1. COMPANY OVERVIEW

Future Supply Chain Solutions Limited (the “Company’’) is a public company domiciled in India and incorporated on March 8, 2006. The Equity Shares of the Company were listed on BSE Limited and the National Stock Exchange of India Limited on December 18, 2017.

The Company is India’s first fully integrated and IT enabled end-to-end Supply Chain and Logistics Company with capabilities in handling Modern Warehousing, Express Logistics, Cold Chain Logistics etc. The Company caters to corporates in Food & Beverages, Lifestyle, Consumer Electronics & High Tech, Automotive & Engineering, Home & Furniture, Healthcare, General Merchandise and E-Commerce sectors. Each category has a distinct supply chain requirements that need customised solutions. The Company has been a pioneer and leader in modernising logistics and supply chain in India by having implemented cutting-edge technology and contemporary supply chain management practices through implementation of global best practices, indigenised and best adapted for Indian conditions. The Company has its registered office at Mumbai, Maharashtra, India.

2. REvisED INDIAN ACCoUNTING sTANDARD (“IND As”) ISSUED BUT NOT EFFECTIVE

Ind AS 115 ‘Revenue from Contracts with Customers’ has been notified by Ministry of Corporate Affairs as on March 28, 2018. This standard prescribes only one underlying principle for revenue recognition i.e., transfer of control over goods / services. Ind AS 115 will supersede Ind AS 11 ‘Construction Contracts’ and Ind AS 18, ‘Revenue’ and is effective for annual periods beginning on or after April 1, 2018. Management considers that the amendment does not have a significant impact on the Financial Statements.

(i) Terms/Rights Attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs.10/- per Share. Each holder of equity share is entitled for one vote per share.

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 shareholdings.

(ii) More than 5 percent Shareholding in the Company

Shareholders holding more than 5 percent of the equity shares in Company are as under :

(iii) Share options granted under the Company’s employee share option plan

Share options granted under the Company’s employee share option plan carry no rights to dividend and no voting rights. (Refer Note no.35)

(v) As at March 31, 2018, 2,69,700 (2016-17 : Nil) equity shares were reserved for issuance toward outstanding employee stock options granted. (Refer Note no.35)

3 financial risk management

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 and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including loans and borrowings, foreign currency receivables and payables.

The Company manages market risk through treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommends 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 and borrowing strategies.

Capital Management

The Company manages its capital to ensure that Company will be able to continue as going concern while maximising the return to shareholders by striking a balance between debt and equity. The capital structure of the Company consists of net debt (offset by cash and bank balances) and equity of the Company (Comprising issued capital, reserves, retained earnings). The Company is not subject to any externally imposed capital requirements except financial covenants agreed with lenders.

In order to optimise capital allocation, the review of capital employed is done considering the amount of capital required to fund capacity expansion, increased working capital commensurate with increase in size of business and also fund investments in new ventures which will drive future growth. The Chief Financial Officer (“CFO”) reviews the capital structure of the Company on a regular basis. As part of this review, the CFO considers the cost of capital and the risks associated with each class of capital. The Company has a target Debt to Equity ratio of 1:1 determined as the proportion of net debt to equity. The Company has zero net debt as on March 31, 2018 (March 31, 2017: Nil)

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company is not exposed to significant interest rate risk as at the respective reporting dates.

Foreign Currency Risk

The Company’s exposure to exchange fluctuation risk is very limited for its purchase from overseas suppliers in various foreign currencies.

The following table analyses foreign currency risk from financial instruments as of:

Foreign exchange risk sensitivity:

10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.

A positive number below indicates an increase in profit and negative number below indicates a decrease in profit. Following is the analysis of change in profit where the Indian Rupee strengthens and weakens by 10% against the relevant currency:

In management’s opinion, the sensitivity analysis is not representative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

Credit Risk

Credit risk refers to the risk of default on its obligation by the counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs.22,888.01 Lakh and Rs.21,977.46 Lakh as of March 31, 2018 and March 31, 2017 respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables. The provision matrix takes into account available external and internal credit risk factors and the Company’s historical experience for customers.

Apart from Future Retail Limited, the largest customer of the Company, the Company does not have significant credit risk exposure to any single counterparty. Concentration of credit risk related to Future Retail Limited did not exceed 27.6% (2017: Future Retail Limited 37.8% and Future Lifestyle Fashions Limited 12.0%) of gross trade receivable as at the end of reporting period. No other single customer accounted for more than 10.0% of total trade receivable.

The average credit period on sale of services is 30 to 90 days. No interest is charged on trade receivables.

Credit Risk Exposure

Movement in Expected credit loss.

Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

Liquidity Risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

As of March 31, 2018, the Company had a working capital of Rs.10,289.60 Lakh including cash and cash equivalent of Rs.7,567.79 Lakh and current investment of Rs.0.70 Lakh.

As of March 31, 2017, the Company had a working capital of Rs.15,790.20 Lakh including cash and cash equivalent of Rs.4,700.72 Lakh and current investment of Rs.0.70 Lakh.

4 contingent liabilites not provided for:

Disputed service tax demand Rs.391.80 Lakh (2016-17: Nil)

5. Estimated amounts of contracts remaining to be executed on capital account (net of advances) Rs.1,927.95 Lakh. (2016-17: Rs.349.46 Lakh)

6. There are no outstanding towards Micro, Small and Medium Enterprises, during the period. This information as required to be disclosed under the Micro, Small and Medium Enterprise Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company and relied by the auditors.

7 related party disclosures

Names of Related Parties and Nature of Relationship

Holding Company - Future Enterprises Limited

Subsidiary Company - Vulcan Express Private Limited (w.e.f. February 2, 2018)

Associate Company - Leanbox Logistics Solutions Private Limited (w.e.f. July 27, 2017)

Fellow subsidiaries, Joint ventures and Associates within the Group :

- Apollo Design Apparel Park Limited

- Future Generali India Life Insurance Company Limited

- Work Store Limited

- Goldmohur Design and Apparel Park Limited

- Galaxy Entertainment Corporation Limited

Key Management Personnel:

- Mayur Toshniwal (Managing Director) (w.e.f August 5, 2017)

During the year, following transactions were carried out with the related parties in the ordinary course of business

Notes :

Consequent to the rejections of various application with respect to the appointment of and payment of remuneration to the Managing Director, and pursuant to the approval by the Board of Directors, the Company has initiated the process by sending a notice to the concerned Managing Director to recover the excess amount paid to him as remuneration during the relevant period. The Company expects the full recovery in the current year.

8 SHARE BASED PAYMENTS

(i) Details of the employee share based plan of the Company

a) The ESOP scheme titled “Future Supply Chain Solutions Limited Employees Stock Option Plan 2017” (FSC ESOP 2017) was approved by the Board on August 5, 2017 and our Shareholders on August 8, 2017. In aggregate 4,00,000 options are covered under the FSC ESOP 2017 for 4,00,000 equity shares.

During the year, the Nomination and Remuneration Committee (“NRC”) of the Company granted 2,83,763 options under FSC ESOP 2017 to certain directors and employees of the Company. The options granted under FSC ESOP 2017 are convertible into equal number of equity shares. The exercise price of each option is Rs.350/-.

The options granted shall vest over a period of 3 years from the date of the grant in the manner specified in the resolution passed by the NRC while granting the options. Accordingly, such options may be exercised within 3 years from date of vesting.

b) The following share-based payment arrangements were in existence during the year:

Note-1 The options granted shall vest over a period of 3 years from the date of the grant in the manner specified in the resolution passed by the NRC while granting the options. Accordingly, these options may be exercised within 3 years from date of vesting.

(ii) Options were priced using a Black Scholes option pricing model. Expected volatility is based on the historical share price volatility over the past 1 year.

(iii) Movement in share options during the year

The following reconciles the share options outstanding at the beginning and end of the year:

(iv) Share options outstanding at the end of the year

The share options outstanding at the end of the year had a weighted average remaining contractual life of 1,799 days (2016-17: Nil).

LEASE

The Company’s has entered into operating lease arrangements for its warehouses, office premises etc. These leasing arrangements, which are non-cancellable range between 3 months and 12 years generally or longer and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rents payable are charged as “Rent” under Cost of Logistics Service amount of Rs.7,364.42 Lakh (2016-17 : Rs.6,238.64 Lakh). Lease rent payable not later than one year is Rs.2,893.50 Lakh (2016-17: Rs.2,421.52 Lakh), payable later than one year but not later than five years is Rs.7,279.04 Lakh (2016-17: Rs.6,904.22 Lakh) and payable later than five years is Rs.1,517.67 Lakh (2016-17: Rs.2,733.59 Lakh).

9 ZERO COUPON FULLY AND COMPULSORILY CONVERTIBLE DEBENTURE

During the year, the Company has converted 55,000 Zero Coupon fully and Compulsorily Convertible Debenture into 9,17,955 equity share of Rs.10 at a premium of Rs.589.16 per equity share.

10. Security clause in respect to Secured Borrowings includes Working Capital Loans from Banks.

A. Short Term Borrowing

Rs. Nil (2017: Rs. Nil) is secured by (a) First Pari-Passu Charge on Current Assets of the Company (b) Second Pari-Passu Charge on Fixed Assets (c) Secured by personal guarantee of a Director.

B. Long Term Borrowing

Rs.3,310.80 Lakh (including current maturity) (2016-17: 3,044.96 Lakh) is secured by First Pari-Passu Charge on entire Fixed Assets (including immovable properties but excluding land)- present and future of the Company and personal guarantee by one of the Directors and Rs.4.98 Lakh (2016-17: Rs.138.09 Lakh including current maturity) is secured by vehicle.

Amount repayable Rs.780.00 Lakh in 2018-19, Rs.780.00 Lakh in 2019-20, Rs.780.00 Lakh in 2020-21, Rs.780.00 Lakh in 2021-22 and 2022-23 Rs.190.80 Lakh. Rate of interest ranges from 9.0% to 11.0%.

Installments falling due in respect of the above term loan upto March 31, 2019 aggregating Rs.784.98 Lakh have been grouped under current maturities of long term borrowings.

11 EMPLOYEE BENEFIT PLANS Defined Contribution Plan

Amount recognised as an expense and included in Schedule 27 under the “Contribution to Provident and Other Funds” of Statement of Profit and Loss account Rs.153.12 Lakh (2017: Rs.166.94 Lakh).

Defined benefit Plan - Gratuity

The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the payment of Gratuity Act, 1972 or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employee on retirement or on termination of employment. The gratuity benefit payable to the employees are based on the employee’s service and last drawn salary at the time of leaving. The employees do not contribute towards this plan and the full cost of providing these benefits are met by the Company. In case of death while in service, the gratuity is payable irrespective of vesting. The Company’s obligation towards Gratuity is a Defined Benefit plan and is not funded.

The plan typically exposes the Company to actuarial risks such as: interest rate risk, longevity risk and salary risk. Interest risk

A decrease in the government bond interest rate will increase the plan liability.

Longevity Risk

The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary risk

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out at March 31, 2018 by M/s. KP Actuaries and Consultants. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

As per Ind AS 19 the disclosures as defined in the Accounting Standard are given below:

Sensitivity analysis : Gratuity

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 reasonably possible change of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity is given below :

Please note that the sensitivity analysis presented above may not be repsesentive of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumption may be correlated.

The Company is engaged only in Logistics business in India and there are no separate reportable business and geographical segments under the Accounting Standard of Ind AS 108 Operating Segments.

As required by clause (4) of Section 186 of the Companies Act 2013, the Company has made an investment of Rs.6,312.26 Lakh (2016-17: Nil) during the year.

12 approval of FINANCIAL STATEMENT

The Financial Statements were approved by the Audit Committee and the Board of Directors at their respective meetings held on April 25, 2018.