FUTURE GODREJ CONSUMER Notes to Accounts

1. CORPORATE INFORMATION


Godrej Consumer Products Limited (the Company) was incorporated on November 29, 2000, to take over as a going concern the consumer products business of Godrej Soaps Limited (subsequently renamed as Godrej Industries Limited), pursuant to a Scheme of Arrangement as approved by the High Court, Mumbai,


The Company is a fast moving consumer goods company, manufacturing and marketing Household and Personal Care products, The Company is a public company limited by shares, incorporated and domiciled in India and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), The Company’s registered office is at 4th Floor, Godrej One, Pirojshanagar, Eastern Express Highway, Vikhroli (east), Mumbai -400 079,


2. BASIS OF PREPARATION, MEASUREMENTAND SIGNIFICANT ACCOUNTING POLICIES


2.1 Basis of Preparation and measurement


a) Basis of Preparation


The financial statements have been prepared in accordance with Indian Accounting Standards (“Ind AS”) as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (‘Act’) read with the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Indian Accounting Standards) Rules, 2016 and other relevant provisions of the Act,


The financial statements up to year ended March 31, 2016 were prepared in accordance with the accounting standards notified under the Companies (Accounting Standard) Rules 2006 and other relevant provisions of the Act, considered as the “Previous GAAP”,


These financial statements are the Company’s first Ind AS financial statements and are covered by Ind AS 101, First-time adoption of Indian Accounting Standards, An explanation of how the transition to Ind AS has affected the Company’s equity, financial position, financial performance and its cash flows is provided in Note 51,


Current versus non-current classification


All 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 taken between acquisition of assets for processing and their realization in cash and cash equivalent, the Company has ascertained its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and noncurrent,


b) Basis of Measurement


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


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


- Defined benefit plans - plan assets and share-based payments measured at fair value


- Assets held for sale -measured at lower of carrying value or fair value less cost to sell


2.2 Key estimates and assumptions


In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses, Actual results may differ from these estimates,


The areas involving critical estimates or judgements are:


i, Determination of the estimated useful lives of tangible assets and the assessment as to which components of the cost may be capitalized; (Note 2,5 (a))


ii, Determination of the estimated useful lives of intangible assets and determining intangible assets having an indefinite useful life; (Note 2,5 (b))


iii, Recognition and measurement of defined benefit obligations, key actuarial assumptions; (Note 44)


iv. Recognition and measurement of provisions and contingencies, key assumptions about the likelihood and magnitude of an outflow of resources; (Note 2.5 (h))


v. Fair valuation of employee share options, Key assumptions made with respect to expected volatility; (Note 2.5 (j)(ii))


vi. Rebates and sales incentives accruals


vii. Fair value of financial instruments (Note 2.3)


2.3 Measurement of fair values


The Company’s accounting policies and disclosures require financial instruments to be measured at fair values,


The Company has an established control framework with respect to the measurement of fair values, The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs,


The management regularly reviews significant unobservable inputs and valuation adjustments,


If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified,


Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows,


Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities,


Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices),


Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs),


If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement,


The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred,


2.4 Standards issued but not yet effective


In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of Cash Flows’ and Ind AS 102, ‘Share-based payment.’ The amendments are applicable to the Company from April 1, 2017.


Amendment to Ind AS 7:


The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement, Amendment to Ind AS 102:


The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes,


It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity settled awards,


The amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification, Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement,


The Company is currently evaluating the effect of the above amendments,


a) During the year, the Company has issued 66,993 equity shares (previous year 86,922) under the Employee Stock Grant Scheme,


b) 31,124 Right Issue equity shares (previous year 31,124 equity shares) are kept in abeyance due to various suits filed in courts / forums by third parties for which final order is awaited,


c) The reconciliation of number of equity shares outstanding and the amount of share capital at the beginning and at the end of the reporting period:


d) Terms / rights attached to equity shares


The Company has issued only one class of equity shares having a par value of Rs.1 each. Each equity shareholder is entitled to one vote per share,


During the year ended March 31, 2017 the amount of per share dividend recognised as distribution to equity shareholders was Rs.5.75 (previous year Rs.5.50).


e) Shares held by Holding Company and Subsidiary of Holding Company and details of shareholders holding more than 5% shares in the Company:


*Godrej & Boyce Manufacturing Company has ceased to be the holding company with effect from March 30, 2017 owing to reorganisation of shareholding within promoter group


f) Shares Reserved for issue under options


The Company has 128,895 (previous year 141,096) equity shares reserved for issue under Employee Stock Grant Scheme as at March 31, 2017. (As detailed in Note 45)


g) Information regarding aggregate number of equity shares during the five years immediately preceding the date of Balance Sheet:


The Company has not issued any bonus shares or shares for consideration other than cash and has not bought back any shares during the past five years,


The Company has not allotted any shares pursuant to contract without payment being received in cash,


h) There are no calls unpaid on equity shares, other than shares kept in abeyance as mentioned in Note (b) above,


i) No equity shares have been forfeited,


j) Capital Management


The primary objective of the Company’s capital management is to ensure that it maintains an efficient capital structure and healthy capital ratios to support its business and maximize shareholder value. The Company makes adjustments to its capital structure based on economic conditions or its business requirements. To maintain / adjust the capital structure the Company may make adjustments to dividend paid to its shareholders or issue new shares,


The Company monitors capital using the metric of Net Debt to Equity. Net Debt is defined as borrowings less cash and cash equivalents, fixed Deposits and readily redeemable investments,


Nature and purpose of reserves


1) Securities premium reserve


The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve, The reserve is utilised in accordance with the provisions of the Companies Act,


2) General reserve


The Company has transferred a portion of the net profit of the Company before declaring dividend to general reserve pursuant to the earlier provisions of Companies Act 1956, Mandatory transfer to general reserve is not required under the Companies Act 2013,


3) Capital Investment Subsidy Reserve


Capital Investment Subsidy Reserve represents subsidy received from the government for commissioning of Malanpur plant in the nature of capital investment,


4) Capital redemption reserve


Capital Redemption reserve represents amount set aside by the company for future redemption of capital,


5) Debenture Redemption Reserve


The Company had issued debentures in India and as per the provisions of the Companies Act, 2013, is required to create debenture redemption reserve out of the profits of the Company available for the payment of dividend. The debenture redemption reserve has been transferred to retained earning during the year ended March 31, 2016 on redemption of the debentures,


6) Employee Stock Options Outstanding


The shares option outstanding account is used to recognise the grant date fair value of options issued to employees under the Employee Stock Grant Scheme which are unvested as on the reporting date and is net of the deferred employee compensation expense, Refer note 45 for details on ESGS Plans,


7) Effective portion of Cash Flow Hedges


The cash flow hedging reserve represents the cumulative portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of cash flow reserve will be reclassified to Statement of Profit and Loss only when the hedged transaction affects the profit or loss or included as a basis adjustment to the non financial hedged item,


The company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.


Significant management judgment is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets, The recoverability of deferred income tax assets is based on estimates of taxable income in which the relevant entity operates and the period over which deferred income tax assets will be recovered,


As on March 31, 2017 the tax liability with respect to the dividends proposed is Rs.83,21 crores (31-Mar-16 : Rs.19,06 crores, 1-Apr-15 : Rs.17,33 crores)


During the year, the Company has not accounted for tax credits in respect of Minimum Alternative Tax (MAT credit) of Rs.77,98 crores (31-Mar-16 : Rs.83,65 crores, 1-Apr-15 : Rs.94,72 crores ), The Company is not reasonably certain of availing the said MAT credit in future years against the normal tax expected to be paid in those years and accordingly has not recognised a deferred tax asset for the same,


NOTES:


a) Cash Credit from Banks are secured by hypothecation of Inventories and Book debts repayable on demand,


b) The packing credit is granted by banks for a maximum tenure of 180 days at Bank’s base rate less interest subvention of 3% per annum as per Interest Equalisation Scheme of Government of India,


c) Commercial Paper carries an average interest rate of 6,49% and are repayable at maturity dates in May 2017,


d) The Company does not have any default as on the Balance Sheet date in the repayment of any loan or interest,


a) Current Maturities of Long term Debt as on April 1, 2015 include 2,500 zero-coupon, unsecured, redeemable, non-convertible debentures having a face value of Rs.10 lac each, redeemable at a premium, which will yield 9.35% p.a. at maturity. These debentures have been redeemed on December 18, 2015,


b) There are no amounts due to be credited to Investor Education and Protection Fund in accordance with Section 125 of the Companies Act, 2013 as at the year end,


Sales Returns:


When a customer has a right to return the product within a given period, the Company recognises a provision for sales return. This is measured on the basis of average past trend of sales return as a percentage of sales. Revenue is adjusted for the expected value of the returns and cost of sales are adjusted for the value of the corresponding goods to be returned,


Legal Claims:


The provisions for indirect taxes and legal matters comprises of numerous separate cases that arise in the ordinary course of business. A provision is recognised for legal cases; if company assesses that it is probable that an outflow of economic resources will be required. These provisions have not been discounted as it is not practicable for the Company to estimate the timing of the provision utilisation and cash outflows, if any, pending resolution,


NOTE :


Miscellaneous non-operating income includes Rs.0.61 crore (Previous Year Rs.0.60 crore), recovered from the GCPL ESOP Trust towards loan repayment, which was earlier written off against reserves under a Scheme of Amalgamation approved by the Hon’ble High Court of Bombay


a) During the year, the Company has netted off the rental income in respect of corporate office premises amounting to Rs.9,12 crore for the year ended on March 31, 2017 (Previous Year Rs.7,99 crore) with rental expenses amounting to Rs.9,12 crore for the year ended on March 31, 2017 (Previous Year Rs.7,99 crore) in respect of similar premises in the same building,


b) Miscellaneous Expenses include the Company’s share of various expenses incurred by group companies for sharing of services and use of common facilities,


c) During the current year, the Company has paid Rs.0,03 crore as donation to Armed Forces Flag Day included under Donations above,


d) During the previous year, the Company had paid Rs.0,10 crore for an advertisement in the commemorative souvenir on Pandit Jawaharlal Nehru published by the All India Congress Committee included under Advertising and Publicity above,


NOTE 3 : COMMITMENTS


Estimated value of contracts remaining to be executed on capital account to the extent not provided for : Rs.46.72 crore (31-Mar-16 Rs.34.40 crore; 01-Apr-15 Rs.39.43 crore), net of advances there against of Rs.15.80 crore (31-Mar-16 Rs.3.40 crore; 01-Apr-15 Rs.20.30 crore),


NOTE 4 : DIVIDEND


The Board has declared a fourth interim dividend for the year 2016-17 on May 9, 2017 at the rate of Rs.12 per share (1200% of the face value of Rs.1 each) amounting to Rs.408.68 crore. The dividend distribution tax on the said dividend is Rs.83.20 crore,


NOTE 5 : RELATED PARTY DISCLOSURES A) Related Parties and their Relationship


a) Holding Company:


Godrej & Boyce Mfg. Co. Limited (upto March 29, 2017)


b) Subsidiaries:


Notes:


Pursuant to a Deed of Merger ("the Scheme"), sanctioned by a Dutch court, vide its order effective March 31, 2016, Godrej Argentina Dutch Cooperatief UA has merged into Godrej Consumer Products Dutch Cooperatief UA, Godrej Netherlands Argentina BV has merged into Godrej Consumer Holding (Netherlands) BV and Godrej Netherlands Argentina Holding BV merged into Godrej Consumer Products (Netherlands) BV with effect from April 1, 2015. As per the Scheme, all investments made by Godrej Netherlands Argentina BV and Godrej Netherlands Argentina Holding BV in Laboratoria Cuenca S.A, Issue Brazil, Consell S.A, Argencos S.A and Panamar Producciones S.A have been respectively transferred to Godrej Consumer Holding (Netherlands) BV and Godrej Consumer Products (Netherlands) BV


c) Fellow Subsidiaries with whom transactions have taken place during the year:


i) Godrej Industries Limited


ii) Godrej Agrovet Limited


iii) Godrej Tyson Foods Limited


iv) Godrej Properties Limited


v) Natures Basket Limited


vi) Godrej Vikhroli Properties LLP


vii) Godrej Infotech Limited


viii) Godrej Projects Development Private Limited


ix) Godrej Anandan


x) Godrej One Premises Management Private Limited


xi) Godrej Seeds & Genetics Limited


xii) Godrej Seaview Properties Private Limited


d) Joint Venture:


e) Associate Company:


f) Investing Entity in which the reporting entity is an Associate (w.e.f. March 30,2017)


i) Godrej Industries Limited


ii) Godrej Seeds & Genetics Limited


g) Companies under common Control with whom transactions have taken place during the year (w.e.f March 30, 2017)


i) Godrej & Boyce Mfg, Co, Limited


ii) Godrej Agrovet Limited


iii) Godrej Tyson Foods Limited


iv) Godrej Properties Limited


v) Natures Basket Limited


vi) Godrej Vikhroli Properties LLP


vii) Godrej Infotech Limited


viii) Godrej Projects Development Private Limited


ix) Godrej Anandan


x) Godrej One Premises Management Private Limited


xi) Godrej Seaview Properties Private Limited


h) Key Management Personnel and Relatives


i) Mr, Adi Godrej Chairman


ii) Ms, Nisaba Godrej Executive Director / Daughter of Mr, Adi Godre]


iii) Mr, Vivek Gambhir Managing Director & CEO


iv) Mr, V. Srinivasan Chief Financial Officer and Company Secretary


v) Ms, Parmeshwar Godrej Wife of Mr, Adi Godrej (Deceased on October 10, 2016)


vi) Mr, Pirojsha Godrej Son of Mr, Adi Godrej


vii) Mr, Nadir Godrej Non-Executive Director/ Brother of Mr, Adi Godrej


viii) Ms, Tanya Dubash Non-Executive Director/ Daughter of Mr, Adi Godrej


ix) Mr, Jamshyd Godrej Non-Executive Director


x) Mr, D Shivakumar Independent Director


xi) Mr, Aman Mehta Independent Director


xii) Mr, Omkar Goswami Independent Director


xiii) Ms, Ireena Vittal Independent Director


xiv) Mr, Bharat Doshi Independent Director


xv) Mr, Narendra Ambvani Independent Director


xvi) Mr, Burjis Godrej Son of Mr, Nadir Godrej


xvii) Ms, Rati Godrej Wife of Mr, Nadir Godrej


xviii) Mr, Sohrab Godrej Son of Mr, Nadir Godrej


xix) Mr, Hormazd Godrej Son of Mr, Nadir Godrej


xx) Mr,Navroze Godrej Son of Mr, Jamshyd Godrej


xxi) Mr, Arvind Dubash Husband of Ms, Tanya Dubash


i) Trust where the reporting entity excercises significant influence


i) Godrej Consumer Products Limited Employees’ Stock Option Trust


j) Post employment Benefit Trust where the reporting entity exercises significant influence


i) Godrej Consumer Products Employees’ Provident Fund


NOTE 6 : LEASES


The Company’s significant leasing agreements are in respect of operating lease for Computers and Premises (office, godown, etc.) and the aggregate lease rentals payable are charged as rent. The Total lease payments accounted for the year ended March 31, 2017 is Rs.14.22 crore (previous year Rs.15.41 crore).


The future minimum lease payments outstanding under non-cancellable operating leases are as follows:


The Company has entered into an agreement to give one of its office building on operating lease effective May 2015, Total lease rentals earned during the year ended March 31, 2017 amounting to Rs.9.12 crore have been netted off against rent expense of Rs.9.12 crore in Note 36 for similar premises in the same building,


NOTE 7 : HEDGING CONTRACTS


The Company uses forward exchange contracts to hedge its foreign exchange exposure relating to the underlying transactions and firm commitment in accordance with its forex policy as determined by its Forex Committee. The Company does not use foreign exchange forward contracts for trading or speculation purposes,


Forward/ Spot Contracts outstanding are as follows:


a) DEFINED CONTRIBUTION PLAN Provident Fund:


The contributions to the Provident Fund of certain employees (including some employees of the erstwhile Godrej Household Products Ltd) are made to a Government administered Provident Fund and there are no further obligations beyond making such contribution. The Superannuation Fund constitutes an insured benefit, which is classified as a defined contribution plan as the Company contributes to an Insurance Company and has no further obligation beyond making payment to the insurance company,


b) DEFINED BENEFIT PLAN Gratuity:


The Company participates in the Employees’ Group Gratuity-cum-Life Assurance Scheme of HDFC Standard Life Insurance Co. Ltd., a funded defined benefit plan for qualifying employees. Gratuity is payable to all eligible employees on death or on separation / termination in terms of the provisions of the Payment of Gratuity (Amendment) Act, 1997, or as per the Company’s scheme whichever is more beneficial to the employees,


The Gratuity scheme of the erstwhile Godrej Household Products Ltd., which was obtained pursuant to the Scheme of Amalgamation, is funded through Unit Linked Gratuity Plan with HDFC Standard Life Insurance Company Limited,


The liability for the Defined Benefit Plan is provided on the basis of a valuation, using the Projected Unit Credit Method, as at the Balance Sheet date, carried out by an independent actuary,


The Company has a gratuity trust. However, the Company funds its gratuity payouts from its cash flows. Accordingly, the Company creates adequate provision in its books every year based on actuarial valuation,


These benefit plans expose the Company to actuarial risks, such as longevity risk, interest rate risk and investment risk,


Provident Fund:


The Company manages the Provident Fund plan through a Provident Fund Trust for its employees which is permitted under The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 and is actuarially valued. The plan envisages contribution by the employer and employees and guarantees interest at the rate notified by the Provident Fund authority. The contribution by employer and employee, together with interest, are payable at the time of separation from service or retirement, whichever is earlier,


c) Amounts Recognised as Expense:


i) Defined Contribution Plan


Employer’s Contribution to Provident Fund including contribution to Family Pension Fund amounting to Rs.9.93 crore (previous year Rs.8.80 crore) has been included under Contribution to Provident and Other Funds,


ii) Defined Benefit Plan


Gratuity cost amounting to Rs.4.52 crore (previous year Rs.3.07 crore) has been included in Note 33 under Contribution to Provident and Other Funds,


xi) Sensitivity analysis


Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below,


NOTE 8 : EMPLOYEE STOCK BENEFIT PLANS


I. EMPLOYEE STOCK OPTION PLAN OF ERSTWHILE GODREJ HOUSEHOLD PRODUCTS LTD


a. Under the Scheme of Amalgamation, the Company has obtained the ‘Godrej Sara Lee Limited Employees Stock Option Plan’ set up for eligible employees of the erstwhile Godrej Household Products Limited. The equity shares of Godrej Industries Limited (GIL) are the underlying equity shares for the stock option plan. The ESOP Scheme is administered by an independent ESOP Trust created with IL&FS Trust Company Limited. The independent ESOP Trust has purchased shares of GIL from the market against which the options have been granted. The purchases have been financed by loans from the erstwhile Godrej Household Products Limited, which together with interest amounted to Rs.1.35 crore as at beginning of the year. The ESOP Trust has made a net repayment of the loan amounting to Rs.0.61 crore during the year and the Company has made a further contribution of Rs.0.11 crore during the year. The total amount of loans outstanding together with interest thereon as at March 31, 2017 amounts to Rs.0.96 crore which had been fully adjusted against the reserves in accordance with the scheme of amalgamation duly approved by the Hon’ble High Court of Judicature at Bombay in FY 2010-11. The repayment of the loans granted to the ESOP Trust and interest thereon is dependent on the exercise of the options by the employees and the market price of the underlying shares of the unexercised options at the end of the exercise period,


a) The Company set up the Employees Stock Grant Scheme 2011 (ESGS) pursuant to the approval by the Shareholders on March 18, 2011,


b) The ESGS Scheme is effective from April 1, 2011, (the Effective Date) and shall continue to be in force until (i) its termination by the Board or (ii) the date on which all of the shares to be vested under Employee Stock Grant Scheme 2011 have been vested in the Eligible Employees and all restrictions on such Stock Grants awarded under the terms of ESGS Scheme, if any, have lapsed, whichever is earlier,


c) The Scheme applies to the Eligible Employees of the Company or its Subsidiaries, The entitlement of each employee will be decided by the Compensation Committee of the Company based on the employee’s performance, level, grade, etc,


d) The total number of Stock Grants to be awarded under the ESGS Scheme are restricted to 2,500,000 (Twenty Five Lac) fully paid up equity shares of the Company. Not more than 500,000 (Five Lac) fully paid up equity shares or 1% of the issued equity share capital at the time of awarding the Stock Grant, whichever is lower, can be awarded to any one employee in any one year.


e) The Stock Grants shall vest in the Eligible Employees pursuant to the ESGS Scheme in the proportion of 1/3rd at the end of each year or as may be decided by the Compensation Committee from the date on which the Stock Grants are awarded for a period of three consecutive years subject to the condition that the Eligible Employee continues to be in employment of the Company or the Subsidiary company as the case may be,


f) The Eligible Employee shall exercise her / his right to acquire the shares vested in her / him all at one time within 1 month from the date on which the shares vested in her / him or such other period as may be determined by the Compensation Committee,


g) The Exercise Price of the shares has been fixed at Rs.1 per share. The fair value value is treated as Employee Compensation Expenses and charged to the Statement of Profit and Loss. The value of the options is treated as a part of employee compensation in the financial statements and is amortised over the vesting period,


NOTE 9 : CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE


Expenditure related to CSR as per section 135 of the Companies Act, 2013 read with Schedule VII thereof, against the mandatory spend of Rs.16.38 crore (previous year Rs.14.22 crore):


NOTE 10 : SPECIFIED BANK NOTES


During the year, the Company had Specified Bank Notes (SBNs) or Other Denomination Notes as defined in the MCA Notification No. GSR 308E dated 30th March 2017. The details of SBN and other notes held and transacted during the period from November 8, 2016 to December 30, 2016 as per the notification is given below:


The term Specified Bank Notes shall have the same meaning provided in the notifications of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407 (E ), dated 8th November, 2016,


NOTE 11 : FINANCIAL INSTRUMENTS A. Accounting classification and fair values


Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.


NOTE 12 : FINANCIAL RISK MANAGEMENT


The activities of the Company exposes it to a number of financial risks namely market risk, credit risk and liquidity risk. The Company seeks to minimize the potential impact of unpredictability of the financial markets on its financial performance. The Company has constituted a Risk Management Committee and risk management policies which are approved by the Board to identify and analyze the risks faced by the Company and to set and monitor appropriate risk limits and controls for mitigation of the risks,


A. MANAGEMENT OF MARKET RISK:


Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of three types of risks: interest rate risk, price risk and currency rate risk. Financial instruments affected by market risk includes borrowings, investments and derivative financial instruments. The Company has international trade operations and is exposed to a variety of market risks, including currency and interest rate risks,


(i) Management of interest rate risk:


Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not have any exposure to interest rate risks since its borrowings and investments are all in fixed rate instruments,


(ii) Management of price risk:


The Company invests its surplus funds in various debt instruments including liquid and short term schemes of debt mutual funds, deposits with banks and financial institutions and non-convertible debentures (NCD’s). Investments in mutual funds and NCD’s are susceptible to market price risk, arising from changes in interest rates or market yields which may impact the return and value of the investments. This risk is mitigated by the Company by investing the funds in various tenors depending on the liquidity needs of the Company,


(iii) Management of currency risk:


Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company has foreign currency trade payables and receivables and is therefore exposed to foreign exchange risk. The Company mitigates the foreign exchange risk by setting appropriate exposure limits, periodic monitoring of the exposures and hedging exposures using derivative financial instruments like foreign exchange forward contracts. The exchange rates have been volatile in the recent years and may continue to be volatile in the future. Hence the operating results and financials of the Company may be impacted due to volatility of the rupee against foreign currencies,


Sensitivity analysis


A reasonably possible 5% strengthening (weakening) of the Indian Rupee against GBP/USD/EURO/AED at March 31 would have affected the measurement of financial instruments denominated in GBP/USD/EURO/AED and affected 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,


B. MANAGEMENT OF CREDIT RISK:


Credit risk refers to the risk of default on its obligations by a counterparty to the Company resulting in a financial loss to the Company. The Company is exposed to credit risk from its operating activities (trade receivables) and from its financing activities including investments in mutual funds, deposits with banks and financial institutions and NCD’s, foreign exchange transactions and financial instruments.


Credit risk from trade receivables is managed through the Company’s policies, procedures and controls relating to customer credit risk management by establishing credit limits, credit approvals and monitoring creditworthiness of the customers to which the Company extends credit in the normal course of business. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed.


Credit risk from investments of surplus funds is managed by the Company’s treasury in accordance with the Board approved policy and limits. Investments of surplus funds are made only with those counterparties who meet the minimum threshold requirements prescribed by the Board. The Company monitors the credit ratings and financial strength of its counter parties and adjusts its exposure accordingly.


At March 31, 2017, the ageing for the financial assets as mentioned in the note below & that were not impaired (not provided for) was as follows, Management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available,


C. MANAGEMENT OF LIQUIDITY RISK:


Liquidity risk is the risk that the Company may not be able to meet its present and future cash obligations without incurring unacceptable losses. The Company’s objective is to maintain at all times, optimum levels of liquidity to meet its obligations. The Company closely monitors its liquidity position and has a robust cash management system. The Company maintains adequate sources of financing including debt and overdraft from domestic and international banks and financial markets at optimized cost.


Exposure to liquidity risk


The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments,


NOTE 13 : HEDGE ACCOUNTING


The objective of hedge accounting is to represent, in the Company’s financial statements, the effect of the Company’s use of financial instruments to manage exposures arising from particular risks that could affect profit or loss. As part of its risk management strategy, the Company makes use of financial derivative instruments, including foreign exchange forward contracts, for hedging the risk embedded in some of its highly probable forecast investment,


For derivative contracts designated as hedge, the Company documents, at inception, the economic relationship between the hedging instrument and the hedged item, the hedge ratio, the risk management objective for undertaking the hedge and the methods used to assess the hedge effectiveness. The derivative contracts have been taken to hedge foreign currency risk on our highly probable forecast investment. The tenor of hedging instrument may be less than or equal to the tenor of underlying highly probable forecast investment,


Financial contracts designated as hedges are accounted for in accordance with the requirements of Ind AS 109 depending upon the type of hedge. The Company applies cash flow hedge accounting to hedge the variability in the future cash flows on the overseas remittance to its subsidiaries subject to foreign exchange risk,


The Company has a Board approved policy on assessment, measurement and monitoring of hedge effectiveness which provides a guideline for the evaluation of hedge effectiveness, treatment and monitoring of the hedge effective position from an accounting and risk monitoring perspective. Hedge effectiveness is ascertained at the time of inception of the hedge and periodically thereafter. The Company assesses hedge effectiveness on prospective basis. The prospective hedge effectiveness test is a forward looking evaluation of whether or not the changes in the fair value or cash flows of the hedging position are expected to be highly effective in offsetting the changes in the fair value or cash flows of the hedged position over the term of the relationship,


Hedge effectiveness is assessed through the application of critical terms match method & dollar off-set method. Any ineffectiveness in a hedging relationship is accounted for in the statement of profit and loss,


The table below enumerates the Company’s hedging strategy, typical composition of the Company’s hedge portfolio, the instruments used to hedge risk exposures and the type of hedging relationship:


NOTE 14 : FIRST TIME ADOPTION TO IND AS


As stated in Note 2, the Company’s financial statements for the year ended March 31, 2017 are the first annual financial statements prepared in compliance with Ind AS. The adoption of Ind AS was carried out in accordance with Ind AS 101, using April 1, 2015 as the transition date. Ind AS 101 requires that all Ind AS standards that are effective for the first Ind AS financial statements for the year ended March 31, 2017, be applied consistently and retrospectively for all fiscal years presented,


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,


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


a) Optional Exemptions from retrospective application availed:


(i) Business combination exemption: The Company has applied the exemption as provided in Ind AS 101 on nonapplication of Ind AS 103, “Business Combinations” to business combinations consummated prior to the date of transition (April 1, 2015). Pursuant to this exemption, goodwill arising from business combination has been stated at the carrying amount under Previous GAAP IND AS 103 will be applied prospectively to business combinations occurring after its transition date,


(ii) Share-based payment exemption: The Company has elected not to apply Ind AS 102, “Share Based Payment”, to grants that vested prior to the date of transition i.e. April 1, 2015


(iii) Property, plant and equipment exemption: The Company has elected to apply the exemption available under Ind AS 101 to continue the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind ASs, measured as per the previous GAAP and use that as its deemed cost as at the date of transition (April 1, 2015),


(iv) Investment in subsidiaries and associates: The Company has elected to apply the exemption available under Ind AS 101 to continue the carrying value for its investments in subsidiaries and associates property as recognised in the financial statements as at the date of transition to Ind ASs, measured as per the previous GAAP as at the date of transition (April 1, 2015).


b) Mandatory exceptions from retrospective application


(i) Estimates: On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under Previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date,


(ii) Classification and measurement of financial assets: The Company has classified and measured the financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS,


(iii) Derecognition of financial assets and financial liabilities: The Company has opted to apply the exemption available under Ind AS 101 to apply the derecognition criteria of Ind AS 109 prospectively for the transactions occurring on or after the date of transition to Ind AS,


c) Transition to Ind AS Reconciliations:


The following reconciliations provide the explanations and quantifications of the differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS 101:


I. Reconciliation of Total Equity as at March 31, 2016 and April 1, 2015


II. Reconciliation of Comprehensive income for the year ended March 31, 2016


III. Adjustments to Statement of Cash Flows for the year ended March 31, 2016


** Other IND AS adjustments include provision for sales return, reversal of purchased goodwill amortised under Indian GAAP, etc


iii) Adjustment to the Statement of Cash Flows for the year ended 31st March, 2016


There were no material differences between the Statement of Cash Flows presented under Ind AS and previous GAAP


Note:


Previous GAAP figures have been reclassified/regrouped wherever necessary to conform with Financial Statments prepared under Ind AS


Notes to the reconciliation:


1 Reversal of amortisation of brands and goodwill under IGAAP:


Under Indian GAAP, brands and goodwill were amortized on a straight line basis considering a finite useful life, the amortisation of Goodknight and Hit brands was being debited to reserves under HIgh Court Order. However, under Ind AS, an intangible asset shall be regarded by the entity as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity. Hence, intangible assets are assessed as having indefinite useful life and are not amortised but are tested for impairment at least annually.


2 Deferred tax on Ind AS adjustments


Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of the balance sheet approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP


3 Interim dividend recognised on approval


Under Indian GAAP, interim dividends are recognised as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors,


4 Fair value gains on financial instruments


Under Indian GAAP, the Company accounted for current investments at lower of cost or fair value. Under Ind AS, the Company has classified the mutual funds as subsequently measured at FVTPL. Such instruments are fair valued at each reporting date and the changes in fair value are recorded through profit and loss account. At the date of transition to Ind AS, difference between the instruments’ fair value and Indian GAAP carrying amount has been recognised in retained earnings,


5 Redemption premium on debentures


Under Indian GAAP, redemption premium on debentures and bonds was debited to securities premium account i.e. through equity. However under Ind AS, debentures are a financial liability carried at amortised cost. Accordingly, the same are measured using effective interest rate method. Such finance cost related to a financial liability has to be recorded through profit and loss account instead of equity,


6 Notional income from corporate guarantees in favour of subsidiaries


The Company has given financial guarantees on behalf of subsidiaries which were disclosed as contingent liabilities under Indian GAAP. Under Ind AS, financial guarantee contracts are accounted as financial liabilities and measured initially at fair value. Subsequently, the guarantee income is recognised over the period of the guarantee on a straight line basis,


7 Other comprehensive income


Both under Indian GAAP and Ind AS the Company recognised costs related to post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, actuarial gains and losses are charged to profit or loss, however in Ind AS the actuarial gains and losses are recognised through other comprehensive income,


NOTE 15 : DISCLOSURE U/S 186 (4) OF THE COMPANIES ACT, 2013


Details of Investments made are disclosed under Note 5 and details of corporate guarantees given to banks on behalf of other body corporates are disclosed under Note 40,


NOTE 16 : SUBSEQUENT EVENTS


There are no significant subsequent events that would require adjustments or disclosures in the financial statements as on the balance sheet date,


NOTE 54 :


The financial statements were authorised for issue by the Board of Directors on May 9, 2017,


NOTE 17 : GENERAL


All amounts disclosed in the financial statements and notes have been rounded off to the nearest crore as per the requirements of Schedule III, unless otherwise stated,

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

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