1.1 Company Overview
DCM Shriram Limited (‘the Company’) is a public limited company incorporated in India. The Holding company, Sumant Investments Private Limited owns 60.51% of equity share capital of the Company. The registered office of the Company is at 1st Floor, Kanchenjunga Building, 18 Barakhamba Road, New Delhi -110001, India.
The financial statements are approved by Board of Directors in their board meeting dated May 1,2017.
The business portfolio of the Company comprises of:
c. Shriram Farm Solutions
f. Others: (Fenesta, Cement and Hariyali Kisaan Bazaar)
Company has presence at various parts of India and its principal Places of Businesses together with major products are as under:
1.2 Basis of preparation of financial statements
The Financial Statements are prepared on an accrual basis under historical cost convention except for certain financial instruments which are measured at fair value. These financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) as prescribed under Section 133 of the Companies Act, 2013 (“The Act”) and other relevant provisions of the Act, as applicable.
The financial statements up to the year ended March 31, 2016 were prepared in accordance with Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 and other relevant provisions of the Act (‘Previous GAAP’). These are Company’s first Ind AS financial statements. The date of transition to Ind AS is April 1, 2015. Refer note 49 for an explanation of the transition from previous GAAP to Ind AS and the effect on the Company’s financial position, financial performance and cash flows.
3. In accordance with past practice, the Company has taken revenue credits aggregating Rs. 66.88 crores (2015-16- Rs. 55.85 crores) receivable for urea subsidy claims , which are pending notification/ final acceptance by ‘Fertiliser Industry Coordination Committee’ (FICC), Government of India, in pursuance of the Retention Price Scheme administered for nitrogenous fertilisers. Necessary adjustments to revenue credits so accrued will be made on issuance of notification by FICC, Government of India.
4. Segment reporting
A. Operating segments and principal activities:
Based on the guiding principles given in Ind AS - 108 ‘Operating segments’, the Company’s operating segments, based on products include: Fertilisers (manufacturing of urea), Chloro-Vinyl (manufacturing of poly-vinyl chloride, carbide and chlor alkali products), Shriram Farm solutions (trading of di-ammonium phosphate, muriate of potash, super phosphate, other fertilisers, seeds and pesticides), Sugar (manufacturing of sugar products and co-generation of Power), Bioseed (production of hybrid seeds), Others (UPVC window systems, Cement, Rural retail and plaster of paris). Sale of power from the power generation facilities set up for the operating segments is included in their respective results.
B Geographical segments:
Since the Company’s activities/ operations are primarily within the country and considering the nature of products/ services it deals in, the risks and returns are same and as such there is only one geographical segment.
C. Segment accounting policies:
In addition to the significant accounting policies applicable to the operating segments as set out in note 1.3, the accounting policies in relation to segment accounting are as under:
(i) Segment revenue and expenses:
Joint revenue and joint expenses of segments are allocated amongst them on a reasonable basis. All other segment revenue and expenses are directly attributable to the segments.
(ii) Segment assets and liabilities:
Segment assets include all operating assets used by a segment and consist principally of operating cash, trade receivables, inventories and property, plant and equipments, net of allowances and provisions, which are reported as direct offsets in the balance sheet. Segment liabilities include all operating liabilities and consist principally of trade payables. Segment assets and liabilities do not include deferred income taxes. While most of the assets/ liabilities can be directly attributed to individual segment, the carrying amount of certain assets/ liabilities pertaining to two or more segments are allocated to the segments on a reasonable basis.
(iii) Inter segment sales:
Inter segment sales between operating segments are accounted for at market price. These transactions are eliminated in consolidation.
D. Revenue from major products:
Revenue from major products is given in note 54
E. Geographical information:
(i) Revenue from external customers: The Company’s revenue from external customers by location of operation are as under:
F. Information about major customer
There is no single customer who contributed 10% or more of the Company’s revenue during the year ended March 31, 2017 and March 31,2016
5. Related party disclosures
A. Name of related party and nature of related party relationship
1. Holding company: Sumant Investments Private Limited
DCM Shriram Credit and Investments Limited, Bioseed India Limited, DCM Shriram Infrastructure Limited, DCM Shriram Aqua Foods Limited, Hariyali Rural Ventures Limited, Fenesta India Limited, Shri Ganpati Fertilizers Limited, Shriram Bioseed Ventures Limited, Bioseeds Limited, Shriram Bioseed (Thailand) Ltd., Bioseed Research Philippines Inc., Bioseeds Holdings PTE. Ltd., Bioseed Vietnam Limited, PT Shriram Seed Indonesia, Bioseed Research USA Inc., PT Shriram Genetics Indonesia, DCM Shriram Foundation, Shridhar Shriram Foundation, Hariyali Services Limited#
#dissolved during financial year 2016-17
3. Joint venture: Shriram Axiall Private Limited
4. Key Managerial Persons, their relatives and HUFs:
Executive Directors, their relatives and HUFs (with whom transactions are there):
Mr. AjayS . Shriram, Mr. VikramS . Shriram, Mr. Ajit S . Shriram, Mr. N . J .Singh, Mr. K . K . Kaul, Mr. AdityaA . Shriram (relative of Mr. AjayS . Shriram), Mr. Anand A. Shriram (relative of Mr. AjayS. Shriram), Mr. PranavV. Shriram (relative of Mr. Vikram S. Shriram)1, Mrs. Anuradha Bishnoi (relative of Mr. AjayS. Shriram), M/s. AjayS. Shriram (HUF), M/s. Vikram S. Shriram (HUF), M/s. Ajit S. Shriram (HUF).
Independent Directors and their relatives (with whom transactions are there):
Mr. Pradeep Dinodia, Mr. Vimal Bhandari, Mr. Sunil Kant Munjal, Mrs. Ramni Nirula, Mr. Vikramjit Sen2, Mr. Pravesh Sharma2, Mr. Sharad Shrivastva, Mrs. Pallavi Dinodia (relative of Mr. Pradeep Dinodia), Mr. S.S. Baijal3, Mr. Arun Bharat Ram3, Mr. DSengupta3
1 w.e.f. December 01,2016
2 w.e.f. August 09,2016
5. Trust: Sir Shriram Foundation, DCM Shriram Employees’ Provident Fund Trust, DCM Shriram Officers’ Superannuation Fund Trust
6. Employee Benefits
The Company has classified the various benefits provided to employees as under:-
(i) Defined contribution plans:
The Company has recognized the following amounts in the statement of profit and loss:
(ii) Disclosure in respect of defined benefit plans (Gratuity) is as under:
The principal assumptions used for the purpose of actuarial valuation were as under:
(f) Major categories of plan assets
The plan assets at one of the unit are maintained with LIC of India Gratuity Scheme. The details of investment maintained by LIC are not available and have therefore not been disclosed.
(g) The Company expects to contribute Rs. 0.75 crores to the LIC fund during the year 2017-18.
(h) The average expected future working life of members of the defined benefit obligation as at March 31, 2017 is 15.82 years (as at March 31, 2016: 15.97 years)
7. (a) Amount recognised in statement of profit and loss for investment properties
(b) Leasing arrangements
One of the investment property has been leased out on long term operating leases with monthly rental payment. Minimum lease payment receivable under non-cancellable operating lease are as under:
(c) Fair value
The fair value of the Company’s investment properties as at March 31, 2017, March 31, 2016 and April 1, 2015 have been arrived at on the basis of a valuation carried out by government approved independent valuers. The inputs used in fair valuation are circle rate of the property, prevailing market price of the similar kind of property in that area and other relevant factors.
Information about the fair value of the Company’s investment properties and fair value hierarchy are as follows:
8. Disclosure in respect of operating leases as per Ind AS 17 ‘Leases’ :
(a) Assets taken on lease:
(i) The Company has entered into lease agreements for lease of offices, showrooms etc., generally for a period of 5/15 years with renewal option on mutual consent, and which can be terminated after lock-in-period by serving notice period as per the terms of the agreements.
(b) Assets given on lease:
(i) The Company has entered into operating lease arrangements for buildings (including certain other assets). The details of leased assets are as under:
9. Information w.r.t. a joint venture is as under:
Name of Joint Venture Shriram Axiall Private Limited
Country of incorporation India
10. Provision for contingencies in note 14 represents provision for various contingencies resulting from issues relating to reconstruction arrangement of the companies and other uncertainties requiring management judgement.
11.1 Donation includes Rs. 3 crores (2015-16 - Rs. Nil) to Satya Electoral Trust as political contribution.
11.2 Expenditure on corporate social responsibility activities under section 135 of the Companies Act 2013 as under:
12. Research and development expenses included under relevant heads in the statement of profit and loss Rs. 42.80 crores (2015-16- Rs. 39.03 crores).
The details of expenditure incurred on scientific research and development centres recognized by Department of Scientific and Industrial Research (DSIR) are as under:
13. Employee share based payments
The Company has an Employees Stock Purchase Scheme (DCM Shriram ESPS) which is administered through DCM Shriram Employees Benefits Trust based on acquisition of shares from the market to provide equity based incentives to employees under the Scheme. The shares offered, lock-in-period and grant price may be different for different eligible participants and determined at the time of every grant of shares. The expenses related to the grant of shares under the Scheme is accounted for on the basis of the fair value (which equals to market price of the Company’s share on date of grant less exercise price) of share on the date of grant and is amortized on a straight line basis over the lock-in period, if any.
14. Capital management
The Company endeavors to optimize debt and equity balance and provide adequate strength to the balance sheet. The Company monitors capital on the basis of debt equity ratio.
15. Financial risk management
The Company’s activities expose it to various financial risks: Credit risk, Liquidity risk and Market risk.
15.1 Credit risk management
Credit risk arises from credit exposure to customers (including receivables and deposit), loans and other financial assets. The Company perform credit evaluation and defines credit limits for each customer/counter party. The Company also continuously reviews and monitors the same.
The provision for doubtful debts or provision for impairment of investments etc. is made on case to case basis, based on the information related to financial position, past history, and other relevant available information about the counterparty.
The Company also makes general provision for lifetime expected credit loss based on its previous experience of provision/write off in previous years.
15.2 Liquidity risk management
(i) The Company manages liquidity by ensuring control on its working capital which involves adjusting production levels and purchases to market demand and daily sales of production and low receivables. It also ensures adequate credit facilities sanctioned from bank to finance the peak estimated funds requirements. The working capital credit facilities are continuing facilities which are reviewed and renewed every year.
The Company also ensures that the long term funds requirements are met through adequate availability of long term capital (Debt & Equity).
(ii) Maturities of financials liabilities
The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amount disclosed in the table are the contractual undiscounted cash flow.
(a) The Company’s operations are mainly in India and therefore rupee denominated, except the following:
- Foreign currency denominated loans (Long term & Short term).
- Imports of some raw material, stores & spares and capital equipments.
The Company follows a policy of keeping these liabilities fully hedged against foreign currencies. Regarding interest rate fluctuation, it follows a policy of partial hedge.
Some of the rupee liabilities have interest linked to the bank’s MCLR or Financial market benchmark rates and are subject to variation in such rates.
(b) The Company’s exposure to foreign currency risk at the end of the reporting period is with respect to loan of USD 5 mn (INR 32.40 crores; March 31,2016-Rs. 33.13 crores; April 1,2015-Rs31.25 crores) which is hedged by an option contract that has become ineffective.
With respect to the above unhedged exposure the sensitivity is as follows:
(d) Interest rate risk exposure
The exposure of the Company’s borrowing to interest rate change at the end of the reporting period are as follows:
Variable interest rate loans are exposed to Interest rate risk, the impact on profit or loss before tax may be as follows:
16. Fair value hierarchy
Some of the Company’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table presents fair value hierachy of financial assets and financial liabilities measured at fair value on a recurring basis:
During the year, Ministry of Coal de-allocated the lignite block earlier allocated to the Company and consequent there to, the land purchased for lignite block is re-classified as assets held for sale and is included in the ‘unallocated’ business segment.
Assets classified as held for sale is measured at the lower of the carrying amount and fair value less costs to sell at the reporting date. The fair value of the assets held for sale is determined using level 3 measurement as per the fair value hierarchy set out in fair value measurement disclosures.
17. Based on the information available with the Company the principal amount and interest due to Micro and small enterprise as defined under the “Micro, Small and Medium Enterprise Development Act 2006” is Rs 0.82 crores (March 31, 2016 - Rs 1.14 crores; April 1, 2015 - Rs. 3.26 crores) and Rs. Nil (March 31,2016 - Rs Nil; April 1,2015 - Rs. Nil) respectively.
18. Transition to Ind AS - Principle and reconciliation
These financial statements for the year ended March 31,2017, are the Company’s first annual financial statements prepared in accordance with Ind AS. The accounting policies set out in note 1.3 have been applied in preparing the financial statements for the year ended March 31, 2017, comparative information presented in these financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS balance sheet as at April 1, 2015 (the date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted/reclassified the amounts reported previously in financial statements prepared in accordance with the Accounting Standards specified under Section 133 of the Companies Act 2013 (The Act) and other relevant provisions of the Act (Previous GAAP) to comply with Ind AS. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following notes.
Exemptions on first time adoption of Ind AS 101:-
(i) Property, plant and equipment, intangible assets and investment property at deemed cost
The Company has opted to measure all of its property, plant and equipment, intangible assets and investment property at their previous GAAP carrying value and use that carrying value as its deemed cost.
(ii) Investment in equity shares of subsidiaries and joint venture at deemed cost
The Company has opted to measure its investment in subsidiaries and joint venture at their previous GAAP carrying value in separate financial statement and use that carrying value as deemed cost.
(iii) Business combinations
The Company has opted to apply Ind AS 103 ‘Business combination’ prospectively to business combinations occuring after its transition date. Business combinations occuring prior to the transition date have not been restated.
(iv) Compound financial instruments
As per Ind AS 101, the Group has opted to split compound financial instrument into separate equity and liability component which were outstanding at the date of transition.
The major reasons for adjustments in Previous GAAP numbers are as under:
(i) Forward exchange contracts/derivative instruments
The Company has adopted hedge accounting prospectively from transition date as per Ind AS 109. Consequently, the Company has fair valued all derivatives (including forward contracts) on transition date and difference between the fair value of such contracts and previous GAAP carrying amount have been recognised in the retained earnings in the opening Ind AS balance sheet.
Under previous GAAP! transaction costs incurred in connection with borrowings were charged to profit or loss as and when incurred. Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in profit or loss over the tenure of the borrowings as part of interest expense using effective interest rate method.
(iii) Interest income on loan measured at amortized cost
Under previous GAAP! the loan given by the Company were carried at book value. However, under Ind AS, these loans are required to be measured initially at fair value on the date of transition and subsequently at amortized cost. Accordingly, interest income is recognised on measurement of loan at amortised cost.
(iv) Leasehold land
Under previous GAAP the leasehold land was considered as part of fixed asset. As per Ind AS-17 leasehold land has now been considered as operating lease and the premium paid on leasehold land is amortized over the period of the lease. The proportionate unamortized amount upto the date of transition is adjusted against retained earnings in the opening Ind AS balance sheet.
(v) Non-current assets held for sale
Under previous GAAP non-current asset held for sale were valued at lower of cost or net realisable value considering all the asset as one disposal group and were shown under ’other current assets’. As per Ind AS-105, these assets are measured at lower of cost or fair value on individual asset basis.
(vi) Deferred tax
Deferred tax on account of Ind AS adjustments on transition date are recognised in the retained earnings in the opening Ind AS balance sheet.
(vii) Proposed dividend on equity shares and dividend tax thereon
Under previous GAAP dividend proposed by the Board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events and accordingly it was recognised as provision in the books of account. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the annual general meeting. Accordingly, proposed dividend earlier recognised in the same financial year is reversed and recognised in the year of approval by the shareholders in the annual general meeting.
(viii) Shares held by Trust under ESPS scheme
The Company has given loan to a trust formed for the implementation of Employee Stock Purchase Scheme of the Company. The shares purchased out of the loan and remaining ungranted to employees under ESPS scheme is shown as part of ‘Other equity’.
(ix) Actuarial gains/losses on defined benefit obligation
The Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP the actuarial gains and losses on gratuity are charged to the statement of profit and loss. Under Ind AS, such actuarial gains or losses are required to be recognised in other comprehensive income. Accordingly, actuarial losses for financial year 2015-16 amounting to Rs 2.55 crores are re-classified from statement of profit and loss to ‘other comprehensive income’. There is no impact on total equity as a result of this adjustment.
Adjustments to the statement of cash flows.
The transition from Indian GAAP to Ind-AS had no significant impact on cash flows generated by the company.
19. Disclosure on specified bank notes (SBNs)
The details of Specified Bank Notes (SBNs) or other denomination notes (as defined in the MCA notification G.S.R. 308(E) dated March 31, 2017) held and transacted during the period from November 8,2016 to December 30,2016, is given below:
20. Proposed dividend
The Board of Directors, in its meeting held on May 1,2017, have recommended a final dividend of Rs. 0.80 per equity share of Rs. 2/-each aggregating to Rs. 15.64 crores (including corporate dividend tax) for the financial year ended March 31, 2017. The recommendation is subject to the approval of shareholders at the Annual General Meeting to be held on August 1,2017.
The Board of Directors, in its meeting held on May 10, 2016, recommended a final dividend of Rs. 0.40 per equity share of Rs. 2/- each for the financial year ended March 31, 2016 and the same was approved by the shareholders at the Annual General Meeting held on August 9, 2016. This resulted in outflow of Rs. 7.82 crores (including corporate dividend tax).