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Notes to Accounts of AVT Natural Products Ltd.

Mar 31, 2018

1. General information

AVT Natural Products Limited is engaged in the production, trading and distribution of Oleoresins and value added Teas. The Company has its production facilities in India and exports most of its products.

The Company is a Public Limited Company incorporated and domiciled in India and has its registered office at 60, Rukmani Lakshmipathy Salai, Egmore, Chennai - 600008. The company has its listings on the Bombay Stock Exchange and National Stock Exchange in India. The standalone financial statements for the year ended March 31st, 2018 were approved by the Board of Directors and authorised for issue on May 29, 2018.

C. Terms/ rights attached to equity shares

The company has one class of equity shares having a par value of Re. 1 per share. Each shareholder is eligible for one vote share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of Interim Dividend. In the event of the liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to the shareholding.

F. Shares Allotted as fully paid up by way of Bonus Shares (During 5 years preceding March 31st 2018)

The Company allotted 7,61,42,000 Equity Shares as Fully Paid up Bonus Shares in the ratio of 1:1 by capitalisation of Capital Redemption Reserve and General Reserve on 28th September 2013 pursuant to Shareholders resolution passed by postal ballot on 19th September 2013.

The estimate of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotions and other relevant factors. The above information has been certified by the actuary and has been relied upon by the Auditors.

Exposure to Risks:

These plans typically expose the Company to actuarial risks such as: interest rate risk, longevity risk and salary risk.

Interest risk: A decrease in the Government Securities (G-Sec Bonds) 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 during 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.

NOTE - 2 GUARANTEE GIVEN BY THE COMPANY

Bank Guarantees of Rs. 39.52 lakhs (PY - Rs. 17.52 lakhs) have been given by the company to various government authorities & other parties. These guarantees were issued against the margin money kept with bank of Rs. 14.86 lakhs (PY Rs. 14.86 lakhs) made with the bank.

Transition to Ind AS

In preparing its opening Ind AS balance sheet, the Company has adjusted, regrouped and reclassified the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). The exemptions and exceptions applied by the Company in accordance with Ind AS 101 ‘First-time Adoption of Indian Accounting Standards’ along with the reconciliations of equity, total comprehensive income, balance sheet and cash flows in accordance with Previous GAAP to Ind AS are explained below.

Exemptions from retrospective application:

The Company has applied the following exemptions:

a. Property, plant and equipment — Deemed Cost

Ind AS 101 permits a first time adoption 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. Accordingly, the Company has elected to measure all of its property, plant and equipment at the carrying value, based on Indian GAAP.

b. Measurement of financial assets and financial liabilities at amortised cost: Under Previous GAAP, all assets and liabilities that are now classified under the head financial assets and financial liabilities were carried at cost. Under Ind AS, however, certain financial assets and financial liabilities are subsequently measured at Fair Value which involves use of Fair Value Measurement hierarchy at the date of transition to Ind AS.

c. Fair valuation of Investments in Mutual Fund (fair value through profit and loss account): Under the Previous GAAP, short term investments were measured at cost less diminution in value. Under the Ind AS, investments in mutual fund are measured at fair value as at the transition date, the Company has made irrevocable choice to account for these investments at fair value through Profit & Loss (FVPL).

d. Deferred Tax: Under Ind AS, Deferred tax has been recalculated in respect of above changes and the deferred tax impact as at the transition date has been recognised in opening reserves and for the year ended March 31st, 2017.

e. Proposed Dividend: Under the Previous GAAP, dividends on equity shares recommended by the Board of Directors after the end of the reporting period but before the financial statements were approved for issue were recognised as a provision in the financial statements. However, under Ind AS, such dividends are recognized when declared by shareholders in the annual general meeting.

f. Figures under previous GAAP have been regrouped/reclassified where ever required.

g Actuarial gain/ loss on defined benefit plans: Under Ind AS, re-measurements i.e. actuarial gain and losses and the return on plan assets, excluding amounts included in the net interest expenses on the net defined benefit liabilities are recognised in the other comprehensive income instead of Profit & Loss under previous GAAP as there re-measurements were forming part of the profit & loss for the year. There is no impact on the total equity.

h. Cash Flow Hedge considered as a direct credit to reserves in IGAAP has been routed through OCI under Ind AS accounting.

a. Actuarial gain/ loss on defined benefit plans: Under Ind AS, re-measurements i.e. actuarial gain and losses and the return on plan assets, excluding amounts included in the net interest expenses on the net defined benefit liabilities are recognised in the other comprehensive income instead of Profit & Loss under previous GAAP, all these re-measurements were forming part of the profit & loss for the year. There is no impact on the total equity.

b. Revenue from Operations: Under Previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty and the excise duty paid is presented on the face of statement of profit and loss as part of expenses.

c. Under Ind AS, forex gains have been regrouped under Other Income from Revenue from Operations. Similarly, bank charges in the nature of finance cost have been grouped under finance costs and own consumption of wind power has been adjusted to costs.

d. Current investments in the nature of mutual funds have been fair valued and the gains have been considered in the profit & loss account under Other Income.

e. Cash Flow Hedge considered as a direct credit to reserves in IGAAP has been routed through OCI under Ind AS accounting.

f. The tax effect on a, c, d and e have been adjusted against profit & loss / OCI as the case may be. g Figures under previous GAAP have been regrouped/reclassified where ever required.

NOTE 3

FAIR VALUE MEASUREMENT

Financial Instruments by category

The significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed.

B.2 Valuation inputs and relationship to fair value

The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date. In respect of the investment in equity share, considering the nature of the investment, fair value is considered close to the carrying value by the management

C. Fair value of Financial Instruments measured at amortised cost:

Due to the short-term nature of cash and cash equivalents and the short-term maturities of trade receivables, loans, liabilities, borrowings, other liabilities and assets the management considers that the carrying amount of assets and liabilities recognised at amortised cost in financial statements is approximate to their fair value.

The fair value of financial instruments as referred to in note (A) above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities [Level 1 measurements] and lowest priority to unobservable inputs [Level 3 measurements].

D. Valuation inputs and relationship to fair value

There are no material level 3 fair value measurements in respect of the financial assets and liabilities of the company.

NOTE - 4: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and short-term deposits that derive directly from its operations. The Company also enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed by the senior management in accordance with the Company’s policies and risk objectives. All derivative activities for risk management purposes are carried out by professionals who have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken.

(A) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings and derivative financial instruments.

The sensitivity analyses in the following sections relate to the position as at 31st March 2018 and 31st March 2017.

The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at 31st March 2018.

The analyses exclude the impact of movements in market variables on: the carrying values of gratuity and other post-retirement obligations; provisions; and the non-financial assets.

The following assumptions have been made in calculating the sensitivity analyses:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31st March 2018 and 31st March 2017 including the effect of hedge accounting.

(a) 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’s exposure to the risk of changes in market interest rates relates primarily to the Company’s short-term debt obligations with fixed & floating interest rates.

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

(b) 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’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency).

The Company manages its foreign currency risk by using foreign currency forward contracts.

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions, the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.

(2) Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD, GBP & SGD exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives. The impact on the Company’s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges. The Company’s exposure to foreign currency changes for all other currencies is not material.

(c) Commodity price risk

The prices of agricultural commodities are subject to fluctuations due to various factors. In the ordinary course of business, the company is exposed to commodity price risk to the extent its open sales are not balanced by the purchase contracts and inventory. The company has in place in a risk management policy to manage such risk by hedging the sales by direct purchases of the commodity and strategic stocking policies.

(B) Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

(a) Trade receivables

Customer credit risk is managed as per the Company’s established policy, procedures and control relating to customer credit risk management. Credit limits are set with approvals on the basis of the defined policies. Outstanding customer receivables are regularly monitored and exposures are kept within the credit limits fixed for each customer.

Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.

In order to avoid excessive concentrations of risk, the Company’s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.

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 company’s and assessed for impairment collectively. The calculation is based on exchange losses historical data. 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.

(b) Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty.

The Company’s maximum exposure to credit risk for the components of the balance sheet at 31st March 2018 and 31st March 2017 is the carrying amounts as mentioned in Notes.

(C) Liquidity risk

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. Approximately, 100% of the Company’s debt will mature in less than one year at 31st March 2018 (31st March 2017: NIL) based on the carryingvalue of borrowings reflected in the financial statements. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

NOTE - 5 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 parent. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. 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, which is net debt divided by fund attributable to Equity Sharesholders. The company includes within net debt, interest bearing loans and borrowings less cash and short-term deposits, excluding discontinued operations.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31st March 2018 and 31st March 2017.

NOTE – 6 DIVIDENDS

Dividends paid during the year 2017-18 represent 20% final dividend for the financial year 2016-17 (Rs.366.57 lakhs inclusive of DDT) and interim dividend of 20% declared in the financial year 2017-18 (Rs.366.57 lakhs inclusive of DDT).

The dividends declared by the Company are in Indian Rupees and are based on the profits available for distribution as reported in the statutory financial statements. Subsequent to March 31st, 2018, the Board of Directors of the Company have proposed a final dividend of Rs. 0.20 per share (20 percent) for the financial year 2017-18. The proposal is subject to the approval of shareholders at the Annual General Meeting, and if approved, would result in a cash outflow of approximately Rs. 366.57 lakhs, inclusive of corporate dividend tax of Rs. 62.00 lakhs.


Mar 31, 2017

E) SHARES ALLOTTED AS FULLY PAID UP BY WAY OF BONUS SHARES (DURING 5 YEARS PRECEDING MARCH 31, 2017)

The Company allotted 7,61,42,000 Equity Shares as Fully Paid up Bonus Shares in the ratio of 1:1 by capitalization of Capital Redemption Reserve and General Reserve on 28th September 2013 pursuant to Share Holders Resolution passed by postal ballot on 19th September 2013. .

The company has a process where by periodically all foreign exchange forward contracts are assessed. At the year end, the company has reviewed the forward exchange contracts and there are no material foreseeable losses on such contracts.

The Company has adopted the provisions mentioned in the guidance note issued by ICAI with respect to Hedge Accounting insofar as it relates to Forward contracts that are in the essence derivative instruments entered into by the Company to hedge foreign currency risk on firm commitments and highly probable forecast transactions meeting the necessary criteria for designation as “Cash Flow Hedge”. The gains and losses on effective cash flow hedges are recognized in “Hedge Reserve Account” and retained until the underlying forecasted transaction occurs.

1 As per Section 135 of the Companies, Act 2013, a CSR committee has been formed by the company. The areas for CSR activities are promoting education, health care, development of sports, sanitation, women empowerment and rural development projects. The total amount spent during the year on such activities which are specified in Schedule VII of the Companies Act, 2013 amounts to Rs. 83,26,799/- ( PY Rs.95,87,482/- )

2 Disclosure on Specified Bank Notes ( SBNs )

During the year, the company had specified bank notes or other denomination note as defined in the MCA notification GSR 308E dated 31st March 2017 on the details of Specified Bank Notes ( SBNs ) held and transacted during the period 8th November 2016 to 30 th December 2016, the denomination wise SBNs and other notes as per the said notification is given below:

* For the purpose of this clause, the term ‘Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs No. SO 340E dated 8th November 2016.

3 Due to Micro & Small Enterprises:

Based on the information available with the company, the principal amount due to Micro, Small & Medium Enterprises as on 31.03.2017 is Rs. 2,60,31,494/- ( PY Rs. 4,83,789/-). There are no overdue principal amounts and therefore no interest was paid or payable.

4 Segment Reporting :

The Company operates in solvent extracted products which is the primary reportable segment. Therefore, segment reporting is not applicable.

5 Dividends :

The Board of Directors, in its meeting on 29th May 2017, proposed a Final Dividend of Rs 0.20 Per equity share for the Financial Year ended March 31, 2017. The proposal is subject to the approval of Share Holders at the Annual General Meeting to be held on 10th August 2017 and if approved would result in a cash outflow of Approximately Rs 366.57 lakhs including Corporate Dividend Tax.

In terms of revised Accounting Standard (AS) 4 Contingencies and Events occurring after Balance Sheet date as notified by the Ministry of Corporate Affairs (MCA) through amendments to Companies (Accounting Standard) Amendment Rules 2016, dated 30th March, 2016, proposed dividend is not recognized as liability as on 31st March, 2017. Accordingly balance of Reserves and Surplus is higher by Rs 366.57 lakh and balance of other liabilities is lower by an equivalent amount.

6 Research and Development Expenditure :

Expenditure incurred at R&D Centres approved by Department of Scientific and Industrial Research (DSIR) eligible for Weighted deduction under the Income Tax Act

7 Employee Benefits:

i) Defined Benefit Plans:

a) Description of the Company’s defined benefit plan:

i) Gratuity Scheme:

This is a funded defined benefit plan for qualifying employees for which, the Company makes contribution to the Gratuity Fund managed by the Life Insurance Corporation of India. The scheme provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service.

ii) Leave Encashment:

The company also operates a non funded leave encashment scheme for its employees.

b) Reconciliation of changes in the Present Value of Obligation:

ii) Defined Contribution Plans:

The Company makes contribution towards employees’ provident fund, family pension fund, superannuation fund and employees’ state insurance scheme. Under the rules of these schemes, the Company is required to contribute a specified percentage of payroll costs. The Company during the year recognized Rs. 2,20,63,459/- as expense towards contributions to these plans.

8 Related Party Transactions :

Following companies are related to the Company on account of Common Control through Constitution of Board/ Shareholdings:

- A V Thomas & Company Ltd.

- L J International Ltd.

- A V Thomas Investments Company Ltd.

- The Nelliampathy Tea & Produce Co. Ltd.

- Neelamalai Agro Industries Ltd.

- The Midland Rubber and Produce Company Ltd.

- AVT McCormick Ingredients Private Ltd.

- AVT Tea Services Ltd.

- AVT Holdings Private Ltd.

- A V Thomas Leather & Allied Products Pvt. Ltd.

Key Management Personnel:

Mr. Ajit Thomas, Chairman

- AVT Tea Services North America, LLC

- A V Thomas Exports Ltd.

- Midland Latex Products Ltd.

- Sermatech Private Ltd.

- Aspera Logistics Pvt. Ltd.

- Midland Corporate Advisory Services Pvt. Ltd.

- AVT Gavia Foods Pvt. Ltd.

- Midland Charitable Trust

- AVT International Ltd.

Mr. M.N. Satheesh Kumar, President and CEO

Mr. A. Ramadas, Sr. Vice President and CFO

Mr. Dileepraj. P, Company Secretary

9 Previous year’s figures have been regrouped wherever necessary to conform to Current year’s classification


Mar 31, 2015

A) Transactions of a non-cash nature.

b) Any deferrals or accruals of past or future operating cash receipts or payments and

c) Items of income or expense associated with investing or financing cash flows.

Cash and cash equivalents (including bank balances) are reflected as such in Cash Flow Statement.

E) SHARES ALLOTTED AS FULLY PAID UP BY WAY OF BONUS SHARES (DURING 5 YEARS PRECEDING MARCH 31,2015)

The Company allotted 7,61,42,000 Equity Shares as Fully Paid up Bonus Shares in the ratio of 1:1 by capitalisation of Capital Redemption Reserve and General Reserve on 28th September 2013 pursuant to Share Holders Resolution passed by postal ballot on 19th September 2013.

The Company has a process where by periodically all foreign exchange forward contracts are assessed. At the year end, the Company has reviewed the forward exchange contracts and there are no material forseeable losses on such contracts.

2 The Company has adopted the useful life of fixed assets prescribed under Part C of Schedule II of the Companies Act 2013 for providing depreciation from 1st April 2014 except in the case of Plant and Machinery relating to Continuous Processing Plant of Marigold and Spices Processing for which the useful life has been taken as per the technical evaluation. As a result the standalone depreciation for the year ended 31.03.2015 is higher by Rs.47,72,830/- with consequential effect on statement of profit and loss before tax by this amount. For the tangible Fixed Assets that had completed useful life as at 01.04.2014, the carrying amount of Rs. 43,86,007/- has been charged to Statement of Profit & Loss as per Note 7 of Part C of Schedule II to the Companies Act 2013.

3 As per Section 135 of the Companies Act 2013, a CSR committee has been formed by the Company. The areas for CSR activities are promoting education, health care, sanitation, women empowerment and rural development projects. The total amount spent during the year on such activities which are specified in Schedule VII of the Companies Act 2013 amounts to Rs.15,00,512/-

4 Due to Micro & Small Enterprises:

Based on the information available with the Company, the principal amount due to Micro, Small & Medium Enterprises as on 31.03.2015 is Rs. Nil (Previous Year Nil). There are no overdue principal amounts and therefore no interest was paid or payable.

5 Segment Reporting :

The Company operates in solvent extracted products which is the primary reportable segment. Therefore, segment reporting is not applicable.

6 Employee Benefits:

i) Defined Benefit Plans:

a) Description of the Company's defined benefit plan:

i) Gratuity Scheme:

This is a funded defined benefit plan for qualifying employees for which, the Company makes contribution to the Gratuity Fund managed by the Life Insurance Corporation of India. The scheme provides for a lumpsum payment to vested employees at retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service.

ii) Leave Encashment:

The Company also operates a non funded leave encashment scheme for its employees.

ii) Defined Contribution Plans:

The Company makes contribution towards employees' provident fund, family pension fund, super annuation fund and employees' state insurance scheme. Under the rules of these schemes, the Company is required to contribute a specified percentage of payroll costs. The Company during the year recognised Rs. 2,26,03,725/- as expense towards contributions to these plans.

7 Related Party Transactions :

Following companies are related to the Company on account of Common Control through Constitution of Board/ Shareholdings:

- A V Thomas & Company Ltd - A V Thomas Leather & Allied Products Pvt. Ltd

- LJ International Ltd - AVT Tea Services North America, LLC

- A V Thomas Investments Company Ltd - A V Thomas Exports Ltd

- The Nelliampathy Tea & Produce Co. Ltd - Midland Latex Products Ltd

- Neelamalai Agro Industries Ltd - Sermatech Private Ltd

- The Midland Rubber and Produce Company Ltd - Ajit Thomas Holdings Private Limited

- AVT McCormick Ingredients Private Ltd - Midland Corporate Advisory Services P Ltd

- AVT Natural Pte Ltd. - AVT Gavia Foods Pvt Ltd

- AVT Tea Services Ltd - Midland Charitable Trust

- Teleflex Medical Private Ltd - Midland Natural Pte. Ltd

- AVT Holdings Private Ltd - AVT International Ltd.

8 Previous year's figures have been regrouped wherever necessary to conform to Current year's classification.


Mar 31, 2013

1 The Company has opted for accounting the exchange differences arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules, 2009 on Accounting Standard 11 (AS-11) notified by the Government of India on 29th December 2011. Accordingly, the effect of exchange differences on foreign currency term loan availed for acquisition of fixed assets has been adjusted to the cost of fixed assets and depreciation has been provided over the balance life of assets. The unamortised amount as on 31.03.2013 on account of the above is Rs. 0.76 Crores.

2 Employee Benefits:

i) Defined Benefit Plans:

a) Description of the Company''s defined benefit plan:

i) Gratuity Scheme:

This is a funded defined benefit plan for qualifying employees for which, the Company makes contribution to the Gratuity Fund managed by the Life Insurance Corporation of India. The scheme provides for a lumpsum payment to vested employees at retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service.

ii) Leave Encashment:

The company also operates a non funded leave encashment scheme for its employees.


Mar 31, 2012

Year ended Year ended 31.03.2012 31.03.2011 Rs. Rs.

1 CONTINGENT LIABILITIES IN RESPECT OF

a) Sales tax demand disputed in appeals, against which Rs.71,23,260/- paid and included under Advances 1,51,46,028 1,51,46,028

b) Service Tax demand disputed in appeal 5,41,50,000 5,41,50,000

c) The company through its banker State Bank of India, Palarivattom Branch has given a Letter of Comfort to State Bank of India, Shanghai, China for Working Capital Facility of US$ 1.5 Million (Rs.750 Lacs) to the Ultimate Subsidiary Heilongjiang AVT-Bio Products Ltd, China 7,50,00,000 Nil

2 The Company has certain unexpired foreign currency derivative contracts to the tune of US $ 4.8 Million as on 31.03.2012, which were entered into to hedge the risk of changes in foreign exchange currency rates on future export sales against existing long term export contracts. The mark to market negative variation on currency position as on 31.03.2012 of Rs.3.37 crores has not been considered as loss on foreign currency derivates. As the hedge transactions have been entered into based on firm export sale contracts and as per the costing systems of the company, such hedge transaction will only result in current profit for the relevant period of execution of the contract. On the principle of going concern, such hedge transactions will not result in losses requiring recognition as on this date.

3 The Company has opted for accounting the exchange differences arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules, 2009 on Accounting Standard 11 (AS-11) notified by the Government of India on 29th December 2011. Accordingly, the effect of exchange differences on foreign currency term loan availed for acquisition of fixed assets has been adjusted to the cost of fixed assets and depreciation has been provided over the balance life of assets. The unamortised amount as on 31.03.2012 on account of the above is Rs. 0.64 Crores.

4 Segment Reporting :

The Company operates in solvent extracted products which is the primary reportable segment. Therefore, segment reporting is not applicable.

5 Employee Benefits:

i) Defined Benefit Plans:

a) Description of the Company's defined benefit plan:

i) Gratuity Scheme:

This is a funded defined benefit plan for qualifying employees for which, the Company makes contribution to the Gratuity Fund managed by the Life Insurance Corporation of India. The scheme provides for a lumpsum payment to vested employees at retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service.

ii) Leave Encashment:

The company also operates a non funded leave encashment scheme for its employees.

ii) Defined Contribution Plans:

The Company makes contribution towards employees' provident fund, family pension fund, super annuation fund and employees' state insurance scheme. Under the rules of these schemes, the Company is required to contribute a specified percentage of payroll costs. The Company during the year recognised Rs. 97,41,489/- as expense towards contributions to these plans.

6 Previous year's figures have been regrouped wherever necessary to conform to Current year's classification.


Mar 31, 2011

Year Ended Year Ended 31.03.2011 31.03.2010 Rs. Rs.

1 CONTINGENT LIABILITIES IN RESPECT OF

a) Salestax demand disputed in appeals, against which Rs.71,23,260/- paid and included under Advances 1,51,46,028 1,52,86,216

b) Service Tax demand disputed in appeal 5,41,50,000 4,30,81,160

c) Outstanding Bank Guarantees/Letters of Credit 3,87,63,541 9,66,83,981

2 The Company has certain unexpired foreign currency derivative contracts to the tune of US $ 9.6 Million as on 31.03.2011, which were entered into to hedge the risk of changes in foreign exchange currency rates on future export sales against existing long term export contracts. The mark to market negative variation on currency position as on 31.03.2011 of Rs.1.12 crores has not been considered as loss on foreign currency derivates. As the hedge transactions have been entered into based on firm export sale contracts and as per the costing systems of the company, such hedge transaction will only result in current profit for the relevant period of execution of the contract. On the principle of going concern, such hedge transactions will not result in losses requiring recognition as on this date.

3 The Company has opted for accounting the exchange differences arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules, 2009 on Accounting Standard 11 (AS-11) notified by the Government of India on 31st March 2009. Accordingly, the effect of exchange differences on foreign currency term loan availed for acquisition of fixed assets has been adjusted to the cost of fixed assets and depreciation has been provided over the balance life of assets. The unamortized amount as on 31.03.2011 on account of the above is Rs. 0.24 Crores.

4 Due to Micro & Small Enterprises:

Based on the information available with the company, the principal amount due to Micro , Small & Medium Enterprises as on 31.03.2011 is Rs.Nil. There are no overdue principal amounts and therefore no interest was paid or payable.

5 Employee Benefits:

i) Defined Benefit Plans:

a) Description of the Company's defined benefit plan: i) Gratuity Scheme:

This is a funded defined benefit plan for qualifying employees for which, the Company makes contribution to the Gratuity Fund managed by the Life Insurance Corporation of India. The scheme provides for a lumpsum payment to vested employees at retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service.

ii) Leave Encashment:

The company also operates a non funded leave encashment scheme for its employees.

ii) Defined Contribution Plans:

The Company makes contribution towards employees' provident fund, family pension fund, super annuation fund and employees' state insurance scheme. Under the rules of these schemes, the Company is required to contribute a specified percentage of payroll costs. The Company during the year recognised Rs. 98,33,873/- as expense towards contributions to these plans.

6 Related Party Transactions:

Following associate companies are related to the company on account of Common Control through Constitution of Board/Shareholdings:

- A V Thomas & Company Ltd - A V Thomas Leather (UK) Ltd

- LJ International Ltd - A V Thomas Exports Ltd

- A V Thomas Investments Company - Midland Latex Products Ltd Ltd

- The Nelliampathy Tea & Produce - Sermatech Private Ltd Co. Ltd

- Neelamalai Agro Industries Ltd - Ajit Thomas Holdings Private Limited

- The Midland Rubber and Produce - Midland Corporate Advisory Company Limited Services Pvt. Ltd

- AVT McCormick Ingredients - AVT Gavia Foods Pvt. Ltd Company Limited

- AVT Natural Pte Ltd. - Midland Charitable Trust

- Heilongjiang AVT Bio-Products - Mdland Natural Pte. Ltd. Ltd.

- Tele flex Medical Private Ltd

- AVT Infotech Private Ltd

- A V Thomas Leather & Allied Products Pvt.Ltd Key Management Personnel : Mr. Ajit Thomas, Chairman

Mr. M.S.A. Kumar, Managing Director


Mar 31, 2010

1 CONTINGENT LIABILITIES IN RESPECT OF

a) Salestax demand disputed in appeals, against which Rs.71,40,702 paid and included under Advances 1,52,86,216 1,52,86,216

b) Service Tax demand disputed in appeal 4,30,81,160 Nil

c) Outstanding Bank Guarantees/Letters of Credit 9,66,83,981 1,35,75,067

d) Capital Commitments not provided for (net of advances) Nil 1,73,77,130

2 The Company has certain unexpired foreign currency derivative contracts to the tune of US $ 14.4 Million as on 31.03.2010, which were entered into to hedge the risk of changes in foreign exchange currency rates on future export sales against existing long term export contracts.The mark to market negative variation on currency position as on 31.03.2010 of Rs. 2.28 crores has not been considered as loss on foreign currency derivates. As the hedge transactions have been entered into based on firm export sale contracts and as per the costing systems of the company, such hedge transaction will only result in current profit for the relevant period of execution of the contract.On the principle of going concern, such hedge transactions will not result in losses requiring recognition as on this date.

3 The Company has opted for accounting the exchange differences arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules, 2009 on Accounting Standard 11 (AS-11) notified by the Government of India on 31st March 2009. Accordingly, the effect of exchange differences on foreign currency term loan availed for acquisition of fixed assets has been adjusted to the cost of fixed assets and depreciation has been provided over over the balance life of assets. The unamortised amount as on 31.03.2010 on account of the above is Rs.0.18 Crores.

4 Due to Micro & Small Enterprises:

Based on the information available with the company, the principal amount due to Micro , Small & Medium Enterprises as on 31.03.2010 is Rs.Nil. There are no overdue principal amounts and therefore no interest was paid or payable.

5 Employee Benefits:

i) Defined Benefit Plans:

a) Description of the Companys defined benefit plan: i) Gratuity Scheme:

This is a funded defined benefit plan for qualifying employees for which, the Company makes contribution to the Gratuity Fund managed by the Life Insurance Corporation of India. The scheme provides for a lumpsum payment to vested employees at retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service.

ii) Leave Encashment:

The company also operates a non funded leave encashment scheme for its employees.

b) Reconciliation of changes in the Present Value of Obligation:

6 Related Party Transactions :

Following associate companies are related to the company on account of Common Control through Constitution of Board/Shareholdings:

- A V Thomas & Company Ltd - A V Thomas Leather & Allied Products Pvt.Ltd

- A V Thomas International Ltd - A V Thomas Leather (UK) Ltd

- LJ International Ltd - A V Thomas Exports Ltd

- A V Thomas Investments Company Ltd - Midland Latex Products Ltd

- The Nelliampathy Tea & Produce Co.Ltd - Sermatech Private Ltd

- Neelamalai Agro Industries Ltd - Ajit Thomas Holdings Private Limited

- The Midland Rubber and Produce Company Ltd - Midland Corporate Advisory Services P Ltd

- AVT McCormick Ingredients Private Ltd - IQ Tech Private Limited

- AVT Natural Pte Ltd. - AVT Gavia Foods Pvt Ltd

- Heilongjiang AVT Bio- Products Ltd - Tekessence Software Solutions P Ltd

- Teleflex Medical Private Ltd - Tek Health Services Inc USA

- AVT Infotech Private Ltd - Midland Charitable Trust

Key Management Personnel: Mr Ajit Thomas, Chairman

Mr M S A Kumar, Managing Director

7 Previous years figures have been regrouped wherever necessary to conform to Current years classification.

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