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Moneycontrol.com India | Notes to Account > Textiles - Spinning - Cotton Blended > Notes to Account from Rajapalayam Mills - BSE: 532503, NSE: RAJPALAYAM
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Rajapalayam Mills

BSE: 532503|NSE: RAJPALAYAM|ISIN: INE296E01026|SECTOR: Textiles - Spinning - Cotton Blended
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Rajapalayam Mills is not traded in the last 30 days
Mar 17
Notes to Accounts Year End : Mar '18

NOTES TO SEPARATE FINANCIAL STATEMENTS

NOTE NO. 48

Disclosure of Fair value measurements

The fair values of financial assets and liabilities are determined 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. 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 instruments approximate their carrying amounts largely due to their short term maturities of these instruments.

Financial Instruments by category

(Rs. in Lakhs)

Particulars

Amortised Cost

FVTPL

FVTOCI

Carrying Amount

Fair Value

As at 31-03-2018

Financial Assets

Investments - Preference Shares

2,500.00

-

-

2,500.00

2,500.00

Other Investments

0.92

-

1.61

2.53

2.53

Loans and Advances

950.00

-

-

950.00

950.00

Trade Receivables

5,046.24

-

-

5,046.24

5,046.24

Cash and Bank Balances

190.76

-

-

190.76

190.76

Other Financial Assets

1,575.83

-

-

1,575.83

1,575.83

Financial Liabilities

Borrowings

23,928.82

-

-

23,928.82

23,928.82

Trade Payables

581.73

-

-

581.73

581.73

Other Financial Liabilities

-

-

-

-

-

As at 31-03-2017

Financial Assets

Investments - Preference Shares

2,500.00

-

-

2,500.00

2,500.00

Other Investments

1.03

-

0.60

1.63

1.63

Loans and Advances

950.00

-

-

950.00

950.00

Trade Receivables

4,337.29

-

-

4,337.29

4,337.29

Cash and Bank Balances

310.79

-

-

310.79

310.79

Other Financial Assets

1,651.30

-

-

1,651.30

1,651.30

Financial Liabilities

Borrowings

28,158.85

-

-

28,158.85

28,158.85

Trade Payables

956.47

-

-

956.47

956.47

Other Financial Liabilities

-

-

-

-

-

Fair value hierarchy

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 details of financial instruments that are measured at fair value on recurring basis are given below:

(Rs. in Lakhs)

Particulars

Level 1

Level 2

Level 3

Total

Financial Instruments at FVTOCI

Investments in listed equity securities

As at 31-03-2018

1.61

-

-

1.61

As at 31-03-2017

0.60

-

-

0.60

Investment in unlisted securities

As at 31-03-2018

-

-

0.92

0.92

As at 31-03-2017

-

-

1.03

1.03

Financial Instruments at FVTPL

Foreign exchange forward contracts

As at 31-03-2018 (Asset)

-

29.33

-

29.33

As at 31-03-2017 (Liability)

-

402.49

-

402.49

Valuation techniques used to determine the fair value

The significant inputs used in the fair value measurement categorized within the fair value hierarchy are given below:

Nature of Financial Instrument

Valuation Technique

Remarks

Investment in Listed securities

Market Value

Closing Price as at 31st March in Stock Exchange

Investment in Unlisted securities

At Book Value

Insignificant Value

Foreign exchange forward contracts

Mark to Market

Based on MTM valuations provided by the Banker

Financial Guarantee Obligation

Differential Interest Rate

Interest rates quote have been obtained from the Banker

NOTE NO. 49

Financial Risk Management

The Board of Directors (BOD) has overall responsibility for the establishment and oversight of the Company''s risk management framework and thus established a risk management policy to identify and analyse the risk faced by the Company. Risk Management systems are reviewed by the BOD periodically to reflect changes in market conditions and the Company''s activities. The Company through its training and management standards and procedures develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee oversees how management monitors compliance with the Company''s risk management policies and procedures, and reviews the risk management framework. The Audit committee is assisted in the oversight role by Internal Audit. Internal Audit undertakes reviews of the risk management controls and procedures, the results of which are reported to the Audit Committee.

The Company has the following financial risks:

Categories of Risk

Nature of Risk

Credit Risk

Receivables

Financial Instruments and Cash deposits

Liquidity Risk

Fund Management

Market Risk

Foreign Currency Risk

Cash flow and fair value interest rate risk

The Board of Directors regularly reviews these risks and approves the risk management policies, which covers the management of these risks:

Credit Risk

Credit Risk is the risk of financial loss to the Company if the customer or counterparty to the financial instruments fails to meet its contractual obligations and arises principally from the Company''s receivables, treasury operations and other operations that are in the nature of lease.

Receivables

The Company''s exposure to credit risk is influenced mainly by the individual characteristic of each customer. The Company extends credit to its customers in the normal course of business by considering the factors such as financial reliability of customers. The Company evaluates the concentration of the risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets. In case of Corporate / Export Customer, credit risks are mitigated by way of enforceable securities. However, unsecured credits are extended based on creditworthiness of the customers on case to case basis.

Trade receivables are written off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the company and where there is a probability of default, the company creates a provision based on Expected Credit Loss for trade receivables under simplified approach as below:

(Rs. in Lakhs)

As at 31-03-2018

Due less than 45 days

46 to 90 days

91 to 180 days

More than 180 days

Total

Gross carrying amount

4,264.81

557.23

222.70

1.50

5,046.24

Expected Loss Rate

0%

0%

0%

0%

0%

Expected Credit Losses

0%

0%

0%

0%

0%

Carrying amount of trade receivables net of impairment

4,264.81

557.23

222.70

1.50

5,046.24

As at 31-03-2017

Due less than 45 days

46 to 90 days

91 to 180 days

More than 180 days

Total

Gross carrying amount

3,297.14

601.46

321.27

117.42

4,337.29

Expected Loss Rate

0%

0%

0%

0%

0%

Expected Credit Losses

0%

0%

0%

0%

0%

Carrying amount of trade receivables net of impairment

3,297.14

601.46

321.27

117.42

4,337.29

Financial Instruments and Cash deposits

Investments of surplus funds are made only with the approved counterparties. The Company is presently exposed to counter party risk relating to short term and medium term deposits placed with Banks. The Company places its cash equivalents based on the creditworthiness of the financial institutions.

Liquidity Risk

Liquidity Risks are those risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. In the management of liquidity risk, the Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the company''s operations and to mitigate the effects of fluctuations in cash flows. Due to the dynamic nature of the underlying business, the Company aims at maintaining flexibility in funding by keeping both committed and uncommitted credit lines available. The Company has laid well defined policies and procedures facilitated by robust information system for timely and qualitative decision making by the management including its day to day operations.

Financial arrangements

The Company has access to the following undrawn borrowing facilities:

(Rs. in Lakhs)

Particulars

31-03-2018

31-03-2017

Expiring within one year

Bank Overdraft and other facilities

10,583.00

9,305.00

Term Loans

960.00

699.49

Expiring beyond year

Term Loans

-

-

Maturities of Financial Liabilities

Nature of Financial Liability

< 1 Year

1 - 5 Years

> 5 years

Total

As at 31-3-2018

Borrowings from Banks

19,049.27

4,879.55

-

23,928.82

Trade payables

581.73

-

-

581.73

Other Financial Liabilities (Including Interest)

1,149.34

-

-

1,149.34

As at 31-3-2017

Borrowings from Banks

20,870.94

7,287.91

-

28,158.85

Trade payables

956.47

-

-

956.47

Other Financial Liabilities (Including Interest)

1,650.24

-

-

1,650.24

Foreign Currency Risk

The Company''s exposure in USD and other foreign currency denominated transactions in connection with import of cotton, capital goods & spares, besides exports of finished goods and borrowings in foreign currency, gives rise to exchange rate fluctuation risk. The Company has following policies to mitigate this risk:

Decisions regarding borrowing in Foreign Currency and hedging thereof, (both interest and exchange rate risk) and the quantum of coverage is driven by the necessity to keep the cost comparable. Foreign Currency loans, imports and exports transactions are hedged by way of forward contract after taking into consideration the anticipated Foreign exchange inflows/outflows, timing of cash flows, tenure of the forward contract and prevailing Foreign exchange market conditions.

The Company''s exposure to foreign currency risk (un-hedged) as detailed below:

Currency

Trade Payables

Trade and other Receivables

Balance with Banks

Foreign Currency Loan

USD in Millions

As at 31-03-2018

-

-

-

2.60

As at 31-03-2017

-

-

-

3.32

EURO in Millions

As at 31-03-2018

-

-

-

0.20

As at 31-03-2017

-

-

-

0.17

Risk sensitivity on foreign currency fluctuation

(Rs. in Lakhs)

Foreign Currency

31-03-2018

31-03-2017

1% Increase

1% increase

USD

(-) 16.94

(-) 21.63

EURO

(-) 1-70

(-) 1-19

Cash flow and fair value interest rate risk

Interest rate risk arises from long term borrowings with variable rates which exposed the company to cash flow interest rate risk. The Company''s fixed rate borrowing are carried at amortized cost and therefore are 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 the change in market interest rates. The Company is exposed to the evolution of interest rates and credit markets for its future refinancing, which may result in a lower or higher cost of financing, which is mainly addressed through the management of the fixed/floating ratio of financial liabilities. The Company constantly monitors credit markets to strategize a well-balanced maturity profile in order to reduce both the risk of refinancing and large fluctuations of its financing cost. The Company believes that it can source funds for both short term and long term at a competitive rate considering its strong fundamentals on its financial position.

Interest rate risk exposure

Particulars

31-03-2018

31-03-2017

Variable rate borrowings

23,928.82

28,158.85

Fixed rate borrowings

-

-

The Company does not have any interest rate swap contracts Sensitivity on Interest rate fluctuation

Incremental Interest Cost works out to

31-3-2018

31-3-2017

1% Increase in Interest Rate

239.29

281.59

NOTE NO. 50 Capital Management

For the purpose of the Company''s capital management, capital includes issued equity share capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximize the Shareholders'' wealth.

The Company manages its capital structure and makes adjustments in the light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus debt.

(Rs. in Lakhs)

Particulars

31-03-2018

31-03-2017

Long Term Borrowings

4,879.55

7,287.91

Current maturities of Long Term borrowings

4,049.83

4,734.19

Short Term Borrowings

14,999.44

16,136.75

Less: Cash and Cash Equivalents

115.65

209.28

Net Debt

(A)

23,813.17

27,949.57

Equity Share Capital

737.62

737.62

Other Equity

26,492.98

23,946.14

Total Equity

(B)

27,230.60

24,683.76

Total Capital Employed

(C) = (A) (B)

51,043.77

52,633.33

Capital Gearing Ratio

(A) / (C)

47%

53%

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/borrowing. The Company has been consistently focusing on reduction in long term borrowings. There are no significant changes in the objectives, policies or processes for managing capital during the years ended 31-03-2018 and 31-03-2017.

As per our report annexed

For N.A. JAYARAMAN & CO.

For SRSV & ASSOCIATES

Shri PR. VENKETRAMA RAJA

Chartered Accountants

Chartered Accountants

Chairman

Firm Registration No. 001310S

Firm Registration No. 015041S

Smt. R. SUDARSANAM

Managing Director

R. PALANIAPPAN

P. SANTHANAM

B. GNANAGURUSAMY

Proprietor, Membership No. 205112

Partner, Membership No. 018697

Chief Financial Officer

Rajapalaiyam,

A. ARULPRANAVAM

29th May, 2018.

Secretary

Source : Dion Global Solutions Limited
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