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SENSEX NIFTY India | Notes to Account > Food Processing > Notes to Account from Parag Milk Foods - BSE: 539889, NSE: PARAGMILK

Parag Milk Foods

BSE: 539889|NSE: PARAGMILK|ISIN: INE883N01014|SECTOR: Food Processing
Oct 18, 16:00
3.5 (2.28%)
VOLUME 32,257
Oct 18, 15:56
3.35 (2.18%)
VOLUME 241,734
Mar 17
Notes to Accounts Year End : Mar '18


Parag Milk Foods Limited (formerly Parag Milk Foods Private Limited) (“the Company”) was incorporated under the provisions of the Companies Act, 1956 and its equity shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. The Company is engaged in the business of procurement of cow milk mainly in western and southern region, undertakes processing of milk and manufacture of various value added products namely cheese, butter, ghee, fresh cream, milk powder, flavoured milk, lassi, curd etc. which are marketed under its registered brand name “Gowardhan”, “Go” and “Topp up”. The registered office of the Company is situated at Flat No. 1, Plot No. 19, Nav Rajasthan Society, S. B. Road, Shivaji Nagar, Pune-411016.


A. Statement of compliance

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the ‘Act’) and other relevant provisions of the Act.

The financial statements up to and for the year ended 31 March 2017 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act.

As these are the Company’s first standalone financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, First-time Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance is provided in Note 52.

The standalone financial statements were authorised for issue by the Company’s Board of Directors on May 9, 2018.

Details of the Company’s accounting policies are included in Note 3.

B. Functional and presentation currency

These standalone financial statements are presented in Indian Rupees (‘), which is also the Company’s functional currency. All amounts have been rounded-off to two decimal places to the nearest millions, unless otherwise indicated.

C. Basis of measurement

The standalone financial statements have been prepared on the historical cost basis except for the following items:

D. Current / non-current classification of assets/ liabilities

The Company has classified all its assets/liabilities into current/non-current portion based on the time frame of 12 months from the date of the financial statements. Accordingly, assets/liabilities expected to be realised /settled within 12 months from the date of financial statements are classified as current and other assets/liabilities are classified as non-current

E. Use of estimates and judgements

In the preparation of the financial statements, the Company makes judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively. Information about assumptions, judgements and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 March 2018 are as below and also been discussed in detail in the relevant section of accounting policies.

- Measurement of defined benefit obligations: key actuarial assumptions;

- Useful life of property, plant and equipment

- Fair value measurement of financial instruments

- Impairment of financial assets.

F. Measurement of fair values

Certain accounting policies and disclosures of the Company require the measurement of fair values, for both financial and non-financial assets and liabilities.

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).

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into a 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.

Further information about the assumptions made in the measuring fair values is included in the following notes:

- Share-based payments

- Financial instruments.

(a) Securities premium reserve represents premium received on equity shares issued, which can be utilised only in accordance with the provisions of the Companies Act, 2013 (the Act) for specified purposes.

(b) General reserve is created from time to time by transferring profits from retained earnings and can be utilised for purposes such as dividend payout, bonus issue, etc

(c ) Debenture redemption reserve represents reserve created out of profit / retained earnings at specified value of debentures to be redeemed. The Company has transferred the balance to general reserve as the debentures have been redemeed during the year.

(d) Retained earnings represents surplus/ accumulated earnings of the Company and are available for distribution to shareholders.

(e) The shares option outstanding account is used to recognise the grant date fair value of options issued to employees under the Employee Stock Grant Scheme which are unvested as on the reporting date and is net of the deferred employee compensation expense.

Indian rupee loans from a bank of Rs.164.12 million (31 March, 2017 : Rs.64.53 million, April 01, 2016 : Rs.180.64 million) carry interest @ 10.50%-13.00%. The loans are repayable in 38-59 monthly instalments starting from Feb 2013, November 2013 and March 2018 along with interest .The loan is secured by pari passu charge on fixed assets and second pari passu charge on current assets of the Company and personal guarantee of Promoter Directors.

Foreign currency loan from a financial institution of Rs.461.50 million (31 March, 2017 : Rs.616.66 million, April 01, 2016 : Rs.791.36 million) carries interest @ 5.15%-5.92%. The loans are repayable in 12 semi annual instalments along with interest starting from June, 2016. The loan is secured by first pari passu charge on movable and immovable fixed property of the Company and second pari passu charge of entire current assets of the Company along with other banks and personal guarantees of Directors and their relatives.

Hire purchase loan from banks of Rs.0.43 million (31 March, 2017 : Rs.1.58 million, April 01, 2016 : Rs.2.63 million) carries interest @ 9.38% to 11.24 % p.a. The loans are repayable in 36 to 60 monthly instalments starting from the respective date of finance. The loan is secured by specific assets financed (vehicle).

Indian rupee loans from financial institutions of Rs.9.10 million (31 March, 2017 : Rs.20.30 million, April 01, 2016 : Rs.27.52 represents loan secured by hypothecation of equipments and vehicles. The loans are repayable over 36 - 78 instalments and carry interest in the range of 9.75 - 12.98%.

The Company had made an issue of 18,000,000 Nos of Non Convertible Debentures of nominal value of Rs.10 each aggregating Rs.180.00 million at 0% interest to the Promoters. The life of such debentures is 10 years from the issue date, i.e., March 2013 or any time to be redeemed on demand after the Company’s IPO. During the year 2017-18, all debenture have been redeemed based on demand made by promoters.

A. Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

B. Measurement of fair value

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.

The following methods and assumptions were used to estimate the fair values:

1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to short term maturities of these instruments.

C. Fair Value Hierarchy

The fair value of financial instruments as referred to above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

Level 1: Level 1 hierarchy includes financial instruments measured usingquoted prices. This includes listed equityinstruments, traded bonds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Level 2: The fairvalue of financial instrumentsthat are not traded in an active market is determined usingvaluation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: Ifone ormore ofthesignificant inputs is not based on observable market data,the instrumentis included in level3.This is the case for unlisted equity securities included in level 3.


Risk management framework

The Company has in place a mechanism to inform the Board about the risk assessment and minimisation procedures and periodical review to ensure that management controls risk through means of a properly defined framework. The Company has formulated and adopted Risk Management Policy to prescribe risk assessment, management, reporting and disclosure requirements of the Company. The Company’s audit committee also 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 ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

The Company’s activities expose it to market risk, liquidity risk and credit risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance.

This note explains the sources of risk to which the Company is exposed to and how the entity manages the risk.

(A) Credit risk

Trade and Other receivables

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 trade and other receivables. The carrying amounts of financial assets represent the maximum credit risk exposure.

Trade receivables are typically unsecured and are derived from revenue earned from customers located in India. Credit risk has always been managed by the Company 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. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are General trade, Modern trade, Institutional and Horeca customers. Outstanding customers are regularly monitored.

On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company computes the expected credit loss allowance as per simplified approch for trade receivables based on available external and internal credit risk factors such as the ageing of its dues, market information about the customer and the Company’s historical experience for customers. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is based on the ageing of the receivable days and the rates as given in the provision matrix.

The movement in the loss allowance in respect of trade receivables is as follows

(B) 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. Management monitors rolling forecasts of the Company’s liquidity position (comprising the undrawn borrowing facilities) and cash and cash equivalents on the basis of expected cash flows. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdraft/ cash credit facility. The Company also monitors the level of expected cash inflows on trade receivables together with expected cash outflows on trade payables and other financial liabilities. The Company has access to a sufficient sources of short term funding with existing lenders that could be arrange upon should there be need.

(i) Maturities of financial liabilities

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted.

(C) Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates and foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short-term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk and interest rate risk.

(i) Foreign currency risk

The Company is subject to risk of changes in foreign currency values that impact costs of imported raw material and import of equipment for expansion of plants, primarily with respect to USD and EURO. The Company’s business model incorporates assumptions on currency risks and ensures any exposure is covered through the normal business operations.

The Company has not entered into any derivative transactions during the year and there were no derivative transactions outstanding as on 31 March, 2018, 31 March, 2017 and 1st April 2016.

(a) The Company unhedged exposure to foreign currency risk at the end of the reporting period are as follows

(b) Sensitivity

A reasonably possible strengthening (weakening) of the Indian Rupee against various currency mentioned in the table below as at March 31 would have affected the measurement of financial instruments denominated in foreign currency 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.


Cash flow and fair value interest rate risk

Interest rate risk is the risk that the fair value or future cashflows of a financial instrument will fluctuate because of changes in market interest rates. The Company main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk.

The company’s borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

(a) Interest rate risk exposure

The exposure of the Company’s borrowing to interest rate changes at the end of the reporting period are as follows:

(b) Cash flow sensitivity analysis for variable-rate instruments

The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming that the amount of the liability as at the end of the reporting period was outstanding for the whole year. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents Management’s assessment of the reasonably possible change in interest rates. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to safeguard the Company’s ability to remain as a going concern and maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions, annual operating plans, long term and other strategic plans and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust its dividend payment ratio to shareholders, return capital to shareholders or issue fresh shares.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘equity’. For this purpose, adjusted net debt is defined as liabilities, comprising interest-bearing loans and borrowings less cash and cash equivalents. Equity comprises all components of equity including share premium and all other equity reserves attributable to the equity share holders.

The Company’s adjusted net debt to equity ratio are as follows.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

No changes were made in the objectives, policies or processes for managing capital of the Company during the current and previous year.


A. Defined Benefit Plan- Gratuity

The Company operates a defined benefit gratuity plan, which is governed by the Payment of Gratuity Act, 1972. The plan entitles an employee who has completed at least five years of continuous service, to gratuity at the rate of fifteen days wages for every completed year of service or part thereof in excess of six months, based on the last drawn wage by the employee concerned. The defined benefit gratuity plan is administered by a Trust that is legally separate from the Company. The gratuity plan is a funded plan, managed by Life Insurance Company (“LIC”) and the Company’s makes annual contributions to Group Gratuity cum Life Assurance Scheme managed by LIC.

The most recent actuarial valuation of the defined benefit obligation was carried out as at 31 March, 2018. The present value of the defined benefit obligations and the related current service cost and past service costs were measured using Projected Unit Credit Method.

These plans typically expose the Company to actuarial risks such as: investment risk, inherent interest rate risk, longevity risk and salary risk.


a) The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on government bonds.

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

c) The gratuity fund is managed by life insurance company, details of fund invested by insurer are not available with company.

d) The Company expects to make a contribution of Rs.9.83 million to the defined benefit plans (gratuity - funded) during the next financial year.

e) The average duration of the defined benefit plan obligation at the end of the reporting period is 6.59 years.

B. Defined contribution plan- Provident Fund/Employee State Insurance

The Company has recognised an amount of Rs.31.25 million as expenses under the Defined Contribution Plans in the Statement of Profit & Loss as below:


In accordance with Ind AS 20- “Accounting for Government Grants and disclosure of Government assistance”, Company has accounted for Industrial Promotion Subsidy under Package Scheme of Incentives, 2013 amounting to Rs.184.83 million ( 31 March, 2017: Rs.310.03 million) as Other Operating Income in Statement of Profit and Loss. The Company has also made duty free imports resulting in custom duty saving amounting to Rs.17.07 million (31 March, 2017: 17.08 million), under Advance License Scheme. There is an export commitment, as disclosed under Note 41 f.

i. The amounts shown above represent the best possible estimates of pending litigations/disputes arrived at on the basis of available information. The above do not include potential risks/demands, if any, for ongoing issues where no claims have been made against the Company.

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


(a) Capital commitments

Capital expenditure contracted for at the end of the reporting period net of capital advance amounting Rs.146.64( Rs.288.52 million as on March 31, 2017 and 160.9 million as on April 1, 2016) but not recognised as liabilities.

(b) Other commitments

For commitments in respect of non-cancellable lease refer note 44

The company has entered into commercial leases for taking office spaces on lease. These leases have an average term of three to five years with renewal option and escalation clauses included in the agreements. There are no restrictions placed upon the Company by entering into these leases. The Company has not given any sub lease during the year. Some of the lease arrangements also include a non-cancellable period. Lease rental debited to Statement of Profit and Loss for the period is Rs.156.11 million (31 March, 2017: Rs.87.08 millions).

Basic: Basic earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the year, excluding equity shares held as treasury shares.

Diluted: Diluted earnings per share is calculated by adjusting the weighted average number of equity shares outstanding during the year for assumed conversion of all dilutive potential equity shares. Employee share options are dilutive potential equity shares for the Company.


The Managing Director of the Company acts as the chief operating decision maker (CODM) of the Company in accordance with Operating Segment (AS 108), for purpose of assessing the financial performance and position of the Company, and make strategic decisions. The Company’s business activities are mainly related to processing of milk and manufacturing of milk related products, which are primarily assessed as a single reportable operating segment in accordance with Ind AS 108 by the CODM. The information based on geographical areas in relation to revenue and non-current assets are as below:

(a) Revenue from operations

(b) Non-current operating assets

All non -current assets other than financial instruments, deferred tax assets of the company are located in India

(c) The Company does not have revenues from transactions with a single external customer amount to 10 per cent or more of the total revenues.

The Board of Directors constituted the equity settled Employee Stock Option Scheme (“ESOS 2015”) vide its resolutions dated 27 February, 2015 and 21 April, 2015 for issue of 696,339 stock options to the key employees of the Company, which has been further approved in the Company’s Extra ordinary General meeting dated 3 April, 2015 and 16 May, 2015.

Pursuant to the above scheme, the Board of Directors vide its circular resolution dated September 3, 2015, approved grant of 227,000 stock options to its employees on September 4, 2015.

According to ESOP 2015, the employee selected will be entitled to stock options, subject to satisfaction of the prescribed vesting conditions in the scheme. The contractual life (comprising the vesting period and the exercise period) of options granted is 3 years. The other relevant terms of the grant are as below

The expected life of the stock is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome

Expenses Arising from share based payment transactions

Total expenses arising from share-based payment transactions recognised in profit or loss as part of employee benefit expense were as follows:


These financial statements are the separate financial statements of the Company (also called standalone financial statements) prepared in accordance with Indian Accounting Standards (‘Ind AS’) notified under Section 133 of the Companies Act, 2013, read together with the Companies (Indian Accounting Standards) Rules, 2015. For all periods up to and including the year ended 31 March, 2017, the Company had prepared its financial statements in accordance with Accounting Standards notified under the Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 (‘Previous GAAP’). Detailed explanation on how the transition from previous GAAP to Ind AS has affected the Company’s Balance Sheet, financial performance and cash flows is given as under.

Optional exemptions availed and mandatory exemptions

In preparing these financial statements the Company has applied the below mentioned optional exemptions and mandatory exemptions.

A Optional exemptions availed

1 Property, plant and equipment and intangible assets:

IND AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant a equipment as recognised in the financial statements as at the date of transition. This exemption can also be used for intangible assets covered by Ind AS 38.

Accordingly, the group has elected to measure all of its property, plant and equipment and intangible assets.

2 Investment in subsidiary

The Company has elected to measure investments in subsidiary as per the statement of financial position prepared in accordance with previous GAAP as a deemed cost at the date of transition as per exemption available under Ind AS 101. Interest in the subsidiary through fair valuation of financial guarantees at initial recognition on transition date had been accounted as investments in accordance with Ind AS 109. The Company has accounted such fair valuation of financial guarantees on transition date to the retained earnings.

3 Long Term Foreign Currency Monetary Items

A first-time adopter may continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP. The Company has chosed to continue this option provided under para D13AA of Ind AS 101.

4 Employee stock option

Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2016 in accordance with the option provided under para D2 and D3 of Ind AS 101.

5 Fair Value Measurement of Financial assets of Financial Liabilities of Indian region

The Group has elected to apply the requirements of Ind AS 109 “Financial Instruments” relating to accounting of day one gains or losses prospectively to transactions occurring on or after the date of transition for the financial instruments where there is no active market as provided under para D20 of Ind AS 101. Accordingly, 0% Non-Convertible Debentures issued to promoters of the Company in earlier years, have not been fair valued as on transition date and continued at carrying value.

B Mandatory exceptions

1 Estimates:

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at April 1, 2016 are consistent with the estimates as the same date made in conformity with previous GAAP, unless if those estimates were not required to be made under previous GAAP. :

2 Derecognition of financial assets and liabilities:

As per Ind AS 101, an entity should apply the derecognition requirements in Ind AS 109, Financials Instruments, prospectively for transaction occurring on or after date of transition to Ind AS. However, an entity may apply the derecognition requirements retrospectively from the date choosen by it if the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transaction was obtained at the time initially accounting for those transactions.

The Company has elected to apply the derecognition principal of Ind AS 109 retrospectively as reliable information was available at the time of initally accounting for these transactions.

3 Classification of financial assets:

As per the requirements of Ind AS 101 the Company has assessed classification of financial assets on the basis of the facts and circumstances that existed at the date of transition to Ind AS.


Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for comparable periods. The following tables represent the reconciliations from previous GAAP to Ind AS.

Notes to reconciliation

a. Financial Guarantees contract:

Under Ind AS, the Company has recognised fair value of financial guarantee provided to its subsidiary company. The fair value of such guarantee as at April 01, 2016 has been recognised as additional capital investment in its subsidiary Company and is amortised over tenure of the guarantee. The impact of amortisation of such fair value of guarantee has been recognised in the statement of profit and loss as interest income for the year ended 31 March, 2017. Under I-GAAP financial guarantee given was disclosed as contingent liabilities.

b. Trade receivable: ECL provision

Under Indian GAAP, the Company has created provision for impairment of receivables which consists only in respect of specific amount for probable losses. Under Ind AS, impairment allowance has been determined based on Expected Credit Loss (ECL) model. Due to ECL model, the Company impaired its trade receivable by Rs.130.78 million (net of related deferred tax) on April 1, 2016 which has been eliminated against other equity and Rs.130.78 million (net of deferred tax) during the year ended 31 March, 2017 which has been charged to the statement of profit and loss.

c. Borrowings: Transaction cost

Under Previous GAAP, the Company had recognised transaction costs incurred in respect of borrowings in the Statement of Profit and Loss in the year in which costs were incurred. Under Ind AS 109, such transaction costs are adjusted against carrying value of borrowing and are amortised using effective interest rate method over the tenure of the loan. Accordingly loan were debited and corresponding credit was given to retained earnings on date of transition. Under Ind AS, finance cost has been charged to statement of profit and loss for amortisation of such transaction cost during the year ended 31 March, 2017.

d. Deferred tax assets

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires accounting for deferred taxes using the balance sheet approach, which focuses on temporary difference between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP. In addition, the various transitional adjustments lead to temporary differences and the Company has accounted for such differences. Deferred tax adjustment are recognised in correlation to the underlying transaction either in retained earnings or a separate component in equity.

MAT credit entitlement is to be presented under loans and advance in accordance with Guidance Note on ‘Accounting for Credit available in respect of MAT under the Income Tax Act, 1961’ issued by ICAI. However, as per Ind AS, MAT credit entitlement is generally recognised as a deferred tax asset with a corresponding deferred tax benefit in the statement of profit and loss. Accordingly, the Company has reclassified the MAT credit entitlement from loans and advances to deferred tax assets.

e. Share based payments

Under Indian GAAP, the Company recognised only the intrinsic value for employee stock option plan as an expense. Under Ind AS, the Company is required to determine the fair value of share options using an appropriate model at grant date and recognised over the vesting period. Accordingly, the same has been recognised as a separate component of equity in Employee Stock Option outstanding (ESOP) as at April 1, 2016 and as an expense has also been recognised for the same during the year ended 31 March, 2017. Adjustment has been done to take additional charge arising due to change from intrinsic value to fair value of ESOSs outstanding.

f. Remeasure of defined benefit plan

Under Ind AS, remeasurement i.e. acturial gain and losses and the return on plan assets, excluding amounts included in the interest expenses on the net defined liability are recognised in other comprehensive income instead of statement of Profit and Loss. Under the previous IGAAP, these reimbursements were forming part of the profit and loss for the year. There is no impact on total equity as at 31 March, 2017 on account of this.

Under Ind AS, all items of income and expense recognised in a period should be included in the Statement of Profit and Loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the Statement of Profit and Loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP.

g. Interest free security deposits

Under the previous GAAP, interest free security deposits are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, the Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent.

h. Look through approach for employee welfare trust

Employee welfare trust, financed through interest free loan by the Company and warehousing the shares which have not vested yet, for distribution to employees of the Company, has been consolidated on line by line basis by reducing from equity share capital and security premium of the Company for such treasury shares held by the trust.

i. IPO related expenses:

Under the previous GAAP, expenses incurred by the Company aggregating to Rs.85.25 million in connection with filing of Draft Red Herring Prospectus and other related expenses were shown under Other current assets. Under Ind AS the same is considered as incremental costs directly attributable to the equity transaction and hence the same has been adjusted against other equity.


Exceptional items during the year ended 31 March, 2017 represent VAT tax liability for previous years and interest thereon in respect of inspection conducted by VAT authorities during the year, wherein certain transactions were identified which were to be considered as local sales instead of interstate transfer.

NOTE 12:

The Company has acquired the Danone Foods and Beverages India Pvt Ltd.’s manufacturing facility of Curd, Yogurt and other related products at Rai, Sonipat, Haryana near Delhi through agreement to sell dated April 18, 2018 for Rs.141 Mn.

NOTE 13:

Previous period/year figures have been regrouped/reclassified wherever necessary to correspond with the current period/year classification / disclosure.

Source : Dion Global Solutions Limited
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