A Defined benefit obligation
Under previous GAAP, actuarial gains and losses were recognised in profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined liability/ asset which is recognised in other comprehensive income. The actuarial losses for the year ended March 31, 2016 were RS.1.63 crore. This change does not affect total equity, but there is increase in profit before tax of RS.1.63 crore.
B Borrowings classified at amortised cost
Foreign currency convertible bonds issued and terms loans from banks and financial institution are carried at amortised cost under Ind AS and the interest expense has been recognised based on effective interest method.
C Expected credit loss
Under previous GAAP, the Company had created provision for impairment of trade receivables consisting only specific amounts for incurred loss. Under Ind AS, impairment allowance has been determined based on expected credit loss model (ECL). Due to this model, the Company impaired its trade receivables by RS.2.76 crores for the year ended as on March 31, 2016 (As at April 1, 2015 - RS.2.37 crores), which has been recognised in other expenses of RS.2.76 crores for the year ended March 31, 2016 (As at April 1, 2016 - RS.2.37 crores) and in retained earnings for the year ended as on April 01, 2016 and impact on deferred tax effect thereon of RS.0.95 crore (As at April 1, 2015 - RS.0.82 crore). The impairment of RS.2.76 crore (As at April 1, 2015 - RS.2.37 crores) and tax there on of RS.0.95 crore for the year ended March 31, 2016 has been recognised in the Statement of Profit and Loss.
D Impact on deferred tax
This includes the deferred tax impact on the Ind AS adjustments passed.
E Non-current investments classified as FVTOCI
Under previous GAAP, long term investments were measured at cost less diminution in value which is other than temporary. Under Ind AS, these financial assets have been classified as FVTOCI. On the date of transition to Ind AS, these financial assets have been measured at their fair value which is lower than the cost as per previous GAAP, resulting in a decrease in carrying amount by RS.5.08 crore as at March 31, 2016 (As at April 1, 2015 - RS.3.89 crore). These changes do not affect profit before tax for the year ended March 31, 2016 because the changes in fair value are recognised in OCI.
F Current investments classified as FVTPL
Under previous GAAP, current investments were measured at lower of cost or fair value. Under Ind AS, these financial assets have been classified as FVTPL on the date of transition. The fair value changes are recognised in statement of profit or loss. On transition to Ind AS, these financial assets have been measured at their fair values which is higher than cost as per previous GAAP, resulting in an increase in carrying amount by RS.5.58 crore as at March 31, 2016 and by RS.5.57 crore as at April 1, 2015, The corresponding deferred taxes have also been recognised as at March 31, 2016 (RS.1.93 crore) and as at April 1, 2015 (RS.1.93 crore) and also for the year ended March 31, 2016. The net effect of these changes is an increase in total equity as at March 31, 2016 of RS.3.64 crore ( As at April 1, 2015 - RS.3.65 crore), increase in profit before tax of RS.0.01 crore and in total profit for the year ended March 31, 2016 of RS.0.01 crore.
G Proposed dividend
Under previous 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 recognised in the financial statements as a liability. Under Ind AS, such dividends are recognised when declared by the members in a general meeting, The effect of this change is an increase in total equity as at March 31, 2016 of RS.37.62crore ( As at April 1, 2015 - RS.35.82 crore), but does not affect profit before tax and total profit for the year ended March 31, 2016.
H Non-current investments in preference shares classified as FVTPL
Under previous GAAP, non-current investments in preference shares were measured at cost less diminution in value which is other than temporary. Under Ind AS, these financial assets have been classified as FVTPL. On the date of transition to Ind AS, these financial assets have been measured at their fair value which is lower than the cost as per previous GAAP, resulting in a decrease in carrying amount by RS.4.18 crore and RS.5.99 crore as at March 31, 2016 and April 1, 2015 respectively. The corresponding deferred taxes have also been recognised at RS.1.45 crores and RS.2.07 crores as at March 31, 2016 and March 31, 2015 respectively. The net effect of these changes is an increase in total equity as at March 31, 2016 of RS.2.82 crore ( decrease in total equity as at April 1, 2015 - RS.3.92 crore), increase in profit before tax of RS.4.31 crore and in total profit for the year ended March 31, 2016 of RS.2.82 crore.
I Other financial assets classified as FVTPL
Under previous GAAP, other financial assets (Derivatives) were measured at cost. Under Ind AS, these financial assets have been classified as FVTPL on the date of transition. The fair value changes are capitalised to Capital work-in-progress. On transitioning to Ind AS, these financial assets have been measured at their fair values which is lower than cost as per previous GAAP, resulting in a decrease in carrying amount by RS.3.02 crore as at March 31, 2016 and by RS.3.12 crore as at April 1, 2015. Since the decrease in cost is capitalised to capital work in progress, the change does not effect profit before tax, total profit and total equity.
J FCCB bifurcation in equity and liability
The Company had taken loan by issue of foreign currency convertible bonds (FCCBs) into equity in earlier years, having outstanding amount of RS.151.14 crore as on April 1, 2015. Under Ind AS, these FCCBs were bifurcated into loan and equity component based on discounted cash flow method hence under Ind AS, the portion of equity would be accounted for as other equity reserves and unwinding interest on FCCBs as on transition date has been adjusted in opening retained earnings.
In the preparation of these Ind-AS Financial Statements, the Company has made several presentation differences between previous GAAP and Ind- AS. These differences have no impact on reported profit or total equity. Accordingly, some assets and liabilities have been reclassified into another line item under Ind- AS at the date of transition. Further, in these Financial Statements some line items are described differently under Ind AS compared to previous GAAP, although the assets and liabilities included in these line items are unaffected.
L Excise duty and sales commission
Under Indian GAAP, the Company accounted the revenue net of excise duties and sales tax. As per Ind AS, any sales incentives, discounts or rebates in any form, including cash discounts given to customers will be considered as selling price reductions and accounted as reduction from revenue. Excise duty will not be netted off from revenue and shown as a part of expenses.
1. General Information
Sintex Industries Limited (“the Company”) is primarily engaged in the business of manufacture and sale of yarn and structured fabrics.
Sintex Industries Limited is a public limited company incorporated in India on June 01, 1931 under the Companies Act, 1956 and listed on the Bombay Stock Exchange and National Stock Exchange. The registered office of the Company is at Kalol (North Gujarat) - 382 721, India.
2. Critical Judgements in applying accounting policies and key sources of estimation uncertainty
3. Critical judgements in applying accounting policies
In the course of applying the policies outlined in all notes under section 2 above, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future period.
4. Key sources of estimation uncertainty
i) Useful lives and residual value of property, plant and equipment
Company reviews the useful lives and residual values of property, plant and equipment at least once a year. Such lives are dependent upon an assessment of both the technical lives of the assets and also their likely economic lives based on various internal and external factors including relative efficiency and operating costs. Accordingly useful lives are reviewed annually using the best information available to the Management.
ii) Fair value measurements and valuation process
Management uses its judgement in selecting an appropriate valuation technique for financial instruments not quoted in an active market. Valuation techniques commonly used by market participants are applied. Other financial instruments are valued using a discounted cash flow method based on assumptions supported, where possible, by observable market prices or rates. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in note 43.
5. Impairment losses recognised in the year
The Company evaluates impairment losses on the fixed assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such assets are considered to be impaired, the impairment loss is then recognised for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the smallest level for which there are separately identifiable cash flows.
The review led to the recognition of an impairment loss of Rs.Nil (for the year ended March 31, 2016: RS.6.24 crores) in plant and machinery which has been recognised in Statement of Profit and Loss. The management has reviewed the recoverability of the asset and has concluded that asset which were not in usable condition charged to Statement of Profit and Loss as impairment loss at their Written Down Value.
6. Addition to Fixed Assets include Capitalisation of borrowing Cost pertaining to qualifying assets of RS.99.84 crore (Previous year RS.286.80 crore) and Foreign Exchange Capitalised of Rs.Nil (Previous year RS.50.55 crore)
7. In case of freehold land capitalised during the year title deed/conveyance deed in respect of RS.116.05 crore in favour of the company is pending.
8. All the property, plant and equipments of the Company have been pledged to secure borrowings of the Company Refer note 20 and 23.
A Nature and purpose of reserves
(i) Employee Stock options outstanding account
This reserve relates to share options granted by the Company to its employees under its employee stock option plan.
(ii) Capital reserve
Capital reserve represents upfront amount of convertible share warrants forfeited during the financial year 2008-09.
(iii) Capital Redemption reserve
Capital Redemption reserve was created for redemption of preference shares .
(iv) General reserve
The general reserve is created from time to time by transfer of profits from retained earnings for appropriate purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to Statement of profit and loss.
(v) Debenture Redemption reserve
This reserve has been created for redemption of debentures issued by the company in compliance of provisions of the Companies Act, 2013 and rules framed there under.
(vi) Foreign Currency Monetary Item Translation Difference Account
This reserve mainly represents foreign exchange rate variations and amortisation on long term monetary assets/liabilities.
(vii) Equity instruments through other comprehensive income
The reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income.
(viii) Retained earnings
The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the balance in this reserve and also considering the requirements of the Companies Act, 2013. Thus the amounts reported above are not distributable in entirely.
(ix) Remeasurement of defined benefit plans
This reserve represents the impact of actuarial gains and losses on the funded obligation due to change in financial assumptions, change in demographic assumption, experience adjustments, etc. recognised through other comprehensive income.
9. Borrowings (non-current)
(i) 2,500 (Previous year 5,000) 9.41% Secured Redeemable Non Convertible debentures of RS.10,00,000/- each, are redeemable at par on 8th October, 2020. The Debentures are secured by first pari passu charge on fixed assets (excluding spinning unit) of the Company.
(ii) 1,375 (Previous year 2,750) 10.70% Secured Redeemable Non Convertible debentures of RS.10,00,000/- each, are redeemable at par in three equal annual installments starting from 30th September, 2019. The Debentures are secured by first pari passu charge on fixed assets (excluding spinning unit) of the Company.
(iii) 1,125 (Previous year 2,250) 10.70% Secured Redeemable Non Convertible debentures of RS.10,00,000/- each, are redeemable at par in three annual installments starting from 11th June, 2019. The Debentures are secured by first pari passu charge on fixed assets (excluding spinning unit) of the Company.
(iv) Nil (Previous year 1,675) 11.5% Secured Redeemable Non Convertible debentures of RS.10,00,000/- each, are redeemable at par in three annual installments starting from 18th February, 2016. The Debentures are secured by first pari passu charge on all the movable and immovable assets, both present and future excluding assets of spinning unit of the Company.
(v) Term Loans from the banks and Financial Institution referred in point no (a),(b) and (f) of Note (vii) below are secured by first charge on pari passu basis on all the immovable and movable properties of the Company, both present and future excluding properties of spinning unit and on specified current assets and book debts on which prior charge created in favour of the Banks for working capital facilities (refer note 23).
(vi) Term Loans from the banks and Financial Institution referred in point no (c) and (d) of Note (vii) below from the banks and financial institution are secured by first charge on pari passu basis on entire fixed assets including immovable properties of the spinning unit.
(vii) Terms of repayments of term loans (including current maturities of long term debt) carrying interest rate range of 2.4% to 11% p.a. are given below:-
(a) Loan outstanding of Nil (previous year RS.260.00 crores) - the overall loan repayment term includes annual installments of RS.16.25 crores each from 31st March, 2013 to 31st March, 2016 and RS.130 crores each on 31st March, 2017 and 31st March, 2018. *
(b) Foreign currency loan of Rs.Nil (previous year RS.796.00 crores) is repayable in three equal annual installment of RS.265.33 crores at the end of 5th, 6th and 7th year i.e. starting from 14th December, 2017 till 14th December 2019.*
(c) Loan outstanding of RS.1220.00 crores (previous year RS.1220.00 crores) - the overall loan repayment term includes 30 quarterly installment of RS.40.67 crores each starting from August, 2017 to November, 2024 .
(d) Loan outstanding of RS.1284.35 crores (previous year RS.249.85 crores) - the overall loan repayment term includes 30 quarterly installment of RS.40.67 crores each starting from April, 2018 to September, 2025 and 36 quaterly installment RS.52.40 crores each starting from September, 2019 to June, 2028 .
(e) Loan outstanding of RS.82.5 crores (previous year Nil) - the loan repayment term includes 32 structured quarterly installment of RS.1.03 crores each starting from December, 2016 to September, 2021 and RS.4.125 crores starting from December, 2021 to September, 2025 . (For Security Refer note (i) to (iv) above)
(f) The Technology Upgradation Fund Scheme (TUFs) term loans include:
(i) Loan outstanding of Nil (previous year RS.2.18 crores) - the overall loan repayment term includes 32 quarterly installment of RS.4.69 crores each starting from 30th June, 2008 till 30th May, 2016.
(ii) Loan outstanding of Nil (previous year RS.2.34 crores) - the overall loan repayment term includes 32 quarterly installment of RS.2.34 crore each starting from 17th October, 2008 to 17th April , 2016.
(iii) Loan outstanding of RS.129.33 crores (previous year RS.154.33 crores) - the overall loan repayment term includes 32 quarterly installment of RS.6.25 crore each starting from 1st October, 2014 till 1st July, 2022.
(iv) Loan outstanding of RS.94.69 crore (previous year RS.112.73 crores) - the overall loan repayment term includes 32 quarterly installment of RS.4.51 crore each commencing after 27 months moratorium period i.e. starting from 1st October, 2014 till 1st July, 2022.
(v) Loan outstanding of RS.63.56 crore (previous year RS.76.07 crores) - the overall loan repayment term includes 32 quarterly installment of RS.3.13 crore each commencing from 1st October , 2014 till 1st July, 2022.
(viii)Foreign currency loan of Nil (previous year RS.198.99 crores), carrying interest rate of 6 months LIBOR plus 340 bps pa - the overall loan repayment term includes 8 half yearly installment commencing from 21st November, 2018 till 20th May, 2022. *
(ix) Foreign currency loan of RS.63.02 crores (previous year Nil) payable in 2 yearly equal installment commencing from 5th April, 2021.
* Represents Loan amount transfer on account of demerger
10. Discontinued operations
Disposal of custom moulding and prefab businesses
The Company has entered into a Composite Scheme of Arrangement (‘the Scheme’) with Sintex Plastics Technology Limited, Sintex - BAPL Limited, Sintex Infra Projects Limited and their respective shareholders and creditors to transfer the Custom Moulding Undertakings and Prefab Undertakings to Sintex - BAPL Limited and Sintex Infra Projects Limited respectively. The Scheme was sanctioned by the Hon’ble NCLT, Bench at Ahmedabad on March 23, 2017 and the Company has received the approval of the Reserve Bank of India (RBI) vide its letter dated May 12, 2017. On giving effect of the Scheme, with effect from the appointed date of the Scheme i.e. April 01, 2016, all the assets and liabilities of Custom Moulding business (including strategic investments in Sintex Holdings B.V., wholly owned subsidiary) and the Prefab business have been transferred and vested to Sintex - BAPL Limited and Sintex Infra Projects Limited respectively. Therefore operations of Custom Molding business and Prefab business are considered as discontinued operations.
Analysis of the profit for the year ended 31st March, 2016 from discontinued operations
The results of the discontinued operations included in the profit for the year are set out below. The profit and cash flows from discontinued operations have been presented for the year ended March 31, 2016.
11. Composite Scheme of Arrangement:
Pursuant to the Composite Scheme of Arrangement (the ‘Scheme’) between the Company, Sintex Plastics Technology Limited,Sintex-BAPL Limited, Sintex Infra Projects Limited and their respective shareholders and creditors, the Custom Moulding business and the Prefab business of the company along with its related assets and liabilities have been transferred to Sintex-BAPL Limited and Sintex Infra Projects Limited respectively, upon the sanction of the Scheme by the Hon’ble NCLT, Bench at Ahmedabad vide Order dated 23rd March, 2017. The certified copy of the Order sanctioning the Scheme has been filed with the office of the Registrar of the Companies, Gujarat, on 13th April 2017 and the Company has received the requisite approval of the Reserve Bank of India (RBI) vide its letter dated 12th May 2017.
Accordingly, the effect of the Scheme has been given from 1st April 2016, being the Appointed Date of the Scheme. In terms of the Scheme, effective from 1st April 2016:
a) The assets and liabilities of the Custom Moulding business and the Prefab business have been transferred to Sintex-BAPL Limited and Sintex Infra Projects Limited respectively, at the values appearing in the books of accounts of the company on the close of business hours on 31st March 2016.
b) The inter-company balances, appearing in the books of accounts of the Company pertaining to the Custom Moulding business and Sintex-BAPL Limited and the inter-company balances appearing in the books of accounts of the Company pertaining to the Prefab business and Sintex Infra Projects Limited have been cancelled.
c) The investment by way of equity shares held by the Company in the paid up share capital of Sintex Plastics Technology Limited of RS.199.91 crore (including RS.199.90 crores invested during the year under review) has been cancelled.
d) The difference between the value of assets and value of liabilities of the Custom Moulding business and Prefab business amounting to RS.1688.09 crore transferred to Sintex-BAPL Limited and Sintex Infra Projects Limited and the cancellation of equity shares held by the Company in the paid up share capital of Sintex Plastics Technology Limited of RS.199.91 crore as mentioned above, aggregating to RS.1888.00 crore have been appropriated as under :
(i) Capital Reserve RS.47.80 crore
(ii) Capital Redemption Reserve RS.15.05 crore
(iii) Securities Premium Account RS.1714.02 crore
(iv) General Reserve RS.111.13 crore
12. Foreign Currency Convertible Bonds (FCCBs)
On May 25, 2016, the Company issued USD 110 million Step Down Convertible Bonds due 2022 (“FCCBs”). The FCCBs bear interest (i) at the rate of 7% p.a from May 25, 2016 to May 25, 2018 and (ii) at the rate of 3.50% p.a from May 25, 2018 to May 25, 2022, payable semiannually in arrear on the interest payment dates falling on 25 November and 25 May.
The FCCBs are convertible at any time on and after July 5, 2016 and up to the close of business on May 15, 2022 by holders of the FCCBs into fully paid equity shares with full voting rights of the Issuer each with a nominal value of RS.1 at the option of the holder, at an initial conversion price of RS.93.8125 per share with a fixed rate of exchange on conversion of RS.67.4463 = USD 1.00. The conversion price is subject to adjustment in certain circumstances and may be reset on November 25, 2018 and November 25, 2019 in accordance with the terms and conditions of the FCCBs.
As per the Scheme of Arrangement, on exercising option for conversion of the FCCBs, the FCCB holders shall receive one fully paid equity shares of RS.1 each with full voting rights of Sintex Plastics Technology Limited and furhter the repayment of FCCBs is guaranteed by Sintex Plastics Technology Limited.
The FCCBs contain two components: liability and equity elements. The equity element is presented in equity under the heading “Equity component of other financial instrument reserve”
13. Segment information
a. Products and services from which reportable segments derive their revenues.
Information reported to the Chief Operating Decision Maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The directors have chose to organise the Company around difference in products and services. No operating segments have been aggregated in arriving at the reportable segments of the Company.
Pursuant to the Composite Scheme of Arrangement, with effect from April 01, 2016 the Company operates in Textile business which is the only reportable segment in accordance with the requirement of Ind AS 108 “Operating Segments”
b. Geographical information
Geographical revenue is allocated based on the location of the customers. Company’s all non-current assets are located in India (i.e. its country of domicile)
b.1 Disclosure of Material Related Party Transactions during the year and Balance outstanding
1 Purchase of goods/services include purchase from (i) Sintex Infra Projects Ltd. Rs.Nil (Previous Year RS.0.32 crore), Balance as on March 31, 2017 Rs.Nil (Previous Year Rs.Nil), (ii) Sintex- BAPL Ltd. Rs.Nil (Previous Year RS.0.00# crore),Balance as on March 31, 2017 Rs.Nil (Previous Year RS.0.00* crore), (iii) BVM Overseas Ltd. RS.16.47 crores (Previous Year RS.2.01 crores), Balance as on March 31, 2017 RS.14.48 crores (Previous Year RS.2.99 crores) (iv) Som Shiva (Impex) Ltd. Rs.Nil (Previous Year RS.12.61 crores). Balance as on March 31, 2017 Rs.Nil (Previous Year RS.0.28 crore) and (v) Healwell International Ltd. Rs.Nil (Previous Year Rs.Nil). Balance as on March 31, 2017 Rs.Nil (Previous Year Rs.Nil).
2 Purchase of fixed assets include purchase from Sintex Infra Projects Ltd. Rs.Nil (Previous Year RS.456.25 crores), Balance as on March 31, 2017 Rs.Nil (Previous Year RS.18.63 crores).
3 Sale of goods/services include sale to (i) Sintex Infra Projects Ltd. Rs.Nil (Previous Year RS.16.12 crores), Balance as on March 31, 2017 Rs.Nil (Previous Year RS.4.06 crores), (ii) Sintex- BAPL Ltd. Rs.Nil (Previous Year RS.0.60 crores ), Balance as on March 31, 2017 Rs.Nil (Previous Year RS.0.12 crores), (iii) Wausaukee Composites Inc Rs.Nil (Previous Year RS.0.21 crore), Balance as on March 31, 2017 Rs.Nil (Previous Year RS.0.21 crore), (iv) Som Shiva (Impex) Ltd. Rs.Nil (Previous Year RS.0.03 crore), Balance as on March 31, 2017 Rs.Nil (Previous Year RS.0.17 crore).
4 Interest Income mainly include interest from Sintex Infra Projects Ltd Rs.Nil (Previous Year RS.26.36 crores), Sintex- BAPL Ltd. Rs.Nil (Previous Year RS.2.01 crores) and Atik Land Developers Pvt Ltd. Rs.Nil (Previous Year RS.3.81 crores).
5 Guarantee commission includes from Sintex Holding B.V. Rs.Nil (Previous Year RS.1.58 crores), Sintex France SAS Rs.Nil (Previous Year RS.1.96 crores).
6 Managerial Remuneration include remuneration to Shri Rahul A. Patel RS.5.53 crores (Previous Year RS.6.61 crores), Shri Amit D. Patel RS.5.56 crores (Previous Year RS.6.70 crores), Shri S B Dangayach RS.1.86 crores (Previous Year RS.1.86 crores).
7 Sitting fees paid includes to Shri Dinesh B. Patel RS.0.04 crore (Previous Year RS.0.03 crore), Shri Arun P. Patel RS.0.06 crore (Previous Year RS.0.03 crore).
8.1 Loans and advance (non-current) include amount paid to Sintex Infra Project Limited Rs.Nil (Previous Year Loan of RS.23.72 crores) and Sintex-BAPL Ltd. Rs.Nil (Previous Year RS.20.53 crores).
8.2 Loan returned / adjusted during the year by Sintex Infra Projects Ltd. Rs.Nil (Previous Year RS.106.81 crores) and by Sintex- BAPL Ltd. Rs.Nil (Previous Year RS.122.10 crores). The Loan balance outstanding for Sintex Infra Projects Ltd. was Rs.Nil (Previous year RS.226.72 crores) and Sintex- BAPL Ltd. was Rs.Nil (Previous Year RS.10.50 crores) as on March 31, 2017.
9 Purchase of Investment include investment in Sintex Infra Projects Ltd Rs.Nil (Previous Year RS.60.75 crores), Sintex-BAPL Ltd Rs.Nil (Previous Year RS.99.20 crores), BVM Overseas Ltd. Rs.Nil (Previous Year RS.4.50 crores) and Neev Educare Limited Rs.Nil (Previous Year RS.0.01 crores).
10 Sale/transfer of investment include buyback of equity shares of Sintex Holding B.V. Rs.Nil (Previous Year RS.439.73 crores) and transfer of equity shares Sintex Infra Projects Ltd Rs.Nil (Previous Year RS.208.30 crores).
#* Figures represented by # is less than RS.50,000/-.
14. Employee benefits plans
a. Defined contribution plan
The Company operates defined contribution retirement benefit plans for all qualifying employees. The assets of the plans are held separately from those of the Company in funds under the control of trustees. Where employees leave the plans prior to full vesting of the contributions, the contributions payable by the Company are reduced by the amount of forfeited contributions.
The Company makes Provident Fund and Superannuation Fund contributions to defined contribution plans for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised RS.6.15 crores (for the year ended March 31, 2016 RS.3.92 crores) for Provident Fund contributions and RS.0.68 crores (for the year ended March 31, 2016 RS.0.57 crores) for Superannuation Fund contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the scheme.
b. Defined benefit plans:
The Company sponsors funded defined benefit plans for qualifying employees of its subsidiaries. The defined benefit plans are administered by a separate Fund that is legally separated from the entity. The board of the fund is composed of an equal number of representatives from both employers and (former) employees. The board of the fund is required by law and by its articles of association to act in the interest of the fund and of all relevant stakeholders in the scheme, i.e. active employees, inactive employees, retirees, employers. The board of the fund is responsible for the investment policy with regard to the assets of the fund.
Under the Gratuity plan, the eligible employees are entitled to post-retirement benefit at the rate of 15 days salary for each year of service until the retirement age of 58, 60 and 62, without any payment ceiling. The vesting period for Gratuity as payable under The Payment of Gratuity Act is 5 years. Under the Compensated absences plan, leave encashment is payable to all eligible employees on separation from the Company due to death, retirement, superannuation or resignation. At the rate of daily salary, as per current accumulation of leave days.
The defined benefit pension plans requires contributions from employees. Contributions are in the following two forms; one is based on the number of years of service and the other one is based on a fixed percentage of salary of the employees. Note 2(viii) describes change in accounting in the current year following the adoption of the amendments to Ind AS 19.
The plans in India typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
The risk relating to benefits to be paid to the dependents of plan members (widow and orphan benefits) is re-insured by an external insurance company. No other post-retirement benefits are provided to these employees.
The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out at March 31, 2017 by Mr. Saurabh Kochrekar, Consultants & Actuaries. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.
c. The Company offers the following employee benefit schemes to its employees:
i. Gratuity (Funded through annual payment to Life Insurance Corporation of India)
ii. Compensated Absences (Unfunded)
The principal assumptions used for the purpose of actuarial valuation were as follows:
The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.
The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factor.
b. Sensitivity analysis:
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
Each year an Asset-Liability-Matching study is performed in which the consequences of the strategic investment policies are analyzed in terms of risk-and-return profiles. Investment and contribution policies are integrated within this study.
15. Financial instruments
1 Capital management
The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Company consists of net debt and total equity of the Company.
16 Financial risk management objectives
The Company’s Corporate finance department provides services to business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse the exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the Management and the internal auditors on a continuous basis. The Company does not enter into or trade financial instruments, including derivatives for speculative purposes.
The Corporate Treasury function reports quarterly to the Company’s risk management committee, an independent body that monitors risks and policies implemented to mitigate risk exposures.
17 Market risk
The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates due to foreign currency borrowings and variable interest loans. The Company has entered into derivative contracts to manage part of its foreign currency risk. The Company does not enter into derivative contracts to manage risks related to anticipated sales and purchases.
18 Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilizing forward foreign exchange contracts and currency options taken at the time of initiation of the booking by the management. Such decision is taken after considering the factors such as upside potential, cost of structure and the downside risks etc. Quarterly reports are submitted to Management Committee on the covered and open positions and MTM valuation.
The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.
19 Foreign currency sensitivity analysis
The Company is mainly exposed to USD and EURO currency.
The above table details the Company’s sensitivity to a 10% increase and decrease in the INR against relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency risk denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A negative number below indicates an increase in profit/equity where the INR strengths 10% against the relevant currency. For a 10% weakening of the INR against the relevant currency, there would be a comparable impact on the profit/equity and the balances below would be positive.
20. Forward foreign exchange contracts
Company had entered into forward foreign exchange contracts to cover specific foreign currency payments and receipts.
21.Interest rate risk management
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The Company has exposure to interest rate risk, arising principally on changes in PLR and LIBOR rates. The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible debentures and short term loans. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied.
The table in 6.1 provides a break-up of the Company’s fixed and floating rate borrowings:
22. Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.
The following table provides a break-up of the Company’s fixed and floating rate borrowings and interest rate sensitivity analysis.
23. Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company uses publicly available financial information and its own trading records to rate its major customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The Company does not have significant credit risk exposure to any single counterparty. Concentration of credit risk related to the above mentioned company did not exceed 10% of gross monetary assets at any time during the year. Concentration of credit risk to any other counterparty did not exceed 10% of gross monetary assets at any time during the year.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
24. Collateral held as security and other credit enhancements
The Company does not hold any collateral or other credit enhancements to cover its credit risk associated with its financial assets.
8 Liquidity risk management
Liquidity risk refers to the risk of financial distress or extraordinary high financing costs arising due to shortage of liquid funds in a situation where business conditions unexpectedly deteriorate and requiring financing. Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. 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.
The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods and its non-derivative financial assets. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.
25. Fair value measurements
This note provides information about how the Company determines fair values of various financial assets. Some of the Company’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used).
26 . The Company has spent RS.9.40 crore (Previous Year RS.1.31 crore)towards schemes of Corporate Social Responsibility as prescribed under section 135 of the Companies Act, 2013.
I. Gross amount required to be spent by the Company during the year RS.12.11 crore (Previous Year RS.9.38 crores)
II. Amount spent during the year on:
27. Share-based payments
Employee stock option plan of the Company
The Compensation Committee of the Board of Directors of the Company at its meeting held on September 28, 2015 resolved to wind up the Sintex Industries Limited Employee Stock Option Scheme, 2006 (ESOP Scheme) to comply with applicable provisions of SEBI (Share Based Employee Benefits) Regulations, 2014. Accordingly, the trustees of the said Sintex Employee Welfare Trust have divested the entire shareholding lying with the Trust. The Company has recovered the outstanding amount of loan in respect of shares allotted to ESOP Trust and has adjusted the difference between the cost of shares and amount of loan recovered against the balance of Employee Stock Options Outstanding account as per the Guidance Note on Accounting for Employee Share-based Payments. Consequent to winding up of the ESOP Scheme, balance amount of Rs.Nil (Previous year RS.3.76 crore) of Employee Stock Options outstanding account has been transferred to General Reserve.
28 . Interest on borrowings is net of interest subsidy of RS.129.52 crore.
29. Contingent assets
The are no contingent assets recognised as at March 31, 2017.
30. Approval of financial statements
The financial statements were approved for issue by the board of directors on 19th May, 2017