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Wendt (India)

BSE: 505412|NSE: WENDT|ISIN: INE274C01019|SECTOR: Abrasives
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Notes to Accounts Year End : Mar '18

1 COMPANY OVERVIEW

Wendt (India) Limited was incorporated on August 21, 1980 under the provisions of the erstwhile Companies Act,1956, and is a joint venture between Wendt GmbH Germany and Carborundum Universal Limited, India. Wendt (India) Limited is a leading manufacturer of Super Abrasives, High precision Grinding, Honing and Special Purpose Machines and High Precision components. The Company’s registered office is in Bangalore and factory is situated in Hosur, Tamilnadu.

(a) Rights, Preferences and Restrictions attached to shares

The Company has only one class of equity shares with voting rights (one vote per share). The dividends proposed by the Board of directors is subject to approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the equity shareholders are entitled to receive only the residual assets of the Company. The distribution of dividend is in the proportion to the number of equity shares held by the shareholders.

(d) There are no instances of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of 5 years immediately preceding the Balance Sheet date.

2.1 Distributions made and proposed

The amount of per share dividend recognized as distributions to equity shareholders for the year ended March 31, 2018 and March 31,2017 was Rs.25 and Rs. 25 respectively.

The Board of Directors at its meeting held on April 24,2017 had recommended a final dividend of 150% (Rs.15/-per equity share of face value Rs. 10/-each). The proposal was approved by shareholders at the Annual General Meeting held on July 24,2017, this has resulted in a cash outflow of Rs. 361.07 lakhs, inclusive of dividend distribution tax of Rs. 61.07 lakhs. Also, the Board of Directors at its meeting held on January 24, 2018 had declared an interim dividend of 100% (Rs.10/- per equity share of face value of Rs.10/-each). Further, the Board of Directors at its meeting held on April 25,2018 have recommended a final dividend of 150% (Rs. 15/- per equity share of face value of Rs.10/-each) which is subject to approval of shareholders. If approved, this would result in a cash outflow of Rs. 361,07lakhs, inclusive of dividend distribution tax.

(iv) Goods and Service Tax (GST) has been effective from July 1, 2017. Consequently, excise duty, value added tax (VAT), Central sales tax (CST), Service tax etc, have been replaced with GST. Until June 30, 2017, ‘Sale of goods’ included the amount of excise duty recovered on sales. With effect from July 1, 2017, ‘Sale of goods’ excludes the amount of GST recovered. Accordingly, revenue from ‘Sale of goods’ and “Revenue from operations’ for the year ended March 31,2018 are not comparable with those of the previous year.

(v) Exports incentives represent grants in the nature of licenses under Merchandise Export from India Scheme (MEIS) and duty drawback. There are no unfulfilled conditions or contingencies attached to these grants.

The tax impact for deferred tax purposes has been arrived by applying a tax rate of 29.12% (March 31,2017: 34.61%) being the prevailing tax rate applicable for the company for the financial year ending March 31,2019 under the Income tax Act, 1961.

Note 3 - Business Combinations

The Company had acquired the “Diamond Tool” business from Star Diamond Tools Private Limited at a consideration of Rs. 250

This acquisition was made to enhance the company’s offerings in the field of one of our existing product line stationery dressers and this would also augment ourexisting manufacturing capability and capacity.

(i) The initial accounting for the acquisition of the business was provisionally determined as at the year ended March 31, 2016, pending installation of the tangible assets and registration of the intangible assets. Accordingly, as on March 31, 2016, the Company had classified these assets under the head “Capital Work-in-progress” and the inventories of Rs. 90.45 lakhs were included under current assets for the year ended March 31, 2016. The tangible assets were received by the company in the month of April 2016 and was subsequently installed and commissioned. These tangible assets have been capitalized during theyear2016-17.

(ii) The intangible assets comprising of Brands & Trademarks and Patents. Trademarks have been filed for registration in the name of the company. These intangible assets acquired in the business combination amounting to Rs. 131.00 lakhs have been recognized separately from Goodwill at their fair value at the acquisition date (which is regarded as their cost).

(iii) Goodwill arising on the acquisition of Star Diamond Tools Private Limited amounting to Rs. 10.27 lakhs has been recognized.

Note 4 - Financial Instruments

4.1 Capital Management

The capital includes issued equity share capital and all other equity reserves attributable to the equity holders. The Company’s objectives when managing capital is to safeguard their ability to continue as a going concern while maximizing the return to shareholders through the optimization of cash and cash equivalents along with investment which is predominantly investment in liquid and shortterm mutual funds.

4.2 Categories of financial instruments

The carrying value and fair value of financial instruments by categories as of March 31, 2018 and March 31, 2017 were as follows:

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

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a currenttransaction between willing parties, otherthan in aforced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

i) The fair value of the quoted mutual funds is based on price quotations at reporting date. The fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available fordebtorsimilarterms, credit riskand remaining maturities.

Fairvalue hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level2- Inputs otherthan quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.as prices) or indirectly (i.e. Derived from prices).

Level 3- Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value measurement hierarchy of financial assets measured at fair value on recurring basis as at March 31,2018 and March 31,2017.

There have been no transfers among Level 1, Level 2 and Level 3 during the period.

Note 4.3 Financial Risk management objectives and polices

The Company treasury function provides service to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the company through internal risk report which analyze exposures by degree and magnitude of risk. These risk include market risk, currency risk, credit risk and liquidity risk.

The Company seeks to minimize the effects of these risks by using policies approved by the board of directors, which provide written principles on interest risk, credit risk and investment of excess liquidity. The Company does notenter into trade financial instruments for speculative purpose.

The Company treasury function reports quarterly to the senior management team that monitors risk and policies implemented to mitigate risk exposures.

4.3.1 Market risk

The company is exposed primarily to the financial risk of change in foreign currency exchange rate. The Company transacts in various foreign currencies. Foreign currencies are recognised at the rate of exchange prevailing at the date of transaction. Company being a net exporter, follows the policy of natural hedging of foreign exchange earnings. Net forex gain is always at positive side.

4.3.1 (a) Foreign currency risk management

The company undertakes transactions denominated in foreign currencies, consequently, the company is exposed to exchange rate fluctuations. The company, being a net exporter, follows the policy of natural hedging of foreign exchange earnings and outflow and hence it does not take any forward covers.

The carrying amounts of the Company’s foreign currency (unhedged) denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

4.3.2 Credit Risk

Credit risk is the risk that counter party 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 financial institutions, foreign exchange transactions and other financial instruments.

The customers are broadly classified into high risk and medium risk, accordingly credit limit exposure is fixed. The company carries out payment performance review of all customers and based on this analysis, risk category of customers are evaluated annually. Further, the utilization of credit limit is regularly monitored through inbuilt locks in the ERP system.

4.3.3 Liquidity Risk

Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s business and reputation.

The Company regularly reviews its receivables, inventory and other working capital elements to mitigate any liquidity concerns. Any surplus from the business funds needs is parked in debt mutual funds (liquid / liquid plus) of reputed Asset Management Companies to provide day today working capital.

Also, the company has unutilized credit limits with bank.

The following table presents the maturity period of all financial liabilities as at March 31,2018 and March 31,2017.

Note 5 - Segment Disclosure

5.1 Products and services from which reportable segments derive their revenue

The CEO of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, Operating Segments. Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the CODM, in deciding how to allocate resources and assessing performance.

1) The Company is organised into two main business segments, namely:

a) Super Abrasives and

b) Machines, Accessories and Components.

The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments. The Company has identified business segments as its primary segments. The reportable business segments are in line with the segment wise information which is being presented to the CODM.

2) Segment Assets and Segment Liabilities of the Company’s business have not been identified to any reportable segment, as these are used interchangeably between segments.

3) Segment Revenue and expenses have been identified to segments on the basis of their relationships to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis have been included under “Other un-allocable Expenditure”.

5.2 Information about major customers

No single customer represents 10% or more of the company’s total revenue for the year ended March 31, 2018 and March 31, 2017.

Note 6 - Leases

(a) The Company is obligated under cancelable operating leases towards residential accommodation, which are renewable at the option of both the lessor and the lessee. Total rental expense debited to the Statement of Profit and Loss under cancelable operating leases amounts to Rs. 16.51 lakhs (March 31,2017: Rs 15.60 lakhs).

There are no sub-lease payments received/receivable recognised in the statement of profit and loss. Also, there are no contingent rents payable and there are no restrictions imposed by lease agreements such as those concerning dividends and additional debt.

(b) The Company has leased out a portion of its factory building to a related party. Total rental income credited to the Statement of Profit and Loss amounts to Rs. 14.76 lakhs (March 31,2017: Rs. 13.42 lakhs)

The lease agreement is fora period of 12 months and can be terminated by either party by giving one month notice.

Details of the above referred lease are as given below:

The depreciation recognized in respect of the factory building for the year is Rs. 53.79 lakhs.

There are no contingent rents receivable.

Note 7 - Employee Benefits

Defined Contribution Plans

The Company operates defined contribution benefit plans for all qualifying employees of the company.

Superannuation fund, Providend fund and pension fund are defined contribution plans towards which the company makes contribution at predetermined rates to the Superannuation Trust funded with Life Insurance Corporation Of India and the Regional Provident Fund Commissioner respectively. The same is debited to the Statement of Profit and Loss accounts based on the amount of contribution required to be made and services rendered by the employees. The Company also makes contributions to state plans namely Employee’s State Insurance Fund and Employee’s Pension Scheme 1995. The Company has no further payment obligation once the contributions have been paid.

Defined Benefit Plans

The Company is having defined benefit plan namely gratuity for all qualifying employees of the company.

The liability for gratuity to employees as at the Balance sheet date is determined on the basis of actuarial valuation using Projected Unit Credit method. The amount is funded to a Gratuity fund administered by the trustees and managed by Life Insurance Corporation of India.

Remeasurement, comprising actuarial gain and losses and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected in retained earnings and is not reclassified to profit or loss.

The plans typically expose the company to actuarial risks such as investment risk, interest rate risk, longevity risk and salary risk.

A. Gratuity

The following tables set out the funded status of the gratuity plans and the amounts recognised in the Company’s financial statements as at March 31,2018 and March 31,2017:

Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual changes in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

The weighted average duration of the defined benefit obligation is 10 years (March 31,2017:10 years)

The Company expects to make a contribution of Rs. 50 lakhs (as at March 31,2017: Rs.29.69 lakhs) to the defined benefit plans during the next financial year. The employee benefit obligations(net) have been included in current liabilities based on the expected contributions.

Note 8 - Related Party Transactions

1) List of Related parties:

i) Party with whom control exists -Subsidiaries

(a) Wendt Grinding Technologies Ltd, Thailand

(b) Wendt Middle East FZE

ii) Venturers and its subsidiaries, to the joint venture with whom transactions have taken place during the year

(a) Carborundum Universal Limited (CUMI)

(1) CumiAmerica

(2) Cumi (Australia) Pty Ltd

(3) Cumi Abrasives & Ceramics Company Ltd

(4) Net Access India Ltd

(b) Wendt GmbH Germany

iii) Company in which KMP/Director is a director

(a) Ace Designers Ltd

(b) Pragati Transmission P Ltd

(c) Tespa Tools Pvt Ltd

(d) Sterling Abrasives Limited

iv) Key Management Personnel

Mr.Rajesh Khanna, Chief Executive

v) Relatives of Key Management Personnel

Mrs. Preethi Khanna-Wifeof Mr. Rajesh Khanna

2) Transaction with related parties during the year ended March 31,2018 and March 31,2017 are as follows:

a) The related party relationships are as identified by the Company, on the basis of information available with the Company and relied upon by the auditors.

b) No amounts in respect of related parties have been written off / back otherthan the amount included above during the year.

c) Key managerial personnel do not exercise significant influence over the gratuity and superannuation trust of the company.

* Amountfor both the years lying in unclaimed / unpaid dividend account

8.1 The Company has a working capital limit with State Bank of India, secured by hypothecation of stock and book debts and collateral charge on all fixed assets other than land and building.

Notes:-

I) Revenue expenditure shown above includes Depreciation on R&D assets of Rs. 49.33 lakhs (Previous year Rs.46.96 lakhs), Consultancy Services of Rs. 12.78 lakhs (Previous year Rs. 30.78 lakhs), Consultancy travel expenditure of Rs. 3.51 lakhs (Previous year Rs. 4.17 lakhs) & Contract manpower of Rs. NIL lakhs (Previous year Rs. 0.16 lakhs).

Note 9 - Previous years’s figures have been regrouped / reclassified to conform to the current year’s presentation for the purpose of comparability

Note 10 - Dislosure on Specified Bank Notes (SBN)

During the year ended March 31, 2017, the Company had specified bank notes or other denomination note as defined in the MCA notification G.S.R. 308(E) dated March 31, 2017. The details of Specified Bank Notes (SBN) held and transacted during the period from November 8,2016 to December 30,2016, the denomination wise SBNs and other notes as perthe notification is given below:

Note 11 - Corporate Social Responsibiltiy

(a) Gross amount required to be spent by the company during the year :- Rs. 32.36lakhs (Previous Year Rs. 32.34 lakhs)

(b) Amount spent by the company during the year on :- Rs. 32.36lakhs (Previous Year Rs. 32.34 lakhs)

Note 12 - Approval of financial statements

The financial statements were approved for issue by the board of directors on April 25, 2018.

Source : Dion Global Solutions Limited
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