1. FIRST TIME ADOPTION OF IND AS
These financial statements, for the year ended March 31, 2017, are the first Financial statements that the Company has prepared in accordance with Ind AS together with the comparative period data as at and for the year ended March 31, 2016. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 01, 2015, the Company’s date of transition to Ind AS. This note explains the adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 01, 2015 and the financial statements as at and for the year ended March 31, 2016.
Following Exemptions and / or election applied to the Company for the first Ind AS financial statements
(a) I nd AS 102 has not been applied to equity instruments in share-based payment transactions that vested before April 01, 2015.
(b) The Company has designated unquoted equity instruments held at April 01, 2015 as FVTOCI investments.
(c) The estimates at April 01, 2015 and at March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:
a) FVTOCI - unquoted equity shares
b) FVTPL - quoted equity shares
c) FVTOCI - debt securities
d) Impairment of financial assets based on expected credit loss model
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 01, 2015, the date of transition to Ind AS and as of March 31, 2016.
1. Under the previous GAAP, the Company capitalized exchange differences arising on translation / settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the respective asset and depreciated over the remaining life of the asset. Under Ind AS the exchange difference up to April 1, 2015 is adjusted against the opening balance of retained earnings and for subsequent periods it is recorded in the statement of profit and loss.
2. As per Ind AS, equity instruments to be measured at fair value either through OCI or statement of profit and loss. The Company has designated all the equity investments as FVTOCI investments except for one of the investments which is designated as Fair Value through Profit and Loss (‘FVTPL’) as it was held for trading.
3. Under the previous GAAP, the Company had created provision for impairment of receivables only in respect of specific amount for incurred losses. Under Ind AS 109, impairment allowance has been determined based on Expected Credit Loss model (‘ECL’).
4. The fair value of foreign exchange forward contracts is recognized under Ind AS which was not recognized under the previous GAAP. Under the previous GAAP forward contracts were accounted under AS 11 whereby the premium was recognized to profit and loss over the period of the forward contract.
5. Under the previous GAAP, proposed dividends including DDT were recognized as a liability in the period to which they relate, irrespective of when they are declared. As per Ind AS, dividend is recognized in the period in which it is approved.
6. Under the previous GAAP, interest free lease security deposits (those are refundable on completion for the lease term) and other deposits were recorded at transactional values. Under Ind AS, these security deposits are recognized initially at the fair value. The difference between the fair value and the transaction value of these security deposits has been recognized as prepaid rent. Subsequently, these lease security deposits are measured at amortized cost using the effective interest rate (‘EIR’).
7. Under the previous GAAP, this financial guarantee was not recorded. As per Ind AS, the Company has recognized unearned income for financial guarantee under other financial liability.
8. Under the previous GAAP, the cost of ESOS were recognized using the intrinsic value method. Under Ind AS the cost of ESOS is recognized based on the fair value of the options as at the grant date only for options unvested as at transition date.
9. Adjustments to deferred taxes has been made in accordance, for the above mentioned line items.
10. OCI: Under previous GAAP, the Company has not presented OCI separately. Hence, it has reconciled previous GAAP profit to total comprehensive income as per Ind AS.
11. The transition from previous GAAP to Ind AS has not had a material impact on the statement of cash flows.
12. I n line with the requirements of Ind AS the Company has reclassified certain assets and liabilities as at April 1, 2015 and March 31, 2016. These majorly includes reclassification between current and noncurrent investments, security deposits and prepayments, investments and investment properties
The investment properties consist of commercial and residential properties based on the management’s assessment of the nature, characteristics and risks of each property. As at March 31, 2017 the fair values of the properties are '''' 512.21 million. These valuation are based on valuation performed by an accredited independent value. The Company has no restrictions on the reliability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.
(a) Terms/ rights attached to each class of shares
The Company has only one class of equity shares having a par value '''' 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees.
I n the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by shareholders.
(b) Cash credit facilities:
Cash credit facilities from banks are secured by first pari-passu charge on the entire current assets and second pari-passu charge on the entire movable fixed assets of the Company with other consortium bankers. The cash credit is repayable on demand with interest rates ranging between 9.75% p.a. and 10.00% p.a. (March 31, 2016: between 9.10% p.a. and 10.50% p.a.)
(c) Buyers’ credit facilities:
(i) Secured buyers’ credit facilities from banks are secured by first charge on the current assets and second charge on moveable fixed assets of the Company with other consortium bankers. Interest rates for buyers’ credit are multiline rates ranging between 1.38% p.a. and 1.72% p.a. (March 31, 2016: between 0.91% p.a. & 1.44% p.a. and April 01, 2015: between 0.66% p.a. & 1.09% p.a.) (as mutually agreed). They are repayable within 90 to 180 days
(ii) Interest rates for unsecured buyers’ credits are multiline rates ranging between 1.41% p.a. and 1.82% p.a. (March 31, 2016: between 0.88% p.a. & 1.39% p.a. and April 01, 2015: between 0.80% p.a. & 0.99% p.a.) (as mutually agreed). They are repayable within 90 to 180 days.
The Company has entered into arrangements with various parties whereby the Company has invested in the securities of these parties. In accordance with these arrangements, the said parties have also agreed to offer their advertisements in the Company’s print and non-print media periodically, for a specified term. The unutilized portion of advertisement advances received from these parties as at March 31, 2017 amounting to '''' 29.89 million (March 31, 2016: '''' 146.26 million and April 01, 2015: '''' 299.18 million) is included in ‘Advance from customers’.
2. (a) Related party disclosures:
Following is the list of related parties:
Particulars Related Parties
Related parties with whom transactions have taken place during the year
Related parties where control I Media Corp Limited
exists: DB Info media Private Limited
Key Management Personnel Shri Sudhir Agarwal, Managing Director
Shri Pawan Agarwal, Deputy Managing Director Shri Girish Agarwal, Director Shri P.G. Mishra, Chief Financial Officer Smt Anita Gokhale, Company Secretary Relatives of Key Management Late Shri Ramesh Chandra Agarwal, Director (Father of Shri Sudhir Agarwal, Shri Girish Personnel Agarwal and Shri Pawan Agarwal)
Smt Kasturi Devi Agarwal (Grand Mother of Shri Sudhir Agarwal, Shri Girish Agarwal and Shri Pawan Agarwal)
Smt Jyoti Agarwal (Wife of Shri Sudhir Agarwal)
Smt Namita Agarwal (Wife of Shri Girish Agarwal)
Smt Nitika Agarwal (Wife of Shri Pawan Agarwal)
Enterprises owned or Abhivyakti Kala Kendra
significantly influenced by key Bhaskar Printing Press- MPCG management personnel or their Bhaskar Printing Press- CPH2 relatives Bhaskar Samachar Seva
Bhaskar Publications and Allied Industries Private Limited
Bhaskar Infrastructure Private Limited
Bhaskar Industries Private Limited
Decore Exxoils Private Limited
Bhaskar Venkatesh Products Private Limited
DB Malls Private Limited
DB Power Limited
DB Infrastructures Private Limited
Writers and Publishers Private Limited Deligent Hotel Corporation Private Limited Peacock Trading and Investments Private Limited Dev Fiscal Services Private Limited Stitex Global Limited
Bhopal Financial Services Private Limited
Aarkey Investments Private Limited
Divya Dev Developers Private Limited
Divine Housing Development Company Private Limited
Sharda Solvent Limited
Independent directors Shri Kailash Chandra Chowdhary (upto October 19, 2016)
Shri Piyush Pandey Shri Harish Bijoor Shri Ashwani Kumar Singhal Shri Navin Kumar Kshatriya Smt Anupriya Acharya
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. These transactions are approved by the audit committee of board of directors. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. The Company has not recorded any impairment of receivables relating to amounts owed by related parties during the year ended March 31, 2017, March 31, 2016 and April 01, 2015. This assessment is undertaken in each financial year through examining the financial position of the related party and the market in which the related party operates.
(c) Corporate guarantee given
The Company has given a corporate guarantee of Rs, 234.04 million, (March 31, 2016: Rs, 293.60 million, April 1, 2015: Rs, 326.50 million) in favor of Export Development Canada on behalf of Decore Exxoils Private Limited towards the credit facility availed by Decore Exxoils Private Limited from Export Development Canada for purchase of assets.
(d) Details as required under Regulation 53 (f) read with Para (A) of Schedule VI of SEBI (Listing Obligation and Disclosure requirements) Regulation, 2015 in respect of loans, advances and investments in companies under the same managements.
(a) Indian Performing Rights Society Limited (IPRS)
IPRS had filed a suit against the Company on May 27, 2006 before the Honorable High Court of Delhi contesting against the refusal by the Company to obtain a license from the IPRS with regards to broadcasting / performing its copyrighted works and pay royalty to IPRS.
I PRS had prayed for a permanent injunction restraining the Company from infringing any of the copyrights owned by the IPRS as well as for damages in favor of the IPRS. The Honorable Delhi High Court has denied IPRS’s application for injunction. IPRS had since preferred an appeal in the Honorable Supreme Court. In its Order dated September 20, 2016 the Honorable Supreme Court has upheld the orders of the Honorable Delhi High Court. The Honorable Delhi High Court has reserved its order and the same is yet to be pronounced. During the current year pursuant to favorable decision by the Honorable Supreme Court of India on royalty payable to Indian Performing Rights Society (‘IPRS’) pertaining to the period before June 21, 2012, the Company has written back provision amounting to Rs, 57.67 million. This had been netted off against royalty expense.
Considering the litigation involved, the Company has provided for royalty based on the best judgment assessment of the case for the period after June 2012. The management believes that the provision made in the books is sufficient to cover the liability for royalty, if any, which would be confirmed only after the final result of the litigation.
Since the matter is under litigation, the disclosures required as per the provisions of Ind AS 37 relating to the provisions made are not given as it is expected to prejudice seriously the position of the Company with regards to the litigation.
(b) Phonographic Performance Limited (PPL)
A legal suit was filed by the Company on July 28, 2008 against PPL before the Copy Right Board against the exorbitant rates proposed by PPL for grant of compulsory licenses. The Copy Right Board passed an order on August 25, 2010 by which PPL was directed to charge the proportionate amount (as per the music played) i.e. Royalty was to be calculated @ 2% of the net revenue. Accordingly, the Company is paying royalty to PPL since then. PPL has been claiming that the said revised rates were applicable only for the period starting from August 25, 2010 and the royalty for the period earlier to August 25, 2010 would be charged at a higher rate. PPL had subsequently filed a summary suit in Bombay High Court towards recovery of the said amount. At present the matter is pending before the Bombay High Court.
Considering the litigation involved, the Company has provided for the royalty for the period before August 25, 2010 based on the best judgment assessment of the case. The management believes that the provision made in the books is sufficient to cover the liability for royalty, if any, which would be confirmed only after the final result of the litigation.
Since the matter is under litigation, the disclosures required as per the provisions of Ind AS 37 -relating to the provisions made are not given as it is expected to prejudice seriously the position of the Company with regards to the litigation
(a) Operating lease (for assets taken on lease):
Rentals in respect of operating leases are recognized as an expense in the statement of profit and loss, on a straight-line basis over the lease term.
a. The Company has taken various godown, office and residential premises under operating lease agreements. These are generally renewable by mutual consent.
b. Lease payments recognized for the year are Rs, 342.23 million (March 31, 2016: Rs, 316.32 million)
c. There are no restrictions imposed in these lease agreements. There are escalation clauses in agreement with some parties. There are no purchase options. There are no sub leases.
(b) Operating lease (for assets given on lease):
Rentals in respect of operating leases are recognized as an income in the statement of profit and loss, on a straight-line basis over the lease term.
a. The Company has given plant and machinery and investment property on operating lease arrangement for the period ranging from 1 year to 3 years. The lease arrangement is cancellable with mutual consent.
b. Lease income recognized for the year is Rs, 4.30 million (March 31, 2016: Rs, 3.11 million).
c. There are no restrictions imposed in the lease agreements and there are no escalation clauses in the agreements.
5. CONTINGENT LIABILITIES
Contingent liabilities not provided for are as follows:
a. For details of corporate guarantee given, refer note 28(c).
b. There are several defamation and other legal cases pending against the Company and its directors. These include criminal and civil cases. There are certain employee related cases also pending against the Company. In view of large number of cases, it is impracticable to disclose the details of each case separately. The estimated amount of claims against the Company in respect of these cases is Rs, 9.71 million (March 31, 2016: Rs, 9.28 million, April 1, 2015: Rs, 2.78 million). The estimated contingency in respect of some cases cannot be ascertained. Based on discussions with the solicitors and also the past trend in respect of such cases, the Company believes that there is no present obligation in respect of the above and hence no provision is considered necessary against the same.
c. Income tax demands from Income tax authorities of Rs, 7.55 million (March 31, 2016: Rs, 13.89 million, April 1, 2015: Rs, 7.47 million) relating to various assessment years is outstanding against the Company. These claims are being contested at various forums by the Company. The management does not expect these claims to succeed and accordingly, no provision for these claims has been recognized in the financial statements.
Estimated amount of contracts remaining to be executed on capital account and not provided for Rs, 47.28 million
(March 31, 2016: Rs, 83.51 million, April 1, 2015: Rs, 213.70 million).
(b) Legal and professional charges include sitting fees paid to directors Rs, 0.70 million (March 31, 2016:
Rs, 0.73 million).
7. EMPLOYEE BENEFITS
As per the payment of Gratuity Act, 1972, the Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days’ salary (last drawn salary) for each completed year of service. The scheme of the Company is funded with an insurance company in the form of a qualifying insurance policy.
Management aims to keep annual contribution relatively stable at such a level such that no plan deficits will arise.
The following table’s summaries the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the respective plans of the Company.
8. DETAILS OF DUES TO MICRO AND SMALL ENTERPRISES AS PER MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006
(a) An amount of Rs, 6.14 million (March 31, 2016: Rs, 12.93 million), (April 1, 2015: Rs, 7.00 million) and Rs, Nil, (March 31, 2016: Rs, Nil), (April 1, 2015: Rs, Nil) was due and outstanding to suppliers as at March 31, 2017 on account of principal and interest respectively.
(b) No interest was paid during the year to any supplier (March 31, 2016: Rs, Nil), (April 1, 2015: Rs, Nil).
(c) No interest was paid to any suppliers for payments made beyond the appointed date during the accounting year (March 31, 2016: Rs, Nil), (April 1, 2015: Rs, Nil).
(d) No claims have been received till the end of the year for interest under Micro, Small and Medium Enterprises Development Act, 2006 (March 31, 2016: Rs, Nil), (April 1, 2015: Rs, Nil).
(e) No amount of interest was accrued and unpaid at March 31, 2017 (March 31, 2016: Rs, Nil), (April 1, 2015: Rs, Nil).
The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
O The Company enters into derivative financial instruments majorly foreign exchange forward contracts with the banks. These foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs.
9. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds quoted and unquoted investments .
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management ensures that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The senior management reviews and agrees policies for managing each of these risks, which are summarized below.
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 two types of risk: currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, investments, derivative financial instruments and borrowings.
The sensitivity analysis have been prepared on the basis that the proportion of financial instruments in foreign currencies are all constant as at March 31, 2017.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and non-financial assets and liabilities
The following assumptions have been made in calculating the sensitivity analysis:
O The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial liabilities held at March 31, 2017 and March 31, 2016
Foreign currency sensitivity
The Company procures newsprint from the international markets after considering the prevailing prices in the domestic and international markets. The Company uses foreign exchange forward contracts to manage some of its transaction exposures. These foreign exchange forward contracts are not designated as cash flow hedges and are entered into for the periods consistent with the foreign currency exposure of the underlying transactions, generally from one to six months.
As at balance sheet date, the Company’s net foreign currency exposure (payable) that is not hedged is Rs, 1,030.75 million (March 31, 2016: Rs, 1,407.62 million and April 1, 2015: Rs, 1,594.63 million)
The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives and embedded derivatives. The impact on the Company’s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges and net investment hedges. 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 printing of newspapers and magazines and therefore require a continuous supply of newsprint. The Company’s Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation. Based on a 12-month forecast of the required newsprint supply, the Company hedges the purchase price using forward commodity purchase contracts. The forecast is deemed to be highly probable.
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).
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. Credit quality of a customer is assessed based on an individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored. At March 31, 2017, the Company had 5 customers (March 31, 2016: 6 customers, April 01, 2015: 9 customers) that owed the Company more than '''' 50.00 million each and accounted for approximately 12% (March 31, 2016: 12%, April 01, 2015: 17%) of all the receivables outstanding. There were 50 customers (March 31, 2016: 50 customers, April 01, 2015: 37 customers) with balances greater than '''' 10.00 million accounting for just over 31% (March 31, 2016: 33%, April 01, 2015: 32%) of the total amount receivables.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogeneous Company’s and assessed for impairment collectively. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 11. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.
The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of buyer’s credit and bank loans. All of the Company’s debt will mature in less than one year at March 31, 2017 based on the carrying value of borrowings reflected in the financial statements. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.
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.
I n 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’s capital management, capital includes issued equity capital, securities premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximize the shareholder value.
I n order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2017 and March 31, 2016.