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Vesuvius India

BSE: 520113|NSE: VESUVIUS|ISIN: INE386A01015|SECTOR: Cement - Products & Building Materials
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Notes to Accounts Year End : Dec '18

Note 1 Company overview

Vesuvius India Limited (“the Company”) is a public company domiciled and headquartered in India. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is primarily engaged in the manufacturing and trading of refractory goods. The Company also provides services in relation to refractory goods. The Company has operations in India and caters to both domestic and international markets. The Company do not have a subsidiary, associates and joint ventures.

Note 1 .1 Approval for issue

These financial statements were approved for issue with a resolution of the Board of Directors on February 27, 2019.

(a) Terms/ rights attached to equity shares

The Company has a single class of equity shares with par value of Rs. 10/- per share. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets. The equity shareholders are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder are in proportion to its share of the paid-up equity capital of the Company. Equity shares held by Investor Education and Protection Fund do not have voting rights.

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

Note

(a) Capital reserve

Represents grants received in prior years against re-imbursement of stamp duty and cost of freehold land at Visakhapatnam.

(b) Securities premium

Securities premium is used to record the premium on issue of shares. The same is to be utilised in accordance with the provisions of Section 52 of the Companies Act, 2013.

(c) General reserve

Under the erstwhile Indian Companies Act, 1956, a general reserve was created through an annual transfer of net profit at a specified percentage in accordance with applicable regulations. Consequent to introduction of Companies Act, 2013, the requirement to mandatory transfer a specified percentage of the net profit to general reserve has been withdrawn though the Company may transfer such percentage of its profits for the financial year as it may consider appropriate. Declaration of dividend out of such reserve shall not be made except in accordance with rules prescribed in this behalf under the Act.

(d) Retained earnings

Retained earnings represents the profits that the Company has earned till date, less any transfer to general reserve, dividends or other distributions to shareholders etc.

(e) Dividends and taxes thereon

During the year 2018 the Company’s shareholders have declared dividend of Rs. 6.75 per share (2017 : Rs. 6.50 per share) which resulted in an outflow of Rs. 1652 (2017 : Rs. 1,588) including dividend distribution tax of Rs. 282 (2017: Rs. 269) and accordingly has been accounted in the year of declaration by the shareholders.

The Board of directors of the Company has proposed a dividend of Rs. 7 per share which would result in an outflow of Rs. 1,713 including dividend distribution tax of Rs. 292. Pending approval of the shareholders the same is not recognised in the financial statements.

2. Earnings per share (EPS)

Basic and diluted earning per share

The calculation of basic and diluted earnings per share for the year ended December 31, 2018 is based on the profit attributable to equity shareholders and weighted average number of equity shares outstanding.

3. Contingent liabilities and commitments

(to the extent not provided for)

(a) Contingent liabilities:

(i) Claims against the Company not acknowledged as debts:

(ii) A counter claim has been filed against the Company before the Hon’ble High Court at Calcutta by a customer for claims aggregating Rs. 749 (December 31, 2016: Rs.749, January 1, 2016 : Rs. 749) regarding certain disputes relating to goods supplied by the Company in prior years.

4. The Company has taken various premises under operating lease which are cancellable during the life of the contract at the option of both the parties. Minimum lease payment charged during the year to the Statement of Profit and Loss aggregated to Rs. 358 (2017 : Rs. 314).

5. Segment Reporting

The Company is engaged in the business of manufacturing, trading and sale of a range of refractories and is having its manufacturing facilities located in India. The performance of the Company is assessed and reviewed by the Chief Operating Decision Maker (‘CODM’) as a single operating segment and accordingly manufacture and sale of refractories is the only operating segment.

Accounting policy:

Segment information is prepared in conformity with the accounting policy adopted for preparing and presenting the financial statements of the Company as a whole.

Geographical Information

The Company is domiciled in India, however also sells its products outside India. The amount of its revenue from external customers broken down by the location of the customers is shown in table below:

6. Related Party Disclosures

A) List of Related parties and relationship

i) Enterprises having control over the Company :

Vesuvius plc, United Kingdom, Ultimate holding company, holding company of Vesuvius Holdings Limited, United Kingdom

Vesuvius Holdings Limited, United Kingdom, (formerly known as Cookson Group plc), holding company of Vesuvius Financial 1 Limited, United Kingdom

Vesuvius Financial 1 Limited, United Kingdom, (formerly known as Cookson Financial Limited), holding company of Vesuvius Group Limited, United Kingdom

Vesuvius Group Limited, United Kingdom, Immediate holding Company

ii) Fellow Subsidiaries (with whom transactions have taken place during the year ):

Name of the related parties

Avemis SAS, France

Foseco (Thailand) Limited, Thailand

Foseco India Limited, India

Foseco Industrial E Commercial Ltda, Brazil

Foseco Korea Limited, South Korea

Foseco Philippines Inc, Philippines

Foseco Pty Limited, Australia

Foseco SAS.

Flo-Con Systems Inc.

Pt. Foseco Indonesia, Indonesia

Sert Metal SAS , France

Vesuvius (Thailand) Co. Ltd, Thailand

Vesuvius Advanced Ceramics (China) Co. Ltd., China

Vesuvius Belgium N.V. Belgium

Vesuvius Corporation S.A. (Taiwan Branch), Switzerland

Vesuvius Corporation S.A., Switzerland

Vesuvius Crucible Company,USA

Vesuvius China Holdings Co. Limited, Hongkong

Vesuvius Emirates FZE, United Arab Emirates

Vesuvius Foundry Products (Suzhou) Co. Ltd., China

Vesuvius France S.A., France

Vesuvius GmbH, Germany

Vesuvius Group S.A., Belgium

Vesuvius Iberica Refractarios S.A., Spain

Vesuvius Istanbul Sanayi ve Ticaret AS, Turkey

Vesuvius Italia S.P.A., Italy

Vesuvius Japan Inc.

Vesuvius UK Limited, Taiwan

Vesuvius Malaysia SDN. BHD, Malaysia

Vesuvius Mexico S.A. de C.V., Mexico

Vesuvius Poland Spolka z.o.o, Poland

Vesuvius Ras Al Khaimah FZ-LLC , United Arab Emirates

Vesuvius Slavia A.S., Czech Republic Vesuvius South Africa (Pty) Limited, South Africa Vesuvius UK Limited, United Kingdom Vesuvius USA Corporation, USA

Wugang Vesuvius Advanced Ceramics (Wuhan) Co., Ltd, China

Wugang Wuhang - Vesuvius Advanced CCR

Yingkou Bayuquan Refractories Co., Ltd , China

Vesuvius Refratarios Ltda, Brasil

Process Metrix LLC

Vesuvius Scandinavia AB, Sweden

Vesuvius Refractory India Private Limited

Vesuvius Australia Pty Ltd.

Vesuvius Canada. Inc.

Vesuvius Inc. (Cleveland Foundry)

Vesuvius PLC.

Vesuvius-Foseco S.A.S. Technical Sales Office SIDERMES S.P.A, Italy

iii) Names of Principal Group Companies / fellow subsidiaries

(with which the Company neither have any transactions nor outstanding balances at current or previous year end)

Vesuvius Overseas Limited, United Kingdom (formerly, Cookson Overseas Limited, United Kingdom)

iv) Key Management Personnel

Mr. Biswadip Gupta - Chairman & Independent Director Mr. Subrata Roy - Managing Director (till December 31, 2018 )

Mr. Ritesh Dungarwal - Managing Director (from January 01, 2019)

Mr. Sudipto Sarkar - Independent Director Mr. Tanmay Ganguly - Director

Mr. Jan Roel van der Sluis - Director (from November 1, 2018)

Mr. Patrick Andre - Director

Miss Nayantara Palchoudhuri - Independent Director

(i) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

Note

Short-term financial assets and liabilities are stated at carrying value which is approximately equal to their fair value.

Categorisation of fair value into level 1, 2 and 3.

Level 1 [Quoted prices in an active market]:

This level of hierarchy includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 [Fair values determined using valuation techniques with observable inputs]:

The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation 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 [Fair values determined using valuation techniques with significant unobservable inputs]:

This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

There are no transfers between levels 1 and 2 during the year.

Short-term financial assets and liabilities are stated at carrying value which is approximately equal to their fair value. The loans and security deposits are fair valued and are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.

Significant estimates

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

7. Financial Risk Management

The Company’s financial assets primarily consists of trade receivables and other receivables, loans, security deposits and cash and bank balances etc., whereas financial liabilities includes trade payables, liabilities for capital expenditure and other financial liabilities. The Company’s business activities exposes it to variety of risks such as fluctuations in foreign currency exchange rates, interest rates, liquidity and credit risk, which may adversely impact the fair value of its financial instruments.

The Company seeks to minimise potential adverse effects of these risks by managing through a structured process laid down by its Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of non-derivative financial instruments, and investment of excess liquidity.

(A) Credit risk

Credit risk refers to risk of financial loss to the Company if customers or counterparties fail to meet their contractual obligations. Credit risk encompasses both the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks. Financial instruments that are subject to credit risk and concentration thereof principally consist of trade receivables, loans receivables and cash and cash equivalents.

Credit risk management

Customer credit risk is managed by the Company through its established policies and procedures which involve evaluation of credit profile of individual customers and regular monitoring of important developments viz. payment history, regulatory changes, industry outlook etc. Outstanding receivables are regularly monitored and an impairment analysis is performed at each reporting date on an individual basis for each major customer, whereas for small customers impairment is assessed collectively for homogeneous groups.

The Company manages credit risk for cash and cash equivalents by placing the deposits with approved counterparties with high credit ratings.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk other than for cash and cash equivalents and other bank balances was Rs. 18,772 as at December 31, 2018 (December 31,2017 : Rs. 22,520), being the total of the carrying amount of financial assets.

Impairment losses on financial assets

None of the Company’s cash equivalents, including time deposits with banks, are past due or impaired. The Company has used expected credit loss model for trade receivables to assess impairment loss or reversal thereof. A summary of movement in allowances for expected credit losses from the beginning to end of the year is provided as under:

(B) Liquidity risk

Liquidity risk implies that the Company may not be able to meet its obligations associated with its financial liabilities. The Company manages its liquidity risk on the basis of business plans that ensures funds required for financing business operations and meeting financial liabilities are available in a timely manner at optimal costs. The Management regularly monitors rolling forecasts of the Company’s liquidity position to ensure it has sufficient cash on an ongoing basis to meet operational fund requirements. Surplus cash generated, over and above operational fund requirement is invested in bank deposits to optimise cash returns while ensuring adequate liquidity for the Company.

All the Company’s financial liabilities are due within one year from the balance sheet date and could be met by realisation of surplus funds deposited with banks.

(C) Market risk

Market risk is the risk that the fair value of future cash flow of financial instruments may fluctuate because of changes in market conditions. Market risk broadly comprises three types of risks namely currency risk, interest rate risk and price risk (for commodities). The above risks may affect the Company’s income and expenses. The Company’s exposure to and management of these risks are explained below:

(i) Foreign currency risk

The Company undertakes transactions (e.g. sale of goods and purchases on raw materials or capital goods) denominated in foreign currencies and thus is exposed to exchange rate fluctuations. The Company evaluates its exchange rate exposure arising from foreign currency transactions and manages the same based upon approved risk management policies which includes managing bank accounts in foreign currency and converting these foreign currency into functional currency when exchange rates are favourable.

Exposure to foreign currency risk

The carrying amounts of foreign currency denominated financial assets and liabilities at the end of the reporting periods are as under:

A 10% appreciation/depreciation of the foreign currencies with respect to functional currency of the Company would result in an increase/decrease in the Company’s net profit before tax by approximately Rs. 205 (2017 : Rs. 312).

(ii) Interest rate risk

The Company does not have any interest bearing financial liabilities. The Company’s interest earning financial assets are primariliy term deposits with banks which are fixed rate interest bearing instruments and accordingly the Company is not significantly exposed to interest rate risk.

8. Capital management

The Company’s capital management is intended to create value for shareholders by facilitating the meeting of long term and short term goals of the Company.

The Company determines the amount of capital required on the basis of annual business plan also taking into consideration any long term strategic investment and expansion plans. The funding needs are met through equity and cash generated from operations.

9. Income tax expense

This note provides an analysis of the Company’s income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Company’s tax positions.

10. Employee benefit obligations

(i) Defined contribution plans

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident and Pension Fund, and Employee State Insurance (‘ESI’) which are defined contribution plans. The Company has no obligations other than to make the specified contributions. The contributions are recognised in the Statement of Profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident and Pension Fund and ESI for the year aggregates to Rs. 449 (2017 : Rs. 431).

ii) Defined benefit plans Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump-sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company makes annual contributions to gratuity funds established as trusts or insurance companies. The Company accounts for the liability for gratuity benefits payable in the future based on an actuarial valuation.

The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:

Assumptions regarding future mortality for gratuity and medical are set, based on actuarial advice in accordance with published statistics and experience. These assumptions translate into an average life expectancy in years for a person retiring at age 60.

Sensitivity analysis

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied while calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

The major categories of plan assets

The defined benefit plans are funded with insurance companies of India. The Company does not have any liberty to manage the funds provided to insurance companies. Thus the composition of each major category of plan assets has not been disclosed.

Risk exposure

Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:

Investment risk:

The defined benefit plans are funded with insurance companies of India. The Company does not have any liberty to manage the funds provided to insurance companies.

Interest risk:

A decrease in the interest rate on plan assets will increase the plan liability.

Life expectancy:

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 at the end of the employment. An increase in the life expectancy of the plan participants will increase the plan liability.

Salary growth risk

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan liability.

Defined benefit liability and employer contributions

Expected contributions to post-employment benefit plans for the year ending December 31, 2018 :

The weighted average duration of the defined benefit obligation (gratuity) is 10 years for December 31, 2018. The expected maturity analysis of undiscounted gratuity is as follows:

Compensated absences

The Company provides benefits in the nature of compensated absences which can be accumulated. The compensated absences are other long term employee benefits plan. The plan is unfunded. Based on actuarial valuation, a provision is recognised in full for the projected obligation and are classified into current and non-current as identified by the actuary. Expenses recognised in the Statement of Profit and loss towards compensated absences includes remeasurement gains and losses.

11. Provisions for taxation has been recognised with reference to profit for the year ended December 31, 2018, in accordance with the provisions of Income-tax Act, 1961 and rules framed thereunder. The ultimate tax liability for the year 2018-19 will be determined on the basis of total taxable income for the year ending March 31, 2019.

12. The management is of the opinion that its international transactions are at arm’s length under the provision of Section 92-92F of the Income-tax Act, 1961.

13 Exceptional items

Exceptional item represents cost of Voluntary Separation Scheme as part of the restructuring activity initiated by the Company.

Source : Dion Global Solutions Limited
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