FUTURE BEML Notes to Accounts

Note No. 1: Corporate Information :


The accompanying financial statements comprise of the financial statements of BEML Limited (the Company) for the year ended 31 March 2017. The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognised stock exchanges in India. The registered office of the Company is located at Bengaluru, Karnataka, India. The Company is a Mini Ratna Category - I public sector enterprise and is under the administrative control of the Department of Defence Production, Ministry of Defence. BEML manufactures and supplies defence ground support equipment such as Tatra based high mobility trucks, aircraft towing tractors etc. Under Mining and Construction business, the company manufactures and supplies equipment like bull dozers, excavators, dumpers, shovels, loaders and motor graders to various user segments and under Rail and Metro business, manufactures and supplies rail coaches, metro cars, ACEMUs, OHE cars, steel and aluminium wagons to the rail and metro sector. Information on other related party and nature of relationships of the Company is provided in Note 39C. These financial statements were authorised for issue in accordance with a resolution of the directors on 30-05-2017.


2.1 Basis of preparation and Statement of Compliance


a. The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of the Companies Act,2013 (the ‘Act’) and other relevant provisions of the Act.


For all periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with Companies (Accounting Standards) Rules, 2006 notified under section 133 of the Companies Act,2013 (the ‘Act’) and other relevant provisions of the Act (‘Previous GAAP’), including accounting standards in accordance with the Companies (Accounting Standards) Rules, 2015 (as amended). These financial statements for the year ended 31 March 2017 with comparatives of year ended 31 March 2016 are the first the Company has prepared in accordance with Ind AS. Refer to note 39O(v) for information on how the Company has adopted Ind AS.


b. The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:


- Derivative financial instruments.


- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments),


- Defined benefit and other long-term employee benefits obligations.


c. The financial statements are presented in Indian Rupee (INR) which is the functional and the presentation currency of the Company and all values are rounded to the nearest lakhs (INR 00,000), except when otherwise indicated.


d. Preparation of the financial statements in conformity with Ind AS requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the Financial Statements are prudent and reasonable. Future results could differ due to these estimates.


e. Assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company’s operating cycle is considered as twelve months for the purpose of current / non-current classification of assets and liabilities.


f. The Company revises its accounting policies if the change is required due to a change in Ind AS or if the change will provide more relevant and reliable information to the users of the financial statements. Changes in accounting policies are applied retrospectively. A change in an accounting estimate that results in changes in the carrying amounts of recognised assets or liabilities or to profit or loss is applied prospectively in the period(s) of change. Discovery of errors results in revisions retrospectively by restating the comparative amounts of assets, liabilities and equity of the earliest prior period in which the error is discovered. The opening balances of the earliest period presented are also restated.


Note 3: Property, Plant and Equipment


A. (i) Carrying value of vehicles own use includes equipment offered to customers for trials on No Cost No Commitment (NCNC) basis Rs.137.98 Lakhs (PreviousYear-’58.62Lakhs).


(ii) Carrying value of plant and equipment includes equipment offered to customers for trials on No Cost No Commitment (NCNC) basis Rs.94.29 Lakhs (Previous Year - Rs.Nil).


B. Property, Plant and Equipment


i) Buildings include carrying value of building at Mumbai and Ranchi pending registration / katha transfer at Rs.16.92 Lakhs (Previous Year - Rs.17.45 Lakhs)


ii) The Company has taken land measuring 1109 acres and two workshops on lease for a period of 10 years vide Lease Agreement dated 5th May 2004, w.e.f. 28.04.2004 from M/s Bharat Gold Mines Limited (BGML) (A Company under orders of winding up by BIFR), and a sum of Rs.100 Lakhs was paid as non-refundable deposit, (included under Other non-current assets (Note no.11)). As per the terms of the Lease agreement, this deposit shall be adjusted against the outright sale/transfer of ownership that may be fixed for the property and lessee shall be free to construct new building/ alter the existing building/lay roads/fence the land in the interest of furthering its business to suit its use and on expiry of the lease the said building shall vest with the lessor on payment of consideration based on value prevailing on the date of handing over of the property. The Company had incurred on the above land a sum of Rs.1452.95 lakhs [carrying value –Rs.1044.44 Lakhs (Previous Year - Rs.1093.18 lakhs)] on Buildings included in Property. Plant and Equipment as at year end.


Vide order dated 09.07.2013, the Hon’ble Supreme Court of India upheld the decision of the Union Government to float a global tender of BGML assets with an observation about the existence of sublease of a portion of the land to BEML Ltd expiring on 28.04.2014 to be included in the tender documents. The Company filed an Interlocutory application before the Hon’ble Supreme Court of India, praying for exclusion of land leased to BEML from the purview of global tender, which was dismissed. Since the lease agreement provides for the continuation of the lease even after the expiry of lease period on 28.04.2014 till the final decision of the Company / Government in this regard, the operations of the company on the above land is continued. Appropriate accounting action will be considered based on the outcome of the tender process.


iii) Lease hold Land includes leased land allotted by Kerala Industrial Infrastructure Development Corporation (KIIDC) measuring 374.59 acres for a lease premium of Rs.2547.21 Lakhs (excluding Service Tax) (Previous Year - Rs.2547.21 Lakhs excluding Service Tax) for 99 years lease period with effect from 01.07.2009. The actual land handed over by KIIDC was measuring 374.16 acres and the revised lease premium payable is Rs.2544.29 Lakhs only. Adjustment in financial statement will be made on formal amendment of lease agreement by KIIDC.


iv) Lease Hold Land includes land measuring 101175.92 Sq. Mtrs taken on perpetual lease from KIADB (Bangalore Aerospace, SEZ Park) at a cost of Rs.5126.00 Lakhs (Previous Year - Rs.5126.00 Lakhs).


v) Lease Hold Land includes land at cost Rs.129.41 Lakhs at Hyderabad for which registration will be completed after development of showroom.


vi) No Provision considered necessary for impairment of assets as the realizable value of assets technically assessed is more than the carrying cost of these assets.


vii) Free Hold Land includes land measuring 555.37 acres at Mysore costing Rs.321.23 Lakhs (including additional compensation ofRs.183.57 Lakhs demanded by KIADB) for which title deeds have to be obtained from KIADB. As per the demand of KIADB, provision of interest amounting to Rs.509.08 Lakhs (Previous Year - Rs.486.60 Lakhs) up to period 31st March 2017 has been made. However, matter has been taken up with KIADB for waiving of interest which is pending before KIADB Board. Liability for both interest and additional compensation has been created. Registration will be made once the matter is settled with KIADB Board.


viii) Free Hold Land measuring 3.647 acres of land, surrendered to BBMP against TDR (at cost) is Rs.4.58 Lakhs. Free Hold Land measuring 1.937 acres of land surrendered to BBMP for which TDR yet to be received (at cost) is Rs.2.43 Lakhs. Above TDR will be utilised for further construction.


ix) Company has taken action to obtain title documents in respect of the following immovable properties.


(1) Flat at Roshan comp, Madras - Rs.4.04 Lakhs.


(2) Flat at Ashadeep, New Delhi - Rs.2.80 Lakhs.


(3) Office building at Nagpur - Rs.27.18 Lakhs.


(4) Lease Hold Land at Singrauli - Rs.1.75 Lakhs.


x) For details of property, plant and equipment hypothecated by way of a first charge against borrowings and other facilities availed, refer Note no. 20 and 24


xi) For information on estimated capital contracts pertaining to the acquisition of property, plant and equipment, refer Note no. 39 D II a.


C. Amount of borrowing cost capitalised on addition of assets during the year is as under:


- Plant & Machinery Rs.169.28 Lakhs


D. Since there is no investment property in the Company as on 31.03.2017, fair value of investment property is Nil (Previous Year - Nil)


a. BEML along with Midwest Granite Private Limited formed a joint venture company in 2007 to conduct excavation and extraction of mineral resources. The agreement was signed in September 2005 whereby BEML has a 45% share in the operations of the joint venture and the remaining 55% is held by Midwest Granite Private Limited.


b. The Joint Venture Company BEML Midwest Ltd. has not prepared its financial statements as at 31st March, 2017 due to litigation pending before National Company Law Tribunal. Hence, disclosure requirements under Ind AS-28 (Investments in Associates and Joint Ventures) could not be complied with. In the absence of financial statements of the JV, the same has not been consolidated with BEML financial statements.


c. The company had issued corporate guarantee to Bank for facilities extended to BEML Midwest Limited, for Rs.1912.50 Lakhs. Since BEML Midwest Limited failed to pay, the Bank concerned invoked the corporate guarantee and claimed from the company. However the company has refused to pay the claim on the ground that the claim relating to forward contracts were entered into without the approval of board of BEML Midwest Limited and that the majority shareholder has misappropriated and acted beyond the mandate without complying with the terms and conditions specified by the Board of BEML Midwest Limited. The matter is pending before Debt Recovery Tribunal (DRT). The company does not envisage any cash outflow in this regard.


Lease deposits represent deposits paid as security for office space and flats taken on rent.


Inter Corporate Loan balance as on 31.03.2017 represent outstanding loan to M/s JK Tyres Ltd. The loan carry interest at the rate of SBI PLR less 2.25%. Currently 11.75% (Previous Year 11.80%) and are unsecured from borrowers. Against this loan the company has received Inter Corporate Loan from M/s Coal India Ltd. which is accounted as unsecured loan in Note No. 20.


Note 4: Income taxes


The substantively enacted tax rate as on 31 March 2017 is 34.61% and as on 31 March 2016 was 34.61% for deferred tax purposes.


The substantively enacted tax rate as on 31 March 2017 is 34.61% and as on 31 March 2016 was 34.61% for deferred tax purposes.


a. The Company has entered into a Consortium Agreement (MAMC Consortium) with M/s. Coal India Limited (CIL) and M/s. Damodar Valley Corporation (DVC) on 08.06.2010 for acquiring specified assets of M/s. Mining and Allied Machinery Corporation Limited (under liquidation). The agreement, inter-alia, provided for formation of a Joint Venture company with a shareholding pattern of 48:26:26 among BEML, CIL and DVC respectively. The Company has paid the proportionate share of Rs.4800.00 Lakhs towards the total bid consideration of Rs.10000.00 Lakhs towards the said acquisition, based on the order passed by the Hon’ble High Court of Calcutta. The said assets are taken possession by the MAMC Consortium. Further, the Company has incurred a sum of Rs.944.31 Lakhs (Previous Year - Rs.875.68 Lakhs) towards maintenance, security and other related expenditure. The expenditure incurred by CIL and DVC on account of this proposal is not ascertained. The total sum of’5744.31 Lakhs (Previous Year - Rs.5675.68 Lakhs) is disclosed as ‘Advance to MAMC consortium’, pending allotment of equity shares in the capital of the JV company. Since the company intends to treat this as a long term investment, independent valuation of the assets taken over has been done and there is no diminution in value of investments. Formulation of business plan and approval of shareholders’ agreement from MOD is being pursued.


Further, a company in the name of ‘MAMC Industries Limited’ (MIL) was formed and incorporated as a wholly-owned subsidiary company for the intended purpose of JV formation. Shareholders’ agreement, as duly approved by the Boards of all the three members of the consortium, has been submitted to Ministry of Defence for necessary approval. After obtaining the said approval, MIL, would be converted into a JV Company. The Company has advanced a sum of Rs.601.76 Lakhs (Previous Year - Rs.601.44 Lakhs) on account of MIL, which is included under the head ‘Advances to related parties’.


Note 5: Inventories (Lower of cost and Net realisable value)


a. Raw materials & Components include materials lying with sub contractors Rs.1855.05 Lakhs (Previous Year - Rs.2087.38 Lakhs). Of these, confirmation from the parties is awaited for Rs.588.75 lakhs (Previous Year - Rs.137.94 Lakhs).


b. The closing stock of work-in-progress and finished goods are stated at lower of standard cost, which approximates to actuals, and net realisable value. The difference between the actual cost of production and the standard cost is not material.


c. Variances arising on account of difference between standard cost and the actual cost, on account of change in the nature of inputs from bought-out to internally manufactured or vice versa, timing difference between standard cost and actual occurrence during the financial period and fluctuations in the material prices, is adjusted in the cost of production in order not to carry forward the period variances to subsequent financial period.


d. Allowance towards obsolescence is made as per the provisioning norms and is based on ageing of inventory.


e. The Carbon Credits are included under Finished Goods at a total value of Rs.1.42 Lakhs (Rs.21.58 per unit of Verified Emission Reductions (VERs)). Total VERs certified and pending for realization is 6589 units. The Certified Emission Reduction (CER) is valued at cost as required by Guidance Note on CER issued by ICAI.


BEML has formed a 100% owned subsidiary in Brazil with the intention of penetrating demand in the local market and provide high quality machinery and equipment in the construction and mining industry. BEML commenced operations via its wholly owned subsidiary but found stiff competition in the Brazilian market with competitors possessing higher market and consumer knowledge and conducting operations by means of easier access to resources. As there is no operations in ‘BEML Brazil Industrial Ltda’ presently, BEML is examining future course of action for the subsidiary company. The subsidiary has bank deposits in the local bank that earns a compounding interest and the expenses of administration and other overhead charges of the subsidiary are incurred from such deposits.


Note 6: Trade receivables


*i. Trade receivables - Outstanding for period exceeding six months include Rs.925.87 Lakhs (Previous Year - Rs.925.87 Lakhs) towards interest rate difference on advance amount received from Ministry of Defence (MoD). This amount pertains to interest rate difference between deposit rate and interest recovered at the rate of 9.50% by MoD during FY 2006-07, 2007-08 and 2009-10 from various bills. The matter has been taken up with MoD and it is under their consideration.


ii. Trade receivables - Outstanding for period exceeding six months include Rs.4899.99 Lakhs (Previous Year Rs.4899.99 Lakhs) towards exchange rate difference and escalation for import of components in respect of a long term contract for Design, Development and Supply, entered into with Ministry of Defence (MoD) in 2001. This contract provided for import content denominated in US Dollar with a clause for escalation and exchange rate variation. As the import of materials was from a country in the European Union which adopted Euro as its International transaction currency, the company was forced to import in Euro currency from January, 2007 to meet its obligations under the contract. The Euro as a trading currency was not contemplated at the time of entering the contract placed by the customer. The request for amendment from US Dollar to Euro and the consequential Escalation and Exchange Rate variation is pending with the customer. The company does not expect any material impact on this account, sequel to the reassessment of the escalation and exchange rate variation, based on an acceptable formula for the customer.


Note 7: Cash and cash equivalents


a. The Company earns no interest on balances with banks in current accounts.


b. Balances with banks include the following on which there were restrictions placed on use and / or held on behalf of third parties:


ESCROW account balance to be distributed among consortium members Rs.174.79 Lakhs (Previous Year Rs.5189.58 Lakhs) & BEML share is Rs.9.80 Lakhs (Previous Year Rs.Nil)


c. Out ofthe Cash Credit Limit of Rs.100000 Lakhs sanctioned to the company by Consortium Bankers, the amount drawn by the company as on 31st March is Rs.11285.16 Lakhs (Previous Year Rs.15367.44 Lakhs)


d. For the purpose ofthe cash flow statement, cash and cash equivalents comprise the following:


Rights and restrictions attached to equity shares


The company has only one class of share, i.e., equity shares having the face value of Rs.10 per share. Each holder of equity share is entitled to one vote per share. Dividend is paid in Indian Rupees. The dividend recommended by the Board of Directors


No shares of the Company is held by its subsidiaries. The Company does not have any holding company.


No shares of the Company is reserved for issue under options and contracts/commitments for the sale of shares / disinvestment.


The Board of Directors in their meeting held on is subject to the approval of the shareholders at the ensuing Annual General Meeting. In the event of liquidation of the Company, equity shareholders will be entitled to receive remaining assets of the Company after distribution of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.


30th May 2017 recommended a dividend of Rs.8/per equity share (i.e., 80%) for the financial year ended 31st March 2017, subject to the approval of shareholders at the ensuing Annual General Meeting. If approved, this would result in a cash outflow of approximately Rs.4009.79 Lakhs including corporate dividend tax.


1. For movement in the provisions during the year refer Note No. 28.


2. The provision for employee benefits represents annual leave and vested long service entitlements accrued.


3. Warranty provisions are recognised on a contract-by-contract basis for goods sold over the warranty period. The provision is based on estimates of probable likelihood of product failure and returns based on current sales level and past experience


4. Provision for unexpired obligations is towards supply of Backup Spares against guaranteed availability contracts.


Note 8: Other non-current liabilities


The government grant income is amortised to profit or loss on a straight line basis over the term of interest free loan (Note 31).


a. Company received an interest free loan of Rs.944.00 Lakhs from Government of Kerala (Note 20). The same has been initially recognised at fair value and the difference between the proceeds and fair value is recognised as deferred government grant.


Micro and Small Enterprises (MSE)


The information under MSMED Act, 2006 has been disclosed to the extent such vendors have been identified by the company. The details of amounts outstanding to them based on available information with the Company is as under :


i. The company has entered into a consortium agreement with one international partner for the supply of Metro coaches to Delhi Metro Rail Corporation Ltd, (DMRCL). As per the agreement, the company is responsible to raise the bills at the full value ofthe contract including consortium scope on DMRCL, as terminal excise duty and CST thereon is discharged by the company.


A. Ind AS 19 (Employee Benefits)


a. Leave Salary


This is an unfunded employee benefit plan categorized under other long term employee benefits in terms of Ind AS 19. The obligation for compensated absence has been actuarially valued and liability provided accordingly.


b. Post Retirement Medical Scheme


1. Employees


(i) The company has a post retirement defined benefit medical scheme where an insurance policy is taken by the company for providing mediclaim benefits to the superannuated employees who opt for the scheme. The Company pays 2/3 rd insurance premium and the balance is paid by the superannuated employees.


(ii) The results of the actuarial study for the obligation of the medical benefit as computed by the actuary are shown below:


(iii) Sensitivity analysis of significant assumptions


The following table presents a sensitivity analysis to one of the relevant actuarial assumption, holding other assumptions constant, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumptions that were reasonably possible at the reporting date.


The estimates of future salary increases considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors.


2. Officers


For officers, from the year 2015-16 a new Post Retirement Medical Scheme has been introduced where a percentage of Basic salary and DA of officers will be contributed to a separate fund and the fund arrange to provide medical insurance to retired officers. Company has contributed 3% of the basic and DA of officers amounting to Rs.527.42 Lakhs during 2016-17 for the scheme. Company has no further liability other than the contribution to the fund. Hence the scheme is a defined contribution plan and no actuarial valuation is required.


c. Interest Rate Guarantee on Provident Fund


(i) Provident Fund Trust of the Company has to declare interest on Provident Fund at a rate not less than that declared by the Employees’ Provident Fund Organisation. In case the Trust is not able to meet the interest liability, Company has to make good the shortfall. This is a defined benefit plan and the Company has got the same actuarially valued and there is no additional liability that needs to be provided for the year.


d. Officers Pension Scheme


Based on the guidelines of Ministry of Defence, Company has implemented “BEML Executive Superannuation (Pension) Scheme” for Officers of the Company. The Scheme is a defined contribution plan and the contribution made is being charged off in the year of contribution. Being a defined contribution plan no actuarial valuation is done.


e. Gratuity


(i) The employees’ gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method.


(ii) The results of the actuarial study for the obligation for employee benefits as computed by the actuary are shown below:


(iii) Sensitivity analysis of significant assumptions


The following table presents a sensitivity analysis to one of the relevant actuarial assumption, holding other assumptions constant, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumptions that were reasonably possible at the reporting date.


The estimates of future salary increases considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors.


(v) Investment details


The plan assets under the fund are deposited under approved securities as follows:


Ind AS 23 (Borrowing Costs)


The amount of interest capitalized during the Year is Rs.169.28 Lakhs (Previous Year - Rs.699.97 Lakhs).


Note 9: Other Disclosures


A. Basic / Diluted Earnings Per Equity Share


B. In terms of Notification No. S.O.2437(E) dated 04-09-2015 of the Ministry of Corporate Affairs, the Board at its meeting held on 27.05.2016 has given consent with regard to non-disclosure of information as required under paragraphs 5(ii) (a) (1), 5(ii) (a) (2), 5(iii) and Para 5(viii) (a), (b), (c) and (e) of Part II to Schedule III of the Companies Act, 2013, in the Annual accounts for the Financial Year 2015-16 onwards.


C. Ind AS 24 - Related Parties


In accordance with the requirements of Ind AS 24, following are details of the transactions during the year with related parties.


Transactions with related parties


1. The details of related party transactions entered into by the Company are as follows: i. Name of the Subsidiary Company M/s. Vignyan Industries Limited, (VIL) Tarikere


iii. Name of the Joint Venture Company - M/s. BEML Midwest Limited, Hyderabad. Shareholding 45%.


iv. Name of the Subsidiary - M/s. BEML Brazil Industrial Ltda


4. Considering the wide scope of the definition of Related Party under section 2(76); Relative under section 2(77) and Key Managerial Personnel under section 2(51) of Companies Act, 2013 and the requirement under Ind AS 24 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the disclosure with respect to Related Party transactions has been restricted to Subsidiary / Joint Venture / Associate companies and to any other Related Party as declared by Directors and Key Managerial Personnel. Accordingly, the compliance with Related Party Transactions under section 188, Ind AS 24 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been made to the extent data is available with the Company.


D. Contingent liabilities & Commitments


I. Contingent liabilities


a. Claims against the Company not acknowledged as debts


i Disputed statutory demands (Customs Duty, Central Excise, Service Tax, Sales Tax/VAT etc.,) - Rs.59307.40 Lakhs (Previous Year –Rs.57046.22 Lakhs).


ii Other claims - legal cases etc. Rs.15431.30 Lakhs (Previous Year - Rs.52629.58 Lakhs).


b. Guarantees


Corporate Guarantee issued to bankers on behalf of M/s. BEML Midwest Ltd (Joint Venture company) Rs.1912.50 Lakhs (Previous Year -Rs.1912.50 Lakhs). The matter is subjudice.


c. Other money for which the company is contingently liable - Rs.Nil (Previous Year -’Nil).


II. Commitments


a. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.5934.42 Lakhs (Previous Year - Rs.2270.81 Lakhs)


b. Uncalled liability on shares and other investments partly paid - Rs.Nil (Previous Year - Rs.Nil ).


c. Other commitments (specify nature) - Rs.Nil (Previous Year - Rs.Nil ).


NOTES


1. The company does not expect any cash outflow in respect of above contingent Liabilities.


2. It is not practicable to estimate the timing of cash flows, if any, in respect of matters referred in I (a) above pending resolutions of the arbitration / appellate proceedings.


3. The cash flow in respect of matters referred to in I (b) above is generally expected to occur within 3 years. However, the matter is under adjudication before DRT.


F. Ind AS 108 (Operating Segments)


Vide Notification No. GSR 463(E) dated 05-062015 (Serial no. 8) issued by Ministry of Corporate Affairs, exempted companies engaged in Defence Production from segmental disclosure as required under Ind AS 108 (Operating Segments), accordingly the disclosure requirements under Ind AS 108 has not been made.


G. Advances, Balances with government departments, Trade Payables and receivables, Other loans and advances and deposits classified under non current and current are subject to confirmation and reconciliation. There are certain old balances pending review / adjustment. The management run for a period of 3 Years to 10 Years and are generally renewable by mutual consent.


J. Leases


a) The Company as a lessee


The Company’s significant leasing arrangements are in respect of operating leases and in respect of its leased office premises. These lease arrangements, does not expect any significant impact upon such reconciliation.


b) The Company as a lessor


The Company provides cars to employees who are eligible and enrol into such a scheme after completion of a specific period of service. Such leases are non-cancellable in nature and have been classified as operating leases.


c) Lease income and expenditure


The gross amounts of operating lease income and expenditure recognised in profit or loss is as below.



H. Figures of previous year have been regrouped/ reclassified/ recast wherever necessary to conform to current year’s presentation.


I. Disclosures as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.


In compliance of Regulation 34(3) of SEBI (Listing Obligations and Disclosure Requirements), the required information is given as under:


Future minimum lease payments under non-cancellable operating leases are summarised below:


Below are the details of carrying amounts of such vehicles recorded as property, plant and equipment:


a) The following table shows the fair values of assets and liabilities including their levels in the fair value hierarchy. It does not include fair value information for assets and liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. The Company’s use of quoted market prices (Level 1), valuation model using observable market information as inputs (Level 2) and valuation models without observable market information as inputs (Level 3) in the valuation of securities and contracts by type of issuer was as follows:


b) Measurement of fair values


Valuation techniques and significant unobservable inputs:


c) Transfers between the fair value hierarchy


There were no transfers in either direction in the fair value hierarchy during the year 2016-17.


L. Financial risk management


The Company is broadly exposed to credit risk, liquidity risk and market risk as a result of financial instruments.


The Company’s Board of Directors has the overall responsibility for the establishment, monitoring and supervision of the Company’s risk management framework. Treasury Management Team in the company take appropriate steps to mitigate financial risks within the framework set by the top management. Derivative transactions are undertaken by a specialist team with appropriate skills and experience. Company do not trade in derivatives for speculation.


(i) Credit risk


Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from credit exposures from customers, cash and cash equivalents held with banks and current and non-current debt investments.


The Company regularly follow up the receivable to minimise losses arising from credit exposure from credit customers. Credit control assesses the credit quality of the customers, their financial position, past experience in payments and other relevant factors. Deposits and cash balances are placed with reputable scheduled banks. The carrying amount of financial assets represents the Company’s maximum exposure to credit risk. No other financial assets carry a significant exposure to credit risk.


Trade receivables


The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, the management also considers the factors that may influence the credit risk of its customer base. Major Customers of the company are from Government Sector and Public Sector Companies, where credit risk is relatively low.


The management has established a system under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, and in some cases bank references.


The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables based on factual information as on the Balance sheet date.


As at 31 March 2017, the Company’s most significant customer, accounted for Rs.6346.78 lakhs of the trade receivables carrying amount (31 March 2016: Rs.6305.00 lakhs, 1 April 2015: Rs.4449.00 lakhs).


The movement in the loss allowance for impairment of trade receivables are disclosed in Note No. 14 Any past due from Government Customers and those fully covered by guarantees or collaterals received are not tested for impairment.


The credit quality of the financial assets is satisfactory, taking into account the allowance for doubtful trade receivables.


The Company has not received any collaterals for receivables as at reporting date.


The impairment loss allowance at 31 March 2017 related to several customers that have indication that they may not pay their outstanding balances. The Company believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on the fact that major customers are Government department, PSUs and historical payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available.


(ii) Liquidity risk


Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset, or the risk that the Company will face difficulty in raising financial resources required to fulfil its commitments. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.


Liquidity risk is maintained at low levels through effective cash flow management, low borrowings and availability of adequate cash. Cash flow forecasting is performed internally by forecasts of the Company’s liquidity requirements to ensure that it has sufficient cash to meet operational needs, to fund scheduled investments and to comply with loan covenants.


To ensure continuity of funding, the Company primarily uses short-term bank facilities in the nature of bank overdraft facility, cash credit facility and short-term borrowings to fund its ongoing working capital requirement needs. The Company has also availed various noncurrent facilities in the form of secured redeemable debentures, secured term loans, inter-corporate loans against the Company’s guarantee and soft loans from the Government for expansion projects and construction and development of capital assets.


Exposure to liquidity risk


The table below details the Company’s remaining contractual maturity for its financial liabilities and derivative financial liabilities. The contractual cash flows reflect the undiscounted cash flows of financial liabilities and derivative financial liabilities based on the earliest date on which the Company can be required to pay.


(iii)Market risk


Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity / commodity prices – will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Company uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by the management. The Company’s activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rate movements (refer to notes below on currency risk and interest risk). The Company enters into forward derivative contracts to manage risks of loss arising due to foreign exchange exposure. During the year ended 31 March 2017, there was no change to the manner in which the Company managed or measured market risk.


(iv) Currency risk


Foreign currency risk is the risk arising from exposure to foreign currency movement that will impact the Company’s future cash flows and profitability in the ordinary course of business. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to its operating activities from procuring or selling in foreign currencies and obtaining finance in foreign currencies.


1 As the foreign currency borrowing exposures are fully hedged, a strengthening or weakening of USD will have no impact on profit or loss or equity. At 31 March 2016, the Company had no exposure to foreign exchange risk on the above foreign currency borrowings, which has been repaid on the maturity date of 13 January 2017.


The Company is exposed to currency risk on account of its borrowings and other payables in foreign currency. The functional currency of the Company is Indian Rupee. The Company uses forward exchange contracts to hedge its currency risk, mostly with a maturity of less than one year from the reporting date.


The Company operates domestically and is currently a party to borrowings in foreign currencies (USD) which is fully hedged through cross currency swaps until maturity. Foreign exchange risk also arises from future commercial transactions. To manage foreign exchange risk arising from future commercial transactions, the Company may use forward contracts, transacted by the Company’s Treasury. The Company’s risk management policy is to fully hedge foreign currency exposures related to borrowings and to hedge foreign currency exposures relating to revenue, operating expenditure and capital expenditure over certain thresholds.


The Company has availed a foreign currency term loan which is fully hedged through cross currency swaps until maturity of the ECB.


The Company does not use derivative financial instruments for trading or speculative purposes. Following is the information on derivative financial instruments to hedge the foreign exchange rate risk as on dates are as below:


Sensitivity analysis


A reasonably possible strengthening / (weakening) of the Indian Rupee against US dollars, Euro, Japanese Yen, the Pound and other currencies at 31 March 2017 and 31 March 2016 would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.


(v) Interest rate risk


Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing instruments will fluctuate because of fluctuations in market interest rates.


Exposure to interest rate risk


The Company’s interest rate risk arises from borrowings and loans made. Borrowings availed at fixed rates expose the Company to fair value interest rate risk. The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.


Fair value sensitivity analysis for fixed-rate instruments


The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss, and the Company does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.


(vi) Equity and commodity price risk


Price risk is the risk of fluctuations in the value of assets and liabilities as a result of changes in market prices of investments. The Company has no exposure to changes in the quoted equity securities price risk as it has investments in unquoted equity instruments only. The Company does not invest in commodities and is not exposed to commodity price risk.


Cash flow sensitivity analysis for variable-rate instruments


A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.


M. Capital Management


The Company strives is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders. The board of directors seeks to maintain a balance between the higher returns and levels of borrowings and the advantages and security afforded by a sound capital position.


N. Derivatives


Derivatives not designated as hedging instruments


The Company uses foreign currency forward contracts to manage its exposure to foreign currency fluctuations. These forward contracts are used to hedge foreign currency payables and other future transactions. However, these foreign exchange forward contracts are not designated as qualifying hedge instruments and are entered into for periods consistent with foreign currency exposure of the underlying transactions, and are generally for a term of 3 months to 12 months.


The Company has unhedged foreign currency exposure of Rs.13938.55 Lakhs (31 March 2016: Rs.2398.23 Lakhs, 01 April 2015: Rs.5160.06 Lakhs) for payables as at reporting date.


The Company has applied the principles of Ind AS 109 for the measurement of derivative financial instruments and has classified such derivative contracts as at fair value through profit or loss.


O. Transition to Ind AS


As stated in Note 2.1, these are the Company’s first financial statements prepared in accordance with Ind AS. The transition to Ind AS has resulted in changes in the presentation of financial statements, disclosures in the notes thereto and accounting policies and principles. The accounting policies set out in “Note 2. Significant accounting policies” have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening balance sheet as at 1 April 2015 (the “transition date”).


The Company has following outstanding forward contracts as on 31 March 2017: JPY Nil (INR Nil) [31 March 2016: JPY 18811.32 Lakhs (INR 10536.54 Lakhs)] [01 April 2015: JPY 10338.68 Lakhs (INR 5584.54 Lakhs)] 31 March 2017: EUR Nil (INR Nil) [31 March 2016: EUR 47.41 Lakhs (INR 3500.74 lakhs)] [01 April 2015: EUR 23.73 Lakhs (INR 1796.28 Lakhs)] 31 March 2017: USD Nil (INR Nil) [31 March 2016: USD NIL (INR Nil)] [01 April 2015: USD 57.72 Lakhs (INR 3652.27 Lakhs)]


For the purpose of transition to Ind AS, the Company has followed the guidance prescribed in Ind AS 101 (first time adoption of Indian Accounting Standards), with 1 April 2015 as the transition date from the previous GAAP. In preparing our opening Ind AS Balance sheet, we have adjusted amounts reported in financial statements prepared in accordance with previous GAAP. An explanation of how the transition from Previous GAAP to Ind AS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables. On transition, we did not revise estimates previously made under previous GAAP except where required by Ind AS.


All applicable Ind AS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the financial statements under both Ind AS and previous GAAP as of the transition date have been recognized directly in equity at the transition date.


(iii) Material adjustments to the statement of cash flows for the year ended 31 March 2016


There are no material differences between the statement of cash flows presented under Ind AS and the statement of cash flows presented under previous GAAP.


(iv) Notes to reconciliation


a Property, plant and equipment


Under Ind AS, special tools have been recognised as property, plant and equipment since they meet the definition of property, plant and equipment as per Ind AS 16. This category of assets was classified as other non- current assets under previous GAAP. This reclassification has no impact on the total comprehensive income for the year ended 31 March 2016 and on equity as at that date.


The carrying amount of special tools reclassified to property, plant and equipment on the transition date is Rs.397.35 Lakhs and as on 31 March 2016 Rs.424.21 Lakhs. The depreciation charge on special tools for the year ended 31 March 2016 Rs.255.44 Lakhs which was earlier presented as amortisation of special tools and classified as part of other expenses.


b Financial assets at amortised cost


Under Ind AS certain financial assets such as redeemable deposits receivable are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial assets are measured at amortised cost using the effective interest method. Under previous GAAP. such financial assets were carried at cost till maturity and interest, if any was accounted on the outstanding principal amount.


c Buyer’s credit facilities


The measurement of outstanding foreign currency buyer’s credit facility has to be restated at each reporting date for movements in the spot rate between the functional currency of the Company and the foreign currency. In accordance with Ind AS 21, such changes in spot exchange rates have to be recognised in profit or loss. The Company has entered into various forward contracts to hedge this currency exposure. According to Ind AS 109, all derivative financial instruments must be measured at each reporting date at fair value. Under previous GAAP, the buyer’s credit facility was measured at the forward rate of settlement of derivatives and such derivative instruments were not recognised.


d. Proposed dividend


Under previous GAAP, dividends proposed by Board of Directors after the reporting date but before the approval of financial statements were considered to be an adjusting event and accordingly recognised (along with related dividend distribution tax) as liabilities at the reporting date. Under Ind AS, dividends so proposed by the Board are considered to be a non-adjusting event. Accordingly, provision for proposed dividend and dividend distribution tax recognised under previous GAAP has been reversed.


g. Employee benefits expense


Under Ind AS, the Company recognises all re-measurement gains and losses arising from post-retirement defined benefit plans in other comprehensive income in the period in which they occur. Under previous GAAP the Company recognised re-measurement gains and losses in the statement of profit or loss in the period in which they occurred. At the date of transition, all previously recognised cumulative re-measurement gains and losses were recognised in retained earnings and hence, has no impact on equity as at the transition date. Re-measurement loss of Rs.1335.94 Lakhs has been presented in UCI tor the year ended 31 March 2016 and corresponding tax effect for such an adjustment was Rs.285.11 Lakhs.


h. Prior period adjustments


Prior period adjustments under previous GAAP were reported in the statement of profit or loss in the period in which they were discovered. According to Ind AS 8, material prior period adjustments are required to be rectified retrospectively in the periods in which they occurred. On the date of transition to Ind AS, prior period errors of the effect of Rs.89.11 Lakhs were adjusted to opening retained earnings.


(v) First-time adoption exemptions


In preparing these financial statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101 as explained below.


a) De-recognition of financial assets and financial liabilities:


The Company has applied the de-recognition criteria as per Ind AS 109 prospectively and has not recognised any previously derecognised non-derivative financial assets and financial liabilities prior to 1 April 2015 that may qualify for recognition as per Ind AS.


b) Government loan:


The Company has applied the mandatory exception to account for the soft loan received from the Government of Kerala retrospectively by not measuring the carrying amount of the loan at fair value on the transition date. The loan is carried at the transaction value in accordance with Previous GAAP for each reporting period.


c) Deemed cost:


The Company has elected to apply the deemed cost exemption in Ind AS 101 whereby the Company has the option to carry all items and classes of property, plant and equipment on the date of transition to Ind AS as per the carrying amounts prevailing as per previous GAAP. Once this exemption is applied, no adjustment pertaining to property, plant and equipment on the date of transition for effects of retrospective application of other standards is made.


d) Leases:


The Company has evaluated leases of land and buildings separately and accounted for each element on the basis of the classification as per Ind AS 17 prospectively from 1 April 2015.


e) Designation of previously recognised financial instruments:


The Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.


f) Fair value of financial instruments:


The fair value of transactions entered into after the transition date qualifying as financial instruments is measured as such prospectively from 1 April 2015.


g) Impairment of financial assets:


The Company has adopted the exemption in the recognition of a loss allowance for financial assets with a significant increase in credit risk prospectively from the date of transition to Ind AS since initial recognition such a determination would require undue cost or effort for retrospective application.

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
“2019 © COPYRIGHT DYNAMIC EQUITIES PVT. LTD.”

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

  • Download our Mobile App
  • Available on Google Play
  • Available on App Store
  • RSS