Notes to Accounts of Huhtamaki India Ltd.
Dec 31, 2022
Goodwill of Rs. 623.8 Mn pertains to below merger/acquisitions:
(a) Merger of Webtech Labels Private Limited in 2015 with Huhtamaki India Limited - Rs. 96.9 Mn
(b) Acquisition of Business of Ajanta Packaging in 2018 - Rs. 467.1 Mn
(c) Acquisition of Business of Mohan Mutha Polytech Private Limited, Sricity in 2020 - Rs. 59.8 Mn
Considering the nature of business and operations of the Company, the management has identified the whole entity as single Cash Generating unit (CGU) for the purpose of impairment testing. Based on the impairment analysis performed, the management has not identified any indicators of impairment were identified for the years ended December 31, 2022 and 2021. Following key assumptions were considered while performing impairment testing:
a. Long Term sustainable growth rates - 5% (Previous year: 5%)
b. Weighted Average Cost of Capital % before Tax (discount rate) - 11% (Previous year: 10%)
The recoverable amount is based on fair value less costs to sell, estimated using discounted cash flows.The fair value measurement has been categorised as Level 3 fair value.
The Projections cover a period of five years, which is considered to be an appropriate timescale over which to review and consider annual performances before applying a fixed terminal value multiple to the final year cashflows. The growth rates used to estimate future performance are based on past performance and current developments. Value in use has been determined by discounting the future cash flows generated from the continuing use. A sensitivity analysis around the base assumptions has been performed and it has been concluded that no reasonable changes in key assumptions would cause the recoverable amount to be less than the carrying value.
Non-current assets or disposal groups comprising of assets and liabilities are classified as âheld for saleâ when all the following criteria are met: (i) decision has been made to sell, (ii) the assets are available for immediate sale in its present condition, (iii) the assets are being actively marketed and (iv) sale has been agreed or is expected to be concluded within 12 months of the Balance Sheet date.
Subsequently, such non-current assets and disposal groups classified as âheld for saleâ are measured at the lower of its carrying value and fair value less costs to sell. Non-current assets held for sale are not depreciated or amortised.
D. Terms/rights attached to equity shares:
The Company has only one class of Issued, Subscribed and Paid-up Equity Capital having a par value of Rs. 2 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends 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.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
a. The Company has availed Term Loan from Bank which was backed by a Corporate Guarantee given by Huhtamaki Oyj. The loan, carrying an interest @ 5.7% p.a. has been repaid on October 05, 2022.
b. The Company has availed External Commercial Borrowings from Huhtamaki Finance Company V B.V., Netherlands (fellow subsidiary) through issuance of Rupee Denominated Bonds in two tranches. This loan is carrying an interest @6.5% p.a. and is due for repayment on December 15, 2025 (first tranche of Rs. 1,000 Mn) and February 9, 2026 (second tranche of Rs. 1,000 Mn)
c. The Company had availed unsecured interest free Sales Tax deferral loan from the Government of Telangana for its Hyderabad (Bollarum) factory, in accordance with their Sales Tax deferral scheme. The above amount was repayable within 14 years from the date of availment of the loan. The last installment of loan was repaid on March 31, 2021.
a) Working capital demand loans from Banks are unsecured and short-term in nature ranging between repayable within 7 to 90 days and carrying interest rates ranging from 3.65% p.a to 7.45% p.a.
b) Commercial Papers are unsecured, unlisted and short-term in nature ranging between 30 to 180 days and carrying interest rates ranging from 4.45% p.a to 7.40 % p.a.
c) Cash Credit facilty availed from a bank is unsecured and short-term in nature ranging between repayable on demand and within 12 months carrying interest rates ranging from 4.25% p.a to 7.45% p.a.
d) Interest accrued but not due includes Rs. 29.5 Mn to be paid to Huhtamaki Finance Co. (V.B.V) in regard to External Commerical Borrowing. (December 31, 2021: Rs. 29.5 Mn) (Refer Note 47)
b. Net Gain on sale of current investment of Rs. 0.4 Mn (December 31, 2021: Rs. 6.9 Mn) and loss towards diminution in fair value of current investment is Rs. (0.0) Mn (December 31, 2021: Rs. (0.2) Mn).
c. In the current year, Liabilities no longer required written back has been shown as a separate line item under Other income to ensure better presentation. Accordingly, corresponding figure for previous year of Rs. 3.9 Mn has been shown separately, which was previously grouped under other non operating income, in line with current year.
In the current year, Other borrowing cost - Corporate guarantee commission has been shown as a separate line item under finance cost to ensure better presentation. Accordingly, corresponding figure for previous year has been shown separately, which was previously grouped under interest to bank, in line with current year. Similarly, interest paid on ECB in the previous year of Rs. 123.1 Mn has also been grouped under interest to others.
b) Details of CSR expenditure:
The CSR activities of the Company includes any or all of the sectors/activities as prescribed by Schedule VII of the Companies Act, 2013 amended from time to time.The Company periodically reviews the sectors/activities relating to the CSR expenditure and if necessary makes changes to those sectors/activities.
The Company has incurred and paid Rs. 20.8 Mn (Previous Year: Rs. 28.0 Mn) towards Corporate Social Responsibility activities. Further, no amount has been spent on construction/acquisition of an asset of the Company.
The amount required to be spent under Section 135 of the Companies Act, 2013 for the year 2022 is Rs. 20.2 Mn (Previous Year: Rs. 27.7 Mn) i.e. 2% of average net profits for last three financial years, calculated as per section 198 of the Companies Act, 2013.
(vi) Nature of CSR activities include
- Promotion of healthcare activities which include providing covid care equipments, protection kit to frontline worker, sanitation system to houses, toilet modification, safe drinking water, oxygen contentrators, distribution of battery operated hand sprayers and hydrocloride liquid,supply of medical oxygen cylinders and pipelines, free vaccination camps.
- Promotion of Education activities which include making library setup, school building repairs, distribution of school bags, shoes.
- Environment sustainability activities which include green cover through plantation
- Communication and societal development which include distribution of Ration bags
(vii) Above includes a contribution of Rs. 20.2 Mn (2021: Rs. 15 Mn) to Huhtamaki Foundation which is is a Trust registered under Maharashtra Public Trust Act, 1950. The primary Objective of the Trust is to work in the area of environmental sustainability and recyclability.
(viii) The Company does not wish to carry forward excess amount of Rs. 0.6 Mn spent during the year (previous year: Rs. 0.3 Mn) against amount required to be spent under Section 135 of the Companies Act, 2013 for the year 2022 is Rs. 20.2 Mn (Previous year: Rs. 27.7 Mn).
(ix) The Company does not carry any provisions for Corporate social responsibility expenses for current year and previous year.
Consequent to the Board Meeting held on July 19, 2021, the Company announced a Voluntary Retirement Scheme (VRS) on July 20, 2021 for its eligible employees at the Thane plant. The scheme was open till July 22, 2021. In response to the scheme, 102 employees opted for the VRS which involved a pay-out cost of Rs. 309.8 Million. The results for the year ended December 31, 2021 include the impact of the VRS scheme and same has been disclosed as âExceptional Itemâ.
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44. Contingent Liabilities and Commitments A. Contingent Liabilities Claims against the Company not acknowledged as Debts |
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|
Particulars |
December 31, 2022 |
December 31, 2021 |
|
a. Excise Duty |
||
|
Matters in Appeal - Duty |
116.4 |
117.2 |
|
Matters in Appeal - Penalties |
113.8 |
110.4 |
|
Show Cause Notices - Duty |
0.8 |
47.4 |
|
Interest |
0.6 |
0.6 |
|
b. Service Tax |
||
|
Matters in Appeal - Tax |
38.4 |
38.4 |
|
Matters in Appeal - Penalties |
8.2 |
8.2 |
|
Show Cause Notices - Duty |
4.9 |
5.2 |
|
c. Custom Duty |
||
|
Matters in Appeal - Duty |
0.1 |
0.1 |
|
Matters in Appeal - Penalties |
2.1 |
2.1 |
|
Show Cause Notices -Custom |
0.8 |
0.8 |
|
d. GST |
||
|
Matters in Appeal - Tax |
0.2 |
0.2 |
|
Matters in Appeal - Penalties |
2.2 |
0.2 |
|
Show Cause Notices -GST |
0.1 |
1.8 |
|
e. Income Tax Demands in Appeal |
16.7 |
24.9 |
|
f. Sales Tax Demands in Appeal |
7.3 |
7.7 |
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g. Others |
7.2 |
13.1 |
Notes
i. It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above, pending resolution of the respective proceedings as it is determinable only on receipt of judgements/decisions pending with various forums/authorities.
ii. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.
iii. In February 2019, the Honorable Supreme Court of India in its judgement opined on the applicability of allowances that should be considered to measure obligations under Employees Provident Fund Act, 1952. The Company has been legally advised that there are interpretative challenges on the application of judgement retrospectively and therefore has currently not considered any probable obligations for past periods.
i. Lease Commitments
Rent expenses incurred on short term lease commitment for the years Rs. 26.2 Mn (December 31, 2021: Rs. 27.3 Mn)
Lease Commitments are the future cash out flows from the lease contracts on an undiscounted basis which are not recorded in the measurement of lease liabilities. These include potential future payments related to leases of low value assets and leases with term less than twelve months.
iv. The Company had entered into Lease - cum- Sale Agreement with Karnataka Industrial Area Development Board (âKIADBâ) on October 29, 2010. As per this agreement land of 40,473 sq. mtrs was allotted to the Company. The Company was required to complete civil constructions works, erect machineries and commence production within 24 months from the date of October 14, 2010 ensuring minimum 50 % utilization of land for manufacturing of flexible packaging material. The Company had applied for extension of deadline from time to time and paid the fees to concerned authorities. All payment including charges for delay has been paid and or provided and last extension application filed by the Company is still pending with KIADB. The Board of the Company has approved capital expenditure plan which will ensure the compliance of minimum utilization of land specified in this agreement.
45. Employee Benefit Plan I Defined Benefit Plans Description of the Plan
The Company has a defined benefit gratuity plan (funded). Gratuity is payable to all eligible employees of the Company on superannuation, death and resignation, in terms of the provisions of the Payment of Gratuity Act or as per the Companyâs Scheme whichever is more beneficial.
Governance
The Fund is in the form of a Company managed Trust ( Refer note 47). The Trustees of the Trust are responsible for the overall governance of the plan and to act in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term investment, risk management and funding strategy.
Investment Strategy
The Companyâs investment strategy in respect of its funded plans is implemented within the framework of the applicable statutory requirements. The plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has allocated assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Company of the benefits provided.
The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. Sensitivity analysis is performed by varying a single parameter while keeping all the other parameters unchanged. Sensitivity analysis fails to focus on the interrelationship between underlying parameters. Hence, the results may vary if two or more variables are changed simultaneously. The method used does not indicate anything about the likelihood of change in any parameter and the extent of the change if any.
H. Expected Employer Contribution for the next year is Rs.76.9 Mn (Previous year: Rs. 69.7 Mn).
I. The average duration of the defined benefit obligation at the end of reporting period is 11 years (Previous year: 12 years).
J. Gratuity is a defined benefit plan and entity is exposed to the Following Risks:
Interest rate risk: A fall in the discount rate which is linked to the G.Sec. Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.
Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the planâs liability.
Investment Risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.
Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.
II Defined Contribution Plans
The Companyâs contribution for Provident Fund, employeesâ state insurance, labour welfare fund, superannuation scheme etc. a aggregating Rs. 113.1 Mn (2021 : Rs. 101.7 Mn) has been recognised in the Profit or Loss under the head âEmployee Benefits Expenseâ.
III Compensated absences (Long term employment benefit)
The liability towards compensated absences for the year ended December 31, 2022 based on actuarial valuation carried out by an independent Actuary using Projected Accrued Benefit Method aggregating to Rs. 142.1 Mn (December 31, 2021 : Rs. 148.8 Mn). Principal assumptions are in line with those used for Gratuity, as applicable.
IV Service Award:
The Company recognizes and celebrates those employees who have invested in building a long term relationship under common service award policy for specified group of employees of specific locations of the Company. The liability towards service awards for the year ended December 31, 2022 based on actuarial valuation carried out by an independent actuary resulted in liability of Rs. 13.6 Mn (December 31, 2021: Rs. 11.8 Mn).
V Pension:
The liability towards pension for the year ended December 31, 2022 based on actuarial valuation carried out by an independent Actuary using Projected unit credit Method aggregating to Rs. 0.8 Mn (December 31, 2021 : Rs. 0.9 Mn). Principal assumptions are in line with those used for Gratuity, as applicable.
a. Performance Share Plans
On March 12, 2010 the Board of Directors of the Parent Company decided on establishing a Performance Share Arrangement to form a part of the long-term incentive and retention program for the key personnel of the Parent Company and its subsidiaries. The Performance Share Arrangement offers a possibility to earn the Parent Company shares as remuneration for achieving established targets. The arrangement includes annually commencing three-year performance share plans. A possible reward shall be paid during the calendar year following each three-year plan. Commencement of each three-year plan will be separately decided by the Board of Directors of Parent Company.
Participants to the plan shall hold at least 50% of the shares received until he/she holds shares received from the Performance Share Plans corresponding in aggregate to the value of his/her 6 months base salary. The aforementioned ownership requirements apply until termination of employment or service.
Performance Share Plan 2022-2024
The Performance Share Plan 2022-2024 commenced in year 2022 and the possible reward will be based on the Groupâs earnings per share (EPS) in 2024. The reward, if any, will be paid during 2025.
Performance Share Plan 2021-2023
The Performance Share Plan 2021-2023 commenced in year 2021 and the possible reward will be based on the Groupâs earnings per share (EPS) in 2023. The reward, if any, will be paid during 2024.
Performance Share Plan 2020-2022
The Performance Share Plan 2020-2022 commenced in year 2020 and the possible reward will be based on the Groupâs earnings per share (EPS) in 2022. The reward, if any, will be paid during 2023.
Performance Share Plan 2019-2021
The Performance Share Plan 2019-2021 commenced in year 2019 and the possible reward will be based on the Groupâs earnings per share (EPS) in 2021 and since employees holding shares resigned during the year 2021, the shares were forfieted.
In terms of the aforesaid plan, the eligible employees of the Company receive certain number of shares of the Parent Company as per the terms and conditions of the Plan. The aforesaid plan is an equity settled plan.
The Company has recognised these share based payment transactions as equity settled share based payment transaction in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments, since the Company receives the services of the employees to whom the shares have been granted by the Parent Company and the Company has no obligation to settle the same.
The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade receivables, Loans, Other Financial Assets, Trade Payables, Other Financial Liabilities at carrying value since, their carrying amounts are a reasonable approximation of the fair values due to their short term nature.
B. Calculation of Fair Values
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended December 31, 2021.
Financial assets and liabilities measured at fair value as at Balance Sheet date:
1. The fair values of investments in mutual fund units is based on the net asset value (âNAVâ) as stated by the issuers of these mutual fund units in the published statements as at Balance Sheet date.
2. The fair values of the forward contracts used for expected future sale has been determined using forward pricing, which employ the use of market observable inputs(closing rates of foreign currency).
3. Derivatives are held to hedge the uncertainty in timing or amount of future forecast cash flows. Such derivatives are classified as being part of cash flow hedge relationships. For an effective hedge, gains and losses from changes in the fair value of derivatives are recognised in other comprehensive income. Any ineffective elements of the hedge are recognised in the consolidated statement of profit and loss.
If the hedged cash flow relates to a non-financial asset, the amount accumulated in equity is subsequently included within the carrying value of that asset. For other cash flow hedges, amounts accumulated in other comprehensive income are taken to the consolidated statement of profit and loss at the same time as the related cash flow. When a derivative no longer qualifies for hedge accounting, any cumulative gain or loss remains in equity until the related cash flow occurs. When the cash flow takes place, the cumulative gain or loss is taken to the consolidated statement of profit and loss. If the hedged cash flow is no longer expected to occur, the cumulative gain or loss is taken to the consolidated statement of profit and loss immediately.
4. Derivative financial instruments for which hedge accounting is not applied are initially recognised at fair value on the date on which a derivative contract is entered and are subsequently measured at FVTPL.
5. For financial liabilities that are measured at fair value under Level 3, the carrying amounts are equal to the fair values.
C. Fair Value Hierarchy
The fair value of financial instruments as referred to in note (A) above have been classified into three categories depending on the
inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
The categories used are as follows:
- Level 1: Quoted prices for identical instruments in an active market;
- Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs; and
- Level 3: Inputs which are not based on observable market data
For assets and liabilities which are measured and disclosed at fair value as at Balance Sheet date, the classification of fair value
calculations by category is summarised below:
5Q Financial Risk Management Objectives and Policies
The Companyâs principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include loans, current investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.
The Companyâs business activities are exposed to a variety of financial risks, namely liquidity risk, market risk and credit risk. The Companyâs senior management has the overall responsibility for establishing and governing the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor controls, periodically review changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board of Directors and Audit Committee of the Company.
A. Management of Liquidity Risk
Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Companyâs approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.
The Company maintained a cautious liquidity strategy, with a positive cash balance throughout most of the year ended December 31, 2022 and December 31, 2021. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis.
The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in other highly marketable debt investments to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.
B. Management of Market Risk
The Companyâs size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:
1. Currency Risk
2. Price Risk
3. Interest Rate Risk
The above risks may affect the Companyâs income and expenses, or the value of its financial instruments. The Companyâs exposure to and management of these risks are explained below.
i. Currency Risk
The Company is subject to the risk that changes in foreign currency values impact the Companyâs exports revenue and imports of raw material and property, plant and equipment. The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollar and Euro.
The Company manages currency exposures within prescribed limits, through use of forward exchange contracts. The aim of the Companyâs approach to management of currency risk is to leave the Company with no material residual risk.
ii) Price Risk:
The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments.
The Company has laid policies and guidelines which it adheres to in order to minimise price risk arising from investments in debt mutual funds.
At December 31, 2022, the investments in debt mutual funds amounts to Rs. Nil (December 31, 2021: Rs. 6.2 Mn). These are exposed to price risk.
A 1% increase in prices would have led to approximately an additional Rs. Nil gain in the Statement of Profit and Loss (2021: Rs. 0.1 Mn gain). A 1% decrease in prices would have led to an equal but opposite effect.
iii) Interest Rate Risk
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. To hedge interest rate risk, a mix of variable and fixed instruments is judiciously applied for financing the Companyâs requirement.
Trade Receivables
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations.
Concentration of credit risk with respect to trade receivables are limited, due to the Companyâs customer base being large and diverse. Further majority of the Companyâs customers are Companies with strong financial stability. All trade receivables are reviewed and assessed for default on a quarterly basis, through detailed review with the business teams.
Credit to be given to a customer is assessed based on credit quality of the customer and individual credit limits are defined in accordance with this assessment.
Our historical experience of collecting receivables is that credit risk is low. Hence, trade receivables are considered to be a single class of financial assets.
Refer Note 3 Accounting policies - 3(d) on financial instruments
Other Financial Assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, liquid mutual funds and derivative instrument. The Company has set counter-parties limits based on multiple factors including financial position, credit rating, etc. The Companyâs maximum exposure to credit risk as at December 31, 2022, December 31, 2021 and January 1, 2021 is the carrying value of each class of financial assets.
Reason for variation:
Debt Service Coverage Ratio (times): The debt service coverage ratio is healthier at 7.3 in current year as against 2.3 in previous year primarily due to increase in earnings available for debt service in 2022 as compared to 2021.
Return on Equity (%): Return on Equity in the current year has improved from -3.1% in previous year to 6.7% in current year on the base of higher profit for the year.
Net profit ratio (in %) : The net profit margin ((after exceptional items)) improved to 1.7% in current year as against -0.9% in the previous year primarily on account of increase in operation performance and impact of exceptional item in previous year.
Return on capital employed (in %) : Return on capital employed has improved from -0.4% in the previous year to 7.9% in the current year on the base of higher profit for the year.
Return on investment (in %) : Return on investment in current year has reduced from 3.9% to 1.6% due lower investment. Definitions:
(a) Earning for available for debt service = Net Profit after taxes Non-cash operating expenses like depreciation and other amortisations Interest other adjustments like loss on sale of Fixed assets etc.
(b) Debt service = Interest & Lease Payments Net Principal Repayments
(c) Average inventory = (Opening inventory balance Closing inventory balance) / 2
(d) Average trade receivables = (Opening trade receivables balance Closing trade receivables balance) / 2
(e) Average trade payables = (Opening trade payables balance Closing trade payables balance) / 2
(f) Working capital = Current assets - Current liabilities.
(g) Earning before interest and taxes = Profit before exeptional items and tax Finance costs - Other Income
(h) Capital Employed = Tangible Net Worth Total Debt Deferred Tax Liability
(i) Return on Investment = Income earned on Investment/Average investment for the period
During the years prior to December 31, 2020, two units of the Company were eligible to claim deduction under Section 80IC of the Income Tax Act, 1961 (âthe IT Actâ). The Company had adjusted losses of these units with other non-eligible units and recorded deferred tax liability aggregating to Rs. 67.5 Mn. During the year relevant to assessment year 2020-21, the Company opted to be taxed under Section 115BAA of the IT Act, however there was an oversight in accounting of the reversal of the aforementioned deferred tax liability and consequential adjustment of deferred tax assets of Rs. 13.1 Mn. As per managementâs evaluation of tax position, there is continuing uncertainty regarding adjustment of losses of such units with other non-eligible units in the earlier years. The consequential accounting for current and deferred tax resulted in the understatement of current tax liability (provision) and Deferred Tax Assets by Rs. 12.1 Mn and Rs. 54.4 Mn and overstatement other tax assets and equity by Rs. 55.4 Mn and Rs 13.1 Mn respectively. These now stand rectified in the respective comparative periods, in accordance with the applicable accounting standards. The affected financial statement captions, line items for the prior period have been summarised below.
53. Other Regulatory requirement
a) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (âIntermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (âUltimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
b) The Company has not received any fund from any person(s) or entity(is), including foreign entities (Funding Party) 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.
The Companyâs capital management objective is to ensure that a sound capital base is maintained to support long term business growth and optimise shareholders value. Capital includes equity share capital and other equity reserves.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using the debt-equity ratio, which is net debt divided by total equity. Net debt is computed as the sum total of all outstanding balances of loans and borrowings net of cash and cash equivalents, bank balance other than cash and cash equivalents and investment in liquid mutual funds.
In order to achieve this overall objective, the Companyâs capital management, amongst other things, aims to ensure that it meets the defined financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2022, December 31, 2021 and January 1, 2021.
55. DISCLOSURE OF TRANSACTIONS WITH STRUCK OFF COMPANIES
The Company did not have any material transactions with companies struck off under Section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956 during the financial year.
In the previous year, the Company disclosed that it had received whistle blowing complaints regarding possible irregularities and potential non-adherence to the Policies of the Company in certain locations, pursuant to which the Company undertook detailed and thorough reviews of these complaints, identified root causes and took corrective, remedial and preventive actions, basis which these matters are now closed. Basis these diligent investigations, the Management assessed and concluded that there are no material adverse findings and there is no material impact on the financial statements for the reporting period. The Company is committed to upholding the highest standards of corporate governance and to strengthen the compliance and control environment wherever deemed necessary.
No transactions to report against the following disclosure requirements as notified by MCA pursuant to amended Schedule III:
(a) Crypto Currency or Virtual Currency
(b) Benami Property held under Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder
(c) Registration of charges or satisfaction with Registrar of Companies
(d) Relating to borrowed funds:
i. Wilful defaulter
ii. Utilisation of borrowed funds & share premium
iii. Borrowings obtained on the basis of security of current assets
iv. Discrepancy in utilisation of borrowings
v. Compliance with scheme of arrangement
The Company has adopted the amended Schedule III to the Companies Act, 2013 effective January 1, 2022. Accordingly, previous period figures have been re-grouped / re-classified wherever necessary, to conform to current periodâs presentation.
As per our report of even date attached.
Dec 31, 2018
1. Corporate information:
Huhtamaki PPL Limited (âthe Company'') is a public limited Company domiciled in India with its registered office located at 12A-06 B-Wing,13th Floor, Parinee Crescenzo, C-38/39, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 and having manufacturing locations spread across the country. The Company is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The principal activity of the Company is manufacture and sale of packaging material.
2. Basis of Preparation, Measurement and Significant Accounting Policies:
A. Basis of Preparation
These financial statements have been prepared in accordance with the Indian Accounting Standards (âInd AS'') as notified by Ministry of Corporate Affairs pursuant to Section 133 of Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2016.
The financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements. All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
The financial statements for the year ended December 31, 2018 were approved by the Board of Directors and authorised for issue on February 18, 2019.
B. Basis of Measurement
The financial statements have been prepared under the historical cost convention, unless otherwise indicated.
The financial statements are presented in Indian Rupees (âINRâ) and all values are rounded to the nearest Lakh, except otherwise indicated.
C. Key Accounting Estimates and Judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Continuous evaluation is done on the estimation and judgements based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Revisions to accounting estimates are recognised prospectively.
Information about critical judgements in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:
- Measurement of defined benefit obligations - Refer Note 46
- Measurement and likelihood of occurrence of provisions and contingencies - Refer Note 45
- Recognition of deferred tax assets - Refer Note 9
- Impairment of Intangibles - Refer Note 5
- Measurement of useful lives for property, plant and equipment and intangible assets - Refer Accounting Policy on Depreciation below
- Measurement of Share Based Payments - Refer Note 47
- Measurement of Fair values - Refer Note 50
D. Recent Accounting Developments
The Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 (the âRules'') on March 28, 2018. The rules shall be effective from reporting periods beginning on or after April 1, 2018. Amendments to Ind AS as per these rules are mentioned below:
Ind AS 115 - Revenue from contracts with customers:
Ind AS 115, Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity''s contracts with customers. Revenue is recognised when a customer obtains control of a promised good or service and thus has the ability to direct the use and obtain the benefits from the good or service in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The standard replaces Ind AS 18 Revenue and Ind AS 11 Construction contracts and related appendices.
The Company is in the process of assessing the detailed impact of Ind AS 115, though it is expected that application of Ind AS 115 will not significantly change the timing of the Company''s revenue recognition.
Appendix B to Ind AS 21 - Foreign currency transactions and advance consideration:
The appendix clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency-denominated contracts. For a single payment or receipt, the date of the transaction should be the date on which the entity initially recognises the non-monetary asset or liability arising from the advance consideration (the prepayment or deferred income/contract liability).
If there are multiple payments or receipts for one item, date of transaction should be determined as above for each payment or receipt.
The management is in process of assessing the impact of above amendment, though it is expected that impact from the amendment would not be significant. The Company intends to adopt the amendments prospectively from January 1, 2019.
Ind AS 12 - Income taxes regarding recognition of deferred tax assets on unrealised losses:
The amendments clarify the accounting for deferred taxes where an asset is measured at fair value and that fair value is below the asset''s tax base.
The management is in process of assessing the impact of above amendment, though it is expected that impact from the amendment would not be significant. The Company will adopt the amendments from January 1, 2019.
Immovable Properties (Leasehold & Freehold Land) with a Gross Block value of Rs. 1,736.86 Lakh (Net block Rs. 1,632.24 Lakh) as at December 31, 2018 are held in the name of erstwhile Positive Packaging Industries Limited on account of amalgamation for which Company is in the process of registering the title deeds in its name.
Immovable Properties (Freehold Land) with a value of Rs.140 Lakh as at December 31, 2018 are held in the name of Ajanta Packaging on account of acquisition of Business by the Company (Refer Note 53) for which Company is in the process of registering the title deeds in its name.
B. Capital Work-in-Progress
Capital Work-in-Progress as at December 31, 2018 is Rs.445.20 Lakh (December 31, 2017: Rs.206.83 Lakh).
For contractual commitment with respect to property, plant and equipment refer note 45.
Impairment Charges
Goodwill has been tested for impairment and accordingly no impairment charges were identified for the year 2018 and 2017.
Goodwill of Rs.968.80 Lakh pertains to Webtech Lables Private Limited (merged with Huhtamaki PPL Limited w.e.f. April 1, 2015) and Goodwill of Rs.4,671.23 Lakh pertains to business of Ajanta Packaging acquired by Huhtamaki PPL Limited (Refer Note 53).
Following Key assumptions were considered while performing Impairment Testing
a) Long-Term sustainable growth rates - 5%
b) Weighted Average Cost of Capital % before Tax (Discount Rate) - 10%
The Projections cover a period of five years, as we believe this to be the most appropriate timescale over which to review and consider annual performances before applying a fixed terminal value multiple to the final year cashflows. The growth rates used to estimate future performance are based on the conservative estimates from past performance.
We have performed sensitivity analysis around the base assumptions and have concluded that no reasonable changes in key assumptions would cause the recoverable amount to be less than carrying value.
c) Terms/rights attached to equity shares
The Company has only one class of Issued, Subscribed and Paid-up Equity Capital having a par value of Rs.2 per share.
Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends 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.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
b) Nature and Purpose of reserves:
i. Share Options Outstanding Account
The above reserve relates to shares of Ultimate Parent Company, granted by the Ultimate Parent Company to specific employees of the Company under its Employee Share arrangement.
Further information about Share based payments to employees is given at Note 47.
ii. Debenture Redemption Reserve (DRR)
The Company has issued redeemable non-convertible debentures. Accordingly, the Companies (Share Capital and Debentures) Rules, 2014 (as amended), require the Company to create DRR out of profits of the Company available for payment of dividend. DRR is required to be created for an amount which is equal to 25% of the value of debentures issued. The DRR is required to be created over the life of debentures viz. 5 years.
iii. General reserve
The Company has transferred a portion of the net profit of the Company before declaring dividend to general reserve. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to the Statement of Profit and Loss.
iv. Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.
a) Loan of Rs.6,408 Lakh (USD 100 Lakh) has been repaid in full in the current year as per the instalments due.
b) Unsecured Debentures carry interest rate of 7% p.a. The debentures are listed and are due for redemption on January 27, 2020.
c) The Company has availed unsecured interest free Sales tax deferral loan from the Government of Telangana for its Hyderabad (Bollarum) factory, in accordance with their sales tax deferral scheme. The above amount is repayable after 14 years from the date of availment of the loan. The loan is repayable annually on April 1 with 1st instalment was due on April 1, 2011 and last one being due on April 1, 2021.
d) The Company had availed interest free sales tax deferral loan from Government of Maharashtra for one of its factories in Maharashtra. The Loan has been repaid in full in the current year.
e) Outstanding balances shown in the foot notes above, are grossed up to the extent of unamortised transaction cost.
a) Retention Money represents:
- Rs.668.40 Lakh, being money payable to erstwhile shareholders of Positive Packaging Industries Limited for purchase of shares.
- Rs.247.13 Lakh, being money payable to Ajanta Packaging for purchase of business.
* There is no amount due and outstanding to be credited to Investor Education & Protection Fund.
Provision for Litigation represents provision made by the Company in respect of disputed Indirect Tax matters that arise in the ordinary course of business. These provisions have not been discounted as it is not practicable for the Company to estimate the timing of the provision utilisation and cash outflows, if any, pending resolution.
a) The Company has recognised a government grant of Rs.297.89 Lakh (December 31, 2017: Rs.342.51 Lakh) relating to benefit received from EPCG Scheme.
b) Goods and Services Tax ("GST") has been implemented with effect from July 1, 2017 which replaces Excise Duty and other input taxes. According to the requirements of Ind AS, revenue for the year ended December 31, 2017 are reported inclusive of excise duty. As per Ind AS 18, the revenue for the year ended December 31, 2018 are reported net of GST. In view of the aforesaid restructuring of indirect taxes, Revenue from Sale of Products and Services for the year ended December 31, 2018 are not comparable with the previous period. Following additional information is being provided to facilitate such comparison:
Note 3: Details of CSR expenditure:
The Company has incurred Rs.238.26 Lakh (Previous Year: Rs.156.85 Lakh) towards Corporate Social Responsibility activities. Further, no amount has been spent on construction/acquisition of an asset of the Company. The amount paid out of the above is Rs.224.95 Lakh (Previous Year: Rs.149.37 Lakh).
The amount required to be spent under Section 135 of the Companies Act, 2013 for the year 2018 is Rs.213.49 Lakh (Previous Year: Rs.195.04 Lakh) i.e. 2% of average net profits for last three financial years, calculated as per Section 198 of the Companies Act, 2013.
Note 4: Taxes relating to earlier periods
In respect of a disputed Income tax matter of earlier years, the Company was pursuing appeals on the basis of expert advice and favourable judicial precedent. The Supreme Court has given in August 2018, a ruling in favour of the revenue authorities on a similar issue concerning other assesses. Consequent to this development, the Company has recognised a provision for income tax of Rs.2,107.49 Lakh and interest thereon of Rs.1,000.41 Lakh during the current year. The Company is evaluating further legal options on the matter.
* Revenue Expenditure of Rs.112.45 Lakh has been grouped under various expense heads of the Financial Statements.
** Additions to Fixed Assets in Note No. 4 includes Rs.Nil towards Capital Expenditure incurred for Company''s in house R & D facilities.
Notes:
i. It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above, pending resolution of the respective proceedings as it is determinable only on receipt of judgements/decisions pending with various forums/authorities.
ii. The Company does not expect any reimbursements in respect of the above contingent liabilities.
iii. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.
B. Commitments-
i. Operating Lease Commitments:
The Company has taken certain Office Premises, Factory Premises and residential facilities under Operating Lease arrangements. The aggregate lease rentals payable are charged as rent in the Statement of Profit and Loss. There are no restrictions imposed by lease arrangements. There are no subleases.
iii. Export Obligation:
The Company has undertaken an export obligation of 6 to 8 times of the duty saved on Machinery imported by the Company to be fulfilled over a period of 6 to 8 years. The Obligation outstanding as on the date of Balance sheet is Rs.2,640.28 Lakh (December 31, 2017 Rs.987.79 Lakh).
Note 5: Defined Benefit Plan - Gratuity
Description of the Plan
The Company has a defined benefit gratuity plan (funded). Gratuity is payable to all eligible employees of the Company on Superannuation, death and resignation, in terms of the provisions of the Payment of Gratuity Act or as per the Company''s Scheme whichever is more beneficial.
Governance
The Fund is in form of Company managed Trust. The Trustees of the Trust are responsible for the overall governance of the plan and to act in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term investment, risk management and funding strategy.
Investment Strategy
The Company''s investment strategy in respect of its funded plans is implemented within the framework of the applicable statutory requirements. The plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has allocated assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Company of the benefits provided.
The Plan does not invest directly in any property occupied by the Company or any financial securities issued by the Company E. Assumptions:
With the objective of presenting the plan assets and plan obligations of the defined benefits plans at their fair value on the Balance Sheet, assumptions under Ind AS 19 are set by reference to market conditions at the valuation date.
The estimates of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.
G. Expected Employer Contribution for the next year is Rs.182.40 Lakh (Year 2017:264.09 Lakh).
H. The Average Duration of the defined benefit obligation at the end of reporting period is 13 years.
Note 6: Share-based payments
a) Performance Share Plans
On March 12, 2010 the Board of Directors of the Parent Company decided on establishing a Performance Share Arrangement to form a part of the long-term incentive and retention programme for the key personnel of the Parent Company and its subsidiaries. The Performance Share Arrangement offers a possibility to earn the Parent Company shares as remuneration for achieving established targets. The arrangement includes annually commencing three-year performance share plans. A possible reward shall be paid during the calendar year following each three-year plan. Commencement of each three-year plan will be separately decided by the Board of Directors of Parent Company.
Participants to the plan shall hold at least 50% of the shares received until he/she holds shares received from the Performance Share Plans corresponding in aggregate to the value of his/her 6 months base salary. The aforementioned ownership requirements apply until termination of employment or service.
Performance Share Plan 2018-2020:
The Performance Share Plan 2018-2020 commenced in year 2018 and the possible reward will be based on the Group''s earnings per share (EPS) in 2020. The reward, if any, will be paid during 2021.
Performance Share Plan 2017-2019:
The Performance Share Plan 2017-2019 commenced in year 2017 and the possible reward will be based on the Group''s earnings per share (EPS) in 2019. The reward, if any, will be paid during 2020.
Performance Share Plan 2016-2018:
The Performance Share Plan 2016-2018 commenced in 2016 and the possible reward will be based on the Group''s earnings per share (EPS) in 2018. The reward, if any, will be paid during 2019.
Performance Share Plan 2015-2017:
The Performance Share Plan 2015-2017 commenced in 2015. The reward was based on the Group''s earnings per share (EPS) in 2017 and was paid in 2018.
In terms of the aforesaid plan, the eligible employees of the Company receive certain number of shares of the Parent Company as per the terms and conditions of the Plan.
The aforesaid plan is an equity settled plan.
The Company has recognised these share based payment transactions as equity settled share based payment transaction in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments, since the Company receives the services of the employees to whom the shares have been granted by the Parent Company and the Company has no obligation to settle the same.
b) Share Appreciation Rights
During the year 2016, at the General Meeting, the shareholders of the Company had unanimously passed Special Resolution on May 10, 2016 to grant stock appreciation rights (SARs) to the eligible employees of the Company. Pursuant to this resolution, Huhtamaki PPL Limited Employee Phantom Stock Scheme 2015 has been formulated and adopted. Fair value of the SARs is measured at each reporting date taking into account the terms and conditions upon which the SARs were granted.
The SARs will be settled in cash and vest after 2 years from the date of allotment as per the terms and conditions of the grant.
* Key managerial personnel are eligible for share based payments of the Ultimate Holding Company for which there is no cash outflow from the Company. ** As the future liabilities for gratuity and leave encashment are provided on an actuarial valuation basis for the Company as a whole, the amount pertaining to individual is not ascertainable and therefore not included above.
7. Terms and Conditions
i) All outstanding balances are unsecured and are repayable as per terms of credit and settlement occurs in cash.
ii) All related party transactions entered during the year were in ordinary course of business and on arms length basis.
iii) The Company has not recorded any impairment of receivables related to amounts owed by related parties.
Note 8: Segment information
For Management purpose, the Company comprise of only one reportable segment - Consumer Packaging.
The Executive Management monitors the operating results of this segment 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.
ii. Entire Non-Current Assets of the Company are situated in India
iii. Major customer
Revenue from one customer of the Company is Rs.24,483.06 Lakh (2017: Rs.22,836.89 Lakh) which is 10.50% (2017: 10.38%) of the Company''s total revenue.
The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, Trade receivables, Loans, Other Financial Assets, Trade Payables, Other Financial Liabilities at carrying value, because, their carrying amounts are a reasonable approximation of the fair values due to their short-term nature.
B. Calculation of Fair Values-
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended December 31, 2017.
Financial assets and liabilities measured at fair value as at Balance Sheet date:
1. The fair values of investments in mutual fund units is based on the net asset value (âNAV'') as stated by the issuers of these mutual fund units in the published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund and the price at which issuers will redeem such units from the investors.
2. The fair values of the forward contracts used for expected future sale have been determined using forward pricing, based on present value calculations.
3. The fair value of the Company''s Sales Tax Deferral Loans are determined by using DCF method using discount rate that reflects the issuer''s borrowing rate at the end of the reporting period.
4. Cash and cash equivalents, trade receivables, investments in term deposits, other financial assets (except derivative financial instruments), trade payables, and other financial liabilities have fair values that approximate to their carrying amounts due to their short-term nature.
5. Loans have fair values that approximate their carrying amounts as it is based on the net present value of the anticipated future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
C. Fair Value Hierarchy-
The fair value of financial instruments as referred to in note (A) above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
The categories used are as follows:
- Level 1: Quoted prices for identical instruments in an active market;
- Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs; and
- Level 3: Inputs which are not based on observable market data
For assets and liabilities which are measured and disclosed at fair value as at Balance Sheet date, the classification of fair value calculations by category is summarised below:
Note 9: Financial Risk Management Objectives and Policies
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include loans, current investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.
The Company''s business activities are exposed to a variety of financial risks, namely liquidity risk, market risk and credit risk. The Company''s senior management has the overall responsibility for establishing and governing the Company''s risk management framework. The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor controls, periodically review changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board of Directors and Audit Committee of the Company.
A. Management of Liquidity Risk
Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.
The Company maintained a cautious liquidity strategy, with a positive cash balance throughout most of the year ended December 31, 2018 and December 31, 2017. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis.
The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in other highly marketable debt investments to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.
B. Management of Market Risk
The Company''s size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:
1. Currency Risk
2. Price Risk
3. Interest Rate Risk
The above risks may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of these risks are explained below.
i. Currency Risk:
The Company is subject to the risk that changes in foreign currency values impact the Company''s exports revenue and imports of raw material and property, plant and equipment. The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollar and Euro.
The Company manages currency exposures within prescribed limits, through use of forward exchange contracts. The aim of the Company''s approach to management of currency risk is to leave the Company with no material residual risk.
The Company''s exposure to foreign currency changes for all other currencies is not material.
ii) Price Risk:
The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments
The Company has laid policies and guidelines which it adheres to in order to minimise price risk arising from investments in debt mutual funds.
At December 31, 2018, the investments in debt mutual funds amounts to Rs.2,112.18 Lakh (December 31, 2017: Rs.13,749.79 Lakh). These are exposed to price risk.
A 1% increase in prices would have led to approximately an additional Rs.21 Lakh gain in the Statement of Profit and Loss (2017: Rs.137 Lakh gain). A 1% decrease in prices would have led to an equal but opposite effect
iii) Interest Rate Risk:
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. To hedge interest rate risk mix of variable and fixed instruments is judiciously applied for financing company''s requirement.
C) Management of Credit Risk Trade Receivables:
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations.
Concentration of credit risk with respect to trade receivables are limited, due to the Company''s customer base being large and diverse. Further majority of the Company''s customers are Companies with strong financial stability. All trade receivables are reviewed and assessed for default on a quarterly basis, through detailed review with the business teams.
Credit to be given to a customer is assessed based on credit quality of the customer and individual credit limits are defined in accordance with this assessment.
Our historical experience of collecting receivables is that credit risk is low. Hence, trade receivables are considered to be a single class of financial assets.
Other Financial Assets:
The Company maintains exposure in cash and cash equivalents, term deposits with banks, liquid mutual funds and derivative instrument. The Company has set counter-parties limits based on multiple factors including financial position, credit rating, etc. The Company''s maximum exposure to credit risk as at December 31, 2018 and December 31, 2017 is the carrying value of each class of financial assets.
There is no major change as compared to previous year w.r.t to risk management and policies
Note 10: Capital management
For the purpose of Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company''s capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using the debt-equity ratio, which is net debt divided by total equity. The Company includes within net debt, entire loans and borrowings less cash and cash equivalents, bank balance other than cash and cash equivalents and investment in liquid mutual funds.
In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2018 and December 31, 2017.
Note 11: Acquisition of Business of Ajanta Packaging
On June 1, 2018, the Company acquired Business of Ajanta Packaging, a partnership firm in India on Slump Purchase basis by way of cash payment to Ajanta Packaging. Ajanta Packaging is a partnership firm specialising in manufacture of Pressure Sensitive Labels.
The Company acquired business of Ajanta Packaging as it enhances its Pressure Sensitive Labels manufacturing capacity and also provides the Company with new customers and synergies in Purchasing.
The Company has measured the acquired business of Ajanta Packaging at fair value.
The Goodwill of Rs.4,671.23 Lakh comprises the value of expected synergies arising from acquisition, trained manpower and established earning capacity of the business, which has not been seperately recognised. Goodwill of Rs.4,077.58 Lakh is tax deductible.
From the date of acquisition, business of Ajanta Packaging has contributed Rs.5,509.21 Lakh to revenue and Rs.683.37 Lakh to the profit before tax.
Note 12
In view of the acquisition of business of Ajanta Packaging referred to in Note 53, the figures for the current year are not comparable with corresponding figures of previous year.
Note 13
The Company, in relation to its Thane manufacturing facility, received a closure notice on November 20, 2018 from Maharashtra Pollution Control Board (âMPCB''), pursuant to the provisions of Water & Air Pollution Act, against which the Company filed an appeal with the National Green Tribunal (âNGT''). The Company submitted documentary evidence of its compliance under the Plastic Waste Management Rules, 2016, (PWM Rules) to MPCB and on December 14, 2018 withdrew its appeal before the NGT, with liberty to file a fresh appeal, which has been accepted by NGT. On January 3, 2019, the Central Pollution Control Board (âCPCB'') certified the Company as âProducer'' as per the PWM Rules, notified under the Environmental (Protection) Act, 1986 covering all its manufacturing sites. In view of the actions taken, the Company expects withdrawal of the closure notice by MPCB.
Note 14
Since the Chief Financial Officer has resigned w.e.f. January 18, 2019 and the Company is still in the process of appointing a new Chief Financial Officer as required under Section 203 of the Companies Act, 2013, the financial statements have not been signed by a Chief Financial Officer as required by Section 134 of the Companies Act, 2013.
Note 15: Events after the reporting period
The Board has recommended dividend of Rs.3 per share (December 31, 2017 - Rs.3 per share) for the year 2018.
Dec 31, 2016
b Terms / Rights attached to equity shares.
The company has only one class of Issued, Subscribed and Paid-up Equity Capital having a par value of '' 2/- per share. Each holder of equity share is entitled to one vote per share. 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.
During the year ended 31st December 2016, the amount of per share dividend recognized as distributions to equity shareholders is '' 3.00 (31 December 2015 : '' 2.80)
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all Preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
a. During the previous year, the Company had issued 3,850 Non Convertible Debentures of ?10 lacs each to Huhtalux S.a.r.l. on private placement basis. The Debentures are listed and due for redemption on January 27, 2020.
b. The Company has availed unsecured interest free Sales tax deferral loan from the Government of Telangana for its Hyderabad (Bollarum) factory, in accordance with their sales tax deferral scheme. The above amount is repayable after 14 years from the date of a ailment of the loan. The loan is repayable annually on 1st April with 1st installment was due on 1st April 2011 and last one being due on 1st April 2021.
c. The Company has availed interest free sales tax deferral loan from Government of Maharashtra for one of its factories in Maharashtra. The Loan is repayable after 1 years from the date of a ailment of loan in 5 equal installment. These loans are repayable annually in April with 1st installment being due in April 2008 and April 2011 and last one being due in April 2017 and April 2020.
d. Loan of USD 100 lacs - Repayable in 15 equal quarterly installments commenced from December 2014 along with interest rate of 3 months LIBOR plus 349 basis points.
e. Indian Rupee loan from bank of ?150.59 lacs carries interest @ 11.40% p.a. The loan is repayable in 54 monthly installments of principal component of Rs, 6.55 lacs each after completion of moratorium of six months from the date of loan. The loan is secured by hypothecation of Machineries of erstwhile Webtech Labels Private Limited (now part of Huhtamaki PPL Limited).
39 RELATED PARTY TRANSACTIONS
a. Related party where control exists :
Ultimate Parent Company Huhtamaki Oyj., Finland
Holding Company Huhtavefa B.V., Netherlands
Subsidiary Company (Refer Note 49) Webtech Labels Private Limited
Positive Packaging Industries Limited (w.e.f.31 January 15)
b. Other Related Parties with whom transactions have taken place during the year :
Fellow Subsidiaries Huhtamaki Australia Ltd., Australia
Huhtamaki Flexible Packaging Germany GmbH & Co. KG., Germany Huhtamki South Africa Pty Ltd., South Africa Huhtamaki (Thailand) Ltd., Thailand Huhtamaki Finance B V, Netherlands
Positive Packaging Industries South Africa Pty Ltd (w.e.f.31 January 15) Huhtalux S.a.r.l.
Positive Packaging United (ME) Fzco (w.e.f.31 January 15)
Primetech M.E.FZE (w.e.f. 31 January 2015)
Huhtamaki Flexible Packaging Middle East LLC. (w.e.f. 31 January 2015) Huhtamaki Flexible Packaging Kenya (w.e.f. 31 January 2015)
c. Key Managerial Personnel Mr. Suresh Gupta Executive Chairman
Mr. A Venkatrangan Managing Director
* Revenue Expenditure of ?104.32 lacs has been grouped under various expense heads of the Financial Statements.
** Additions to Fixed Assets in Note no.12 includes Rs, 1.72 lacs towards Capital Expenditure incurred for Company''s in house R & D facilities.
45 During the year, at the General Meeting, the shareholders of the Company had unanimously passed Special Resolution on 10 May 2016 to grant stock appreciation rights (SARs) to the eligible employees of the Company. Pursuant to this resolution, Huhtamaki PPL Limited Employee Phantom Stock Scheme 2015 has been formulated and adopted. In terms of the above Scheme, 33,000 SARs have been granted to the Managing Director.
The SARs will be settled in cash and vest after 2 years from the date of allotment as per the terms and conditions of the grant.
2. During the current year, in terms of the Share Purchase Agreement between the Company, Positive Packaging Industries Limited (âPositive'') and erstwhile owners of Positive, the closing adjustment in connection with acquisition of Positive was agreed upon, resulting in an amount of Rs, 175 lacs being receivable by the Company from erstwhile owners of Positive. This amount and expenses of Rs, 63.77 lacs, which were directly related to Investment in Positive have been taken to General Reserve, on account of amalgamation of Positive with the Company.
3. The Company has incurred Rs, 57.44 lacs (Previous Year: Rs, 15.01 lacs) towards Corporate Social Responsibility activities. Further, no amount has been spent on construction/acquisition of an asset of the Company. The amount spent in Cash out of the above is Rs, 44.51 lacs (Previous Year: Rs, 15.01 lacs).
The amount required to be spent under Section 135 of the Companies Act, 2013 for the year 2016 is Rs, 148.87 lacs (Previous Year:? 144.89 lacs) i.e. 2% of average net profits for last three financial years, calculated as per section 198 of the Companies Act, 2013.
4 The Company has set up a Flexible Packaging Manufacturing Unit in Guwahati, Assam and a Pressure Sensitive Label Manufacturing Unit in Sikkim, which have commenced commercial production in last week of March 2017, to better service its customers based in North East India.
5. Amalgamations
Pursuant to the Scheme of Arrangement under section 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956, Section 52 of the Companies Act, 2013 and any amendments thereto or re-enactments for amalgamation of erstwhile Positive Packaging Industries Limited (Rs,Positive'') and erstwhile Webtech Labels Private Limited (âWebtech'') with the Company as sanctioned by the National Company Law Tribunal on 22nd February, 2017, all assets, liabilities and reserves of Positive and Webtech were transferred to and vested in the Company with effect from appointed date being 30th January, 2015 in case of Positive and 1st April, 2015 in case of Webtech. The Schemes became effective on 1st April,
2017 on filing the National Company Law Tribunal Order with the Registrar of Companies. Positive was engaged in the business of Consumer Packaging and Webtech was engaged in business of manufacturing of Pressure Sensitive Labels. The Schemes have accordingly been given effect to in these financial statements.
The amalgamation has been accounted for under the âPooling of Interest Methodâ as prescribed under Accounting Standard 14 - âAccounting for Amalgamationsâ (AS 14) issued by the Institute of Chartered Accountants of India and as notified under section 133 of the Companies Act 2013 read with Rule 7 of the Companies Accounts Rules 2014. Accordingly and giving effect in compliance of the Scheme of Arrangement all the assets, liabilities and reserves of Positive and Webtech, now considered as part of the Company, were recorded in the books of the Company at their carrying amounts and in the same form as at appointed date as was appearing in the books of Positive and Webtech.
On 6th April, 2017, in terms of the Scheme of Arrangement 28,10,000 Equity shares of '' 2 each of the Company have been allotted to the shareholders of Webtech for 10,000 shares held by them in the share capital of Webtech in the ratio of 281:1, after cancellation of 10,408 shares of Webtech held by the Company. These shares have been considered for the purpose of calculation of earnings per share. Positive being a wholly owned subsidiary of the Company neither any shares were required to be issued nor any consideration was required to paid.
The difference of net assets value of transferor companies after adjusting reserves and Investment already made in Transferor Companies is transferred to the respective reserves as detailed here under:-
6. The accounts of the Company for the year ended 31st December, 2016 were earlier approved by the Board of Directors at its meeting held on 21st February, 2017 and reported upon by the statutory auditors vide their report dated 21st February 2017. The said accounts did not include the effect of the Schemes of Amalgamation of Positive and Webtech with the Company which were then pending for requisite approvals. The Company has since received the requisite approvals for merger of Positive and Webtech with the Company. As a result, the Schemes have became effective on 1st April 2017, with retrospective effect from the Appointed date (30 January 2015 in case of Positive and 1st April 2015 in case of Webtech). The Board of Directors have decided to revise the accounts of the Company for the year ended 31st December 2016 to incorporate the effect of the merger and accordingly these accounts have been prepared in supersession of the accounts previously adopted, as referred to above, for giving consequential effect to the Scheme of Amalgamation.
7. The Company has accrued Stamp duty payable on account of merger and transfer fees payable for transfer of Land from Positive to the Company in these accounts, as these expenses have arose on account of merger of Positive and Webtech with the Company. The Company has disclosed the same as Exceptional Item.
Dec 31, 2014
1. Terms / Rights attached to equity shares.
The company has only one class of Issued, Subscribed & Paid up Equity
Capital having a par value of Rs. 2/- per share. Each holder of equity
share is entitled to one vote per share. 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.
During the year ended 31st December 2014, the amount of per share
dividend recognised as distributions to equity shareholders was A 2.80
(31 December 2013 : Rs. 2.80)
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all Preferential amounts. The distribution will
be in proportion to the number of equity shares held by the share
holders.
31 December 31 December
2014 2013
2. CONTINGENT LIABILITIES
a Excise Duty
Matters in Appeal - Duty 5,016.95 5,202.50
- Penalties 419.52 147.01
Show Cause Notices - Duty 4,014.54 3,703.92
b Service Tax
Show Cause Notices - Service Tax 64.40 49.74
- Penalties 3.26 -
Matters in Appeal - Service Tax 24.10 84.26
- Penalties 14.45 58.12
c Income Tax Demands in Appeal 67.32 -
d Sales Tax Demands in Appeal 178.96 76.91
e Claims against the Company not
acknowledged as debts 65.18 65.18
Note for (a) to (e): Future cash outflows / uncertainties, if any, in
respect of the above are determinable only on receipt of judgements /
decisions pending with various forums / authorities.
3. SEGMENT REPORTING
The Company''s sole business segment is consumer packaging and all
activities of the Company are incidental to this sole business segment.
Given this fact and that the Company services its domestic and export
markets from India only, the financial statements reflect the
information required by AS-17 Segment Reporting for the sole business
segment of consumer packaging.
Secondary segments for the Company are geographic, namely domestic and
exports. Revenue from geographic segments is based on the domicile of
customers.
4. Defined Benefit Plans
The Company has classified the various benefit plans provided to
employees as under :
I Gratuity Plan
Gratuity is payable to all eligible employees of the Company on
superannuation, death and resignation, in terms of the provisions of
the Payment of Gratuity Act or as per the Company''s Scheme whichever is
more beneficial.
II Leave Plan
Eligible employees can carry forward and encash leave on
superannuation, death, and resignation subject to maximum limits as per
Company policy.
The following table summarises the components of the net benefit
expense recognised in the statement of profit & loss and the funded
status and amount recognised in the Balance sheet for the respective
plans.
5. EXCEPTIONAL ITEM
Exceptional Income in the previous year comprises of gain realised on
sale of office property at Nariman Point,Mumbai of Rs. 704.66 Lacs
(Provision for Tax includes Rs. 239.51 lacs towards tax on this gain).
6. EXTRAORDINARY ITEM
Extra-Ordinary Item in the current year, represents Insurance claim for
fire at Silvassa Plant during the year 2013. The claim has been settled
in January 2015, resulting in surplus of Rs. 627.53 lacs (net of tax of
Rs. 323.13 lacs). Out of the total claim an amount of Rs. 228.63 lacs
(net of tax of R117.73 lacs) has been received subsequent to the year
end.
7. On 8 July 2014, the Company and the Shareholders of Positive
Packaging Industries Limited, India (''PPIL''), had entered into a
definitive agreement, pursuant to which the Company on 30th January
2015, has acquired 100% of PPIL. This has been completed, after all
necessary approvals and for a total enterprise value of Rupees 78,819
lacs inclusive of debt of Rs. 27,917 lacs, subject to closing
adjustments.
The Company has funded the above acqusition through the following:-
* Issue of 10,024,744 Equity shares of R.2 each (face value) to
Huhtavefa B.V. (''Holding Company'') on Preferential basis in August 2014
at a price of Rupees 134.08 per share. These funds as on 31st December
2014 were temporarily invested in liquid mutual funds.
* Issue of 7% Non-convertible Debentures of Rupees 38,500 lacs on 27th
January 2015 on private placement basis to Huhtalux S A R. L.
(''Huhtamaki Group entity'')
8. Since the Company Secretary has resigned w.e.f.20 September 2014
and the Company is in the process of appointing a new Company Secretary
as required under Section 203 of the Companies Act, 2013, the financial
statements have not been signed by a Company Secretary as required by
section 215 of the Companies Act, 1956.
9. Previous year figures have been regrouped or reclassified wherever
necessary, to conform to this year classifications.
Dec 31, 2013
1 SEGMENT REPORTING
The Company''s sole business segment is consumer packaging and all
activities of the Company are incidental to this sole business segment.
Given this fact and that the Company services its domestic and export
markets from India only, the financial statements reflect the
information required by AS-17 Segment Reporting for the sole business
segment of consumer packaging.
Secondary segments for the Company are geographic, namely domestic and
exports. Revenue from geographic segments is based on the domicile of
customers.
2 EXCEPTIONAL INCOME
Exceptional Income comprises of gain realised on sale of office
property at Nariman Point, Mumbai during the current year of a 705 Lacs
(Provision for Tax includes a 239 lacs towards tax on this gain).
3 Previous year figures have been regrouped or reclassified wherever
necessary, to conform to this year classifications.
Dec 31, 2012
A Terms /rights attached to equity shares.
The company has only one class of equity shares having a par value of
a2/- per share. Each holder of equity share is entitled to one vote per
share. 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.
During the year ended 31st December 2012,the amount of per share
dividend recognised as distributions to equity shareholders was a 2.60
(31 December 2011 : a 2.40)
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all Preferential amounts. The distribution will
be in proportion to the number of equity shares held by the share
holders.
31 December
2012 31 December
2011
1 CONTINGENT LIABILITIES
a) Excise Duty
Matters in Appeal - Duty 5,099.57 5,013.67
- Penalties 125.58 125.58
Show cause notices - Duty 3,221.53 2,948.66
- Penalties - 0.09
b) Service Tax
Show cause notices - Service Tax 34.47 108.89
Matters in Appeal - Service Tax 74.81 21.05
- Penalties 55.87 0.70
c) Sales Tax demands in appeal 117.24 208.94
d) Income Tax demands in appeal - 54.94
e) Claims against the company not
acknowledged as debts 120.83 120.83
Note for (a) to (e): Future cash
outflows / uncertainties, if any, in
respect of the above are determinable
only on receipt of judgments /
decisions pending with various
forums / authorities.
f) Bank guarantees issued by bankers
on behalf of the Company 228.01 148.62
g) Contracts remaining to be executed
on capital account 323.04 961.47
and not provided for (net of advances)
h) Letters of Credit issued by banks
on behalf of the company 982.72 816.15
for import of goods
i) The company has obtained EPCG Licenses issued under and subject to
conditions in Chapter 5 of the foreign trade Policy 2004-2009.These
Licenses entitle the company to import Capital goods at concessional
rates of Customs duty and accordingly duty concession obtained is Rs
418.54 Lacs ( Previous year Rs 383.15 Lacs).In accordance with the
terms of the EPCG License the company has an export obligation of Rs
3,348.34 Lacs (Previous year Rs 3,288.32 Lacs) to be discharged over a
period of 8 years. As at the year end the company has discharged export
obligation of approximate value of Rs 1,376.03 Lacs (Previous year Rs
862.24 Lacs)
2 SEGMENT REPORTING
The Company''s sole business segment is consumer packaging and all
activities of the Company are incidental to this sole business segment.
Given this fact and that the Company services its domestic and export
markets from India only, the financial statements reflect the
information required by AS-17 Segment Reporting for the sole business
segment of consumer packaging.
(iii) Defined Benefit Plans
The Company has classified the various benefit plans provided to
employees as under :
I Gratuity Plan
Gratuity is payable to all eligible employees of the group on
superannuation, death and resignation, in terms of the provisions of
the Payment of Gratuity Act or as per the Company''s Scheme whichever is
more beneficial.
II Leave Plan
Eligible employees can carry forward and encase leave on
superannuation, death, and resignation subject to maximum limits as per
Company policy.
III Long Service Award
Long Service Award benefit is payable to eligible employees who leave
after completion of 20 years of service.(31 December 2011 - 25 years)
The following table summarizes the components of the net benefit
expense recognised in the profit & loss account and the funded status
and amount recognised in the Balance sheet for the respective plans.
3 LEASES
The Company has taken certain Office Premises and residential
facilities under Operating Lease arrangements. All the lease
agreements are cancellable and there are no restrictions imposed by
lease arrangements. There are no sub leases.
4 EXTRAORDINARY ITEM IN THE PREVIOUS YEAR COMPRISE OF :
Insurance claim of Fire at Thane Plant was settled, resulting in
surplus of a 294.17 Lacs (Net of Income Tax of a 141 Lacs)
5 Till the year ended 31 December 2011, the Company was using
pre-revised schedule VI to the Companies Act, 1956 for preparation &
presentation of its Financial statements.
During the year ended 31 December 2012 the revised schedule VI notified
under the Companies Act, 1956 has become applicable. The Company has
reclassified the previous year figures to conform this year''s
classification.
Dec 31, 2010
1 Gross sales are inclusive of Excise Duty and Sales Tax .
2 Sales returns are accounted for in the year of return.
3 Dividend income is recognised when the right to receive dividend is
unconditional at the balance sheet date.
4 Interest on investments is accounted on a time proportion basis
taking into account the amounts invested and the rate of interest.
I. RETIREMENT BENEFITS
1 Defined Contribution Plans
Contributions payable to the recognised provident fund, which is a
Defined contribution Plan, are charged to the Profit and loss account
as incurred.
2 Defined Benefit Plans
The Companys gratuity Benefit scheme is a Defined Benefit plan. The
Companys net obligation in respect of the gratuity Benefit scheme is
calculated by estimating the amount of future Benefit that employees
have earned in return for their service in the current and prior
periods; that Benefit is discounted to determine its present value, and
the fair value of any plan assets is deducted.
The present value of the obligation under such Defined Benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee Benefit entitlement and measures each unit
separately to build up the fnal obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value of
the obligation under Defined Benefit plans are based on the market
yields on Government securities as at the balance sheet date.
When the calculation results in a Benefit to the Company, the
recognized asset is limited to the lower of the net total of the
present value of the Defined Benefit obligation at the balance sheet
date minus any past service cost minus fair value of plan assets as at
balance sheet date and the present value of any future refunds from the
plan or reductions in future contributions to the plan.
Actuarial gains and losses are recognised immediately in the Profit and
Loss Account.
Family Pension and Long Term Service Award plan are Defined Benefit
plans and are valued based on actuarial valuation.
3 Other Long term employment benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Profit and Loss
Account.
4 Other short term employment benefits
Company provides short term Benefit of sick leave to its employees with
certain accumulation provisions and same being short term and expected
to be utilised within twelve months are provided on undiscounted basis.
VIII. INVESTMENTS
Long term investments are valued at cost and an appropriate provision
is made for diminution, which is other than temporary, in their value.
Current investments are valued at cost or market value, whichever is
lower.
IX. RESEARCH AND DEVELOPMENT EXPENDITURE
Research and development expenditure of a revenue nature is charged off
in the year in which it is incurred and expenditure of a capital nature
is capitalised to fixed assets.
X. TAXATION
Income tax expense comprises current income tax (i.e. amount of tax for
the period determined in accordance with the income tax law), fringe
benefit tax and deferred tax charge or credit (reflecting the tax
effects of timing differences between accounting income and taxable
income for the period). The deferred tax charge or credit and the
corresponding deferred tax liabilities or assets are recognized using
the tax rates and tax laws that have been enacted or substantively
enacted by the balance sheet date. Deferred tax assets are recognized
only to the extent there is reasonable certainty that the assets can be
realized in future; however, where there is unabsorbed depreciation or
carried forward loss under taxation laws, deferred tax assets are
recognized only if there is a virtual certainty of realization of such
assets. Deferred tax assets are reviewed at each balance sheet date and
written down or written up to refect the amount that is reasonably/
virtually certain (as the case may be) to be realized.
Provision for fringe Benefit tax (FBT) is made on the basis of
applicable FBT on the taxable value of eligible expenses of the company
as prescribed under the Income Tax Act, 1961.
XI. LEASES Operating Leases
Lease payments under operating leases are recognised as an expense in
the statement of Profit and loss account on a straight line basis over
the lease term.
XII. IMPAIRMENT OF ASSETS
The Company assesses at each balance sheet date whether there is any
indication that an asset or a group of assets (cash generating unit)
may be impaired. If any such indication exists, the Company estimates
the recoverable amount of the asset or the cash generating unit to
which the asset belongs. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset
belongs is less than its carrying amount, the carrying amount is
reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognized in the Profit and loss account. If at
the balance sheet date there is an indication that a previously
assessed impairment loss no longer exists, the recoverable amount is
reassessed and the asset is refected at the recoverable amount subject
to reversal of loss being limited to maximum of historical impairment
loss booked.
XIII. PROVISIONS AND CONTINGENT LIABILITIES
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
refect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed. Contingent assets are not recognized in the
financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an inflow of economic
benefits will arise, the asset and related income are recognized in the
period in which the change occurs.
XIV. EARNINGS PER SHARE (EPS)
Basic EPS is computed by dividing the net Profit for the period
attributable to the equity shareholders by the weighted average number
of equity shares outstanding during the period. Diluted EPS is computed
using the weighted average number of equity and dilutive equity
equivalent shares outstanding during the period, except where the
results would be anti dilutive.
1 SECURED LOANS
Working Capital Facility taken from Banks are secured by hypothecation
of inventories & bookÃdebts.
4 SEGMENT REPORTING
The Companys sole business segment is consumer packaging and all
activities of the Company are incidental to this sole business segment.
Given this fact and that the Company services its domestic and export
markets from India only, the financial statements refect the information
required by AS-17 Segment Reporting for the sole business segment of
consumer packaging.
5 RELATED PARTY TRANSACTIONS
a) Related party where control exists : Ultimate Parent Company Holding
Company
Huhtamaki Oyj., Finland Huhtavefa B.V., Netherlands
b) Other Related Parties with whom transactions have taken place during
the year : Fellow Subsidiaries
Huhtamaki New Zealand Ltd., New Zealand.
Huhtamaki Vietnam Ltd, Vietnam
Huhtamaki Australia Ltd., Australia
Huhtamaki Deutschland Gmbh and Co.KG., Germany
Huhtamki South Africa Ltd., South Africa
Huhtamaki (Thailand) Ltd., Thailand
c) Key Managerial Personnel
Mr. Suresh Gupta
Chairman and Managing Director
Mr. M. K. Srinivasan
Chief Executrive Officer and Executive Director
(w.e.f. 25th March 2010)
Mr. C. N. Murthy
Executive Director and Chief Operating Officer
(Till 8th December 2010)
d) Relatives of Key Managerial Personnel
Mr. Suresh Gupta Mrs. Kumkum GuptaÃWife, Ms. Ratna GuptaÃDaughter,
Ms. Shivani GuptaÃDaughter, Mr. C.N. Murthy Mrs. Jayanthi MurthyÃWife
21 During the year, revenue expenses incurred for the projects that
have been capitalised are Rs Nil (Previous Year Rs. 24,533/-). Out of
the same, amount lying in capital work in progress is Rs Nil (Previous
year Rs Nil).
23 DISCLOSURE PURSUANT TO ACCOUNTING STANDARD - 15 (REVISED) EMPLOYEE
BENEFITS
(i) Effective 1 January,2007 the Company has adopted accounting
standard 15 (revised 2005) "Employee benefits"
The Company has classifed the various benefits provided to employees as
under.
(ii) Defined Contribution Plans
Amount recognised as an expense and included in "Personnel costs" for
Provident Fund & ESIC contributions in the Profit and Loss account.
25,942 22,655
(iii) Defined Benefit Plans
The Company has classifed the various Benefit plans provided to
employees as under :
I Gratuity Plan Gratuity is payable to all eligible employees of the
Company on superannuation, death and resignation, in terms of the
provisions of the Payment of Gratuity Act or as per the Companys
Scheme whichever is more benefcial.
II Leave Plan Eligible employees can carry forward and encash leave on
superannuation, death, and resignation subject to maximum limits as per
Company policy.
III Long Service Award Long Service Award Benefit is payable to
eligible employees on completion of 25 years of service. The following
table summarises the components of the net Benefit expense recognised
in the Profit & loss account and the funded status and amount
recognised in the Balance sheet for the respective plans
24 EXCEPTIONAL ITEMS COMPRISE OF :
a. Income of Rs.139,813/- Thousand being net gain realised on sale of
Nagpur Factory Assets (Current Tax includes Rs. 28,600/- Thousand
related to the said gain).
b. Expenses of Rs. 17,004/- Thousand incurred during the year on
Voluntary Retirement Scheme (VRS) at Hyderabad Plant.
25 EXTRAORDINARY ITEMS COMPRISE OF :
a. The Company has reversed balance provision amounting to Rs.27,949/-
Thousand (Net of Rs.Nil Tax) created in earlier year towards repairs of
certain machineries damaged by food in 2005, as the same is no longer
required.
b. Against an insurance claim for fire at Thane plant during the year
an advance payment of Rs. 10,000/- Thousand has been received pending
final settlement.
A surplus of Rs. 2,578/- Thousand net of Income Tax of Rs. 2,912/-
Thousand, cost of repairs & book value of damaged assets has been
recognised in Year 2010.
26 Since the Company Secretary has resigned with effect from 30th
November 2010 and the Company is still in the process of appointing a
new Company Secretary as required under section 383A of the Companies
Act 1956, the financial statements have not been signed by a Company
Secretary as required by section 215 of the Companies Act, 1956.
27 The figures of the previous year were audited by a firm of Chartered
Accountants other than S.V.Ghatalia & Associates.
28 Previous years figures are appropriately reclassified to conform
with current years classification.
Dec 31, 2009
1 SECURED LOANS
Working Capital Loans from Banks are secured by hypothecation of
inventories, book-debts and bills.
2 SEGMENT REPORTING
The Companys sole business segment is consumer packaging and all
activities of the Company are incidental to this sole business segment.
Given this fact and that the Company services its domestic and export
markets from India only, the financial statements reflect the
information required by AS-17 Segment Reporting for the sole business
segment of consumer packaging. The entire business assets of the
Company are situated in India.
3 RELATED PARTY TRANSACTIONS
a) Related party where control exists :
Ultimate Parent Company Huhtamaki Oyj., Finland
Holding Company Huhtavefa B.V., Netherlands
b) Other Related Parties with whom transactions have taken place during
the year:
Fellow Subsidiaries Huhtamaki New Zealand Ltd., New Zealand.
Huhtamaki Vietnam Ltd,
Vietnam Huhtamaki Australia Ltd.,
Australia Huhtamaki Deutschland Gmbh and Co.KG.,
Germany Huhtamaki Finance B.V.,
Netherlands Huhtamki South Africa Ltd.,
South Africa Huhtamaki Singapore Pte.Ltd.,
Singapore Huhtamaki (Thailand) Ltd., Thailand
c) Key Managerial Personnel
Mr. Suresh Gupta
Managing Director and Chief Executive Officer
Mr. C.N.Murthy
Executive Director and Chief Operating Officer
d) Relatives of Key Managerial Personnel
Mr. Suresh Gupta
Brig.V.P.Gupta-Father,
Mrs.Manmohini Gupta-Mother,
Mrs.Kumkum Gupta-Wife,
Ms.Ratna Gupta-Daughter,
Ms.Shivani Gupta-Daughter
Mr.Suresh Gupta as Excecutor of Jyoti Trust and Geeta Trust.
Mrs.Jayanthi Murthy-Wife
Mr. C.N.Murthy
4 CONTINGENT LIABILITIES
31 December 2009 31 December 2008
i) Excise Duty
a Matters in Appeal - Duty 497,382 497,382
- Penalties 7,148 7,148
b Show cause notices- Duty 225,242 189,392
- Penalties 1,179 776
ii) Customs Duty demands
in appeal - 133
iii) Service Tax show cause
notices 4,065 1,700
- Penalties 88 --
iv) Service Tax appeal
- Service Tax 4,143 2,528
- Penalties 136 70
v) Sales Tax demands in appeal 22,998 19,546
vi) Claims against the company
not acknowledged as debts 6,288 6,288
5 The Company has availed of unsecured interest free Sales tax
deferred loan from the Government of Andhra Pradesh for its Hyderabad
(Bollaram) factory, in accordance with their sales tax deferral scheme.
225,309 225,309
The above amount is repayable after 14 years from the date of availment
of the loan. The first due date for repayment is 1 April 2011.
(iv) General Descriptions of significant defined benefit plans
I Gratuity Plan
Gratuity is payable to all eligible employees of the Company on
superannuation, death and resignation, in terms of the provisions of
the Payment of Gratuity Act or as per the Companys Scheme whichever is
more beneficial.
II Leave Plan
Eligible employees can carry forward and encash leave on
superannuation, death, and resignation subject to maximum accumulation
of 90 days.
III Long Service Award
Long Service Award benefit is payable to eligible employees on
completion of 25 years of service.
6 Previous year figures are appropriately reclassified to conform with
current years classification.
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- Rights
- BSE Price History
- NSE Price History
-
Huhtamaki India Ltd. Key Financial Ratios
- Ratios
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Huhtamaki India Ltd. Results
- Quarterly Results
- Half Yearly Results
- Nine Months Results
- Annual Results
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Huhtamaki India Ltd. Financial Data
- Audited Results
- Cash Flow
- Balance Sheet
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Huhtamaki India Ltd. Reports
- Accounting Policies
- Auditors Report
- Directors Report
- Notes To Account
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Huhtamaki India Ltd. Corporate Announcements
- Book Closure
- Dividend
- Board Meetings
- Change of Name
