TCI Notes to Accounts

1.Capital management


The Company'''' s capital management objectives are


- to ensure the Company''''s ability to continue as a going concern


- to provide an adequate return to shareholders


The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of balance sheet.


Management assesses the Company''''s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company''''s various classes of debt. The Company manages the capital structure and makes adjustments to it in the 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, issue new shares, or sell assets to reduce debt.


(i) Loan Covenants


Under the terms of the major borrowing facilities, the Company is required to comply with the following financial covenants:


- the gearing ratio must be not more than 50%


- the ratio of net finance cost to EBITDA must be not more than 10%.


The Company has complied with these covenants throughout the reporting period. As at 31st March 2017, the ratio of net finance cost to EBITDA was 4% (31st March 2016 - 3%).


2. Segment Information Operating Segments:


a) Freight Division: b) Supply Chain Solutions Division: c) Seaways Division:


d) Energy Division: e) XPS Division (Demerged):


Identification of Segments:


The chief operating decision maker monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of the nature of products/services and have been identified as per the quantitative criteria specified in the Ind AS


Segment Revenue and Results:


The expenses and incomes which are not attributable to any business segment are shown as unallocated expenditure (net of unallocated income). Segment Assets and Liabilities:


Segment assets include all operating assets used by the operating segment and mainly consist of property plant and equipment, trade receivables, cash and cash equivalents etc. Segment liabilities primarily include trade payables, borrowings and other liabilities. Common assets and liabilities which cannot be allocated to any of the segments are shown as a part of unallocated Corporate assets / liabilities.


Inter Segment Transfer:


Profit or loss on inter segment transfers are eliminated at company level.


Leave Obligations


The lease obligations cover the Company liability for earned leaves. The amount of provision ofRs,36,997,539 (31st March 2016Rs,33,023,982 1st April 2015Rs,28,158,097) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations. However based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months, therefore based on the independent actuarial report, only a certain amount of provision has been presented as current and remaining as non-current. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.


These assumptions were developed by management with the assistance of independent actuarial appraisers. Discount factors are determined close to each year-end by reference to government bonds of relevant economic markets and that have terms to maturity approximating to the terms of the related obligation. Other assumptions are based on management''''s historical experience.


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. For the funded plan the group makes contributions to recognized funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.


The weighted average duration of the defined benefit obligation as at 31 March 2017 is 17 years (31st March 2016: 17 years).


The amounts recognized in the balance sheet and the movements in the net defined benefit obligation over the year are as follows: Changes in defined benefit obligation


3.(a) Corporate Social Responsibility (CSR)


As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the company. The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation and rural development projects. The funds were primarily allocated to a corpus and utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013


(b) Contributions towards CSR


As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the company. Expenditure by way of contribution to various trusts and institutions related to Corporate Social Responsibility as per Section 135 of the Companies Act, 2013 read with Schedule VII thereof Rs, 223 lakh.


4. Details of Loans Given, Investments Made and Guarantee Given Covered u/s 186 (4) of the Companies Act, 2013


Investments made are given under the respective heads (Refer note 6)


Corporate Guarantees given by the Company in respect of loans


5. Discontinued Operation (Demerger ofTCI XPS Undertaking)


The scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 (the scheme) between Transport Corporation of India Limited (the demerged company) and its wholly owned subsidiary TCI Express Limited (formerly known as TCI Properties (Pune) Limited) (the resulting company) and their respective shareholders and the creditors of the two companies for demerger of the XPS undertaking of the demerged company into TCI Express limited with the appointed date at the close of business hours on 31st March 2016, has been sanctioned by the Hon''''ble Telengana and Andhra Pradesh High Court by an order dated 14th June, 2016 and a certified copy thereof has been filed with the Registerar of the Companies, Hyderabad. The scheme, being effective from the appointed date, provides for:


a) Issue of one equity share of Rs, 2 each by TCI Express Limited for two equity shares of Rs, 2 each of the demerged company


b) Cancellation of 50,000 equity shares of Rs, 10 each of the TCI express Ltd held by the demerged company under the provisions of sections 102 to 103 of the Companies Act 1956 and same has been adjusted with General Reserve.


c) In respect of the above adjustments it is deemed that the special resolution as contemplated under Article 62 of the Article of Association of the demerged company and under section 100 of the Companies act 1956 has been passed and all the procedures required under section 100 of the Companies Act, 1956 for reduction of share capital have been complied with.


d) I n Pursuant to the Scheme, losses of Rs, 2,13,739,400 on liquidation of the wholly owned subsidiary of the demerged company TCI Global Holding (Mauritius) Limited shall be adjusted in the statement of profit and loss and an equivalent amount of such loss shall be transferred from Securities Premium Account to the Statement of Profit and Loss.


e) The amount of difference in the net value of assets shall be adjusted against reserves as envisaged under the Scheme.


6. First-Time Adoption of Ind AS


These financial statements, for the year ended 31st March 2017, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31st March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31st March 2017, together with the comparative period data as at and for the year ended 31st 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 Company''''s date of transition to Ind AS. An explanation of how the transition from previous GAAP to Ind AS has affected the Company''''s financial position, financial performance and cash flows is set out in the following tables and notes.


Exemptions and Exceptions Availed


Set out below 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 Deemed Cost


Ind AS 101 permits a first time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.


Accordingly, the Company has elected to measures all of its property, plant and equipment and intangible assets at their previous GAAP carrying values. Investment in Subsidiaries, Jointly Controlled Entities and Associates


Ind AS 101 permits a first-time adopter to choose the previous GAAP carrying amount at the entity''''s date of transition to Ind AS to measure the investment in the subsidiary, jointly controlled entities and associates as the deemed cost. Accordingly, the Company has opted to measure its investment in subsidiary, jointly controlled entities and associates at deemed cost i.e., previous GAAP carrying amount.


Share Based Payment


Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before the transition date, i.e. 1st April 2015.


Business Combinations


Ind AS 103, Business Combinations has not been applied to acquisition of subsidiaries, which are considered under Ind AS that occurred before 1st April 2015. Use of this exemption means that Indian GAAP carrying amount of assets and liabilities, that are required to be recognized under Ind AS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with the respective Ind AS.


(b) Ind AS Mandatory Exceptions Estimates


An entity''''s estimates in accordance with Ind ASs 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), unless there is an objective evidence that those estimates were in error.


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:


- Impairment of financial assets based on expected credit loss model.


Classification and measurement of financial assessing AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS."


c) Reconciliations Between Previous GAAP and Ind AS


Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS.


d) Notes to First-Time Adoption:


Note : 7.


AS 19 excluded lease agreements to use land from its scope. However, lease agreements to use land are within the scope of Ind AS 17. Accordingly, in accordance with principles set out in Ind AS 17, land lease agreements have been determined to be operating lease arrangements.


Accordingly, amount paid upfront which was earlier recognized under previous GAAP as a fixed asset has been derecognized having a net impact of Rs, 155.24 lakh on 1st April 2015 and of Rs, Nil for the FY 2015 -16. Accordingly, amortization on leasehold land has also been charged amounting to Rs, 30.07 lakh as on 1st April 2015 and Rs, 2.32 lakhs in the FY 2015 -16.


The above has resulted in a net impact of Rs, 30.07 lakh as on 1st April 2015 and Rs, 32.39 lakhs as on 31st March 2016 in equity. Further, this has resulted an impact of Rs, 2.32 lakhs in the net profit for the FY 2015 -16.


Note : 8


Under Indian GAAP, proposed dividends including DDT are recognized as a liability in the period to which they relate, irrespective of when they are declared/paid. Under Ind AS, a proposed dividend is recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid which happens after year end.


Therefore, the liability of Rs, 817 lakh for the year ended on 31st March 2015 recorded for proposed dividend & their tax has been derecognized on 1st April 2015 and the same has been recognized as an appropriation of profit in the FY 2015-16.


Note : 9


Interest free security deposits paid/received were carried at nominal cost under previous GAAP. On application of Ind AS 109, all such financial assets are now being measured at amortized cost using effective rate of interest. At the date of transition to Ind AS, difference between the amortized cost and Indian GAAP carrying amount these security deposits lacs has been recognized as prepaid rent. Correspondingly, interest income/expense on security deposits and amortization of prepaid rent have also been accounted for.


The above recognition has a net impact of Rs, 1.92 lakh in the FY 2015 -16.


Note : 10


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. In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity. The net impact on deferred tax liabilities is of Rs, 126.32 lakh on 1st April 2015 and Rs, 87.15 lakh on 31st March 2016.


Note : 11


Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized to retained earnings through OCI. Thus, remeasurements gains of Rs, 102.33 lakh has been reduced from the net profit of the FY 2015-16 and has been recognized in OCI at Rs, 66.9 lakh (net of tax). This has no resulting impact on equity.


Note : 12


Under Previous GAAP, current investments were measured at lower of cost or fair value and long term investments were measured at cost less diminution which is other than temporary, under Ind AS financial asset other than amortized cost are subsequently measured at fair value.


The Company holds investment in equity instruments of companies and mutual funds with the objective of both collecting contractual cash flows which give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding and selling financial assets. The Company has also made an irrevocable election to present in other comprehensive income subsequent changes in the fair value of equity investments not held for trading. This has resulted in increase in investments reserve by Rs, 310.61 lakh as at 1st April 2015 and by Rs, 33.32 lacs as at 31st March 2016, net of related deferred taxes.


Investments in mutual funds have been classified as fair value through statement of profit and loss and changes in fair values are recognized in statement of profit and loss. This has resulted in decreased in retained earnings by Rs, 17.85 lakh as at 1st April 2015 and by Rs, 20.50 lakh as at 31st March 2016 and decreased in net profit by Rs, 2.64 lakh for the year ended 31st March 2016.


Note : 13


Under Previous GAAP, revenue from rendering services were recognized using either Percentage of completion method or completed contract method. Under Ind AS, revenue from rendering of services is recognized using Percentage of completion method.


Accordingly, the Company has changed its accounting policy for recognising revenue and associated costs from logistic services on the basis of Percentage of completion method. The above recognition has a net impact of Rs, 1323.62 lakh on 1st April 2015 and Rs, 261.24 lakh in the FY 2015 -16 accumulating to Rs, 1584.86 lakh on 31st March 2016.


Note : 14


Under Indian GAAP, the Company has created provision for impairment of receivables consists only in respect of specific amount for incurred losses. Under Ind AS, impairment allowance has been determined based on Expected Loss model (ECL). Due to ECL model, the group impaired its trade receivable by Rs, 991.55 lakh on 1st April 2015 which has been eliminated against retained earnings. The impact of Rs, 52.93 lakh for year ended on 31st March 2016 has been recognized in the statement of profit and loss.


Note : 15


Under Indian GAAP, the Company recognized only the intrinsic value for the share based ayments as an expense. Ind AS requires the fair value of the share options to be determined using an appropriate pricing model recognized over the vesting period. An expense of Rs, 17.61 lakh has been reduced recognized in the statement of profit and loss for the year ending 31st March 2016.


Note : 16


Ind AS 16 requires significant component parts of an item of property, plant and equipment to be depreciated separately. Accordingly, the cost of major overhaul (Dry docking cost) is capitalized and depreciated separately over the period to the next major overhaul. At the date of transition to Ind AS, an increase of Rs, 253.14 lakh was recognized in property, plant and equipment net of accumulated depreciation due to separate depreciation of significant components of property, plant and equipment. This amount has been recognized against retained earnings. For the year ended on 31st March 2016, increase in depreciation was charged in the statement of profit and loss for Rs, 257.54 lakh and correspondingly dry dock expenses which was debited in statement of profit and loss reversed of Rs, 622.49 lakh.


Note : 17


The Company has reclassified certain items of assets and liabilities to comply with the requirements of Ind AS. This has no resulting impact on equity and net profit.]


Note : 18


The transition from previous GAAP to Ind AS has not made a material impact on the statement of cash flows.

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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