A. Corporate Information
Banswara Syntex Limited ("the Company") is a Company domiciled in India and limited by shares (CIN: L24302RJ1976PLC001684). The shares of the Company are publicly traded on the National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The address of the Company's registered office is Industrial Area, Dahod Road, Post Box No. 21, Banswara - 327001(Rajasthan). The Company is a vertically integrated textile mill manufacturing man-made synthetic blended Yarn, wool and wool mixed yarn, all type of Fabrics, Jacquard Furnishing Fabrics, besides production of Readymade Garments and Made-up's.
B. Statement of Compliance and Basis of Preparation
1. Compliance with Ind AS
These Separate Financial Statements are prepared on going concern basis following accrual basis of accounting and comply in all material aspects with the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and subsequent amendments thereto, the Companies Act, 2013 (to the extent applicable) and applicable provisions of the Companies Act,1956. These are Company's first Ind AS compliant financial statements and Ind AS 101 'First Time Adoption of Indian Accounting Standards' has been applied.
For all periods up to and including 31stMarch 2017, the Company has prepared its financial statements in accordance with Generally Accepted Accounting Principles (GAAP) in India, accounting standards specified under Section 133 of the Companies Act, 2013, the Companies Act, 2013 (to the extent notified and applicable) and applicable provisions of the Companies Act,1956. The Company followed the provisions of Ind AS 101 in preparing its Opening Ind AS Balance Sheet as on the date of Transition, viz. 1st April 2016. Some of the Company's Ind AS accounting policies used in the Opening Balance Sheet are different from its previous GAAP policies applied as at 31st March 2016, accordingly the adjustment were made to restate the opening balance as per Ind AS. The resulting adjustment arose from events and transaction before the date of transition to Ind AS. Therefore, as required by Ind AS 101, those adjustments were recognized directly through retained earnings as at 1stApril 2016. This is the effect of the general rule of the Ind AS 101 which is to apply Ind AS retrospectively.
An Explanation of how the transition to Ind AS 101 has affected the reported financial position, financial performance and cash flows of the Company is provided in note no. 58.
These financial statements were authorized for issue by Board of Directors on 30th May 2018.
2. Basis of measurement/Use of Estimates
(i) The Financial Statements are prepared on accrual basis under the historical cost convention except certain financial assets and liabilities (including derivatives instruments) that are measured at fair value. The methods used to measure fair values are discussed in notes no. 53 to financial statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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.
(ii) The preparation of financial statements requires judgments, estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized. Major Estimates are discussed in Part D.
3. Functional and presentation currency
These financial statements are presented in Indian Rupees (INR), which is the Company's functional currency. All financial information presented in INR has been rounded to the nearest Lakhs (up to two decimals), except as stated otherwise.
4. Current and non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification.
An asset is current when it is:
- Expected to be realized or intended to sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realized within twelve months after the reporting period; or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets/liabilities are classified as non-current.
2.1. The company has purchased Road & Building amounting to Rs. 497.60 lakhs in the previous years at Mumbai from M/s Rastogi Estate & Construction Co. (Pvt.) Ltd. The company has taken the equity shares in M/s Rastogi Estate & Construction Co. (Pvt.) Ltd. to establish the right of ownership & possession.
As per the audited financial statement of M/s Rastogi Estate & Construction Co. (Pvt.) Ltd. for the year ended on 31st March 2016 the company holds 876 Equity Shares which comprise 35 % of Share capital of that company, The audited financial statement for FY 2016-17 and FY 2017-18 of M/s Rastogi Estate & Construction Co. (Pvt.) Ltd. are not available. The company does not have any control on the M/s Rastogi Estate & Construction Co. (Pvt.) Ltd. as per conditions prescribed under IND-AS 110. Further, the equity shares of M/s Rastogi Estate & Construction Co. (Pvt.) Ltd. is not in the nature of investment. Therefore it has not been shown as Investment under the head Financial Instrument.
2.2. Depreciation has been charged on Straight Line Method (SLM) based on useful life of the assets as mentioned in Schedule II of the Companies Act, 2013, except in case of Plant & machinery where the useful life has been taken as ascertained by the Independent Chartered Engineer and technical experts of the Company. The useful life of the Plant & Machinery so ascertained is ranging from 10 to 18 years on triple shift basis as against the life of 15 years given in Part C of Schedule II of the Companies Act, 2013. Further, considering materiality of assets costing less than Rs.5,000 are fully depreciated in the year of purchase/acquisition. The Company provide pro-rata depreciation from/to the date on which asset is acquired or put to use/ disposed off as appropriate.
2.3 The Company has purchased a free hold land at Daman amounting to ' 586.00 Lakhs for which possession has been taken and certificate received on 26 March, 2018, however registration for the same is still in the process.
2.4. Lease hold lands are amortised over the period of lease.
2.5 The Company has elected to measure all its property, plant and equipments at the previous GAAP carrying amount i.e. 31st March, 2016 as its deemed cost (Gross Block Value) on the date of transition to Ind AS i.e. 1st April, 2016.
17.2 The Board of Directors in its meeting held on 10th February, 2017 has issued 186,696 Equity Shares to the shareholders of Banswana Fabrics Limited being the transferor Company in the scheme of amalgamation.
17.3 Rights, preferences and restrictions to the shareholders : Equity Shares
All equity shareholders are having right to get dividend in proportion to paid up value of the each equity share as and when declared.
The Company has equity shares having a par value of '10 each. Each shareholder is entitled to 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. 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.
No member shall be entitled to exercise any voting rights either personally or by proxy at any meeting of the company in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid or in regard to which the company has, and has exercised, any right of lien.
19.1 Securities/ Guarantees
A. For Term Loans from Financial Institutions and Banks:
(i) Terms Loans from Financial Institutions and Banks are secured by a joint equitable mortgage and /or hypothecation charges ranking pari-passu on immovable/movable properties, present and future of the Company and are also secured by second charge on current assets of the Company ranking pari-passu.
(ii) Working Capital Term Loans from Banks are secured by first charge on current assets of the Company ranking Pari-passu and are also scured by second charge on fixed assets of the Company ranking pari-passu.
(iii) Term Loans and Working Capital term Loans from Financial Institutions and Banks are guaranteed by Shri R.L.Toshniwal, Chairman and Shri Ravindra Kumar Toshniwal, Managing Director in their personal capacities as per sanctions of the respective Financial Institutions and Banks.
(iv) Term Loan and Working Capital Loan Interest rate ranging from 9.20% to 11.40% (Previous Year 10.70% to 11.55%)
B. For Fixed deposits
(i) Fixed Deposits accepted by the Company are in accordance with the provisions of section 73(2)(a) and section 76 of the Companies Act, 2013 and rule 4(1) and 4(2) of the Companies (Acceptance of Deposits) Rules, 2014 are unsecured. Fixed Deposits are repayable within 1 to 3 years depending upon the terms of deposits.
(ii) Fixed Deposits Interest rate ranging from 9% to 9.50% (Previous Year 10% to 10.50%)
NOTE NO. 5. NON CURRENT LIABILITIES: DEFERRED TAX LIABILITIES (Net)
Considering accounting procedure prescribed by the IND AS 12 " Income Taxes", the following amounts have been worked out and provided in books:
23.1 Securities and Guarantees
(i) Loans repayable on demand from banks are secured by way of hypothecation (Floating charges) of Raw material, Dyes-Chemicals, Packing Materials, Stores & Spares, Stock-in-process, Finished goods, Book debts, Export Incentives and second charge on all the Property, Plant and Equipments of the Company and also guaranteed by Shri R.L. Toshniwal, Chairman and Shri Ravindra Kumar Toshniwal, Managing Director in their personal capacities.
(ii) Cash Credit Facility and Export Packing Credit Facility Interest rate ranging from 8.15% to 9.30% (Previous Year 9.20% to 12.40%).
@ To the extent information received for status under the Micro, Small and Medium Enterprises Development Act, 2006.
24.1 Details of Dues to Micro Enterprises and Small Enterprises
A) Defined contribution plan
Employer's contribution to provident fund paid Rs.1,287.63 Lakhs (Previous year Rs.1,251.25 Lakhs) has been recognized as expense for the year. Employer's contribution to Employee State Insurance Corporation paid Rs.425.95 Lakhs (Previous year Rs.394.63 Lakhs) has been recognized as expense for the year.
The Company's Provident Fund is administered by the Trust. The Rules of the Company's Provident Fund administered by a Trust require that if the Board of the Trustees are unable to pay interest at the rate declared for Employees' Provident Fund by the Government under Para 60 of the Employees' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the fund and the return on the investments, the Company does not expect any deficiency in the foreseeable future.
B) Defined benefits plan
The Company has following post employment benefits which are in the nature of defined benefit plans:
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 administered by a Trust and the Company makes contributions to recognised Trust.
Senstivity Analysis:
The table below outlines the effect on the service cost, the interest cost and the defined benefit obligation in the event of a decrease/ increase of 1% in the assumed rate of discount rate.
Risk Exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
a) 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 are 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 with 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. The Company has a risk management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The Company intends to maintain the above investment mix in the continuing years.
b) Changes in discount rate
A decrease in discount rate will increase plan liabilities, although this will be partially offset by an increase in the value of the plans' bond holdings.
c) Inflation risks
In the pension plans, the pensions in payment are not linked to inflation, so this is a less material risk.
d) Life expectancy
The pension plan obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans' liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.
The Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the Company's ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency.
The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. The Company uses derivatives to manage some of its risk. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
C) Other Long Term Employee Benefit
Leave Encashment
Amount of Rs.193.38 Lakhs ( March 31, 2017 ; Rs.217.15 Lakhs) is recognised as expenses and included in Note No 34 " Employee benefit expenses.
Note No.6.Disclosure as per Ind AS-17” Lease”
Operating Lease
I. Lease as Lessee
Factory building of Surat Unit is taken on non-cancellable with option to renewal for the period of 30 Years and it's in the nature of operating lease. Consideration for the same is already paid at the inception of the lease, hence no obligation disclosure required.
II. Lease as Lessor
Rent Income includes Lease Rental received toward Building. Such Operating Lease is for a period of 10 years with the option of renewal on mutual consent and premature termination of agreement through agreed notice period.
Accounting Method used for consolidation purpose is Equity Method.
Nature of the business of Joint Venture Entity is Textile
Note No. 7. Disclosure as per Ind AS 21 'The Effects of Changes in Foreign Exchange Rates
The amount of exchange differences (net) credited to the Statement of Profit & Loss is Rs.898.16 Lakhs (31 March, 2017: credited of Rs.828.97 Lakhs).
Note No. 8. Disclosure of Corporate social responsibility(CSR)
As per section 135 of Companies Act 2013, the company is required to spend in every financial year , at least 2% of the average net profits of the company made during the three immediately preceding financial year in accordance with its CSR policy.
Note No. 9. Disclosure as per Ind AS 36 'Impairment of Assets".
As required by Ind AS 36, an assessment of impairment of assets was carried out and based on such assessment, the Company has accounted impairment losses as below:
Plant and Machinery lying in Capital work in progress as non operative condition since 4 to 5 years amounting to Rs. 83.46 Lakhs was impaired. it is in dismantled condition, stacked haphardly. These machinery needs extensive over hauling which involves replacement of major parts & PCBs. These machines are obsolete and parts are not readily available in national market. The machinery has no economics life"
Note No.50.Disclosure as per Ind AS-103,Business Combination
During the Financial year 2016-17, Rajasthan High Court, Jodhpur has sanctioned the scheme of amalgamation of Banswara Global Limited (""BGL"")and Banswara Fabric Limited (""BFL"")with the Company with effect from 11.08.2016 under the provision of section 391 to 394 of the Companies Act, 1956.
In terms of Ind AS 103, this combination is accounted for as a combination under common control. Accordingly the same is accounted for as per the 'Pooling of Interest Method' and information of prior periods are restated as if the control was in existence prior to the date of transition.
Note No. 10. Disclosure as per Ind AS 108 ' Operating segment.
(a) The Company is engaged in production of textile products having integrated working and captive power generation. For management purpose, Company is organized into major operating activity of the textile products. The Company has no activity outside India except export of textile products manufactured in India. Thereby, no geographical segment and no segment wise information is reported.
Note No.11. Disclosure as per Ind AS 107 Financial instrument disclosure.
A) Capital management
For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximise shareholder value.
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions or its business requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio and includes within net debt, interest bearing loans and borrowings less cash and short-term deposits (including other bank balance).
B) Financial risk management
The Company's principal financial liabilities comprise Borrowings, trade payables and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include trade & other receivables, loan given, cash & cash Equivalent, Investment, deposits.
(a) Credit Risk
(b) Liquidity Risk
(c) Market Risk
(d) Foreigen Currency Risk
(e) Interest Rate Risk
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 is set by the Managing Board.
(a) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations resulting in a financial loss to the Company. Credit risk arises principally from trade receivables, loans & advances, cash & cash equivalents and deposits with banks and financial institutions.
Trade Receivable
Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on 7 days to 90 days credit term. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 11. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets. The requirement of impairment is analysed as each reporting date.
Other Financial Instruments and Cash & Cash Equivalent
The Company maintain its cash & cash equivalent in current account to meet the day to day requirements, in fixed deposits for bank margin & to meet regulatory requirements for repayment of deposits. Other financial instruments are loan given to employee, Investment and Deposit. The Company's maximum exposure to credit risk for the component of the Balance Sheet as of 31st March, 2018, 31st March, 2017 & 1st April, 2016 is the carrying amount as disclosed in Note 10,12, 13, 14 & 15.
Provision for Expected Credit or Loss
(a) Financial assets for which loss allowance is measured using 12 month expected credit losses.
The Company has assets where the counter-parties have sufficient capacity to meet the obligations and where the risk of default is very low. Accordingly, no loss allowance for impairment has been recognised.
(b) Financial assets for which loss allowance is measured using life time expected credit losses.
The Company provides loss allowance on trade receivables using life time expected credit loss and as per simplified approach
(b) Liquidity Risk
Liquidity risk is the risk that the Company will encounter 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 managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
*Includes contractual interest payment based on interest rate previling at the end of reporting period over tenure of the borrowings and also include fixed deposit received from Shareholders
# Current maturity of long-term borrowings is included in interest bearing borrowing part in above note.
Overdraft or other on demand loan facility, if any available with the Company to be disclosed, to the extent undrawn The Company had access to the following undrawn borrowing facilities at the end of the reporting period:
(c) Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company's income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Board of Directors is responsible for setting up of policies and procedures to manage market risks of the Company. All such transactions are carried out within the guidelines set by the Managing Board.
(d) Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risk on certain transactions that are denominated in a currency other than entity's functional currency, hence exposure to exchange rate fluctuations arises. The risk is that the functional currency value of cash flows will vary as a result of movements in exchange rates. The company uses forward contracts to mitigate its risk from foreign currency fluctuations.
Derivative instruments and unhedged foreign currency exposure
Foreign Currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in USD ,EURO and GBP rates to the functional currency of respective entity, with all other variables held constant. The Company's exposure to foreign currency changes for all other currencies is not material. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets and liabilities.
The Company's investment consists of investments in publicly traded companies held for purposes other than trading. Such investments held in connection with non-consolidated investments represent a low exposure risk for the Company and are not hedged.
As at 31st, March 2018 Company does not have material exposure to listed or unlisted equity price risk.
Interest Rate Risk
Interest rate risk arises from the sensitivity of financial assets and liabilities to changes in market rates of interest.
The Company is exposed to interest rate risk arising mainly from long term borrowings with floating interest rates. The Company is exposed to interest rate risk because the cash flows associated with floating rate borrowings will fluctuate with changes in interest rates. The Company manages the interest rate risks by entering into different kinds of loan arrangements with varied terms.
As at March 31st, 2018, approximately 5.85% of the Company's Borrowings are at fixed rate of interest (March 31st, 2017 : 3.18% and April 1st, 2016 : 2.23%)
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company's profit before tax is affected through the impact on floating rate borrowings, as follows:
Note No. 12. Disclosure as per Ind AS 113 Fair Value Measurement
Fair Value Hierarchy
This section explains the judgments and estimates made in determining the fair values of the financial instruments that are:-
(a) recognised and measured at fair value and;
(b) measured at amortised cost and for which fair values are disclosed in financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into three levels prescribed under the accounting standard.
Fair value are categorised into different level in a fair value hierarchy which are as follows:
Level 1 : Level 1 hierarchy includes financial instruments measured using quoted prices.
Level 2 : The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity specific estimates.
Level 3 : If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3 is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable market transactions and dealer quotes of similar instruments.
Valuation Techniques used to determine fair values:
A) Specific valuation technique is used to determine the fair value of the financial instruments which include:
i) For financial instruments other than (ii) and (iii)- the use of quoted market prices
ii) For financial liabilities (domestic currency loans) :- appropriate market borrowing rate of the entity as of each balance sheet date used.
iii) For financial assets (employee loans) : appropriate market rate of the entity as of each balance sheet date used.
B) Financial Instruments By Category
Set out below categorised table of financial instruments measured at FVTPL and Amortised Cost, no such instument is measured at Fair value through Other Comprehensive Income (FVTOCI):-
D) Fair value disclosures of financial assets and liabilities
Set out below is a comparison, by class of the carrying amounts and fair value of the Company's financial instruments, other than those with carrying amounts that are reasonable approximations of fair value:
Note No. 13. Some of the balances shown under Trade Receivables, Advances and Trade Payables are subject to confirmation. The Company has been sending letter for confirmation to parties and does not expect any material dispute w.r.t. the recoverability/payment of the same.
Note No. 14. Event occuring after Balance Sheet Date The Board of Directors has recommended equity dividend of Rs. one per share (Previous Year Rs.one per share) for the year ended 31st March, 2018, subject to the approval of the shareholders.
Note No. 15. During the year, the Company has implemented SAP for certain business processes. Inventory valuations and raw material consumption have been worked out manually based on the other records available/physical Inventories taken by the management. Necessary updation in SAP modules shall be done in subsequent period.
Note No. 16. The Company has noticed a fraud of Rs.196.89 lakhs approximately at Surat Unit and lodged FIR on 27.04.2018. The same was intimated to Bombay Stock Exchange Limited and National Stock Exchange of India Limited under the SEBI (Listing Obligation and Disclosure Reports) Regulations, 2015 and SEBI Circular CIR/CFD/CMD/4/2015 dated 09.09.2015. Two employees of Surat Unit have withdrawn the fake salary and wages in the name of 50 workers who have left the Company in earlier periods by preparing fake papers and documents. This matter is under investigation. In view of the management, there will not be any material financial impact on the financial results of the Company.
Note No. 17. Disclosure as per Ind AS 101 'First Time Adoption of Ind AS'
These financial statements, for the year ended 31st March, 2018, are the first annual Ind AS financial statements, the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under the Companies (Accounting Standard) Rules, 2006 (as amended) 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, 2018, together with the comparative period data as at and for the year ended March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company's opening balance sheet is prepared as at April 1, 2016, the Company's date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1, 2016 and the previously published Indian GAAP financial statements as at and for the year ended March 31, 2017.
Any resulting differences between carrying amounts of assets and liabilities according to Ind AS 101 as of 1st April 2016 compared with those presented in the previous GAAP Balance Sheet as of 31 March 2015, were recognized in equity under retained earnings within the Ind AS Balance Sheet.
Exemptions applied:
According to Ind AS 101, the first Ind As financial statements must use recognition and measurement principle that are based on standard and interpretations that one effective at 31 March, 2018
Ind AS Optional Exemptions
1. Property, Plant and Equipments and Intangible Assets
As per Ind AS 101, para D7AA, a first-time adopter to Ind ASs may 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 ASs, 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. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
2. Investment in Joint Ventures
As per Ind AS 101, para D15, the Company has elected the option provided under Ind AS 101 to measure all its investments in Joint venture at previous GAAP carrying value on the date of transition in its separate financial statement and used that carrying value as the deemed cost of such investments.
3 Business Combination
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date.
Accordingly, the Company has elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.
4. Borrowings
Ind AS 101 permits that if it is impracticable for an entity to apply retrospectively the effective interest method in Ind AS 109 'Financial Instruments', the fair value of the financial liability at the date of transition to Ind AS shall be the new amortised cost of that financial liability at the date of transition to Ind AS Accordingly, Company has elected to apply this exemption.
5. Classification and measurement of financial assets
As per Ind AS 101, para B8, an entity is required to assess 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.
6. Derecognition of financial assets and financial liabilities
As per Ind AS 101. para B2, a first-time adopter shall apply the derecognition requirements in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.
7. Estimates
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, unless there is objective evidence that those estimates were in error. Ind AS estimates as at April 1, 2015 and March 31, 2016 are consistent with the estimates as at the same date made in the conformity with previous GAAP . The Company made estimates for the following in accordance with Ind AS at the date of transition as these were not required under previous GAAP.
1. Investment in equity instruments carried at FVTPL
2. Impairment of financial assets based on Expected Credit Loss model The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 1, 2016, the date of transition to Ind AS and as of March 31, 2017.
Notes to the reconciliation of equity as at April 1, 2016 and March 31, 2017 and total comprehensive income for the year ended March 31, 2017.
1. Government Grant
Under Previous GAAP Government Grant received was recognised in Capital Reserve by considering it as promoter's contribution. Under Ind AS Government grant are required to be recognised in Profit or Loss on systematic basis in case, the grant is related to assets and recognised as deferred income. Accordingly, Rs.788.11 Lakhs has been transferred to Deferred income and is amortised in life of Property, Plant and Equipments for which it is received and accordingly an amount Rs.171.37 Lakhs has been transferred to Retained Earnings being the amount amortised till 1st April, 2016. Grant received during the year 2016-17 has been transferred to Deferred Income and Rs.71.78 Lakhs has been transferred to Other Income in Statement of Profit or Loss.
2. Fair Valuation of Investments and Forward Contracts
Under previous GAAP, the long-term investments were measured at cost less permanent diminution in value, if any and current investments at cost. Ind AS requires all investments and derivatives to be measured at fair value at the reporting date and all changes in the fair value subsequent to the transition date to be recognised either in the Statement of profit and loss or Other Comprehensive Income (based on the category in which they are classified).
This has resulted in increase in other equity by Rs.172.79 Lakhs and Rs.314.72 Lakhs with corresponding increase in value of investment by Rs.18.88 Lakhs and Rs.21.22 Lakhs and in Derivative assets & Debtors by Rs.155.03 Lakhs and Rs.290.02 Lakhs as at 1st April 2016 and 31st March 2017, respectively.
3. Proposed Dividend and tax thereon
Under Previous GAAP, proposed dividends are recognized as liability in the period to which they relate irrespective of the approval by shareholders. Under Ind AS, a proposed dividend is recognised as a liability in the period in which it is declared by the company (on approval of Shareholders in a general meeting) or paid. Therefore, the liability amounting Rs.407.52 Lakhs (inclusive of Dividend Distribution Tax) recorded under previous GAAP has been derecognised as on the date of transition i.e. 01.04.2016. The same is recognised in Financial year 2016-17, when dividend was approved by shareholders.
4. Business Combination
During the financial year 2016-17 the company was combined with Banswara Global Limited and Banswara Fabrics Limited. Under Previous GAAP accounting done as per pooling of interest method as specified in AS-14 from the date on which merger was effected. Ind AS requires business combination under common control to be accounted as per Appendix C of Ind AS 103, which prescribes pooling of interest method. Under pooling of interest method assets and liabilities are required to be carried forward at book value and prior period presented in balance sheet are to be restated considering that the merger was effective from first day of the last year presented.
Hence, balance sheet of 01 April, 2016 has been prepared as if the merger was effective from that day.
5. Deferred Tax
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-Income Taxes requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of asset or liability in the balance sheet and its corresponding 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 GAP.
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 as separate component of equity.
6. Actuarial Gain or Loss on Defined Benefit Plans
Both under Indian GAAP and IND AS, the company recognized costs related to its post employment defined benefits plan on an actuarial basis. Under Indian GAAP the entire cost including actuarial gain/loss are charged to profit or loss. Under IND AS , remeasurements are recognized in Other Comprehensive Income.
As a result profit for the year ended 31st March 2017 has increased by Rs.27.25 Lakhs (net of tax) with corresponding decrease in Other Comprehensive Income during the year.
7. Other equity
Retained earnings as at 1st April 2016 has been adjusted consequent to the above Ind AS transition adjustments. Refer 'Reconciliation of total equity as at 31st March 2017 and 1st April 2016' as given above for details.
8. Other comprehensive income
Under previous GAAP, the Company has not presented other comprehensive income (OCI) separately. Items that have been reclassified from statement of profit and loss to other comprehensive income includes remeasurement of defined benefit plans and fair value gain/loss on FVTOCI equity instruments. Hence, previous GAAP profit or loss is reconciled to total comprehensive income as per Ind AS
9. Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise duty on sale of goods shown as separate line item as expenses in the Statement of Profit and Loss accordingly.
10. Due to classification of one of the land as operating lease, the related amount which was earlier classified as depreciation and amortization is now considered as lease rent expense, hence grouped in Other Expenses.
11. Certain amount of Cash and cash equivalents has been reclassified to Other Bank Balances and Other Non-Current Financial Assets in accordance with Ind AS 7-Statement of Cash Flows and Divison II of Schedule III of Companies Act, 2013.
12. One of the Leasehold land has been classified as operating lease and accordingly, amount of Rs.33.23 Lakhs as on 31 March, 2017and Rs.35.08 Lakhs as on 01 April, 2016 has been representing its value has been transferred to Other Non-current Assets and Other Current Assets.
Cash flow from Operating Activities under Ind AS has been decreased mainly due to reclassification of other bank balances form cash and cash equivalents to working capital changes. The difference in the balance of cash and cash equivalents, cash flow from investing activities and cash flow from financing activities respectively is mainly due to taking the effect of merger of BFL and BGL with the Company as presented in Note No. 50.
Note No. 18. Disclosure as required by Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015
A. Loans and advances in the nature of loans
To Joint Venture : Nil
B. Investment by the loanee : Nil
Note No. 19. Standards issued but not yet effective
The standard issued, but not yet effective up to the date of issuance of the Company financial statement is disclosed below. The Company intends to adopts this standard when it becomes effective.
Ind AS 115 Revenue from Contracts with Customers Ind AS 115 was issued by Ministry of Corporate Affairs on 28th March, 2018 vide Companies (Indian Accounting Standard) Amendments Rules, 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115 revenue is recognised at an amount that reflects to a consideration which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard supersede all current revenue recognition requirements under Ind AS. This standard will come into force from 1st April, 2018. The Company will adopt the new standard on the effective date.
Appendix to Ind AS 21, Foreign Currency transaction and advance consideration.
This appendix was issued by Ministry of Corporate Affairs on 28th March, 2018. It clarifies the date of transaction for the purpose of determing the exchange rate to use on initial recognition of the related asset, expenses or income when an entity has received or paid advance consideration in a foreign currency. The appendix will come into force from 1st April, 2018. The Company will adopt the requirement in the new appendix from the effective date.
Significant Accounting Policies, Notes on Accounts and other disclosures from Note no. 1 to 60 forming part of these financial statements.
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