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Texmo Pipes and Products

BSE: 533164|NSE: TEXMOPIPES|ISIN: INE141K01013|SECTOR: Plastics
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Notes to Accounts Year End : Mar '18

1. CORPORATE INFORMATION

Texmo Pipes and Products Limited (“the Company”) was formed as a Partnership Firm by the name M/s Shree Mohit Industries on 13th May 1999 and was subsequently converted and incorporated as a Public limited Company in July 2008 with the Registrar of Companies, Madhya Pradesh and Chhattisgarh. The Partnership Firm was converted into Company under Part IX of the Companies Act, 1956 under the name of Texmo Pipes and Products Limited having Certificate of Incorporation dated 3rd July 2008.

2.1 BASIS OF PREPARATION AND PRESENTATION

The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:

- Certain financial assets and liabilities (including derivative instruments) and

- Defined benefit plans - plan assets

The financial statements of the Company have been prepared to comply with the Indian Accounting standards (''Ind AS''), including the rules notified under the relevant provisions of the Companies Act, 2013.

Upto the year ended March 31, 2017, the Company has prepared its financial statements in accordance with the requirement of Indian Generally Accepted Accounting Principles (GAAP), which include Standards notified under the Companies (Accounting Standards) Rules, 2006 and considered as “Previous GAAP”.

These financial statements are the Company''s first Ind AS standalone financial statements.

Company''s financial statements are presented in Indian Rupees (INR), which is also its functional currency.

1. The company has availed the deemed cost exemption in relation to the property, plant and equipment except in case of Land, that is valued at its fair value, on the date of transition i.e. April 1,2016 and hence the net carrying amount has been considered as the gross carrying amount on that date.

2. Freehold Land has been revalued at Rs.6447.13 Lakhs as per requirement of lND AS. Previous value as per GAAP was Rs.198.70Lakhs.

3. Entire movable and immovable Property, Plants and Equipment are mortgaged in favour of secured lenders against the sanction limits. (Note 18)

4. All intangible assets are other than internally generated.

5. In respect of Intangible as sets; a) Useful life is as follows

(i) In respect of Computer Software average useful life 4 - 5 years.

Notes: # The Company retired from the LLP w.e.f. January 10, 2018

*Aggregate amount of diminution in value of investments is Rs.3194 Lakhs as at March 31, 2018, as at March 31, 2017 and as at April 1, 2016.

Note : Refer note 42 for detailed disclosure on the fair values.

Includes portion of compound financial instrument and fair valuation of loan of Rs.594.64 Lakhs as at March 31, 2018, Rs.596.63 Lakhs as at March 31, 2017 and Rs.597.55 Lakhs as at April 1, 2016

Note: The cost of inventories recognized as an expense during the year is disclosed in Note 28, 29 and 30.

Borrowings are secured by first paripassu charge on stock (including raw material, finished goods and work in progress) and book debts. (Note 17)

Terms / Rights to Shareholders

(1) Equity Shares

(A) Voting

(i) The Company has one class of equity shares having a per value of f 10 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

Notes:

Nature and Purpose of reserve

Securities premium Account - The amount received in excess of face value of the equity shares is recognized in Securities Premium Account. This reserve is available for utilization in accordance with the provisions of the Companies Act, 2013.

Revaluation Reserve - The company has created revaluation reserve out of revaluation of land carried out during the year 2016-17.

Retained Earnings - Retained Earnings are the profits/losses that the Company has earned till date

* Current Items include amount payable in the next 12 months Notes :

(i) Amount stated in Current maturity is disclosed under the head of “Other Financial Liabilities (Current)” (Note 22).

(ii) Refer Note 42 for information about liquidity risk.

(iii) Term Loans are Secured by way of first charge, in respect of Fixed assets, both present and future, and second charge on entire current assets of the Company both present and future. (Note 3,10,11)

3. Nature of Security and terms of repayment for Long Term Secured Borrowings HDFC Bank Term Loan of Rs.83.71 Lakhs (Previous Year: Rs.92.54Lakhs) secured by Mumbai office of the Company.

Repayable in 120 equal monthly installments starting from May 2014 . Last installment due in April 2024. Rate of interest 12% p.a. as at year end.(Previous Year 12%).

Bank of Baroda Term Loan for Plant & Machinery of Rs.66.62 Lakhs (Previous Year: Rs.180.14 Lakhs), repayable within 66 months including initial moratorium period of 6 months, repayable by October 2019, secured on pari pasu charge on plant & Machinery and Personal Guarantees of Mr. Sanjay Kumar Agrawal, Mrs. Rashmidevi Agrawal, Shree Padmavati Irrigation LLP, Balaji Industries and Venkatesh Industries.

Repayable in 60 equal monthly installments starting from November 2013. Last installment due in November 2018. Rate of interest 12.08% p.a. as at year end.(Previous Year 13.50%).

Vehicle Loans of Rs.231.57 Lakhs (Previous Year: Rs.261.29 Lakhs). The Loans are secured by way of hypothecation of respective motor vehicle purchased. Repayable in 36 to 60 equal monthly instalments. Rate of interest in range of 9.44% to 9.81% p.a. (Previous year 9.81% to 14% p.a.).

Secured Loan From Others include Loan from Religare Fin Vest Limited of Rs.64.81 Lakhs (Previous Year: Rs.71.75 Lakhs), secured by Equitable Mortgage of Indore Office. Repayable in 120 equal monthly instalments starting from May 2014. Last instalment due in April 2024.. Rate of interest is 13.50% p.a. at the year end. (Previous year 13.50% p.a.).

Secured Loan From Others include Loan from Reliance Capital Limited of Rs.40.19 Lakhs (Previous Year: f 60.71Lakhs), secured by Hypothecation of Plant & Machinery , disbursed in November 2015 of Rs.83.00 Lakhs repayable by January 2016.

Repayable in 48 equal monthly installments starting from January 2016. Last installment due in December 2019. Rate of interest is 12% p.a. at the year end. (Previous year 15% p.a.).

Central Bank of India Term Loan for plant & Machinery is Rs.317.83 Lakhs (Previous Year: Rs.385.43 Lakhs), secured by Pari Pasu charge on Plant & Machinery with SBI situated at Factory Premises Present & Future and Personal Guarantees of Directors Mr. Sanjay Kumar Agrawal, Mrs. Rashmidevi Agrawal, M/s Balaji Industries, M/s Shree Padmavati irrigations LLP and Shree Venkatesh Industries.

Repayable in 84 equal monthly installments starting from October 2016. Last installment due in September 2023.. Rate of interest is 12.65% p.a. at the year end. (Previous year 13.95% p.a.)

Punjab National Bank Term Loan for Plant & Machinery of Rs.703.85 Lakhs (Previous Year: Rs.Nil), repayable within 84 months including initial moratorium period of 5 months, repayable by March 2025, secured on pari pasu charge on plant & Machinery and Guarantees of Mr. Sanjay Kumar Agrawal, Mrs. Rashmidevi Agrawal, Shree Padmavati Irrigation LLP, Balaji Industries and Venkatesh Industries.

Repayable in 84 equal monthly installments starting from April 2018. Last installment due in March 2025. Rate of interest 10.55% p.a. as at year end.

Terms of loans from Related Parties

i) Loans & Advances from Related parties Include Loan from Managing Director Mr. Sanjay KumarAgrawal of Rs.3.49 Lakhs (Previous Year - Rs.46.25 Lakhs) , Director Mrs. Rashmi Devi Agrawal - Rs.11.00 Lakhs (Previous Year - Rs.57.50Lakhs) & Shree Padmavati Irrigations LLP, Indore- Rs.19.00 Lakhs (Previous Year - Rs.325.25Lakhs). The Loans taken from Related Parties are Interest free.

a. Working Capital Loans are from Consortium of Banks State Bank of India, Bank of Baroda , Punjab National Bank and Central Bank of India led by State Bank of India where in, SBI Cash Credit Loan of Rs.2735.37 Lakhs (Previous Year: Rs.3221.31 Lakhs), Bank Of Baroda Cash Credit Loan of Rs.681.49 Lakhs (Previous Year: Rs.3221.31 Lakhs), Punjab National Bank cash Credit Loan of f345.91 Lakhs (Previous Year: f392.50 Lakhs) and Central Bank of India Cash Credit Loan of Rs.188.52 Lakhs (Previous Year: Rs.197.81 Lakhs) secured by first Pari pasu charge (between consortium members) on whole of companies present & future stocks of Raw Material, Finished Goods, Stock in Process, Stores & Spares and other Raw Material, and the company''s present and future book debts, outstanding monies, receivable, claims, bills, Contracts, engagements, securities, investments, rights and assets of the company. The working capital facilities as above are further secured by way of equitable mortgage of Immovable Properties of the company and promoters, Related Entities and Personal Guarantees of Mr. Sanjay Kumar Agrawal, Mrs. Rashmidevi Agrawal, Shree Padmavati Irrigations LLP, Shree Balaji Industries and Shree Venkatesh Industries.

b. Working Capital Loans from others includes Raw Material NSIC assistance of Rs.198.97 Lakhs (Previous Year: Rs.351.43 Lakhs) and is secured by bank guarantees.

4.1 Information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the Auditor.

4.2 Refer Note 42 for information about credit risk, market risk and liquidity risk of Trade payables.

- It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

- The Company does not expect any reimbursements in respect of the above contingent liabilities.

- Future cash outflows in respect of the above matters are determined only on receipt of judgments / decisions pending at various forums / authorities.

The Company''s pending litigations comprise of claims against the Company pertaining to proceedings pending with Excise, Income Tax, Sales/ VAT tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements

1. The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflations, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

2. The expected contribution for Defined Benefit Plan for the next financial year will be in line with FY 2017-18.

3. The company makes provident fund (PF) contributions to defined contribution benefit plans for eligible employees. Under the scheme the company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions specified under the law are paid to the government authorities (PF commissioner).

4. Amount towards Defined Contribution Plan have been recognized under “Contribution to Provident and Other funds” in Note 28 Rs.120.52 Lakhs (Previous Year: Rs.102.40 Lakhs).

5. Defined Benefit Plan:

The Company has defined benefit plans for gratuity to eligible employees, contributions for which are made to Life Insurance Corporation of India, who invests the funds as per IRDA guidelines. The details of these defined benefit plans recognized in the financial statements are as under:

General Description of the Plan:

The Company operates a defined benefit plan (the Gratuity Plan) covering eligible employees, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment.

The defined benefit plans typically expose the company to various risk such as;

- Investment risk:

The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end ofthe reporting period on government bonds. If the return on plan asset is below this rate, it will create plan deficit.

- Interest risk:

A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the plan assets.

- Longevity risk:

The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.

- Salary risk:

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary ofthe plan participants will increase the plan''s liability.

The amount outstanding are unsecured and will be settled in cash. No expense has been recognized in the current or prior years for bad or doubtful debts in respect of amounts owned by related parties.

* Balance outstanding at the end of the year/previous years are stated without considering impact of fair valuation carried out as per Ind AS. a) Part of the Unsecured Loan from Related Parties classified as Equity Component in the Statement of Changes in Equity is:

5. Preferential allotment :

The Company has, on a preferential basis, issued Rs.12,00,000 (Twelve Lakhs) equity shares of f 10 each, fully paid up at a price of f 22 per share aggregating to Rs.264.00 Lakhs to Shree Padmavati Irrigation LLP, a promoter group company on October 06, 2017, in accordance with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

6. During the year the Management has revised the estimated useful life of Dies & Moulds from 8 years to 12 years.

Accordingly, the Depreciation charge for FY 2017-18 is lower by Rs.172.67 lakhs.

7. FINANCIAL INSTRUMENTS

All financial instruments are initially recognized and subsequently re-measured at fair value as described below:

(a) The fair value of Forward Foreign Exchange contracts and is determined using forward exchange rates at the balance sheet date.

(b) All foreign currency denominated assets and liabilities are translated using exchange rate at reporting date.

Fair Value measurement hierarchy:

Interest Rate Risk

Interest rate risk is the risk that the future cash flow with respect to interest payments on borrowing will fluctuate because of change in market interest rates. The company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s long-term debt obligation with floating interest rates.

Interest Rate Sensitivity

Te following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company''s profit before tax is affected through the impact on floating rate borrowings, as follows:

Commodity Price Risk

Commodity price risk arises due to fluctuation in prices of raw material. The company has a risk management frame work aimed at prudently managing the risk arising from the volatility in raw material prices and freight costs. The company''s commodity risk is managed centrally through well-established trading operations and control processes. In accordance with the risk management policy, the Company carefully caliberates the timing and the quantity of purchase Credit Risk

Credit risk is the risk that a customer or counterparty to a financial instrument fails to perform or pay the amounts due causing financial loss to the company. Credit risk arises mainly from the outstanding receivables from customers. The company has a prudent and conservative process for managing its credit risk arising in the course of its business activities. The credit ratings/market standing of the customers are evaluated on a regular basis.

Liquidity Risk

Liquidity risk arises from the Company''s inability to meet its cash flow commitments on time. Prudent liquidity risk management implies maintaining sufficient stock of cash and marketable securities . The Company maintains adequate cash and cash equivalents alongwith the need based credit limits to meet the liquidity needs.

Hedge Accounting

The Company avails Foreign Currency Demand Loans from bank time to time to reduce the interest cost. The Company takes forward cover to hedge against the foreign currency risks. The amount of foreign currency risks and forward cover are as under :

Operating Leases

(a) There were no non-cancellable operating lease. (b) The Company pays rent for office premises at Indore and Mumbai. The lease period is for 11 months with option to renew. The payments for office premises at Indore are to related parties. None of the lease agreements have any restrictions concerning dividend, additional debt and further leases.

Reconciliation Notes explaining Reclassification Adjustments

1 .Investment Property classified as Non current Investments under the previous GAAP has been reclassified to Investment Property under Ind AS.

2. Loans and Advances in the nature of financial assets have been reclassified as Financial Assets- Loans. Under the previous GAAP, such loans were classified as Other Non- Current assets.

3. Other Current Assets, under the previous GAAP includes Loans and Advances which have been classified as Financial Assets- Other Financial assets under the Ind AS.

4. Other Current Liabilities under the previous GAAP includes Current Maturities of Long Term Debts and Interest accrued but not due on borrowings which have been classified as Other Financial Liabilities under the Ind AS.

5. Provision for Tax was classified as Other Non Current Liabilities under the previous GAAP. Under the Ind AS, it has been reclassified to Current Tax Liabilities shown as net of Advance Tax and TDS.

Reconciliation Notes explaining Ind AS Adjustments

1. The company has exercised the option of carrying the Freehold Land, Investment property and Land Held for Sale at its fair value on the date of transition. This has resulted in increase in Property, Plant and Equipment by Rs.6,248.43 Lakhs, Investment Property by Rs.21.52 Lakhs and Other Current Assets by Rs.177.66 Lakhs and there is corresponding impact on Revaluation Reserve by Rs.6,447.61 Lakhs.

2. The company has exercised the option of carrying the Investments in its subsidiaries at its fair value on the date of transition. Consequently, there is decrease in Non Current Investments by Rs.3,194 Lakhs on that date.

3. As per Ind AS 109 Financial Instruments, Interest free loans to subsidiary has been carried at amortized cost. Accordingly, Financial Assets- Loans have decreased and Other current assets have increased by Rs.22.99 Lakhs and Rs.24.83 Lakhs as on 01.04.2016 and 31.03.2017 respectively.

4. The transaction costs paid for the term loans borrowed have been amortized over the period of the loans, as the loans are required to be carried at amortized cost as per IndAS 109 Financial Instruments. Consequently, the Borrowings have reduced by Rs.9.51 Lakhs and Rs.8.47 Lakhs as at 1st April 2016 and 31st March 2017 respectively.

5. Under the Ind AS, the Deferred Tax is calculated on the basis of the Balance Sheet approach and not the Income approach. Consequently, the Deferred Tax Liabilities (Net) have been increased by Rs.23.70 Lakhs and Rs.19.88 Lakhs as at 1st April 2016 and 31st March 2017 respectively.

6. The company has borrowed interest free unsecured loans from promoters/directors. Such loans have been classified as compound financial instruments and split into debt and equity in accordance with Ind AS 32 Financial Instruments : Presentation. Accordingly, Borrowings have decreased and Other Equity increased.

8. Effect of Ind AS Adoption on the Statement of Profit and Loss for the year ended March 31, 2017

1. Under the Ind AS, the actuarial gains and losses are classified as part of the Other Comprehensive Income under the head Items that are not reclassified to Profit and Loss. There is no impact on the Total Comprehensive Income.

2. The company has borrowed interest free unsecured loans from promoters/directors. Such loans have been classified as compound financial instruments and bifurcated as debt and equity in accordance with Ind AS 32 Financial Instruments : Presentation. The interest on debt component have been recognized in accordance with Ind AS 109 Financial Instruments. Accordingly, there is an increase in Finance Cost.

3. The transaction costs paid for the term loan borrowed have been amortized over the period of the loans, as the loans are required to be carried at amortized cost as per IndAS 109 Financial Instruments. Consequently, there is an impact on Finance Cost.

4. Under the Ind AS, significant components of plant and equipment which have different useful life are depreciated based on their specific useful lives. Consequently, the amount of Depreciation charged for the year ended 31st March 2017 has increased by Rs.50.31 Lakhs.

5. Under the Ind AS, the Deferred Tax is calculated on the basis of the Balance Sheet approach and not the Income Approach. As a result the net Deferred Tax for the FY 2016-17 is lower by Rs.3.82 Lakhs as against Deferred Tax recognized under previous GAAP.

9. Reconciliation of total comprehensive income for the year ended March 31, 2017 44.

APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved for issue by the board of directors on May 29, 2018.

10. Trade Receivables/Payables are confirmed by the Management. No independent balance confirmation has been received from Customers/Suppliers. The above figures are subject to reconciliation and consequent adjustment, if any.

11. The company has established Unit No. 2 and is eligible for incentive under Madhya Pradesh Industrial Investment Promotion Assistance Scheme-2004, Wherein 50% of VAT and CST paid shall be refunded till 30th June,2017. During the year ended 31st March 2018, incentive as mentioned are booked in Other Operating Income of Rs.9.49 Lakhs (P. Y Rs.28.75 Lakhs).

12. Segment Reporting : The company is primarily engaged in business of plastic products which constitutes a single reportable segment in accordance with IND AS 108 ''Operating Segments’

13. Insurance Claim Receivable

During the year 2010-11 on 21.03.2011 a fire occurred in main raw material godown at the factory premises of the Company. The Company has lodged a claim of Rs.25.47 Crores with the Oriental Insurance Company Limited and the same was accounted as ''Insurance Claim Receivable''. The claim is finally settled by the Insurance Company for Rs.1640.86 Lakhs on 12.04.2012. The Management has filed a lawsuit against the Insurance Company as the claim is fully recoverable. The Management is confident of realizing the amount due from the Insurance Company and according no adjustments are made to the financial results of the company in this regard.

Source : Dion Global Solutions Limited
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