Note - 1 Leases
a) The Company has taken office spaces on operating lease basis. The operating lease arrangements, are renewable on a periodic basis and for most of the leases extend up to a maximum of 7 years from their respective dates of inception and relates to rented premises. Some of these lease agreements have price escalation clauses.
b) The Company has entered into non cancellable finance lease agreement with IBM dated 30th December 2011 to install a server from 1st March 2012 to 28th February 2017.
a) During the year, the Company has allotted 74,28,240 Equity Shares of H10/- each upon conversion of FCCBs Series-2 of Euro 6.5 million. During the previous year 2015-16, the Company had allotted 1,19,10,000 Equity Shares of H10/- each on preferential basis to the Promoter and constituents of the Promoter Group for cash at a price of H42/- each (including a premium of H32/- each) on 16th September,2015. The proceeds of the said issue have been used towards augmenting the Net Worth of the Company.
b) Company has received the request from one of the FCCB Holder for conversion of FCCB''''s (Series 3) of Euro 2.4 million on 27th March,
2017 and accordingly an amount of H15.46 Cr has been considered as other equity.
c) The Company has allotted 74,28,240 Equity Shares of H10/- each upon conversion of FCCBs (Series 3) of Euro 6.5 million, after the financial year ended March 2017.
Note - 2. Employee Benefits
The Company participates in defined contribution and benefit schemes, the assets of which are held (where funded) in separately administered funds. For defined contribution schemes the amount charged to the statements of profit or loss is the total of contributions payable in the year.
a) Defined Contribution Plans
Amount recognized as an expense and included in Note 31 Item "Contribution to Provident and Other Funds H0.67 Crore (Previous year H1.19 Crore) for Superannuation Fund.
b) Other long-term benefits
Amount recognized as an expense and included in Note 31 Item "Salaries, Wages, Allowances etc. H3.72 Crore (Previous year H2.43 Crore) for long term compensated Absences.
c) Defined benefits plans
(i) Amount recognized as an expense and included in Note 31 & Note 44 "Contribution to Provident and Other Funds" H8.25 Crore (Previous year H7.58 Crore) for Provident and other fund.
(ii) Gratuity Expense H2.03 Crore (Previous year H1.35 Crore) has been recognized in "Contribution to Provident and Other Funds" under Note 31. as per Actuarial Valuation.
iii. Associate of
Bengal & Assam Company Limited (BACL)
iv. Trust under common control
JK Paper Limited (JK Paper Mills) Compulsory Employees Provident Fund JK Paper Limited Employees Gratuity Fund JK Paper Limited Officers Superannuation Scheme
v. Key Management Personnel (KMP)
Shri Harsh Pati Singhania, Vice Chairman & Managing Director .
Shri Bharat Hari Singhania, Chairman
Shri Om Prakash Goyal, Whole-time Director
Shri Arun Bharat Ram
Executives Shri Dhirendra Kumar
Shri V. Kumaraswamy, Chief Finance Officer •
Shri M. H. Dalmia
Shri S. C. Gupta, Vice President & Company Secretary
Shri R. V. Kanoria Shri Sandip Somany Shri Shailendra Swarup Shri Udayan Bose Smt. Vinita Singhania Shri Wim Wienk
The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values.
A The fair values of derivatives are on MTM as per Bank
B Company has opted to fair value its mutual fund investment through profit & loss C Company has opted to fair value its quoted investments in equity share through OCI
D As per Para D-15 of Appendix D of Ind AS 101, the first time adopter may chose to measure its investment in subsidiaries, JVs and Associates at cost or at fair value. Company has opted to value its investments in subsidiaries, JVs and Associates at cost.
E Company has adopted effective rate of interest for calculating Interest. This has been calculated as the weighted average of effective interest rates calculated for each loan. In addition processing fees and transaction cost relating to each loan has also been considered for calculating effective interest rate.
* The carrying amounts are considered to be the same as their fair values due to short term nature.
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
3. Financial risk factors
The Company''''s operational activities expose to various financial risks i.e. market risk, credit risk and risk of liquidity. The Company realizes that risks are inherent and integral aspect of any business. The primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk & interest rate risk. The Company calculates and compares the alternative sources of funding by including cost of currency cover also. Whenever, the currency cover costs are such as to neutralize the advantage in foreign currency, loans are hedged so as to not to lose advantage. The Company uses derivative financial instruments to reduce foreign exchange risk exposures.
i. Credit Risk
The Company evaluates the customer credentials carefully from trade sources before appointment of any distributor and only financially sound parties are appointed as distributors. The Company secures adequate deposits from its distributor and hence risk of bad debt is limited. The credit outstanding is sought to be limited to the sum of advances/deposits and credit limit determined by the company. The company have stop supply mechanism in place in case outstanding goes beyond agreed limits.
ii. Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of fluctuation in market prices. These comprise three types of risk i.e. currency rate , interest rate and other price related risks. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Regular interaction with bankers, intermediaries and the market participants help us to mitigate such risk.
a.) Foreign Currency Risk and sensitivity
The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to reduce foreign exchange risk exposures and follows its risk management policies to mitigate the same. After taking cognisance of the natural hedge, the company takes appropriate hedges to mitigate its risk resulting from fluctuations in foreign currency exchange rate(s).
b. Interest Rate Risk and Sensitivity
The Company''''s exposure to the risk of changes in market interest rates relates primarily to long term debt. The Company has entered into various interest rate swap contracts, in which it agrees to exchange, at specific intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed upon principal amount. Borrowings at variable rates expose the Company to cash flow interest rate risk. With all other variables held constant, the following table demonstrates composition of fixed and floating rate borrowing of the company and impact of floating rate borrowings on company''''s profitability.
c. Commodity price risk and sensitivity
The Company is exposed to the movement in price of key raw materials in domestic and international markets. The Company has in place policies to manage exposure to fluctuations in the prices of the key raw materials used in operations. The Company manages fluctuations in raw material price through hedging in the form of advance procurement when the prices are perceived to be low and also enters into advance buying contracts as strategic sourcing initiative in order to keep raw material and prices under check cost of material hedged to the extent possible.
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to H110.81 Crore and H139.18 Crore as of March 31, 2017 and March 31, 2016, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India. Credit risk has always been managed by the company through credit approvals, 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 or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables. The provision matrix takes into account as per the Company''''s historical experience for customers.
Liquidity risk arises when the Company will not be able to meet its present and future cash and collateral obligations. The risk management action focuses on the unpredictability of financial markets and tries to minimise adverse effects. The Company uses derivative financial instruments to hedge risk exposures. Risk management is carried out by the Finance department under Forex Policies as adopted and duly approved by the Board. The Company''''s approach is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due and company monitors rolling forecasts of its liquidity requirements.
4. Competition and Price risk
The Company faces competition from local and foreign competitors. Nevertheless, it believes that it has competitive advantage in terms of high quality products and by continuously upgrading its expertise and range of products to meet the needs of its customers.
5. Capital Risk Management
The Company''''s policy is to maintain an adequate capital base so as to maintain creditor and market confidence and to sustain future development. Capital includes issued capital, share premium and all other equity reserves attributable to equity holders. In order to strengthen the capital base, the company may use appropriate means to enhance or reduce capital, as the case may be.
Note - 6. Derivative Financial Instruments
The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.
*Net of Receivables USD 1.22 Million - H7.93 Crore (Previous year USD 3.10 Million - H20.55 Crore) and GBP 0.02 Million - H0.14 Crore (Previous year GBP Nil - HNil).
Note - 53 Impairment Review
Assets are tested for impairment whenever there are any internal or external indicators of impairment. Impairment test is performed at the level of each Cash Generating Unit (''''CGU'''') or groups of CGUs within the Company at which the assets are monitored for internal management purposes, within an operating segment. The impairment assessment is based on higher of value in use and value from sale calculations. During the year, the testing did not result in any impairment in the carrying amount of other assets. The measurement of the cash generating units'''' value in use is determined based on financial plans that have been used by management for internal purposes. The planning horizon reflects the assumptions for short to- mid-term market conditions.
Key assumptions used in value-in-use calculations are:-
(i) Operating margins (Earnings before interest and taxes), (ii) Discount Rate, (iii) Growth Rates and (iv) Capital Expenditure
Note - 7.New Developments
a) The Company has ceased to be a party to Joint Venture Agreement with Oji JK Packaging Private Limited w.e.f 20th January, 2017
b) During the year 2016-17, JK Enviro-Tech Limited, a subsidiary of the Company, became its Wholly Owned Subsidiary Company
c) During the year 2016-17, JK Paper International (Singapore) Pte Limited JKPI (S) PL , previously known as Habras International (Singapore) Pte. Limited (subsidiary of JK Enviro-Tech Limited), become wholly owned subsidiary of JK Paper Limited w.e.f 8th of March 2017.
Note - 8. Information related to consolidated financials
The company is listed on stock exchange in India, the Company has prepared consolidated financial as required under Ind AS110, Sections 129 of Companies Act, 2013 and listing requirements. The consolidated financial statement is available on Company''''s web site for public use.
Note - 9. First Time Adoption of Ind AS
These financial statements, for the year ended 31 March 2017, have been prepared in accordance with Ind AS, for the purposes of transition to Ind AS, the company has followed the guidance prescribed in Ind AS 101- First time adoption of Indian Accounting Standards, with April 01, 2015 as the transition date and IGAAP as the previous GAAP.
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2017, together with the comparative period data as at and for the year ended 31 March 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''''s opening balance sheet was prepared as at 1 April 2015, the date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2015 and the financial statements as at and for the year ended 31 March 2016.
D. There is no significant reconciliation items between cash flow prepared under Previous GAAP and prepared under Ind AS.
Disclosures as required by Indian accounting standard (Ind AS) 101 first time adoption of Indian Accounting Standards Exemption and exceptions availed
Below mentioned are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
(A) Ind AS Optional Exemptions:
Ind AS 101 allow first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The company has applied the following exemptions:
i) The company has elected to measure an item of Property plant and Equipments and intangible assets at the date of transition to Ind AS as at its fair value and use that fair value as deemed cost at that date
ii) Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the company has done the assessment of lease in contracts based on conditions in prevailing as at the date of transition.
iii) The company has elected to apply previous GAAP carrying amount of its investment in subsidiaries, associates and joint ventures as deemed cost as on the date of transition to Ind AS.
iv) Ind AS 101 permits an entity to designate particular equity investment ( Other than equity investment in subisdiaries, joint ventures and associates ) as at fair value through other Comprehensive Income (FVOCI) based on facts and circumstances as the date of transition to Ind AS ( rather than at intitial recognition). Other equity investment are classified at Fair Value through Profit & Loss (FVTPL). The Company has availed this exemption to designate certain equity investment as FVOCI on the date of trasition.
v) The company has continued the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP
(B) Ind AS mandatory Exceptions:
The following mandatory exceptions have been applied in accordance with Ind AS 101 in preparing the financial statements.
The estimates at April 01, 2015 and March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences if any, in accounting policies) apart from the items where application of Indian GAAP did not require estimation. The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions as at the transition date and as of March 31, 2016.
ii) Derecognition of financial assets and financial liabilities
The Company has elected to apply the derecognition requirements for financial assets and financial liabilities in Ind AS 109 prospectively for transitions occurring on or after the date of transition to Ind AS.
iii) Classification and measurement of financial assets
The Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.
Notes to the reconciliation of equity as at April 01, 2015 and March 31, 2016 and total comprehensive income for the year ended March 31, 2016A.
i) Fair Value as deemed cost - Property Plant and Equipment (PPE)
The Company has opted the option of fair value as deemed cost for the Property Plant and Equipment as on the date of transition to Ind AS. This has resulted in increase of H310.06 Cr in the value of the Property Plant and Equipment with corresponding increase in retained earnings of H310.06 Cr and deferred tax liability of H68.47 Cr . Further, the company has also recognised the revision in useful life as on date of transition to Ind AS to retained earnings and deferred tax liability.
Reclassification of Assets Held for sale and fair value adjustments led to additional depreciation of H9.90 Crore during the year ended March 31, 2016.
During the year ended March 31, 2016, the Company has sold some of the itmes of Property Plant and Equipment which was fair valued as on the transition date under Ind AS, such sale has resulted into reduction of profit on sale of Property Plant and Equipment by H0.15 Crore. As the Company has opted the option of fair value as deemed cost for the Property Plant and Equipment as on the date of transition to Ind AS, hence the carrying value of revaluation reserve of H2.92 Cr has been adjusted against retained earnings on the date of transition. Subsequently during 2015-16, depreciation charged to revaluation reserve under previous GAAP has been reversed and depreciation as per Ind AS has been accounted for.
ii) As per the provisions of Ind AS 105, any non- current assets are to be classified as assets held for sale, if the sale of such assets is highly probable within a period of 12 months from the date of its classification. The Company has now reclassified its assets earlier held for sale as Property Plant & Equipment (PPE) - Assets Not in Active Use. Impact of depreciation has also been considered accordingly.
B. Investments (Non - Current & Current)
i) The company has elected to apply previous GAAP carrying amount of its investment in subsidiaries, associates and joint ventures as deemed cost as on the date of transition to Ind AS.
ii) For investment in Mutual Fund, company has elected to fair value through Profit and Loss Account(FVTPL)
iii) For investment in Quoted Instrument, company has elected to fair value through OCI.(FVTOCI)
C. Financial instruments
1 Derivative financial instruments
Under Indian GAAP, derivative contracts are restated at each balance sheet date to the extent of any reduction in value is recognised in Statement of Profit and Loss. A gain on valuation is only recognised by the Company if it represents the subsequent reversal of an earlier loss. Also under IGAAP premium on forward contract is amortised over the contract period and value was calculated excluding the premium.
Under Ind AS, both reductions and increases to the fair values of derivative contracts are recognised in profit & loss. Premium is not separately accounted and amortised.
2 Financial assets and financial liabilities measured at amortized cost
Under the previous GAAP, security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value.Under Ind AS 109-Financial Instruments, security deposits are required to be valued at fair value and difference between cost and fair value is to be amortised over the period of security as rental expenses and consequently interest income is to be booked at Effective Interest method in Profit and Loss Account
3 Cost of borrowing
Borrowing designated and carried at amortised cost are accounted on EIR method. The upfront fee or cost of borrowing incurred is deferred and accounted on EIR basis. Borrowings are shown as net of unamortised amount of upfront fee incurred.
D. Proposed Dividend
Under Indian GAAP, proposed dividends are recognised as liability in the period to which they relate irrespective of the approval by shareholders. Under Ind AS a proposed dividend is recognised as liability in the period in which it is declared (on approval of shareholders in a general meeting) or paid. Therefore the proposed dividend and dividend distribution tax for the F.Y. 2015-16 has been derecognised and recognised during 2016-17 on payment.
E. Deferred Tax
i) Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences, which was not required under Indian GAAP
ii) In addition, the various transitional adjustments lead to different temporary differences resulting in recognition of deferred tax. Such deferred tax asset has been recognized in retained earnings.
iii) Deferred Tax liability recognised on fair valuation of PPE as on transition date has been reversed to the extent of assets sold during the year.
F. Fair Valuation of Financial Assets
i) Fair Valuation has been done for Loan given at lower rate of interest. Difference between loan amount and Fair value is recognised as interest income and Employee Cost expense as per Effective Interest Method in Profit and Loss Account.
ii) Mutual Funds has been fair valued through Profit and Loss (FVTPL)
G. Arrangement containing the lease
The company has entered into raw material supply arrangement which contains the lease. The arrangement has been classified as operating lease based on terms of the agreement, corresponding results in decrease of Cost of Material Consumed and Increase in Rent Expenses.
H. Excise Duty
Paragraph 8 of Ind AS 18, Revenue states that ''''Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not having any economic benefits which flow to the entity and do not result in increases in equity. Therefore, they are excluded from revenue and shown separately.
I. Remeasurements of post-employment benefit obligations
Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year.
J. Depreciation on Property, Plant and Equipment
Company has reversed depreciation charged on revaluation of PPE as per previous GAAP and Depreciation on Property, Plant and Equipment has been calculated on the fair value for the F.Y. 2015-16 and depreciation as per Ind AS has been accounted.
K. Company has derecognized its Financial Assets pertaining to Renewal Energy Certificate as on April 1, 2015 H26.97 Crore and H17.87 Crore for 2015-16 due to Ind AS adjustment and the same is included in Equity reconciliation as per Indian GAAP and Ind AS.
* For the purposes of this clause, the term ''''Specified Bank Notes'''' shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8 November 2016.
Note - 10 Segment information Information about primary segment
The Company has only one business segment i.e. Paper and Boards and geographical reportable segment i.e. Operations mainly within India. The performance is reviewed by the Board of Directors (Chief operating decision makers).
Previous year figures have been regrouped/ rearranged, wherever considered necessary to conform to current year''''s classification. Notes 1 to 62 are annexed to and form an integral part of financial statements.