

(c ) Includes fair value of the financial guarantee for Rs. 0.28 crore issued by Ircon to Punjab National Bank on behalf of and in respect of term loan facility availed by ISTPL. Loan outstanding as on 31.03.2018 is Nil.

# IRSDC - Indian Railway Stations Development Corporation Limited, a Subsidiary with equity participation of 51% from IRCON : Ministry of Railways vide letter dated 10.04.2017 has decided to transfer 1% equity to RLDA from IRCON, thereby revising the ownership and noncontrolling interest to 50:50. The composition of IRSDC was converted to Joint venture with 1% share transferred by Ircon to RLDA at a value of Rs. 0.40 crore.

Foot Note :-

(i) Includes FDRs under Lien for Rs. 0.41 crore (Rs. 0.41 crore)

(ii) Fixed Deposits received from Contractors are realisable, if the contractor fails to fulfil its obligations as per the terms and conditions of the contract agreement.

(iii) (a) The Company has raised a loan from Indian Railway Finance Corporation (“IRFC”) (Refer note 15.1) which in turn have been paid to Railway Land Development Authority (“RLDA”) in terms of lease agreement. As per the Memorandum of understanding (“MOU”) entered between RLDA and the Company, all instalments of principal and interest, as also any default or additional interest, and other costs, expenses and charges associated with the loan (or otherwise payable under or pursuant to the Loan Agreement), shall be paid by RLDA to the Company, at least five (5) days prior to their respective due date under the Loan Agreement, into such account as maybe designated by IRFC. RLDA and Ministry of Railways (“MoR”) shall mutually enter into appropriate arrangements for corresponding disbursement of funds from MoR to RLDA. The terms and conditions of this recoverable amount is same as in the case of the said loan.

Further under MOU, RLDA has transferred the leasehold rights in the Project site at Bandra East in favour of the Company, together with the rights to undertake commercial development thereon. The Company shall be entitled to appoint appropriate developer(s) through open, competitive and transparent bid process for the purposes of undertaking the commercial development of the Project Site, and for the purposes thereof further sub-lease the Project Site (together with all associated Development Rights) to the developers so identified by the Company.

(b) Includes advance paid to RLDA for an amount of Rs.15 crore as per Memorandum of Understanding (MOU) dated 3 d August 2017 for redevelopment of Safdarjung Railway Station.

Foot Notes : -

(i) Includes Clients Fund of Rs. 2,884.78 crore (Rs. 3,141.33 crore) on which interest is passed on to them.

(ii) Fixed Deposits received from Contractors are realisable, if the contractor fails to fulfil its obligations as per the terms and conditions of the contract agreement.

(iii) Includes Rs. 593.55 crore earmarked for expenses for project site at Bandra (East).

Debts due by officers of the company, firms in which any director is a partner or private company in which any director is a member except JVs and Subsidiaries are Rs. Nil (Rs. Nil).

(a) Includes Value of work amounting to Rs. 7.99 crore (Rs. 1.61 crore) certified by client, but not billed by reporting date.

(b) Includes Rs. 8.50 crore (Rs. 2.48 crore) from Chhattisgarh East Railway Limited, a Joint Venture Company.

(c) Includes Rs. 1.07 crore (Rs. 0.31 crore) from Chhattisgarh East West Railway Limited, a Joint Venture Company.

Terms / Rights attached to Equity Shares :

(a) Voting

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity share is entitled to one vote per share.

(b) Liquidation

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

(i) Increase in Authorised Share Capital to Rs. 400 crore was approved in the Extra Ordinary General Meeting held on 22.05.2017

(ii) Department of Investment and Public Asset Management (DIPAM) had instructed the Company to buy back shares to the extent of 5% of paid up capital. Total shares proposed to be bought back was 49,41,818 in numbers at book value of these shares. Board of Directors at its 236th meeting dated 21.09.2017 approved proposal to buy back by the company of its fully paid up equity shares of Rs. 10 each not exceeding 49,41,818 shares from the existing shareholders. As on the closing date of submission of offer i.e. 04.12.2017 offer for 49,28,426 shares held by Govt. of India was received.

Notes :

(a) Terms and Conditions of the unsecured Loan :

The repayment of principal of the Loan Amount shall be made in 5 (five) equal instalments commencing from April 15, 2019.

(b) Rate of Interest :

(i) The Company will pay interest on the principal amount of the Loan advanced and outstanding from time to time, at the rate of 8.77% (Eight point seven seven percent) per annum (“Applicable Interest rate”) (exclusive of applicable interest tax, service tax and / or any such other taxes / levies / duties). such taxes / levies / duties, if any, applicable, shall be payable (in the same manner and time as the principal and interest) by the Borrower to the Lender over and above the rates specified above.

(ii) The Applicable Interest Rate shall be fixed for currency of loan term.

(c) Termination of the Memorandum of Understanding (MOU)

Upon the occurrence of certain identified events the MOU would stand terminated, whereupon Ircon would be substituted by such entity as agreed to between IRFC, Ircon, RLDA & Ministry of Railways (MoR). MoR would the entitled to pre pay the entire outstanding under the Loan Agreement on termination of this agreement.

(ii) Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical financial instruments that the entity can access at measurement date.

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

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

The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on recurring basis and at amortised cost (ii) (a) Assets and liabilities which are measured at amortized cost for which fair values are disclosed.

i) The carrying amounts of current trade receivables, trade payables, security deposits and retention money, cash and cash equivalents, bank balances and other financial assets and liabilities are considered to be the same at their fair values, due to their short term nature.

ii) The fair value of long term security deposits, retention money and long term trade payables were calculated based on cash flows discounted using current market rate. They are classified as level 3 fair values hierarchy due to inclusion of unobservable inputs.

iii) Investment in unquoted equity of subsidiaries and joint ventures are stated at carrying value as per Indian GAAP as on 31-3-2015 as per exemption provided by Para 10 of IND AS 27.

iv) Loans and Advances given to related parties are at market rate, therefore the carrying amount of such loans and advances are equal to their fair value.

v) Financial assets are recognised at transaction price, as the effect of measuring these at fair value is immaterial.

(iii) Financial risk management

The Company’s principal financial liabilities comprise borrowings, trade and other payables. The Company’s principal financial assets include loans to related parties, trade and other receivables, and cash and short-term deposits that derive directly from its operations. The Company also holds investment in mutual funds and tax free bonds. The Company’s activities expose it to some of the financial risks: market risk, credit risk and liquidity risk.

a) Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in market prices. Market risk comprises Foreign Currency Risk and Interest rate risk. Financial instruments affected by market risk includes borrowings, trade receivables, trade payable and other non derivative financial instruments.

(i) Foreign Currency Risk

The company operates internationally and is exposed to insignificant foreign currency risk (since receipts & payments in foreign currency are generally matched) arising from foreign currency transactions, primarily with respect to the US $, EURO, YEN, BDT, DZD, LKR, MZN, BTN, ZAR, NPR amd MYR. Significant foreign currency risk of company are naturally hedged.As of March 31, 2018 and March 31, 2017, every 1% increase or decrease of the respective foreign currency would impact our profit before tax by approximately Rs. 0.70 crore and Rs. 2.63 crore respectively.

ii) Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of change in market interest rate. The company manages its interest risk in accordance with the companies policies and risk objective. Financial instruments affected by interest rate risk includes tax free bonds and deposits with banks. Interest rate risk on these financial instruments are very low as interest rate is fixed for the period of financial instruments. Also, the Company does not have any interest risk on loans / borrowings as it bears fixed rate of interest.

b) Credit risk

The Group’s customer profile include Ministry of Railways, public sector enterprises, state owned companies in India and abroad. Accordingly, the Group’s customer credit risk is low. The Group’s average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 60 days and certain retention money to be released at the end of the project. In some cases retentions are substituted with bank / corporate guarantees. The Group has a detailed review mechanism of overdue customer receivables at various levels within organisation to ensure proper attention and focus for realisation.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.

c) Liquidity risk

The Company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through an adequate amount of committed credit lines. The treasury department regularly monitors the position of cash and cash equivalents vis-a-vis projections. Assessment of maturity profiles of financial assets and financial liabilities and maintenance of Balance Sheet liquidity ratios are considered while reviewing the liquidity position.

The Company’s investment policy and strategy are focused on preservation of capital and supporting the Company’s liquidity requirements. The senior Management of the Company oversees its investment strategy and achieve its investment objectives. The Company typically invests in government of India debt bonds and mutual funds. The policy requires investments generally to be investment grade, with the primary objective of minimising the potential risk of principal loss.

The NHAI bonds bear a fixed rate of interest thus they are not affected by the change in bond yield rates and the mutual funds are highly liquid assets which are paid out monthly and re-invested.

d) Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.

In order to avoid excessive concentrations of risk, the Company’s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.

(iv) Capital Management

The Company objective to manage its capital in a manner to ensure and safeguard their ability to continue as a going concern so that the Company can continue to provide maximum returns to shareholders and benefit to other stakeholders. The Company has paid dividend as per the guidelines issued by Department of Investment and Public Asset Management (DIPAM) as follows :-

Further, the Company manages its capital structure to make adjustments in light of changes in economic conditions and the requirements of the financial covenants. During the year, the Company has gone for buy back of 4,928,426 shares held by the Government of India through Ministry of Railways.

Loan raised by the Company from IRFC during the year which in turn has been given to RLDA will be repaid from the amount received from RLDA.

2. Contingent liabilities and Contingent Assets

(I) Contingent Liabilities:

(a) Claims against the company not acknowledge as debt;

i. Rs. 421.08 crore (Rs.418.82 crore) net of provision of Rs. 69.38 crore (Rs.56.44 crore). Against this the Company has counter claims of Rs. 258.41 crore (Rs. 278.24 crore). Interest on claims is not considered, being unascertainable.

ii. There are some cases relating to employees/others are pending in the Courts against the Company in respect of which the liability is not ascertainable.

iii. Rs. 292.35 crore (Rs.136.52 crore) relating to Direct tax which includes Rs. 197.23 crore (Rs.64.95 crore) on account of appeal filed by Income tax department before Income Tax appellate tribunal (ITAT) & High Court against order passed by Commissioner of Income Tax (Appeals) & ITAT in favour of company.

iv. Indirect tax disputed demands under appeal Rs. 327.43 crore (Rs.266.27 crore) of which Rs. 110.44 crore (Nil) has been reimbursed by the client and Rs. 43.89 crore (Rs. 61.35 crore) are reimbursable from the clients.

(b) Guarantees excluding financial guarantee

In respect of Joint arrangements:

i. Sales-tax liability of International Metro Civil Contractor of Rs. 4.25 crore (Rs. 4.25 crore) and Service Tax Rs. 1.01 crore (Rs. 1.01 crore).

ii. Bank guarantee in case of Ircon-RCS-PFLEIDERER of Rs. 1.40 crore (Rs. 1.40 crore).

iii. Income Tax liability in the case of Metro Tunnelling Group of Rs. 0.01 crore (Rs.0.96 crore). Regular assessment for FY 2010-11, 2012-13 & 2013-14 has resulted in a demand of Rs. 0.24 crore as on 31.03.2018. The JV is disputing the assessment and has filed appeals against the orders

iv. Recovery suit against the International Metro Civil Contractor by M/s Sai Engineers is Rs. 0.02 crore (Rs. 0.02 crore).

v. Bank Guarantee in case of Ircon-Afcon JV for Rs. 14.28 crore (Rs. 25.72 crore) for Bhairab Railway Bridge Project, Bangladesh.

c) Other money for which company is contingent liable

(II) Contingent Assets:

i) Claims raised by Ircon on some of its clients and awarded by arbitrators in favour of Ircon against which clients have gone to court not accounted for as receivables are Rs. 178.79 crore (Rs. 179.06 crore) including interest calculated up to 31.03.2018 as per arbitration award.

ii) Counter Claims raised by Ircon on sub-contractors and awarded by arbitrators in favour of Ircon against which sub-contractors have gone to court, not accounted for as receivables are Rs. 13.80 crore (Rs. 8.92 crore).

iii) Insurance Claim of USD 0.84 Mn (USD 0.82 Mn) and Ethiopian Birr 1.0 Mn (ETB 0.95 Mn) equivalent to Rs. 5.66 crore (Rs. 5.50 crore) including interest calculated upto 31.03.2018 awarded by Honourable Supreme Court of Ethiopia in favour of Ircon has not been accounted for, pending execution order by High Court of Ethiopia.

3. Commitments:

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) is Rs. 85.91 crore (Rs.76.68 crore).

b) Other Commitments:

Commitments for fund/providing guarantee to/on behalf of subsidiaries/ joint arrangements:

i) Counter guarantee to Indian Overseas Bank & ICICI Bank for issuance of bank guarantee to subsidiary companies amounting to Rs. 150.00 crore (Rs. 150.00 crore). Out of the total limit of Rs. 150 crore, Indian Overseas Bank & ICICI Bank have issued bank guarantees to the extent of Rs. 104.39 crore (Rs. 41.52 crore). Therefore, the balance limit for issuance of bank guarantees is Rs. 45.61 crore (Rs.108.48 crore).

ii) For subscribing towards balance share of equity of Rs. 293.82 crore (Rs. 54.06 crore) to subsidiary and joint venture company.

iii) For release of balance shareholder’s loan of Rs. 979.44 crore (Rs. 883.46 crore) to subsidiary companies.

iv) Counter guarantee to State bank of India for issuance of letter of credit to Joint operation, Ircon Afcons JV, amounting to Rs. 30.93 crore (Rs. 2.26 crore).

v) An undertaking to Punjab National Bank for non-disposal of 21% of present holding of the company (1,34,12,700 shares of Rs. 10 each) in Joint Venture Company, Ircon-Soma Tollway Private Limited, amounting to Rs. Nil (Rs. 13.41 crore).

4 . There are certain claims against the Company not acknowledged as debt Rs. 1,098.26 crore (Rs. 860.98 crore) net of provisions of Rs. 1.13 crore (Rs. 1.13 crore). In case, such claims against the Company do materialize, it will be reimbursable from the clients. Against this, the company has counter claims of Rs. 1,062.59 crore (Rs. 950.94 crore).

Interest on claims not considered, being unascertainable but would also be reimbursable.

5. The Company is liable to pay Rs.0.04 crore (Rs.0.70 crore) on account of taxes on construction profits of Sri Lanka projects which shall be directly reimbursed by Sri Lankan Railway to Sri Lankan Inland Revenue Department. Therefore, the same has not been provided in the books of accounts.

6. (a) The company has made a provision for tax without considering the deduction under section 80IA of Income Tax Act 1961. For the period commencing from AY 2000-01 to 2017-18, deduction u/s 80-IA was allowed to company by CIT (A) for six different years (AY 2004-05, 2005-06, 2007-08, 2012-13, 2013-14 and 2014-15) and for AY 20002001 it was allowed by ITAT. For these seven years provision has not been written back. Company has decided to carry this provision having conservative approach considering appeals filed by department against company for these years.

b) The company is offering global income for tax in India after excluding the income in accordance with DTAA agreements where income earned from foreign country are excluded from global income offered for taxation. The company was allowed exclusion method upto AY 2005-06, thereafter credit against taxes paid in foreign countries have been allowed from taxes computed on global income by department. After paying the due tax the issue has been contested by filing appeals which are pending for disposal before ITAT.

7. (a) The Company had 25% equity stake in Comphanhia Dos Caminhos De Ferro Da Beira SARL Mozambique (CCFB), a Joint Venture Company incorporated as per Mozambican laws in the year 2004 to execute a railway project awarded by the Government of Mozambique (GOM) on BOT basis and had paid USD 1.25 Mn (Rs. 5.53 Crores). Other shareholders were RITES & CFM, Mozambique with 26% & 49% share respectively.

(b) On 8th December 2011, Government of Mozambique (GoM) unilaterally terminated the concession agreement and took over the project which in the opinion of company was unlawful and against the provision of agreement. Consequently, CCFB initiated arbitration against the said decision of GoM. Dispute has now been amicably settled with Government of Mozambique on 21st October 2015 through settlement agreement. As per the settlement agreement, IRCON will get in installments an amount of USD 40.31 Million and out of this 23.525 USD (equivalent to INR 158.98 crore) was received up to 31.03.2017 and third installment of Rs 5.595 Mn ( equivalent to INR 36.40 crore) has received in October 2017. Balance two installments of USD 5.595 Mn each are due on 18.10.2018 & 18.10.2019 which will be received through the confirmed Letter of Credit opened by Government of Mozambique.

8. (a) Some of the balances shown under debtors, advances and creditors are subject to confirmation / reconciliation/ adjustment, if any. The company has been sending letters for confirmation to parties. However, the Company does not expect any material dispute w.r.t. the recoverability/payment of the same.

(b) In the opinion of the management, the value of current assets, loans and advances on realization in the ordinary course of business, will not be less than the value at which these are stated in the balance sheet.

The unhedged foreign currency exposures are naturally hedged.

DZD- Algerian Dinar, ZAR-South African Rand, LKR-Sri Lankan Rupee, ETB-Ethiopian Birr, MYR-Malaysian Ringgit, NPR-Nepalese Rupee, MZN-Mozambican Metical, BTN-Bhutanese Ngultrum, BDT-Bangladeshi Taka, AUD-Australian Dollar, JPY-Japanese Yen

9.Disclosure regarding Leases:

I. Assets taken on operating lease:

The Company’s leasing arrangements are in respect of operating leases of premises for residential use of employees, offices, guesthouses and transit camps. Most of the leasing arrangements are cancellable and are usually renewable on mutually agreed terms. The amounts of lease payments during the year are as under:

(a) Lease payments (net of recoveries) in respect of premises for residential use of employees -Rs. 3.55 crore (Rs.3.73 crore) (included in salaries and wages note 23).

(b) Lease payments in respect of office premises, guesthouses and transit camps - Rs. 6.41 crore (Rs. 6.29 crore) (included in operating & administrative expenses note 22.).

II. Assets given on operating lease:

(a) The Company has given certain commercial/residential premises on operating lease which are cancellable by giving appropriate notices as per respective agreements.

(b) The Company has also provided Plant & Machinery (Locomotives) on wet lease basis to a foreign client till 31.12.2015.

(c) The amount of lease rent received during the year is as under:

1. Lease rent in respect of non-residential premises - Rs.7.89 crore (Rs. 8.01 crore) (included in miscellaneous income note 21.)

2. Lease rent in respect of locomotives - Rs. Nil (Rs.0.88 crore) (included in loco lease note 20)

(d) Future minimum lease rental receivable as on 31.03.2018 in respect of non - cancellable operating lease for each of the following period is as under:

10.Segment Reporting:

A. General Information:

(i) The Company has determined reportable operating segments from geographical perspective.

(ii) The Company’s source of risk and rewards are derived from the units spread across the globe and hence, International projects and Domestic projects are considered as individual operating segments.

(iii) The operating segments have been reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM).

(iv) These operating segments are monitored by company’s Chief Operating Decision Maker (CODM) and strategic decisions are made on the basis of segments results. Segment performance is evaluated based on the profit of each segment.

D. Information about major Customers:

During the period ended March 31, 2018, Operating Revenue of approximately 50.90 % (38.70%) derived from a single external customer in Domestic Segment.

11.Interest in other Entities

A- Disclosure in respect of Joint arrangements

(a) Unincorporated Joint operations:

i) For projects in operation:

ii) For projects which have been completed:

* PPE figures include capital work in progress, wherever applicable.

** IRSDC has became joint venture company w.e.f 19.09.2017, hence, share of income, expenses, assets and liabilities have been considered proportionately.

$ Net of PPE.

(d) Contingent Liabilities of the Joint arrangements are disclosed in note 29 (b).

12.Related Party disclosures: Related party to be identified as per IND AS

a) Enterprises where control exists:

(i) Subsidiary Companies: -

- Ircon Infrastructure and Services Limited. (IISL)

- IrconPB Tollway Limited. (IPBTL)

- IrconShivpuriGuna Tollway Limited (ISGTL)

- Devangare Haveri Highway Limited (IDHHL)

- Indian Railway Station Development Corporation Limited till September 18, 2017

(ii) Joint arrangements: -

- Unincorporated Joint operations - As per Note no. 39 (a) above

- Joint Venture Companies - As per Note no. 39 (b) above.

b) Key management personnel:

(i) Whole time Directors: -S/Shri S.K. Chaudhary, M.K.Singh, Deepak Sabhlok and Hitesh Khanna till March 28, 2018.

(ii) Directors (Official Government nominated): - S/Shri Rajiv Chaudhary, S/Shri S.C. Jain w.e.f. 3rdJanuary, 2017 to 17thNovember, 2017, S/Shri Ved Pal w.e.f. 22nd November, 2017.

(iii) Independent Directors: - S/Shri Avineesh Matta, Ms. Vasudha V. Kamat, Dr. C.B Venkataramana w.e.f 29th Sept 2017, Dr. Narendra Singh Raina, w.e.f 17th Oct 2017, and Sh. Ashok Kumar Ganju w.e.f. March 8, 2018 and S/Shri Sanjay Kumar Singh till 02nd July 2018

Company Secretary: - Smt. Sumita Sharma till 27thOctober, 2017

Smt. Iti Matta w.e.f.1st November, 2017 to 4th January, 2018

Smt. Ritu Arora w.e.f 4th January, 2018

D) Transaction with the Related Government entities

Apart from transactions reported above, the company has transactions with related Government entities which includes but not limited to the following:

Name of Government: Ministry of Railways, Government of India (Significant control over company)

Outstanding loan to Shri M K Singh as on 31.03.2018 is Rs.1.16 Lakh (Rs. 1.64 Lakh ).

*Figures of FY 2017-18 include PRP of Rs. 0.13 crore paid during the year for the FY 2015-16.

Recovery as applicable has been made from Directors who have been provided with Company accommodation and car.

13. During the year, Company has carried out assessment on impairment of individual assets by working out the recoverable amount based on lower of the net realizable value and carrying cost in terms of Ind AS 36, “Impairment of Assets” notified under 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. Accordingly, impairment loss of Rs. Nil (Rs. 1.26 crore) has been provided for.”

14. Disclosure under Ind AS-19 on Employee benefits Provident Fund

The Company pays fixed contribution of Provident Fund at a pre-determined rate to a Separate trust, which invests the funds in permitted securities. The trust is required to pay a minimum rate of interest on contribution to the members of the trust. The amount available in the fund including the returns on investment is greater than the obligation of the company. During the year, the Company has contributed Rs. 11.81 crore (Rs.10.84 crore) to the trust.

Gratuity

The Company has implemented IRCON Employees Group Gratuity Scheme to provide financial assistance to the employees of the Company as a social security measure on the termination of their employment due to superannuation, retirement, resignation, physical incapacitation or death. The scheme is managed by a Separate Trust formed in the year 2015-16 for this purpose and approved by the Income Tax Authorities. Funds of the Trust are managed by LIC of India. As at 31.03.2018, a liability of Rs. 14.34 crore has been booked in the books of accounts based on the actuarial valuation.

Pension

The Company has implemented IRCON Defined Contribution Superannuation Pension Scheme, 2009 i.e. 01.04.2009, for all regular employees drawing pay in IDA scale who would complete 15 years of service in the Company (including service in other CPSEs) upto normal retirement date. The scheme is managed by a Separate Trust formed in the year 2015-16 for this purpose and approved by the Income Tax Authorities. Company’s share of contribution amounting to Rs. 6.32 crore for the period from 01.04.2017 to 28.02.2018 has been paid and accounted for during the year 2017-18.Liability for the month of March 2018 of Rs. 0.77 crore (Rs.0.51 crore) has been provided in the books of accounts.

Post-Retirement Medical Facility (PRMF)

The Company had established an irrevocable trust by initial one-time contribution of Rs. 12 crore during the year 2000-01 for providing annuity, medical and other benefits to the spouse of employees who die in harness as also the medical benefits to the employees (and spouse) who superannuate from the Company. This being a voluntary welfare measure, the Company is not liable for providing such benefits to its employees. However, Company has also kept provision of Rs. 12.81 crore (Rs.8.32 crore), based on the decision of management.

Leave Encashment

The liability towards encashment of leave as per rules of the Company is recognised on the basis of actuarial valuation except for employees posted in foreign projects. Since, the foreign assignments are treated as dies - non, liability for those employees is provided in the books on accrual basis as the amount is payable to employee on repatriation.

Leave Travel Concession (LTC)

The company has made a provision in respect of leave travel concession (LTC) on the basis of actuarial valuation in accordance with IND AS-19.

Other Retirement Benefits

Other retirement benefits include settlement at home-town or to the place where he or his family intends to settle in India including Baggage Allowance. The liability on this account is recognized on the basis of actuarial valuation.

The summarised position of various employee benefits recognised in the statement of profit and loss and balance sheet as on 31.03.2018 is as under:

* Except employees posted on Foreign Projects

** The unrecognized actuarial loss (OCI) of Rs. 7.46 crore (Rs. 2.81 crore) consisting of loss of Rs.7.65 crore (Rs. 2.97 crore) in respect of liability towards Post-Retirement Medical Benefits (PRMB) and gain of Rs.0.19 crore (Rs. 0.16 crore) in respect of liability towards Settlement allowance. Since the liability in respect of PRMB has not been provided as per Actuarial valuation and has been restricted as per DPE guidelines, therefore, the OCI in respect of PRMB, as per Actuarial valuation, has not been considered.

* Except employees posted on Foreign Projects

(Previous year figures are shown under bracket () to differentiate from current year figures.)

Sensitivity due to mortality & withdrawals are not material & hence impact of change not calculated.

Sensitiveness as to rate of inflation, rate of pensions in payment, rate of increase of pensions before retirement & life expectancy are not applicable being a lump sum benefit on retirement.

15. Disclosure under IndAS-11 on Revenue from contracts for contracts in progress

a. Method Used to determine Contract Revenue: - Percentage of completion.

b. Method Used to determine the Stage of completion of Contract in progress: - Proportion of cost incurred of work certified up to the reporting date to the total estimated cost of the contract.

c. Other details:

16. The Company has received information from few of its suppliers of their being covered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). Based on this information, there are Rs.5.67 crore (Rs. Nil) amounts due to Micro, Small and Medium Enterprises as at 31st March 2018.

17. (i) Gross amount required to be spent on Corporate Social Responsibility (CSR) by the Company during the year is Rs. 7.67 crore (Rs.6.80 crore).

(ii)During the year, company has spent Rs. 8.73 crore (Rs.5.90 crore) as against required amount of Rs. 7.67 crore (Rs.6.80 crore) on Corporate Social Responsibility (CSR) activities. Break up of expenditure incurred is as follows

*Assets purchased and handed over to respective organisation and are not being held by the Company.

(iv) CSR expenditure yet to be incurred is Rs. Nil (Rs. 0.91 crore).

18. Earnings per share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the parent by the weighted average number of Equity shares outstanding during the year.

*Diluted EPS amounts are also same as basic EPS because company has no dilutive potential Equity shares. The following reflects the income and share data used in the basic EPS computations: -

The following reflects the weighted average number of shares used in calculating basic EPS.

*The weighted average number of shares takes into account the weighted average effect of changes in treasury share transactions during the year. There have been no other transactions involving equity shares or potential equity shares between the reporting date and the date of authorization of these financial statements.

19 . The Company has engaged agents/consultants to secure contracts and provide other services for foreign projects, being implemented in three countries. Pending assessment of services provided by the agent/consultants, the company has not accounted for expenses aggregating to Rs. 4.96 crore (Rs 3.80 crore), comprising of Rs 1.16 crore (Rs 1.36 crore) during financial year 2017-18.

20. Financial Guarantee

The Company has issued financial guarantee (undertaking) to Punjab National Bank on behalf of and in respect of term loan facility availed by joint venture company, Ircon Soma Tollway Private Limited (ISTPL), to make good 50% of total shortfall in the dues, if any, in the event of termination of the concession agreement. Loan outstanding as on 31.03.2018 is Nil (Rs.63.07 crore). The said financial guarantee has been recognised as per Ind-As 109. The ISTPL has repaid the loan amount during the current period.

21. In one of the projects under Northern Region, provision in respect of legal expenses amounting to Rs 11.52 crore has not been provided in the accounts based on legal opinion that the liability is primarily not of the company.

22. During the financial year 2017-18, based on Expert opinion taken by management it was decided that the effects of discounting security deposit with client and contractor, Retention money with client and contractor and money withheld with client and contractor was not material for the preparation and presentation of financial statements. Ind AS 8- “Accounting Policies, Changes in Accounting Estimates and errors” allows that the policies specified by Ind AS need not to be applied when the effect of applying them is immaterial. Hence, it has been decided to discontinue discounting the same, consequently in the current year the carrying value of the financial liabilities have been increased by Rs. 48.70 crore, financial assets have been increased by Rs. 6.45 crore, non-financial liabilities have been decreased by Rs. 42.70 crore and non-financial assets have been decreased by Rs. 6.24 crore. The resultant net impact on current year’s Profit and Loss is amounting to Rs. 0.80 crore, which is not considered as material for the preparation and presentation of financial statements.

23. Events occurring after Reporting period

Refer to Note 14 for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing meeting.

24. Standards issued but not effective for the financial year 2017-18 IND AS 115 Revenue from Contracts with Customers:

The Ministry of Corporate Affairs notified IND AS -115 “Revenue from contracts with Customers” in respect of accounting periods commencing on or after 1 April 2018, superseding IND AS - 11 “Construction Contracts” and IND AS -18 “ Revenue”.

The company’s current revenue recognition policy is broadly aligned to the principles enunciated in IND AS -115 and does not require any material change. The management is in the process of evaluating IND AS -115 and does not expect any material impact on the company’s financial position as at 31 March 2018 and on the financial results of the company in the first year of implementation viz. financial year commencing on 1 April 2018.

25. Certain prior periods amounts have been reclassified for consistency with the current period presentations. These reclassifications have no effect on the reported results of operations.

Source : Dion Global Solutions Limited
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