FUTURE TITAN Notes to Accounts

1.1 TRANSITION TO IND AS


These are the Company’s first financial statements prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015. The adoption of Ind AS was carried out in accordance with Ind AS 101 - ‘First-time Adoption of Indian Accounting Standards’ using transition date as April 1, 2015.


Ind AS 101 requires that all Ind AS be consistently and retrospectively applied for fiscal years presented. The Company has prepared Opening Balance Sheet on the transition date and subsequent financials based on the accounting policies set out in Note-1.


In preparing these financials, the Company has availed following exemptions in the transition from previous GAAP to Ind AS in accordance with Ind AS 101.


Optional exemptions


a) Business combinations


The Company has elected not to apply Ind AS 103- Business Combinations retrospectively for the past business combinations that occurred before the transition date. Thus business combinations that have occurred prior to transition date have not been restated. The Company has applied same exemption for investment in associates and joint ventures.


b) Deemed cost


i) Property, plant and equipment and intangible assets were carried in the balance sheet prepared under previous GAAP as at March 31, 2015. The Company has elected to regard such carrying amount as deemed cost at the date of transition i.e. April 01, 2015.


ii) Under previous GAAP, investment in subsidiaries, joint venture and associate were stated at cost and provisions made to recognise the decline, other than temporary. Under Ind AS, the Company has elected to regard such carrying amount as at March 31, 2015 as deemed cost at the date of transition.


iii) Under previous GAAP, non-current Investments were stated at cost. Where applicable, provision was made to recognise a decline, other than temporary, in valuation of such Investments. Under Ind AS, financial assets in equity instruments [other than those in ii) above] have been classified as Fair Value through Profit and Loss (FVTPL) through an irrevocable election at the date of transition.


iv) Under previous GAAP, current investments were stated at lower of cost and fair value. Under Ind AS, these financial assets have been classified as FVTPL on the date of transition and fair value changes after the date of transition has been recognised in the statement of profit and loss.


1.2 The following statement provides first-time Ind AS adoption reconciliation that quantifies the significant differences arising on account of transition from previous GAAP to Ind AS and adjustments due to demerger of PED division (refer note xi)


a) Effect of Ind AS adoption and adjustments due to demerger of PED division on the balance sheet as at March 31, 2016 and April 1, 2015 (transition date)


iii) Under previous GAAP, current investments were stated at lower of cost or fair value. Under Ind AS, these financial assets have been classified as Fair Value through Profit and Loss (“FVTPL”) on the date of transition and fair value changes after the date of transition has been recognised in the statement of profit and loss.


Under previous GAAP, non current Investments were stated at cost. Where applicable, provision was made to recognise a decline, other than temporary, in valuation of such Investments. Under Ind AS, financial assets in equity instruments (other than investments in subsidiaries, associate and a joint venture) have been classified as FVTPL.


iv) Under previous GAAP, employee loans were stated at the amount paid to the employees. Under Ind AS, employee loans are carried at amortised cost over the period of employee loans.


v) Under previous GAAP, lease deposits were recognised at amount paid to lessors. Under Ind AS, lease deposits are carried at amortised cost over the period of deposits.


vi) Under previous GAAP, lease payments on all operating leases were recognised as an expense on a straight line basis over the lease term. Under Ind AS, lease payments under operating leases recognised on a straight line basis as expense only if the payments to lessor vary because of factors other than expected general inflation.


vii) Under previous GAAP, revenue relating to EMG (Extended Maintenance Guarantee) and signing fees were recognised at the point of receipt / agreement respectively. Under Ind AS, EMG and signing fees is recognised in the accounting periods in which services are rendered.


viii) Under previous GAAP, actuarial gains and losses were recognised in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the defined benefit liability/asset which is recognised in other comprehensive income. Consequently, the tax effect of the same has also been recognised in the Other Comprehensive Income under Ind AS.


ix) Under previous GAAP, liability for dividend and dividend distribution tax thereof is recognised in the period to which the dividend relates, even though the dividend may be approved by the shareholders subsequent to the reporting date. Under Ind AS, dividend is recognised in the year in which the obligation to pay is established.


x) Under previous GAAP, gain/ (loss) arising on changes in fair value of hedging instruments designated and effective as hedges of future cash flows is shown as “Hedging Reserve” under Reserves and surplus. Under Ind AS, the same is recognised as a component of Other Comprehensive Income. Tax effect on the same is also recognised under Other Comprehensive Income.


xi) The Honorable High Court of Madras vide its order dated February 13, 2017 has approved the scheme of arrangement between Titan Engineering & Automation Limited (transferee), a Wholly Owned Subsidiary of the Company and the Company to transfer all assets and liabilities of Precision Engineering Division (PED) of the Company to the transferee effective April 1, 2015. Consequently, all assets and liabilities of the PED have been transferred to the transferee on the date of transition after giving effect to adjustments as required under Ind AS 101. Profits and losses for all periods from April 1, 2015 are also transferred to the transferee.


2.1 DISTRIBUTIONS MADE AND PROPOSED


The Board of Directors at its meeting held on May 7, 2015 had declared a final dividend of Rs.2.3 per equity share of par value of Rs.1 each and the same was paid during the year ended 2016. The proposal was approved by shareholders at the Annual General Meeting held on July 31, 2015.


The Board of Directors at its meeting held on March 16, 2016 had declared an interim dividend of Rs.2.2 per equity share of par value Rs.1 each.


This has resulted in a total outflow of Rs.48,083 lakhs including corporate dividend tax of Rs.8,133 lakhs. No dividends were paid during F.Y. 2016-17.


The Board of Directors, in its meeting on May 12, 2017, have proposed a final dividend of Rs.2.60 per equity share for the financial year ended March 31, 2017. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on August 3, 2017 and if approved would result in a cash outflow of approximately Rs.27,781 lakhs, including corporate dividend tax.


Notes:


a) Rates and taxes include Rs.6,191 lakhs (Previous year: Rs.5,569 lakhs) being the excise duty paid on watch components transferred from Hosur factory to Dehradun, Roorkee and Pantnagar factories.


b) Includes exchange (gain) / loss (net) of Rs.563 lakhs (Previous year: Rs.51 lakhs)


c) Auditors remuneration comprises fees for audit of statutory accounts Rs.175 lakhs (Previous year: Rs.175 lakhs), taxation matters Rs.22 lakhs (Previous year: Rs.36 lakhs), audit of consolidated accounts Rs.10 lakhs (Previous year: Rs.10 lakhs), other services Rs.36 lakhs (Previous year: Rs.49 lakhs) and reimbursement of levies and expenses Rs.61 lakhs (Previous year: Rs.19 lakhs).


3 EXCEPTIONAL ITEM


The Company has announced Voluntary Retirement Scheme (VRS) to its employees during the year. The entire expenses relating to the same being exceptional are classified accordingly and accounted for in the year.


25 SEGMENT INFORMATION


a) Description of segments


The CODM of the Company examines the performance both from a product perspective and geography perspective and has identified 4 reportable segments Watches, Jewellery, Eyewear and Others, where ‘Others’ include Accessories, Fragrances and Sarees.


Corporate (unallocated) represents other income, expenses, assets and liabilities which relate to the company as a whole and are not allocated to segments.


4.1 Leasing arrangements


The Company has taken the above operating leases for non-cancellable periods ranging from 12 months to 108 months. The leases are renewable by mutual consent. The Company does not have an option to purchase the leased asset at the expiry of the lease periods.


4.2 Non-cancellable operating lease commitments


The total of future minimum lease payments in respect of premises taken on lease under non-cancellable operating leases are as follows:


5 Contingent liabilities not provided for - Rs.30,084 lakhs (2016: Rs.29,137 lakhs) comprising of the following:


a) Sales Tax - Rs.2,949 lakhs (2016: Rs.2,316 lakhs)


(relating to the applicability of rate of tax, computation of tax liability, submission of certain statutory forms)


b) Customs Duty - Rs.69 lakhs (2016: Rs.150 lakhs)


(relating to denial of benefit of exemptions)


c) Excise Duty - Rs.19,226 lakhs (2016: Rs.19,250 lakhs)


(relating to denial of exemption by amending the earlier notification, computation of the assessable value, denial of input credit on service tax and excise duty on jewellery)


d) Income Tax - Rs.7,081 lakhs (2016: Rs.6,850 lakhs)


(relating to disallowance of deductions claimed)


e) Others - Rs.759 lakhs (2016: Rs.571 lakhs)


(relating to miscellaneous claims)


The above amounts are based on the notice of demand or the Assessment Orders or notification by the relevant authorities, as the case may be, and the Company is contesting these claims with the respective authorities. Outflows, if any, arising out of these claims would depend on the outcome of the decisions of the appellate authorities and the Company’s rights for future appeals before the judiciary. No reimbursements are expected.


6 Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs.18,032 lakhs (2016: Rs.8,239 lakhs and April 1, 2015: Rs.16,172 lakhs).


7 The Company was issued with show cause notices by the Excise authorities aggregating to Rs.34,819 lakhs (2016: Rs.34,819 lakhs) without quantifying interest and penalty, relating to disallowance of cenvat credit availed. The Hon’ble High Court of Madras allowed the writ petition filed by the Company by setting the show cause notices. Against the aforesaid Order the Excise department filed an appeal before the Hon’ble Supreme Court which is pending for admission.


8 OTHER COMMITMENTS


Unclaimed liability on shares of joint venture ‘ Nil (2016: Rs.1,078 lakhs)


9 EMPLOYEE BENEFITS


a) Defined Contribution Plans


i) The contributions recognized in the statement of profit and loss during the year are as under:


ii) Contributions are made to the Company’s Employees Provident Fund Trust at predetermined rates in accordance with the Fund rules. The interest rate payable by the Trust to the beneficiaries is as notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate and recognizes such shortfall as an expense. Based on the actuarial valuation, there is no shortfall in the interest payable by the Trust to the beneficiaries as on the balance sheet date.


b) Defined Benefit Plans i) Funded


The Company makes annual contributions to The Titan Industries Gratuity Fund. The scheme provides for lump sum payment to vested employees at retirement, death while in employment, or on termination of employment as per the Company’s Gratuity Scheme. Vesting occurs upon completion of five years of service.


The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. In particular, there is a risk for the Company that an adverse salary growth or inadequate returns on underlying plan assets can result in an increase in cost of providing these benefits to employees in future. Since the benefits are lump sum in nature the plan is not subject to any longetivity risks.


- The retirement age of employees of the Company varies from 58 to 65 years.


- The mortality rates considered are as per the published rates in the Indian Assured Lives Mortality (2006-08) Ult table.


- Rates of leaving service (leaving service due to disability included) at specimen ages are as shown below:


The current service cost and the net interest expense for the year are included in the ‘Employee benefits expense’ line item in the statement of profit and loss.


The remeasurement of the net defined liability is included in other comprehensive income.


The amount included in the balance sheet arising from the entity’s obligation in respect of its defined benefit plans is as follows:


9.1 (i) Fair value hierarchy


This note explains about basis for determination of fair values of various financial assets and liabilities:


Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes quoted equity instruments, mutual funds and derivative financial instruments. The fair value of all such instruments that are traded in the stock exchanges is valued using the closing price at the reporting date.


Level 2: The fair value of financial instruments that are not traded in an active market (for example: Over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Fair value of derivative financial instruments are measured using closing rates as provided by the financial institutions as at the reporting date.


Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.


(ii) Valuation technique used to determine fair value


Specific value techniques used to value financial instruments include:


- the use of quoted market prices for listed instruments.


- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date.


- the fair value of foreign currency option contracts is determined using option pricing models.


- the fair value of remaining financial instruments is determined using discounted cash flow analysis.


(iii) Fair value of financial assets and liabilities that are not measured at fair value but fair value disclosures are required The carrying values of financial assets and liabilities approximate the fair values.


9.2 Financial risk management objective


The Company has constituted a Risk Management Committee. The Company has in place a Risk management framework to identify, evaluate business risks and challenges across the Company both at corporate level as also separately for each business division. These risks include market risks, credit risk and liquidity risk.


The Company minimises the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of derivative financial instruments and investment of excess liquidity is governed by the Company’s policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent with the Company’s risk management strategy.


The Company does not enter into or trade financial instruments including derivative financial instruments, for speculative purposes.


9.3 Credit risk


Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Company. 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. Credit risk is managed by the Company through approved credit norms, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. Credit risk arises principally from the Company’s receivables from customers. Refer Note 10.2 for the disclosures for trade receivables.


Credit risk on liquid funds, Inter Corporate Deposits and derivative financial instruments is limited because the counterparties are banks and companies with high credit-ratings assigned by credit-rating agencies.


9.4 Liquidity risk


The Company has an approved policy to invest surplus funds from time-to-time in various short-term instruments. Security of funds and liquidity shall be the primary consideration while deciding on the type of investments.


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 company expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.


Liquidity risk tables


The following table below analyses the Company’s financial liabilities into relevant maturity groupings based on their maturities for:


- all non-derivative financial liabilities, and


- derivative financial liabilities, that are net settled.


The tables have been drawn on an undiscounted basis based on the earliest date on which the Company can be required to pay.


9.5 Market risk


The market risks to which the Company is exposed are price risk {refer note a) below} and foreign currency risk {refer note b) below}.


a) Price Risk:


The Company is exposed to fluctuations in gold price (including fluctuations in foreign currency) arising on purchase/ sale of gold.


To manage the variability in cash flows, the Company enters into derivative financial instruments to manage the risk associated with gold price fluctuations relating to all the highly probable forecasted transactions. Such derivative financial instruments are primarily in the nature of future commodity contracts, forward commodity contracts and forward foreign exchange contracts. The risk management strategy against gold price fluctuation also includes procuring gold on loan basis, with a flexibility to fix price of gold at any time during the tenor of the loan.


The use of such derivative financial instruments is governed by the Company’s policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent with the Company’s risk management strategy.


As the value of the derivative instrument generally changes in response to the value of the hedged item, the economic relationship is established.


The Company assesses the effectiveness of its designated hedges by using the same hedge ratio as that resulting from the quantities of the hedged item and the hedging instrument that the Company actually uses. However, this hedge ratio will be rebalanced, when required (i.e., when the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting), by adjusting weightings of the hedged item and the hedging instrument.


Sources of hedge ineffectiveness include mismatch in the weightings of the hedged item and the hedging instrument and the selling rate.


- The line item in the Balance Sheet that include the above hedging instruments are other financial assets and other financial liabilities.


As at March 31, 2017, the aggregate amount of gains under forward/future contracts is recognised in “Other Comprehensive Income” and accumulated in the cash flow hedging reserve. It is anticipated that the sales will take place during 6 months of the next financial year, at which time the amount deferred in equity will be reclassified to the statement of profit and loss. Details of movements in hedging reserve is as follows:


b) Foreign currency risk management


The company is exposed to foreign exchange risk arising through its sales and purchases denominated in various foreign currencies.


(i) The risk management strategy on foreign currency exchange fluctuation arising on account of purchase/ sale of gold is covered in Note 35.6 above.


(ii) In respect of normal purchase and sale transactions denominated in foreign currency, the Company enters into forward foreign exchange contracts and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. These contracts are measured at fair value through profit and loss.


Foreign currency sensitivity analysis:


The Company is mainly exposed to USD and Euro currencies. The Company’s sensitivity to a 1% increase and decrease in ‘ against the relavant foreign currencies is presented below:


The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 1% change in foreign currency rates. There is a decrease in profit and equity by Rs.14 lakhs where INR weakens by 1% against the relavant currencies. For a 1% strengthning of the ‘ against the relavant currencies there would be a comparable increase in profit and equity.


9.6 The Company’s exposure to forward foreign exchange contracts and option contracts at the end of the reporting year are as follows:


The Company has 159 forward exchange contracts for US Dollars 638 lakhs equivalent to Rs.42,721 lakhs (2016: 6 forward exchange contracts for US Dollars 56 lakhs equivalent to Rs.3,734 lakhs and April 1, 2015: 13 forward exchange contracts for US Dollars 108 lakhs equivalent to Rs.6,778 lakhs), and Nil forward exchange contracts for Euro (2015: 3 forward exchange contracts for Euro 4 lakhs equivalent to Rs.282 lakhs) for firm commitment of purchases.


In addition to the above, the Company has 3 Option contracts in USD 170 lakhs equivalent to Rs.11,296 lakhs (2016 : Nil, April 1, 2015: Nil)


The Company has Nil forward exchange contracts for US Dollars (2016 : Nil, April 1, 2015: 4 forward exchange contracts for US Dollars 31 lakhs equivalent to Rs.1,906 lakhs) for firm commitment on sales.


10 Full particulars of loans given, investment made, guarantees given, security provided together with purpose in terms of section 186 (4) of the Companies Act, 2013


11 In terms of Scheme of Arrangement sanctioned by Honorable High Court of Madras vide order dated February 13, 2017, the Company has transferred the Precision Engineering Division (PED) to its wholly owned subsidiary Titan Engineering & Automation Limited (TEAL) effective from April 1, 2015.


The business of the PED for the year ended March 31, 2017 was conducted and operated by the Company for the benefit of and on behalf of TEAL. Consequently all the accounting documents and supportings documents thereto of transactions such as sales invoices, purchases, expenditure bills, vouchers, agreements/contracts, challans of statutory payments, employee records etc. are in the name of the Company.


All the statutory dues such as provident fund, sales tax, service tax, income tax has been collected/ deducted and remitted by the Company for and on behalf of the TEAL for the year ended March 31, 2017.


12 The figures of the previous year have been regrouped/recasted, wherever necessary to conform with the current year classification.

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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