Mar 31, 2023
During the year, the Company has issued following equity shares under preferential allotment and employee stock option scheme:
(i) 85233645 equity shares of the face value of '' 2 each at a price of '' 8.56 (including premium) per equity share, for an aggregate consideration of
'' 72.96 crores on conversion of 85233645 warrants held by Tube Investments of India Limited (''TII'') into equity share.
(ii) 54760 equity shares of the face value '' 2 each at a price of '' 156.20 (including premium) per equity share, for an aggregate consideration of '' 0.86 crores on allotment of 54760 equity shares in lieu of employee stock options.
During the year ended 31 March, 2022, the Company has issued following equity shares under preferential allotment:
(i) 13845000 equity shares of face value of '' 2 each issued to a bank towards guarantee settlement consideration on preferential basis at '' 73.10 (including premium) per equity share for an aggregate consideration of '' 101.21 crores.
(ii) 90000000 equity shares of the face value of '' 2 each at a price of '' 8.56 (including premium) per equity share, for an aggregate consideration of
'' 77.04 crores on conversion of 90000000 warrants held by Tube Investments of India Limited (''TII'') into equity shares.
(b) Terms / rights attached to equity shares:
The Company has one class of share capital, i.e., equity shares having face value of '' 2 per share. Each holder of equity share is entitled to 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 shareholding. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting.
(a) Dividend paid and proposed:
The Company has declared and paid interim dividend of '' 1.50 per share for the financial year 2022-23 (previous year '' Nil).
(b) Nature and purpose of items in other equity:(i) Retained Earnings:
Retained earnings are the profits that the Company has earned till date and includes any transfers to general reserve, dividends or other distributions paid to shareholders.
General reserve comprises of transfer of profits from retained earnings for appropriation purpose, the reserves can be distributed / utilised by the Company in accordance with the Companies Act, 2013.
Capital reserve mainly represents the amount recognised on demerger of consumer product business.
(iv) Capital redemption reserve:
Capital redemption reserve was created on buy back of shares. The Company may issue bonus shares to its members out of the capital redemption reserve account.
Securities premium reserve is used to record the premium on issue of shares and is utilised in accordance with the provisions of the Companies Act, 2013.
(vi) Share warrant money:
Share warrant money represents amount received against instruments carrying right exercisable by the warrant holder to subscribe to one equity share per warrant at a specific fixed price within specified period from date of allotment.
(vii) Share options outstanding account:
Share options outstanding account represents fair value of the options granted which is to be expensed out over the life of the vesting period as employee compensation costs reflecting period of receipt of service.
Security created to the extent of :
(a) Secured term loans from banks:
During the current year, the term loans have been fully repaid (as at 31 March, 2022''98.87 crores). The said term loans were drawn at rate of interest of 6 months MCLR plus applicable spread and were secured by first charge on fixed assets except such properties as were specifically excluded. Second charge were by way of hypothecation of inventories and book debts / receivables of the Company. The initial loans amount were additionally secured by corporate guarantee from Tube Investments Of India Limited. As at 31 March, 2022, the bank had released said corporate guarantee considering the financial performance of the Company.
(b) Unsecured loans:Debentures:
During the year the Company has fully redeemed Non-convertible Debenture (NCDs). The Non-convertible Debenture (NCDs) were unlisted, unsecured, redeemable and non-convertible. NCDs were issued to lenders in terms of Settlement Agreement towards settlement of borrowings. NCDs carried coupon rate of 0.01% for the initial period of 2 years and thereafter 8.00% p.a. until the maturity date. The Company had the right to redeem the NCDs, in whole or part, on and after initial period of 2 years from date of allotment of the NCDs till the date of maturity.
Intercompany loan from a subsidiary amounting to '' 2.87 crores (as at 31 March, 2022''3.44 crores) at interest rate of 7.50% p.a. and is repayable in October 2024.
(i) Product Warranties: The Company gives warranties on certain products and services in the nature of repairs / replacement, which fail to perform satisfactorily during the warranty period. Provision made represents the amount of the expected cost of meeting such obligation on account of rectification / replacement. The timing of outflows is generally expected to be within a period of two years from the date of Balance Sheet.
(ii) Provision for Tax related Litigations include liability on account of non-collection of declaration forms and other legal matters related to Sales Tax, Excise Duty, Custom Duty and Service Tax which are in appeal under the relevant Act / Rules.
(iii) Provision for other Litigation related obligations represents estimated liabilities that are expected to materialise in respect of other matters under litigation.
'' crores |
|||
NOTES ACCOMPANYING THE STANDALONE FINANCIAL STATEMENTS (Contd.) |
|||
36. CONTINGENT LIABILITIES AND COMMITMENTS |
|||
As at 31-03-2023 |
As at 31-03-2022 |
||
A. |
Contingent liabilities: (to the extent not provided for) |
||
(a) |
Claims against the Company not acknowledged as debts |
4.69 |
4.80 |
(b) |
Sales tax / VAT / goods and service tax liability that may arise in respect of matters in appeal |
4.81 |
4.80 |
(c) |
Excise duty / custom duty / service tax liability that may arise in respect of matters in appeal |
13.05 |
14.08 |
(d) |
Income tax liability that may arise in respect of matters in appeal |
0.69 |
0.69 |
B. |
Commitments: |
||
Estimated amount of contracts remaining to be executed on capital account and not provided for |
|||
(net of advances) |
24.52 |
12.50 |
(i) From time to time, the Company is involved in claims and legal matters arising in the ordinary course of business. Management is not currently aware of any matters that will have a material adverse effect on the financial position, results of operations, or cash flows of the Company.
(ii) It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at A(a) to A(d) above, pending resolution of the arbitration / appellate proceedings.
(iii) Sales tax / VAT / goods and service tax cases include disputes pertaining to disallowances of input tax credit and non-submission of various forms with authorities.
(iv) Excise duty / custom duty / service tax cases include disputes pertaining to inadmissibility of cenvat credit, short payment of service tax on work contracts, refund of excise duty on export of transformers, interest payment on provisional assessment cases, etc.
(v) Contingent liabilities for Income tax cases pertains to difference on account of cenvat credit and valuation of closing inventory, disallowance of expenses, etc.
(vi) The Company had received notice of demand under Income Tax Act for '' 606.30 crores for financial year 2016-17, and the Hon''ble Bombay High Court has granted the interim stay against the notice of demand until admission of appeal before the High Court. The Company has filed its detailed submissions in response to notices received for the appeal filed before Commissioner of Income Tax (Appeals). Considering the facts and underlying documents with respect to the demand raised under Section 68 of the Income Tax Act, 1961, the management strongly believes that the demand is not sustainable, bad in law and will be reversed at appellate levels.
The Company has lease contracts for various items of land, building, furniture and vehicles used in its operation. Lease of land generally have lease terms between 30 to 99 years while furniture & fittings and building generally have lease terms between 2 to 9 years. The Company''s obligation under the lease is secured by the lessor''s title to leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets.
Set out below are the carrying amounts right of use assets and lease liabilities included under financial liabilities and the movements during the year:
(i) The actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out as at 31 March, 2023 and as at 31 March, 2022. 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.
(ii) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
(iii) The salary escalation rate is arrived after taking into consideration the seniority, the promotion and other relevant factors, such as, demand and supply in employment market.
The Company made contribution towards provident fund to CG Provident Fund which was administered by the trustees till 31 March, 2022. During the year, the Company has surrendered its Provident Fund to Government administered Employee''s Provident Fund Organisation (''EPFO''). Accordingly, the assets held by trust were sold based on best prevailing market price and amount received on sale of assets was transferred to EPFO. However, there was some shortfall towards employees provident fund liability which has been paid by the company (the employer) to EPFO.
The chief operational decision maker monitors the operating results of its Business Segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of the nature of products / services and have been identified as per the quantitative criteria specified in the Ind AS.
The expenses and incomes which are not directly attributable to any business segment are shown as unallocable expenditure (net of unallocated income). Segment assets and liabilities:
Segment assets include all operating assets used by the operating segment and mainly consist of property, plant and equipment, trade receivables, cash and cash equivalents and inventories. Segment liabilities primarily include trade payables and other liabilities. Common assets and liabilities which cannot be allocated to any of the segments are shown as a part of unallocable assets / liabilities.
Inter segment prices are normally negotiated amongst segments with reference to the costs, market price and business risks. Profit or loss on inter segment transfers are eliminated at the Company level.
1 The sales to and purchases from Related Parties are made on terms equivalent to those that prevail in arm''s length transactions.
2 During the year, the Company has transferred the provident fund to government administered Employee''s Provident Fund Organisation (''EPFO'') which was earlier managed by âCG Provident Fundâ. The Company contributed to âCG Provident Fundâ as at 31 March, 2023 '' Nil ( as at 31 March, 2022 '' 10.91 crores).
3 The Company maintains gratuity trust for the purpose of administering the gratuity payment to its employees (CG Gratuity Fund). During the year, the Company contributed '' 5.67 crores (as at 31 March, 2022''6.69 crores).
4 Following subsidiaries are under liquidation process:
i) CG Power Solutions Limited#
ii) CG Power Solutions UK Limited
iii) CG Sales Networks Malaysia Sdn. Bhd.
iv) PT Crompton Prima Switchgear Indonesia
# During the year, a subsidiary of the Company i.e. CG Power Solutions Limited (''CGPSOL'') admitted to Insolvency and Bankruptcy Code 2016 (''IBC'') and Corporate Insolvency Resolution Process (''CIRP'') was initiated as per National Company Law Tribunal (''NCLT'') order dated 27 April, 2022 (''effective date''). As per order, Interim Resolution Professional (''IRP'') was appointed and subsequently IRP was confirmed to continue as the Resolution Professional (''RP'') by Committee of Creditors (''CoC'') on 30 July, 2022 to manage the affairs of the CGPSOL. As per provisions of IBC, RP has invited claims from concern parties. In absence of having any resolution plan after publishing the expression of interest, the RP has filed for liquidation / dissolution of CGPSOL with NCLT as on 24 December, 2022 after receiving due approval from CoC. As on 31 March, 2023, said application is with NCLT, Mumbai Bench and hearing is scheduled on 5 June, 2023.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
Transformer Division - Kanjurmarg
In previous year 2021-22, the Company has completed the sale transaction of remaining portion of land at Kanjurmarg and received net sale consideration '' 367.18 crores and accounted profit of '' 123.62 crores of this transaction.
Hence, provision made towards delay in completion of contractual obligation and land sale aggregating to '' 156.90 crores has been reversed in financial year 2021-22 and formed part of the exceptional items in the standalone financial statements.
The following methods and assumptions were used to estimate the fair values:
1. The Company has not disclosed the fair value of financial instruments such as trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents, current financial assets - loans, current financial assets - others, current financial liabilities - borrowings, trade payables and other financial liabilities because their carrying amounts are a reasonable approximation of fair value and hence these have not been categorised in any level in the table given below. Further, for financial assets, the Company has taken into consideration the allowances for expected credit losses and adjusted the carrying values where applicable.
2. The fair values of the quoted investments / units of mutual fund schemes are based on market price / net asset value at the reporting date.
3. The fair values for loans given are calculated based on discounted cash flows using current lending rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these loans given. Accordingly, fair value of such instruments are not materially different from their carrying values. They are classified as level 2 fair values in the fair value hierarchy.
4. Fair values of the Company''s interest-bearing borrowings are determined by using discounted cash flow method using the current borrowing rates. Fair value of such instruments are not materially different from their carrying values, accordingly non-current borrowings are classified as level 2 fair values in the fair value hierarchy.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
(a) In previous year, the Company had discharged and settled the borrowings facilities. Consequent to settlement, the gain on extinguishment of liability on account of reduction of certain portion of agreed debt including interest thereon as per resolution plan aggregating to '' 0.35 crores were recognised in statement of profit and loss as an exceptional item.
(b) During the year, the Company has reversed excess provision of '' 24.30 crores towards settlement of corporate guarantee obligation including net foreign exchange gain / (loss). In previous year, the unrealised foreign exchange loss of '' 1.29 crores accrued on outstanding balance towards corporate guarantee obligation settlement.
(c) During the year, the Company has reversed excess provision related to claims under dispute / litigation of '' 31.77 crores (provision made in previous year of '' 40.00 crores).
The Company''s activities expose it to certain financial risks namely credit risk, market risk and liquidity risk. The financial risks are managed in accordance with the Company''s risk management policy which has been approved by its Board of Directors.
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 of three types of risk: currency risk, interest rate risk and equity price risk. Financial instruments affected by market risk include foreign currency receivables, payables, loans and borrowings, derivative financial instruments and FVTOCI investments.
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 debt obligations with floating interest rates. The Company has managed its interest rate risk by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
Credit risk refers to the risk that 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 loans, foreign exchange transactions and other financial instruments. Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are generally set to manage credit risk. General payment terms include credit period ranging from 45 to 90 days and where applicable, mobilisation advance, progress payments and certain retention money to be released at the end of the project.
Where the loans or receivables are impaired, the Company continues to engage in enforcement activity to attempt to recover the receivable due.
The Company is exposed to credit risk for trade receivables, cash and cash equivalents, investments, other bank balances, loans given, other financial assets and financial guarantees.
In respect of financial guarantees provided by the Company to banks and financial institutions, the maximum exposure which the Company is exposed to is the maximum amount which the Company would have to pay if the guarantee is called upon or in case where settlement is agreed, the settlement amount. Based on the expectation at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the guarantees provided except as otherwise stated in respect of guarantees where settlement is agreed.
The Company''s functional currency is Indian Rupee. The Company undertakes transactions denominated in foreign currencies and consequently the Company is exposed to foreign exchange risk. Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies. The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies.
The Company has hypothecated its trade receivables, other current assets, cash and cash equivalents, entire movable assets and mortgaged the specific immovable properties in order to fulfil collateral requirements for the banking facilities extended to the Company.
For the purposes of the Company''s capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company''s Capital Management is to maximise shareholder value. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants. The Company monitors capital using gearing ratio, which is total debt divided by total capital plus debt.
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iii) The Company has not traded or invested in Crypto Currency or Virtual Currency during the financial year.
(iv) The Company have not advanced or loaned or invested funds to any person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(v) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Parties) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(vi) The Company has not made any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during
the year in the tax assessments under the Income Tax Act,1961 (such as search or survey or any other relevant provision of the Income Tax Act, 1961).
(vii) The Company does not have any transactions with companies which has been struck off by ROC under section 248 of the Companies Act, 2013.
The Board of Directors of the Company, basis the recommendations of the Audit Committee and Committee of Independent Directors of the Company, at its meeting
held on 19 October, 2022 approved the Scheme of Arrangement ("Scheme") between the Company and its shareholders under Section 230 and other applicable provisions of the Companies Act, 2013 ("Act"). The Scheme inter alia provides for capital reorganization of the Company, whereby it is proposed to transfer '' 400 crores from the General Reserves to the Retained Earnings of the Company with effect from the Appointed Date. The Scheme is subject to receipt of regulatory approvals / clearances from the Hon''ble National Company Law Tribunal, Mumbai Bench, Securities and Exchange Board of India (through BSE Limited and National Stock Exchange of India Limited), BSE Limited and National Stock Exchange of India Limited (collectively referred to as "Stock Exchanges") and such other approval / clearances as may be applicable.
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards) Amendment Rules, 2023 dated 31 March, 2023 to amend the following Ind AS which are effective from 1 April, 2023.
(i) Definition of Accounting Estimates - Amendments to Ind AS 8
The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. It has also been clarified how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective for annual reporting periods beginning on or after 1 April, 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. The amendments are not expected to have a material impact on the Company''s financial statements.
(ii) Disclosure of Accounting Policies - Amendments to Ind AS 1
The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ''significant'' accounting policies with a requirement to disclose their ''material'' accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to Ind AS 1 are applicable for annual periods beginning on or after 1 April, 2023. Consequential amendments have been made in Ind AS 107.
(iii) Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to Ind AS 12
The amendments narrow the scope of the initial recognition exception under Ind AS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.The amendments should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, at the beginning of the earliest comparative period presented, a deferred tax asset (provided that sufficient taxable profit is available) and a deferred tax liability should also be recognised for all deductible and taxable temporary differences associated with leases and decommissioning obligations. Consequential amendments have been made in Ind AS 101. The amendments to Ind AS 12 are applicable for annual periods beginning on or after 1 April, 2023.
The Company is fully co-operating with the ongoing investigation by Serious Fraud Investigation Office (''SFIO'') and other regulatory authorities on the affairs of the Company pertaining to past period and against erstwhile promoters and erstwhile key managerial personnel relating to transactions that took place when the Company was under the control of the erstwhile promoters / management. In respect to this there is no impact on current year financials of the Company.
58. The figures for the corresponding previous year have been regrouped / reclassified wherever necessary, to make them comparable.
59. Amounts shown as '' 0.00 represents amount below '' 50,000 (Rupees Fifty Thousand).
Mar 31, 2022
During the year, the Company has issued following equity shares and warrants under preferential allotment:
(i) 13845000 equity shares of face value of '' 2 each issued to a bank towards guarantee settlement consideration on preferential basis at '' 73.10
(including premium) per equity share for an aggregate consideration of '' 101.21 crores;
(ii) 90000000 equity shares of the face value of '' 2 each at a price of '' 8.56 (including premium) per equity share, for an aggregate consideration of
'' 77.04 crores on conversion of 90000000 warrants held by Tube Investments of India Limited (âTIIâ) into equity share;
During the year ended 31 March, 2021, the Company has issued following equity shares and warrants under preferential allotment to TII:
(i) 642523365 equity shares of the face value of '' 2 each at a price of '' 8.56 (including premium) per equity share, for an aggregate consideration of '' 550 crores;
(ii) 175233645 warrants (âWarrants"), each carrying a right exercisable by TII as the Warrant holder to subscribe to 1 (one) Equity Share per Warrant within 18 (eighteen) months from allotment, for a subscription amount of '' 37.50 crores, being 25% of the aggregate consideration payable for subscribing to equity shares upon exercise of the warrants; and
(iii) 68728522 equity shares of the face value of '' 2 each at a price of '' 14.55 (including premium) per equity share, for an aggregate consideration of '' 100 crores;
The Company has utilised the entire proceeds of '' 57.78 crores (as at 31 March, 2021 '' 587.50 crores and '' 100 crores) from the preferential issue for current / future running and expansion of the business, working capital, general corporate purpose, repayment of loans and for payment of interest for loans liabilities towards lenders.
801251887 equity shares (previous year 711251887 equity shares) of the face value of '' 2 each held by Holding company, TII.
13845000 equity shares (previous year Nil) of the face value of '' 2 each, alloted as fully paid up pursuant to contract without payment being received in cash.
I Terms / rights attached to equity shares:
The Company has one class of share capital, i.e., equity shares having face value of '' 2 per share. Each holder of equity share is entitled to 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 shareholding. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
(a) Dividend paid and proposed:
No dividends have been proposed, declared or paid during the financial year 2021-22 (2020-21 '' Nil) or after the financial year but before the financial statements were approved for issue.
(b) Nature and purpose of items in other equity:
(i) Retained Earnings:
Retained earnings are the profits that the Company has earned till date and includes any transfers to general reserve, dividends or other distributions paid to shareholders and impact on account of transition to Ind AS.
General reserve comprises of transfer of profits from retained earnings for appropriation purpose, the reserves can be distributed / utilised by the Company in accordance with the Companies Act, 2013.
Capital reserve mainly represents the amount recognised on demerger of consumer product business.
(iv) Capital redemption reserve:
Capital redemption reserve was created on buy back of shares. The Company may issue fully-up bonus shares to its members out of the capital redemption reserve account.
Securities premium reserve is used to record the premium on issue of shares and is utilised in accordance with the provisions of the Companies Act, 2013.
Share warrant money represents amount received against instruments carrying right exercisable by the warrant holder to subscribe to one Equity Share per warrant at a specific fixed price within specified period from date of allotment.
(vii) Share options outstanding account:
Share options outstanding account represents fair value of the options granted which is to be expensed out over the life of the vesting period as employee compensation costs reflecting period of receipt of service.
Security created to the extent of :
(a) Secured term loans from banks:
(i) The term loans of '' 98.87 crores (as at 31 March, 2021 '' 612.99 crores) has been drawn at rate of interest of 6 months MCLR plus applicable spread and is secured by first charge on fixed assets except such properties as may be specifically excluded. Second charge by way of hypothecation of inventories and book debts / receivables of the Company. The initial loan amount was additionally secured by corporate guarantee from Tube Investmenst of India Limited. During the year the Bank has released this corporate guarantee considering the financial performance of the Company. The repayment of the loan is due in year 2027-28.
(b) Unsecured loans:Debentures:
The Non-convertible Debenture (NCDs) are unlisted, unsecured, redeemable and non-convertible. NCDs are issued to lenders in terms of Settlement Agreement towards settlement of borrowings. NCDs carry coupon rate of 0.01% for the initial period of 2 years and thereafter 8% p.a. until the maturity date. The NCDs is repayable after 5 years from December, 2020, the date of allotment. The Company has the right to redeem the NCDs, in whole or part, on and after initial period of 2 years from date of allotment of the NCDs till the date of maturity.
Intercompany loan from a subsidiary amounting to '' 3.44 crore at interest rate of 7.5% p.a.and is repayable in June 2023
(a) Amount of unclaimed dividend due to be transferred to Investor Education and Protection Fund (âIEPFâ) as at 31 March, 2022 '' Nil (as at 31 March, 2021 '' 0.16 crores) subsequent to year end, the Company has remitted amount to IEPF '' Nil (previous year '' 0.16 crores).
(b) * Major items includes provision towards guarantee settlement consideration of '' 124.99 crores (as at 31 March, 2021 '' 306.01 crores), provision towards delay in completion of contractual obligation of '' Nil (as at 31 March, 2021 '' 156.90 crores), provision towards disputed claims '' 40 crores (as at 31 March, 2021 '' Nil).
(i) Product Warranties: The Company gives warranties on certain products and services in the nature of repairs / replacement, which fail to perform satisfactorily during the warranty period. Provision made represents the amount of the expected cost of meeting such obligation on account of rectification / replacement. The timing of outflows is generally expected to be within a period of two years from the date of Balance Sheet.
(ii) Provision for Tax related Litigations include liability on account of non-collection of declaration forms and other legal matters related to Sales Tax, Excise Duty, Custom Duty and Service Tax which are in appeal under the relevant Act / Rules.
(iii) Provision for other Litigation related obligations represents estimated liabilities that are expected to materialise in respect of other matters under litigation.
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration and are transferred to trade receivables on completion of milestones and its related invoicing.
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company satisfies the performance obligation.
(i) From time to time, the Company is involved in claims and legal matters arising in the ordinary course of business. Management is not currently aware of any matters that will have a material adverse effect on the financial position, results of operations, or cash flows of the Company.
(ii) It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at A(a) to A(d) above, pending resolution of the arbitration / appellate proceedings.
(iii) Sales tax / VAT cases include disputes pertaining to disallowances of input tax credit and non-submission of various forms with authorities.
(iv) Excise duty / custom duty / service tax cases include disputes pertaining to inadmissibility of cenvat credit, short payment of service tax on work contracts, refund of excise duty on export of transformers, interest payment on Provisional Assessment Cases, etc.
(v) Contingent liabilities for Income tax cases pertains to difference on account of cenvat credit and valuation of closing inventory, disallowance of expenses, etc.
(vi) The Company had received notice of demand under Income Tax Act for '' 606.30 crores for financial year 2016-17, and the Honâble Bombay High Court has granted the interim stay against the notice of demand until admission of appeal before the High Court. The Company has filed its detailed submissions in response to notices received for the appeal filed before Commissioner of Income Tax (Appeals). Considering the facts and underlying documents with respect to the demand raised under Section 68 of the Income Tax Act, 1961, the management strongly believes that the demand is not sustainable, bad in law and will be reversed at appellate levels.
T he Company has lease contracts for various items of land, building, furniture and vehicles used in its operation. Lease of land generally have lease terms between 30 to 999 years while furniture and building generally have lease terms between 2 to 9 years. The Companyâs obligation under the lease is secured by the lessorâs title to leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets.
Set out below are the carrying amounts right of use assets and lease liabilities included under financial liabilities and the movements during the year:
Gratuity:
Under the Gratuity plan operated by the Company, every employee who has completed at least five years of service gets a Gratuity on departure at 15 days on last drawn salary for each completed year of service as per Payment of Gratuity Act, 1972.
The Company makes annual contributions to the CG Gratuity Fund, which is funded defined benefit plan for qualifying employees. The Board of Trustees of the fund is entrusted with responsibility for the administration of the plan assets and for the investment strategy.
The following table summarizes the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the Balance Sheet.
(i) The actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out as at 31 March, 2022 and as at 31 March, 2021. 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.
(ii) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
(iii) The salary escalation rate is arrived after taking into consideration the seniority, the promotion and other relevant factors, such as, demand and supply in employment market.
The Company makes contribution towards provident fund to CG Provident Fund which is administered by the trustees. During the year, the Company has decided to transfer the fund to government administered Employeeâs Provident Fund Organisation (âEPFOâ). Accordingly, majority of the plan assets held by the Trust are sold and the amount received is transferred to EPFO. The Company has agreed to pay to EPFO any shortfall in fund to the extent of employee provident fund liability as on March 31, 2022. Further, the Company has paid '' 5.92 crore towards shortfall assessed till date.The Company is carrying sufficient provision in the books of account as at March 31, 2022, towards shortfall.
During the year,1834100 stock options were granted to eligible employees at the rate of one stock option of the Company for every stock option held and outstanding
in the Company.
In this regard, the Company has recognised expense amounting to ''1.78 crores for employees services received during the year, shown under Employee Benefit
Expenses (Refer Note 34).
Identifications of Segments:
The chief operational decision maker monitors the operating results of its Business Segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of the nature of products / services and have been identified as per the quantitative criteria specified in the Ind AS.
Segment revenue and results:
The expenses and incomes which are not directly attributable to any business segment are shown as unallocable expenditure (net of unallocated income). Segment assets and liabilities:
Segment assets include all operating assets used by the operating segment and mainly consist of property, plant and equipment, trade receivables, cash and cash equivalents and inventories. Segment liabilities primarily include trade payables and other liabilities. Common assets and liabilities which cannot be allocated to any of the segments are shown as a part of unallocable assets / liabilities.
Transformer Division - Kanjurmarg
The Company had entered into a definitive agreement followed with revised term sheet with a Buyer for sale of its remaining portion of land at Kanjurmarg. During the year, the Company has complied with Conditions Precedent required as laid down in the binding term sheet signed and completed the sale transaction in December, 2021. The Company received net sale consideration '' 367.18 crores and accounted profit of '' 123.62 crores on completion of this transaction.
The plant and machineries of factory at this Kanjurmarg were shifted to other manufacturing facilities and the carrying value of land and building was classified as âAsset held for saleâ. The restructuring provision, utilisation thereof and provision towards delay in completing contractual obligation towards completion of land sale aggregating to '' 94.67 crores was accounted in previous year and formed part of the exceptional items in the standalone financial statements. On completion of sale transaction, during current year accumulated provision of '' 156.90 crores is reversed and accounted as exceptional gain.
1 The sales to and purchases from Related Parties are made on terms equivalent to those that prevail in armâs length transactions.
2 The Company makes monthly contributions to provident fund managed by âCG Provident Fund" for certain eligible employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. During the year, the Company contributed '' 10.91 crores (as at 31 March 2021 '' 10.22 crores).
3 The Company maintains gratuity trust for the purpose of administering the gratuity payment to its employees (CG Gratuity Fund). During the year, the Company contributed '' 6.69 crores (as at 31 March 2021 '' 2.05 crores).
4 Following subsidiaries are under liquidation process:
i) CG Power Solutions UK Limited
ii) CG Power and Industrial Solutions Limited Middle East FZCO
iii) CG Power Systems Canada Inc.
iv) CG Sales Networks Malaysia Sdn. Bhd.
(a) The Company has discharged and settled the borrowings facilities. Consequent to settlement, the gain on extinguishment of liability on account of reduction of certain portion of agreed debt including interest thereon as per resolution plan aggregating to '' 0.35 crores (previous year '' 1426.89 crores) is recognised in profit or loss as an exceptional item.
(b) During current year, unrealised foreign exchange loss of '' 1.29 crores accrued on outstanding balance of provision towards corporate guarantee obligation settlement. In previous year, provision of '' 206.55 crores and ''101.21 crores made towards cash and value of equity settlement option respectively of consideration payable on guarantee obligation settlement. Further unrealised foreign exchange gain of '' 1.75 crores was accrued on this provision amount.
(c) In previous year, '' 191.54 crores receivables from subsidiary and '' 176.11 crores advances receivable from other company were written off.
(d) In previous year, based on the reassessment of value of investment in its subsidiary, CG International BV, impairment provision of '' 288.75 crores was reversed.
(e) The Company has made provision related to claims under dispute / litigation for '' 40.00 crores (previous year '' 18.54 crores).
(f) In previous year, the Company incurred professional fees of ''14.39 crores towards investigation and debt resolution.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1. The Company has not disclosed the fair value of financial instruments such as trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents, current financial assets - loans, current financial assets - others, current financial liabilities - borrowings, trade payables and other financial liabilities (except current maturities of long term borrowings) because their carrying amounts are a reasonable approximation of fair value and hence these have not been categorised in any level in the table given below. Further, for financial assets, the Company has taken into consideration the allowances for expected credit losses and adjusted the carrying values where applicable.
2. The fair values of the quoted investments / units of mutual fund schemes are based on market price / net asset value at the reporting date.
3. The fair values for loans given are calculated based on discounted cash flows using current lending rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these loans given. Accordingly, fair value of such instruments are not materially different from their carrying values. They are classified as level 2 fair values in the fair value hierarchy.
4. Fair values of the Companyâs interest-bearing borrowings are determined by using discounted cash flow method using the current borrowing rates. Fair value of such instruments are not materially different from their carrying values, accordingly non-current borrowings are classified as level 2 fair values in the fair value hierarchy.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
The Companyâs activities expose it to certain financial risks namely credit risk, market risk and liquidity risk. The financial risks are managed in accordance with the Companyâs risk management policy which has been approved by its Board of Directors.
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 of three types of risk: currency risk, interest rate risk and equity price risk. Financial instruments affected by market risk include foreign currency receivables, payables, loans and borrowings, derivative financial instruments and FVTOCI investments.
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 Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs debt obligations with floating interest rates. The Company has managed its interest rate risk by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
The Companyâs functional currency is Indian Rupee. The Company undertakes transactions denominated in foreign currencies and consequently the Company is exposed to foreign exchange risk. Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies. The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies.
Credit risk refers to the risk that 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 loans, foreign exchange transactions and other financial instruments. Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are generally set to manage credit risk. General payment terms include credit period ranging from 45 to 90 days and where applicable, mobilisation advance, progress payments and certain retention money to be released at the end of the project.
Where the loans or receivables are impaired, the Company continues to engage in enforcement activity to attempt to recover the receivable due.
The Company is exposed to credit risk for trade receivables, cash and cash equivalents, investments, other bank balances, loans given, other financial assets and financial guarantees.
In respect of financial guarantees provided by the Company to banks and financial institutions, the maximum exposure which the Company is exposed to is the maximum amount which the Company would have to pay if the guarantee is called upon or in case where settlement is agreed, the settlement amount. Based on the expectation at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the guarantees provided except as otherwise stated in respect of guarantees where settlement is agreed.
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The Company has hypothecated its trade receivables, other current receivables and cash and cash equivalents in order to fullfill collateral requirements for the banking facilities extended to the Company. There is obligation to return the securities to the Company once these banking facilities are surrendered (Refer note 21 and 24).
For the purposes of the Companyâs capital management, capital includes issued capital and all other equity reserves. The primary objective of the Companyâs Capital Management is to maximise shareholder value. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants. The Company monitors capital using gearing ratio, which is total debt divided by total capital plus debt.
The Company is fully co-operating with the ongoing investigation by Serious Fraud Investigation Office (âSFIOâ) and other regulatory authorities on the affairs of the Company pertaining to past period and against erstwhile promoters and erstwhile key managerial personnel relating to transactions that took place when the Company was under the control of the erstwhile promoters/management.
Ministry of Corporate Affairs (âMCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, as below.
Ind AS 16 - Property Plant and equipment - The amendment clarifies that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from the directly attributable costs considered as part of cost of an item of property, plant, and equipment.
Ind AS 37 - Provisions, Contingent Liabilities and Contingent Assets - The amendment specifies that the âcost of fulfillingâ a contract comprises the âcosts that relate directly to the contractâ. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
The effective date for adoption of this amendment is annual periods beginning on or after April 1, 2022. The Company has evaluated the amendment and there is no impact on its standalone financial statements.
57. The figures for the corresponding previous year have been regrouped / reclassified wherever necessary, to make them comparable.
58. Amounts shown as '' 0.00 represents amount below '' 50,000 (Rupees Fifty Thousand).
Mar 31, 2021
(a) Impact of provision for diminution in value of investment in a subsidiary company for '' 0.05 crores considered in previous financial year.
(b) Impact on deferred tax assets considered upto previous year ended 31 March, 2020, of '' 888.17 crores on account of recasting and revision of standalone
financial statements and consequential reversal of deferred tax assets of '' 806.89 crores earlier recognised in original standalone financial statements for the year ended 31 March, 2021. Reduction in carry forward balance of deferred tax assets (net) aggregating to '' 286.02 crores due to change in tax rate.
(c) Impact of recasting of standalone financial statements upto year ended 31 March, 2019, on current tax assets (net) of '' 71.76 crores.
(d) Change in other equity of '' 133.03 crores is on account of recasting and revision of standalone financial statements upto year ended 31 March, 2021.
(e) The reclassification of current borrowing of '' 4.84 crores to non-current borrowing.
(f) Foreign exchange loss for '' 4.10 crores is regrouped and considered as a part of other expenses.
(g) Change in exceptional items on account of reversal of provision against doubtful advances of '' 963.13 crores and reversal of provision against doubtful loans
to subsidiary of '' 1027.33 crores which are recognised in recasted and revised standalone financial statements upto year ended 31 March, 2020.
In terms of the Debt resolution referred in note 3A(b), a Securities Subscription Agreement (âSSAâ) was executed between the Company and TII and subsequently the shareholders of the Company approved the issuance of securities. In compliance with the applicable SEBI (Issue of Capital and Disclosure Requirements) Regulation, 2018 (âSEBI ICDR Regulations"), the Company has issued following equity shares and warrants under preferential allotment to TII:
(i) 642523365 equity shares of the face value of '' 2 each at a price of '' 8.56 (including premium) per equity share, for an aggregate consideration of '' 550 crores;
(ii) 175233645 warrants (âWarrantsâ), each carrying a right exercisable by TII as the Warrant holder to subscribe to 1 (one) Equity Share per Warrant within 18 (eighteen) months from allotment, for a subscription amount of '' 37.50 crores, being 25% of the aggregate consideration payable for subscribing to equity shares upon exercise of the warrants; and
(iii) 68728522 equity shares of the face value of '' 2 each at a price of '' 14.55 (including premium) per equity share, for an aggregate consideration of '' 100 crores.
Consequent to the allotment of 642523365 equity shares, TII has acquired a controlling interest in the Company and therefore the Company become a subsidiary of TII from 26 November, 2020 and TII has been classified as the âpromoterâ of the Company.
The Company has utilised the entire proceeds of '' 587.50 crores and '' 100 crores from the preferential issue for current / future running and expansion of the business, working capital, general corporate purpose, repayment of loans and for payment of interest for loans liabilities towards lenders.
(b) Terms / rights attached to equity shares:
The Company has one class of share capital, i.e., equity shares having face value of '' 2 per share. Each holder of equity share is entitled to 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 shareholding. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
(a) Dividend paid and proposed:
No dividends have been proposed, declared or paid during the financial year 2020-21 (2019-20 '' Nil) or after the financial year but before the revised financial statements were approved for issue.
(b) Nature and purpose of reserves:
(1) Retained Earnings:
Retained earnings are the profits that the Company has earned till date and includes any transfers to general reserve, dividends or other distributions paid to shareholders and impact on account of transition to / intial application of Ind AS.
General reserve comprises of transfer of profits from retained earnings for appropriation purpose, the reserves can be distributed / utilised by the Company in accordance with the Companies Act, 2013.
Capital reserve mainly represents the amount recognised on demerger of consumer product business.
(4) Capital redemption reserve:
Capital redemption reserve was created on buy back of shares. The Company may issue fully paid-up bonus shares to its members out of the capital redemption reserve account.
Securities premium is used to record the premium on issue of shares and is utilised in accordance with the provisions of the Companies Act, 2013.
(6) Equity Instruments through Other Comprehensive Income:
G his reserve represents the cumulative gains and losses arising on revaluation of equity instruments measured at fair value through other comprehensive income, net of amounts reclassified to retained earnings.
Share warrant money represents amount received against instruments carrying right exercisable by the warrant holder to subscribe to one Equity Share per warrant at a specific fixed price within specified period from date of allotment.
(a) Secured term loans from banks:
(i) The term loan of '' 608.15 crores has been drawn at rate of interest of 6 months MCLR plus applicable spread and is secured by first charge on fixed assets except such properties as may be specifically excluded. Second charge by way of hypothecation of inventories and book debts / receivables of the Company. Corporate Guarantee given by TII. The term loan will be repaid in 20 structured quarterly instalments starting from December, 2022. Refer note 25(i) for term loan of '' 4.84 crores.
(ii) As at 31 March, 2020:
Term loan of '' 300.14 crores (as at 1 April, 2019''367.66 crores) (current maturity pertaining to the said loan '' 227.46 crores and as at 1 April, 2019
'' 151.63 crores) has been drawn at rate of interest of MCLR plus applicable spread and is secured by first charge on certain identified fixed assets except
such properties as may be specifically excluded.
Term loan of '' 125.24 crores (as at 1 April, 2019''139.56 crores) (current maturity pertaining to the said loan '' 103.12 crores and as at 1 April, 2019
'' 45.38 crores) has been drawn at rate of interest of MCLR plus applicable spread and is secured by first charge on certain identified fixed assets and
subservient charges on identified assets.
Term loan of 279.59 crores (as at 1 April, 2019''305.00 crores) (current maturity pertaining to the said loan '' 152.50 crores and as at 1 April, 2019 '' 76.25 crores) has been drawn at rate of interest of MCLR plus applicable spread and is secured by second charge on identified plant and machinery and immovable fixed assets.
In November, 2020, the Company and the lenders executed settlement agreement in respect this liability (Refer note 3A(b)).
(b) Unsecured loans:Debentures:
The Non-convertible Debenture (NCDs) are unlisted, unsecured, redeemable and non-convertible. NCDs are issued to lenders in terms of Settlement Agreement towards settlement of borrowings at stated in Note 3A(b). NCDs carry coupon rate of 0.01% for the initial period of 2 years and thereafter 8% p.a. until the maturity date. The NCDs is repayable after 5 years from the date of allotment. The Company has the right to redeem the NCDs, in whole or part, on and after initial period of 2 years from date of allotment of the NCDs till the date of maturity.
(i) Loan from banks of '' 132.59 crores (settled amount) was to be secured by creation and perfection of security over specified property within agreed period and accordingly classified as secured. Subsequent to year end, loans aggregating to '' 145.16 crores are settled by payment of '' 127.75 crores except for '' 4.84 crores payable to one lender which is secured by lien over a time deposit. Subsequent to year end, all the banks have discharged entire borrowings to be secured by perfection of security over specified property (Refer note 3A(b)).
(ii) Loans of '' 370.59 crores as at 31 March, 2020 (as at 1 April, 2019''357.10 crores) were secured by first charge by way of hypothecation of stocks of raw materials, finished goods, work-in-process, consumables (stores and spares) and book debts / receivables of the Company, both present and future. In November, 2020, the Company and the lenders executed settlement agreement in respect this liability (Refer note 3A(b)).
(iii) As at 31 March, 2020:
The Company had received the aforesaid amount from Blue Garden Estate Private Limited (âBGEPLâ) as an initial advance consideration towards the transactions which were not approved by the then Board of Directors in relation to Assignment / Sale of Land along with Factory Building at Nashik and Kanjurmarg, Mumbai of the Company.
Advance receivable from BGEPL had been offset against liability from BGEPL in Recasted books of accounts of the Company. During the year, this liability was settled as referred to in note 3A(b), however the possibility of recoverability of advance receivable was considered remote and therefore the advance outstanding from BGEPL of '' 176.11 crores has been provided for and written off.
(a) During the financial year 2020-21, the amount of unclaimed dividend due to be transferred to Investor Education and Protection Fund (âIEPFâ) as on
7 December, 2020 and 28 February, 2021 aggregating to '' 0.16 crores could not be credited to IEPF account due to technical glitches. As a result, the said
amount remains due and outstanding as on 31 March, 2021. Subsequent to year end, the Company has remitted the amount to IEPF.
(b) Refer note 25 on disclosure on defaults in payment of loans and interest as at 31 March, 2020. In November, 2020, the Company and the lenders executed settlement agreement in respect these liabilities (Refer note 3A(b)).
(c) * Major items includes provision towards guarantee settlement consideration of '' 306.01 crores (as at 31 March, 2020 '' Nil and as at 1 April, 2019 '' Nil),
provision towards delay in completion of contractual obligation of '' 156.90 crores (as at 31 March, 2020''53.23 crores and as at 1 April, 2019 '' Nil).
(a) Product Warranties: The Company gives warranties on certain products and services in the nature of repairs / replacement, which fail to perform satisfactorily during the warranty period. Provision made represents the amount of the expected cost of meeting such obligation on account of rectification / replacement. The timing of outflows is generally expected to be within a period of two years.
(b) Provision for Tax related Litigations include liability on account of non-collection of declaration forms and other legal matters related to Sales Tax, Excise Duty, Custom Duty and Service Tax which are in appeal under the relevant Act / Rules.
(c) Provision for other litigation related obligations represents estimated liabilities that are expected to materialise in respect of other matters under litigation.
(i) It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at A(a) to A(d) above, pending resolution of the arbitration/appellate proceedings.
(ii) Sales tax / VAT cases include disputes pertaining to disallowances of input tax credit and non-submission of various forms with authorities.
(iii) Excise duty / custom duty / service tax cases include disputes pertaining to inadmissibility of cenvat credit, short payment of service tax on work contracts, refund of excise duty on export of transformers, interest payment on Provisional Assessment Cases, etc.
(iv) Contingent liabilities for Income tax cases pertains to difference on account of cenvat credit and valuation of closing inventory, disallowance of expenses, etc.
(v) The Company had received notice of demand under Income Tax Act for '' 606.30 crores for financial year 2016-17, and the Honâble Bombay High Court has granted the interim stay against the notice of demand until admission of appeal before the High Court. The Company has filed the submissions in respect of the appeal filed before Commissioner of Income Tax (Appeals). Considering the facts and underlying documents with respect to the demand raised under Section 68 of the Income Tax Act, 1961, the management strongly believes that the demand is not sustainable, bad in law and will be reversed at appellate levels.
(vi) From time to time, the Company is involved in claims and legal matters arising in the ordinary course of business. Management is not currently aware of any matters that will have a material adverse effect on the financial position, results of operations, or cash flows of the Company.
(i) The actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out as at 31 March, 2021 and as at 31 March, 2020. 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.
(ii) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
(iii) The salary escalation rate is arrived after taking into consideration the seniority, the promotion and other relevant factors, such as, demand and supply in employment market.
The Company makes contribution towards provident fund to CG Provident Fund which is administered by the trustees. The Rules of the Companyâs Provident Fund administered by a trust, require that if the Board of the Trustees are unable to pay interest at the rate declared by the Government under Para 60 of the Employees Provident Fund Scheme, 1972 for the reason that the return on investment is less for any other reason, then the deficiency shall be made good by the Company making interest shortfall a defined benefit plan. Accordingly, the Company has obtained actuarial valuation and based on the below provided assumption there is no deficiency as at the balance sheet date. Hence, the liability is restricted towards monthly contributions only.
The Company has the following reportable segments:
Power Systems : Transformer, Switchgear and Turnkey Projects
Industrial Systems : Electric Motors, Alternators, Drives, Traction Electronics and SCADA
The chief operational decision maker monitors the operating results of its Business Segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of the nature of products / services and have been identified as per the quantitative criteria specified in the Ind AS.
The expenses and incomes which are not directly attributable to any business segment are shown as unallocable expenditure (net of unallocated income). Segment assets and liabilities:
Segment assets include all operating assets used by the operating segment and mainly consist of property, plant and equipment, trade receivables, cash and cash equivalents and inventories. Segment liabilities primarily include trade payables and other liabilities. Common assets and liabilities which cannot be allocated to any of the segments are shown as a part of unallocable assets / liabilities.
Inter segment prices are normally negotiated amongst segments with reference to the costs, market price and business risks. Profit or loss on inter segment transfers are eliminated at the Company level.
(a) As stated in Note 3A(b), the Company has discharged andsettled the existing borrowings facilities for a total consideration of '' 1000 crores. Consequent to settlement, the gain on extinguishment of liability on account of reduction of certain portion of agreed debt including interest thereon as per resolution plan aggregating to '' 1426.89 crores is recognised in profit or loss as an exceptional item.
(b) As stated in Note 3A(c), provision of '' 206.55 crores and '' 101.21 crores is made towards cash and value of equity settlement option respectively of
consideration payable on guarantee obligation settlement. Further unrealised foreign exchange gain of '' 1.75 crores is accrued on the provisions towards corporate guarantee obligation settlements.
(c) '' 191.54 crores receivables from subsidiary (previous year '' 325.73 crores) and '' 176.11 crores advances receivable from other company is provided.
During the previous year, there was reversal of provision towards advance receivable from other companies '' 3.55 crores.
(d) The Company reassessed value of investment in its subsidiary CGIBV and based on the reassessment has reversed impairment provision of '' 288.75 crores.
In previous year, the Company evaluated recoverability of certain investments in its subsidiaries (includes CGIBV) and recorded impairment provision of '' 884.17 crores.
(e) The Company has incurred professional fees of '' 14.39 crores (previous year '' 36.24 crores) towards the debt resolution process initiatives and ongoing
investigation.
(f) The amount of '' 18.54 crores is provided towards matters related to sales tax pending either in appeal or in rectification. In previous year, the Company
recognised provision of '' 22.48 crores towards liability for reimbursement of sale proceeds to a customer towards transformer manufactured at CG Belgium
factory.
(g) In previous year, the Company evaluated recoverability of certain receivables from / advances given to its subsidiaries and recorded impairment provision of '' 92.31 crores.
(h) In previous year, the Company has recognised provision of '' 0.78 crores towards liability arising on account of judgement pronounced by Supreme Court of India in relation to consideration of various components of salary for computation of contribution to provident fund.
* In financial year 2020-21 the total amount of write off is '' 1234.21 crores and includes the amount against provision.
** In financial year 2020-21 the total amount of write off is '' 1199.50 crores and includes the amount against provision.
The following methods and assumptions were used to estimate the fair values:
1. The Company has not disclosed the fair value of financial instruments such as trade receivables, cash & cash equivalents, bank balances other than cash and cash equivalents, current financial assets - loans, current financial assets - others, current financial liabilities - borrowings, trade payables and other financial liabilities (except current maturities of long term borrowings) because their carrying amounts are a reasonable approximation of fair value and hence these have not been categorised in any level in the table given below. Further, for financial assets, the Company has taken into consideration the allowances for expected credit losses and adjusted the carrying values where applicable.
2. The fair values of the quoted investments / units of mutual fund schemes are based on market price / net asset value at the reporting date.
3. The fair values for loans given are calculated based on discounted cash flows using current lending rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these loans given. Accordingly, fair value of such instruments are not materially different from their carrying values. They are classified as level 2 fair values in the fair value hierarchy.
4. Fair values of the Companyâs interest-bearing borrowings are determined by using discounted cash flow method using the current borrowing rates. Fair value of such instruments are not materially different from their carrying values, accordingly non-current borrowings are classified as level 2 fair values in the fair value hierarchy.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
The Companyâs activities expose it to certain financial risks namely credit risk, market risk and liquidity risk. The financial risks are managed in accordance with the Companyâs risk management policy which has been approved by its Board of Directors.
Market RiskMarket 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 of three types of risk: currency risk, interest rate risk and equity price risk. Financial instruments affected by market risk include foreign currency receivables, payables, loans and borrowings, derivative financial instruments and FVTOCI investments.
Interest rate riskInterest 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 Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs debt obligations with floating interest rates. The Company has generally managed its interest rate risk by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
Credit risk refers to the risk that 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 loans, foreign exchange transactions and other financial instruments. Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are generally set to manage credit risk. General payment terms include credit period ranging from 45 to 90 days and where applicable, mobilisation advance, progress payments and certain retention money to be released at the end of the project.
Where the loans or receivables are impaired, the Company continues to engage in enforcement activity to attempt to recover the receivable due.
The Company is exposed to credit risk for trade receivables, cash and cash equivalents, investments, other bank balances, loans given, other financial assets and financial guarantees.
In respect of financial guarantees provided by the Company to banks and financial institutions, the maximum exposure which the Company is exposed to is the maximum amount which the Company would have to pay if the guarantee is called upon or in case where settlement is agreed, the settlement amount. Based on the expectation at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the guarantees provided except as otherwise stated in respect of guarantees where settlement is agreed.
The Ministry of Corporate Affairs (MCA) issued certain amendments to Ind AS (the 2021 amendments). These amendments pertains to the following areas:
- Inter-bank Offered Rate (IBOR) related reforms (phase 2 reforms)
- Extension of practical expedient for rent concession
- Amendments consequent to issue of Conceptual Framework for financial reporting under Ind AS
- Other updates in the nature of clarification
The amendments are effective from annual reporting periods beginning on or after 1 April, 2021. These amendment does not have significant impact on the revised standalone financial statements of the Company.
56. The figures for the corresponding previous year have been regrouped / reclassified wherever necessary, to make them comparable.
57. Amounts shown as '' 0.00 represents amount below '' 50,000 (Rupees Fifty Thousand).
Mar 31, 2018
1. CORPORATE INFORMATION
CG Power and Industrial Solutions Limited, formerly known as Crompton Greaves Limited (the âCompanyâ) is a limited company incorporated and domiciled in India whose shares are publicly traded. The registered office is located at 6th Floor, CG house, Dr. Annie Besant Road, Worli, Mumbai - 400 030, India. The Company has changed its name from Crompton Greaves Limited to CG Power and Industrial Solutions Limited w.e.f. 27th February, 2017.
The Company is a global enterprise providing end-to-end solutions to utilities, industries and consumers for the management and application of efficient and sustainable electrical energy. It offers products, services and solutions in two main business segments, viz. Power Systems and Industrial Systems for the year ended 31st March, 2018.
The financial statements of the Company for the year ended 31 st March, 2018 were authorised for issue in accordance with a resolution of the directors on 30th May, 2018.
2. BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended thereafter.
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
- Derivative financial instruments,
- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).
The financial statements are presented in Indian Rupees (âINRâ) and all values are rounded to the nearest crore, except when otherwise indicated.
(b) Terms / rights attached to equity shares:
The Company has one class of share capital, i.e., equity shares having face value of Rs. 2 per share. Each holder of equity share is entitled to one vote per share. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets ofthe Company after distribution of all preferential amounts, in proportion to their shareholding.
(g) Dividend paid and proposed:
No dividends have been proposed, declared or paid during the financial year 2017-18 (Previous year 2016-17 ^ Nil) or after the Financial year but before the financial statements were approved for issue.
(h) Nature and purpose of reserves:
(i) Capital redemption reserve:
Capital redemption reserve was created on buy back of shares. The Company may issue fully paid-up bonus shares to its members out ofthe capital redemption reserve account.
(ii) Security premium account:
Security premium account is created when shares are issued at premium. The Company may issue fully paid-up bonus shares to its members out of the security premium reserve account, and Company can use this reserve for buy-back of shares.
(iii) Capital reserve:
The Company had paid certain deferred sales tax liabilities in accordance with the scheme formulated by the State Government of Maharashtra for such optional prepayments. The resultant surplus of Rs. 19.12 crore, representing the excess ofthe recorded liability over the amount paid was credited to Capital reserve.
During the financial year ended 31 st March, 2016, the capital reserve of ^ 652.53 crore is recognised due to demerger of consumer products segment pursuant to the transfer of all assets and liabilities to the resulting company i.e. Crompton Greaves Consumer Electricals Limited.
Security created to the extent of:
(a) Secured term loans from banks:
(i) The term loan of Rs. 402.02 crore (as at 31 -03-2017 Rs. 412.71 crore) at an interest rate of 1 year Bankâs MCLR plus a spread of 1.55% p.a. payable monthly. The loan is repayable within five years from the date of disbursement i.e. 3rd August, 2016, in 18 structured quarterly payments with a moratorium of 6 months. The loan is secured by First exclusive charge on identified plant and machinery and immovable fixed assets. (Current maturity pertaining to the said loan is Rs. 44.60 crore (Previous yearRs. 22.30 crore), Refer note 26).
(ii) The term loan of Rs. 159.51 crore and Rs. 43.50 crore respectively (as at 31-03-2017 Rs. Nil) at an interest rate of 6 months MCLR. The loan tenure is 42 months for Rs. 159.51 crore and 13 months forRs. 43.50 crore respectively. The loan is secured by First charge on movable and immovable property. (Current maturity pertaining to the said loan isRs. 65.63 crore (Previous yearRs. Nil), Refer note 26).
(iii) The term loan of Rs. 305.00 crore (as at 31 -03-2017 Rs. Nil) at an interest rate of 1 year Bankâs MCLR plus 1.75% p.a. payable at monthly interval. The loan is repayable within five years from the date of disbursement i.e. 24th July, 2017, in 36 equal monthly instalments after a moratorium of 2 years. The loan is secured by second charge on identified plant and machinery and immovable fixed assets.
(b) Unsecured term loans from banks:
(i) The term loan ofRs. 119.30 crore (as at 31-03-2017Rs. 210.63 crore) at an interest rate linked to Bankâs 1 year MCLR (Floating rate). The loan is repayable within 2.75 years from the date of disbursement i.e. 11th July, 2016, in 10 equal quarterly installments with first installment starting after 6 months from the date of disbursement. (Current maturity pertaining to the said loan isRs. 97.44 crore (Previous yearRs. 97.44 crore), Refer note 26).
(ii) The term loan ofRs. 71.24 crore (as at 31-03-2017 Rs. Nil) at an interest rate of bank MCLR plus applicable margin payable at monthly intervals. The loan is repayable within 2 years from the date of disbursement i.e. 16th May, 2017, in 15 structured monthly installments with first starting after 9 months from the date of disbursement. (Current maturity of the said loan isRs. 56.25 crore (Previous yearRs. Nil), Refer note 26).
Finance lease commitments
The Company has during the financial year 2017-18, made reassessment of an arrangement after its inception, which was earlier assessed as containing a finance lease. The reassessment was necessitated on account of change in the contractual terms (which did not relate only to renewal or extension of the arrangement). The arrangement is now reassessed as not containing a lease and thus, lease accounting ceased to apply from the date when the change in circumstances giving rise to the reassessment occurred.
The difference between the carrying amount of the leased assets and the lease liability, amounting to Rs. Nil (Previous year Rs. 3.07 crore) has been recognised in the Statement of profit and loss.
(2) Nature of provisions:
(a) Product Warranties: The Company gives warranties on certain products and services in the nature of repairs / replacement, which fail to perform satisfactorily during the warranty period. Provision made represents the amount of the expected cost of meeting such obligation on account of rectification / replacement. The timing of outflows is expected to be within a period of two years.
(b) Provision for sales tax / VAT represents liability on account of non-collection of declaration forms and other legal matters which are in appeal under the Act / Rules.
(c) Provision for excise duty / custom duty / service tax represents the differential duty liability that is expected to materialise in respect of matters in appeal.
(d) Provision for liquidated damages has been made on contracts for which delivery dates are exceeded and computed in reasonable and prudent manner.
(e) Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
Notes:
(a) The Company does not expect any reimbursement in respect of the above contingent liabilities.
(b) It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above, pending resolution of the arbitration / appellate proceedings.
Operating lease commitments:
(i) Company as lessor:
The Company has not entered into operating leases.
(ii) Company as lessee:
The Company has taken various residential / commercial premises and plant and equipments under cancellable operating lease. These lease agreements are normally renewed on expiry, wherever required.
(a) Defined contribution plans:
Amount of Rs. 16.27 crore (Previous year Rs. 15.51 crore) is recognised as an expense and included in Employee benefits expense as under the following defined contribution plans:
(b) Defined benefit plans:
Gratuity
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount equivalent to 15 to 30 daysâ salary for each completed year of service subject to a maximum of Rs. 0.20 crore. Vesting occurs upon completion of five continuous years of service in accordance with Indian law.
The Company makes annual contributions to the Crompton Greaves Limited Gratuity Fund, which is funded defined benefit plan for qualifying employees.
The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Post-retirement medical benefit
Post-retirement medical benefit includes hospitalization cover & benefits on Cessation of Employment for the Policy. This cover is applicable only to employee and spouse as per the limits specified for the last grade while in employment. This coverage does not form part of essential terms and condition of employment, and is a benefit extended by the company as a part of its social benefit policies.
The policies of Medical, Health and Hospitalization insurance are subject to change based on contemporary market trends and practices.
Notes :
(i) The actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out at 31 st March, 2018. 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.
(ii) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
(iii) The salary escalation rate is arrived after taking into consideration the seniority, the promotion and other relevant factors, such as, demand and supply in employment market.
(c) Provident Fund:
The Company makes contribution towards provident fund to Crompton Greaves Limited Provident Fund No. 1, which is administered by the trustees. The Rules of the Companyâs Provident Fund administered by a trust, require that if the Board of the Trustees are unable to pay interest at the rate declared by the Government under Para 60 of the Employees Provident Fund Scheme, 1972 for the reason that the return on investment is less for any other reason, then the deficiency shall be made good by the Company making interest shortfall a defined benefit plan. Accordingly, the company has obtained actuarial valuation and based on the below provided assumption there is no deficiency as at the balance sheet date. Hence, the liability is restricted towards monthly contributions only.
Operating Segments:
Power Systems : Transformer, Switchgear and Turnkey Projects
Industrial Systems : Electric Motors, Alternators, Drives, Traction Electronics and SCADA
Identifications of Segments:
The chief operational decision maker monitors the operating results of its Business Segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of the nature of products / services and have been identified as per the quantitative criteria specified in the Ind AS.
Segment revenue and results:
The expenses and incomes which are not directly attributable to any business segment are shown as unallocable expenditure (net of unallocated income).
Segment assets and liabilities:
Segment assets include all operating assets used by the operating segment and mainly consist of property plant and equipment, trade receivables, cash and cash equivalents and inventories. Segment liabilities primarily include trade payables and other liabilities. Common assets and liabilities which cannot be allocated to any of the segments are shown as a part of unallocable assets / liabilities.
Inter segment transfer:
Inter segment prices are normally negotiated amongst segments with reference to the costs, market price and business risks. Profit or loss on inter segment transfers are eliminated at the Company level.
Power Distribution
On 1st June, 2011, the Company had entered into Power Distribution Franchise Agreement (âDFAâ) with Maharashtra State Electricity Distribution Company Limited (âMSEDCLâ) for distribution of power in Jalgaon region of Maharashtra, India.
As per the terms of the arrangements, the Company had obtained the right (âfranchiseâ) to distribute the electricity for the period of 10 years to the public at large.
MSEDCL shall supply / sale electricity to the Company at rate prescribed under regulatory guidelines (MERC directives on load shedding). The Company shall distribute and supply the electricity at the tariff determined by the regulatory authorities.
The Company shall conduct normal maintenance activities of network and other assets to maintain uninterrupted service. The Company is a private operator and MSEDCL is a Government body. The Company undertakes obligation of public service granted by MSEDCL. Thus, the arrangement is a public-to-private service concession. The electricity distribution service is totally regulated by the MSEDCL or other Government regulatory authorities.
MSEDCL had given right to the Company to use its distribution assets which will always belong to MSEDCL. During the tenure of the arrangement, if the Company incurs any capital expenditure, the same shall vest with MSEDCL at the end of the contract. MSEDCL shall reimburse the Company for the capital expenditure incurred at the then value calculated based on pre-determined depreciation rate. Thus, MSEDCL controls significant residual interest in the concession assets. Accordingly, the Company had a contractual right to receive cash from MSEDCL for the capital expenditure incurred.
Therefore, the arrangement is a Service concession arrangement under Appendix A to Ind AS 11. The Company had a contractual right to receive the residual value of the capital expenditure incurred under the arrangement and accordingly, will recognise financial asset. Further, the Company had right to charge the consumers for the services and therefore, there was an intangible asset.
The revenues and losses in respect of Service Concession Arrangements recognised during the year are as follows:
Consequent to the certain unresolved disputes arising out of the Distribution Franchisee Agreement (DFA) of the Company with Maharashtra State Electricity Distribution Company Limited (MSEDCL) at Jalgaon in Maharashtra, MSEDCL had exercised its step in rights and taken over the Distribution Franchisee in Jalgaon from the Company with effect from 12th August, 2015. Accordingly, the Company has classified Power Distribution Segment as discontinued operations.
In respect of discontinued Distribution Franchise business (Jalgaon), the Company and Maharashtra State Electricity Distribution Company Limited (MSEDCL) have entered into final settlement on 16th February, 2018. Based on the same, the Company has written off amount of Rs. 79.56 crore towards receivable from MSEDCL during the year ended 31st March, 2018 respectively, which is disclosed under Discontinued Operations. The balance of Rs. 74.80 crore is subject to receivable from MSEDCL as an when the MSEDCL receives the dues from the Customers.
Automation Systems
The Board of Directors of the Company vide resolution dated 7th November, 2016, accepted an offer for the sale of Companyâs B2B Automation business (Indian business) from Alfanar Electric Systems Company (âAlfanarâ) of the Kingdom of Saudi Arabia. Alfanar is a major player in the electrical manufacturing business, including the manufacturing of electrical construction products as well as related engineering services.
Consequently, CG incorporated, on 18th November, 2016, a wholly owned subsidiary - a special purpose vehicle, ZIV Automation India Limited (âZIVâ). Effective 1st January, 2017, the Company transferred its automation business in India to ZIV under slump sale agreement against shares issued by ZIV.
Subsequently, on 6th March, 2017, CGâs entire investment in ZIV was sold to Alfanar at ^ 31.71 crore, pursuant to an agreement between CG and Alfanar. Thus, ZIV ceased to be subsidiary company of CG w.e.f. 6th March, 2017.
The particulars of CSR expenditure are as follows:
(a) Gross amount required to be spent by the company during the year is Rs. 5.02 crore* (Previous year Rs. 6.81 crore*)
(b) Amount spent during the year on:
(c) Out of the above, the Company has paid Rs. 0.05 crore (Previous year Rs. 0.65 crore) to Avantha Foundation towards CSR activities.
*The profit attributable to the demerged consumer business of the Company has been excluded to arrive at the average net profits of the past three financial years for calculating the CSR obligation.
The fair values ofthe financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
The Companyâs financial risk management is an integral part of how to plan and execute its business strategies. The Companyâs 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, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.
The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The corporate 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, borrowing strategies, and ensuring compliance with market risk limits and policies.
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. In order to optimize the Companyâs position with regard to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
Foreign currency risk
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas and purchases from overseas suppliers in various foreign currencies.
Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies.
The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
Credit risk
Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forward looking information such as :
(i) Actual or expected significant adverse changes in business,
(ii) Actual or expected significant changes in the operating results of the counterparty,
(iii) Financial or economic conditions that are expected to cause a significant change to the counterpartyâs ability to meet its obligations,
(iv) Significant increase in credit risk on other financial instruments of the same counterparty,
(v) Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company. The company categorises a loan or receivable eligible for evaluation of expected credit losses when a debtor fails to make contractual payments greater than 2 years past due. In case the loans or receivables are written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
Liquidity risk
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Companyâs treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Companyâs net liquidity position through rolling forecasts on the basis of expected cash flows.
Maturity profile of financial liabilities
The table below provides details regarding the remaining contractual maturities of financial liabilities at the reporting date based on contractual undiscounted payments.
Capital management
For the purposes of the Companyâs capital management, capital includes issued capital and all other equity reserves. The primary objective of the Companyâs capital management is to maximise shareholder value. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants.
The Company monitors capital using gearing ratio, which is total debt divided by total capital plus debt.
3. Revenue from operations for period up to 30th June, 2017 includes excise duty. From 1st July, 2017 onwards the excise duty and most indirect taxes in India have been replaced by the Goods and Services Tax (GST). The Company collects GST on behalf of the Government. Hence, GST is not included in revenue from operations. In view of the aforesaid change in indirect taxes, revenue from operations for the year ended 31 st March, 2018 is not comparable with that for the year ended 31st March, 2017.
The comparable figures for revenue from operations (net of excise duty) are as under:
In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying Ind AS 115, âRevenue from Contracts with Customersâ, superseding Ind AS 11, âConstruction Contractsâ and Ind AS 18, âRevenueâ and other amendments. The amendments are applicable to the Company from 1st April, 2018.
Ind AS 115 Revenue from Contracts with customers:
Ind AS 115 establishes a five-step model to account for revenue arising from contracts with customers.
The new revenue standard will supersede all current revenue recognition requirements under Ind AS. This new standard requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions of the Company. Ind AS 115 is effective for the Company on and from the financial year beginning 1st April, 2018 using either one of two methods: (i) retrospectively to each prior reporting period presented in accordance with Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors, with the option to elect certain practical expedients as defined within Ind AS 115 (the full retrospective method); or (ii) retrospectively with the cumulative effect of initially applying Ind AS 115 recognized at the date of initial application (1st April, 2018) and providing certain additional disclosures as defined in Ind AS 115 (the modified retrospective method).
The Company has chosen to apply the modified retrospective method. The Company has identified following areas where Ind AS 115 will impact, however there is no material impact of these:
(a) Sale of goods:
Contracts with customers in which the sale of equipment is generally expected to be the only performance obligation are not expected to have any significant impact on the Companyâs profit or loss. The Company expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods.
In preparing for Ind AS 115, the Company is considering the following:
(i) Variable consideration:
Some contracts with customers provide trade discounts, volume rebates, penalties (liquidated damages), price adjustment clause, etc. Currently, the Company recognizes revenue from the sale of goods measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. If revenue cannot be reliably measured, the Company defers revenue recognition until the uncertainty is resolved. Such provisions give rise to variable consideration under Ind AS 115, and will be required to be estimated at contract inception.
Ind AS 115 requires the estimated variable consideration to be constrained to prevent over-recognition of revenue. The Company expects that application of the constraint may result in more revenue being deferred than under current Ind AS, however, that deferment is not significant.
(ii) Warranty obligations:
The Company provides warranties for general repairs, and in a few contracts, provides extended warranties or maintenance services. As such, the Company expects that the former type of warranties will be assurance-type warranties which will continue to be accounted for under Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets consistent with its current practice.
The service-type warranties / extended warranties are treated as a separate performance obligation, with a part of the transaction price allocated to the stand alone selling price of the warranty obligation. The revenue is deferred and recognized over the period of warranty.
(b) Presentation and disclosure requirements:
Ind AS 115 provides presentation and disclosure requirements, which are more detailed than under current Ind AS. The presentation requirements represent a significant change from current practice and significantly increases the volume of disclosures required in the Companyâs financial statements. Many of the disclosure requirements in Ind AS 115 are completely new.
(c) Contract costs:
The Company also expects a change in the manner that it recognizes certain incremental and fulfilment costs from expensing them as incurred to deferring and recognizing them over the contractual period. However, the change is not significant.
4. Amounts shown as 0.00 represents amount below Rs. 50,000 (Rupees Fifty Thousand).
5. Figures for the previous year have been regrouped wherever necessary.
Mar 31, 2017
(i) Nature and purpose of reserves:
(1) Capital redemption reserve:
Capital redemption reserve was created on buy back of shares. The Company may issue fully paid-up bonus shares to its members out of the capital redemption reserve account.
(2) Security premium account:
Security premium account is created when shares are issued at premium. The Company may issue fully paid-up bonus shares to its members out of the security premium reserve account, and Company can use this reserve for buy-back of shares.
(3) Capital reserve:
The Company had paid certain deferred sales tax liabilities in accordance with the scheme formulated by the State Government of Maharashtra for such optional prepayments. The resultant surplus of Rs19.12 crores, representing the excess of the recorded liability over the amount paid was credited to Capital reserve.
During the financial year ended 31st March, 2016, the capital reserve ofRs 652.53 crores is recognized due to demerger of consumer products segment pursuant to the transfer of all assets and liabilities to the resulting company i.e. Crompton Greaves Consumer Electricals Limited (Refer note 51).
Notes:
Security created to the extent of :
(a) Secured term loans from banks:
The term loan of Rs 412.71 crore (as at 31-03-2016 Rs Nil) at an interest rate of 1 year Bankâs MCLR (reset on the 1st day of the month falling after twelve calendar months from the date of relevant drawdown and every 12 months thereafter) plus a spread of 1.55% p.a. payable monthly. The loan is repayable within five years from the date of disbursement i.e. 3rd August, 2016, in 18 structured quarterly payments with a moratorium of 6 months. The loan is secured by first exclusive charge on plant and machinery and moveable fixed assets (Current maturity pertaining to the said loan isRs 22.30 crore, Refer note 27).
(b) Unsecured term loans from banks:
The term loan of Rs 210.63 crore (as at 31-03-2016 RsNil) at an interest rate of 10.15% p.a. linked to Bankâs 1 year MCLR (Floating rate). The loan is repayable within 2.75 years from the date of disbursement i.e. 11th July, 2016, in 10 equal quarterly installments with first installment starting after 6 months from the date of disbursement (Current maturity pertaining to the said loan is Rs97.44 crore, Refer note 27).
The Company has during the financial year 2016-17, made reassessment of an arrangement after its inception, which was earlier assessed as containing a finance lease. The reassessment was necessitated on account of change in the contractual terms (which did not relate only to renewal or extension of the arrangement). The arrangement is now reassessed as not containing a lease and thus, lease accounting ceased to apply from the date when the change in circumstances giving rise to the reassessment occurred.
The difference between the carrying amount of the leased assets and the lease liability, amounting to Rs3.07 crore has been recognized in the Statement of profit and loss.
# Additional provision made during the year and reversal of unused amount are included in the respective head of accounts.
* Carrying amounts comprise of non-current and current provisions.
(2) Nature of provisions:
(a) Product warranties: The Company gives warranties on certain products and services in the nature of repairs / replacement, which fail to perform satisfactorily during the warranty period. Provision made represents the amount ofthe expected cost of meeting such obligation on account of rectification / replacement. The timing of outflows is expected to be within a period of two years.
(b) Provision for sales tax / VAT represents liability on account of non-collection of declaration forms and other legal matters which are in appeal under the Act / Rules.
(c) Provision for excise duty /customs duty / service tax represents the differential duty liability that is expected to materialise in respect of matters in appeal.
(d) Provision for liquidated damages has been made on contracts forwhich delivery dates are exceeded and computed in reasonable and prudent manner.
(e) Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
The term âSpecified Bank Notesâ shall have same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated 8th November 2016.
Operating lease commitments:
(i) Company as lessor:
The Company has not entered into operating leases.
(ii) Company as lessee:
The Company has taken various residential / commercial premises and plant and equipments under cancellable operating lease. These lease agreements are normally renewed on expiry, wherever required.
(b) Denned benefit plans:
Gratuity
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount equivalent to 15 to 30 daysâ salary for each completed year of service subject to a maximum of'' 0.10 crore. Vesting occurs upon completion of five continuous years of service in accordance with Indian law.
The Company makes annual contributions to the Crompton Greaves Limited Gratuity Trust, which is funded defined benefit plan for qualifying employees.
The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.
Post-retirement medical benefit
Post-retirement medical benefit includes hospitalization cover & benefits on Cessation of Employment for the Policy. This cover is applicable only to employee and spouse as per the limits specified for the last grade while in employment. This coverage does not form part of essential terms and condition of employment, and is a benefit extended by the company as a part of its social benefit policies.
The policies of Medical, Health and Hospitalization insurance are subject to change based on contemporary market trends and practices.
Notes :
(i) The actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out at 31st March, 2017. 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.
(ii) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
(iii) The salary escalation rate is arrived after taking into consideration the seniority, the promotion and other relevant factors, such as, demand and supply in employment market.
(c) Provident Fund:
The Company makes contribution towards provident fund which is administered by the trustees. The Rules of the Companyâs Provident Fund administered by a trust, require that if the Board of the Trustees are unable to pay interest at the rate declared by the Government under Para 60 of the Employees Provident Fund Scheme, 1972 for the reason that the return on investment is less for any other reason, then the deficiency shall be made good by the Company making interest shortfall a defined benefit plan. Accordingly, the company has obtained actuarial valuation and based on the below provided assumption there is no deficiency as at the balance sheet date. Hence, the liability is restricted towards monthly contributions only.
(iv) Key Management Personnel:
1 Gautam Thapar - Non- Executive Director, Chairman and Promoter Director
2 K. N. Neelkant - Executive Director, CEO & Managing Director
3 MadhavAcharya - Executive Director-Finance & CFO
4 Manoj Koul - Company Secretary
5 Omkar Goswami - Non- Executive Director
6 B. Harirahan - Non- Executive Director
7 Sanjay Labroo - Non- Executive Director and Independent Director
8 Valentin Von Massow - Non- Executive Director and Independent Director
9 Ramni Nirula - Non- Executive Directorand Independent Director
10 Shirish Apte - Non- Executive Director and Independent Director (ceased to be a Director w.e.f. 1st April 2017)
11 Meher Pudumjee - Non- Executive Director and Independent Director (ceased to be a Director w.e.f. 28th May 2016)
(v) Other Related Parties in which directors are interested:
1 Ballarpur Industries Limited
2 Solaris ChemTech Industries Limited
3 BILT Graphic Paper Products Limited
4 Avantha Holdings Limited (entity with significance influence over the Company)
5 Avantha Business Solutions Limited
6 Avantha Realty Limited
7 Malanpur Captive Power Limited
8 Corella Investments Limited
9 Ambuja Cements Limited
10 Asahi India Glass Limited
11 Crompton Greaves Consumer Electricals Limited (ceased w.e.f. 26th August 2016)
12 Avantha Foundation
13 Thermax Limited (ceased w.e.f. 28th May 2016)
14 Infosys Limited
15 Varun Prakashan Private Limited
16 KorbaWest Power Company Limited
17 KEC International Limited
18 Jhabua Power Limited
19 Avantha Power & Infrastructure Limited
The transactions with related parties are made on terms equivalent to those that prevail in armâs length transactions. This assessment is undertaken each
financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured and settlement occurs in cash.
Automation Systems
The Board of Directors of the Company vide resolution dated 7th November, 2016, accepted an offer for the sale of Companyâs B2B Automation business (Indian business) from Alfanar Electric Systems Company (âAlfanarâ) of the Kingdom of Saudi Arabia. Alfanar is a major player in the electrical manufacturing business, including the manufacturing of electrical construction products as well as related engineering services.
Consequently, CG incorporated, on 18th November, 2016, a wholly owned subsidiary - a special purpose vehicle, ZIV Automation India Limited (âZIVâ). Effective 1st January, 2017, the Company transferred its automation business in India to ZIV under slump sale agreement against shares issued by ZIV.
Subsequently, on 6th March, 2017, CGâs entire investment in ZIV was sold to Alfanar at '' 31.71 crore, pursuant to an agreement between CG and Alfanar. Thus, ZIV ceased to be subsidiary company of CG w.e.f. 6th March, 2017.
The Discontinued operations have been disclosed as âAutomation Systemsâ segment separately.
Consumer Products
The Company demerged its Consumer products business unit into a separate company (wholly owned subsidiary of CG till 23rd March, 2016), Crompton Greaves Consumer Electricals Limited (âCGCELâ) with effect from 1st October, 2015. For the year ended 31st March, 2016, results up to 30th September, 2015 have been presented under profit or loss from discontinued operations.
The Discontinued operations have been disclosed as âConsumer Productsâ segment separately.
Power Distribution
On 1st June, 2011, the Company had entered into Power Distribution Franchise Agreement (âDFAâ) with Maharashtra State Electricity Distribution Company Limited (âMSEDCLâ) for distribution of power in Jalgaon region of Maharashtra, India.
As per the terms of the arrangements, the Company had obtained the right (âfranchiseâ) to distribute the electricity for the period of 10 years to the public at large. MSEDCL shall supply / sale electricity to the Company at rate prescribed under regulatory guidelines (MERC directives on load shedding). The Company shall distribute and supply the electricity at the tariff determined by the regulatory authorities.
The Company shall conduct normal maintenance activities of network and other assets to maintain uninterrupted service. The Company is a private operator and MSEDCL is a Government body. The Company undertakes obligation of public service granted by MSEDCL. Thus, the arrangement is a public-to-private service concession. The electricity distribution service is totally regulated by the MSEDCL or other Government regulatory authorities.
MSEDCL had given right to the Company to use its distribution assets which will always belong to MSEDCL. During the tenure of the arrangement, if the Company incurs any capital expenditure, the same shall vest with MSEDCL at the end of the contract. MSEDCL shall reimburse the Company for the capital expenditure incurred at the then value calculated based on pre-determined depreciation rate. Thus, MSEDCL controls significant residual interest in the concession assets. Accordingly, the Company had a contractual right to receive cash from MSEDCL for the capital expenditure incurred.
Therefore, the arrangement is a Service concession arrangement under Appendix A to Ind-AS 11. The Company had a contractual right to receive the residual value of the capital expenditure done under the arrangement and accordingly, will recognize financial asset. Further, the Company had right to charge the consumers for the services and therefore, there was an intangible asset.
Consequent to the certain unresolved disputes arising out of the Distribution Franchisee Agreement (DFA) of the Company with Maharashtra State Electricity Distribution Company Limited (MSEDCL) at Jalgaon in Maharashtra, MSEDCL had exercised its step in rights and taken over the Distribution Franchisee in Jalgaon from the Company with effect from 12th August, 2015. Accordingly, the Company has classified Power Distribution Segment as discontinued operations.
The Company and MSEDCL have raised demand on each other and the matter is under dispute. The Company and MSEDCL are in the process of constituting a Permanent Dispute Resolution Body (PDRB) to arrive at a solution in near future. The Company does not expect any adverse impact with respect to above.
(c) Out of the above, the Company has paid Rs 0.65 crore (Previous year Rs 6.00 crore) to Avantha Foundation towards CSR activities.
*The profit attributable to the demerged consumer business of the Company has been excluded to arrive at the average net profits of the past three financial years for calculating the CSR obligation of the Company for financial year 2016-17.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
The Companyâs financial risk management is an integral part of howto plan and execute its business strategies. The Companyâs 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, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.
The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The corporate 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, borrowing strategies, and ensuring compliance with market risk limits and policies.
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. In order to optimize the Companyâs position with regard to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of Axed rate and floating rate financial instruments in its total portfolio.
Foreign currency risk
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas and purchases from overseas suppliers in various foreign currencies.
Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies.
The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
Credit risk
Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as :
(i) Actual or expected significant adverse changes in business,
(ii) Actual or expected significant changes in the operating results of the counterparty,
(iii) Financial or economic conditions that are expected to cause a significant change to the counterpartyâs ability to meet its obligations,
(iv) Significant increases in credit risk on other financial instruments of the same counterparty,
(v) Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company. The company categorizes a loan or receivable for write off when a debtor fails to make contractual payments greater than 2 years past due. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in profit or loss.
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of cash flowsâ and Ind AS 102, âShare-based paymentâ. The amendments are applicable to the Company from April 1, 2017.
Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion ofa reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on the financial statements.
Amendment to Ind AS 102:
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
Currently Ind AS 102 is not applicable to the company and hence there is no impact.
3. Amounts shown as 0.00 represents amount below '' 50,000 (Rupees Fifty Thousand).
4. Figures for the previous year have been regrouped wherever necessary.
Mar 31, 2016
1. Non-current assets held for sale and discontinued operations:
Non-current assets and disposal groups are classified as held for sale
if their carrying amounts will be recovered principally through a sale
transaction rather than through continuing use. Non-current assets and
disposal groups classified as held for sale are measured at the lower
of their carrying amount and fair value less costs to sell. This
condition is regarded as met only when the sale is highly probable and
the asset or disposal group is available for immediate sale in its
present condition. Management must be committed to the sale, which
should be expected to qualify for recognition as a completed sale
within one year from the date of classification.
Discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit or loss after
tax from discontinued operations in the statement of profit and loss.
Assets and liabilities classified as held for distribution are
presented separately from other assets and liabilities in the balance
sheet.
A disposal group qualifies as discontinued operation if it is a
component of the Company that either has been disposed of, or is
classified as held for sale, and:
- represents a separate major line of business or geographical area of
operations.
- is part of a single co-ordinated plan to dispose of a separate major
line of business or geographical area of operations. Or
- is a subsidiary acquired exclusively with a view to resale.
An entity shall not depreciate (or amortise) a non-current asset while
it is classified as held for sale or while it is part of a disposal
group classified as held for sale.
3.21 Financial instruments: (i) Financial assets:
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in
the case of financial assets not recorded at fair value through profit
or loss, transaction costs that are attributable to the acquisition of
the financial asset.
Financial assets are classified, at initial recognition, as financial
assets measured at fair value or as financial assets measured at
amortised cost.
Subsequent measurement
For purposes of subsequent measurement financial assets are classified
in two broad categories:
- Financial assets at fair value
- Financial assets at amortised cost
Where assets are measured at fair value, gains and losses are either
recognised entirely in the statement of profit and loss (i.e. fair
value through profit or loss), or recognised in other comprehensive
income (i.e. fair value through other comprehensive income).
A financial asset that meets the following two conditions is measured
at amortised cost (net of any write down for impairment) unless the
asset is designated at fair value through profit or loss under the fair
value option.
- Business model test: The objective of the Company''s business model is
to hold the financial asset to collect the contractual cash flows
(rather than to sell the instrument prior to its contractual maturity
to realise its fair value changes).
- Cash flow characteristics test: The contractual terms of the
financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount
outstanding.
A financial asset that meets the following two conditions is measured
at fair value through other comprehensive income unless the asset is
designated at fair value through profit or loss under the fair value
option.
- Business model test: The financial asset is held within a business
model whose objective is achieved by both collecting contractual cash
flows and selling financial assets.
- Cash flow characteristics test: The contractual terms of the
financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount
outstanding.
Even if an instrument meets the two requirements to be measured at
amortised cost or fair value through other comprehensive income, a
financial asset is measured at fair value through profit or loss if
doing so eliminates or significantly reduces a measurement or
recognition inconsistency (sometimes referred to as an ''accounting
mismatch'') that would otherwise arise from measuring assets or
liabilities or recognising the gains and losses on them on different
bases.
All other financial asset is measured at fair value through profit or
loss.
All equity investments are measured at fair value in the balance sheet,
with value changes recognised in the statement of profit and loss,
except for those equity investments for which the entity has elected to
present value changes in ''other comprehensive income''.
If an equity investment is not held for trading, an irrevocable
election is made at initial recognition to measure it at fair value
through other comprehensive income with only dividend income recognised
in the statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or
part of a group of similar financial assets) is primarily derecognised
(i.e. removed from the Company''s statement of financial position) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in
full without material delay to a third party under a ''pass-through''
arrangement and either;
(a) the Company has transferred substantially all the risks and rewards
of the asset, or
(b) the Company has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred control of the
asset.
When the Company has transferred its rights to receive cash flows from
an asset or has entered into a pass-through arrangement. it evaluates
if and to what extent it has retained the risks and rewards of
ownership. When it has neither transferred nor retained substantially
all of the risks and rewards of the asset, nor transferred control of
the asset, the Company continues to recognise the transferred asset to
the extent of the Company''s continuing involvement. In that case, the
Company also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the
rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the
transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the
Company could be required to repay.
Investment in associates, joint venture and subsidiaries
The Company has accounted for its investment in subsidiaries and
associates, joint venture at cost. Impairment of financial assets
The Company assesses impairment based on expected credit losses (ECL)
model to the following:
- Financial assets measured at amortised cost;
- Financial assets measured at fair value through other comprehensive
income (FVTOCI); Expected credit losses are measured through a loss
allowance at an amount equal to:
- the 12-months expected credit losses (expected credit losses that
result from those default events on the financial instrument that are
possible within 12 months after the reporting date); or
- full lifetime expected credit losses (expected credit losses that
result from all possible default events over the life of the financial
instrument).
The Company follows ''simplified approach'' for recognition of impairment
loss allowance on:
- Trade receivables or contract revenue receivables; and
- All lease receivables
Under the simplified approach, the Company does not track changes in
credit risk. Rather, it recognises impairment loss allowance based on
lifetime ECLs at each reporting date, right from its initial
recognition.
The Company uses a provision matrix to determine impairment loss
allowance on the portfolio of trade receivables. The provision matrix
is based on its historically observed default rates over the expected
life of the trade receivable and is adjusted for forward looking
estimates. At every reporting date, the historical observed default
rates are updated and changes in the forward-looking estimates are
analysed.
For recognition of impairment loss on other financial assets and risk
exposure, the Company determines that whether there has been a
significant increase in the credit risk since initial recognition. If
credit risk has not increased significantly, 12-months ECL is used to
provide for impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent period, credit
quality of the instrument improves such that there is no longer a
significant increase in credit risk since initial recognition, then the
Company reverts to recognising impairment loss allowance based on
12-months ECL.
For assessing increase in credit risk and impairment loss, the Company
combines financial instruments on the basis of shared credit risk
characteristics with the objective of facilitating an analysis that is
designed to enable significant increases in credit risk to be
identified on a timely basis.
(ii) Financial liabilities:
Initial recognition and measurement
All financial liabilities are recognised initially at fair value and,
in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Company''s financial liabilities include trade and other payables,
loans and borrowings including bank overdrafts, and derivative
financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or
loss.
Financial liabilities are classified as held for trading if they are
incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered into by
the Company that are not designated as hedging instruments in hedge
relationships as defined by Ind AS 109. Separated embedded derivatives
are also classified as held for trading unless they are designated as
effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the
statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value
through profit or loss are designated at the initial date of
recognition. and only if the criteria in Ind AS 109 are satisfied.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of
the EIR. The EIR amortisation is included as finance costs in the
statement of profit and loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts
that require a payment to be made to reimburse the holder for a loss it
incurs because the specified debtor fails to make a payment when due in
accordance with the terms of a debt instrument. Financial guarantee
contracts are recognised initially as a liability at fair value,
adjusted for transaction costs that are directly attributable to the
issuance of the guarantee. Subsequently, the liability is measured at
the higher of the amount of loss allowance determined as per impairment
requirements of Ind AS 109 and the amount recognised less cumulative
amortisation.
Derecognition
A financial liability is derecognised when the obligation under the
liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated
as the derecognition of the original liability and the recognition of a
new liability. The difference in the respective carrying amounts is
recognised in the statement of profit and loss.
(iii) Offsetting of financial instruments:
Financial assets and financial liabilities are offset and the net
amount is reported in the balance sheet if there is a currently
enforceable legal right to offset the recognised amounts and there is
an intention to settle on a net basis, to realise the assets and settle
the liabilities simultaneously
(iv) Derivative financial instruments and hedge accounting:
The Company enters into derivative contracts to hedge foreign currency
/ price risk on unexecuted firm commitments and highly probable
forecast transactions. Such derivative financial instruments are
initially recognised at fair value on the date on which a derivative
contract is entered into and are subsequently premeasured at fair
value. Derivatives are carried as financial assets when the fair value
is positive and as financial liabilities when the fair value is
negative.
Any gains or losses arising from changes in the fair value of
derivatives are taken directly to statement of profit and loss, except
for the effective portion of cash flow hedges, which is recognised in
other comprehensive income and presented as a separate component of
equity which is later reclassified to statement of profit and loss when
the hedge item affects profit or loss.
2. Business combinations under common control:
Common control business combinations include transactions, such as
transfer of subsidiaries or businesses, between entities within a
group.
Business combinations involving entities or businesses under common
control are accounted for using the pooling of interests method. Under
pooling of interest method, the assets and liabilities of the combining
entities are reflected at their carrying amounts, the only adjustments
that are made are to harmonise accounting policies.
The financial information in the financial statements in respect of
prior periods are restated as if the business combination had occurred
from the beginning of the preceding period in the financial statements,
irrespective of the actual date of the combination. However, if
business combination had occurred after that date, the prior period
information is restated only from that date.
The difference, if any, between the amount recorded as share capital
issued plus any additional consideration in the form of cash or other
assets and the amount of share capital of the transferor is transferred
to capital reserve and presented separately from other capital reserves
with disclosure of its nature and purpose in the notes.
The preparation of the Company''s financial statements requires
management to make judgements, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities, and
the accompanying disclosures, and the disclosure of contingent
liabilities. Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.
Judgements
Service concession arrangements:
Management has assessed applicability of Appendix A of Ind AS 11:
Service Concession Arrangements to power distribution arrangements
entered into by the Company. In assessing the applicability, management
has exercised significant judgment in relation to the underlying
ownership of the assets, terms of the power distribution arrangements
entered with the grantor, ability to determine prices, fair value of
construction service, assessment of right to guaranteed cash etc. Based
on detailed evaluation, management has determined that this arrangement
meet the criteria for recognition as service concession arrangements.
Discontinued operations:
Consumer products segment
In pursuant to the demerger of the Consumer products business unit, the
Board considered the consumer product business unit to meet the
criteria to be classified as held for distribution at that date for the
following reasons:
- The actions to complete the distribution were initiated and expected
to be completed within one year from the date of commitment to demerger
the business i.e.,19th February, 2015.
- Consumer products represents a separate major line of business of
operations.
- The shareholders approved the distribution in August 2015.
- The Scheme of demerger was approved by the Honourable High court
judicature at Bombay, 20th November, 2015 (the Appointed date).
Power distribution business
In Pursuant to the certain unresolved disputes arising out of the
Distribution Franchisee Agreement (DFA) of the Company with Maharashtra
State Electricity Distribution Company Limited (MSEDCL) at Jalgoan in
Maharashtra, MSEDCL has exercised its step in rights and taken over the
Distribution Franchisee in Jalgoan from the Company with effect from
12th August, 2015. The operations were terminated with immediate effect
and the final claim settlement between the Company and MSEDCL is in
progress. The Company have classified the Power distribution business
as held for disposal from 12th August, 2015 for the following reasons:
- Power distribution business represents a separate major line of
operations
- The operations were abandoned with immediate effect from 12th August,
2015 and hence the carrying amount will not be recovered principally
through continuing use.
Lease of equipment not in legal form of lease
Significant judgment is required to apply lease accounting rules under
Appendix C to Ind AS 17: determining whether an Arrangement contains a
Lease. In assessing the applicability to arrangements entered into by
the Company, management has exercised judgment to evaluate the right to
use the underlying assets, substance of the transaction including
legally enforced arrangements and other significant terms and
conditions of the arrangement to conclude whether the arrangements meet
the criteria under Appendix C to Ind AS 17.
Estimates and assumptions
The key assumptions concerning the future and other key sources of
estimation uncertainty at the reporting date, that have a significant
risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are described below.
The Company based its assumptions and estimates on parameters available
when the financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due to
market changes or circumstances arising that are beyond the control of
the Company. Such changes are reflected in the assumptions when they
occur.
Impairment of non-financial assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or CGU''s fair value less costs of disposal
and its value in use. It is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent
of those from other assets or groups of assets. Where the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the
risks specific to the asset. In determining fair value less costs of
disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used.
These calculations are corroborated by valuation multiples, quoted
share prices for publicly traded subsidiaries or other available fair
value indicators.
Defined benefit plans
The cost of the defined benefit plan and other post-employment benefits
and the present value of such obligation are determined using actuarial
valuations. An actuarial valuation involves making various assumptions
that may differ from actual developments in the future. These include
the determination of the discount rate, future salary increases,
mortality rates and attrition rate. Due to the complexities involved in
the valuation and its long-term nature, a defined benefit obligation is
highly sensitive to changes in these assumptions. All assumptions are
reviewed at each reporting date.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities
recorded in the balance sheet cannot be measured based on quoted prices
in active markets, their fair value is measured using valuation
techniques including the Discounted Cash Flow (DCF) model. The inputs
to these models are taken from observable markets where possible, but
where this is not feasible, a degree of judgement is required in
establishing fair values. Judgements include considerations of inputs
such as liquidity risk, credit risk and volatility. Changes in
assumptions about these factors could affect the reported fair value of
financial instruments.
Development costs
The Company capitalises development costs for a project in accordance
with the accounting policy. Initial capitalisation of costs is based on
management''s judgement that technological and economic feasibility is
confirmed, usually when a product development project has reached a
defined milestone according to an established project management model.
In determining the amounts to be capitalised, management makes
assumptions regarding the expected future cash generation of the
project, discount rates to be applied and the expected period of
benefits.
Impairment of financial assets
The impairment provisions for financial assets are based on assumptions
about risk of default and expected loss rates. The Company uses
judgement in making these assumptions and selecting the inputs to the
impairment calculation, based on Company''s past history, existing
market conditions as well as forward looking estimates at the end of
each reporting period.
(b) Defined benefit plans:
Gratuity
The Company provides for gratuity, a defined benefit retirement plan
covering eligible employees. The Gratuity Plan provides a lump sum
payment to vested employees at retirement, death, incapacitation or
termination of employment, of an amount equivalent to 15 to 30 days''
salary for each completed year of service subject to a maximum of Rs,
0.10 crore. Vesting occurs upon completion of five continuous years of
service in accordance with Indian law.
The Company makes annual contributions to the Crompton Greaves Limited
Gratuity Trust, which is funded defined benefit plan for qualifying
employees.
Post-retirement medical benefit
Post-retirement medical benefit includes hospitalization cover &
benefits on Cessation of Employment for the Policy. This cover is
applicable only to employee and spouse as per the limits specified for
the last grade while in employment. This coverage does not form part of
essential terms and condition of employment, and is a benefit extended
by the company as a part of its social benefit policies.
The policies of Medical, Health and Hospitalization insurance are
subject to change based on contemporary market trends and practices.
The following tables summarise the components of net benefit expenses
recognised in the statement of profit and loss and the funded status
and amounts recognised in the balance sheet for the respective plans:
(iv) Key Management Personnel:
1 Gautam Thapar - Chairman and Promoter Director
2 Laurent Demortier - CEO & Managing Director (resigned w.e.f. 3rd
February, 2016)
3 K. N. Neelkant - CEO & Managing Director (appointed w.e.f. 3rd
February, 2016)
4 Madhav Acharya - Executive Director - Finance & CFO
5 Minal Bhosale - Company Secretary (resigned w.e.f. 31st May, 2015)
6 Manoj Koul - Company Secretary (appointed w.e.f. 3rd August, 2015)
(v) Other Related Parties in which directors are interested:
1 Ballarpur Industries Limited
2 Solaris ChemTech Industries Limited
3 BILT Graphic Paper Products Limited
4 Avantha Holdings Limited
5 Avantha Business Solutions Limited (formerly Salient Business
Solutions Limited)
6 Avantha Realty Limited
7 Sabah Forest Industries Sdn. Bhd.
8 Malanpur Captive Power Limited
9 Corella Investments Limited
10 Lustre International Limited
11 Ambuja Cements Limited
12 Asahi India Glass Limited
13 Avantha Foundation
14 Thermax Limited
15 Infosys Limited
16 Varun Prakashan Private Limited
17 Korba West Power Company Limited
18 KEC International Limited
19 Jhabua Power Limited
20 Avantha Power & Infrastructure Limited
Consequent to the certain unresolved disputes arising out of the
Distribution Franchisee Agreement (DFA) of the Company with Maharashtra
State Electricity Distribution Company Limited (MSEDCL) at Jalgoan in
Maharashtra, MSEDCL had exercised its step in rights and taken over the
Distribution Franchisee in Jalgoan from the Company with effect from
August 12, 2015. Accordingly, the Company has classified Power
Distribution Segment as discontinued operations.
The Company and MSEDCL have raised demand on each other and the matter
is under dispute. The Company and MSEDCL are in process of constituting
the Permanent Dispute Resolution Body (PDRB). The financial impact of
the dispute will be known after the final outcome from PDRB.
Consumer Products
On 19th February, 2015 the Company announced the decision of its Board
for the vertical demerger of Consumer Products Business unit of CG into
its wholly owned subsidiary, Crompton Greaves Consumer Electricals
Limited (''CGCEL'') with effect from 1st October, 2015. The Business of
Consumer Products consists of Fans, Appliances, Luminaires, Light
Sources and Pumps. For the year ended 31st March, 2015, the Consumer
Product segment was shown as discontinued operations.
The decision to demerge the Consumer Products business unit was done
with the intent of creation of two industry leading independent
entities and unlocking shareholder value. The demerger is expected to
complete within 12 months from the date of classification as
discontinued operations.
The Discontinued operations have been disclosed as ''Consumer Products''
segment separately.
Power Distribution
On 1st June 2011, the Company had entered into Power Distribution
Franchise Agreement (DFA) with Maharashtra State Electricity
Distribution Company Limited (''MSEDCL'') for distribution of power in
Jalgaon region of Maharashtra, India.
As per the terms of the arrangements, the Company had obtained the
right (''franchise'') to distribute the electricity for the period of 10
years to the public at large.
MSEDCL shall supply / sale electricity to the Company at rate
prescribed under regulatory guidelines (MERC directives on load
shedding). The Company shall distribute and supply the electricity at
the tariff determined by the regulatory authorities.
The Company shall conduct normal maintenance activities of network and
other assets to maintain uninterrupted service. The Company is a
private operator and MSEDCL is a Government body. The Company
undertakes obligation of public service granted by MSEDCL. Thus, the
arrangement is a public-to-private service concession. The electricity
distribution service is totally regulated by the MSEDCL or other
Government regulatory authorities.
MSEDCL had given right to the Company to use its distribution assets
which will always belong to MSEDCL. During the tenure of the
arrangement, if the Company incurs any capital expenditure, the same
shall vest with MSEDCL at the end of the contract. MSEDCL shall
reimburse the Company for the capital expenditure incurred at the then
value calculated based on pre-determined depreciation rate. Thus,
MSEDCL controls significant residual interest in the concession assets.
Accordingly, the Company had a contractual right to receive cash from
MSEDCL for the capital expenditure incurred.
Therefore, the arrangement is a Service concession arrangements under
Appendix A to Ind AS 11. The Company had a contractual right to receive
the residual value of the capital expenditure done under the
arrangement and accordingly, will recognise financial asset. Further,
the Company had right to charge the consumers for the services and
therefore, there was an intangible asset.
(c) Out of the above, the Company has paid Rs, 6.00 crore (Previous
Year Rs, 4.78 crore) to Avantha Foundation towards CSR activities.
The fair values of the financial assets and liabilities are included at
the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or
liquidation sale.
The following methods and assumptions were used to estimate the fair
values:
1. Fair value of cash and short-term deposits, trade and other short
term receivables, trade payables, other current liabilities, short term
loans from banks and other financial institutions approximate their
carrying amounts largely due to the short-term maturities of these
instruments.
2. Financial instruments with fixed and variable interest rates are
evaluated by the Company based on parameters such as interest rates and
individual credit worthiness of the counterparty. Based on this
evaluation, allowances are taken to account for the expected losses of
these receivables.
The Company uses the following hierarchy for determining and disclosing
the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical
assets or liabilities
Level 2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly or
indirectly
Level 3: techniques which use inputs that have a significant effect on
the recorded fair value that are not based on observable market data
During the reporting period ending 31 st March, 2016 and 31 st March,
2015, there were no transfers between Level 1 and Level 2 fair value
measurements.
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, equity prices and other market changes that affect market risk
sensitive instruments. Market risk is attributable to all market risk
sensitive financial instruments including investments and deposits,
foreign currency receivables, payables and loans and borrowings.
The Company manages market risk through a 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, borrowing strategies, and ensuring
compliance with market risk limits and policies.
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. In order to optimize the Company''s position with
regards to interest income and interest expenses and to manage the
interest rate risk, treasury performs a comprehensive corporate
interest rate risk management by balancing the proportion of fixed rate
and floating rate financial instruments in its total portfolio.
The Company is not exposed to significant interest rate risk as at the
respective reporting dates.
Foreign currency risk
The Company operates internationally and portion of the business is
transacted in several currencies and consequently the Company is
exposed to foreign exchange risk through its sales and services in
overseas and purchases from overseas suppliers in various foreign
currencies.
Foreign currency exchange rate exposure is partly balanced by
purchasing of goods, commodities and services in the respective
currencies.
The Company evaluates exchange rate exposure arising from foreign
currency transactions and the Company follows established risk
management policies, including the use of derivatives like foreign
exchange forward contracts to hedge exposure to foreign currency risk.
Credit risk
Credit risk arises from the possibility that counter party may not be
able to settle their obligations as agreed. To manage this, the Company
periodically assesses the financial reliability of customers, taking
into account the financial condition, current economic trends, and
analysis of historical bad debts and ageing of accounts receivable.
Individual risk limits are set accordingly.
The Company considers the probability of default upon initial
recognition of asset and whether there has been a significant increase
in credit risk on an ongoing basis throughout each reporting period. To
assess whether there is a significant increase in credit risk the
company compares the risk of a default occurring on the asset as at the
reporting date with the risk of default as at the date of initial
recognition. It considers reasonable and supportive forwarding-looking
information such as :
(i) Actual or expected significant adverse changes in business,
(ii) Actual or expected significant changes in the operating results of
the counterparty,
(iii) Financial or economic conditions that are expected to cause a
significant change to the counterparty''s ability to meet its
obligations,
(iv) Significant increases in credit risk on other financial
instruments of the same counterparty,
(v) Significant changes in the value of the collateral supporting the
obligation or in the quality of third-party guarantees or credit
enhancements.
Financial assets are written off when there is no reasonable
expectation of recovery, such as a debtor failing to engage in a
repayment plan with the Company. The Company categorises a loan or
receivable for write off when a debtor fails to make contractual
payments greater than 2 years past due. Where loans or receivables have
been written off, the Company continues to engage in enforcement
activity to attempt to recover the receivable due. Where recoveries are
made, these are recognised in profit or loss.
During the year the Company has recognised loss allowance of Rs,1359.14
crore under 12 months expected credit loss model. No significant
changes in estimation techniques or assumptions were made during the
reporting period.
Exemptions and exceptions availed
These financial statements, for the year ended 31st March, 2016, are
the first, the Company has prepared in accordance with Ind AS. For the
periods up to and including the year ended 31st March, 2015, the
Company prepared its financial statements in accordance with the
accounting standards notified under section 133 of the Companies Act
2013, read together with Paragraph 7 of the Companies (Accounts) Rules,
2014 (Indian GAAP).
Accordingly, the company has prepared its financial statements to
comply with Ind AS for the year ending 31 st March, 2016, together with
comparative date as at and for the year ended 31st March, 2015, as
described in the summary of significant accounting policies. In
preparing these financial statements, the company''s opening balance
sheet was prepared as at 1st April, 2014, 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 1st April, 2014 and the financial
statements as at and for the year ended 31st March, 2015.
Exemptions:
Ind AS 101 allows first-time adopters certain exemptions from the
retrospective application of certain requirements under Ind AS. The
Company has applied the following exemptions:
- Certain items of Land and buildings (other than investment
properties) have been measured at fair value at the date of transition
to Ind AS.
- Appendix C to Ind AS 17 requires an entity to assess whether a
contract or arrangement contains a lease. In accordance with Ind AS 17,
this assessment should be carried out at the inception of the contract
or arrangement. However, the Company has done the assessment of lease
in contracts based on conditions in prevailing as at the date of
transition.
- The Company has elected to apply previous GAAP carrying amount of its
investment in subsidiaries, associates and Joint venture as deemed cost
as on the date of transition to Ind AS.
- The Company has recognised financial assets and intangible assets as
per Appendix A to Ind AS 11 on Service Concession Arrangements, based
on the previous GAAP carrying amounts as at the date of transition.
Exceptions:
The following mandatory exceptions have been applied in accordance with
Ind AS 101 in preparing the financial statements.
(a) Estimates
The estimates at 1st April, 2014 and at 31st March, 2015 are consistent
with those made for the same dates in accordance with Indian GAAP
(after adjustments to reflect any differences if any, in accounting
policies) apart from the following items where application of Indian
GAAP did not require estimation:
- 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 as at the transition date and
as of 31st March, 2015.
(b) Derecognition of financial assets and financial liabilities
The Company has elected to apply the derecognition requirements for
financial assets and financial liabilities in Ind AS 109 prospectively
for transactions occurring on or after the date of transition to Ind
AS.
(c) Classification and measurement of financial assets
The Company has classified the financial assets in accordance with Ind
AS 109 on the basis of facts and circumstances that exist at the date
of transition to Ind AS.
xNotes to the reconciliation of equity as at 1st April, 2014 and 31st
March, 2015 and total comprehensive income for the year ended 31st
March, 2015
A. Fair Value as deemed cost - Property Plant and Equipment (PP&E)
The Company has elected the option of fair value as deemed cost for
Land and Building as on the date of transition to Ind AS. This has
resulted in increase ofRs, 1108.25 crore in the value of land and
buildings with corresponding increase in retained earnings of Rs,
804.48 crore and deferred tax liability of Rs, 303.77 crore. Further,
the company has also recognised the revision in useful life as on date
of transition to Ind AS to retained earnings and deferred tax
liability.
During the year ended 31st March, 2015, the Company has sold some of
the land and building which was fair valued as on the transition date.
Under Ind AS, such sale has resulted into reduction of profit on sale
of land and building by Rs, 157.99 crore, (Rs, 47.63 crore and Rs,
110.36 crore has been reduced from other income and exceptional items
respectively).
B. Arrangement containing the lease
The Company has entered into subcontracting arrangement with one of the
vendor which contains the lease. The arrangements have been classified
as finance lease based on the terms of the agreement. Leased assets
ofRs, 14.39 crore, Accumulated depreciation ofRs, 4.80 crore and
finance lease obligation of Rs, 13.63 crore have been recognised as on
the date of transition to Ind AS.
During the year ended 31st March, 2015, the depreciation of Rs, 2.40
crore has charged on the leased assets, interest expense of Rs, 1.15
crore has been recognised on the finance lease obligations and
subcontracting charges of Rs, 3.58 crore, to the extent of lease
portion, recognised under Indian GAAP have been reversed.
C. Service concession arrangements
The Company has entered into Power Distribution Franchise Agreement
(''DFA'') with Maharashtra State Electricity Distribution Company Ltd
(''MSEDCL). The arrangement has been classified as service concession
arrangement (SCA). On the transition date, the Company has reclassified
the PP&E of Rs, 9.85 crore and capital work in progress ofRs, 19.57
crore at the existing carrying value as at the transition date to the
financial asset of Rs, 5.32 crore and intangible asset ofRs, 24.10
crore.
In respect of capital expenditure incurred under SCA during the
F.Y2014-15, the Company has derecognised the PP&E and recognised the
financial assets and intangible assets in line with the accounting
policy on SCA.
The depreciation of Rs, 2.09 crore on PP&E under Indian GAAP has been
reversed as the financial assets and intangible assets are recognised
under Ind AS. Further the amortisation of Rs, 3.93 crore on intangible
assets have been provided and the financial assets are carried at
amortised cost by accretion of interest income ofRs, 0.63 crore at
effective interest rate during the year ended 31st March, 2015.
The SCA is considered as discontinued operation w.e.f 12th August, 2015
and accordingly, the profit or loss on discontinued operations have
been presented separately (Refer Note 51 for further discussion on
SCA).
D. Recognition of investment property
The investment properties are reclassified from PP&E and presented
separately amounting to Rs, 5.64 crore (WDV as on 1-04-2014) as on date
of transition to Ind AS by reclassifying from PP&E.
The depreciation ofRs, 0.08 crore have been provided for the year ended
31st March, 2015.
E. Loan considered as equity contribution
The Company had given loan to one of the erstwhile subsidiary in
earlier years, having outstanding amount of Rs, 11.20 crore as on
transition date. In 2008, the investment in subsidiary was sold to
third party. As per the terms and conditions of the loan, the loan
given was in the nature of equity contribution and hence under Ind AS,
the same would have been accounted for as equity investment. As the
original investment in subsidiary has been disposed of, the loan
outstanding as on transition date has been adjusted in opening retained
earnings.
F. Financial guarantee
The Company has issued the financial guarantee on behalf of its
subsidiaries for the borrowings taken by them. As on date of transition
to Ind AS, the Company has recognised financial guarantee obligation at
fair value amounting to Rs, 98.57 crore (31st March, 2015: Rs, 81.55
crore) with corresponding recognition of financial guarantee
receivable.
The guarantee fee income recognised under Indian GAAP has been
reclassified as interest income on guarantee fee receivable and other
income being amortisation of financial guarantee obligation. Thus, Rs,
8.29 crore has been reclassified from guarantee fee to interest income
during the year ended 31st March, 2015.
G. Bills discounted with recourse
Under Indian GAAP, trade receivables derecognised by way of bills of
exchange have been shown as contingent liability since there is
recourse clause. Under Ind AS, the trade receivables have been restated
with corresponding recognition of short term borrowings of Rs, 34.72
crore as on 31 st March, 2015.
H. Expected credit loss
Under Indian GAAP, the Company has created provision for impairment of
trade receivables consist only in respect of specific amount for
incurred loss. Under Ind AS, impairment allowance has been determined
based on expected credit loss model (ECL). Due to this model, the
Company impaired its trade receivables by Rs, 60.61 crore as on the
transition date which has been recognised in retained earnings (net of
deferred tax) of Rs, 40.00 crore. The impairment of Rs, 10.40 crore for
the year ended 31 st March, 2015 has been recognised in the statement
of profit and loss.
The interest income of Rs, 4.47 crore is accrued during the year ended
31st March, 2015 on trade receivables discounted to present value as on
transition date on account of expected delay under ECL.
I. Revaluation surplus under Indian GAAP
The Company has elected cost model for its PP&E and thus, the
revaluation surplus existing as on the transition date under Indian
GAAP amounting to Rs, 13.62 crore has been derecognised in the retained
earnings on the date of transition.
Accordingly, the transfer of proportionate share of revaluation surplus
of Rs, 2.84 crore to profit & loss on sale of land under Indian GAAP
have been reversed under Ind AS during the year ended 31st March, 2015.
J. Proposed dividend
Under Indian GAAP, proposed dividend including dividend distribution
tax (DDT), are recognised as liability in the period to which they
relate, irrespective of when they are declared. Under Ind AS, proposed
dividend is recognised as a liability in the period in which it is
declared by the Company, usually when approved by shareholders in a
general meeting, or paid.
Therefore, the dividend liability (proposed dividend) including
dividend distribution tax liability amounting to Rs, 29.33 crore has
been derecognised in the retained earnings as on the date of
transition.
Proposed dividend including dividend distribution tax liability
amounting to Rs, 29.33 crore which was derecognised as on the
transition date, has been recognised in retained earnings during the
year ended 31st March, 2015 as declared and paid.
K. Discontinued operations - Consumer products
The Company has classified its Consumer products segment as
discontinued operations w.e.f 19th February, 2015. Under Indian GAAP,
the statement of profit and loss includes the revenue, expense of
discontinued operations with separate disclosure of profit and income
tax on the statement of profit and loss.
Under Ind AS, the Company has excluded the revenue, expense of
discontinued operations and presented profit and tax expenses related
to discontinued operation as single line items.
Under Ind AS, assets, liabilities and other comprehensive income
related to discontinued operations have been separately presented on
the balance sheet (Refer Note 51).
L. Defined benefit obligation
Both under Indian GAAP and Ind AS, the Company recognised costs related
to its post-employment defined benefit plan on an actuarial basis.
Under Indian GAAP, the entire cost, including actuarial gains and
losses, are charged to profit or loss. Under Ind AS, remeasurements
[comprising of actuarial gains and losses, the effect of the asset
ceiling, excluding amounts included in net interest on the net defined
benefit liability and the return on plan assets excluding amounts
included in net interest on the net defined benefit liability] are
recognised in balance sheet through other comprehensive income. Thus,
employee benefits expense is reduced by Rs, 9.67 crore and is
recognised in other comprehensive income during the year ended 31st
March, 2015.
M. Discontinued Operations - Power distribution
The Company has classified its Power distribution business as
discontinued operations w.e.f 12th August, 2015.
Under Ind AS, the company has excluded the revenue, expense of
discontinued operations and presented profit and tax expenses related
to discontinued operation as single line items.
Under Ind AS, assets, liabilities and other comprehensive income
related to discontinued operations have been separately presented on
the balance sheet (Refer Note 51).
N. Cash discount
Under Indian GAAP, cash discount ofRs, 7.29 crore was recognised as
part of other expenses which has been adjusted against the revenue
under Ind AS during the year ended 31st March, 2015.
O. Excise duty
Excise duty of Rs, 293.43 crore on account of sale of goods have been
included in revenue as it is on own account because it is a liability
of the manufacturer which forms part of the cost of production,
irrespective of whether the goods are sold or not.
4. Standards issued but not yet effective
The standard issued, but not yet effective up to the date of issuance
of the Company financial statements is disclosed below. The Company
intends to adopt this standard when it becomes effective.
Ind AS 115 Revenue from Contracts with Customers
Ind AS 115 was issued in February 2015 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 the
consideration to which an entity expects to be entitled in exchange for
transferring goods or services to a customer. The new revenue standard
will supersede all current revenue recognition requirements under Ind
AS. This standard will come into force from accounting period
commencing on or after 1st April, 2018. The Company will adopt the new
standard on the required effective date. During the current year, the
Company performed a preliminary assessment of Ind AS 115, which is
subject to changes arising from a more detailed ongoing analysis.
5. Figures for the previous year have been regrouped wherever
necessary.
Mar 31, 2013
1. During the year, the Company has entered into a definite agreement
dated 11 th January, 2013 for acquisition of Compact Fluorescent Lamps
(CFL) business of Karma Industries located at Baddi, Himachal Pradesh.
(c) The Company makes contribution towards superannuation fund as a
defined contribution''retirement benefit plan for qualifying employees.
To fund the benefits, the Company is required to contribute a specified
percentage of salary to the respective TrustSrwhich administer the
retirement benefit schemes.
(d) The Company makes annual contributions to the Crompton Greaves
Limited Gratuity Trust, which is funded defined benefit plan for
qualifying employees. The Scheme provides for lump sum payment to
vested employees at retirement, death while in employment or on
termination of employment as per the Company''s Gratuity Scheme. Vesting
occurs upon completion of five years of service.
(e) The Company provides post retirement medical benefits to qualifying
employees.
(f) The actuarial valuation of plan assets and the present value of the
defined benefit obligation were carried out at 31st March, 2013. 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.
(g) Discount rate is based on the prevailing market yields of Indian
Government securities as at the balance sheet date for the estimated
term of the obligations.
(h) Expected rate of return on the plan assets is based on the average
long-term rate of return expected on investments of the Fund during the
estimated term of the obligations.
(i) The salary escalation rate is arrived after taking into
consideration the seniority, the promotion and other relevant factors,
such as, demand and supply in employment market.
Ill Segment Identification, Reportable Segment and definition of each
Reportable Segment:
(a) Primary segment:
In the opinion of the management, the business segment comprises the
following :
(i) Power Systems : Transformer, Switchgear, Turnkey Projects and Power
SCADA (Supervisory control and data acquisition systems)
(ii) Consumer Products : Fans, Appliances, Luminaires, Light Sources
and Pumps
(iii) Industrial Systems : Electric Motors, Alternators, Drives,
Traction Electronics/and SCADA
(iv) Other : Power Distribution
(b) Primary / Secondary segment reporting format:
(d) Reportable segments:
Reportable segments have been identified as per the quantitative
criteria specified in the Accounting Standard.
(e) Segment revenue and results:
The expenses and incomes which are not directly attributable to any
business segment are shown as unallocable expenditure (net of
unallocated income).
(f) Segment assets and liabilities:
Segment assets include all operating assets used by the business
segment and mainly consist of fixed assets,
(g) Inter segment transfer:
2. (a) The Company has not entered into any finance lease as specified
in Accounting Standard (AS) 19 Leases. The Company has, however taken
various residential / commercial premises and plant and equipments
under cancellable operating lease. These lease agreements are normally
renewed on expiry, wherever required.
(b) There are no exceptional / restrictive covenants in the lease
agreements.
3. Amounts shown as - 0.00 represent amounts below 150,000 (Rupees
Fifty Thousand).
4. Figures for the previous year have been re-grouped / re-classified
whenever necessary.
Mar 31, 2012
1. Depreciation
(a) owned assets:
(1) Revalued Assets
Depreciation is provided on straight line method on the values and at
the rates specified in schedule Xiv to the companies act, 1956. the
difference between depreciation provided on revalued amount and on
historical cost is recouped out of revalution reserve.
(2) Assets carried at historical cost
Depreciation on the fixed assets carried at historical cost is provided
at the rates and in the manner specified in schedule Xiv to the
companies act, 1956, on written down value method other than on
buildings and Plant and equipments, which are depreciated on a straight
line method.
(b) Leased Assets:
(1) Leasehold land are amortised over the period of lease.
(2) Buildings constructed on leasehold land are depreciated at normal
rate as prescribed in schedule Xiv to the companies act, 1956, where
the lease period of land is beyond the life of the building.
(3) In other cases, buildings constructed on leasehold land are
amortised over the lease period of the land.
2. Borrowing costs
(a) Borrowing costs that are attributable to the acquisition,
construction or production of a qualifying asset are capitalised as
part of the cost of such asset till such time as the asset is ready for
its intended use or sale. a qualifying asset is an asset that
necessarily requires a substantial period of time (generally over
tweLVe months) to get ready for its intended use or sale.
(b) All other borrowing costs are recognised as expense in the period
in which they are incurred.
3. Segment accounting
(a) Segment accounting policies segment accounting policies are in line
with the accounting policies of the company. in addition, the following
specific accounting policies have been followed for segment reporting:
(1) segment revenue includes Sales and other income directly
identifable with / allocable to the segment including inter-segment
revenue.
(2) expenses that are directly identifable with / allocable to segments
are considered for determining the segment result. expenses which
relate to the company as a whole and not allocable to segments are
included under unallocable expenditure.
(3) income which relates to the company as a whole and not allocable to
segments is included in unallocable income.
(4) segment result includes margins on inter-segment and Sales which
are reduced in arriving at the profit before tax of the company.
(5) segment assets and liabilities include those directly identifable
with the respective segments. unallocable assets and liabilities
represent the assets and liabilities that relate to the company as a
whole and not allocable to any segment.
(b) inter-segment transfer pricing segment revenue resulting from
transactions with other business segments is accounted on the basis of
transfer price agreed between the segments. such transfer prices are
either determined to yield a desired margin or agreed on a negotiated
basis.
4. Taxes on Income
(a) Tax on Income for the current period is determined on the basis of
estimated taxable income and tax credits computed in accordance with
the provisions of the income tax act, 1961 and based on the expected
outcome of assessments / appeals.
(b) deferred tax is recognised on timing differences between the
accounted income and the taxable income for the year and quantifed
using the tax rates and tax laws enacted or substantively enacted as on
the balance sheet date.
(c) deferred tax assets relating to unabsorbed depreciation / business
losses are recognised and carried forward to the extent there is
virtual certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
(d) other deferred tax assets are recognised and carried forward to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
5. provisions, Contingent liabilities, Contingent assets and
Commitments
(a) provisions are recognised for liabilities that can be measured only
by using a substantial degree of estimation, if:
(1) the company has a present obligation as a result of a past event;
(2) a probable outflow of resources is expected to settle the
obligation; and
(3) the amount of the obligation can be reliably estimated.
(b) Reimbursement by another party, expected in respect of expenditure
required to settle a provision, is recognised when it is virtually
certain that reimbursement will be received if, obligation is settled.
(c) contingent liability is disclosed in the case of:
(1) a present obligation arising from past events, when it is not
probable that an outflow of resources will be required to settle the
obligation;
(2) a present obligation when no reliable estimate is possible;
(3) a possible obligation arising from past events, unless the
probability of outflow of resources is remote.
(d) contingent assets are neither recognised nor disclosed.
(e) commitments include the amount of purchase order (net of advance)
issued to parties for completion of asset.
(f) provisions, contingent liabilities, contingent assets and
commitments are reviewed at each balance sheet date.
(b) disclosures as required by Accounting standard (As) 14 Accounting
for Amalgamations:
scheme of amalgamation of cg capital and investments limited with the
company
(1) in accordance with the scheme of amalgamation (the 'scheme') of the
cg capital and investments limited (the 'cgcil') with the company, as
sanctioned by the Honourable High court of Judicature at Bombay, vide
their order dated 20th august, 2011, the undertaking of cgcil, being
all its assets and properties, both movable and immovable, industrial
and other licences, all rights and obligations under the contracts,
trademarks, all other interests, rights and powers of every kind, etc.,
and all it's debts, liabilities including contingent liabilities,
duties and obligations, has been transferred to and vested in the
company retrospectively with effect from 1st april, 2010 (the
'appointed date'). the scheme has, accordingly, been given effect to in
the Financial statements. the effective date of amalgamation is 20th
september, 2011.
(2) cgcil was engaged in the business of investments activities.
(3) the amalgamation had been accounted for under the 'pooling of
interest method' as prescribed by accounting standard (as) 14
accounting for amalgamations, specified by the companies (accounting
standards) Rules, 2006. accordingly, the assets, liabilities and
reserves of cgcil as at 31st March, 2010 have been taken over at their
book values. (as stipulated in the said scheme, the reserves of the
transferor company have been transferred to the respective reserves.)
(4) cgcil, being a wholly owned subsidiary of the company, the entire
paid-up share capital had been cancelled and the company stands
dissolved without winding-up.
Rs. crore
2011-12 2010-11
6. Contingent Liabilities And Commitments
i) Contingent liabilities:
(to the extent not provided for)
(a) Claims against the company not
acknowledged as debts 9.26 1.35
(b) Sales tax liability that may arise
in respect of matters in appeal 8.11 5.45
(c) Excise duty/service tax liability
that may arise in respect of
matters in appeal 7.07 10.40
(d) Income tax liability that may arise
in respect of matters in appeal 0.38 8.47
(e) Guarantees/securities given on
behalf of subsidiary companies 175.30 123.70
(f) Bills discounted 87.17 100.87
ii) Commitments:
Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances) 38.79 28.50
7. The Company, during the year, has been awarded a contract as
franchisee of Maharashtra State Electricity Distribution Company
Limited (MSEDCL) for power distribution in Jalgaon Circle in
Maharashtra for a period of 10 years and an agreement has since been
executed between the Company and MSEDCL on 1st June, 2011.
8. Disclousre as Required by Accounting Standard (as) 15 Employee
Benefits:
(a) Defined contribution plans [Refer policy Note 12(b)(i), supra]
Amount of Rs. 15.17 crore (previous year Rs. 15.32 crore) is recognised as
an expense and included in Employee benefits [Refer Note 26, supra]
(c) The Company makes contribution towards provident fund and
superannuation fund as a defined contribution retirement benefit plan for
qualifying employees. To fund the benefits, the Company is required to
contribute a specified percentage of salary to the respective Trusts,
which administer the retirement benefit schemes.
(d) The Guidance issued by the Accounting Standard Board (ASB) on
implementing the Accounting Standard states that the provident funds
set up by employers, which require interest shortfall to be met by the
employer, needs to be treated as defined benefit plan. The Fund does not
have any existing deflcit or interest shortfall. As per the Company's
Actuary, any future obligation arising due to interest shortfall cannot
be measured reliably. However, having regard to the assets of the Fund
and return on the investments, the Company does not expect any
deficiency in the foreseeable future.
(e) The Company makes annual contributions to the Crompton Greaves
Limited Gratuity Trust, which is funded defined benefit plan for
qualifying employees. The Scheme provides for lump sum payment to
vested employees at retirement, death while in employment or on
termination of employment as per the Company's Gratuity Scheme. Vesting
occurs upon completion of five years of service.
(f) The Company provides post retirement medical benefits to qualifying
employees.
(g) The actuarial valuation of plan assets and the present value of the
defined benefit obligation were carried out at 31st March, 2012. 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.
(h) Discount rate is based on the prevailing market yields of Indian
Government securities as at the balance sheet date for the estimated
term of the obligations.
(i) Expected rate of return on the plan assets is based on the average
long-term rate of return expected on investments of the Fund during the
estimated term of the obligations.
(j) The salary escalation rate is arrived after taking into
consideration the seniority, the promotion and other relevant factors,
such as, demand and supply in employment market.
III segment Identification, Reportable segment and defnition of each
Reportable segment:
(a) Primary segment
In the opinion of the management, the business segment comprises the
following :
(i) Power Systems : Transformer, Switchgear, Turnkey Projects, Power
Distribution and Power SCADA (Supervisory control and data acquisition
Systems) (ii) Consumer Products : Fans, Appliances, Luminaires, Light
Sources and Pumps (iii) Industrial Systems : Electric Motors,
Alternators, Drives, Traction Electronics and SCADA
(b) Primary / Secondary segment reporting format:
(i) The risk-return profile of the Company's business is determined
predominantly by the nature of its Products and services. Accordingly,
the business segment constitutes the primary segment for disclosure of
segment information. (ii) In respect of secondary segment information,
the management has identified its geographical segments as (a) Domestic
and (b) Overseas. The secondary segment information has been disclosed
accordingly.
(c) Segment identification:
Business segments have been identified on the basis of the nature of
Products / services, the risk-return profile of individual businesses,
the organizational structure and the internal reporting system of the
Company.
(d) Reportable segments:
Reportable segments have been identified as per the quantitative
criteria specified in the Accounting Standard.
(e) Segment revenue and results:
The expenses and incomes which are not directly attributable to any
business segment are shown as unallocable expenditure (net of
unallocated income).
(f) Segment assets and liabilities:
Segment assets include all operating assets used by the business
segment and mainly consist of fixed assets, trade receivables and
inventories. Segment liabilities primarily include trade payables and
other liabilities. Common assets and liabilities which cannot be
allocated to any of the segments are shown as a part of unallocable
assets / liabilities.
(g) Inter segment transfer:
Inter segment prices are normally negotiated amongst segments with
reference to the costs, market price and business risks. Profit or loss
on inter segment transfers are eliminated at the Company level.
9. (a) The Company has not entered into any finance lease as specified
in Accounting Standard (AS) 19 Leases. The Company has, however taken
various residential / commercial premises and Plant and equipments
under cancellable operating lease. These lease agreements are normally
renewed on expiry, wherever required. (b) There are no
exceptional/restrictive covenants in the lease agreements.
10. Amounts shown as 0.00 represents amount below Rs. 50,000 (Rupees
fifty thousand).
11. During the year, the revised Schedule VI to the Companies Act,
1956 was notified by the Ministry of Corporate Affairs. The Company has
reclassified the figures of the previous year to confirm to the current
year's classification, and the adoption of revised Schedule VI does not
impact recognition and measurement principles followed for preparation
of Financial statements.
Mar 31, 2010
1 The Company has, in its extra ordinary general meeting held on 24th
February, 2010, increased its authorised share capital from Rs.125
crore to Rs. 260 crore comprising of 130,00,00,000 number of equity
shares of Rs. 2 each and declared bonus shares in the ratio of three
shares for every four shares held by utilising securities premium
account.
2 The Company has, on 27th August, 2009, acquired balance 81,60,000
equity shares in Brook Crompton Greaves Limited (BCGL), for a
consideration of Rs. 6.40 crore, making it to a wholly owned subsidiary
of the Company.
3 The Board of Directors of the Company has approved the Scheme of
Amalgamation of BCGL, with effect from 1 st April, 2009 at their
meeting held on 28th January, 2010. Pending approval of Honourable High
Court of Judicature of Bombay, no effect of the amalgamation has been
given in the financial statements.
4 The Company has, during the year, divested its entire investment in
Malanpur Captive Power Limited for consideration of Rs. 51.40 crore to
Avantha Power & Infrastructure Limited, an associate of the Company.
Profit on sale of above investment of Rs. 40.38 crore has been
disclosed as an extraordinary item in the profit and loss account.
5 The Company has, during the year, entered into an arrangement for the
acquisition of Power Technology Solutions Limited (PTS), based in
United Kingdom (UK) at an approximate Enterprise Value of ã30 million.
PTS is a high voltage electrical engineering company which provides
consultancy, technical and engineering support to Regional Electricity
Companies (RECs).
6 Secured Loans
(a) Term loans from banks are secured by way of equitable mortgage of
land and buildings and by way of hypothecation of specific movable
properties at certain locations.
(b) Working Capital Demand Loans from banks are secured by
hypothecation of stocks and book debts, present and future.
7 There are no amounts due and outstanding to be credited to the
Investor Education and Protection Fund as at 31st March, 2010.
8 Other liabilities include Rs. 8.30 crore (Previous year Rs. 8.30
crore) received as advance against sale of immovable property of the
Company. As per the agreements with the buyers, the Company is
entitled to forfeit the said amounts, if the buyers do not comply with
the conditions of sale within the stipulated time. Since, the buyers
have failed to comply with the conditions and hence, the Company has
forfeited these amounts received in accordance with the terms of the
agreements. The buyers have filed suits in the Courts for recovery of
the advances paid by them. The Company contends that as per the force
majeure clause of the agreements, is not required to be refunded.
Pending disposal of the cases by the Courts, the Company, as a measure
of prudence, has not recognised the said amount in the profit and loss
account.
9 Disclosures as required by Accounting Standard (AS) 15 Employee
Benefits: (Contd.)
(d) The Company makes annual contributions to the Crompton Greaves
Limited Gratuity Trust, which is funded defined benefit plan for
qualifying employees. The Scheme provides for lump sum payment to
vested employees at retirement, death while in employment or on
termination of employment as per the Companys Gratuity Scheme. Vesting
occurs upon completion of five years of service.
(e) The Company provides post retirement medical benefits to qualifying
employees.
(f) The actuarial valuation of plan assets and the present value of the
defined benefit obligation were carried out at 31st March, 2010. 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.
(g) The salary escalation rate is arrived after taking into
consideration seniority, promotion and other relevant factors such as
demand and supply in employment market.
10 Disclosures as required by Accounting Standard (AS) 17 Segment
Reporting (Contd.) Ill Segment Identification, Reportable Segment and
definition of each Reportable Segment:
(a) Primary segment
In the opinion of the management, the business segment comprises the
following :
(i) Power Systems : Transformer, Switchgear, Turnkey Projects
(ii) Consumer Products : Fans and Appliances, Luminaires, Light Sources
and Pumps
(iii) Industrial Systems : Electric Motors, Alternators and Drives
(b) Primary / Secondary segment reporting format:
(i) The risk-return profile of the Companys business is determined
predominantly by the nature of its products and services. Accordingly,
the business segment constitutes the primary segment for disclosure of
segment information.
(ii) In respect of secondary segment information, the management has
identified its geographical segments as (a) Domestic and (b) Overseas.
The secondary segment information has been disclosed accordingly.
(c) Segment identification:
Business segments have been identified on the basis of the nature of
products / services, the risk-return profile of individual businesses,
the organisational structure and the internal reporting system of the
Company.
(d) Reportable segments:
Reportable segments have been identified as per the quantitative
criteria specified in the Accounting Standard.
(e) Segment revenue and results:
The expenses and incomes which are not directly attributable to any
business segment are shown as unallocable expenditure (net of
unallocable income).
(f) Segment assets and liabilities:
Segment assets include all operating assets used by the business
segment and mainly consist of fixed assets, debtors and inventories.
Segment liabilities primarily include creditors and other liabilities.
Common assets and liabilities which cannot be allocated to any of the
segments are shown as a part of unallocable assets / liabilities.
(g) Inter segment transfer:
Inter segment prices are normally negotiated amongst segments with
reference to the costs, market price and business risks. Profit or loss
on inter segment transfers are eliminated at the Company level.
11 Disclosures as required by Accounting Standard (AS) 18 Related Party
Disclosures
i) List of related parties over which control exists:
Sr. Name of the Related Party Relationship
No.
1 CG Capital & Investments Limited Wholly owned Subsidiary
2 CG Energy Management Limited Wholly owned Subsidiary
3 CG PPI Adhesive Products Limited Subsidiary of CG Capital &
Investments Limited
4 Brook Crompton Greaves Limited Wholly owned Subsidiary (w.e.f. 27th
August, 2009)
5 Malanpur Captive Power Limited Subsidiary (upto 28th February, 2010)
(Sold during the year - refer Note No. 4)
6 CG International B.V. Wholly owned Subsidiary
7 CG Holdings Belgium N.V. Wholly owned subsidiary of CG International
B.V. (formerly Pauwels International N. V.)
8 CG Power Systems Belgium N.V. Subsidiary of CG Holdings Belgium N.V.
(formerly Pauwels Trafo Belgium N. V.)
9 Pauwels Trafo Gent N.V. Subsidiary of CG Holdings Belgium N.V.
10 CG Power Systems Ireland Limited Wholly owned subsidiary of CG Power
Systems Belgium N.V. (formerly Pauwels Trafo Ireland Limited)
11 CG Sales Networks France SA Subsidiary of CG Power Systems Belgium
N.V. (formerly Pauwels France S.A)
12 CG Power Systems USA Inc. Wholly owned subsidiary of CG Power
Systems Belgium N.V. (formerly Pauwels Transformers Inc.)
13 CG Sales Networks Americas Inc. Wholly owned subsidiary of CG
Holdings Belgium N.V. (formerly Pauwels Americas Inc.)
14 CG Power Systems Canada Inc. Wholly owned subsidiary of CG Power
Systems Belgium N.V. (formerly Pauwels Canada Inc.)
15 CG Service Systems Curacao N.V. Subsidiary of CG International B.V.
(formerly Pauwels Trafo Service N. V.)
16 PT. CG Power Systems Indonesia Subsidiary of CG Power Systems
Belgium N.V. (formerly PT. Pauwels Trafo Asia)
17 CG Holdings Hungary Kft. Subsidiary of CG Power Systems Belgium
N.V. (formerly CG Hungary Kft.)
18 CG Electric Systems Hungary Zrt. Wholly owned subsidiary of CG
Power Systems Belgium N.V. (formerly Ganz Transelektro Villamossagi
Zrt.)
19 CG Power Holdings Ireland Limited Wholly owned subsidiary of CG
International B.V. (formerly Microsol Holdings Limited)
20 Microsol Limited Wholly owned subsidiary of CG Power Holdings
Ireland Limited
21 CG Automation Systems UK Limited Wholly owned subsidiary of CG Power
Holdings Ireland Limited {formerly Microsol (UK) Limited}
22 Viserge Limited Subsidiary of CG Power Holdings Ireland Limited
23 CG Automation Systems USA Inc. Subsidiary of MSE Power Systems Inc.
(formerly Microsol Inc.)
24 CG Service Systems France SAS Wholly owned subsidiary of CG
International B.V. {formerly Societe Nouvelle de Maintenance de
Transformateurs (Sonomatra)}
25 M.S.E. Power Systems Inc. Subsidiary of CG International B.V.
26 CG Holdings Germany GmbH Wholly owned subsidiary of CG International
B.V. (formerly Crompton Greaves Germany GmbH)
During the year, Transverticum Kft., wholly owned subsidiary of CG
Electric Systems Hungary Zrt. and M.S.E West LLC, wholly owned
subsidiary of M.S.E Power Systems Inc. have been liquidated.
28 Disclosures as required by Accounting Standard (AS)18 Related Party
Disclosures (Contd.)
ii) List of related parties with whom transactions were carried out
during the year and description of relationship: Subsidiaries:
1 CG Capital & Investments Limited
2 CG Energy Management Limited
3 CG PPI Adhesive Products Limited
4 Malanpur Captive Power Limited (upto 28th February, 2010)
5 Brook Crompton Greaves Limited (w.e.f. 27th August, 2009)
6 CG International B.V.
7 PT. CG Power Systems Indonesia
8 CG Power Systems USA Inc.
9 CG Sales Networks Americas Inc.
10 CG Power Systems Belgium N.V.
11 CG Power Systems Canada Inc.
12 CG Holdings Belgium N.V.
13 CG Electric Systems Hungary Zrt.
14 CG Automation Systems UK Limited Associates:
1 CG Lucy Switchgear Limited
2 International Components India Limited
3 Brook Crompton Greaves Limited (upto 26th August, 2009)
4 Avantha Power & Infrastructure Limited (w.e.f. 24th November, 2009)
Key Management Personnel:
1 Gautam Thapar - Chairman and Promoter Director
2 Sudhir Trehan - Managing Director
Other Related Parties in which a director is interested:
1 Ballarpur Industries Limited
2 Solaris Chemtech Limited
3 BILT Graphic Paper Products Limited
4 Asia Aviation Limited
5 Avantha Holdings Limited (formerly NewQuest Corporation Limited)
6 Salient Business Solutions Limited
7 Avantha Technologies Limited
8 Avantha Reality Limited
9 Korba West Power Company Limited
10 Malanpur Captive Power Limited (w.e.f 1st March, 2010)
11 Corella Investments Limited
12 Lustre International Limited
13 Solaris Holdings Limited
14 Janpath Investments & Holdings Limited
15 KCT Chemicals & Electricals Limited
16 Sabah Forest Industries Sdn. Bhd.
29 (a) The Company has not entered into any finance / operating lease
as specified in Accounting Standard (AS) 19 Leases. The Company has,
however taken various residential / commercial premises and plant and
equipments under cancellable operating lease. These lease agreements
are normally renewed on expiry, wherever required. (b) There are no
exceptional / restrictive covenants in the lease agreements.
32 As per the Accounting Standard (AS) 28 Impairment of Assets, the
Company has reviewed potential generation of economic oenetits from
tixed assets. According1/, impairment loss amounting to Rs. nil
(Previous year Rs. 5.36 crore) provided in prior years have been
reversed during trie year.
36 Figures for the previous year have been re-grouped / re-classified
wherever necessary.