Note 1 COMPANY OVERVIEW

Ador Fontech Limited (‘the Company’) was incorporated in India on August 22, 1974 under the provisions of the Companies Act applicable in India and is a frontrunner organisation that operates on the philosophy of ‘partnering’ with its clients in recommending and implementing value-added fusion, surfacing, spraying and environmental solutions. The Company is dedicated to the supply of products, services and solutions that meet and exceed the needs of its end-users under the broad gamut of ‘Life enhancement of industrial components’.

The Company is a public limited company [CIN: L31909KA1974PLC020010] domiciled in India and is listed on the Bombay Stock Exchange (BSE). The registered and corporate office of the Company is located at Belview 7 Haudin Road Bengaluru 560 042.

The financial statements were authorised for issue in accordance with the resolution of the Board of Directors on May 29, 2018.

BASIS OF PREPARATION

(i) Compliance with IND-AS

These financial statements have been prepared in accordance with the Indian Accounting Standards (Ind-AS) as per the Companies (Indian Accounting Standards) Rules, 2015 (as amended) notified under Section 133 of the Companies Act, 2013 (the ‘Act’) and other applicable Enactments, Rules and Regulations.

The financial statements up to and for the year ended March 31, 2017 were prepared in accordance with accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Act (Indian GAAP/Previous GAAP).

These are the first set of financial statements of the Company prepared in accordance with Ind-AS and the ‘First-time Adoption of Indian Accounting Standards’ as per Ind -AS-101 has been applied. Kindly refer to detailed explanation note on how the transition from Indian GAAP to Ind-AS, has effected the Company’s financial position, financial performance and cash flows.

These financial statements have been prepared on a historical cost and accrual basis, except for certain financial assets & liabilities and defined benefit plan assets & liabilities, that are measured at fair value.

(ii) Use of estimates and critical accounting judgements

The preparation of financial statements is in conformity with Ind-AS which requires the Management to make estimates, assumptions and exercise judgements in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of income and expenses during the year.

The Management believes that these estimates are prudent, reasonable and are based upon the Management’s best knowledge of current events and actions. Actual results could differ from these estimates. Differences between actual results and estimates are recognised in the periods in which the results are known or materialised.

This note along with the next provides an overview of areas that involved a higher degree of judgement or complexity and of items adjusted or which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed/estimated.

(iii) Basis of measurements

The Ind-AS financial statements have been prepared on a going concern basis using historical cost convention and on an accrual method of accounting, except for certain financial assets and liabilities, including derivative financial instruments which have been measured at fair value as described below and defined benefit plans which have been measured at actuarial valuation as required by relevant Ind-AS.

FAIR VALUE MEASUREMENT

The Company measures financial instruments at fair value at each Balance Sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that transaction to sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability or

- In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Company.

The fair value of an asset or a liability is measured using assumptions that market participants would use their economic best interest, when pricing the asset or liability.

A fair value measurement of a non-financial-asset takes in to account a market participant’s ability to generate economic benefits by using the asset to its highest and best use or by selling it to another market participant that would use the asset to its highest and best use.

Fair value for measurement and/or for disclosure purpose in these financial statements is determined on the above basis, except for share based payment transactions that are within the scope of Ind-AS-102, leasing transactions that are within the scope of Ind-AS-17 and measurements that have some similarities to fair value, such as net realisable value in Ind-AS-2 or value in use in Ind-AS-36.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value is directly or indirectly observable.

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of nature, characteristics and risks of the asset or liability and the level of fair value hierarchy as explained above.

MEASUREMENT OF DEBT INSTRUMENTS

Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:

Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss, when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.

Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the asset’s cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in the profit and loss account. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is re-classified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in other income using the effective interest rate method.

Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the statement of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in other income.

FUNCTIONAL AND PRESENTATION CURRENCY

These Ind-AS financial statements are prepared in Indian Rupees which is the Company’s functional currency and presented in lakhs.

Notes:

As part of Ind-AS transition provisions and fair value concept:

- An amount of rupees nine lakhs only has been enhanced in office premises and

- An amount of rupees nineteen lakhs, eighty six thousand, four hundred and eighty eight only has been retired from fixed assets as at 31.03.2017. However, as the books of accounts cannot be revised/changed, entries have been passed on April 01, 2017 as transitional adjustment.

- The earmarked investments (*) have been provided as collateral security (lien in favour of the HDFC Bank Limited) for grant of loan (be it in the nature of working capital/term loan) to 3D Future Technologies Private Limited (wholly owned subsidiary of Ador Fontech Limited).

- As at March 31, 2018, 3D Future Technologies Private Limited had a liability of rupees one hundred and eighty nine lakhs (previous year rupees two hundred and twenty four lakhs) with regard to loan availed from the HDFC Bank Limited.

- The earmarked investments (*) have been provided as collateral security (lien in favour of the HDFC Bank Limited) for grant of loan (be it in the nature of working capital/term loan) to 3D Future Technologies Private Limited (wholly owned subsidiary of Ador Fontech Limited).

- As at March 31, 2018, 3D Future Technologies Private Limited had a liability of rupees one hundred and eighty nine lakhs (previous year rupees two hundred and twenty four lakhs) with regard to loan availed from the HDFC Bank Limited.

- Cash and cash equivalents as of March 31, 2018 and March 31, 2017 include restricted cash and bank balances of rupees three hundred and sixty one lakhs and rupees two hundred and eighty one lakhs, respectively. The restrictions are primarily on account of cash and bank balances held as margin money deposits against guarantees and unclaimed dividends. The deposit maintained by the Company with banks comprise time deposit.

- Disclosure of specified bank notes: The disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from November 8, 2016 to December 30, 2016 are not relevant for the financial year 2017-18. Details of SBN held and transacted during the period from November 8, 2016 to December 30, 2016 are as follows: Closing cash in hand as on November 8, 2016: Rs.1 lakh, Permitted receipts: Rs.7 lakhs, Permitted payments: Rs.7 lakhs and amount deposited in banks: Nil, Closing cash in hand as on December 30, 2016: Rs.1 lakh.

(ii) Rights, preferences and restrictions

The Company has only one class of shares, referred to as equity shares having a par value of Rs.2/- per share. Each holder of equity share is entitled to one vote per share and dividend as may be declared at the Annual General Meeting.

Note: In view ofJ B Advani and Company Private Limited’s shareholding being 26.32%, it will be treated as an Associate by Ador Fontech Limited in terms of the Companies Act, 2013 and amendments thereon.

However, in view of Ind-AS regulations, we have been informed that JBA will aggregate the accounts of Ador Fontech Limited as a subsidiary for the purpose of its consolidated financial statements.

(iv) As on the date of the Balance Sheet

- The Company has not issued any equity share as fully paid pursuant to contracts without payment being received in cash.

- The Company has not issued any fully paid bonus share.

- The Company also did not buy back any equity share.

(v) Issue/conversion of equity shares

As on the date of the Balance Sheet, the Company has not issued securities like convertible preference shares, convertible debentures etc., which are convertible in to equity/preference shares.

Note: Trade payables include creditors for capital goods, raw materials, consumables, traded goods and other materials as well as expenses, be it in the nature of capital or revenue. The Company has not received any information from its vendors regarding their status under Micro, Small and Medium Enterprises Development Act, 2006. Hence, it is deemed that there are no amounts outstanding in respect of such entities to be categorised under ‘MSME’ in the books of accounts.

Notes:

- FVTPL - Fair value through profit and loss.

- (a) Fair value hierarchy

The fair values of financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Judgements and estimates are made in determining fair values of financial instruments. They are broadly classified in to

(i) recognised and measured at fair value and

(ii) measured at amortised cost, for which fair values are disclosed in the financial statements.

To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments in to three levels prescribed under the Accounting Standards. An explanation of each level follows underneath the table.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. For example: Listed equity instruments that have quoted market price.

Level 2: The fair value of financial instruments that are not traded in an active market (For example: traded bonds, over-the-counter derivatives) are determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.

The carrying amounts of trade receivables, cash and bank balances, other bank balances, non-current loans, current loans, trade payables and other current financial liabilities are considered to be approximately equal to their fair values.

Note 2 FINANCIAL RISK MANAGEMENT

The Company’s principal financial liabilities comprise deposits, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include current loans, trade and other receivables, cash and cash equivalents that derive directly from its operations. The Company also holds FVTPL investments in mutual funds.

The Company is exposed to credit risk, market risk and liquidity risk. The Company’s senior management oversees the management of these risks.

(i) Credit risk

The Company is exposed to credit risk from its operating activities (primarily in respect of trade receivables) and from its financing activities (deposits with banks and other financial instruments).

Credit risk management

To manage credit risk, the Company follows a policy of providing 30-180 days credit to its domestic customers based on the nature of the customers. The credit limit policy is established considering the current economic trends of the industry in which the Company is operating.

However, trade receivables are monitored on a periodic basis for assessing any significant risk of non-recoverability of dues and provision is created accordingly.

Bank balances are held with only high rated banks and majority of other security deposits are placed majorly with Governmental agencies/public sector undertakings.

(ii) Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. For the Company, liquidity risk arises from obligations on account of financial liabilities — trade payables and other financial liabilities.

Liquidity risk management

The Company’s management is responsible for liquidity and funding as well as settlement. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company’s net liquidity position through rolling forecasts on the basis of expected cash flows.

(iii) Market risk

(A) FOREIGN CURRENCY RISK

The Company is exposed to foreign exchange risk on their receivables, payables which are held in USD, EUR and SEK.

The fluctuation in the exchange rate of INR relative to USD, EUR and SEK may have a material impact on the Company's assets and liabilities.

FOREIGN CURRENCY RISK MANAGEMENT

In respect of the foreign currency transactions, the Company does not hedge the exposures since the Management believes that the same is insignificant in nature and also that it will offset to some extent, the corresponding receivables and payables. The Company's exposure to foreign currency risk at the end of reporting period are as under:

SENSITIVITY TO FOREIGN CURRENCY RISK

The following table demonstrates the sensitivity to USD, EURO and SEK with all other variables held constant. The below impact on the Company's profit before tax is based on changes in the fair value of unhedged foreign currency monetary assets and liabilities as at date of the Balance Sheet.

(B) PRICE RISK

The Company is exposed to price risk from its investment in mutual fund classified in the balance sheet at fair value through profit and loss.

To manage its price risk arising from the investment, the Company has invested in the mutual fund after considering the risk and return profile of the mutual funds i.e. the debt profile of the mutual fund indicates that the debt has been given to credit worthy banks and other institutional parties and equity investment is made after considering the performance of the stock. However, the entity being risk averse has opted to invest its substantial funds in debt oriented mutual funds.

Note 3 CAPITAL MANAGEMENT

(i) Risk management

The Company’s objectives when managing capital are to:

- Safeguard its ability to continue as a going concern, so that it can continue to provide returns to its shareholders and also benefit other stakeholders and

- Maintain an optimal capital structure to reduce its cost of capital.

Apart from trade payables and other current liabilities, there is no debt on the Company. Therefore, the Company manages its capital and return to shareholders by adequately investing in mutual funds and adjusting the amount of dividend paid to the Shareholders.

(iii) General reserve

In terms of the proviso to Section 123 of the Companies Act, 2013, the Board has elected to transfer an amount of rupees one crore to the General reserve for the financial year 2017-18, being the same as in the previous year.

Note 4 DETAILS OF JOINT VENTURE & SUBSIDIARY

Joint venture

In view of significant business performance and consistent year on year losses, the Board on the basis of commercial viability has decided to exit from the joint venture — Dualrank Fontech (M) Sdn.Bhd. vide meeting of the Board of Directors dated January 30, 2017. Further, the nominee Directors representing the Company also exited from the Board. Consequently, Ador Fontech Limited does not have any representation in the management of the joint venture. With only an investment proposition in terms of accounting standard, aggregation of accounts of Dualrank Fontech (M) Sdn.Bhd. has not been facilitated. The process for exit has been initiated and it is expected to be completed before the end of the financial year 2018-19.

- *External liabilities are liabilities payable to other than the venture companies.

- MYR-Malaysian Ringgits

- Audited financial statements of Dualrank Fontech (M) Sdn. Bhd. as at December 31, 2017 has been uploaded on the website of the Company.

Note 5 EMPLOYEE BENEFITS

As per Indian Accounting Standard-19 ‘Employee Benefits’, the disclosure of Employee benefits as defined in the Standard are given below:

Brief description of the plans

The Company has various schemes for employee benefits such as provident fund, gratuity and superannuation. In case of funded schemes, the funds are administered through Trustees/appropriate authorities.

(i) The Company's defined contribution plans are provident fund and superannuation. The Company's defined benefit plan consists of gratuity. The Company has no further obligation beyond making the contributions.

(ii) The employees of the Company are entitled to compensated absences as per the Company’s policy, which is determined as per Actuarial valuation.

(i) Defined contribution plan

- Provident fund

- Superannuation fund

Sensitivity analysis:

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonable possible changes of the assumptions occuring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:

Note: The Company contemplates to move leave encashment from being unfunded to funded through the aegis of the Life Insurance Corporation of India, with a sixty day carry forward of earned leave for encashment being made available to the employees, during and from the financial year 2018-19.

- Remuneration has been reckoned as per the provisions of the Income tax.

- Provision for gratuity and leave encashment are determined for the Company as a whole and with liability not crystalising on the individuals, it is not possible to identify the amounts of KMPs separately.

Note 6 LEASE ARRANGEMENTS

The Company has entered in to cancellable operating lease with an option to renew in respect of certain godowns, offices and residential premises. The expenditure incurred thereon amounting to Rs.74,44,934/- (Previous year Rs. 68,40,437/-) has been charged to the Statement of Profit and Loss.

Note 7 CONTRACTUAL LIABILITIES

All contractual liabilities connected with business operations of the Company have been appropriately provided for.

Note 8 REALISATIONS

In the opinion of the Board and to the best of its knowledge and belief, the value on realisation of current assets, loans and advances, will in the ordinary course of business be not less than the amounts at which they are stated in the Balance Sheet.

Note 9 TRANSFER PRICING

The Management is of the opinion that its transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for tax.

Note 10 SEGMENT REPORTING

As per para 12 of Ind-AS-108, two or more operating segments may be aggregated in to a single operating system, if aggregation is consistent with the core principle of Ind-AS, with the segments having similar economic characteristics and are similar in each of the following respects:

- The nature of products and services

- The nature of production process

- The type or class of customers for the products and services

- The methods used to distribute products or provide services

- The nature of their regulatory environment, if applicable

Based on the same, the Company views its business operations in a holistic manner and not as segments. Hence 'Segment Reporting' being not applicable, has not been presented. Further, it would be suffice to state that in terms of geographical operations, the Company’s operations are concentrated in India with only a minor portion of revenue coming in as part of commission on export services.

Note 11 AMOUNTS IN THE FINANCIAL STATEMENTS

Amounts in the financial statements are rounded off to the nearest lakh and have been re-grouped whenever necessary.