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SENSEX NIFTY India | Notes to Account > Electric Equipment > Notes to Account from V-Guard Industries - BSE: 532953, NSE: VGUARD

V-Guard Industries

BSE: 532953|NSE: VGUARD|ISIN: INE951I01027|SECTOR: Electric Equipment
Nov 14, 13:41
0.9 (0.39%)
VOLUME 2,622
Nov 14, 13:47
0.85 (0.36%)
VOLUME 87,149
Mar 18
Notes to Accounts Year End : Mar '19


V-Guard Industries Limited (‘V-Guard’ or ‘the Company’) is a public company domiciled in India with its registered office at Vennala High School Road, Kochi, Kerala. The Company is engaged in the manufacturing, trading and selling of a wide range of products as given below:

The Company’s manufacturing facilities are located at K.G. Chavady, Coimbatore, Tamil Nadu; at Kashipur, Utharakhand; at Kala Amb, Himachal Pradesh; at SIPCOT Industrial growth center, Perundurai, Tamil Nadu and at Majitar, Rangpo and Mamring in Sikkim. The Company’s shares are listed on BSE Ltd. and National Stock Exchange of India Limited (NSE).

The standalone financial statements were authorized by the Board of Directors for issue in accordance with resolution passed on May 29, 2019.

1.1. Leasehold land represents land obtained on long term lease from State Industries Promotion Corporation of Tamilnadu Limited and considered as finance lease.

1.2. The Company has not capitalised any borrowing cost in the current and previous year.

1.3. Capital work in progress as at March 31, 2019 includes Rs. 569.97 lakhs [March 31, 2018: Rs. 435.01 lakhs) which represents assets under constructions at various plants, warehouses and office buildings.

1.4. Land, buildings and plant with a carrying amount of Rs. Nil [March 31, 2018 - Rs. 1,793 lakhs) are subject to a hypothecation to secure the Company’s bank loans. Also refer note 19.

1.5. During the year, the Company has capitalized the following expenses of revenue nature to the cost of property, plant and equipment/ capital work-in-progress [CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalized by the Company. No expenses of revenue nature is capitalised during the year ended March 31, 2018.

Note (i): Inter corporate loan represents unsecured loan given to M/s Sakthi Accumulators Private Limited (‘the vendor’) for enhancing its manufacturing infrastructure. The loan is to be repaid over a period of three years starting from March 30, 2018 and ending on March 30, 2021. One of the promoter director of the vendor has provided personal guarantee for the repayment of loan. Interest rate of the loan is 10% p.a.

Note (ii): Others represents unsecured loan given to Mr. Gopal Singh Cintury , the landlord for construction of building to be occupied by the Company, at an interest rate of 9% p.a.. The loan is repayable by adjustment of monthly rent payable to the landlord pursuant to lease agreement entered for a period of five years. The landlord’s son has provided personal guarantee for the repayment of loan.

Note (iii): There are no loans as at March 31, 2019 and March 31, 2018 which have significant increase in credit risk or which are credit impaired.

(a) Trade receivables are generally on terms of 15 to 90 days and are non-interest bearing except in case of overdue payments.

(b) Trade receivables are net of Rs. 6,764.72 lakhs (March 31, 2018: Rs. 5,240.98 lakhs) which represents discounts and rebates/trade incentives due to customers.

(c) No trade receivables are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.

(d) Bankers have first charge on trade receivables in respect of the working capital limits availed by the Company. Refer note 23.

(i) Includes deposits of Rs. 82.59 lakhs (March 31, 2018: Rs. 77.75 lakhs) provided as security against bank guarantees.

(ii) At March 31, 2019, the Company had available Rs. 27,484 lakhs (March 31, 2018: Rs. 25,558 lakhs) of undrawn committed borrowing / credit facilities.

(iii) Changes in liabilities arising from financing activities are as follows:

(b) Terms/rights attached to equity shares:

The Company has issued only one class of equity shares having a face value of Rs.1 per share (March 31, 2018: Rs.1 per share). Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the equity share holders will be entitled to receive remaining assets of the Company, after settling the dues of preferential and other creditors as per priority. The distribution will be in proportion to the number of equity shares held by the shareholders.

Proposed dividends on equity shares are subject to approval at the annual general meeting and are not recognised as a liability (including DDT thereon) as at the balance sheet date.

(f) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note 45.

(a) Cash credits from banks have been secured by hypothecation by way of pari passu first charge on all current assets of the Company, both present and future, including stock of goods and book debts. The short term fund carries interest varying from 8.35% to 10.15% p.a (March 31, 2018: 9.63% to 11.40% p.a)

(b) The Company has arranged Channel Finance Facilities for its customers from various banks. As per the terms of these facilities, should the customers default in making payment, after exhausting other modes of recovery the bankers have recourse on the Company up to Rs. 1,000 lakhs. There were no recourse on the Company as at March 31, 2018. The total amount guaranteed by the Company towards such recourses under the Channel Financing Facilities as at March 31, 2019 is Rs. 1,000 lakhs (March 31, 2018: Nil) and is included under Borrowings.

(i) Trade payables are non interest bearing and are normally settled in 7 days to 120 days term.

(ii) Trade payables are unsecured and for amounts due to related parties refer note 43.

(iii) Disclosures required under section 22 of the Micro, Small and Medium Enterprises Development Act, 2006:

(i) Sale of products includes excise duty collected from customers of Rs. Nil (Year ended March 31, 2018: Rs. 953.42 lakhs). Sale of products net of excise duty is Rs. 253,747.37 lakhs (Year ended March 31, 2018: Rs. 228,529.66 lakhs). Sales for periods up to June 30, 2017 includes excise duty. From July 1, 2017 onwards the excise duty and most indirect taxes in India have been replaced by Goods and Service Tax (GST). The Company collects GST on behalf of the Government. Hence, GST is not included in Sales. In view of the aforesaid change in indirect taxes, Sales for the year ended March 31, 2019 is strictly not comparable with Sales for the year ended March 31, 2018.

(ii) The Company is entitled to ‘Scheme of budgetary support’ under Goods and Service Tax law in respect of eligible manufacturing units located in specified regions.

(iii) Disaggregated revenue information

Set out below is the disaggregation of the Company’s revenue from contracts with customers:

Trade receivables are non-interest bearing and are generally on terms of 15 to 90 days. In FY 2018-19, Rs. 252.74 Lakhs was recognised as provision for expected credit losses on trade receivables. Conract liabilities represents advance received from customers for sale of products.

(vii) Performance obligation

The performance obligation for sale of products and scrap are satisfied upon delivery/despatch of goods depending upon terms with customers and payment is generally due within 15 to 90 days from delivery. Some contracts provide customers with a right of return, volume based discounts, rebates and other promotion incentive schemes, which give rise to variable consideration subject to constraint. The performance obligation for product repair services is satisfied over-time and payment is generally due upon completion of service and acceptance of the customer. There are no unsatisfied or partially satisfied performance obligations as at March 31, 2019.


A) Operating lease: Company as lessee

The Company has entered into commercial leases on certain vehicles, land and building. These leases have an average life of between one and five years with no cancellation option included in these contracts. There are no restrictions placed upon the Company by entering into these leases.

(i) There are numerous interpretative issues relating to the Supreme Court (“SC”) judgement on Provident Fund (“PF”) dated February 28, 2019. As a matter of caution, the Company has made a provision on a prospective basis from the date of the SC order. The Company will update its provision, on receiving further clarity on the subject.

(ii) The Company is involved in taxation and other disputes, lawsuits, proceedings etc. including commercial matters and claims relating to Company’s products that arise from time to time in the ordinary course of business. Management is of the view that such claims are not tenable and will not have any material adverse effect on the Company’s financial position and results of operations.


a) These financial statement are separate financial statements prepared in accordance with Ind AS-27 “Separate Financial Statements”

With effect from August 31, 2017, the Company acquired 74% equity stake in Guts Electro-Mech Limited (“Guts”) for a total purchase consideration of Rs. 618.26 lakhs which represents amount paid to promoters of Guts and subscription to fresh issue of equity shares of Guts. Guts is a public limited company engaged in the business of Switch Gear. The Company has a Call Option to acquire the balance 26% stake in Guts, which option can be exercised by the Company any time. Similarly, the original promoter of Guts, holding 26% stake has a Put Option to sell his stake to the Company, which Put Option can be exercised by him after the end of three years from the aforesaid date. The Call Option/ Put Option is exercisable by the parties at the price specified in the purchase agreement linked to the time of exercise. The Put Option liability is initially measured at the present value of the amount payable on exercise of the option, as a financial liability amounting to Rs. 317.15 lakhs, with corresponding increase in Investment cost of subsidiary. The subsequent changes in carrying amount of the Put Option liability is recognised in the statement of profit and loss. The Call Option is initially measured at fair value as a financial asset amounting to Rs. 50.46 lakhs with corresponding reduction in Investment cost of subsidiary and subsequent changes in fair value through profit or loss.


Defined Contribution plan

The Company mainly makes Provident Fund (PF) and Employee’s state insurance (ESI) contributions to a defined contribution plan for qualifying employees. Under the Scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company has recognised Rs. 759.20 lakhs (year ended March 31, 2018: Rs. 643.75 lakhs) towards PF contributions (included in note 33(b)) and Rs. 37.71 lakhs (year ended March 31, 2018: Rs. 47.03 lakhs) towards ESI contributions (included in note 33(b)) in the statement of profit and loss. The contributions payable to this plan by the Company is at the rate specified in the rules of the scheme.

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.

Asset Liability Matching Strategies

The Company has purchased insurance policy, which is basically a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance company, as part of the policy rules, makes payment of all gratuity outgoes happening during the year (subject to sufficiency of funds under the policy). The policy, thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in a increase in liability without corresponding increase in the asset).

Funding arrangements and Funding Policy

The Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The plan assets are maintained with Life Insurance Corporation of India (LIC).


The segment reporting of the Company has been prepared in accordance with Ind AS-108, “Operating Segment”. For management purposes, the Company is organised into business units based on its products and has three reportable segments as follows

Electronics Segment includes Stabilizers, Digital UPS, UPS and Solar Inverters;

Electricals Segment includes PVC Insulated Cables, Switch Gears, Single Phase Pumps, Three Phase Pumps and Modular Switches; and

Consumer Durables Segment includes Electric Water Heaters, Solar Water Heaters, Fans, Induction Cooktops, Mixer Grinders, Rice cookers, Glass-top Gas Stoves and Air Coolers.

The Management Committee of the Company monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of the nature of product and have been identified as per the quantitative criteria specified in the Ind AS. The management has complied with the aggregation criteria as specified in Ind-AS 108 and the same has been applied based on the nature of products, considering their end users and as considered relevant and appropriate for the industry the Company operates in.

Segment assets include all operating assets used by a segment and consist principally of debtors, inventories, advances and fixed assets. Assets at corporate level are not allocable to segments on a reasonable basis and thus the same have not been allocated. Segment liabilities include all operating liabilities and consist principally of creditors and accrued liability.

Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to segments as they are also managed on Company basis.

Capital expenditure consists of addition of property, plant and equipment and intangible assets.

Transfer pricing between operating segments are on an arm length basis in a manner similar to transaction with third parties.

1. The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Company as a whole.

2. Represents additional related parties as per Companies Act, 2013 with whom transactions have taken place during the year.

3. The Company has formed V-Guard Foundation, a Company incorporated under Section 8 of the Companies Act, 2013, as its principal arm for implementing the Company’s CSR programs/projects in compliance with Section 135 of the Companies Act, 2013. Two directors of the Company are the directors of V-Guard Foundation. During the year ended March 31, 2019, the Company has contributed Rs. 304 lakhs (Year ended March 31, 2018: Nil) towards expenditure for CSR activities.

4. The purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free.


The members of the Company by way of a special resolution under Section 81(1)(A) of the Companies Act, 1956, passed on 14th May, 2013 through postal ballot procedure, approved Employees Stock Option Scheme, 2013 (ESOS 2013) for grant of stock options to eligible employees of the Company. According to the Scheme, the eligible employees will be entitled to options as given below subject to satisfaction of prescribed vesting conditions. All options granted under ESOS 2013 can be exercised within 6 years from the date of vesting. The number of shares allocated for allotment under the ESOS 2013 is 19,538,118 equity shares of Rs. 1/- each. The schemes are monitored and supervised by the Nomination and Remuneration Committee of the Board of Directors in compliance with the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and amendments thereof from time to time.

Note: The numbers in parenthesis pertains to the previous year ended March 31, 2018.

Weighted average fair value of the options granted during the year was Rs. 209.33 (2017-18: Rs. 214.47).

Weighted average equity share price at the date of exercise of options during the year was Rs. 205.90 (2017-18: Rs. 235.83). The value of the underlying shares has been determined by an independent valuer. The following assumptions were used for calculation of fair value of grants in accordance with Binomial model:

The risk free interest rates are determined based on the zero-coupon sovereign bond yields with maturity equal to the expected term of the option. Volatility calculation is based on historical stock prices using standard deviation of daily change in stock price. The historical period is taken into account to match the expected life of the option. Dividend yield has been calculated taking into account expected rate of dividend on equity share price as on grant date.


The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities in future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Revenue from sale of products

Revenue is measured at the fair value of consideration received/receivable from its customers and in determining the transaction price for the sale of products, the Company considers the effects of various factors such as volume based discounts, rebates and other promotion incentives schemes (‘trade schemes’) provided to the customers. At year end, amounts for trade schemes that have been incurred and not yet provided to the customers are estimated and accrued.

The Company estimates variable considerations to be included in the transaction price for the sale of goods with rights of return. The Company updates its assessment of expected returns quarterly and the refund liabilities are adjusted accordingly. Estimates of expected returns are sensitive to changes in circumstances and the Company’s past experience regarding returns and may not be representative of customers’ actual returns in the future.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a Discounted Cash Flow (DCF) model. The cash flows are derived from the budget and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using appropriate valuation techniques. The inputs for these valuations are taken from observable sources where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of various inputs including liquidity risk, credit risk, volatility etc. Changes in assumptions/ judgements about these factors could effect the reported fair value of financial instruments.

The Put Option liability granted on the non controlling interests of subsidiary is accounted for at the present value of the amount payable on exercise of the option, as a financial liability. The subsequent changes in carrying amount at each reporting date is recognised in the statement of profit and loss. The determination of the carrying value is based on discounted cash flows. The key assumption taken into consideration is the discount factor. As part of the accounting for the investment in subsidiary, put option liability with an estimated value of Rs. 317.15 lakhs was recognised at the acquisition date and remeasured to Rs. 363.85 lakhs as at the reporting date.

Defined benefit plans

The cost of the defined benefit gratuity plan and other post-employment leave benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates. Further details about the gratuity obligation are given in Note 41.

Share-based payments

Estimating fair value for share-based payment requires evaluation of vesting conditions and determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility, dividend yield, forfeitures and making assumptions about them. The assumptions and model used for estimating fair value for share based payment transactions are disclosed in Note 45.

Warranty provision

Warranty provision is determined based on the historical trend of warranty expense for the same types of goods for which the warranty is currently being determined, after adjusting for unusual factors related to the goods that were sold. It is very unlikely that actual warranty claims will exactly match the historical trend of warranty expenses and hence such estimates are reviewed annually for any material changes in assumptions and likelihood of occurrence.

The management assessed that fair value of cash and cash equivalents, trade receivables, other financial assets, trade payables and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Long-term receivables/advances given are evaluated by the Company based on parameters such as interest rates and individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

The fair value of investments in mutual funds units is based on the net asset value (‘NAV’) as stated by the issuers of these mutual fund units in the published statements as at balance sheet date. NAV represents the price at which the issuer will issue further units of mutual funds and the price at which issuers will redeem such units from the investors.

The fair value of the derivative instrument- call option has been determined using valuation techniques with market observable inputs. The valuation techniques incorporate various inputs including risk free interest rates and volatility.

The fair value of loans and borrowings is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. The same would be sensitive to a reasonably possible change in the forecast cash flows or the discount rate. The fair value of Put Option Liability is determined based on the present value of the amount payable on exercise of the option. There are no unobservable inputs that impact fair value.


The Company’s business activities are exposed to a variety of financial risks, namely liquidity risk, market risks and credit risk. The Company’s senior management has the overall responsibility for establishing and governing the Company’s risk management framework. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Audit Committee of the Company.

A. Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities.

The Company’s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses.

The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended March 31, 2019 and March 31, 2018. 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 ongoing 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 and other highly marketable investments, such as mutual funds, with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

For long term borrowings, the Company also focuses on maintaining / improving its credit ratings to ensure that appropriate refinancing options are available on the respective due dates.

B. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and commodity price risk. Financial instruments affected by market risk include loans, borrowings and deposits.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because these borrowings are at fixed interest rate and hence the exposure to change in interest rate is insignificant. of changes in market interest rates. This risk exist mainly on account of borrowings of the Company.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risks arising from exposures to US Dollars from the Company’s import of goods. The Company manages this foreign currency risk by using foreign currency forward contracts to hedge its import liabilities. The Company has hedged 79% of foreign currency exposure as on March 31, 2019. The Company’s exposure to foreign currency changes for all other currencies is not material.

Commodity Price risk

The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing manufacture of industrial and domestic cable and other electronic items and therefore require a continuous supply of copper, being the major input used in the manufacturing. Due to the significantly increased volatility of the price of the Copper, the Company has entered into various purchase contracts for this material for which there is an active market. The Company’s Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation. The Company partly mitigated the risk of price volatility by entering into the contract for the purchase of these material based on average price for each month.

C. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities including deposits with banks and other financial assets.

Trade receivables

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and all major customers are covered under credit insurance. An impairment analysis is performed at each reporting date by grouping a large number of minor receivables into homogenous groups and assess them for impairment collectively. The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 13. The Company does not hold any collateral as security except for the deposits and bank guarantees received from the customers. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several locations and operate in largely independent markets.

Other financial assets

Credit risk from balances with banks and financial institutions and in respect of loans is managed by the Company in accordance with the Company’s policy. Investments of surplus funds are made only in highly marketable liquid fund instruments with appropriate maturities to optimise the cash return on instruments while ensuring sufficient liquidity to meet its liabilities.

D. Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.

In order to avoid excessive concentrations of risk, the Company’s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.


For the purpose of the Company capital management, capital includes issued equity capital and other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders. The capital structure of the Company is based on management’s judgement of its strategic and day-to-day needs with a focus on total equity so as to maintain investor, creditors and market confidence. The Company monitors Capital using Gearing ratio, which is net debt divided by total capital plus net debt.


As at March 31, 2019, the Company has provided guarantee amounting to Rs. 800 lakhs to a bank for the borrowings availed by the subsidiary of the Company - Guts Electro-Mech Limited (“Guts”) . The borrowing is availed by Guts for working capital requirements and purchase of machineries. The Company has not given any loans and advances in the nature of loans to subsidiaries, associates or companies / firms in which directors are interested.


The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standards:

Ind As 116 Leases

Ind AS 116 Leases was notified by MCA on March 30, 2019 and it replaces Ind AS 17 Leases, including appendices thereto. Ind AS 116 is effective for annual periods beginning on or after April 1, 2019. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. The standard includes two recognition exemptions for lessees - leases of ‘low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under Ind AS 116 is substantially unchanged from today’s accounting under Ind AS 17. Lessors will continue to classify all leases using the same classification principle as in Ind AS 17 and distinguish between two types of leases: operating and finance leases. The Company intends to adopt these standards from April 1, 2019 and is in the process of implementing the new standard and expects that it will have no material effects on the results of the operations of the Company.

Appendix C to Ind AS 12 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of Ind AS 12 and does not apply to taxes or levies outside the scope of Ind AS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

a. Whether an entity considers uncertain tax treatments separately

b. The assumptions an entity makes about the examination of tax treatments by taxation authorities

c. How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

d. How an entity considers changes in facts and circumstances

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. In determining the approach that better predicts the resolution of the uncertainty, an entity might consider, for example, (a) how it prepares its income tax filings and supports tax treatments; or (b) how the entity expects the taxation authority to make its examination and resolve issues that might arise from that examination. The interpretation is effective for annual reporting periods beginning on or after April 1, 2019, but certain transition reliefs are available. The Company will apply the interpretation from its effective date. As the taxation of the Company is not complex, the adoption of this standard is not likely to have a material impact on the financial statements.

Ind As 23 Borrowing Costs

The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments, i.e. April 1, 2019. Since the Company’s current practice is in line with these amendments, the Company does not expect any effect on its financial statements.

Source : Dion Global Solutions Limited
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