1 EXCEPTIONAL ITEMS
Exceptional items represents compensation towards Voluntary Retirement Scheme opted by Employees RS,470.14 Lakhs (Previous year RS, 106.80 Lakhs); Investments in Pugoda Textiles Lanka Limited written off RS, Nil Lakhs (Previous year RS,391.57 Lakhs]. In respect of shares of Pugoda Textiles Lanka Ltd vested with the Government of Sri lanka for compensation, the carrying amount of investment net of compensation awarded by the Compensation Tribunal of Sri lanka has been written off and the compensation receivable of RS,92.26 Lakhs is recognized as income receivable. However the company has appealed for higher compensation.
2 RELATED PARTY TRANSACTIONS
Related Party Relationships Key Management Personnel
Sri. Sanjay Jayavarthanavelu, Chairman and Managing Director Sri. C.B.Chandrasekar, Chief Financial Officer Sri. C.R. Shivkumaran, Company Secretary
Wholly Owned Subsidiary :
LMW Textile Machinery (Suzhou) Co. Ltd.
Post employment benefit plans
Lakshmi Machine Works Limited Employees’ Gratuity Fund Other related parties
Dhanuprabha Agro P Ltd; Eshaan Enterprises Limited; Harshini Textiles Limited; Hermes Academy of Training Limited; Lakshmi Card Clothing P Ltd; Lakshmi Cargo Company Limited; LCC Cargo Holdings Limited;Lakshmi Caipo Industries Ltd; Lakshmi Energy & Environmental Designs Ltd; Lakshmi Electrical Drives Limited; Lakshmi Technology & Engg. Industries Ltd; Lakshmi Ring Travellers (CBE) Limited; Lakshmi Electrical Control Systems Limited;Lakshmi Precision Tools Limited; Lakshmi Life Sciences Limited; Mahalakshmi Engineering Holdings Limited; Quattro Engineering India Limited; Rajalakshmi Engineering; Revantha Holdings Limited; Revantha Services Ltd; Revantha Agro FarmsP Ltd; Sowbarnika Enterprises Ltd; Sowbarniha Resorts Private Limited; Sri Kamakoti Kamakshi Textiles P Ltd; Sri Lakshmi Vishnu Plastics; Sudhasruti Agro P Ltd; Super Sales India Limited; Supreme Dairy Products India Ltd; Starline Travels Limited;Titan Paints & Chemicals Limited; The Lakshmi Mills Company Limited; Venkatavaradha Agencies P Limited; Walzer Hotels P Ltd.
1 Purchase of Goods includes LMW Textile Machinery (Suzhou) Co.Ltd C23.85 Lakhs (Previous year Nil) Lakshmi Electrical Control Systems Limited RS,14401.16 Lakhs (Previous Year RS,16897.90 Lakhs), Lakshmi Electrical Drives Limited RS,3209.01 Lakhs (Previous Year RS,3899.07 Lakhs); Quattro Engineering India Limited RS,4319.81 Lakhs ((Previous Year RS,2515.83 Lakhs);Super Sales India Ltd RS,2841.85 Lakhs (Previous Year RS,2543.41 Lakhs) and Other Related Parties- Associates RS,5451.74 Lakhs (Previous Year RS,7198.67 Lakhs)
2 Sale of Goods includes LMW Textile Machinery (Suzhou) Co. Ltd RS,2143.33 Lakhs (Previous Year RS,5158.01 Lakhs), Lakshmi Electrical Control Systems Limited RS,2649.78 Lakhs (Previous Year RS,2561.85 Lakhs) , Quattro Engineering India Limited RS,559.85 Lakhs (Previous Year RS,325.56 Lakhs) Super Sales India Ltd RS,1016.19 Lakhs (Previous Year RS,1236.79 Lakhs) and Other related Parties -Associates RS,174.49 Lakhs (Previous Year RS,321.51 Lakhs)
3 Purchase of Fixed Assets includes Super Sales India Limited RS,37.00 Lakhs (Previous year RS, Nil Lakhs); Lakshmi Energy and Environments Designs Limited RS,27.61 Lakhs (Previous year RS, Nil Lakhs); Quattro Engineering India Limited RS, Nil Lakhs (Previous Year RS,127.12 Lakhs); Other Related Parties- Associates RS, Nil Lakhs (Previous Year RS,9.49 Lakhs)
4 Sale of Fixed Assets includes LMW Textile Machinery (Suzhou) Co. Ltd RS,109.03 Lakhs (Previous Year RS, Nil Lakhs); Quattro Engineering Ltd RS,238.89 Lakhs (Previous year RS,14.71 Lakhs ); Lakshmi Cargo Company Limited RS, Nil Lakhs (Previous Year RS,385.89Lakhs);Super Sales India Limited RS, Nil Lakhs (Previous Year RS,184.90 Lakhs); and Other Related Parties-Associates RS, Nil Lakhs (Previous Year RS,0.03 Lakhs)
5 Rendering of Services includes , LMW Textile Machinery (Suzhou)Co. Ltd RS,185.61 Lakhs (Previous Year RS,423.88 Lakhs), Super Sales India Limited RS,20.35 Lakhs (Previous Year RS,32.33 Lakhs); Lakshmi Technology & Engineering Industries Ltd. RS,69.41 Lakhs (Previous year RS,60.91 Lakhs) Quattro Engineering India Limited RS,14.06 Lakhs (previous Year RS,0.03 Lakhs) and Other Related Parties-Associates RS,14.77 Lakhs (Previous Year RS,19.27 Lakhs)
6 Receiving of Services include Lakshmi Ring Travellers (Cbe) Limited RS,548.00 Lakhs (Previous Year RS,547.23 Lakhs); Lakshmi Cargo Company Limited RS,6168.44 Lakhs (Previous Year RS,6659.06 Lakhs); Revantha Services Ltd RS,3294.85 Lakhs (Previous year RS,2345.63 Lakhs); Super Sales India Limited RS,673.36 Lakhs (Previous Year RS,669.92 Lakhs) and Other Related Parties - Associates RS,963.73 Lakhs (Previous Year RS,1291.15 Lakhs)
7 Agency arrangement includes Super Sales India Limited RS,1208.08 Lakhs (Previous Year RS,1383.76 Lakhs)
8 Investment in shares include Super Sales India Limited RS,926.66 Lakhs(Previous Year RS,564.41 Lakhs)
9 Contribution to gratuity fund includes Lakshmi Machine Works Limited Employees’ Gratuity Fund RS,560.60 Lakhs (Previous Year RS,682.67 Lakhs)
10 Managerial Remuneration includes amount paid to Chairman and Managing Director RS,768.99 Lakhs (Previous Year RS,899.74 Lakhs); Chief Financial Officer RS,47.56 Lakhs (Previous year RS,26.78 Lakhs*); Company Secretary RS, 10.60 Lakhs* (Previous year RS,28.31 Lakhs)
11 Outstanding Payables include Lakshmi Cargo Company Limited RS,544.87 Lakhs (Previous Year RS,450.56 Lakhs); Lakshmi Precision Tools Limited RS,415.72 Lakhs (Previous Year RS,384.44 Lakhs); Lakshmi Electrical Drives Limited RS,430.89 Lakhs (Previous Year RS, Nil Lakhs); Lakshmi Electrical Control Systems Ltd RS,949.01 Lakhs (Previous year RS,1140.17 Lakhs); Super Sales India Limited RS,134.98 Lakhs (Previous Year RS,808.82 Lakhs) Sri. Sanjay Jayavarthanavelu RS,559.05 Lakhs (Previous year RS,687.60 Lakhs) and Other Related Parties -Associates RS,379.38 Lakhs (Previous Year RS,423.10 Lakhs);
12 Outstanding Receivables include LMW Textile Machinery (Suzhou) Co. Ltd RS,2644.93 Lakhs (Previous Year RS,3459.96 Lakhs), Revantha Services Limited RS,85.88 Lakhs ( Preivous Year RS,173.28 Lakhs); Lakshmi Technology and Engineering Industries Limited RS,124.79 Lakhs (Previous Year RS,63.87 Lakhs); Quattro Engg India Ltd RS,101.55 Lakhs (Previous year RS,458.06 Lakhs) and Other Related Parties - Associates RS,41.47 Lakhs (Previous Year RS,117.32 Lakhs)
* For part of the year
The salary escalation considered in actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
Gratuity is applicable to all permanent and full time employees of the company.
Gratuity payment is based on last drawn basic salary and dearness allowance at the time of termination or retirement. The Scheme takes into account each completed year of service or part thereof in excess of six months. The entire contribution is borne by the company.
Leave encashment benefits are provided as per the rules of the Company. The liabilities on account of defined benefit obligations are expected to be contributed within the next financial year.
The company expects to make a contribution of RS,300 Lakhs (as at 31st March 2016: RS,700 Lakhs; as at 31st March 2015 RS,800 Lakhs) to the defined benefit plans during the next financial year.
The above sensitivity analysis are based on change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the balance sheet.
J Brief description of the Plans & risks
These plans typically expose the company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk. Investment risk
The present value of the defined benefit plan liability is calculated using a discount which is determined by reference to market yields at the end of the reporting period on government bonds. Plan investment is a mix of investments in government securities, other debt instruments and equity shares of listed companies.
A decrease in the bond interest rate will increase the plan liability. However, this will be partially offset by an increase in the return on the plan’s debt investments, if any.
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
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 type of goods or services delivered or provided. The company has chosen to organise the company around differences in products and services. No operating segments have been aggregated in arriving at the reportable segments of the company. Specifically, the Company is organised into three main reportable segments viz.,(1) Textile Machinery Division (2) Machine Tool Division & Foundry Division and (3) Advanced Technology Centre for Aero Space-Parts & Components
1) The accounting policies of the reportable segments are the same as the company’s accounting policies. Inter Segment transfers are accounted on cost plus basis vis-a-vis at competitive market price charged to Unaffliated customers for similar goods.
2) Segment profit represents the profit before tax earned by each segment without allocation of unallowable expenses, finance costs and unallocable income. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.
3) Segment Revenue ,Results, Assets and Liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.
Information about major customers
There is no single customer contributing 10% or more to the company’s revenue for both 2016-17 and 2015-16. Included in revenues of RS,2,35,587.87 Lakhs, are revenues approximately RS,6,535.55 Lakhs [Previous year RS, 17,771.41 Lakhs] which arose from sale to the company’s largest customer.
14 FINANCIAL RISK MANAGEMENT OBJECTIVES
The company’s activity exposes itself to variety of financial risk which includes market risk, credit risk, liquidity risk, interest rate risk and price risk. The Company monitors and manages the above financial risks relating to the operations of the group through internal risk reports which analyses exposures by degree and magnitude of risks. The primary focus is to identify risks and take steps for mitigation of risk or to minimize the potential adverse effects on the financial performance of the Company. The Company does not enter into any derivative financial instruments to hedge risk exposures.
Foreign Currency Risk
The Company undertakes transactions denominated in foreign currencies and consequently has exposure to exchange rate fluctuations. The company operates internationally and a major portion of the international sales transaction are in USD and balance in EUR, purchases from overseas suppliers are in various foreign currencies. The exposure at the end of the reporting period does not reflect the transaction during the year and there is a natural hedge in the currency for USD and EUR. The exchange rate between INR and other currency does have an impact on the business. The company is a net exporter and export realization combined with a depreciating INR has given the company a net foreign exchange gain.
Interest rate risk - The Company holds interest bearing assets in the form of fixed deposits with banks. The variation in interest risks is managed by distributing deposits among wide base of banks and financial institutions.
The company do not have any debts and therefore any fluctuation in market interest rates may not affect the cash flow/profitability position of the company in terms of debts servicing.
Price risk - Holding marketable financial assets expose the company to risk of price fluctuation. Price escalations will have insignificant impact on carrying amounts of respective financial assets. However, the Company is exposed to equity price risks from equity investments. Certain of the Company’s equity investments are held for startegic rather than trading purposes.
Credit risk - Credit risk arises from the risk of default on its obligation by the counterparty resulting in financial loss, such as cash and cash equivalents, and outstanding receivables.
Credit risk on cash and cash equivalents is considered negligible as the company generally invests in fixed deposits with reputable banks. They are not impaired or past due for each of the reporting dates
Credit risk on outstanding receivables is the exposure to billed receivable and are normally unsecured and derived from revenue earned from customer mostly from India. Credit risk is managed by the company through credit approvals and continuously monitoring the credit worthiness of the customer to which the company grants credit in the normal course of business. The company applied simplified approach of estimated credit loss for trade receivable, which provide for expected credit loss based on life-time expected losses. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. The Company does not have any significant credit risk exposure to any single counterparty.
The concentration of credit risk is limited due to the fact that the customer base is large and unrelated.
Liquidity risk - Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The company’s pricincipal source of liquidity is from cash and cash equivalent and the cash flow from operations. The company does not have any external borrowings from banks or any other financial institution. The company believes that the working capital through internal accruals is sufficient to meet its current requirements and hence the Company does not perceive any such risk.
Capital management - The company’s objective is to safeguard its financial stability, financial independence and its ability to continue as a going concern in order to generate returns for the shareholders and benefits for the other stake holders. The company incentivize the shareholders by paying optimum and regular dividends.
The Company determines the amount of capital required on the basis of annual operating plans and other strategic investment plans. The funding requirements are met through internally generated funds . The Company does not have any borrowings in its capital portfolio.
Notes to reconciliation
1. Under previous GAAP, long terms 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 higher than the cost as per previous GAAP, resulting in an increase in the carrying amount by RS,2,312.53 Lakhs as at March 31st, 2016 and by RS,503.52 Lakhs as at April 1st, 2015. There is no deferred tax liability recognized considering that there will be no tax liability in the future. The net effect of these changes is an increase in total equity as at March 31, 2016 of RS,2,816.05 Lakhs (RS,503.52 Lakhs as at April 1, 2015). These changes do not affect profit before tax or total profit for the year ended March 31, 2016 because the investments have been classified as FVTOCI.
2. 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 recognized in the financial statements as a liability. Under IND AS, such dividends are recognized 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,5,424.14 Lakhs (RS,5,085.14 Lakhs as at April 1, 2015), but does not affect profit before tax and total profit for the year ended March 31, 2016.
3. Under previous GAAP, actuarial gains and losses were recognized in profit or loss. Under IND AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability/asset which is recognized in Other comprehensive income. Consequently, the tax effect of the same has also been recognized in Other comprehensive income under IND AS instead of profit or loss. Actuarial losses for the year ended March 31, 2016 were RS,85.01 Lakhs and the tax effect thereon is RS,27.20 Lakhs. The effect of this change is increase in profit by RS,85.01 Lakhs and equity by C57.81Lakhs.
4. Under the previous GAAP, provision for doubtful debts on trade receivables were carried on the basis of an incurred loss model. As per Ind AS, the Company is required to apply expected credit loss model for recognizing the allowance for doubtful debts. As a result there is an increase in the amount of allowance for doubtful debts and corresponding deferred tax has also been recognized. The net effect of this change is a decrease in total equity as at March 31, 2016 of RS,44.14 Lacs (RS,595.67 Lacs as at April 1, 2015) and decrease in total profit for the year ended March 31, 2016 of RS,44.14 Lacs
5. Under the previous GAAP, the company recorded revenue based on the delivery of the finished product. However under IND AS, revenue needs to be recognized on the basis of POCM relating to the job work services done by the company. The effect of this change is an increase in total equity as at March 31, 2016 of RS,92.77 Lacs (RS,112.76 Lacs as at April 1, 2015) 31.15
Previous years’ figures have been restated to comply with IND AS to make them comparable with the current period. Further, previous years’ figures have been regrouped / reclassified, wherever necessary, to conform with the current period presentation.