1 In accordance with the Payment of Gratuity Act, 1972 the company provides for gratuity covering eligible employees. The liability on account of gratuity is covered partially through a recognized Gratuity Fund managed by Life Insurance Corporation of India (LIC) and balance is provided on the basis of valuation of the liability by an independent actuary as at the year end. The management understands that LIC overall portfolio of assets is well diversified and as such, the long term return on the policy is expected to be higher than the rate of return on Central Government bonds.
A Defined benefit plans
(i) Liability for gratuity as on March 31, 2017 is Rs, 143.18 million (31.03.2016:Rs, 123.17 million and 01.04.2015: Rs, 113.32 million) of which Rs, 31.89 million (31.03.2016: Rs, 41.15 million and 01.04.2015: Rs, 24.86 million) is funded with the Life Insurance Corporation of India. The balance of Rs, 111.29 million (31.03.2016:Rs, 82.02 million and 01.04.2015: Rs, 88.46 million ) is included in Provision for Gratuity.
(ii) Details of the company''''s post-retirement gratuity plans for its employees including whole-time directors are given below, which is certified by the actuary.
2 Working Capital Demand Loans and Cash Credit facilities availed from consortium of banks are secured by:
a) Hypothecation against first charge on stocks, book debts, shares of NCC Infrastructure Holdings Limited (Refer note 4.3) and other current assets of the Company, (excluding specific projects) both present and future, ranking parri passu amongst consortium banks.
b) Hypothecation against first charge on unencumbered fixed assets of the Project Division and Light Engineering Division (excluding Land & Buildings) of the Company rank parri passu amongst consortium banks.
c) Equitable mortgage of three properties (Land & Buildings).
d) The Company availed overdraft facility from ICICI Bank and is secured, in terms of the sanction letter, by:
- mortgage over immovable fixed assets;
- pledge of shares of NCC Urban Infrastructure Limited held by NCC Limited;
- personal guarantees of Sri. A.A.V. Ranga Raju, Sri A.G.K. Raju, Sri. A.S.N. Raju, Sri. A.V.N. Raju, Sri. A.K.H.S. Rama Raju, Sri. N.R. Alluri and Sri. J.V. Ranga Raju;
This facility carries an interest rate of 13.50% per annum.
3 Unsecured - term loans from Others: having a maturity of less than one year and carry interest rate of 12.00 % per annum.
4. Related Party Transactions
i) Following is the list of related parties and relationships:
S.No Particulars S.No Particulars
A) Subsidiaries 36 Sri Raga Nivas Ventures Private Limited
1 NCC Infrastructure Holdings Limited 37 Mallelavanam Property Developers Private Limited
2 NCC Urban Infrastructure Limited 38 Sradha Real Estates Private Limited
3 NCC Vizag Urban Infrastructure Limited 39 Siripada Homes Private Limited
4 Nagarjuna Construction Co.Ltd and Partners LLC 40 NJC Avenues Private Limited
5 OB Infrastructure Limited 41 NCC Urban Lanka (Private) Limited
6 NCC Infrastructure Holdings Mauritius Pte. Limited 42 NCC WLL
7 Nagarjuna Construction Company International LLC 43 Al Mubarakia Contracting Company LLC
8 Nagarjuna Contracting Co.LLC 44 NCCA International Kuwait General Contracts Company LLC
9 Patnitop Ropeway and Resorts Limited 45 Samashti Gas Energy Limited
10 Western UP Tollway Limited ** 46 NCC Infra Limited
11 Vaidehi Avenues Limited 47 NCC Urban Homes Private Limited
12 NCC International Convention Centre Limited 48 NCC Urban Ventures Private Limited
13 NCC Oil & Gas Limited 49 NCC Urban Meadows Private Limited
14 Nagarjuna Construction Company (Kenya) Limited 50 NCC Urban Villas Private Limited
15 Naftogaz Engineering Private Limited 51 Nagarjuna Suites Private Limited
16 Aster Rail Private Limited 52 Savitra Agri Industrial Park Private Limited (formerly NCC Power
Projects (Sompeta) Private Limited)
17 Pachhwara Coal Mining Private Ltd
B) Step-Down Subsidiaries C) Associates
18 Liquidity Limited 53 Paschal Form Work (India) Private Limited
19 Dhatri Developers & Projects Private Limited 54 Nagarjuna Facilities Management Services LLC
20 Sushanti Avenues Private Limited 55 Himalayan Green Energy Private Limited
21 Sushruta Real Estates Private Limited 56 Jubilee Hills Landmark Projects Private Limited
22 PRG Estates Private Limited 57 Tellapur Technocity (Mauritius)
23 Thrilekya Real Estates Private Limited 58 Tellapur Technocity Private Limited
24 Varma Infrastructure Private Limited 59 Apollonius Coal and Energy Pte.Ltd.
25 Nandyala Real Estates Private Limited 60 Ekana Sportz City Private Limited
26 Kedarnath Real Estates Private Limited 61 Varapradha Real Estates Private Limited
27 AKHS Homes Private Limited 62 Brindavan Infrastructure Company Limited
28 JIC Homes Private Limited 63 Bangalore Elevated Tollway Limited *
29 Sushanthi Housing Private Limited 64 Pondicherry Tindivanam Tollway Limited
30 CSVS Property Developers Private Limited
31 Vera Avenues Private Limited D) Key Management Personnel
32 Sri Raga Nivas Property Developers Private Limited 65 Sri A.A.V. Ranga Raju
33 VSN Property Developers Private Limited 66 Sri A.S.N. Raju
34 MA Property Developers Private Limited 67 Sri A.G.K. Raju
35 Vara Infrastructure Private Limited 68 Sri A.V.N. Raju
S.No Particulars S.No Particulars
69 Sri N.R. Alluri 94 Shyamala Agro Farms Private Limited
70 Sri J.V. Ranga Raju 95 Ranga Agri Impex Private Limited
71 Sri R.S. Raju 96 NCC Foundation
72 Sri M.V. Srinivasa Murthy 97 Sirisha Projects Private Limited
98 Ruthvik Estates Private Limited
E) Relatives of Key Management Personnel 99 Narasimha Developers Private Limited
73 Dr. A.V.S. Raju 100 Mihika Agro Farms Private Limited
74 Smt. A. Bharathi 101 Lalit Agro Farms Private Limited
75 Smt. B. Kausalya 102 Bhuvanesh Realtors Private Limited
76 Smt. A. Satyanarayanamma 103 Arnesh Ventures Private Limited
77 Smt. J. Sridevi 104 Suguna Estates Private Limited
78 Smt. J. Sowjanya 105 AVSR Holdings Private Limited
79 Smt. A. Arundhati 106 Kolleru Industries Pvt Ltd
80 Sri. A. Srinivasa Rama Raju 107 Godavari Holiday Resorts Private Limited
81 Smt. A.Swetha 108 Sridevi Properties
82 Sri. J. Krishna Chaitanya 109 Kaveri Properties
83 Smt. A. Subhadra Jyotirmayi 110 Avathesh Property Developers Private Limited
84 Smt. A.Shyama 111 Jyothi Greenlands Private Limited
85 Smt. A.Suguna 112 Arundhathi Greeenlands Private Ltd
86 Sri. A. Harsha Varma 113 Sirisha Mining Private Limited
87 Sri. SK. S.S.K. Raju 114 Nirathi Mining Private Limited
88 Sri. A. Vishnu Varma 115 Jyothirmayi Minerals Private Limited
89 Ms. A. Nikitha 116 Prakrithi Realty Private Limited
117 Natural Buildtech Private Limited
F) Enterprises owned or significantly influenced by key 118 Prakrithi Promoters Private Limited management personnel or their relatives
90 NCC Blue Water Products Limited
91 Swetha Estates
92 NCC Finance Limited
93 Sirisha Memorial Charitable Trust
* Ceased to be Associate w.e.f October 18, 2016 ** Ceased to be Subsidiary w.e.f May 11, 2016
(i) Rental expenses of Rs, 410.03 million (31.03.2016: Rs, 366.15 million) has been charged to Statement of Profit and Loss in respect of cancellable operating lease.
(ii) The Company has entered into Operating Lease arrangement for certain equipments. The lease is non-cancellable for a period of 5 years from March 28, 2013 to March 27, 2018.
7. Capital management
The Company''''s capital management objective is to maximize the total shareholder return by optimizing cost of capital through flexible capital structure that supports growth. Further, the Company ensures optimal credit risk profile to maintain/enhance credit rating.
The Company determines the amount of capital required on the basis of annual operating plan and long-term strategic plans. The funding requirements are met through internal accruals and long-term/short-term borrowings. The Company monitors the capital structure on the basis of Net debt to equity ratio and maturity profile of the overall debt portfolio of the Company.
For the purpose of capital management, capital includes issued equity capital, securities premium and all other revenue reserves. Net debt includes all long and short-term borrowings as reduced by cash and cash equivalents.
8. Financial risk management objectives
The company''''s business activities exposed to a variety of financial risk viz., market risk, credit risk and liquidity risk. The company''''s focus is to estimate a vulnerability of financial risk and to address the issue to minimize the potential adverse effects of its financial performance.
9. 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. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The company''''s exposure to market risk is primarily on account of foreign currency exchange rate risk.
- Interest rate risk
Out of total borrowings, large portion represents short term borrowings (WCDL) and the interest rate primarily basing on the company''''s credit rating and also the changes in the financial market. Company continuously monitoring over all factors influence rating and also factors which influential the determination of the interest rates by the banks to minimize the interest rate risks.
- Foreign currency risk
The company has several balances in foreign currency and consequently the company is exposed to foreign exchange risk. The exchange rate between the rupee and foreign currencies has changed substantially in recent years, which has affected the results of the company, and may fluctuate substantially in the future. The company evaluates exchange rate exposure arising from foreign currency transactions and follows established risk management policies.
We summarize below the financial instruments which have the foreign currency risks as at March 31, 2017, March 31, 2016 and April 1, 2015.
The company is exposed only to non-listed equity investments and as a policy matter the company bringing down the equity investment exposure to the various companies. The company continuously in the process of disinvestment of its investments in the foreign companies. As the exposure has come down significantly and does not have any equity investment in the listed entities, the impact of change in equity price on profit or loss is not significant.
10. Credit risk management
Credit Risk refers to the risk for a counter party default on its contractual obligation resulting a financial loss to the company. The maximum exposure of the financial assets represents trade receivables, work in progress and receivables from group companies.
Credit risk on trade receivables, work in progress is limited as the customers of the company mainly consists of the Government promoted entities having a strong credit worthiness. For doubtful receivables the company uses a provision matrix to compute the expected credit loss allowances for trade receivables. The provision matrix takes into account ageing of accounts receivables and the company''''s historical experience of the customers and financial conditions of the customers. The company has made a provision of '''' 403.00 million and '''' 230.00 million towards amounts doubtful to receive during the year ended March 31, 2017 and March 31, 2016 respectively.
11. Liquidity risk management
The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Note
12.sets out details of additional undrawn facilities that the Company has at its disposal to reduce liquidity risk.
The table below provides details regarding the contractual maturities of financial liabilities including estimated interest payments as at March 31, 2017:
13. Fair value measurements
Some of the Company''''s financial assets and financial liabilities are measured at fair value at the end of the reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation techniques and inputs used):
(1) In case of Investments in equity instruments, the company adopted fair value as deemed cost for certain investments as on transition date i.e. April 01, 2015.
(2) In case of certain loans and other receivables, the company has provided expected credit loss allowance as on transition date i.e. April 01, 2015.
(3) The fair values of the financial assets and financial liabilities included above have been determined in accordance with generally accepted pricing models.
14 Expenses incurred on Corporate Social Responsibility (CSR) programs under Section 135 of the Companies Act, 2013 are charged to the Statement of Profit and Loss under ''''Other Expenses'''' (Note 34) - Rs, 20.73 million and an advance of Rs, 3.00 million has been paid for CSR related activities (31.03.2016: Rs, 12.94 million).
15 The exceptional items for the year ended March 31, 2017 is Rs, 503.37 million after netting off interest earned Rs, 277.71 million, profit on sale of investments Rs, 219.22 million with provision made on investments, loans, interest and warranties / claims Rs, 1,000.30 million.
The exceptional items for the year ended March 31, 2016 is Rs, 203.23 million after netting off profit on sale of non current investments Rs, 309.77 million with provision made for impairment of noncurrent investments Rs, 513.00 million.
16. During the current year, a customer of the Company had raised claims for an amount of Rs, 2,882.50 million and of US$ 9.04 million on February 23, 2017 towards liquidated damages towards the delays in execution of the project. As against this, on March 14, 2017 the Company has issued a notice of disputes under the contracts and amongst other things, had counter claimed payment of additional costs of Rs, 6,847.80 million, with interest. The Company filed petitions under Section 9 of the Arbitration and Conciliation Act, 1996, before the Hon''''ble Court of the XXIV Additional Chief Judge cum Commercial Court, City Civil Courts, Hyderabad ("Commercial Court"), seeking injunction restraining the Company from invoking the Performance Bank Guarantees issued in favour of the Company, pursuant to the terms of the EPC Contracts. On April 18, 2017, the Commercial Court dismissed the petition filed by the Company. The Company has filed an appeal before the High Court to set aside the Order passed by Commercial Court until the disputes are adjudicated and settled between the parties through arbitration as per the terms of the contract and restraining the Company from invoking or encashing the bank guarantee(s). In the interim, the demand notices for the bank guarantees had already been presented to the respective banks by the Customer and the bank guarantee for '''' 516.00 million issued by the Syndicate Bank was honoured. The matter is pending disposal as of date and as per the Management estimates, no additional provision required for this project.
17 "First-time adoption of Ind-AS
(i) These financial statements, for the year ended March 31, 2017 have been prepared in accordance with the Ind AS. For the purpose of transition to Ind AS, the Company has complied with Ind AS 101 - "First time adoption of Indian Accounting Standard" for exemptions and exceptions, on transition date (i.e. April 1, 2015) and Indian GAAP is the previous GAAP followed by the company.
The transition to Ind AS has resulted in changes in the presentation of financial statements, disclosures in the notes and accounting policies and principles. The accounting policies set out in Note 2 have been applied in preparing the separate financial statements for the year ended March 31, 2017 and the comparative information.
(ii) Deemed cost for investments in Subsidiaries, associates and Other entities:
The Company has elected to continue with the carrying value for all its investments in subsidiaries and associates as of April 1, 2015 measured under Indian GAAP as deemed cost as of April 1, 2015 (transition date) except certain investments where fair value has been considered as deemed cost.
(iii) Cumulative translation differences on foreign operations:
The Company has elected to transfer the cumulative foreign currency translation reserve existed as of April 1, 2015 (transition date) to retained earnings.
(iv) Derecognition of Financial Assets (i.e. Loans, Accrued Interest etc.):
The Company has applied the derecognition of financial assets and financial liabilities prospectively for transactions occuring on or after April 1, 2015(trasition date).
18. The effect of the Company''''s transition to Ind AS is summarized as reconciliations of Equity, Profit and Total comprehensive income with Indian GAAP as explained below:
(a) Reconciliation of equity as previously reported under Indian GAAP to Ind AS.
(b) Reconciliation of profit or loss and Total Comprehensive income as previously reported under Indian GAAP to Ind AS.
(c) Adjustments to the statement of cash flows.
(i) Under Indian GAAP, the Company accounted for investments in subsidiaries and associates (unquoted) measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, as of April 01, 2015 (transition date) the company opted the deemed cost of investments in subsidiaries and associates as the carrying value as per Indian GAAP except certain investments where fair value has been considered as deemed cost.
(ii) Under Indian GAAP, the Company accounted for other entity investments as investments measured at lower of cost and fair value. Under Ind AS, the Company has designated such investments as FVTPL.
(iii) Under Indian GAAP, the Company measured financial assets at cost. As at the transition date, the company recognized the provision for expected credit loss for certain financial assets as per the criteria set out in Ind AS 101.
(iv) Under Indian GAAP, dividends on equity shares recommended by the Board of Directors after the end of the reporting period but before the financial statements were approved for issue were recognized in the financial statements as a liability. Under Ind AS, such dividends along with the dividend distribution tax thereon are recognized as a liability when approved by the members in a general meeting.
(v) Under Ind AS, the company has recognized interest income on financial guarantees given on behalf of its group companies.
(vi) The Company recognizes costs related to its post-employment defined benefit plan on an actuarial basis both under Indian GAAP and Ind AS. Under Indian GAAP, the entire cost including actuarial gains and losses and return on planned assets are charged to profit or loss. Under Ind AS, actuarial gains and losses and return on planned assets recognized immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income.
(vii) Under Indian GAAP, transaction costs incurred in connection with borrowings are charged in statement of profit or loss in respective year. Under Ind AS, such costs are included in the initial recognition amount of financial liability are charged to statement of profit or loss using the effective interest method (i.e., over the tenure of the loan).
(viii) Under Indian GAAP, the company has accumulated the foreign exchange translation differences in Foreign Currency Translation Reserve (FCTR). Under Ind AS as of April 1, 2015, the company elected to net off the accumulated FCTR to retained earnings and subsequently charge off all the exchange gains and losses to the statement of profit and loss except translation differences arising during the conversion of financial statements of branches from their respective reporting currency to company presentation currency and such translation differences are recognized in other comprehensive income.
(ix) Consequential deferred tax on above applicable adjustments
(c) Effect of adoption of Ind AS on the Statement of cash flows for the year ended March 31, 2016:
Following is the impact on cash flows on transition from Indian GAAP to Ind AS. Cash flows relating to interest are classified in a consistent manner as operating, investing or financing each year.
19. Approval of financial statements:
The financial statements were approved for issue by the Board of Directors on May 23, 2017.