3 Rupee loan of Rs. 900.00 lakhs (March 31, 2017 Rs. 1350.00 lakhs, April 1, 2016 Rs. 1,800.00 lakhs) from a Bank is secured by first pari passu charge by way of hypothecation of all movable fixed assets of the Company, excluding assets exclusively charged to other Banks and second pari passu on all current assets of the company both present and future. The aforesaid loan is repayable in 8 equal quarterly instalments starting from June, 2018.
4 Rupee loan of NIL (March 31, 2017 Rs. 784.49 lakhs, April 1, 2016 Rs. 1,584.49 lakhs) from a Bank is secured by first pari passu charge by way of hypothecation of all movable fixed assets of the Company, excluding assets exclusively charged to other Banks and second pari passu on all current assets of the company both present and future.
5 Rupee loan of Rs. 2,505.00 lakhs (March 31, 2017 Rs. 3,355.00 lakhs, April 1, 2016 Rs. 2,000.00 lakhs) from a Bank and Buyers'/Suppliers' credit of Rs. 2,215.56 lakhs (March 31, 2017 Rs. 2,145.66 lakhs, April 1, 2016 Rs. 2,228.09 lakhs). Equivalent to aggregate of USD 27.25 lakhs and Euro 5.33 lakhs (March 31, 2017 equivalent to aggregate of USD 27.25 lakhs and Euro 5.33 lakhs, April 1, 2016 Equivalent to aggregate of USD 27.25 lakhs and Euro 5.33 lakhs) are secured by first pari passu charges by way of hypothecation of Plant & Machinery and other movable fixed assets of the company situated at Kassar and Kadi plants excluding those exclusively charged to other Banks and second pari passu charge over current assets of the company both present and future. Repayment of aforesaid loan is Rs. 1,100.00 lakhs, Rs. 1,450.00 lakhs, Rs. 1,700.00 lakhs, and Rs. 470.56 lakhs in FY19, FY20 and FY21 respectively.
6 Rupee loan of Rs. 3,000.00 lakhs (March 31, 2017 Nil, April 1, 2016 Nil) from a Bank and Buyers'/Suppliers' credit of Rs. 726.51 lakhs (March 31, 2017 Nil, April 1, 2016 Nil) Equivalent to aggregate of USD 11.10 lakhs (March 31, 2017 Nil, April 1, 2016 Nil) are secured by first pari passu charge by way of hypothecation of all movable fixed assets, both present and future, of the Company at Kassar & Kadi excluding assets those exclusively charged to other Banks. Repayment of aforesaid loan is Rs. 1,000.00 lakhs, Rs. 1,000.00 lakhs, Rs. 1,500.00 lakhs and Rs. 226.51 lakhs in FY19, FY20, FY21 and FY22 respectively.
7 Car loan from Banks and others are secured by hypothecation of cars purchased there under and are repayable in monthly instalments over the period of loan.
8 Rate of interest applicable to all term loans is linked with MCLR.
37 Contingent liabilities, contingent assets and commitments (Contd.)
(ii) Others Financial Liabilities includes encashment of bank guarantee in earlier years provided by a supplier of machinery. The supplier of machinery has challenged the encashment of bank guarantee and the case is pending before Hon'ble High Court of Delhi and Calcutta. pending final decision, no adjustment has been carried out in accounts.
(iii) The company has procured certain capital goods under EPCG scheme at concessional rate of duty. As on March 31, 2018 the company is contingently liable to pay differential custom duty of Rs. 121.74 Lakhs (March 31, 2017 - Rs.265.34 Lakhs, April 1, 2016 Rs. 681.17 Lakhs) on such procurement. In view of past export performance and future projections, the management is hopeful of completing the export obligation within stipulated time, and expect no cash outflow on this account.
38 Interest in Joint Venture Company (JVC)
a) Company's contribution in the joint venture (by the name SKPL Ceramics. Pvt. Ltd. (Formerly Somany Keraben Pvt Ltd.), a 50:50 Joint Venture Company) till June 1, 2017 is Rs. 89.30 lakhs (Previous year Rs 89.30 lakhs) towards share capital of Joint Venture entity. The company is in process of striking off.
The above loans carries interest rate in the range of 10.5% to 14.5%.
b) Details of investments made is given in Note No. 4.
42 Employee benefits
The Company contributes to the following post-employment defined benefit plans in India.
(i) Defined Contribution Plans:
The Company makes contributions towards provident fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.
Contributions to Provident and other Funds' of the Statement of Profit and Loss includes Rs. 544.12 lakhs (Previous year Rs. 504.78 lakhs) towards contribution to Provident Fund [including Rs. 190.45 lakhs (Previous year Rs. 171.11 lakhs) towards Somany Provident Fund, a multi-employer plan].
(ii) Defined Benefit Plan:
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. Gratuity liability is being contributed to the gratuity fund formed by the company.
The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2018. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
A. Movement in net defined benefit (asset)/liability
The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset)/liability and its components:
42 Employee benefits (Contd.)
E. Description of Risk Exposures:
Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such Company is exposed to various risks as follow
A) Salary Increases- Actual salary increases will increase the Plan's liability. Increase in salary increase rate assumption in future valuations will also increase the liability.
B) Investment Risk - Assets and liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.
C) Discount Rate - Reduction in discount rate in subsequent valuations can increase the plan's liability.
43 Related parties
A. Related parties and their relationships
i Key Managerial Personnel (KMP) and their relatives Name Relationship
Mr. Shreekant Somany Chairman & Managing Director
Mr. Abhishek Somany Managing Director (Son of Chairman & Managing Director)
Mrs. Anjana Somany Whole time Director (Wife of Chairman & Managing Director) (w.e.f. May 21, 2016)
Mr. G.G. Trivedi Additional Director w.e.f. September 1, 2017 (CEO upto August 31, 2017)
Mr. T.R. MaheshwariA CEO w.e.f. January 30, 2018 (Deputy CEO and CFO upto January 29, 2018)
Mr. Saikat MukhopadhyayA CFO w.e.f January 30, 2018
Mr. Ambrish JulkaA DGM (Legal) & Company Secretary
Mrs. Minal Somany Wife of Managing Director
Mr. G. L. Sultania Non- Executive Director
Mr. R.K. Daga Non- Executive Director
Mr. Ravindra Nath Non- Executive Director
Mr. Salil Singhal Non- Executive Director
Mr. Y. K. Alagh Non- Executive Director
Mr. Narayan Anand Non- Executive Director (upto April 12, 2017)
a KMP under the Companies Act, 2013
ii Subsidiary Company
SR Continental Limited Somany Global Limited Amora Tiles Private Limited Somany Fine Vitrified Private Limited Somany Sanitaryware Private Limited Somany Excel Vitrified Private Limited Vintage Tiles Private Limited Commander Vitrified Private Limited
43 Related parties (Contd.)
Vicon Ceramic Private Limited Acer Granito Private Limited
Sudha Somany Ceramics Private Limited (Formerly Sudha Ceramics Private Limited) (w.e.f. November 9, 2016)
Amora Ceramics Private Limited (w.e.f. March 30, 2018)
iii Associate (Joint Venture upto June 01, 2017)
SKPL Ceramics Private Limited (Formerly Somany Keraben Private Limited) upto June 1, 2017*
*The Company has terminated the Joint Venture Agreement with Keraben Grupo S.A. w.e.f. June 1, 2017. Now the Company is under the process of Strike Off.
iv. Enterprise over which Company exercise significant influence and with whom transactions have taken place during the year:
H. L. Somany Foundation
v. Enterprise over which Key Management Personnel and their relatives exercise significant influence and with whom transactions have taken place during the year
Schablona India Limited (w.e.f. January 10, 2018)
Vidres India Ceramics Private Limited
Yogi Cerachem Private Limited
Ishiv India Solutions Private Limited
vi. Other related parties with which Company has transactions:
Name
Biba Apparels Private Limted Private company in which director is a director
Ashiana Housing Limited Public company in which director is a director
Shree Cement Limited Public company in which director is a director
Wolkem India Limited Public company in which director is a director and holds more than 2% shares alongwith relatives
G.L. Sultania & Co. Firm in which director is proprietor
44 Financial instruments - Fair values and risk management (Contd.)
II. Financial risk management
The Company has exposure to the following risks arising from financial instruments:
- credit risk;
- liquidity risk; and
- market risk
i. Risk management framework
The Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The board of directors has established the processes to control risks through defined framework.
The Company's risk management policy is established to identify and analyse the risks faced by the Company, to set appropriate controls. Risk management policy is reviewed by the board annually to reflect changes in market conditions and the Company's activities.
The Company's Audit Committee oversees compliance with the Company's risk management policy, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
ii. Credit risk
Financial loss to the Company, arising, if a customer or counterparty to a financial instrument fails to meet its contractual obligations principally from the Company's receivables from customers and investments in debt securities.
The carrying amount of financial assets represents the maximum credit exposure. The Company monitor credit risk closely both in domestic and export market.
Trade and other receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.
The Company Management has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes market check, industry feedback, past financials and external ratings, if they are available, and in some cases bank reference checks are also done. Sales credit limit are set up for each customer and reviewed periodically. "
The Company creates allowances for impairment that represents its expected credit losses in respect of trade and other receivables. The management uses a simplified approach for the purpose of computation of expected credit loss for trade receivables.
The gross carrying amount of trade receivables is Rs 38,756.66 Lakhs (31 March 2017 - Rs. 40,741.28 Lakhs, 1 April 2016 - Rs.31,375.50 Lakhs).
Investments
Company invests in Bonds, Debentures, Liquid Mutual Funds etc., in accordance with the Company's Investment Policy that includes parameters of safety, liquidity and post-tax returns. Company avoids the concentration of credit risk by spreading them over several counterparties with good credit rating profile and sound financial position as well as held to maturity policy. The Company's exposure and credit ratings of its counterparties are monitored on an on-going basis. Based on historical experience and credit profiles of counterparties, the Company does not expect any significant risk of default.
iii. Liquidity risk
Liquidity risk is the risk that the Company may face difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to manage liquidity is to ensure, as far as possible, sufficient liquidity to meet its obligations, under both normal and stressed conditions.
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.
Management monitors rolling forecasts of the Company's liquidity position (comprising the undrawn borrowing facilities) and cash and cash equivalents on the basis of expected future cash flows.
Maturities of financial liabilities
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and exclude contractual interest payments and the impact of netting agreements.
iv. Market risk
Risk on account of changes in foreign exchange rates, interest rates etc. that may affect the Company's income or the value of its holdings of financial instruments. The objective of market risk is to optimize the return by managing and controlling the market risk exposures within acceptable parameters.
v. Currency risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company's functional currency (INR). The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD and small exposure in EURO. The risk is measured through a forecast of highly probable foreign currency cash flows.
Exposure to currency risk
The summary quantitative data about the Company's exposure to currency risk as reported to the management of the Company is as follows (Foreign currency in lakhs).
Sensitivity analysis
A reasonably possible strengthening (weakening) of the Rs. against USD & EURO at 31 March would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
47 Exceptional item of Rs. 440.41 Lakhs (Previous Year Rs. 406.25 lakhs) includes Rs. 245.70 Lakhs (Previous Year Rs. 406.25 Lakhs) on account of write off of certain plant and machineries and Rs. 194.71 Lakhs (Previous Year Nil) on account of settlement of demand of wage raise during the year.
48 Out of Rs. 11,999.97 lakhs raised through qualified institutions placement of equity shares in December, 2015, the Company has so far utilized Rs. 1,849.97 lakhs (previous year Rs. 1,849.97 lakhs), including issue expenses of Rs. 307.34 lakhs, for the purpose the fund were so raised and balance Rs. 10,150.00 lakhs (previous year Rs. 10,150.00 lakhs) has been temporarily invested mainly in the debt instruments/ funds.
46 The Company has taken warehouse locations on operating lease. The operating lease arrangements are renewable on periodic basis. Some of these agreements have price escalation clauses.
49 Events after the Balance Sheet Date
Dividend declared and paid by the Company
The Board of directors has recommended dividend of Rs. 2.70 (Previous Year Rs. 2.70) per equity share aggregating Rs. 1,379.45 Lakhs (Previous Year Rs. 1,377.19 Lakhs) including corporate dividend tax of Rs. 235.20 Lakhs (Previous Year Rs. 232.94 Lakhs) for the financial year ended March 31, 2018 and same is subject to approval of shareholders at the ensuing Annual General Meeting.
50 Segment Reporting
According to Ind AS 108, identification of operating segments is based on Chief Operating Decision Maker (CODM) approach for making decisions about allocating resources to the segment and assessing its performance. The business activity of the company falls within one broad business segment viz. "Ceramic Tiles and Allied products" and substantially sale of the product is within the country. The Gross income and profit from the other segment is below the norms prescribed in Ind AS 108. Hence, the disclosure requirement of Ind AS 108 of 'Segment Reporting' is not considered applicable.
51 Capital management
The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders. The following table summarises the capital of the Company.
53 First Time Adoption of Ind AS
As stated in note 2, these are the Company's first financial statements prepared in accordance with Ind AS. The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of an opening Ind AS statement of financial position at April
1, 2016 (the Company's date of transition). In preparing its opening Ind AS statement of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Indian GAAP (previous GAAP). 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 the notes that accompany the tables.
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
(i) 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 recognised 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 measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
(ii) Effect of changes in exchange rate
In respect of long term foreign currency monetary items recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period, the Company has elected to recognise exchange differences on translation of such long term foreign currency monetary items in line with its Previous GAAP accounting policy.
In respect of long term foreign currency monetary items recognised in the financial statements beginning with the first Ind AS financial reporting period, exchange differences are recognised in the statement of profit and loss.
B. Ind AS mandatory exceptions
(i) 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 objective evidence that those estimates were in error.
Ind AS estimates as at April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company made estimates for Impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under previous GAAP
(ii) Classification and measurement of financial assets and financial liabilities
Ind AS 101 requires an entity to assess classification and measurement of financial assets and financial liabilities 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:
1 Fair valuation of investments
Under previous GAAP, current investments were stated at lower of cost and fair value. Under Ind AS, these financial assets have been classified as Fair Value through Profit or Loss (FVTPL) on the date of transition and fair value changes after the date of transition has been recognised in statement of profit and loss.
2 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. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting.
3 Remeasurements of post-employment benefit obligations
Under previous GAAP, actuarial gains and losses related to the defined benefit schemes for gratuity were recognised 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 recognised in OCI. Consequently, the tax effect of the same has also been recognised in OCI instead of statement of profit and loss.
4 Retained earnings
Retained earnings as at April 1, 2016 has been adjusted consequent to the above Ind AS transition adjustments
5 Depreciation
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 recognised 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. The Company has further reassessed and realigned the depreciation methodology as per the requirement of IND AS.
6 Other comprehensive income
Under Ind AS, all items of income and expense recognised in a period should be included in statement of profit & loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in statement of profit & loss but are shown in the statement of profit and loss as 'other comprehensive income' includes remeasurements of defined benefit plans and tax thereon. The concept of other comprehensive income was not there under previous GAAP.
7 Deferred Tax
Deferred tax have been recognised on the adjustments made on transition to Ind AS.
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