Notes to Reconciliations between previous GAAP and Ind AS
(a) Recognition of Biological Assets :
The company has recognized Standing Crop as Biological Asset from April 1, 2015 as result of India AS. This has resulted in an increase in equity by '''' 65.87 Lakhs and '''' 164.68 Lakhs as at March 31,2016 and April 1, 2015 respectively and decrease in net profit by '''' 98.80 Lakhs for the year ended March 31, 2016.
(b) Restatement of Grant and Subsidies :
Under Previous GAAP, Fixed Assets acquired with the Grants/Subsidy are accounted net of the Grant/Subsidy in books of account. Now as per India AS the extent of Grant/Subsidy reduced from Fixed Assets are re-instated in the books as Fixed Assets along with the Grant/Subsidy as Liability. The value of the Fixed Assets re-instated will be depreciated as per schedule II of Companies Act 2013 and Grant/Subsidy re-instated will be charged to profit & loss a/c over the life time of those assets in equal installments. Net difference of Depreciation and Grant/Subsidy charged to Profit & loss a/c has resulted in equity decrease by Rs, 8.67 Lakhs and Rs, 6.54 Lakhs as at March 31,2016 and April 1, 2015 respectively and decrease net profit by Rs, 2.13 Lakhs for the year ended March 31, 2016.
(c) Fair Value Adjustments of Financial Assets:
Under India AS, historical percentage of receivables written off over the years need to be provided from sales and the same should be reduced in sales and as well as in trade receivables. This has resulted in decrease of equity by Rs, 4.14 Lakhs and Rs, Nil as at March 31,2016 and April 1,2015 respectively and decrease in net profit by Rs, 4.14 Lakhs for the year ended March 31,2016.
(d) Fair Value of Investments :
Under previous GAAP, current investments were measured at cost less diminution in value, under India AS investments are measured at fair value. Net increase in fairvalue after reducing provision for current tax has resulted in increase of equity by Rs, 1981.79 Lakhs and Rs, 1177.12 Lakhs as at March 31,2016 and April 1,2015 respectively.
The fairvalue difference as on April 1, 2015 is effected to retained earnings and later increase/ decrease is effected to Other Comprehensive
Income (OCI). For the year ended March 31,2016 this has resulted in increase in Other Comprehensive Income (OCI) by Rs, 1246.36 Lakhs net of provision for current tax and decrease in net profit by Rs, 441.68 Lakhs due to redemption of investment held on April 1,2015 on those fairvalue difference is already effected to retained earings.
(e) Dividend and Dividend Tax :
Under India AS, dividend to holders of equity instruments is recognized as a liability in the year in which the obligation to pay is established. Under previous GAAP, dividend payable is recorded as a liability in the year to which it relates. This has resulted in an increase in equity by Rs, Nil and Rs, 2077.83 Lakhs as at March 31, 2016 and April 1, 2015 respectively.
(f) Tax Adjustments :
Tax adjustments include deferred tax impact on account of differences between previous GAAP and Ind AS. These adjustments have resulted in an increase in equity under Ind AS by Rs, 27.07 Lakhs and Rs, (35.45) Lakhs as at March 31, 2016 and as at April 1, 2015 respectively and increase in net profit by Rs, 62.51 Lakhs as at March 31, 2016.
Investments in Subsidaries
Investments in Subsidaries - Under Previous GAAP were measured at cost. Under Ind AS, the Company has designated these investments at cost only.
Investments in Associates & Other Equities
I nvestment in Associates & Other Equities - Under Previous GAAP were measured at lower of cost or market value . Under Ind AS, the Company has designated these investments at fair value through Other Comprehensive Income (OCI). Accordingly, these investments are required to be measured at fair value. At the date of transition to Ind AS, difference between the fair value of the instruments and the carrying value under Previous GAAP has been recognized in retained earnings. Fair value changes are recognized in the Statement of Other Comprehensive Income (OCI) for the year ended 31st March, 2016.
Rs, 500.00Lakhs paid to M/s. ASK Real Estate Fund, out of this 125 units of ASK Real Estate Special Situation Mutual Fund has been allotted for Rs, 125.00Lakhs. The balance amount of Rs, 375.00 Lakhs was kept as advance for further allotment of Real Estate Fund units.
Of the Trade Receivables balances, top 3 customers represent a balance of Rs, 3219.97 Lakhs as at 31st March 2017 and Rs, 1764.71 Lakhs as at 31st March 2016, and 3 customers represent more than 5% of the total balance of Trade Receivables as at 31st March 2017 and 2 Customers as at 31st March 2016.
The Average Credit period on sales of goods is 60 days.
The Company maintains a provision for doubtful debts based on ageing of receivable are considered as tool to determine the degree of liquidity. Receivable due for more than two years and balance considered doubtful, referred for recovery through legal proceeding are considered for provision.
Rights, preferences and restrictions attached to equity shares
The Company has only one class of shares referred to as equity shares having a par value of Rs, 2 per share. Each shareholder is eligible for one vote per share held and carry a right to dividend. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
Share options granted under the Company’s employee share option plan
Share options granted under the Company''''s Employee Share option plan carry no rights to dividends and no voting rights. Further details of the Employee Share option plan are provided.
Securities Premium Reserve: The amount received in excess of face value of the equity shares is recognized in Securities Premium Reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve.
Employee Stock Options Outstanding Account: The fair value of the equity-settled share based payment transactions with employees is recognized in Statement of Profit and Loss with corresponding credit to Employee Stock Options Outstanding Account.
Retained Earnings: Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.
Other Comprehensive Income: The fair value change of the investments measured at fair value through other comprehensive income recognized through Other Comprehensive Income. Upon derecognition, the cumulative fair value changes on the said investments are reclassified to the Statement of Profit and Loss. Accumulated gain or loss on employee benefits also recognized through other comprehensive income.
The Company has received Loan from Department of Biotechnology, Ministry of scicence and technology, GOI for research in Hybrid Maize and Rice development. The loan is secured by all equipment, plant and machinery and other moveable assets of the company and is repayable in 10 equal half yearly installments starting from June, 2018.
On appointment of distributor initially an amount is collected as deposit and accounted as security deposit, without bearing any interest , refundable and adjustable against the receivable at settlement shown in separately as liability.
1. Exceptional Items:
For the financial year 2015-16 the company based on notifications of the various State Governments has short provided royalty in comparison with M/s.Mahyco Monsanto Biotech India Ltd Agreement. On this issue legal cases were pending for which the company has shown an amount of Rs, 6550.57 Lakhs as contingent liability for the year 2015-16. In the subsequent period these legal issues have been sorted out and setteled in arbitration. The settled amount of Rs, 5923.80 Lakhs is provided in accounts as exceptional item.
2. Capital Management:
Equity share capital and other equity are considered for the purpose of Company''''s capital management. The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimize returns to shareholders. The capital structure of the Company is based on management''''s judgment of its strategic and day-to-day needs with a focus on total equity so as to maintain investor, creditors and market confidence. The management and the Board of Directors monitors the return on capital as well as the level of dividends to shareholders. The Company may take appropriate steps in order to maintain, or if necessary adjust, its capital structure.
3. FINANCIAL INSTRUMENTS
Refer Note 2.13 for accounting policy on Financial Instruments.
The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade receivables, current account balances with group companies and joint venture, trade payables and unpaid dividends at carrying value because their carrying amounts are a reasonable approximation of the fair values due to their short term nature.
B. INCOME, EXPENSES, GAINS OR LOSSES ON FINANCIAL INSTRUMENTS
Interest income and expenses, gains or losses recognized on financial assets and liabilities in the Statement of Profit and Loss are as follows:
C. FAIR VALUE HIERARCHY
The fair value of financial instruments have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
The categories used are as follows:
Level 1 : Quoted Prices for identical Instruments in an active Market
Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs, and
Level 3: Inputs which are not based on observable market data
CALCULATION OF FAIR VALUES
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Financial assets and liabilities measured at fair value as at Balance Sheet date:
1. The fair values of investment quoted investment in equity shares is based on the current bid price of respective investment as at the Balance Sheet date.
2. The fair values of investments in mutual fund units is based on the net asset value (''''NAV'''') as stated by the issuers of these mutual fund units in the published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund and the price at which issuers will redeem such units from the investors.
Other financial assets and liabilities
- Cash and cash equivalents (except for investments in mutual funds), trade receivables, investments in term deposits, other financial assets (except derivative financial instruments), trade payables,
and other financial liabilities (except derivative financial instruments) have fair values that approximate to their carrying amounts due to their short-term nature.
- Loans have fair values that approximate to their carrying amounts as it is based on the net present value of the anticipated future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
4. FINANCIAL RISK MANAGEMENT
The Company''''s business activities are exposed to a variety of financial risks, namely liquidity risk, market risks and credit risk. The Company''''s senior management has the overall responsibility for establishing and governing the Company''''s risk management framework. The Company''''s risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly.
A. MANAGEMENT OF LIQUIDITY RISK
Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company''''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.
The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2017 and 31st March, 2016. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis.
The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in highly marketable debt investments with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.
The following table shows the maturity analysis of the Company''''s financial liabilities based on contractually agreed undiscounted cash flows along with its carrying value as at the Balance Sheet date.
B. MANAGEMENT OF MARKET RISK
The Company''''s size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:
CURRENCY RISK PRICE RISK INTEREST RATE RISK
The above risks may affect the Company''''s income and expenses, or the value of its financial instruments. The Company''''s exposure to and management of these risks are explained below.
1. CURRENCY RISK
''''POTENTIAL IMPACT OF RISK
The impact of risk due to change in foreign currency value is very minute on the company as the company''''s exposure to foreign currency is very low.
As at 31st March, 2017, the net unhedged exposure to the Company on holding financial assets (trade receivables and capital advances) Rs,and liabilities (trade payables and capital ''''creditors) other than in their functional currency Rs,amounted to Rs, 0 Lakhs payable (31st March, Rs,2016 Rs, 0 Lakhs and 1st April, 2015 Rs, 0 Lakhs).
The Company is not majorly exposed to foreign currency exchange risk because of its low volume foreign currency transactions, even though management exercises proper precautions to minute the currency risk in foreign exchange transactions. The company deals with US Dollor and Euro for its foreign currency transactions.
The Company makes its exports against advance irrevocable LC to mitigate the risk of currency exchange due to delay in remittances. The company does not opt for forward exchange contracts. Foreign exchange transactions are closely monitored to reduce the risk.
The aim of the Company''''s approach to management of currency risk is to leave the Company with no material residual risk.
SENSITIVITY TO RISK
A 5% strengthening of the INR against key currencies to which the Company is exposed (net of hedge) would have led to approximately ''''an additional Rs, 0 Lakhs gain in the Statement of ''''Profit and Loss (2015-16: Rs, 0 Lakhs gain). A 5% ''''weakening of the INR against these currencies ''''would have led to an equal but opposite effect.
2. PRICE RISK
POTENTIAL IMPACT OF RISK
The Company is exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments.
At 31st March 2017, the investments in debt mutual funds amounts to Rs, 62697.12 Lakhs (31st March, 2016 Rs, 48634.07 Lakhs and 1st April, 2015 Rs, 29430.05 Lakhs). These are exposed to price risk.
The Company takes all the precautions to minimize price risk arising from investments in debt mutual funds. The company is investing mainly in debt mutual funds through leading mutual fund companies and in best mutual funds where price risk is very low. The company will examine fund performance, rating, liquidity and risk aspects before investing.
SENSITIVITY TO RISK
A 0.5% increase in prices would have led to approximately an additional '''' 313.49 Lakhs gain in the Statement of Profit and Loss (2015-16 Rs, 243.17 Lakhs gain). A 0.5 % decrease in prices would have led to an equal but opposite effect.
3. INTEREST RATE RISK
POTENTIAL IMPACT OF RISK
The impact of interest rate risk is very minute on the company as the company does not have exposure to any interest rate sensitive investments or securities.
The company does not have any investment in interest sensitive securities/bonds as on 31st march 2017, 2016 and 2015.
The Company makes maximum of the investments in non interest sensitive sectors to mitigate interest rate risk.
SENSITIVITY TO RISK
A 0.25% or .50% increase/decrease in interest rates will not make any difference to the company profit or loss as there are no interest rate sensitive investments.
C. MANAGEMENT OF CREDIT RISK
Credit risk is the risk of financial loss to the company if a customer or counter-party fails to meet its contractual obligations.
Concentration of credit risk with respect to trade receivables is moderate, due to the Company''''s customer base being large and diverse and also company receivesgood amount of receipts towards advances. All trade receivables are reviewed and assessed for default on a quarterly basis based on collections and ageing.
Our historical experience of collecting receivables is that credit risk is moderate. Hence, trade receivables are considered to be a single class of financial assets.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments money market liquid mutual funds and derivative instrument with financial institutions. The Company has set counter-parties limits based on multiple factors including financial position, credit rating, etc. The Company has given inter-corporate deposits (ICD) only to its subsidiaries amounting Rs, 0 Lakhs (31st March, 2016 Rs, 740 Lakhs and 1st April, 2015 Rs, 642 Lakhs).
The Company''''s maximum exposure to credit risk as at 31st March, 2017, 2016 and 1st April, 2015 is the carrying value of each class of financial assets.
5. Related Party Transactions
50.1 Following is the list of related parties and their relationships
A. Key managerial persons and their relatives
1 Mr. G.V.Bhaskar Rao
2 Mrs. G. Vanaja Devi
3 Mr. R. Venumanohar Rao
4 Mr. C. Vamsheedhar
5 Mr. C. Mithun Chand
6 Mr. G.Pawan
7 Mrs. G. Madhusree
8 G.V.Bhaskar Rao - HUF
9 C. Vamsheedhar - HUF
10 R. Venumanohar Rao - HUF
B. Subsidary Companies:
11 M/s. Kexveg India Pvt Ltd
12 M/s. Aditya Agritech Pvt Ltd
13 M/s. Genome Agritech Pvt Ltd
14 M/s. Kaveri Microteck Pvt Ltd C Other related firms
15 M/s. Kaveri Infra_
6. Employee benefit plans
The gratuity scheme is a final salary Defined Benefit Plan that provides for a lump sum payment made on exit either by way of retirement, death, disability or voluntary withdrawal. The benefits are defined on the basis of final salary and the period of service and paid as lump sum at exit. The plan design meand the risks commonly affecting the liabilities and the financial results are expected to:
a) Interest rate risk : the defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
b) Salary inflation risk : Higher than expected increases in salary will increase the defined benefit obligation
c) Demographic risk : For example, as plan is open to new entrants, an increase in membership will increase the defined benefit obligation. Also, the plan only provides benefits upon completion of a vesting criteria. Therefore, if tunover rates increase, then the liability will tend to fall as fewer employees reach vesting period.
The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.
7. Operating Leases
The Company''''s significant leasing arrangements are in respect of operating leases for lands and premises (Agricultural lands, office, stores, go down etc.). These leasing arrangements which are cancellable range between 11 months and 10 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as rent in the Statement of Profit and Loss.
The company does not have any non-cancellable agreements.
8. Segment Information
9. The Company has only one business segment via, Seeds.
10. Geographical information
The Company operates in single principal geographical area i.e., India. Though the Company has operations across various geographies within India, the same are considered as a single operating segment considering the following factors
- These operating segments have similar long term gross profit margins.
- The nature of the products and production processes are similar and the methods used to distribute the products to the customers are the same.
11. In view of the above mentioned classification of business and geographical segments, the particulars relating to Segment revenue and results, Segment assets and liabilities, Other segment information, revenue from major products and services, geographical information are not furnished herewith.