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Tribhovandas Bhimji Zaveri

BSE: 534369|NSE: TBZ|ISIN: INE760L01018|SECTOR: Diamond Cutting & Jewellery & Precious Metals
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Notes to Accounts Year End : Mar '18

1 Company Overview

Tribhovandas Bhimji Zaveri Limited (‘TBZ or the “the Company) known under the brand’ TBZ- the Original’ was incorporated on 24 July 2007 by conversion of a partnership firm Tribhovandas Bhimji Zaveri under Part IX of the Companies Act, 1956 whereby the partners of the partnership firm became shareholders with the shareholdings as agreed amongst the partners. The Company has been converted to a public limited company w.e.f. 3 December 2010. The Company is in the business of retail sales of ornaments made of gold, diamond, silver, platinum and precious stones through its 32 show rooms and 5 franchisee outlets located across India.

2 Basis of preparation of financial statement and significant accounting policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements.

2.1 Basis of preparation of financial statements

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 financial statements prepared in accordance with 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 and cash flows of the Company is provided in Note 40.16.

The financial statements were authorized for issue by the Company’s Board of Directors at their meeting held on 2 May 2018.

b. Functional and presentation currency

The financial statements are presented in Indian Rupees (INR), which is also the Company’s functional currency. All amounts have been rounded-off to the nearest lakhs with two decimals, unless otherwise indicated.

c. Basis of measurement

The financial statements have been prepared on historical cost basis, except for the following assets and liabilities which have been measured at fair value as required by relevant Ind AS:

- Derivative financial instruments,

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments), and

- Net defined benefit liability

d. use of estimates and judgement

The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. Such estimates and assumptions are based on management’s evaluation of relevant facts and circumstances as on the date of financial statements. The actual outcome may diverge from these estimates.

Estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:

(a) Measurement of defined benefit obligations - Note 40.3

(b) Measurement and likelihood of occurrence of provisions and contingencies - Note 40.1

(c) Recognition of deferred tax assets - Note 10 (a) and (b)

e. Current -non-current classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria :

a. it is expected to be realised in, or is intended for sale or consumption in, the Company’s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets.

All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

a. it is expected to be settled in the Company’s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is due to be settled within 12 months after the reporting date; or

d. the Company does not have as unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instrument do not affect its classification.

Current liabilities include current portion of non-current financial liabilities.

All other liabilities are classified as non-current.

operating Cycle :

Based on the nature of services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current -non-current classification of assets and liabilities.

Other amendments

The Company does not expect the effect of other amendments notified by the Ministry of Corporate Affairs (“MCA”), on 28 March, 2018, through Companies (Indian Accounting Standards) Amendment Rules, 2018 in respect of Ind AS 12 -Income taxes, Ind AS 21 - The effect of changes in foreign exchange rates and Ind AS 40 - Investment property, on the financial statements to be material based on preliminary evaluation.

*Working capital borrowing are secured by hypothication of inventories of the company (refer note 26).

**Cost of precious stones forming part of the jewellery is determined by management based on technical estimate of the purity and clarity of diamonds used, on which the auditors have placed reliance, as this being a technical matter.

*Working capital borrowing are secured by hypothication of trade receivables of the Company (refer note 26).

** Includes receivable from credit card companies amounting to Rs. 126.32 Lakhs (31 March 2017: Rs. 71.99 Lakhs and 1 April 2016: Rs. 26.69 Lakhs)

#Includes restricted amounts towards Unclaimed Dividend of Rs. 0.70 Lakhs (31 March 2017: Rs. 0.70 Lakhs and 1 April 2016: Rs. 0.71 Lakhs) and unclaimed share application money due for refund of Rs. 0.34 Lakhs (31 March 2017: Rs. 0.34 Lakhs and 1 April 2016: Rs. 0.34 Lakhs).

*Deposits with a carrying amount of Rs. 5.54 Lakhs (31 March 2017: Rs. 4.78 Lakhs and 1 April 2016: Rs. 3.78 Lakhs) are under lien with VAT authorities as deposits.

*Deposits with a carrying amount of Rs. 2,635.30 Lakhs (31 March 2017: Rs. 2,617.04 Lakhs and 1 April 2016: Rs. 3,205.05 Lakhs) are under lien to secure working capital facilities availed from banks.

*Deposits with a carrying amount of Rs. 7.50 Lakhs (31 March 2017: Rs. 7.50 Lakhs and 1 April 2016: Rs. 7.50 Lakhs) are towards base capital given to Multi Commodity Exchange India Ltd.

b Terms / rights attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity sharerholder on a poll (not on show of hands) are in proportion to his share of paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

Failure to pay any amount called up on shares may lead to forfeiture of the shares.

On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

Notes:

Securities premium account

Premium collected on issue of securities are accumulated as part of securities premium. Utilisation of such reserves is restricted by the Companies Act, 2013.

General reserves

Represents appropriation of profit by the Company. surplus profit and loss

Retained earnings comprise of the Company’s undistributed profits after taxes. other comprehensive income

Items of other comprehensive income consist of re-measurement of defined benefit plan. other comprehensive income accumulated in other equity, net of tax

The disaggreation of changes in other comprehensive income by each type of reserve in equity is shown below:

The term loans from banks carry interest in the range of 10.00% - 11.75% p.a (31 March 2017: 10.00% - 11.75% p.a. and 1 April 2016: 10.00% - 11.75% p.a). The loans are repayable in equated monthly installments of 60 months (31 March 2017: 60 months and 1 April 2016: 60 to 72 months) with installments of Rs. 0.23 (31 March 2017: Rs. 0.44 lakhs and 1 April 2016: Rs. 0.23 to 32.50 lakhs). The loans are secured by hypothecation of vehicle purchased, (31 March 2017: hypothecation of vehicle purchased and 1 April 2016: first mortgage charge of assets purchased i.e. premises at Nariman point, Mumbai and IT equipment, hypothecation of vehicle purchased, first mortgage charge on immovable properties situated at Punjagutta, Hyderabad and second mortgage charge on the property located at Kandivali Industrial Estate, Mumbai).

The loan from non-banking financial companies comprised of vehicle loan which carried interest at 10.78% p.a. The loan was repayable in 36 monthly installments of 1.62 lakhs alongwith interest, commencing from the date of loan. The loan has been fully reapid during the previous year.

Working capital demand loan and the Cash credit facilities are part of a consortium arrangement with banks. The above facilities carry interest ranging between 2.70% to 11.50% (31 March 2017: 2.70% - 11.75% p.a. and 1 April 2016: 2.85% -12% p.a.) and are secured by primary security by way of hypothecation charge on the entire current assets of the Company, present and future, on first pari passu basis among the members of the consortium.

Further, the facility is secured by collateral security on first pari passu charge basis among the members of the consortium

- By way of mortgage over premises at Zaveri Bazar, Mumbai, premises at Surat, premises at Kandivali Industrial Estate, Mumbai, premises at Nariman Point, Mumbai, premises at Punjagutta, Hyderabad.

- By way of hypothecation charge over Property, Plant and Equipment installed/erected at Surat, at Kandivali Industrial Estate, Mumbai, at Pune, and all movable and immovable assets present in all the Company’s showrooms.

The facility is also secured by way of extension of mortgage charge on Second pari passu basis over commercial premises at Santacruz, Mumbai belonging to Shri Shrikant Zaveri (Chairman and Managing Director) and the personal guarantee of Shri Shrikant Zaveri the Chairman and Managing Director of the Company

Further, bank deposits of Rs. 2,635.30 lakhs (31 March 2017: Rs. 2,617.04 lakhs and 1 April 2016: Rs. 3,205.05 lakhs) are under lien with the banks as a security for the above facilities. The facilities are also secured by stand-by Letter of credit and Bank Guarantee of Rs. 24,710.00 lakhs (31 March 2017: Rs. 19,450 lakhs and 1 April 2016: Rs. 16,127 lakhs) and Letter of comfort of ‘ Nil lakhs (31 March 2017: Rs. 10,800 lakhs and 1 April 2016: Rs. 14,956 lakhs).

Loan from directors is interest free and repayable on demand.

Other borrowings carry interest in the range of Nil (31 March 2017: 5% -10% p.a and 1 April 2016: 5% -10% p.a). These are repayable at the end of 361 days from the date of borrowing.

*During May 2012, the Company had received application money for allotment of equity shares via Initial Public Offer (IPO). However, due to over subscription the application money became due for refund. There is no interest payable on share application money.

(a) The Company’s pending litigations comprise of proceedings pending with 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 position.

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

(c) The Company does not expect any reimbursements in respect of the above contingent liabilities.

Commitments

Contracts remaining to be executed on capital account and not provided for as at 31 March 2018 is Rs. 11.89 lakhs (31 March 2017: Rs. 25.90 Lakhs and 1 April 2016 Nil) (net of advances).

The Company has provided a letter of financial support upto 31 March 2019 to its wholly owned subsidiary company, Tribhovandas Bhimji Zaveri (Bombay) Limited.

3.1 Dues to Micro, small and Medium Enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro, Small and Medium Enterprise.

On the basis of the information and records available with management, the following disclosures are made for the amounts due to Micro, Small and Medium enterprises who have registered with the Competent authorities.

3.2 employee Benefits:

a) defined contribution plans

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund and Employees State Insurance, which are defined contribution plans. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of Profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund and other funds for the year aggregated to Rs. 303.98 Lakhs (31 March 2017: Rs. 282.72 Lakhs) which is shown under notes to financial statements 36 - ‘Employee benefits.

IX Sensitivity Analysis

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:

The Company expects to pay Rs. 75 lakhs (31 March 2017 Rs. 75 lakhs) to the fund in the following year.

*The Company has maintained funds with Life Insurance Corporation of India and HDFC Life. The details of major category of plan assets held by the insurance companies is not available and hence the disclosure thereof is not made. The expected long-term rate of return on plan assets is based exclusively on the historical returns, without adjustments.

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

c) other long-term employee benefits Compensated absences

The liability towards compensated absences (annual and sick leave) for the year ended 31 March 2018 based on actuarial valuation carried out by using Projected unit credit method resulted in a (reversal)/charged of ‘ (43.92) Lakhs (31 March 2017: Rs. 39.03 Lakhs).

3.3 Long-term contracts

The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and determined that there are no long term contracts (including derivative contracts) which require provision under any law / accounting standards for material foreseeable losses.

3.4 Corporate social responsibility (CsR)

As per Section 135 of the Companies Act 2013, a CSR Committee has been formed by the Company. The areas of CSR activities are to eradicate hunger, poverty and malnutrition, promoting healthcare, including preventive health care and sanitation. The Company also wants to promote education, including special education and employment, enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects. As part of above, the Company has undertaken CSR activities through Cancer Patient Aid Association (CPAA), Ahmedabad Women’s Action Group (AWAG), Stree Mukti Sanghatan, Voice Tree Technologies Private Limited, Baroda Citizen Council (BCC), Bharatiya Street Shakti and West Wind Foundation which are specified in Schedule VII of the Companies Act, 2013.

3.5 Leases

Operating leases as a lessee

The Company has recognized the showroom rent expenses in the books of accounts. Rental expenses under operating leases (including cancelable and non - cancelable) aggregating Rs. 2,515.27 Lakhs (31 March 2017: Rs. 2,468.19 Lakhs) have been included under “other expenses” in the Statement of Profit and Loss as disclosed under note 39.

Operating leases as a lessor

The Company has recognized rent income on investment property and plant and machinery given on operating lease to its wholly owned subsidiary. Rent income aggregating to Rs. 151.78 Lakhs (31 March 2017: Rs. 111.78 Lakhs) have been included under “other income” in the Statement of Profit and Loss as disclosed under note 33.

3.6 Information on related party transactions as required by the Indian Accounting standard (Ind As) - 24 for the year ended 31 March 2018

I. Name of related parties Key Managerial personnel

1 Shrikant Zaveri, Chairman and Managing Director

2 Binaisha Zaveri, Whole Time Director

3 Raashi Zaveri, Whole Time Director

4 Saurav Banerjee, Chief Financial Officer

5 Niraj Oza, Company Secretary

6 Ajay Mehta, Independent Director

7 Kamlesh Vikamsey, Independent Director

8 Sanjay Asher, Independent Director

relative of Key Managerial personnel

1 Kunal S Vaishnav

entities over which Key Managerial personnel and/or their relatives exercise significant influence

1 TBZ Limited Employees Gratuity Trust

subsidiary

1 Konfiaance Jewellery Private Limited. (ceased from 31 March 2018)

2 Tribhovandas Bhimji Zaveri (Bombay) Limited

Notes:

1) All Related Party Transactions entered during the year were in ordinary course of the business and are on arm’s length basis.

2) Providend Fund and ESIC is not applicable to KMP.

3) *Amounts pertaining to year ended 31 March 2017 are in brackets.

4) ”Remuneration to key managerial personnel does not include charge for gratuity and leave encashment as employee-wise break-up is not available.

5) The borrowing is secured by personal guarantee of the Chairman and Managing Director of the Compnay (refer note 26).

3.7 segment reporting

The Company is engaged in manufacturing/ trading and selling of jewellery mainly in India, which is the primary business segment based on the nature of products manufactured/traded and sold. Thus, the Company has only one reportable business which is manufacturing/trading and selling ofjewellery and only one reportable geographical segment. Accordingly the segment information as required by Ind AS 108 on ‘Operating Segments’ is not required to be disclosed.

3.8 disclosure pursuant to change with sEBI (Listing obligation and disclosure requirement, 2015) and section 186 of the Companies Act,2013

No loans have been given by the Company to any third party or its subsidiary companies.

The details of investment in subsidiary companies are given in Note 7.

3.9 Hedging activity and derivaties

Fair value hedge of gold price risk in inventory

The Company enters into contracts to purchase gold wherein the Company has the option to fix the purchase price based on market price of gold during a stipulated time period. The prices are linked to gold prices. Accordingly, these contracts are considered to have an embedded derivative (represented in the said option to fix the price) that is required to be separated from the host contract which is the gold loan liability. Such feature is kept to hedge against exposure in the value of inventory of gold due to volatility in gold prices. The Company designates the embedded derivative in the payable for such purchases as the hedging instrument in fair value hedging of inventory. The Company designates only the spot-to-spot movement of the gold inventory as the hedged risk. The carrying value of inventory which are designated under fair value hedge relationship are measured at fair value at each reporting date. There is no ineffectiveness in the relationships designated by the Company for hedge accounting.

Disclosure of effects of fair value hedge accounting on financial position:

Hedged item - Changes in fair value of inventory attributable to change in gold prices

Hedging instrument - Changes in fair value of the option to fix prices of gold purchases, as described above

note 3.10: Capital management

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The primary objective of the Company’s Capital Management is to maximise shareholder value. The Company manages its capital structure and makes adjustments in the light of changes in the economic environment and the requirements of the financial covenants, if any.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘equity’. For this purpose, adjusted net debt is defined as total borrowings, comprising interest-bearing loans and borrowings less cash and cash equivalents. Equity comprises all components of equity.

Note 3.11: Financial Instruments - Fair values and risk management

3.11.1: Financial Instruments - Fair values

Accounting classification and fair values

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the 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.

a) The fair value of financial instruments 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)

The categories used are as follows:

- Level 1: Quoted prices for identical instruments in an active market;

- Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs; and

- Level 3: Inputs which are not based on observable market data.

b) Specific valuation techniques used to value financial instruments include:

(a) The use of quoted market prices for investments in mutual funds.

(b) Use of market available inputs such as gold prices for option to fix prices of gold in purchase contracts

3.11.2: Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk;

- Liquidity risk;

- Market risk

Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the board of directors on its activities.

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

A: Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s exposures to trade receivables (mainly institutional customers and credit sales), deposits with landlords for store properties taken on leases and other receivables including balances with banks.

Trade receivables and other deposits

The Company’s retail business is predominantly on ‘cash and carry’basis which is largely through cash and credit card collections. The credit risk on such credit card collections is minimal, since they are primarily owned by customers’ card issuing banks. The Company has adopted a policy of dealing with only credit worth counterparties in case of institutional customers and credit sales and the credit risk exposure for institutional customers and credit sales are managed by the Company by credit worthines checks. The Company also carries credit risk on lease deposits with landlords for store properties taken on leases, for which agreements are signed and property possessions timely taken for store operations. The risk relating to refunds of deposits after store shut down is managed through successful negotiations or appropriate legal actions, where necessary.

other financial assets

The Company maintains exposure in cash and cash equivalents and term deposits with banks. The Cash and cash equivalents and term deposits are held with the banks with good credit ratings.

The Company’s maximum exposure to credit risk as at 31st March 2018, 31 March 2017 and 1st April 2016 is the carrying value of each class of financial assets.

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, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31 March 2017 and 31 March 2016. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis.

The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest bearing term deposits with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments:

As of 31 March 2018, 31 March 2017 and 1 April 2016 the Company had unutilized credit limits from banks of Rs. 10,712.66 lakhs, Rs. 18,450.02 lakhs and Rs. 9,290.70 lakhs respectively.

C: Market risk Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

i. Currency risk

The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to US Dollar. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Company’s functional currency.

There are no exposure to currency risk as on 31 March 2018, 31 March 2017 and 1 April 2016.

ii. Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing financial assets or borrowings because of fluctuations in the interest rates, if such assets/borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.

The Company’s fixed rate 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.

Sensitivity

The sensitivity to profit and loss in case of a reasonable possible change in interest rate of /- 25 basis points (previous year /- 25 basis points), keeping all other variables constant, would have resulted in an impact on proifts by Rs. 130.24 Lakhs (previous year Rs. 138.41 Lakhs)

iii. price risk

Exposure from investements in mutual funds:

The Company’s exposure to price risk arises from investment in mutual funds held by the company and classified in the balance sheet as fair value through profit and loss.

Exposure from Borrowings:

The Company’s exposure to price risk also arises from borrowings of the Company that are at unfixed prices, and therefore, payment is sensitive to changes in gold price. The option to fix gold prices are classified in the balance sheet as fair value through profit or loss. The option to fix gold prices are at unfixed prices to hedge against potential losses in value of inventory of gold held by the Company.

The Company applies fair value hedge for the gold purchased whose price is to be fixed in future. Therefore, there will no impact of the fluctuation in the price of the gold on the Company’s profit for the period.

note 3.12: First time adoption of Ind As

These standalone financial statements, for the year ended 31 March 2018, are the first financial statements prepared by the Company in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its standalone financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2014, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (‘Indian GAAP’ or ‘Previous GAAP’).

Accordingly, the Company has prepared standalone financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these standalone financial statements, the Company’s opening Ind AS balance sheet was prepared as at 1 April 2016, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Previous GAAP standalone financial statements, including the balance sheet as at 1 April 2016 and the standalone financial statements as at and for the year ended 31 March 2017.

The Company has applied Ind AS 101 in preparing these first standalone financial statements. The effect of transition to Ind AS on equity, total comprehensive income and reported cash flows are presented in this section and are further explained in the notes accompanying the tables.

Ind As optional exemptions:

a. Deemed cost for property, plant and equipment, intangible assets and investment property.

The Company has elected to measure all its property, plant and equipment, intangible assets and investment property at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS.

b. Investment in subsidiaries

The Company has elected to measure its investments in subsidiaries at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS.

Ind As mandatory exceptions:

a. estimates

On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under Previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date.

b. Classification and measurement of financial assets

The classification of financial assets to be measured at amortised cost or fair value through other comprehensive income is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.

Notes to the reconciliations

a. Measurement of leases

Under Previous GAAP, any escalation in operating lease rentals were straight-lined over the lease term.

Under Ind AS, operating lease rentals are not straight lined over the lease term if the payments to the lessor are structured to increase in line with expected general inflation. Further, under Ind AS, rental expense is also attributed to operating lease incentives, like rent free period.

b. Fair valuation of Investment

Under Previous GAAP, current investments were stated at lower of cost and fair value.

Under Ind AS, these financial assets have been classified as Fair Value Through Profit and Loss (‘FVTPL’) on the date of transition to Ind AS and fair value changes after the date of transition have been recognised in the statement of profit and loss.

c. remeasurements of defined benefit liability

Under the Previous GAAP, these remeasurements were forming part of the profit or loss for the year.

Under Ind AS, remeasurements i.e. actuarial gains or losses, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of the statement of profit and loss.

d. provision for Kp scheme

Under Previous GAAP, provision for KP scheme was accrued and recognised over the period of the scheme.

Under Ind AS, discount offered to customers under KP scheme need to be recognised as and when actual sales happen. Hence, provision created for KP scheme under Previous GAAP has been reversed and discount under the scheme is recognised as reduction of revenue at the time of actual sale.

e. Deferred tax

Under Previous GAAP, deferred tax was accounted as per the income statement approach which required creation of deferred tax asset/ liability on timing differences between taxable income and accounting income. Under Ind AS, deferred tax is accounted as per the Balance Sheet approach which requires creation of deferred tax asset/ liability on temporary differences between the carrying amount of an asset/ liability in the Balance Sheet and its corresponding tax base. The adjustments in equity and net profit, as discussed above, resulted in additional temporary differences on which deferred taxes are calculated.

f. other comprehensive income

Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in the statement of profit and 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. proposed dividend

Under Previous GAAP, proposed dividends and related dividend distribution tax was recognised as a provision in the year to which they relate, irrespective of when they are declared. Under Ind AS, dividends and related dividend distribution tax are recognised as a liability in the year in which it is approved by the shareholders in the Annual General Meeting of the Company.

h. excise duty

Under Previous GAAP, excise duty was netted off against sale of goods. However, under Ind AS, excise duty is included in sale of goods and is separately presented as expense on the face of Statement of Profit and Loss. Thus, sale of goods under Ind AS has increased with a corresponding increase in expenses.

i. Investment property

Based on Ind AS 40 the Company has reclassified land and building given on lease to investment property. Under the Previous GAAP, this was disclosed as a part of property, plant and equipment.

j. Hedge Accounting

Under Previous GAAP, in respect of purchase of goods at prices that are yet to be fixed at the period end, adjustments to the provisional amounts invoiced by the vendor were recognised in the cost of inventory based on the closing gold rate.

Under Ind AS, in respect of purchase of goods at prices that are fixed subsequent to the date of purchase, the Company has applied hedge accounting w.e.f. 1 April 2016 wherein the option to fix prices is designated as a hedging instrument and change in fair value of inventory attributable to change in prices between the date of purchase and the date of fixing prices or reporting date (as applicable) is designated as hedged item.

The hedging relationship is considered a fair value hedge. The gain or loss on the hedging instrument is recognised in statement of profit and loss and the corresponding gain or loss on the hedged item is adjusted in the carrying amount of the hedged item and recognised in statement of profit and loss.

k. Financial assets and liabilities

Under Previous GAAP, the financial assets and financial liabilities were carried at the contractual amount receivable or payable.

Under Ind AS, certain financial assets and financial liabilities are initially recognised at fair value and subsequently measured at amortised cost which involves the application of effective interest method. Hence, security deposits have been be recorded initially at fair value using an appropriate discount rate. The difference between the present value and the amount paid is recognised as a prepaid rent. The unwinding of the security deposit as per the effective interest rate method will be recognised as a finance income over the period of the lease.

Source : Dion Global Solutions Limited
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