@ During the previous years, the Company invested an amount of Rs,6168 lakhs as at 31st March, 2016 and Rs,2000 lakhs as at 1st April 2015 by subscription to the rights issue of equity shares of Raymond Luxury Cottons Limited (RLCL) a Subsidiary of the Company, enhancing the Company''''s shareholding from 62% to 75.69% in 2015-16 and from 55% to 62% in 2014-15.
In the year 2012-13, Cottonificio Honegger S.p.A (‘CH''''), Italy, the erstwhile JV partner with Raymond Limited through one of its joint venture Company in India, Raymond Luxury Cotton Limited (RLCL) (formerly known as Raymond Zambaiti Limited), had submitted request for voluntary winding up including composition of its creditors in the Court of Bergamo, Italy. Consequent to this, RLCL as at 31st March, 2013, had provided for its entire accounts receivable from CH of USD 1,255,058 and Euro 612,831, equivalent Indian Rupee aggregating Rs, 1,122.24 Lakhs. In the year 2013 - 14, RLCL had put up its claim of receivable from CH of Rs, 1,122. 24 Lakhs before the Judicial Commissioner of the Composition (the Commissioner) appointed by the Court of Bergamo, Italy. In protraction of matter with Cottonificio Honegger S.p.A (‘CH''''), Italy, the Judicial Commissioner of the Composition (“the Commissioner”) appointed by the Court of Bergamo, Italy, has declared RLCL as unsecured creditor for the amount outstanding from ‘CH''''. Further ‘CH'''' had also sought permission from the Court of Bergamo, Italy, for initiating proceeding against RLCL in India.
RLCL had received a notice dated 23rd November 2015 notifying that CH has filed a Petition against then before the Hon''''ble Company Law Board (“CLB”), Mumbai Bench under Section 397 and 398 of Companies Act, 1956. RLCL responded to the petition filed by CH. The CLB in its order dated 26th November, 2015 has recorded the statement made by the counsel for RLCL that CH''''s shareholding in RLCL shall not be reduced further and the fixed assets of RLCL also shall not be alienated till further order. Subsequently, the proceedings were transferred to the National Company Law Tribunal (“NCLT”), Mumbai bench and currently, the matter is pending before the said forum.
* These securities issued by Subsidiaries are equity nature investment for Raymond Limited. (Refer Note 5(a))
Significant Estimates : The carrying value of exposure in Raymond Uco Denim Private Limited is determined by an Independent valuer .The company uses judgment to select from variety of methods and make assumptions which are mainly based on market conditions existing at the end of each reporting period.
@ Investment in venture capital funds have been fair valued at closing NAV.
# Company has invested in non trade investments aggregating Rs,30.53 Lakhs which have already been fully provided in the books
* The Company has invested in Preference Shares and Debenture of some of its Subsidiaries, the terms of said instruments were changed effective 1st April, 2015, consequently said instruments became compulsory convertible in to equity shares. After conversion of terms, aforesaid investments has been shown under investments in subsidiaries, associates and joint venture (Refer note 5), gain on aforesaid conversion aggregating to '''' 156. 27 is shown under other income, (Refer note 26).
b) Rights, preferences and restrictions attached to shares
Equity shares: The Company has one class of equity shares having a par value of ''''10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
Refer Note 1. for liquidity risk
Nature of Security and terms of repayment for Long Term secured borrowings:
Nature of Security Terms of Repayment
i. Term loan from bank, balance outstanding amounting to Rs,10350.00 Repayable in 32 quarterly installments starting from September lakhs (March 31, 2016 : Rs,11550.00 lakhs and April 1, 2015 : Rs,12637.50 2011. Last installment due in June 2019. Rate of interest 10.95% lakhs) is secured by pari passu charge on the entire immovable assets .p.a. as at year end. (March 31, 2016 : 11.20% p.a. and April 1, at Vapi Plant acquired out of this loan and exclusive first charge on the 2015 : 12.50% p.a.)* entire movable assets acquired out of the said loans from the bank, located at Vapi Plant.
ii. Term loan from bank, balance outstanding amounting to Rs, 1920.21 Repayable in 32 quarterly installments starting from June 2011. lakhs (March 31, 2016 : Rs, 2200.21 lakhs and April 1, 2015 : Rs, 2480.21 Last installment due in March 2019. Rate of interest 10.95%.p.a. lakhs) is secured by way of first pari passu charge on fixed assets of as at year end. (March 31, 2016 : 11.20% p.a. and april 1, 2015 Chindwara and Jalgaon Plant. : 12.50% p.a.)*
iii. Term loan from bank, balance outstanding amounting to Rs, 5552.00 Repayable in 32 quarterly installments starting from September (March 31, 2016 : Rs,6312.00 lakhs and April 1, 2015: Rs,7000.75 lakhs) 2011. Last installment due in June 2019. Rate of interest 11.05% is secured by pari passu charge on the entire immovable assets at .p.a. as at year end. (March 31, 2016 : 12.00% p.a. and April 1, Vapi Plant acquired out of this loan and exclusive first charge on the 2015 : 12.50% p.a.)* entire movable assets acquired out of the loans, located at the Vapi Plant.
iv. Term loan from bank, balance outstanding amounting to Rs, Nil (March Repaid in December, 2016..Rate of interest 9.65% p.a. as at the 31, 2016 : Rs,1072.52 lakhs and April 1, 2015: Rs,2972.53 lakhs) is date of repayment. (March 31, 2016 : 9.70% p.a. and April 1, secured by pari passu charge on the immovable assets at Vapi Plant 2015 : 10.20% p.a.)* and exclusive charge on movable assets acquired under the loan, at Vapi Plant.
v. Term loan from bank, balance outstanding amounting to Rs, Nil (March Repaid in February 2017. Rate of interest 10.75%.p.a. as at the 31, 2016 : Rs,515.63 lakhs and April 1, 2015: Rs, 1031.25 lakhs) is date of repayment. (March 31, 2016 : 10.80% p.a. and April 1, secured by Lien on Fixed Deposits placed with State Bank of India for 2015 : 11.50% p.a.)*
Rs, Nil. (March 31, 2016 : Rs,1097.49 lakhs and April 1, 2015 Rs, 1645.37 lakhs)
vi. Term loan from bank, balance outstanding amounting to Rs, Nil (March Repaid in April, 2016. Rate of interest 11.70% p.a. as at the date 31, 2016 : Rs, 1653.02 lakhs and April 1, 2015: Rs, 1985.02 lakhs partial of prepayment. (March 31, 2016 : 11.70% p.a. and April 1, 2015 disbursement) is secured by first charge on movable assets including : 12.20% p.a.)
plant and machinery, furniture and fixture and other assets of Captive Power Plant at Vapi and pari passu charge on the immovable assets at Vapi Plant.
Nature of Security and terms of repayment for Long Term secured borrowings: Nature of Security Terms of Repayment
vii. Term loan from bank, balance outstanding amounting to Rs,2763.39 Repayable in 20 quarterly installments starting from November lakhs (March 31, 2016 : Rs, 3498.39 lakhs and April 1, 2015: Rs,4110.89 2013. Last installment due in September, 2018. Rate of interest lakhs) is secured by way of first pari passu charge on fixed assets 10.60% p.a. as at year end. (March 31, 2016 : 10.70% p.a. and of Vapi and Jalgaon factories and second pari passu charge on April 1, 2015 : 11.25% p.a.)*
immoveable assets at Vapi Plant acquired out of this loan.
viii. Term loan from bank, balance outstanding amounting to Rs, 6050.00 Repayable in 10 equal quarterly installment starting from January lakhs (March 31, 2016 : Rs,12410 lakhs and April 1, 2015: 14000 lakhs) 2016 and last installment due in July 2018. Rate of interest 9.85% is secured by first pari passu charge on fixed assets of Chindwara and p.a. as at year end. (March 31, 2016 : 10.25% p.a. and April 1, Jalgaon factories, moveable fixed assets of Company owned retail 2015 : 10.90% p.a.)
stores and second pari passu charge on the land at Vapi Plant.
Terms of repayment for Long Term unsecured borrowings: Nature of Security Terms of Repayment
Term loans from banks
Rs, Nil (March 31, 2016 : Rs, Nil and April 1, 2015 : Rs, 5000 lakhs) Repaid in August 2015. Rate of interest 11.20% p.a. as at the date of
Rs, Nil (March 31, 2016 : Rs, Nil and April 1, 2015 : Rs,4500 lakhs) Repaid in March 2016. Rate of interest 10.85% p.a. as at the date of
Rs,5000.00 lakhs (March 31, 2016 : Rs,5000 lakhs and April 1, 2015 : Nil) Repayable in 12 equal quarterly installment starting from March 2018 and last installment due in December 2020. Rate of interest 9.55% p.a. as at year end. (March 31, 2016 : 9.75% p.a.)
Rs,6570.00 lakhs (USD 10.00 milion) C6625 lakhs, March 31, 2016 : Repayable in October 2017. Rate of interest USD Overnight Libor 107. (USD 10.00 million) and April 1, 2015 : Nil) bps as at year end. (March 31, 2016 : USD Overnight Libor 107 bps)
Privately Placed Non-Convertible Debentures (face value Rs,10 lakhs each)
Rs, Nil (March 31, 2016 : Rs, Nil and April 1, 2015 : Rs,10000 lakhs) Repaid in October 2015. Rate of interest 11.10% p.a.
Rs, Nil (March 31, 2016 : Rs,10000 lakhs and April 1, 2015 : Rs,10000 lakhs) Repaid in June 2016. Rate of interest 10.55% p.a. (March 31,2016 :10.55% p.a. and April 1, 2015 : 10.55% p.a)
Rs, Nil (March 31, 2016 : Rs, Nil and April 1, 2015 : Rs,3000 lakhs) Repaid in November 2015. Rate of interest 11.25% p.a.
Rs, Nil (March 31, 2016 : Rs,4465.59 lakhs and April 1, 2015 : Rs,4067.48 Repaid in November 2016. Redemption premium at a Yield to maturity of lakhs) 11.01% p.a. (March 31, 2016 : 11.01% p.a. April 1, 2015 : 11.01% p.a.)
Rs,13712.74 lakhs (March 31, 2016 : Rs,12473.47 lakhs and April 1, Repayable in April 2017. Redemption premium at a Yield to maturity of 2015 : Rs,11253.95 lakhs) 10.71% p.a. (March 31, 2016 : 10.71% p.a. April 1, 2015 : 10.71% p.a.)
Rs,7500 lakhs. (March 31, 2016 : Rs,7500 lakhs and April 1, 2015 : Rs,7500 Repayable in April 2018. Rate of interest 10.20% p.a. (March 31, 2016 : lakhs) 10.20% p.a. April 1, 2015 : 10.20% p.a.)
Rs,10000 (March 31, 2016 : Rs,10000 lakhs and April 1, 2015 : Nil) Repayable in June 2018. Rate of interest 9.75% p.a.(March 31, 2016 :
Rs,10000 (March 31, 2016 : Rs,10000 lakhs and April 1, 2015 : Nil) Repayable in April 2019. Rate of interest 9.52% p.a. (March 31,2016 :
Installments falling due within a year in respect of all the above Loans aggregating Rs,31894.40 lakhs (March 31, 2016 : Rs, 25707.18 lakhs and April 1, 2015 : Rs, 25473.25 lakhs) have been grouped under “Current maturities of long-term debt” (Refer Note 22)
Amount of Rs, 127.44 lakhs (March 31, 2016: Rs, 394.94 lakhs and 1st April, 2015: Rs, 573.08 lakhs) related to deferred expense towards processing charges is netted of against loan.
* Rate of Interest is without considering interest subsidy under TUF scheme.
The carrying amounts of financial and non financial assets as security for secured borrowings are disclosed in Note 37.
Total operating lease expenses (including Contingent Rent Rs, 160.14 lakhs, Previous Year Rs, 202.23 lakhs) debited to Statement of Profit and Loss is Rs, 8179.43 lakhs (Previous year Rs, 7564.16 lakhs)
Note :- 41 - POST RETIREMENT BENEFIT PLANS Defined Benefits Plan (i) Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognized funds in India.
(ii) Pension Benefits
The Company operates defined benefit pension plans which provide benefits to some of its employees in the form of a guaranteed level of pension payable for certain year after retirement. The level of benefits provided depends on members, length of service and their salary in the final years leading up to retirement.
The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the method (Projected Unit Credit Method) used to calculate the liability recognized in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.
**In case of certain employees, the Provident Fund contribution is made to a trust administered by the Company. In terms of the guidance note issued by the institute of Actuaries of India, the actuary has provided a valuation of Provident Fund liability based on the assumptions listed above and determined that there is no shortfall as at 31st March, 2017.
# takes into account the inflation, seniority, promotions and other relevant factors.
Risk Exposure - Asset Volatility
The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in government securities. These are subject to interest rate risk and the fund manages interest rate risk derivatives to minimize risk to an acceptable level. A portion of the funds are invested in equity securities and in alternative investments % which have low correlation with equity securities. The equity securities are expected to earn a return in excess of the discount rate and contribute to the plan deficit.
(iii) Leave obligations
The lease obligations cover the Company''''s liability for sick and earned leave.
The amount of the provision of Rs, 2543.17 lakhs (31st March, 2016 - Rs,2423.99 lakhs, 1 April 2015 - Rs, 2535.52 lakhs) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations
(iv) Defined contribution plans
The Company also has certain defined contribution plans. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognized during the period towards defined contribution plan is Rs, 1,112.46 lakhs (31st March, 2016 - Rs, 1,043.22 lakhs).
Note :- 2
In accordance with Accounting Standard Ind As 108 ‘Operating Segment ‘, segment information has been given in the consolidated financial statements of Raymond Limited, and therefore, no separate disclosure on segment information is given in these financial statements.
Note :- 3 - FAIR VALUE MEASUREMENT Financial Instrument by category and hierarchy
The fair values of the 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:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to short term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.
The fair values for loans, security deposits and investment in preference shares were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.
The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
For financial assets and liabilities that are measured at fair value, the carriying amounts are equal to the fair values.
*Company has invested in HDFC India Real Estate Fund and Kotak India Growth Fund and these funds have been further invested into various companies. Company has considered the fair value on the basis of the valuation report provided by venture capital fund.
Note :- 4 - FINANCIAL RISK MANAGEMENT Financial risk management objectives and policies
The Company''''s financial risk management is an integral part of how to plan and execute its business strategies. The Company''''s financial risk management policy is set by the Managing Board.
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.
The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommend risk management objectives and policies, which are approved by Senior Management and the Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures like foreign exchange forward contracts, borrowing strategies and ensuring compliance with market risk limits and policies.
Market Risk- Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Company''''s position with regards to interest income and interest expenses and to manage the interest rate risk,
Market Risk- Foreign currency risk.
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas and purchases from overseas suppliers in various foreign currencies. Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies.
(a) (iii) Market Risk- Price Risk
The Company''''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet either at fair value through OCI or at fair value through profit and loss. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.
The table below summarizes the impact of increases/decreases of the BSE index on the Company''''s equity and Gain/Loss for the period. The analysis is based on the assumption that the index has increased by 5 % or decreased by 5 % with all other variables held constant, and that all the Company''''s equity instruments moved in line with the index.
Note :- 5 - FINANCIAL RISK MANAGEMENT (Contd...)
Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information.
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 through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business,
ii) Actual or expected significant changes in the operating results of the counterparty,
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty''''s ability to meet its obligations,
iv) Significant increase in credit risk on other financial instruments of the same counterparty,
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.
Financial assists are written off when there is no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. 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 as income in the statement of profit and loss.
The Company measures the expected credit loss of trade receivables and loan from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.
Note :- 6 - FINANCIAL RISK MANAGEMENT (Contd...)
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities 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 treasury 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.
Note :- 7 - CAPITAL RISK MANAGEMENT
(a) Risk Management
The Company aim to manages its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders.
The capital structure of the Company is based on management''''s judgment of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. We consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.
The Company''''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.
Note :- 8 - EXPORT PROMOTION CAPITAL GOODS (EPCG)
Export Promotion Capital Goods (EPCG) scheme allows import of certain capital goods including spares at concessional duty subject to an export obligation for the duty saved on capital goods imported under EPCG scheme. The duty saved on capital goods imported under EPCG scheme being Government Grant, is accounted as stated in the Accounting policy on Government Grant.
Specified Bank Notes is defined as Bank Notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees.
The disclosures with respects to ‘Permitted Receipts'''', ‘Permitted Payments'''', ‘Amount Deposited in Banks'''' and ‘Closing Cash in Hand as on 30.12.2016'''' is understood to be applicable in case of SBNs only.
Note :- 9 - EVENT OCCURING AFTER BALANCE SHEET DATE
The Board of Directors has recommended Equity dividend of '''' 1.25 per share (Previous year ''''3) for the financial year 2016-17. (Refer Note 46). Note :- 53 - The Financial Statements were authorized for issue by the directors on 28th April, 2017.
Note :- 10 - FIRST-TIME ADOPTION OF Ind AS
These are the Company''''s first financial statements prepared in accordance with Ind AS.
The Company has adopted Indian Accounting Standards (Ind AS) notified by the Ministry of Corporate Affairs with effect from 1st April, 2016, with a transition date of 1st April, 2015. Ind AS 101-First-time Adoption of Indian Accounting Standards requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements which is for the year ended 31st March, 2017 for the company, be applied retrospectively and consistently for all financial years presented. Consequently, in preparing these Ind AS financial statements, the Company has availed certain exemptions and complied with the mandatory exceptions provided in Ind AS 101, as explained below. The resulting difference in the carrying values of the assets and liabilities as at the transition date between the Ind AS and Previous GAAP have been recognized directly in equity (retained earnings or another appropriate category of equity).
Set out below are the Ind AS 101 optional exemptions availed as applicable and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A. Optional Exemptions availed
(a) Deemed Cost
The Company has opted paragraph D7 AA and accordingly considered the carrying value of property, plant and equipments and Intangible assets as deemed cost as at the transition date.
(b) Investments in subsidiaries, joint ventures and associates
The Company has opted para D14 and D15 and accordingly considered the Previous GAAP carrying amount of Investments as deemed cost as at the transition date.
(c) Designation of previously recognized financial instruments
Paragraph D19B of Ind AS 101 gives an option to an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS.The company has opted to apply this exemption for its investment in equity Investments.
B. Applicable Mandatory Exceptions
An entity''''s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).
Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Investment in equity instruments carried at FVPL or FVOCI;
- Investment in debt instruments carried at FVPL; and
- Impairment of financial assets based on expected credit loss model.
(b) Classification and measurement of financial assets
As required under Ind AS 101 the company has assessed the classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
C. Transition to Ind AS - Reconciliations
The following reconciliations provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS as required under Ind AS 101:
I. Reconciliation of Balance sheet as at April 1, 2015 (Transition Date)
II. A. Reconciliation of Balance sheet as at March 31, 2016
B. Reconciliation of Total Comprehensive Income for the year ended March 31, 2016
III. Reconciliation of Equity as at April 1, 2015 and as at March 31, 2016
IV. Adjustments to Statement of Cash Flows
As required under the IND AS 109 transactions costs incurred towards origination of borrowings have been deducted from the carrying amount of borrowings on initial recognition. These costs are recognized in the profit and loss over the tenure of the borrowing as interest expense, computed using the effective interest rate method corresponding effect being in Long term borrowings and to the extent attributable to Current maturity of long term debts.
Under the previous GAAP, these transaction costs were charged to the profit and loss as and when incurred. Consequently, borrowings as at 31st March, 2016 have been reduced by Rs,458,69 Lakhs (April 1, 2015- Rs,573.08 Lakhs) with a corresponding adjustment to retained earnings resulting in increase in total equity. The profit under the previous GAAP for the year ended 31st March, 2016 has been reduced by Rs,1859.51 Lakhs C1681.37 lakhs premium on zero copoun debentures and Rs, 178.14 lakhs) additional interest expense.
B Other Liabilities
As required under Paragraph 17 of IND AS 18 - Revenue recognition, provision has been made for the estimated sales returns of Rs,252 lakhs as at 31st March, 2016 (As at April 1, 2015 - Rs, 251 Lakhs) and consequently reserves and surplus as at transition date and profit and loss for the year ended 31st March, 2016 have been adjusted accordingly.
C Proposed dividend
Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events and accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of Rs,1841.43 Lakhs as at 1st April, 2015 included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity has been increased by an equivalent amount.
D Fair Valuation of Investments
Under the previous GAAP, investments in equity instruments and mutual funds were classified as long-term investments or current investments based on the intended holding period and reliability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under IND AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognized in retained earnings Rs, 795.76 Lakhs as at 31st March, 2016 C791.59 Lakhs As at 1 April, 2015).
Fair value changes with respect to investments in equity instruments designated as FVTPL have been recognized in FVTPL - Equity investments reserve as at the date of transition and subsequently in the Profit and Loss for the year ended 31st March 2016. This increased other reserves by Rs, 2577.76 Lakhs as at 31st March, 2016 (1st April 2015 - Rs, 3135.86 Lakhs).
E Security deposits
Under the previous GAAP, interest free security deposits are recorded at their transaction value. Under IND AS, all financial assets are required to be recognized at fair value. Accordingly, the Company has fair valued the security deposits under IND AS. Difference between fair value of security deposits and the carrying value (transaction value) as per Previous GAAP has been recognized as prepaid rent. Consequently, the amount of security deposits has been decreased by Rs, 1577.14 lakhs as at 31st March, 2016 C 1651.95 lakhs as at 1st April, 2015). The prepaid rent increased by Rs, 1445.37 lakhs as at 31st March,2016 (Rs, 1530.38 lakhs as at 1st April, 2015).Total equity decreased by Rs, 120.67 lakhs as at 1st April, 2015. The profit for the year and total equity as at 31st March, 2016 decreased by Rs, 11.10 (net) lakhs due to amortization of the prepaid rent of Rs, 193.80 lakhs is partially off-set by the notional interest income of Rs, 182.70 lakhs recognized on these security deposits.
F Fair Valuation of Forward Contracts
Under the previous GAAP the premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/liability, was amortised as expense or income over the life of the contract. Under the Ind AS 109, Forward Contracts are carried at fair value and the resultant gains and losses are recorded in the statement of Profit and Loss. Accordingly, the same has been fair valued resulting in decrease of in equity by Rs, 7.82 lakhs as at 31st March, 2016 (increase Rs, 7.27 lakhs as at 1st April, 2015).
G Fair Valuation of debt Instruments
As per IND AS 32 and IND AS 109, a debt instruments are required to fair valued. Accordingly, debt instruments were fair valued and resulted to increase in Interest Income of Rs, 607.64 lakhs and resulted to increase in profit before tax and equity as at 31st March,2016.
H Premium on redemption of debentures
Under the Previous GAAP, premium payable on redemption of debentures was debited to security premium account. As required under the Ind AS, the Company has debited the same to the Profit and Loss. Consequently, profit for the year ended March 31, 2016 has been reduced by Rs, 1681.37 lakhs.
I Remeasurements of post employment benefit obligation
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 recognized in other comprehensive income instead of profit and loss. Under the previous GAAP, these remeasurements were forming part of the profit and loss for the year. As a result of this change, the profit for the year ended March 31, 2016 increase by by Rs, 327.69 lakhs There is no impact on the total equity as at 31st March, 2016.
J Bank Overdrafts
Under Ind AS, bank overdrafts repayable on demand and which form an integral part of the cash management process are included in cash and cash equivalents for the purpose of presentation of statement of cash flows. Under previous GAAP, bank overdrafts were considered as part of borrowings and movements in bank overdrafts were shown as part of financing activities. Consequently, cash and cash equivalents have reduced by Rs, 174.07 lakhs as at 31st March, 2016 (1st April 2015 - Rs, 103.65 lakhs) and cash flows from financing activities for the year ended 31st March, 2016 have also reduced by Rs, 131.49 lakhs to the effect of the movements in bank overdrafts.
K Government Grant
Apportionment of Government Grant recognized under Export Promotion Capital Goods (EPCG) scheme and corresponding charge of depreciation on account of grossing-up of Property, Plant & Equipment (Refer Note 48).
L Retained earnings
Retained earnings as at April 1, 2015 has been adjusted consequent to the above Ind AS transition adjustments.
M Other comprehensive income
Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as other comprehensive income'''' includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP.
N Deferred Tax
Deferred Tax on aforesaid IND AS adjustments
O Current Tax
Tax component on Actuarial Gains and losses which is transferred to Other Comprehensive Income under IND AS and Tax Component on premium payable on redemption of debentures which was debited to security premium account under previous GAAP.As required under the Ind AS, the same has been debited to Profit and Loss.
P The Ind AS adjustments are either non cash adjustments or are regrouping among the cash flows from operating, investing and financing activities. Consequently, Ind AS adoption has no impact on the net cash flow for the year ended 31st March, 2016 as compared with the previous GAAP.