1. Terms/ Rights attached to equity shares:
The Company has only one class of equity shares having a par value of INR 2 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
The Board of Directors proposed a final dividend of INR 1.62 per equity share for the financial year ended 31 March 2015 and the same was approved by the shareholders at the Annual General Meeting held on 6 August 2015. The amount was recognized as distributions to equity shareholders during the year ended 31 March 2016. This event is considered as non-adjusting event.
The Board of Directors declared an interim dividend of INR 1.62 per equity share during the financial year 2015-16. The amount was recognized as distributions to equity shareholders during the year ended 31 March 2016.
The Board of Directors proposed a final dividend of INR 1.62 per equity share for the financial year ended 31 March 2017. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held and if approved, will be recognized as distributions to equity shareholders during the year ended 31 March 2018.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the company after distributing all preferential amounts.
2. Shares held by holding/ultimate holding company and/or their subsidiaries/associates:
The company does not have any holding or ultimate holding company.
3. Shares reserved for issue under options:
Shares reserved for issue under the Employee Stock Option Plan (ESOP) please refer note 34.
4. Employee Stock Option Plan (ESOP)
In the meeting of the Compensation and Share Allotment Committee held on 16 November, 2010 it was decided to utilize the surrendered and lapsed options out of earlier grant and 1,250,000 options (Plan A) were granted to CEO & MD with vesting period of 5 years in terms of his appointment at the relevant market price as Grant IV. In the Annual General Meeting of the Company held on 22 July 2011, total of 9,238,936 stock options were approved under the scheme “Employee Stock Option Plan 2011". In the Meeting of the Compensation and Share Allotment Committee held on 27 January 2015 it was decided to grant options to CEO & MD and senior executives of the Company at the relevant market price as ESOP 2011 - Grant I. The total options granted under ESOP 2011 - Grant I are 3,750,000 options out of which 250,000 options (Plan A) were granted to CEO & MD and 3,500,000 options (Plan B) were granted to senior executives of the Company. During the year 2015-16 390,000 options were granted to senior executives of the Company as ESOP 2011 - Grant II to V. During the year 2016-17 100,000 options were granted to senior executive of the Company as ESOP 2011 - Grant VI. The stock options vest in a graded manner equally over the period of vesting, each vesting taking effect as per the terms of the grant. The stock options granted are exercisable at 100% of the fair market value of the underlying equity shares of the Company as on the date of grant.
5. Expenditure on research & development activities
Revenue expenditure on research and development is charged under respective heads of account in the year in which it is incurred. Capital expenditure on research and development is included as part of property, plant and equipment and depreciated on the same basis as other property, plant and equipment.
The company has not recognized MAT credit entitlement to the extent of INR 296.768 till 31st March, 2017 in respect of Income Tax paid in view of uncertainty of its utilization for payment of tax in foreseeable future.
7. Fair value measurements
As per assessments made by the management, fair values of all financial instruments carried at amortized cost (except as specified below) are not materially different from their carrying amounts since they are either short term nature or the interest rates applicable are equal to the current market rate of interest. The Company has performed a fair valuation of its investment in mutual funds which are classified as FVTPL using quoted prices
8. Financial risk management policy and objectives
Company''''s principal financial liabilities, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance company''''s operations and to provide guarantees to support its operations. Company''''s principal financial assets include advances to subsidiaries, trade and other receivables, security deposits and cash and cash equivalents, that derive directly from its operations. In order to minimize any adverse effects on the financial performance of the company, it has taken various measures. This note explains the source of risk which the entity is exposed to and how the entity manages the risk and impact of the same in the financial statements.
9. Credit risk
Credit risk in case of the Company arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers including outstanding receivables.
Credit risk management
Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forward looking information such as:
10. Actual or expected significant adverse changes in business,
11. Actual or expected significant changes in the operating results of the counterparty,
12. Financial or economic conditions that are expected to cause a significant change to counterparty''''s ability to meet its obligations,
13. Significant increases in credit risk on other financial instruments of the same counterparty,
14. Significant changes in the value of collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.
The company provides for expected credit loss in case of trade receivables, claims receivable and security deposits when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the company. The company categorizes a receivable for provision for doubtful debts/write off when a debtor fails to make contractual payments greater than 180 days past due. The amount of provision depends on certain parameters set by the Company in its provisioning policy. Where loans or receivables have been written off, the company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in profit or loss.
15. Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the company''''s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. This is carried out in accordance with practice and limits set by the Company. In addition, the company''''s liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
16. Foreign currency risk
The company is exposed to foreign exchange risk mainly through its sales to overseas customers and purchases from overseas suppliers in various foreign currencies. The company evaluates exchange rate exposure arising from foreign currency transactions and the company follows established risk management policies, including use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk, where the economic conditions match the company''''s policy.
17. Capital management Risk management
The company''''s objectives when managing capital are to
-safeguard it''''s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
-Maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the company monitors capital on the basis of the following gearing ratio: Net debt (total borrowings net of cash and cash equivalents) divided by total ''''equity'''' (as shown in the balance sheet).
18. Explanation of transition to Ind AS
These are Company''''s first financial statements prepared in accordance with Indian Accounting Standards (Ind AS) as notified under Companies'''' (Indian Accounting Standards) Rules, 2015. In preparing the financial statements for the year ended 31 March 2016 and balance sheet as at 1 April 2015 (date of transition), the Company has adjusted amounts reported previously in financial statements prepared in accordance with Indian Generally Accepted Accounting Principles (Indian GAAP). 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 for the year ended 31 March 2016.
19.. Exemptions applied
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has elected to apply the following exemptions:
20.. Property, plant and equipment, investment property and intangible assets
Since, there is no change in the functional currency, the Company has elected to continue with the carrying value for all of its property, plant and equipment, investment property and intangible assets as recognized in its Indian GAAP financials as deemed cost at the transition date.
21. Share based payments
Ind AS 102 share based payment has not been applied to equity instruments in share based transactions that vested before 1 April 2015.
22. Investments in subsidiaries
The Company has elected to continue with carrying value for all of its investment in subsidiaries as recognized in its Indian GAAP financials as deemed cost as at the transition date.
23. Exceptions applied
24. Government loans
The Company as a first-time adopter did not, under Indian GAAP, recognize and measure a government loan at a below-market rate of interest as a government grant. Accordingly, the Company has used its previous GAAP carrying amount of the loan at the date of transition.
The estimates at 1 April 2015 and at 31 March 31 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:
FVTOCI - unquoted equity shares
FVTPL - debt securities
Impairment of financial assets based on expected credit loss model Fair valuation of financial instruments carried at FVTPL
Determination of the discounted value of financial instruments carried at amortized cost
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2015, the date of transition to Ind AS and as of 31 March 2016.
26. De-recognition of financial assets and liabilities
Ind AS 101, requires first time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements of Ind AS 109, retrospectively from a date of the company''''s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities de-recognized as a result of past transaction was obtained at the time of initially accounting of transactions. The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from date of transition to Ind AS.
Explanation of transition to Ind AS
An explanation of how the transition from Indian GAAP to Ind AS has affected the Company''''s financial position, financial performance and cash flow is set out in the following tables and notes that accompany the tables. The reconciliations include
- equity reconciliation as at 1 April 2015;
- equity reconciliation as at 31 March 2016;
- profit reconciliation for the year ended 31 March 2016;
There are no material adjustments to the cash flow statements
27. Excise duty
Under Indian GAAP, excise duty is reduced from gross revenues to report revenues net of excise duty. Under Ind AS, revenue includes gross inflows of economic benefits received by a company for its own account. Excise duty collected, which is a duty on manufacture and a primary obligation of the manufacturer is considered as revenue with the corresponding payments to government as expenditure. This adjustment does not have any impact on statement of profit and loss.
28. Share based payment transactions - Employee Stock Option Plan (ESOP)
Under Indian GAAP, a company uses intrinsic value approach to measure the cost of share based payments. Under this approach, if the exercise price for employee stock option is not less than the market price of the underlying shares on the date of the grant, no compensation cost is recorded. Under Ind AS, costs of share based payments are recorded based on the fair value of employee stock option. Under this approach, the instrument would have a value even if the exercise price is equal to the market price of the underlying shares on the date of grant.
29. Employee benefit expenses - actuarial gains and losses and return on plan assets
Under Indian GAAP, actuarial gains and losses and return on plan assets on post-employment defined benefit plans are recognized immediately in statement of profit and loss. Under Ind AS, re-measurements which comprise of actuarial gains and losses, return on plan assets and changes in the effect of asset ceiling, if any, with respect to post-employment defined benefit plans are recognized immediately in other comprehensive income (OCI). Further, re-measurements recognized in OCI are never reclassified to statement of profit and loss.
30. Reclassification of leases of land
Under Indian GAAP, there is no specific guidance for contracts that involve leases of land. Under Ind AS, lease of land is recognized as operating or finance lease as per definition and classification criteria stated in standard on leases. Accordingly, as on the date of transition, the leases of land have been classified as operating / finance lease as the case may be.
31. Foreign exchange forward derivative contracts
Under Indian GAAP the premium or the discount on foreign exchange forward derivative contracts related to underlying receivables and payables are amortized over the period of the contracts. In case of foreign exchange forward derivative contracts entered into at highly probable future transactions or firm commitments, mark to market losses (gains are ignored), if any, are recognized in the statement of profit and loss at the reporting date. Under Ind AS, all the foreign exchange forward derivative contracts are recorded at fair value with the subsequent changes in fair value recognized in the statement of profit and loss.
32. Corporate guarantee
Under Indian GAAP, financial guarantee given by the parent on behalf of its subsidiaries is recognized as ''''contingent liability''''. Under Ind AS, corporate / financial guarantee is treated as financial liability and recognized at fair value on initial and subsequent recognition. The fair value of the guarantee recoverable from the subsidiary is treated as receivable from subsidiary. The fair value of the guarantee not recoverable from the subsidiary is written off as expenditure. Finance income is recognized over the term of the guarantee using effective interest method.
33. Interest-free security deposits paid
Under Indian GAAP, interest-free lease security deposits paid are reported at their transaction values. Under Ind AS, interest-free security deposits are measured at fair value on initial recognition and at amortized cost on subsequent recognition. The difference between the transaction value and fair value of the lease deposit at initial recognition is treated as prepaid rentals. This amount is recognized in statement of profit and loss on a straight line basis over the lease term.
34. Investment property
Under Indian GAAP there is limited guidance on investment property. Under Ind AS, investment property comprises of land or building held for earning rentals or for capital appreciation or both. Where a property is held for a currently undetermined future use, it is regarded as held for capital appreciation. Investment property is required to be measured at cost and is subsequently depreciated based on its useful life. Fair value of the investment property is to be disclosed at every reporting period end.
35. Proposed dividend
Under Indian GAAP, dividend proposed after the date of the financial statements but prior to the approval of financial statements is considered as an adjusting event, and a provision for dividend is recognized in the financial statements of the period to which the dividend relates. Under Ind AS, dividend declaration is considered as a non-adjusting event and provision for dividend is recognized only in the period when the dividend is approved by the shareholders in annual general meeting.
36. Deferred tax
Under Indian GAAP, deferred taxes are recognized using income statement approach i.e. reflecting the tax effects of timing differences between accounting income and taxable income for the period. Under Ind AS, deferred taxes are recognized using balance sheet approach i.e. reflecting the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes using the income tax rates enacted or substantively enacted at reporting date. Also, deferred taxes are recognized on account of the above mentioned changes explained in notes (a)