Notes to Accounts of Maral Overseas Ltd.
Mar 31, 2018
1. Corporate information
Maral Oveseas Limited (the Company) is a limited company incorporated and domiciled in India having its registered office at Maral Sarovar, V&P.O. Khalbujurg Tehsil Kasrawad, District Khargone, Madhya Pradesh, India. The Company has its primary listing on the BSE Limited and National Stock Exchange India Limited in India.
The Company is one of Indiaâs largest vertically integrated textile companies, having multiple facilities to produce Grey Yarn, Dyed Yarn, Knitted Fabric and Garments. The manufacturing plants of the Company are located in India.
8% redeemable cumulative preference shares of Rs. 100 each (total face value of Rs. 1,414.05) are classified as financial liability (Refer Note 20).
3% redeemable cumulative preference shares of Rs. 100 each (total face value of Rs. 1,200.00) are classified as financial liability (Refer Note 20).
(ii) Rights, preferences and restriction attached to equity shares
Company has only one class of equity shares having a par value of Rs. 10/-. Each holder of equity shares 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. The holder of equity shares is entitled to receive dividend only after distribution of dividend to the holders of preference shares.
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.
(iii) Rights, preferences and restriction attached to preference shares
For rights, preferences and restriction attached to both type of preference shares, classified as financial liability Refer Note 20.
2.1 Nature and Purpose of Reserves Securities Premium Reserves
Securities premium reserves is used to record the premium on issue of shares. The reserve is utilised in accordance with the provision of the Companies Act, 2013.
General Reserve
This represents appropriation of profit after tax by the company.
Retained Earnings
This comprise companyâs undistributed profit after taxes.
Cash flow hedge reserve
The group uses hedging instrument as part of its management of foreign currency risk associated with borrowing in foreign exchange. For hedging the foreign currency risk, the group uses cross currency interest rate swap which is designated as cash flow hedge. Amounts recognised in cash flow hedge reserve is reclassified to profit and loss, when the hedge item affects profit and loss.
Equity Component of Financial Instruments
The Reserve is created due to the fair valuation of preference share capital in accordance of Ind As.
Preference Share Capital Redemption Reserve
Preference Share Capital Redemption reserve is created against the redemption of cumulative preference shares.
Summary of borrowing arrangements
(i) Term loans from both banks & financial institutions are secured by first mortgage and charge created / to be created on all the present and future immovable & movable properties (other than current assets) of the Company, ranking pari-passu, and second pari-passu charge on current assets of the company.
(ii) Term loans from both banks (except term loans from Central Bank of India Rs. 3,688 Lakhs and Union Bank of India Rs. 3,200 Lakhs and State Bank of India Rs. 2,844 Lakhs and Export-Import Bank of India Rs. 3,520 Lakhs) & financial institutions along with working capital facilities from banks, are secured by pledge of stipulated promoterâs equity shareholding, constituting 36% of the present equity capital, in favour of the lenders on pari-passu basis.
(iii) Maturity Profiles & Interest rate of secured loans
(iv) All secured loans are repayable in quarterly installments.
(v) Unsecured loan from related party, carries a fixed rate of interest of 8% and is repayable on 31st March, 2019.
(vi) The Companyâs financial restructuring package was approved under the Corporate Debt Restructuring mechanism (CDR) by the CDR Empowered group vide their letter dated March 26, 2009 (âCDR letterâ) and subsequent approvals received from the various financial institutions and banks.
(vii) Some of the lenders follow the practice to recover sue motto, payment of both principal as well as interest from the working capital facility advanced by them, where applicable, or from the current account under instructions from the Company. It is regarded as accepted practice that the due date for payment shall be the date next following the date when interest is charged. Any delay on part of the lender to recover payment, either in line with past practice or specific instructions given in this regard by the Company, is not attributable to default on part of the Company Accordingly, there is no continuing default in repayment of the principal loan and interest amounts.
Notes:
(i) Rights, preferences and restriction attached to preference shares
Company has only one class of cumulative redeemable preference shares (CRPS) having a par value of Rs. 100/-. There are two series of CRPS, carrying differential dividend coupon rates.
First series of preference shares carrying a dividend coupon rate of 8%,allotted to the various banks and financial institutions, pursuant to the Corporate Debt Restructuring (âCDRâ) Package, are redeemable in four equal annual instalments from 2016 to 2019. In terms of the Master Restructuring Agreement executed with the Companyâs bankers, premium of 5% on redemption is payable in case Companyâs cash flows permit.
Second series of preference shares carrying a dividend coupon rate of 3%, allotted to promoters, against infusion of funds by them, pursuant to the Corporate Debt Restructuring (âCDRâ) Package are redeemable on 31st March, 2019.
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. Each holder of preference shares is entitled to one vote per share only on resolutions placed before the company which directly affect the rights attached to preference shares. The holders of preference shares are entitled to a preferential right of repayment of capital on winding up vis-a-vis the holders of equity shares. The distribution will be in proportion to the number of shares held by the shareholders.
Each holder of preference shares is entitled to one vote per share only on resolutions placed before the company which directly affect the rights attached to preference shares. Further, they shall have the right to vote on all resolutions placed before the Company if the dividend on such preference shares remain unpaid over a period of two years or more.
3.1 The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 (âthe Actâ) has been determined to the extent such parties have been identified by the Company, on the basis of information and record available with them. This information has been relied upon by the auditors. Disclosures as required under section 22 of the Act, is as under. Disclosure in respect of interest due on delayed payments has been determined only in respect of payments made after the receipt of information, with regards to filing of memorandum, from the respective suppliers.
4. Earnings per share
Basic earnings per equity share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year.
Potential equity options may arise in the event of default in payment due on loan funds. Potential options also exist in the form of right of CDR lenders to convert 20% of their debt outstanding beyond seven years from the date of CDR Letter into equity capital.
5. Segment Reporting
The Company is currently organized into three business operating segments: Yarn, Fabric and Textile Made-ups. The Companyâs business segments offer different products and require different technology and marketing strategies.
Identification of Segments
The Board of Directors of the Company has been identified as Chief Operation Decision Maker who monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Accounting policy in respect of segments is in conformity with accounting policy of the company as a whole.
Intersegment Transfer
Segment revenue resulting from transactions with other business segments is accounted for on basis of transfer price agreed between the segments. Transfer prices between operating segments are on armâs length basis in a manner similar to transactions with third parties.
Segment Revenue & Results
The Revenue and Expenditures in relation to the respective segments have been identified and allocated to the extent possible. Other revenue and expenditures non allocable to specific segments are disclosed separately as unallocated and adjusted directly against total income of the Company.
Segment Assets & Liabilities
Segment Assets includes all operating assets used by the operating segment and mainly consisting property, plant & equipment, trade receivables, cash and cash equivalents and inventory etc. Segment Liabilities primarily include trade payables and other liabilities. Common assets & liabilities which can not be allocated to specific segments are shown as a part of unallocable assets/liabilities.
36. Operating lease
The Company has entered into operating lease arrangements for office space. The average lease term is 1 year. The minimum lease payment during non-cancellable period under foregoing arrangements in the aggregate for each of the following period as follows:
viii. Further, in terms of the Master Restructuring Agreement, if, in the opinion of the Lenders, the profitability and cash flows of the Company so warrant, the Lenders shall be entitled to receive recompense for the reliefs and sacrifices extended by them within the CDR Parameters, with the approval of the CDR Empowered Group. Pending determination by the lenders, same is neither quantifiable nor provided.
Based on legal advice, discussions with the solicitors, etc., the management believes that there is fair chance of decisions in the companyâs favour in respect of all the items listed at (i) to (vi) above and hence no provision is considered necessary against the same. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the companyâs financial position and results of operations.
6. Employee Benefits
A Defined Contribution plans
The Company makes contributions towards provident fund and superannuation fund, to defined contribution retirement benefit plans for qualifying employees. The provident fund plan is operated by the Regional Provident Fund Commissioner and the superannuation fund is administered by the Trustees of the âMaral Overseas Limited Senior Executive Superannuation Fundâ. Under the schemes, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits.
B Defined Benefit plans
The Company makes annual contributions towards funding the defined benefit plans for qualifying employees and also contributes towards the insurance scheme of ICICI Prudential Life Insurance Co. Ltd.The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary (last drawn salary) payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.
The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.
Sensitivities due to mortality and withdrawals are not material & hence impact of change not calculated.
Sensitivities as to rate of inflation, rate of increase of pensions in payment, rate of increase of pensions before retirement & life expectancy are not applicable being a lump sum benefit on retirement.
xi. The estimates of future salary increase considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors. The above information is certified by the actuary and relied upon by the auditors.
xii. The employer âs best estimate of contribution expected to be paid during the next year is Rs. 128.81 lakhs.
Sensitivities due to mortality and withdrawals are not material & hence impact of change not calculated.
Sensitivities as to rate of inflation, rate of increase of pensions in payment, rate of increase of pensions before retirement & life expectancy are not applicable being a lump sum benefit on retirement.
viii. The estimates of future salary increase considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors. The above information is certified by the actuary and relied upon by the auditors.
ix. The employer âs best estimate of contribution expected to be paid during the next year is Rs. 77.47 lakhs
These plans typically expose the Company to actuarial risks such as Investment risk, salary risk, discount rate risk, mortality risk, withdrawals risk.
Salary risk Actual salary increases will increase the Planâs liability. Increase in salary increase rate assumption in future valuations will also increase the liability.
Investment risk If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability
Discount rate risk Reduction in discount rate in subsequent valuations can increase the planâs liability.
Mortality & disability risk Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities.
Withdrawals Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Planâs liability.
B.3. Defined Benefit plans- Leave Obligations
The leave obligations cover the Companyâs liability for sick and earned leave.
The amount of the provision Rs. 1.57 lakhs of (31st March, 2017- Rs. 1.77 lakhs, 1st April 2016- Rs. 23.15 lakhs ) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations.
7.1 Terms and Conditions
The transactions with the related parties are made on term equivalent to those that prevail in armâs length transactions. The assessment is under taken each financial year through examining the financial position of the related party and in the market in which the related party operates. Outstanding balances are unsecured and the settlement will be occured in cash.
8. Financial Instruments
8.1 Capital Management
The primary objective of the Companyâs Capital Management is to maximize the shareholder value and also maintain an optimal capital structure to reduce cost of capital. In order to manage the capital structure, the Company may adjust the amount of dividend paid to shareholders, return on capital to shareholders, issue new shares or sell assets to reduce debts.
The Company monitors capital on the basis of following gearing ratio, which is net debt divided by total capital plus debt.
Note:
i. Debt is defined as long and short-term borrowings (excluding derivative, financial guarantee contracts), as described in notes 19 and 20.
ii. In order to achieve this overall objective, the Groupâs 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 call loans and borrowings or charge some penal interest. 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 current years and previous years.
8.2 Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value and measured at amortised cost and for which fair values are disclosed in financial statements. To provide an indication about the reliability of inputs used in determining fair values, the group has classified its financial instruments into three levels prescribed under the accounting standards.
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
8.2.2 Valuation techniques used to determine Fair value
The Company maintains policies and procedures to value financial assets or financial liabilities using the best and most relevant data available. The fair values of the financial assets and liabilities are included at the amount 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.
The following methods and assumptions were used to estimate the fair values:
1) Fair value of cash and deposits, trade receivables, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of other non-current financial assets and liabilities (security deposit taken/given and advance to employees) carried at amortized cost is approximately equal to fair value. Hence carrying value and fair value is taken same.
2) Long-term fixed-rate and variable-rate receivables / borrowings are evaluated by the Company based on parameters such as interest rates, specific country risk factors, credit risk and other risk characteristics. Fair value of variable interest rate borrowings approximates their carrying values. For fixed interest rate borrowing fair value is determined by using the discounted cash flow (DCF) method using discount rate that reflects the issuerâs borrowings rate. Risk of non-performance for the company is considered to be insignificant in valuation.
3) The fair values of derivatives are estimated by using pricing models, where the inputs to those models are based on readily observable market parameters basis contractual terms, period to maturity, and market parameters such as interest rates, foreign exchange rates, and volatility. These models do not contain a high level of subjectivity as the valuation techniques used do not require significant judgement, and inputs thereto are readily observable from actively quoted market prices. Management has evaluated the credit and non-performance risks associated with its derivative counterparties and believe them to be insignificant and not warranting a credit adjustment.
8.2.3 Fair Value Measurement Heirarchy
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following provides the fair value measurement hierarchy of Companyâs asset and liabilities, grouped into Level 1 to Level 3 as described below:
Level 1: Quoted prices (unadjusted) in the active markets for identical assets or liabilities
Level 2: Other techniques for which all the inputs which have a significant effect on the recorded fair values are observable, either directly or indirectly
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
8.3 Financial risk management
The Companyâs activities expose it to a variety of financial risks which includes market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
The Companyâs focus is to ensure liquidity which is sufficient to meet the Companyâs operational requirements. The Company monitors and manages key financial risks so as to minimise potential adverse effects on its financial performance. The Company has a risk management policy which covers the risks associated with the financial assets and liabilities. The details for managing each of these risks are summarised ahead.
8.4 Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: currency rate risk, interest rate risk and other price risks, such as equity price risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments.
The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks.
8.4.1 Foreign currency risk
Foreign exchange risk is the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in foreign exchange rate.
The Company derives significant portion of its revenue in foreign currency, exposing it to fluctuations in currency movements. The Company has laid down a foreign exchange risk policy as per which senior management team reviews and manages the foreign exchange risks in a systematic manner, including regular monitoring of exposures, proper advice from market experts, hedging of exposures, etc.
The Company uses derivative financial instruments, such as foreign exchange forward contracts, to mitigate foreign exchange related risk exposures. Derivative financial instruments relating to a firm commitment or a highly probable forecast transaction, are marked to market at every reporting date.
In managementâs opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
8.4.2 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. In order to optimize the Companyâs position with regard to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of the fixed rate and floating rate financial instruments in its total portfolio .
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease represents managementâs assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the companyâs: profit for the year ended 31 March, 2018 would decrease/increase by Rs. 18.63 lakhs (31 March, 2017: decrease/increase by Rs. 17.22 lakhs). This is mainly attributable to the companyâs exposure to interest rates on its variable rate borrowings.
8.4.3 Price risks
The companyâs exposure to price risk arises from the investment held by the company . To manage its price risk arising from investments in marketable securities, the company diversifies its portfolio and is done in accordance with the company policy. The companyâs major investments are actively traded in markets and are held for short period of time. Therefore no sensitive is provided for the same.
8.5 Credit Risk
Credit risk arises from the possibility that the counterparty will default on its contractual obligations resulting in financial loss to the company. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial conditions, current economic trends, and analysis of historical bad debts and ageing of accounts receivable.
The Company considers the probability of default upon initial recognition of assets and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is significant increase in credit risk, it considers reasonable and supportice forward looking information such as:
(i) Actual or expected significant adverse changes in business.
(ii) Actual or expected significant changes in the operating results of the counterparty.
(iii) Financial or economic conditions that are expected to cause a significant change to the counterpartyâs ability to meet its obligation
(iv) Significant increase in credit risk anf other financial instruments of the same counterparty
(v) Significant changes in the value of collateral supporting the obligation or in the quality of third party guarantees or credit enhancements
The companyâs major exposure is from trade receivables, which are unsecured and derived from external customers. Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted securities and certificates of deposit which are funds deposited at a bank for a specified time period. Other loans are majorly provided to the subsidiaries and employee which have very minimal risk of loss.
Credit risk is managed through credit approvals, establishing credit limits, continuous monitoring of creditworthiness of customers to which the company grants credit terms in the normal course of business. The Company also assesses the financial reliability of customers taking into account the financial condition, current economic trends and historical bad debts and ageing of accounts receivables.
8.6 Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the companyâs short, medium, and long-term funding and liquidity management requirements. The company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
The following tables detail the companyâs remaining contractual maturity for its financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the company can be required to pay.
8.7 Derivative financial instruments
The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The objective of hedges is to minimize the volatility of INR cash flows of highly probable forecast transaction. The Companyâs risk management policy is to hedge around 70% to 90% of net exposure with forward exchange contract, having a maturity upto 12 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
Sensitivity Analysis
The Following table demonstrate the sensitivity in the foreign exchange rate ( USD & EURO) to the Indian Rupees wit all other variable held constant. The Impact on the other component of Equity arises from foreign forward exchange contract designated as cash flow hedge reserve is given below:
Notes to the reconciliaiton
1 Under previous GAAP, long term investments were measured at cost less diminution in value which is other than temporary.Under Ind AS, these financial assets have been classifies as FVTPL. On the date of transition to Ind AS, these financial assets have been measured at their fair value which is lower than the cost as per previous GAAP, resulting in an (decrease)/increase in the carrying amount by â (5.48) lakhs (as at March 31, 2017: Rs. 21.99 lakhs and as at April 1, 2016: Rs. 27.71 lakhs).
2 Under previous GAAP, actuarial gains and losses were recognised in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability/ asset which is recognised in other comprehensive income. Consequently, the tax effect of the same has also been recognised in other comprehensive income under Ind AS instead of the statement of profit and loss.
3 Under the previous GAAP, revenue from sale of products was presented exclusive of exise duty. Under Ind AS, revenue from sale of goods is presented inclusve of excise duty. Th excise duty paid is presented on the face of statement of profit and loss as part of expenses. There is no impact on the total equity and profit.
4 Previous GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deffered taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences, which was not required under previous GAAP.
5 Under Ind AS, effective portion of the cash flow hedge to be recognised in other comprehensive income and however in the previous GAAP same has been recognised under Reserve and Surplus under the head â Cash Flow Hedge Reserveâ.
6 The Company has isssued Cummulative redeemable preference shares. Under previous GAAP, the Preference shares were classifed as equity and dividend payable thereon was treated as distribution of profit. Under Ind AS, these prefeence shares are separated in to liability and equity component based on the terms of the contract. Interest on liability component is recognised using the effective interest method. These shares are classiifed as debt and dividend on shares along with dividend distribution tax has been recognised to statement of profit & loss as interest cost.
7 Under Previous GAAP, there was no concept of other comprehensive income. Under Ind AS, specified items of income, expenses, gains, or losses ae required to be presented in other comprehensive income.
9. Recent Accounting Pronouncements
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company is evaluating the effect of this on the financial statements.
Ind AS 115- Revenue from Contract with Customers: On March 28, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors.
- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach).
The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.
The Company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The company is evaluatng the effect on adoption of Ind AS 115.
10. Approval of financial statements
The financial statements for the year ended 31 March, 2018 were approved by the Board of Directors and authorise for issue on 9th May, 2018
11. Previous Periodâs Figures have been regrouped/ recast whereever considered necessary.
Mar 31, 2016
b) Terms/rights attached to equity shares
Company has only one class of equity shares having a par value of Rs.10/-. Each holder of equity shares 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. The holder of equity shares is entitled to receive dividend only after distribution of dividend to the holders of preference shares.
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.
c) Terms/rights attached to preference shares
Company has only one class of cumulative redeemable preference shares (CRPS) having a par value of Rs. 100/-. There are two series of CRPS, carrying differential dividend coupon rates.
First series of preference shares carrying a dividend coupon rate of 8%, allotted to the various banks and financial institutions, pursuant to the Corporate Debt Restructuring (''CDR'') Package, are redeemable in four equal annual installments from 2016 to 2019. In terms of the Master Restructuring Agreement executed with the Company''s bankers, premium of 5% on redemption is payable in case Company''s cash flows permit.
Second series of preference shares carrying a dividend coupon rate of 3%, allotted to promoters, against infusion of funds by them, pursuant to the Corporate Debt Restructuring (''CDR'') Package are redeemable on 31st March, 2019.
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. Each holder of preference shares is entitled to one vote per share only on resolutions placed before the company which directly affect the rights attached to preference shares. The holders of preference shares are entitled to a preferential right of repayment of capital on winding up vis-a-vis the holders of equity shares. The distribution will be in proportion to the number of shares held by the shareholders.
d) Details of shareholders holding more than 5% shares in the company
The aforesaid disclosure is based upon percentages computed separately for each class & series of shares outstanding, as at the balance sheet date. As per records of the company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
e) The Company has not allotted any fully paid up shares pursuant to contract(s) without payment being received in cash nor has allotted any fully paid up shares by way of bonus shares nor has bought back any class of shares during the period of five years immediately preceding the balance sheet date.
f) The CDR package grants a right to the various banks and financial institutions to convert 20% of their debt outstanding beyond seven years from the date of CDR Letter i.e March 26, 2009 into equity shares, as per SEBI guidelines / loan covenants, whichever is applicable.
1. Long Term Borrowings
Notes:
a. Term loans from both banks & financial institutions are secured by first mortgage and charge created / to be created on all the present and future immovable & movable properties (other than current assets) of the Company, ranking pari-passu, and second pari-passu charge on current assets of the company.
Forex derivative loss loan is secured by way of residual charge on the fixed assets and current assets of the company.
Term loans from both banks (except term loans from Central Bank of India Rs.3688 lakh and Union Bank of India Rs.3200 lakh) & financial institutions along with working capital facilities from banks, are secured by pledge of stipulated promoter''s equity shareholding, constituting 36% of the present equity capital, in favour of the lenders on pari-passu basis.
2 Carry a fixed rate of interest of 11.75% to be reset on an annual basis
3 Carry floating interest rate of Base Rate 1.25% to 1.50%
4 Carry a fixed rate of interest of 9.25%
All secured loans are repayable in quarterly installments.
c) Unsecured loan from related party, carries a fixed rate of interest of 8% and is repayable on 31st March, 2019
d) The Company''s financial restructuring package was approved under the Corporate Debt Restructuring mechanism (CDR) by the CDR Empowered group vide their letter dated March 26, 2009 (''CDR letter'') and subsequent approvals received from the various financial institutions and banks.
e) Some of the lenders follow the practice to recover sue motto, payment of both principal as well as interest from the working capital facility advanced by them, where applicable, or from the current account under instructions from the Company. It is regarded as accepted practice that the due date for payment shall be the date next following the date when interest is charged. Any delay on part of the lender to recover payment, either in line with past practice or specific instructions given in this regard by the Company, is not attributable to default on part of the Company. Accordingly, there is no continuing default in repayment of the principal loan and interest amounts.
Based on schedule of reversal of timing differences of Deferred Tax liabilities, historical pre-tax earnings and projections for future taxable income over the periods in which the Deferred Tax assets are deductible, management believes it is more likely than not that the Deferred Tax assets would be realized
Loans repayable on demand, comprise of working capital facilities from banks and are secured by way of hypothecation first charge, ranking pari-passu, on stocks of raw material, stock in process, finished goods, book debts / receivables and all current assets stored in the company''s factory premises, at all plants and / or elsewhere including those in transit covered by documents of title thereto, local and export usance bills and second pari-passu charge on the entire movable and immovable assets of the Company (fixed assets), both present and future.
Loans repayable on demand from banks, along with term loans from both banks (except term loans from Central Bank of India Rs.3688 lakh and Union Bank of India Rs.3200 lakh) & financial institutions are secured by pledge of stipulated promoter''s equity shareholding, constituting 36% of the present equity capital, in favour of the lenders on pari-passu basis.
The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 ("the Act") has been determined to the extent such parties have been identified by the company, on the basis of information and records available with them. This information has been relied upon by the auditors. Disclosure as required under section 22 of the Act, is as under. Disclosure in respect of interest due on delayed payment has been determined only in respect of payments made after the receipt of information, with regards to filing of memorandum, from the respective suppliers.
a. Buildings include Rs.0.02 lakh representing cost of unquoted fully paid shares held in co-operative housing society.
b. Buildings include certain portion given on operating lease. It is not practicable to give separate disclosure of gross block, depreciation charge for the year, accumulated depreciation and net block in respect of the same.
c. Opening balance of gross block, depreciation and net block are adjusted for reclassification of asset categories inter se. These do not have any impact on the aggregate depreciation charge / provision.
a) In respect of MAT credit entitlement, management, based on present profitability trend as well as future profit projections, is of the view that there is convincing evidence for utilization of MAT credit assets in future periods
b) Direct taxes refundable represent amounts recoverable from the Income Tax Department for various assessment years. In respect of disputed demands, company has filed appeals which are pending at various levels and for assessment years where the issues have been decided in favour of the company, company is in the process of reconciling / adjusting the same with the department. Necessary value adjustments shall be made on final settlement by the department.
5 a) Response to letters sent by the Company requesting confirmation of balances has been insignificant. In the management''s opinion, adjustments on reconciliation of the balances, if any required, will not be material in relation to the financial statements of the Company and the same will be adjusted in the financial statements as and when the confirmations are received and reconciliations completed.
b) Inventories, loans & advances, trade receivables and other current / non-current assets are reviewed annually and in the opinion of the management do not have a value on realization in the ordinary course of business, less than the amount at which they are stated in the Balance Sheet.
6 Employee benefit obligations Defined contribution plans
The Company makes contributions towards provident fund and superannuation fund, to defined contribution retirement benefit plans for qualifying employees. The provident fund plan is operated by the Regional Provident Fund Commissioner and the superannuation fund is administered by the Trustees of the ''Maral Overseas Limited Senior Executive Superannuation Fund''. Under the schemes, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits.
Defined benefit plan
The Company makes annual contributions to the Employees'' Group Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance Company Limited, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary (last drawn salary) payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.
The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.
The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.
The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards.
The discount rate is based on prevailing market yields of Indian government bonds, as at the balance sheet date, consistent with the currency and estimated term of the post employment benefit obligations.
The expected rate of return on plan assets is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.
7 Segment information
The Company is currently organized into three business operating segments: Yarn, Fabric and Textile Made-ups. The Company''s business segments offer different products and require different technology and marketing strategies.
Yarn includes bought out yarn as well as production of yarn over a wide range of counts, which besides being sold, is also used for further value addition in fabric. It also includes surplus captive & standby power. Fabric includes both bought out fabric as well as the value added activities relating to knitting, dyeing and processing. Textile Made-ups, comprise of made-ups made for renowned international brands.
The accounting principles used in preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments and are as set out in the note on significant accounting policies.
Transfer prices for inter segment revenues are generally set on an arm''s length basis and are eliminated in consolidation.
Revenue and direct expenses in relation to segments are categorized based on items that are individually identifiable or allocable on a reasonable basis to that segment. Revenue and expenses, besides financial costs and taxes that are not allocated to operating segments, are included under "inter segment & unallocated items".
Assets and liabilities represent assets (both tangible and intangible) employed in operations and liabilities owed to third parties that are individually identifiable or allocable on a reasonable basis to that segment. Assets and liabilities excluded from allocation to operating segments, are included under "inter segment & unallocated items". Capital expenditure includes expenditure incurred during the period on acquisition of segment fixed assets.
The company''s secondary segments are the geographic distribution of activities. Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and west), Ireland and the United Kingdom; Africa includes Mauritius; Asian continent has been segregated into the Middle East & Gulf countries while the rest of Asia, other than India has been covered under Far East & South East Asia; Rest of the World comprises all other places except those mentioned above and India.
8 Previous period''s figures have been regrouped and recast wherever considered necessary.
Mar 31, 2015
A) Terms/rights attached to Equity Shares
Company has only one class of equity shares having a par value of ''
10/-. Each holder of equity shares 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. The holder of
equity shares is entitled to receive dividend only after distribution
of dividend to the holders of preference shares.
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) Terms/rights attached to Preference Shares
Company has only one class of Cumulative Redeemable Preference Shares
(CRPS) having a par value of Rs. 100/-. There are two series of CRPS,
carrying differential dividend coupon rates.
First series of preference shares carrying a dividend coupon rate of
8%, allotted to the various banks and financial institutions, pursuant
to the Corporate Debt Restructuring (''CDR'') Package, are redeemable in
four equal annual installments from 2016 to 2019. Second series of
preference shares carrying a dividend coupon rate of 3%, allotted to
promoters, against infusion of funds by them, pursuant to the Corporate
Debt Restructuring (''CDR'') Package, are redeemable on 31st March, 2019.
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.
Each holder of preference shares is entitled to one vote per share only
on resolutions placed before the Company which directly affect the
rights attached to preference shares.
The holders of preference shares are entitled to a preferential right
of repayment of capital on winding up vis-a-vis the holders of equity
shares. The distribution will be in proportion to the number of shares
held by the shareholders.
1.1.2 Trade Payables
The information as required to be disclosed under The Micro, Small and
Medium Enterprises Development Act, 2006 ("the Act") has been
determined to the extent such parties have been identified by the
Company, on the basis of information and records available with them.
This information has been relied upon by the auditors. Disclosure as
required under Section 22 of the Act, is as under. Disclosure in
respect of interest due on delayed payment has been determined only in
respect of payments made after the receipt of information, with regards
to filing of memorandum, from the respective suppliers.
a) In respect of MAT credit entitlement, management, based on present
profitability trend as well as future profit projections, is of the
view that there is convincing evidence for utilization of MAT credit
assets in future periods.
b) Direct taxes refundable represent amounts recoverable from the
Income Tax Department for various assessment years. In respect of
disputed demands, Company has filed appeals which are pending at
various levels and for assessment years where the issues have been
decided in favour of the Company, Company is in the process of
reconciling / adjusting the same with the department. Necessary value
adjustments shall be made on final settlement by the department.
1.1.2 Contingent Liabilities not provided for in respect of :
Rs. / Lacs
As at As at
31.03.2015 31.03.2014
a) Claims against the Company not
acknowledged as debts 14.04 13.00
b) Income tax matters in dispute 392.64 72.64
c) Excise / customs / service tax
matters in dispute 400.21 311.04
d) Non Solar renewable energy obligations - 108.50
e) Pending litigations
Miscellaneous labour cases involving
claims for reinstatement, back
wages etc 71.51 60.17
Based on legal advice, discussions with the solicitors, etc., the
management believes that there is fair chance of decisions in the
Company''s favour in respect of all the items listed at (a) to (e) above
and hence no provision is considered necessary against the same. The
management believes that the ultimate outcome of these proceedings will
not have a material adverse effect on the Company''s financial position
and results of operations.
1.1.3 a) Response to letters sent by the Company requesting
confirmation of balances has been insignificant. In the management''s
opinion, adjustments on reconciliation of the balances, if any
required, will not be material in relation to the financial statements
of the Company and the same will be adjusted in the financial
statements as and when the confirmations are received and
reconciliations completed.
b) Inventories, loans & advances, trade receivables and other current /
non-current assets are reviewed annually and in the opinion of the
management do not have a value on realization in the ordinary course of
business, less than the amount at which they are stated in the Balance
Sheet.
1.1.4 Employee Benefit Obligations Defined Contribution Plans
The Company makes contributions towards provident fund and
superannuation fund, to defined contribution retirement benefit plans
for qualifying employees. The provident fund plan is operated by the
Regional Provident Fund Commissioner and the superannuation fund is
administered by the Trustees of the ''Maral Overseas Limited Senior
Executive Superannuation Fund''. Under the schemes, the Company is
required to contribute a specified percentage of payroll cost to the
retirement benefit schemes to fund the benefits.
Defined Benefit Plan
The Company makes annual contributions to the Employees'' Group
Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance
Company Limited, a funded defined benefit plan for qualifying
employees. The scheme provides for lump sum payment to vested employees
at retirement, death while in employment or on termination of
employment of an amount equivalent to 15 days salary (last drawn
salary) payable for each completed year of service or part thereof in
excess of six months. Vesting occurs upon completion of five years of
service.
The present value of the defined benefit obligation and the related
current service cost were measured using the Projected Unit Credit
Method with actuarial valuations being carried out at each balance
sheet date.
The estimates of future salary increase, considered in actuarial
valuation, take account of inflation, seniority, promotions and other
relevant factors such as supply and demand in the employment market.
The Company evaluates these assumptions annually based on its long-term
plans of growth and industry standards.
The discount rate is based on prevailing market yields of Indian
government bonds, as at the balance sheet date, consistent with the
currency and estimated term of the post employment benefit obligations.
The expected rate of return on plan assets is based on the expectation
of the average long term rate of return expected on investments of the
fund during the estimated term of the obligations.
1.1.5 Related Party Disclosures
Following information regarding related parties has been determined on
the basis of criteria specified in AS-18 "Related Party Disclosures".
a) Related parties with whom transactions have taken place
i) Key Management Personnel
- Shri Ravi Jhunjhunwala, Chairman
- Shri Shekhar Agarwal, Managing Director
ii) Relatives of Key Management Personnel
- Smt Shashi Agarwal
- Shri Shantanu Agarwal
- Shekhar Agarwal (HUF)
iii) Enterprises in respect of which the reporting enterprise is an
associate
- M/s Agarwal Trademart Private Limited
- M/s BMD Private Limited
iv) Enterprises owned or significantly influenced by key management
personnel or their relatives
- M/s RSWM Limited
- M/s HEG Limited
- M/s BSL Limited
- M/s Cheslind Textiles Limited (Amalgamated with M/s RSWM Limited)
1.1.6 Segment Information
The Company is currently organized into three business operating
segments: Yarn, Fabric and Textile Made-ups. The Company''s business
segments offer different products and require different technology and
marketing strategies.
Yarn includes bought out yarn as well as production of cotton yarn over
a wide range of counts, which besides being sold, is also used for
further value addition in fabric. It also includes surplus captive &
standby power. Fabric includes both bought out fabric as well as the
value added activities relating to knitting, dyeing and processing.
Textile Made-ups, comprise of made-ups made for renowned international
brands.
The accounting principles used in preparation of the financial
statements are consistently applied to record revenue and expenditure
in individual segments and are as set out in the note on significant
accounting policies.
Transfer prices for inter segment revenues are generally set on an
arm''s length basis and are eliminated in consolidation.
Revenue and direct expenses in relation to segments are categorized
based on items that are individually identifiable or allocable on a
reasonable basis to that segment. Revenue and expenses, besides
financial costs and taxes that are not allocated to operating segments,
are included under "inter segment & unallocated items".
Assets and liabilities represent assets (both tangible and intangible)
employed in operations and liabilities owed to third parties that are
individually identifiable or allocable on a reasonable basis to that
segment. Assets and liabilities excluded from allocation to operating
segments, are included under "inter segment & unallocated items".
Capital expenditure includes expenditure incurred during the period on
acquisition of segment fixed assets.
The Company''s secondary segments are the geographic distribution of
activities. Revenue and receivables are specified by location of
customers while the other geographic information is specified by
location of the assets. North America comprises the United States of
America, Canada and Mexico; Europe includes continental Europe (both
the east and west), Ireland and the United Kingdom; Africa includes
Mauritius; Asian continent has been segregated into the Middle East &
Gulf countries while the rest of Asia, other than India has been
covered under Far East & South East Asia; Rest of the World comprises
all other places except those mentioned above and India.
1.1.7 Previous period''s figures have been regrouped and recast
wherever considered necessary.
Mar 31, 2014
1 Basis of Preparation
The Financial Statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Financial Statements have been prepared to comply in
all material respects with the accounting standards notified under the
Companies (Accounting Standards) Rules, 2006, (as amended) and the
relevant provisions of the Companies Act, 1956. The Financial
Statements have been prepared on an accrual basis and under the
historical cost convention. The accounting policies adopted in the
preparation of Financial Statements are consistent with those of
previous year.
a) Terms/rights attached to Equity Shares
Company has only one class of equity shares having a par value of Rs.
10/-. Each holder of equity shares 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. The holder of
equity shares is entitled to receive dividend only after distribution
of dividend to the holders of preference shares.
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) Terms/rights attached to Preference Shares
Company has only one class of Cumulative Redeemable Preference Shares
(CRPS) having a par value of Rs. 100/-. There are two series of CRPS,
carrying differential dividend coupon rates.
First series of preference shares carrying a dividend coupon rate of
8%, allotted to the various banks and financial institutions, pursuant
to the Corporate Debt Restructuring (''CDR'') Package, are redeemable in
four equal annual installments from 2016 to 2019. Second series of
preference shares carrying a dividend coupon rate of 3%, allotted to
promoters, against infusion of funds by them, pursuant to the Corporate
Debt Restructuring (''CDR'') Package, are redeemable on 31st March, 2019.
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.
Each holder of preference shares is entitled to one vote per share only
on resolutions placed before the company which directly affect the
rights attached to preference shares.
The holders of preference shares are entitled to a preferential right
of repayment of capital on winding up vis-a-vis the holders of equity
shares. The distribution will be in proportion to the number of shares
held by the shareholders.
The aforesaid disclosure is based upon percentages computed separately
for each class & series of shares outstanding, as at the balance sheet
date. As per records of the Company, including its register of
shareholders/members and other declarations received from shareholders
regarding beneficial interest, the above shareholding represents both
legal and beneficial ownerships of shares.
c) The Company has not allotted any fully paid up shares pursuant to
contract(s) without payment being received in cash nor has allotted any
fully paid up shares by way of bonus shares nor has bought back any
class of shares during the period of five years immediately preceding
the Balance Sheet date.
d) The CDR package grants a right to the various banks and financial
institutions to convert 20% of their debt outstanding beyond seven
years from the date of CDR Letter i.e March 26, 2009 into equity
shares, as per SEBI guidelines / loan covenants, whichever is
applicable.
Notes:
a. Term loans from both banks & financial institutions are secured by
first mortgage and charge created / to be created on all the present
and future immovable & movable properties (other than current assets)
of the Company, ranking pari-passu, and second pari-passu charge on
current assets of the Company.
Forex derivative loss loan is secured by way of residual charge on the
fixed assets and current assets of the Company.
Term loans from both Banks & Financial Institutions, alongwith working
capital facilities from banks, are secured by pledge of stipulated
promoter''s equity shareholding, constituting 36% of the present equity
capital, in favour of the lenders on pari- passu basis.
a) Unsecured loan from related party is repayable on 31st March, 2019.
b) The Company''s financial restructuring package was approved under the
Corporate Debt Restructuring mechanism (CDR) by the CDR Empowered group
vide their letter dated March 26, 2009 (''CDR letter'') and subsequent
approvals from the various Financial Institutions and Banks received.
The CDR scheme included interalia reduction of interest rate on loans,
rescheduling of loan repayments, conversion of interest payable into
funded interest term loan, conversion of certain portion of the working
capital into term loan and conversion of part term loan into preference
shares. The restructuring package also stipulated conditions to be
complied with by the Company and its promoters relating interalia to
disposal of surplus assets, fresh infusion of additional equity by
promoters, arrangement for additional infusion of term loan and working
capital from existing lenders and bringing in funds by promoters to
bridge shortfall of funding if any. The Company is confident that all
the conditions as stipulated will be complied with in agreement with
the CDR Monitoring Committee.
c) Some of the lenders follow the practice to recover suo motto,
payment of both principal as well as interest from the working capital
facility advanced by them, where applicable, or from the current
account under instructions from the Company. It is regarded as accepted
practice that the due date for payment shall be the date next following
the date when interest is charged. Any delay on part of the lender to
recover payment, either in line with past practice or specific
instructions given in this regard by the Company, is not attributable
to default on part of the Company. Accordingly, there is no continuing
default in repayment of the principal loan and interest amounts.
Recognition of deferred tax assets has been restricted to the extent of
deferred tax liabilities available. Based on schedule of reversal of
timing differences giving rise to deferred tax liabilities, the
management believes there is requisite degree of virtual certainty that
the deferred tax assets, to the extent recognized, would be realised.
Loans repayable on demand, comprise of working capital facilities from
banks and are secured by way of hypothecation first charge, ranking
pari-passu, on stocks of raw material, stock in process, finished
goods, book debts / receivables and all current assets stored in the
Company''s factory premises, at all plants and / or elsewhere including
those in transit covered by documents of title thereto, local and
export usance bills and second pari-passu charge on the entire movable
and immovable assets of the Company (fixed assets), both present and
future.
Loans repayable on demand from Banks, along with term loans from both
Banks & Financial Institutions are secured by pledge of stipulated
promoter''s equity shareholding, constituting 36% of the present equity
capital, in favour of the lenders on pari-passu basis.
The information as required to be disclosed under The Micro, Small and
Medium Enterprises Development Act, 2006 ("the Act") has been
determined to the extent such parties have been identified by the
Company, on the basis of information and records available with them.
This information has been relied upon by the auditors. Disclosure as
required under Section 22 of the Act, is as under. Disclosure in
respect of interest due on delayed payment has been determined only in
respect of payments made after the receipt of information, with regards
to filing of memorandum, from the respective suppliers.
a. Buildings include Rs. 0.02 lacs representing cost of unquoted fully
paid shares held in co-operative housing society.
b. Buildings include certain portion given on operating lease. It is
not practicable to give separate disclosure of gross block,
depreciation charge for the year, accumulated depreciation and net
block in respect of the same.
c. Opening balance of gross block, depreciation and net block are
adjusted for reclassification of asset categories inter se. These do
not have any impact on the aggregate depreciation charge / provision.
Direct taxes refundable represent amounts recoverable from the Income
Tax Department for various assessment years. In respect of disputed
demands, Company has filed appeals which are pending at various levels
and for assessment years where the issues have been decided in favour
of the Company, Company is in the process of reconciling / adjusting
the same with the department. Necessary value adjustments shall be
made on final settlement by the department.
After commissioning of captive thermal power plant in the year 2007,
the HFO fuelled Wartsila Power Generators were retained as standby. In
view of uneconomical cost of power generation, Company has during the
year decided to retire them from active use with eventual disposal.
Resultant, loss of Rs. 416.90 lac being difference of WDV and estimated
realisable value of these generators has been charged to Statement of
Profit and Loss. Realisable value of the generators Rs. 166.25 lac has
been shown under "Assets Held For Sale" as at year end, pending their
final disposal.
a) The Company has been treating plant & machinery of spinning unit as
continuous process plant and providing depreciation accordingly. This
practice has consistently been a subject matter of audit observation.
Review of industry practice indicates that such machinery are
depreciated based on an estimated useful life corresponding to rates
prescribed for triple shift operation.
Company has revised the estimated useful life of such plant & machinery
to correspond to the rates prescribed, for triple shift operations, in
Schedule XIV of the Companies Act, 1956. Accordingly, depreciation has
been charged by depreciating the remaining unamortised depreciable
amount prospectively over the remaining useful life.
Resultantly, charge on account of depreciation for the year is higher
by Rs. 1765 lac and Profit before tax for the year is lower by even
amount.
b) During the year, in order to align depreciation policy with the
current replacement cycle, taking into consideration various factors
such as technology up-gradation and industry best practices, the
Company has revised the estimated useful life of the plant & machinery
deployed in the garment division to 10 years.
Consequent to above, charge on account of depreciation for the year is
higher by Rs. 112 lac and Profit before tax for the year is lower by
even amount.
Potential equity options may arise in the event of default in payment
due on loan funds. Potential options also exist in the form of right of
CDR lenders to convert 20% of their debt outstanding beyond seven years
from the date of CDR Letter into equity capital, more fully explained
in Note 2.1.1.
2. Contingent Liabilities not provided for in respect of :
(Rs. Lacs)
As at As at
31.03.2014 31.03.2013
a) Claims Against the Company not
Acknowledged as debts 13.00 13.00
b) Income Tax Matters in Dispute 72.64 27.64
c) Excise / Customs / Service Tax
Matters in Dispute 311.04 392.81
d) Non Solar Renewable Energy
Obligations 108.50 60.33
Based on legal advice, discussions with the solicitors, etc., the
management believes that there is fair chance of decisions in the
Company''s favour in respect of all the items listed at (a) to (d) above
and hence no provision is considered necessary against the same. The
management believes that the ultimate outcome of these proceedings will
not have a material adverse effect on the Company''s financial position
and results of operations.
3. a) The response to letters sent by the Company requesting
confirmation of balances has been insignificant. In the management''s
opinion, adjustments on reconciliation of the balances, if any
required, will not be material in relation to the Financial Statements
of the Company and the same will be adjusted in the Financial
Statements as and when the confirmations are received and
reconciliations completed.
b) Inventories, loans & advances, trade receivables and other current /
non-current assets are reviewed annually and in the opinion of the
management do not have a value on realization in the ordinary course of
business, less than the amount at which they are stated in the Balance
Sheet.
4. Employee Benefit Obligations
Defined Contribution Plans
The Company makes contributions towards Provident Fund and
Superannuation Fund, to defined contribution retirement benefit plans
for qualifying employees. The Provident Fund Plan is operated by the
Regional Provident Fund Commissioner and the Superannuation Fund is
administered by the Trustees of the ''Maral Overseas Limited Senior
Executive Superannuation Fund''. Under the schemes, the Company is
required to contribute a specified percentage of payroll cost to the
retirement benefit schemes to fund the benefits.
Defined Benefit Plan
The Company makes annual contributions to the Employees'' Group
Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance
Company Limited, a funded defined benefit plan for qualifying
employees. The scheme provides for lump sum payment to vested employees
at retirement, death while in employment or on termination of
employment of an amount equivalent to 15 days salary (last drawn
salary) payable for each completed year of service or part thereof in
excess of six months. Vesting occurs upon completion of five years of
service.
The present value of the defined benefit obligation and the related
current service cost were measured using the Projected Unit Credit
Method with actuarial valuations being carried out at each Balance
Sheet date.
The estimates of future salary increase, considered in actuarial
valuation, take account of inflation, seniority, promotions and other
relevant factors such as supply and demand in the employment market.
The Company evaluates these assumptions annually based on its long-term
plans of growth and industry standards.
The discount rate is based on prevailing market yields of Indian
government bonds, as at the Balance Sheet date, consistent with the
currency and estimated term of the post employment benefit obligations.
The expected rate of return on plan assets is based on the expectation
of the average long term rate of return expected on investments of the
fund during the estimated term of the obligations.
5. Segment Information
The Company is currently organized into three business operating
segments: Yarn, Fabric and Textile Made-ups. The Company''s business
segments offer different products and require different technology and
marketing strategies.
Yarn includes bought out yarn as well as production of cotton yarn over
a wide range of counts, which besides being sold, is also used for
further value addition in fabric. It also includes surplus captive &
standby power. Fabric includes both bought out fabric as well as the
value added activities relating to knitting, dyeing and processing.
Textile Made-ups, comprise of made-ups made for renowned international
brands.
The accounting principles used in preparation of the Financial
Statements are consistently applied to record revenue and expenditure
in individual segments and are as set out in the note on significant
accounting policies.
Transfer prices for inter segment revenues are generally set on an
arm''s length basis and are eliminated in consolidation.
Revenue and direct expenses in relation to segments are categorized
based on items that are individually identifiable or allocable on a
reasonable basis to that segment. Revenue and expenses, besides
financial costs and taxes that are not allocated to operating segments,
are included under "inter segment & unallocated items".
Assets and Liabilities represent assets (both tangible and intangible)
employed in operations and liabilities owed to third parties that are
individually identifiable or allocable on a reasonable basis to that
segment. Assets and Liabilities excluded from allocation to operating
segments, are included under "inter segment & unallocated items".
Capital expenditure includes expenditure incurred during the period on
acquisition of segment fixed assets.
The Company''s secondary segments are the geographic distribution of
activities. Revenue and receivables are specified by location of
customers while the other geographic information is specified by
location of the assets. North America comprises the United States of
America, Canada and Mexico; Europe includes continental Europe (both
the east and west), Ireland and the United Kingdom; Africa includes
Mauritius; Asian continent has been segregated into the Middle East &
Gulf countries while the rest of Asia, other than India has been
covered under Far East & South East Asia; Rest of the World comprises
all other places except those mentioned above and India.
6. Previous period''s figures have been regrouped and recast
wherever considered necessary.
Mar 31, 2013
1. Basis of Preparation
The Financial Statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP).The fnancial statements have been prepared to comply in
all material respects with the accounting standards notifed under the
Companies (Accounting Standards) Rules, 2006, (as amended) and the
relevant provisions of the Companies Act, 1956. The Financial
Statements have been prepared on an accrual basis and under the
historical cost convention. The accounting policies adopted in the
preparation of Financial Statements are consistent with those of
previous year.
2.1.1 a) The response to letters sent by the Company requesting
confrmation of balances has been insignifcant. In the management''s
opinion, adjustments on reconciliation of the balances, if any
required, will not be material in relation to the Financial Statements
of the Company and the same will be adjusted in the Financial
Statements as and when the confrmations are received and
reconciliations completed.
b) Inventories, loans & advances, trade receivables and other current /
non-current assets are reviewed annually and in the opinion of the
management do not have a value on realization in the ordinary course of
business, less than the amount at which they are stated in the Balance
Sheet.
2.1.2 lease commitments
a) The Company leases space for offce and other facilities under
various operating leases for periods ranging between three to fve years
along with options that permit renewals for additional periods. There
were no future minimum commitments in respect of the operating leases.
b) The Company has taken motor cars on operating lease, which are
non-cancelable for tenure of four years. The total amount recognised in
the Statement of Proft and Loss on account of rental expense for these
operating leases, for the year, is Rs. Nil (Previous period - Rs. 1.93
Lacs). There were no future minimum commitments in respect of the
operating lease.
2.1.3 Employee Beneft Obligations
Defned Contribution Plans
The Company makes contributions towards Provident Fund and
Superannuation Fund, to defned contribution retirement beneft plans for
qualifying employees. The Provident Fund plan is operated by the
Regional Provident Fund Commissioner and the Superannuation Fund is
administered by the Trustees of the ÂMaral Overseas Limited Senior
Executive Superannuation Fund''. Under the schemes, the Company is
required to contribute a specifed percentage of payroll cost to the
retirement beneft schemes to fund the benefts.
Defned Beneft Plan
The Company makes annual contributions to the Employees'' Group
Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance
Company Limited, a funded defned beneft plan for qualifying employees.
The scheme provides for lump sum payment to vested employees at
retirement, death while in employment or on termination of employment
of an amount equivalent to 15 days salary (last drawn salary) payable
for each completed year of service or part thereof in excess of six
months. Vesting occurs upon completion of fve years of service.
The present value of the defned beneft obligation and the related
current service cost were measured using the Projected Unit Credit
Method with actuarial valuations being carried out at each Balance
Sheet date.
2.1.4 Related Party Disclosures
Following information regarding related parties has been determined on
the basis of criteria specifed in AS-18 "Related Party Disclosures".
a) Related Parties with whom transactions have taken place:
i) Key Management Personnel
Shri Ravi Jhunjhunwala, Chairman
Shri Shekhar Agarwal, Managing Director ii) Relatives of Key Management
Personnel
Smt. Shashi Agarwal
Shri Shantanu Agarwal
Shekhar Agarwal (HUF) iii) Enterprises in respect of which the
reporting enterprise is an associate
Agarwal Trademart Private Limited
BMD Private Limited iv) Enterprises owned or signifcantly infuenced by
Key Management Personnel or their relatives
RSWM Limited
HEG Limited
BSL Limited
2.1.5 Segment information
The Company is currently organized into three business operating
segments: Yarn, Fabric and Textile Made-ups. The Company''s business
segments offer different products and require different technology and
marketing strategies.
Yarn includes bought out yarn as well as production of cotton yarn over
a wide range of counts, which besides being sold, is also used for
further value addition in fabric. It also includes surplus captive &
standby power. Fabric includes both bought out fabric as well as the
value added activities relating to knitting, dyeing and processing.
Textile Made-ups, comprise of made-ups made for renowned international
brands.
The accounting principles used in preparation of the fnancial
statements are consistently applied to record revenue and expenditure
in individual segments and are as set out in the note on signifcant
accounting policies.
Transfer prices for inter segment revenues are generally set on an
arm''s length basis and are eliminated in consolidation.
Revenue and direct expenses in relation to segments are categorized
based on items that are individually identifable or allocable on a
reasonable basis to that segment. Revenue and expenses, besides
fnancial costs and taxes that are not allocated to operating segments,
are included under "inter segment & unallocated items".
Assets and liabilities represent assets (both tangible and intangible)
employed in operations and liabilities owed to third parties that are
individually identifable or allocable on a reasonable basis to that
segment. Assets and liabilities excluded from allocation to operating
segments, are included under "Inter Segment & Unallocated Items".
Capital expenditure includes expenditure incurred during the period on
acquisition of segment fxed assets.
The Company''s secondary segments are the geographic distribution of
activities. Revenue and receivables are specifed by location of
customers while the other geographic information is specifed by
location of the assets. North America comprises the United States of
America, Canada and Mexico; Europe includes continental Europe (both
the east and west), Ireland and the United Kingdom; Africa includes
Mauritius; Asian continent has been segregated into the Middle East &
Gulf countries while the rest of Asia, other than India has been
covered under Far East & South East Asia; Rest of the World comprises
all other places except those mentioned above and India.
2.1.6 Previous period''s fgures have been regrouped and recast wherever
considered necessary.
Mar 31, 2012
1. Basis of Preparation
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The financial statements have been prepared to comply in
all material respects with the accounting standards notified under the
Companies Accounting Standards (AS) Rules, 2006 (as amended), and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of previous year, except for the
change in accounting policy explained below.
Background for preparation of amended financial statements
The Board of Directors had adopted the financial statements for the
year ended 31st March 2012 in their meeting held on 3rd May 2012 and
the statutory auditors' had issued their report dated 3rd May 2012 on
those financial statements. The Company subsequently applied for and
received approval under section 205A(3) of the Companies Act, 1956 from
the Central Government vide their letter dated 25th October, 2012 for
withdrawing Rs. 370.61 lacs from the accumulated profits earned in
previous years and transferred to the free reserves, for declaring
preference dividend for current year on the 8 per cent Cumulative
Redeemable Preference Shares as well as to set off current year losses.
Accordingly, the Board of Directors of the Company have proposed
declaration of dividend on the 8 per cent Cumulative Redeemable
Preference Shares allotted to the various banks and financial
institutions, pursuant to the Corporate Debt Restructuring (ÃCDR')
Package.
Necessary appropriations / adjustments under the main head ÃReserves
and Surplus' have accordingly been recorded. Consequential amendments
to the above recognition of provision for proposed dividend relate to
short term provisions, disclosure of contingent liabilities not
provided for and disclosure on segment reporting. These financial
statements represent the amended version of the financial statements
adopted by the Board of Directors earlier.
a) terms / rights attached to equity Shares
Company has only one class of equity shares having a par value of
Rs.10/-. Each holder of equity shares 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. The holder of
equity shares is entitled to receive dividend only after distribution
of dividend to the holders of preference shares.
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) terms / rights attached to Preference Shares
Company has only one class of Cumulative Redeemable Preference Shares
(CRPS) having a par value of Rs.100/-. There are two series of CRPS,
carrying differential dividend coupon rates.
First series of preference shares carrying a dividend coupon rate of
8%, allotted to the various banks and financial institutions, pursuant
to the Corporate Debt Restructuring (ÃCDR') Package, are redeemable in
four equal annual installments from 2016 to 2019. Second series of
preference shares carrying a dividend coupon rate of 3%, allotted to
promoters, against infusion of funds by them, pursuant to the Corporate
Debt Restructuring (ÃCDR') Package, are redeemable on 31st March, 2019.
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.
Each holder of preference shares is entitled to one vote per share only
on resolutions placed before the Company which directly affect the
rights attached to preference shares.
The holders of preference shares are entitled to a preferential right
of repayment of capital on winding up vis-ÃÂ -vis the holders of equity
shares. The distribution will be in proportion to the number of shares
held by the shareholders.
The aforesaid disclosure is based upon percentages computed separately
for each class & series of shares outstanding, as at the balance sheet
date. As per records of the Company, including its register of
shareholders / members and other declarations received from
shareholders regarding beneficial interest, the above shareholding
represents both legal and beneficial ownerships of shares.
e) The Company has not allotted any fully paid-up shares pursuant to
contract(s) without payment being received in cash nor has allotted any
fully paid-up shares by way of bonus shares nor has bought back any
class of shares during the period of five years immediately preceding
the balance sheet date.
f) The CDR package grants a right to the various banks and financial
institutions to convert 20% of their debt outstanding beyond seven
years from the date of CDR Letter i.e March 26, 2009 into equity
shares, as per SEBI guidelines / loan covenants, whichever is
applicable.
vi) Project Term Loans, Corporate Term Loans, Working Capital Term
Loans from both banks & financial institutions are secured by
first mortgage and charge created / to be created on all the present
and future immovable & movable properties (other than current assets)
of the Company, ranking pari-passu and second pari-passu charge on
current assets of the Company.
Forex derivative loss loan is secured by way of residual charge on the
fixed assets and current assets of the Company.
Project Term Loans, Corporate Term Loans, Working Capital Term Loans
from both banks & financial institutions, alongwith working capital
facilities from banks, are secured by pledge of stipulated promoters'
equity shareholding, constituting 36% of the present equity capital, in
favour of the lenders on pari-passu basis.
c) The Company's financial restructuring package was approved under the
Corporate Debt Restructuring mechanism (CDR) by the CDR Empowered group
vide their letter dated March 26, 2009 (ÃCDR letter') and subsequent
approvals from the various financial institutions and banks received .
The CDR scheme included inter-alia reduction of interest rate on loans,
rescheduling of loan repayments, conversion of interest payable into
funded interest term loan, conversion of certain portion of the working
capital into term loan and conversion of part term loan into preference
shares. The restructuring package also stipulated conditions to be
complied with by the Company and its promoters relating inter-alia to
disposal of surplus assets, fresh infusion of additional equity by
promoters, arrangement for additional infusion of term loan and working
capital from existing lenders and bringing in funds by promoters to
bridge shortfall of funding if any. The Company is confident that all
the conditions as stipulated will be complied with in agreement with
the CDR Monitoring Committee.
d) The Company has incorporated impact of the CDR scheme in these
financial statements, as approved vide the CDR letter dated March 26,
2009 and accepted by the lenders. Impact of the CDR scheme and related
accounts as reflected in these financial statements are subject to
final adjustments that may arise on settlement of pending issues and
reconciliation of accounts with the lenders.
e) Some of the lenders follow the practice to recover suo-motto,
payment of both principal as well as interest from the working capital
facility advanced by them, where applicable or from the current account
under instructions from the Company. It is regarded as accepted
practice that the due date for payment shall be the date next following
the date when interest is charged. Any delay on part of the lender to
recover payment, either in line with past practice or specific
instructions given in this regard by the Company, is not attributable
to default on part of the Company. Accordingly, there is no continuing
default in repayment of the principal loan and interest amounts.
2.1.1 Discontinued operation
In July, 2006, the Board of Directors resolved substantive downsizing
of the Company's manufacturing facility at Jammu in the State of Jammu
& Kashmir. After obtaining necessary approval for closure from the
state regulatory authorities in March, 2007, the Board of Directors
formally approved closure of the unit and relocation / disposal of its
assets in May, 2007.
Jammu unit's operations have been shown under unallocated items in the
segment information. Company has completed the process of disposing the
unit's remaining assets during the current financial year.
The carrying value of fixed assets (net block) as at March 31, 2011
pending disposal was Rs. 120.28 Lac. During the year Company has disposed
all these assets and recognised a profit of Rs. 575.31 Lac on disposal.
2.1.2 contingent liabilities not Provided for in respect of :
As at As at
31.03.2012 31.03.2011
a) Claims Against the Company not
Acknowledged as Debts 13.00 14.56
b) Income Tax Matters in Dispute 27.64 28.29
c) Sales Tax Matters in Dispute 1.85 0.55
d) Excise / Customs / Service Tax
Matters in Dispute 378.81 322.07
e) Entry Tax Matters in Dispute 74.45 74.45
f) The Government of Madhya Pradesh had
imposed electricity cess on
captive generation 408.01 408.01
of electricity vide the Madhya Pradesh
Upkaar (Dwitiya Sanshodhan)
Adhiniyam, 2005.
The imposition of cess was challenged by the Company along with other
industrial units before the Hon'ble High Court of Madhya Pradesh. In
the meanwhile the State Government passed legislation revoking
imposition of the cess effective 17.8.2007. The Hon'ble High Court
dismissed the petition and matter is now pending before the Supreme
Court for final decision. The entire amount involved has been paid.
g) The Madhya Pradesh Government imposed renewable energy obligation on
power produced 50.80 13.80 from captive power plants vide their
Notification dated 09.11.2010. The same has been
challenged by Company in the Hon'ble High Court of Madhya Pradesh, as
being violative of Article 14 and 19 (1) (g) of the Constitution so far
as these provisions relate to captive power plants. Liability estimated
on a tentative basis.
h) Arrears of dividends on Cumulative Preference Shares, excluding tax
thereon (note 2.1.2) 36.00 Ã
Based on legal advice, discussions with the solicitors, etc., the
management believes that there is fair chance of decisions in the
Company's favour in respect of all the items listed at (a) to (g) above
and hence no provision is considered necessary against the same. The
management believes that the ultimate outcome of these proceedings will
not have a material adverse effect on the Company's financial position
and results of operations.
2.1.3 a) The response to letters sent by the Company requesting
confirmation of balances has been insignificant. In the management's
opinion, adjustments on reconciliation of the balances, if any
required, will not be material in relation to the financial statements
of the Company and the same will be adjusted in the financial
statements as and when the confirmations are received and
reconciliations completed.
b) Inventories, loans & advances, trade receivables and other current /
non-current assets are reviewed annually and in the opinion of the
management do not have a value on realization in the ordinary course of
business, less than the amount at which they are stated in the Balance
Sheet.
2.1.4 lease commitments
a) The Company leases space for office and other facilities under
various operating leases for periods ranging between three to five
years along with options that permit renewals for additional periods.
b) The Company has taken motor cars on operating lease, which are
non-cancelable for tenure of four years. The total amount recognised in
the Statement of Profit & Loss on account of rental expense for these
operating leases, for the year, is Rs. 1.93 Lacs (Previous period - Rs.
2.90 Lacs).
2.1.5 employee Benefit obligations
Defined contribution Plans
The Company makes contributions towards provident fund and
superannuation fund, to defined contribution retirement benefit plans
for qualifying employees. The provident fund plan is operated by the
Regional Provident Fund Commissioner and the superannuation fund is
administered by the Trustees of the ÃMaral Overseas Limited Senior
Executive Superannuation Fund'. Under the schemes, the Company is
required to contribute a specified percentage of payroll cost to the
retirement benefit schemes to fund the benefits.
Defined Benefit Plan
The Company makes annual contributions to the Employees' Group
Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance
Company Limited, a funded defined benefit plan for qualifying
employees. The scheme provides for lump sum payment to vested employees
at retirement, death while in employment or on termination of
employment of an amount equivalent to 15 days salary (last drawn
salary) payable for each completed year of service or part thereof in
excess of six months. Vesting occurs upon completion of five years of
service.
The estimates of future salary increase, considered in actuarial
valuation, take account of inflation, seniority, promotions and other
relevant factors such as supply and demand in the employment market.
The Company evaluates these assumptions annually based on its long-term
plans of growth and industry standards.
The discount rate is based on prevailing market yields of Indian
government bonds, as at the balance sheet date, consistent with the
currency and estimated term of the post employment benefit obligations.
The expected rate of return on plan assets is based on the expectation
of the average long term rate of return expected on investments of the
fund during the estimated term of the obligations.
2.1.6 Related Party Disclosures
Following information regarding related parties has been determined on
the basis of criteria specified in AS-18 "Related Party DisclosuresÃ.
a) Related Parties with whom transactions have taken place :
i) Key Management Personnel
- Shri Ravi Jhunjhunwala, Chairman
- Shri Shekhar Agarwal, Managing Director ii) Relatives of Key
Management Personnel
- Smt. Shashi Agarwal
- Shri Shantanu Agarwal
- Shekhar Agarwal (HUF)
iii) Enterprises Owned or Significantly Influenced by Key Management
Personnel or their Relatives
- RSWM Limited
- HEG Limited
- BMD Private Limited
- Agarwal Trademart Private Limited
- Ultramarine Impex Private Limited
- Apeksha Vyapar Private Limited
- BSL Limited
- Cheslind Textiles Limited
- Pawanputra Trading Private Limited
- Sita Nirman Private Limited
2.1.7 Segment information
The Company is currently organized into three business operating
segments: Yarn, Fabric and Textile Made-ups. The Company's business
segments offer different products and require different technology and
marketing strategies.
Yarn includes bought out yarn as well as production of cotton yarn over
a wide range of counts, which besides being sold, is also used for
further value addition in fabric. It also includes surplus captive &
standby power. Fabric includes both bought out fabric as well as the
value added activities relating to knitting, dyeing and processing.
Textile Made-ups, comprise of made-ups made for renowned international
brands.
The accounting principles used in preparation of the financial
statements are consistently applied to record revenue and expenditure
in individual segments and are as set out in the note on significant
accounting policies.
Transfer prices for inter-segment revenues are generally set on an
arm's length basis and are eliminated in consolidation.
Revenue and direct expenses in relation to segments are categorized
based on items that are individually identifiable or allocable on a
reasonable basis to that segment. Revenue and expenses, besides
financial costs and taxes that are not allocated to operating segments,
are included under "Inter Segment & Unallocated ItemsÃ.
Assets and liabilities represent assets (both tangible and intangible)
employed in operations and liabilities owed to third parties that are
individually identifiable or allocable on a reasonable basis to that
segment. Assets and liabilities excluded from allocation to operating
segments, are included under "Inter-Segment & Unallocated itemsÃ.
Capital expenditure includes expenditure incurred during the period on
acquisition of segment fixed assets.
The Company's secondary segments are the geographic distribution of
activities. Revenue and receivables are specified by location of
customers while the other geographic information is specified by
location of the assets. North America comprises the United States of
America, Canada and Mexico; Europe includes continental Europe (both
the east and west), Ireland and the United Kingdom; Africa includes
Mauritius; Asian continent has been segregated into the Middle East &
Gulf countries while the rest of Asia, other than India has been
covered under Far East & South East Asia; Rest of the World comprises
all other places except those mentioned above and India.
2.1.8 Till the year ended 31st March 2011, the Company was using
pre-revised Schedule VI to the Companies Act 1956, for preparation and
presentation of its financial statements. During the year ended 31st
March, 2012, the revised Schedule VI notified under the Companies Act
1956, has become applicable to the Company. The Company has
reclassified previous year figures to conform to this year's
classification.
Mar 31, 2010
As at 31.03.
2010 As at 30.09.
2009
Rs / Lac Rs / Lac
1) Contingent liabilities not
provided for in respect of :
i) Counter guarantees given in
respect of
Guarantees given by the
Companys bankers 203.75 230.41
ii) Duties & tax liabilities
disputed by the Company 396.78 377.53
iii) Claims not acknowledged
by the Company 50.40 41.15
iv) Unexpired Letters of Credit,
for which counter guarantee
given by the Company 418.26 452.10
2) The Government of Madhya Pradesh had imposed electricity cess on
captive generation of electricity vide the Madhya Pradesh Upkaar
(Dwitiya Sanshodhan) Adhiniyam, 2005. The imposition of cess was
challenged by the Company along with other industrial units before the
Honble High Court of Madhya Pradesh. In the meanwhile the State
Government passed legislation revoking imposition of the cess effective
17.8.2007. The Honble High Court dismissed the petition and issue is
now pending before the Supreme Court for final decision. Pending
disposal of the case, Company feels that no provision is considered
necessary in respect of above matter. Amount involved Rs.408 lacs
(Previous year Rs.408 lacs), not included under note no. B (1) (ii) of
this Schedule.
3) Upto financial year 1999-2000, Company was treating plant &
machinery of spinning unit as continuous process plant and accordingly
charging depreciation based on an estimated useful life of 18 years.
The estimated useful life was then revised to 13 years on basis of the
then available technology indicators.
From 2008-2009, based on usage, technology and efficiency parameters,
the Company, in order to reflect a more appropriate preparation/
presentation of financial statements, revised the estimated useful life
of such plant & machinery by reinstating the same to 18 years. Had the
depreciation been provided at rates applicable for triple shift
operations, the depreciation charge for the period would have been
higher by Rs.112.20 lacs (Previous year - Rs.360.29 lacs)
4) (i) The Companys financial restructuring package was approved under
the Corporate Debt Restructuring mechanism (CDR) by the CDR Empowered
group vide their letter dated March 26, 2009 (CDR letter) and
subsequent approvals from the various financial institution and banks
received .
The CDR scheme included interalia reduction of interest rate on loans
with effect from July 1, 2008 (Cut Off Date), rescheduling of loan
repayments, conversion of interest payable into funded interest term
loan, conversion of certain portion of the working capital into term
loan and conversion of part term loan into preference shares. The
restructuring package also stipulated conditions to be complied with by
the Company and its promoters relating interalia to disposal of surplus
assets, fresh infusion of additional equity by promoters, arrangement
for additional infusion of term loan and working capital from existing
lenders and bringing in funds by promoters to bridge shortfall of
funding if any.
The Company has initiated necessary action to ensure compliance with
the above conditions, and is confident that all the conditions as
stipulated will be complied with in agreement with the CDR Monitoring
Committee of the lenders. Since some of the lenders were yet to give
full effect to the CDR package as at end of the year, the Company has
incorporated impact of the CDR scheme, as approved vide the aforesaid
CDR letter and subsequently accepted by the various lenders, in these
financial statements as below.
This has been relied upon by the auditors. The impact of the CDR scheme
and related accounts as reflected in these financial statements are
subject to final adjustments that may arise on settlement of pending
issues and reconciling items with the various lenders.
Profit and Loss Account
a) Interest to banks and financial institutions has been accounted for
at the rates as per the restructuring package with effect from the cut
off date.
Balance Sheet
b) Interest payable from the cut off date upto March 31, 2009 to the
various lenders has been transferred to funded interest term loan.
c) 8 per cent Cumulative Redeemable Preference Shares (8%CRPS) of Rs.
100 each, aggregating Rs. 1885.40 lakhs have been allotted on 30th
September, 2009 to the various banks and financial institutions.
d) Forex derivative loss payable to Yes Bank Ltd has been transferred
to term loan of Rs. 9.50 crore with residual charge on the fixed assets
and current assets of the Company.
e) Unsecured loan aggregating to Rs 1975 Lacs, from a promoter group
company, has been converted into equity capital, on a preferential
basis at a price of Rs 10/- per share.
f) 3 per cent Cumulative Redeemable Preference Shares (3%CRPS) of Rs.
100 each, aggregating Rs. 800 lakhs have been allotted to the promoters
against infusion of capital, as required under the CDR package.
The CDR package also grants a right to lenders to convert defaulted
interest / principal into equity, as well as the right to CDR lenders
to convert 20% of their debt outstanding beyond seven years from the
date of CDR Letter into equity shares, as per SEBI guidelines/ loan
covenants, whichever is applicable. (ii) Some of the lenders have been
following the practice to recover suo motto, payment of both principal
as well as interest from the working capital facility advanced by them,
where applicable, or from the current account under instructions from
the Company. It is regarded as accepted practice that the due date for
payment shall be the date next following the date when interest is
charged. Any delay on part of the lender to recover payment, either in
line with past practice or specific instructions given in this regard
by the Company, is not attributable to default on part of the Company.
5) Miscellaneous expenses include provision for diminution in value of
investments made of Rs. Nil (Previous Period - Rs.0.46 lacs).
Miscellaneous income includes provision for diminution in value of
investments written back during the year of Rs. 2.86 lacs (Previous
Period - Rs. Nil).
6) The information as required to be disclosed under The Micro, Small
and Medium Enterprises Development Act, 2006 ("the Act") has been
determined to the extent such parties have been identified by the
Company, on the basis of information and records available with them.
This information has been relied upon by the auditors. Disclosure as
required under section 22 of the Act, is as under. Disclosure in
respect of interest due on delayed payment has been determined only in
respect of payments made after the receipt of information, with regards
to filing of memorandum, from the respective suppliers.
7) During 2007-08, the Company closed its garment division at the
Sarovar unit. Major part of the machinery has since been relocated to
another manufacturing facility.
Company had closed the garment division as per provisions of the
Industrial Disputes Act, 1947 after ensuring due compliance with all
stipulated regulatory provisions. The Companys action for closure was
challenged by the District Labour Officer before the local civil court.
Company in the meanwhile obtained stay from the Honble High Court of
Madhya Pradesh precluding the local authorities from initiating any
action for recovery of wages after the date of closure. The Honble
High Court has referred matter to the Industrial Tribunal. The
Companys petition before the Honble High Court challenging the terms
of reference to the Industrial Tribunal was dismissed. The Company
filed a Special Leave Petition before the Honble Supreme Court and
obtained stay on further proceedings of the Industrial Tribunal Court.
Company does not foresee any further liability on the above accounts.
8) In July, 2006, the Board of Directors had resolved substantive
downsizing of the Companys manufacturing facility at Jammu in the
State of Jammu & Kashmir. After obtaining necessary approval for
closure from the state regulatory authorities in March, 2007, the Board
of Directors formally approved closure of the unit and
relocation/disposal of its assets in May, 2007.
9) Adjustment relating to previous year includes Expenses Rs.3.22 lacs
and Income Rs. Nil (Previous period Expenses Rs.202.20 lacs and Income
Rs.10.44 lacs).
10) Deferred Taxes
Deferred taxes arise because of difference in treatment between
financial accounting and tax accounting, known as "Timing differences".
The tax effect of these timing differences is recorded as "deferred tax
assets" (generally items that can be used as a tax deduction or credit
in future periods) and "deferred tax liabilities" (generally items for
which the Company has received a tax deduction, but have not yet been
recorded in the statement of income).
Recognition of deferred tax assets has been restricted to the extent of
deferred tax liabilities available. Based on schedule of reversal of
timing differences giving rise to deferred tax liabilities, the
management believes there is requisite degree of virtual certainty that
the deferred tax assets, to the extent recognized, would be realised.
11) Lease Commitments
a) The Company leases space for office and other facilities under
various operating leases for periods ranging between three to five
years along with options that permit renewals for additional periods.
b) The Company has taken motor cars on operating lease, which are
non-cancelable for tenure of four years. The total amount recognised in
the profit & loss account on account of rental expense for these
operating leases, for the period, is Rs. 2.14 Lacs (Previous year - Rs.
8.81 Lacs).
12) Employee benefit obligations
Defined contribution plans
The Company makes contributions towards provident fund and
superannuation fund, to defined contribution retirement benefit plans
for qualifying employees. The provident fund plan is operated by the
Regional Provident Fund Commissioner and the superannuation fund is
administered by the Trustees of the Maral Overseas Limited Senior
Executive Superannuation Fund. Under the schemes, the Company is
required to contribute a specified percentage of payroll cost to the
retirement benefit schemes to fund the benefits.
Defined benefit plan
The Company makes annual contributions to the Employees Group
Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance
Company Limited, a funded defined benefit plan for qualifying
employees. The scheme provides for lump sum payment to vested employees
at retirement, death while in employment or on termination of
employment of an amount equivalent to 15 days salary (last drawn
salary) payable for each completed year of service or part thereof in
excess of six months. Vesting occurs upon completion of five years of
service.
The present value of the defined benefit obligation and the related
current service cost were measured using the Projected Unit Credit
Method with actuarial valuations being carried out at each balance
sheet date.
The Company evaluates these assumptions annually based on its long-term
plans of growth and industry standards.
The discount rate is based on prevailing market yields of Indian
government bonds, as at the balance sheet date, consistent with the
currency and estimated term of the post employment benefit obligations.
The expected rate of return on plan assets is based on the expectation
of the average long term rate of return expected on investments of the
fund during the estimated term of the obligations.
The Company adopted AS 15 (Revised) from April 1, 2007 and has
accordingly given the following disclosure prospectively from this
date:
13) Earnings Per Share
Basic earning per share is computed by dividing the net profit or loss
for the year available to equity shareholders by the weighted average
number of equity shares outstanding during the year. Diluted earnings
per share is computed by dividing the net profit or loss for the year
by the weighted average number of equity shares in issue, adjusted for
the effect of all dilutive potential equity shares that were
outstanding during the year. Dilutive potential equity shares are
weighted for the period they were outstanding and are deemed converted
as of beginning of the year, unless they have been issued at a later
date.
Potential equity options exist in the form of right of CDR lenders to
convert 20% of their debt outstanding beyond seven years from the date
of CDR Letter into equity capital, more fully explained in Note 5 of
this schedule. Potential options may also arise in the event of default
in payment due on loan funds.
14) Related Party Disclosures
Following information regarding related parties has been determined on
the basis of criteria specified in AS-18 "Related Party Disclosures".
a) Related parties
i) Key management personnel
- Mr. Ravi Jhunjhunwala, Chairman
- Mr. Shekhar Agarwal, Managing Director
ii) Relatives of key management personnel
- Mr. L.N. Jhunjhunwala
- Mrs. Shashi Agarwal
- Mr. Shantanu Agarwal
- Shekhar Agarwal (HUF)
iii) Enterprises over which any person described in (i) & (ii) above is
able to exercise significant influence
- RSWM Ltd.
- HEG Ltd.
- BMD (P) Ltd
- Agarwal Trademart (P) Ltd.
- Mayur Knits (P) Ltd.
- Ultramarine Impex (P) Ltd
- Apeksha Vyapar (P) Ltd
- Indo Canadian Consultancy Services Ltd
- BSL Ltd
- Bhilwara Spinners Ltd
15) Segment Information
The Company is currently organized into three business operating
segments: Yarn, Fabric and Textile Made-ups. The Companys business
segments offer different products and require different technology and
marketing strategies.
Yarn includes bought out yarn as well as production of cotton yarn over
a wide range of counts, which besides being sold, is also used for
further value addition in fabric. It also includes surplus captive &
standby power. Fabric includes both bought out fabric as well as the
value added activities relating to knitting, dyeing and processing.
Textile Made-ups, comprise of made-ups made for renowned international
brands.
The accounting principles used in preparation of the financial
statements are consistently applied to record revenue and expenditure
in individual segments and are as set out in the note on significant
accounting policies.
Transfer prices for inter segment revenues are generally set on an
arms length basis and are eliminated in consolidation.
Revenue and direct expenses in relation to segments are categorized
based on items that are individually identifiable or allocable on a
reasonable basis to that segment. Revenue and expenses, besides
financial costs and taxes that are not allocated to operating segments,
are included under "inter segment & unallocated items".
Assets and liabilities represent assets (both tangible and intangible)
employed in operations and liabilities owed to third parties that are
individually identifiable or allocable on a reasonable basis to that
segment. Assets and liabilities excluded from allocation to operating
segments, are included under "inter segment & unallocated items".
Segment assets employed in the Companys various business segments are
all located in India. Capital expenditure includes expenditure incurred
during the period on acquisition of segment fixed assets.
Geographical revenues are segregated based on location of the customer
who is invoiced. North America comprises the United States of America,
Canada and Mexico; Europe includes continental Europe (both the east
and west), Ireland and the United Kingdom; Africa includes Mauritius;
Asian continent has been segregated into the Middle East & Gulf
countries while the rest of Asia, other than India has been covered
under Far East & South East Asia; Rest of the World comprises all other
places except those mentioned above and India.
16) Additional information pursuant to Schedule VI to the Companies
Act, 1956: a) Installed Capacity*
* As certified by the Management. Since the Companys installations can
technically be considered as multi-purpose plants, their capacity is
variable in line with process improvements and the product mix adopted
from time to time. The figures given in relation to installed
capacities, are therefore, approximate and refer to an assumed product
mix.
17) a) Figures in brackets, wherever given, are in respect of previous
year.
b) Figures for the Current Period are of six months ended 31st March,
2010 and hence are not strictly comparable with those of previous
period, which were of eighteen months ended 30th September, 2009
c) Previous years figures have been regrouped and recast wherever
considered necessary.
The Schedules referred to in Balance Sheet and Profit & Loss Account
form an integral part of the accounts.
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