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Notes to Accounts of Prabhat Dairy Ltd.

Mar 31, 2018

1. Reporting Entity

Prabhat Dairy Limited ("Prabhat" or "the Company") is a public Company domiciled and headquartered in India. The Company was incorporated on 25 November 1998 as a Private Limited Company and converted to a Public Limited Company on 19 March 2015. Consequent to completion of the its Initial Public Offering (''IPO''), the equity shares of the Company were listed on the National Stock Exchange of India Limited and BSE Limited on 21 September 2015.

The Company is engaged in the business of procurement and processing of milk and sale of milk and milk products like Ghee, Flavored Milk, Skimmed Milk Powder, Whole Milk Powder and Sweeten Condensed Milk etc. It caters to the needs of retail as well as the industrial trade sector.

2. Basis of Preparation

2.1 Statement of compliance

These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.

The financial statements were authorized for issue by the Company''s Board of Directors on 18 May 2018.

Details of the Company''s significant accounting policies are included in Note 3.

2.2 Functional and presentation currency

These financial statements are presented in Indian Rupees (Rs.), which is also the Company''s functional currency. All amounts have been rounded-off to the nearest lakh to two decimal points, unless otherwise indicated.

2.3 Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following items:

2.4 Use of estimates and judgements

I n preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosures of contingent liabilities. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 March 2018 is included in the following notes:

- Note 3 - recognition of deferred tax assets and MAT credit entitlement: availability of future taxable profit against which deferred tax assets and MAT credit entitlement can be utilized;

- Note 4 - Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of company''s assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life.

- Note 5 - the Company has received some orders and notices from tax authorities in respect of direct taxes. The outcome of these matters may have a material effect on the financial position, results of operations or cash flows. Management regularly analyzes current information about these matters and makes provisions for probable losses. In making the decision regarding the need for loss provisions, management considers the degree of probability of an unfavorable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. The filing of a suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision of a loss may be appropriate; and;

- Note 6 - measurement of defined benefit obligations: key actuarial assumptions;

7. Measurement of fair values

A number of Company''s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

The Company has an established control framework with respect to the measurement of fair values. The finance team has the overall responsibility for all significant fair value measurements, including Level 3 fair values, supported by external experts, whenever required. Fair value measurement are reviewed by the Chief Financial Officer (CFO).

Significant valuation issues are reported to the Company''s audit committee.

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in Note 46 - financial instruments.

8. current-non-current classification

The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.

Assets

An asset is classified as current when it satisfies any of the following criteria:

a) i t is expected to be realized in, or is intended for sale or consumption in, the Company''s normal operating cycle;

b) it is held primarily for the purpose of being traded;

c) it is expected to be realized within 12 months after the reporting date; or

d) i t is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include current portion of non-current financial assets. All other assets are classified as noncurrent.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

a) it is expected to be settled in the Company''s normal operating cycle;

b) it is held primarily for the purpose of being traded;

c) i t is expected to be settled within 12 months after the reporting date; or

d) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. The operating cycle of the Company is less than 12 months.

Sale of goods includes excise duty collected from customers of Rs. 14.00 lakhs (31 March 2017: Rs.39.22 lakhs). Sale of goods net of excise duty is Rs.1,44,118.87 lakhs (31 March 2017: Rs.1,13,052.86 lakhs). Revenue from operations for periods up to 30 June 2017 includes excise duty. From 1 July 2017 onwards the excise duty and most indirect taxes in India have been replaced Goods and Service Tax (GST). The Company collects GST on behalf of the Government. Hence, GST is not included in Revenue from operations. In view of the aforesaid change in indirect taxes, Revenue from operations year ended 31 March 2018 is not comparable 31 March 2017.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company has unused tax credit in the form of MAT credit amounting to Rs.526.08 lakhs (31 March 2017 : Rs.241.66 lakhs) that are available for offsetting for 15 years against future tax payable by the Company. These will expire in 2033.

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered.

*Valued at the lower of cost or net realisable value

Hypothecated as charge against borrowings [ refer notes 31 (a&b) & 34a]

The write down of inventories to net realisable value as at 31 March 2018 amounted to Rs.26.91 lakhs (31 March 2017: Rs.69.38 lakhs). The write down are included in changes in inventories of finished goods, stock-in-trade and work in progress in statement in profit and loss .

9. Aggregate number of bonus shares issued and shares issued for consideration other than cash during the five years immediately preceding the reporting date:

During the year ended 31 March 2015, after consolidation of equity shares, the Company had issued 66,666,796 fully paid up bonus shares in the ratio of 14 bonus shares against every 1 equity share of Rs.10/- each held by the shareholders on 12 March 2015, by utilising share premium.

10. Rights, preferences and restrictions attached to the shares:

The Company has a single class of equity shares having a par value of '' 10 per share. Accordingly all equity shares rank equally with regard to dividend and share in the Company''s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of equity shareholders are in proportion to their share of paid up equity capital of the Company.

Nature and purpose of other reserves

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Act.

Remeasurement of defined benefit liability (asset)

Remeasurement of defined benefit liability (asset) comprises actuarial gains and losses.

11. Earnings per share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of Equity shares outstanding during the year.

Notes: a) Details of repayment, interest rate, pre-payment and security provided for term loan from banks outstanding as on 31 March 2018:

During the year the Company has obtained a new term loan amounting to Rs.800 lakhs from Kotak Mahindra Bank to set up cold chain project & drawn down of '' 428.94 Lakhs in May, 2017. The loan carries an interest rate of 6 months MCLR 0.6% p. a. and is repayable in 48 monthly equal installments starting from April, 2018. The company is having existing Term loan of Rs.3,750 Lakhs with Kotak Mahindra Bank Ltd & its carries an in interest rate of 6 months MCLR 0.6% p. a. and is repayable in 20 monthly installments starting from November 2018, with installments ranging between '' 90 lakhs to '' 220 lakhs. In the month of December, 2017 The HSBC Limited has taken over Term Loan - I & Term Loan - II amounting Rs.3750 Lakhs & Rs.800 Lakhs respectively. Interest rate for Term Loan - I & Term Loan - II is 6 month MCLR & 1 year MCLR respectively. In case of default the lender have rights to cancel the outstanding commitments under the facility, recall/ accelerate all amounts outstanding under the facility, levy additional interest and enforce security. The loan has been secured by way of creation of the following security: -

1. First ranking charge over the Company''s moveable fixed assets / properties by way of hypothecation.

2. Second ranking pari passu charge over the Company''s Current assets (present & future) by way of hypothecation.

3. First ranking charge by way of registered mortgage on the following lands and building thereon:

i) Survey No. D-37/4 owned by MIDC, leased to the Company.

ii) Survey No. 121/2 owned by the Company.

iii) Survey No. 121/3 and 121/2A owned by Mr. Sarangdhar Nirmal, leased to the Company."

4. Personal guarantee of Mr. Sarangdhar R. Nirmal and Mr. Vivek S. Nirmal.

b) Details of repayment, interest rate, pre-payment and security provided for term loan from banks outstanding as on 31 March 2017:

During 2016-17 the Company has obtained a new term loan amounting to Rs.3,750 lakhs from Kotak Mahindra Bank to make prepayment of loan taken from Indostar Capital Finance Private Limited. The loan carries an interest rate of 6 months MCLR 0.6% p.a and is repayable in 20 monthly installments starting from November 2018, with installments ranging between Rs.90 lakhs to Rs.220 lakhs. In case of prepayments, a prepayment penalty of 1% p.a. shall be payable. In the event of default the lender will cancel the outstanding commitments under the facility, recall/ accelerate all amounts outstanding under the facility, levy additional interest and enforce security. The loan has been secured by way of creation of the following security

1. First ranking charge over the Company''s entire fixed assets.

2. Second ranking pari passu charge over the Company''s current assets (present & future) by way of hypothecation.

3. First ranking charge by way of registered mortgage on the following lands and building thereon:

i) Survey No. D-37/4 owned by MIDC, leased to the Company.

ii) Survey No. 121/2 owned by the Company.

iii) Survey No. 121/3 and 121/2A owned by Mr. Sarangdhar Nirmal, leased to the Company."

c) Details of repayment, interest rate and security provided for vehicle loans from loans outstanding as on 31st March 2018:

The vehicle loans from other banks are secured against such vehicles and carry interest rate ranging from 7.77% to 11.50% p.a. (31 March, 2017: 7.77% to 11.50% p.a.)

The Company''s exposure to interest rate and liquidity risks are disclosed in note 46)

a) Details of loans from bank repayable on demand:

These loans are from various banks under multiple banking arrangements and in the nature of cash credit facilities, Working Capital Demand Loan, repayable on demand and carry interest rate ranging from 8.30% p.a. to 8.90% p.a. (2017: 8.65% p. a. to 9.50% ). The various short term loans have been secured by way of creation of the following security: -

1. First ranking pari passu charge over the Company''s Current assets (present & future) by way of hypothecation.

2. Second ranking pari passu charge over the Company''s Fixed movable assets (present & future) by way of hypothecation.

3. Second ranking pari passu charge by way of registered mortgage on the following lands and all the present & future structures thereon:

i) Survey No. D-37/4, TTC MIDC industrial area, Turbhe, Navi Mumbai .

ii) Survey No. 121/2 adm. 0.81 Hectares owned by the Company.

iii) Survey No. 121/3 and 121/2A adm. 0.39 Hectares owned by Mr. Sarangdhar Nirmal, leased to the Company."

4. Personal guarantee of Mr. Sarangdhar R. Nirmal and Mr. Vivek S. Nirmal.

The Company''s exposure to interest rate and liquidity risks are disclosed in note 46)

i) The Company is contesting the demands related to Income Tax matters and the management believes that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demands raised. The management believes that the ultimate outcome of this proceedings will not have a material adverse effect on the Company''s financial position and results of operations.

b) On October 09, 2015, a search was conducted by the Income Tax Department pursuant to the provisions of section 132(1) and section 133A of the Income Tax Act, 1961 at the offices of the Company at Shrirampur, Pune and Navi Mumbai and also at the offices of the subsidiaries of the Company and the residence of Executive Directors residing at Shrirampur. The Company has not received any demand notice with respect to the search.

Consequent to the survey carried out by the Income Tax department under section 133A of the IT Act on the Company, the Income Tax department has requisitioned books of accounts and other documents under section 132A of the IT Act. Accordingly, the Company had submitted the copies of the documents required by the tax authority.

During the previous year, the Company had decided to file an application with the Hon''ble Income Tax Settlement Commission (ITSC) with respect to the expected litigations which may arise pursuant to the survey carried out by the Income Tax authorities for AY 2010-11 to AY 2016-17. As on 31 March 2018, the Company is in process of filing the said application with ITSC.

Based on best estimate, management has carried an evaluation of possible tax obligation that may arise out of the said litigation. As per the management evaluation, the Company will have to pay additional tax amounting to Rs.208.81 lakhs [(including interest thereon)(gross of excess provision for earlier year written back '' 196.81 lakhs)] for assessment years 2010-11 to 2016-17 and provide for additional deferred tax liability charge due to write off of certain fixed assets in tax block for which depreciation claim would not be allowed by the tax authorities amounting to Rs.283.39 lakhs. Accordingly, total provision was made pursuant to above matter amounting to Rs.492.20 lakhs in the previous year.

The Company believes that they will not have any additional tax liability or penalty (if any) other than already accounted into books of accounts based on management best estimate.

Since the ultimate outcome of the assessment proceeding of a settlement application cannot presently be determined, no additional provision for tax including penalty, if any, as a result of such outcome, is made in the current financial statements.

a) The Company has taken land on lease from Directors and relatives of directors for a period ranging from 10 years to 30 years starting from October, 1999. In terms of the said lease agreement, the Company is required to pay an annual rent of Rs. 8,190 p.a. However, the Company has received a letter of waiver from them indicating that the total rent payable since inception of the lease till March 2018 has been waived and that the Company is not required to pay any lease rent for the above referred period.

12. Operating leases

The Company has entered into operating lease arrangements for office space. Lease arrangements provide for cancellation by either party and also contain a clause for renewal of the lease agreement and there are no non-cancellable arrangements. Total lease rental expenses for operating leases recognised in Statement of Profit and Loss is Rs.364.63 lakhs (2017 : Rs.121.93 Lakhs).

Includes fee Rs.Nil (31 March 2017: '' 49.46 lakhs) and out of pocket expenses of Rs. Nil (31 March 2017: Rs.1.75 lakhs) including service tax, paid to a firm other than MSKA & Associates.

13. Corporate Social Responsibility (CSR)

As per provisions of section 135 of Companies Act 2013, the Company was required to spend Rs.22.05 lakh (2017 : Rs.15.47 lakhs ) being 2% of average net profits made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy on the activities specified in Schedule VII of the Act. The Company has spent Rs.22.06 lakh (2017 : Rs.21.01 lakhs ) towards Corporate Social Responsibility activities.

14. Liabilities relating to employee benefits

The Company contributes to the following post-employment defined benefit plans.

(i) Defined Contribution Plans:

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund, which is a defined contributions plans. The Company has no obligation other than to make specified contributions. The contribution are charged to the Statement of Profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident Fund is Rs.115.69 Lakhs (2017: Rs.104.84 Lakhs). The contributions payable to these plans by the Company are at rates specified in the rules of the scheme.

(ii) Defined Benefit Plan:

Actuarial gains and losses in respect of defined benefit plans are recognised in Other Comprehensive Income. The Defined Benefit Plan comprise of Gratuity. Gratuity is a benefit to an employee based on 15 days last drawn salary for each completed year of service.

Assumptions regarding future mortality have been based on published standard table in accordance with Indian Assured Lives Mortality (2006-08) ultimate.

The discount rate is based on the prevailing market yield of Indian government securities as at Balance sheet date for the estimated terms of obligation.

Salary Escalation Rate : The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors

15. Financial instruments

- Fair values and risk management

A. Accounting classification and fair values

The fair value of other current financial assets, cash and cash equivalents, trade receivables, investments trade payables, short-term borrowings and other financial liabilities approximate the carrying amounts because of the short term nature of these financial instruments.

The amortized cost using effective interest rate (EIR) of non-current financial assets consisting of security and term deposits are not significantly different from the carrying amount.

Financial assets that are neither past due nor impaired include cash and cash equivalents, security deposits, term deposits, and other financial assets.

Carrying values of non-current security deposits and non-current term deposits are not significant and therefore the impact of fair value is not considered for above disclosure.

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy

B. Measurement of fair values

Valuation techniques and significant unobservable inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Accordingly, unquoted equity shares have been considered as Level 3 financial instrument. The carrying amount of unquoted equity shares is not considered material and hence it has not been fair valued and carrying amount for the same has been considered as the fair value.

Valuation techniques used to determine fair value

Specific valuation techniques used to value the financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

Valuation processes

The finance team performs the valuation of financial assets and liabilities required for financial reporting purposes. The fair valuation results are reviewed by the CFO.

i. Risk management framework

The Company''s board of directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The board of directors has established a Risk Management Framework which is reviewed and monitored by the Risk Management Committee. The Committee reports regularly to the board of directors on its activities.

The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate limits and controls and to monitor risks and adherence to limits. The Company, through its training and established procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company''s activities expose it to market risk, liquidity risk and credit risk.

This note explains the sources of risk to which the Company is exposed to and how the entity manages the risk.

ii. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations.The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs.9257.46 Lakhs and Rs.10,911.37 lakhs as of 31 March 2018 and 31 March 2017, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers located in India. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company computes the expected credit loss allowance for trade receivables based on available external and internal credit risk factors such as the ageing of its dues, market information about the customer, industry information and the Company''s historical experience for customers.

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry/ sector in which customers operate.

Credit risk exposure

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables.

The Company believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behavior.

Cash and cash equivalents

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 domestic credit rating agencies. Investments primarily include investment in certificates of deposit which are funds deposited at a bank for a specified time period.

iii. Liquidity risk

The Company''s principal sources of liquidity are cash and cash equivalents, working capital facility with banks and the cash flows that are generated from operations. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

The working capital as at 31 March 2018 calculated above includes cash and cash equivalents of Rs.1773.27 lakhs and deposits with banks of Rs.7916.44 lakhs. Also, the working capital as at 31 March 2017 calculated above includes cash and cash equivalents of Rs.7,660.89 lakhs and deposits with banks of Rs.5,586.28 lakhs.

iv. Market risk

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

Sensitivity analysis

As the Company does not have significant amount of transactions in foreign currency, a reasonably possible strengthening/ (weaking) of the Indian Rupee against EURO would not have a material impact on the profit or loss or equity.

v. interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

Fair value sensitivity analysis for fixed-rate instruments

A change of 100 basis points in interest rate would have increased or decreased profit or loss by Rs.78.61 Lakhs (31 March 2017: Rs.200.14 Lakhs). This analysis assumes that all other variables remain constant.

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.

Capital Management

The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

Notes:

a) Figures in bracket relate to the previous year.

* The Company has taken Land on lease from Directors and relatives of directors for a period ranging from 10 years to 30 years starting from Oct, 1999. In terms of the said lease agreement, the Company is required to pay an annual rent of Rs.8,190 p.a. However, the Company has received a letter of waiver from them indicating that the total rent payable since inception of the lease till March 2018 has been waived and that the Company is not required to pay any lease rent for the above period.

** Carrying value of Preference shares as on 31 March 2018 are at amortised cost

*** Amortised cost as at 31 March 2018 Rs.NIL (31 March 2017: Rs.14,545.07 lakhs).

With respect to transactions with related parties, the Company is of view that such transactions have been carried out at arms length and conditions/ provisions as laid down in section 188 of the Companies Act, 2013 have been complied with.

16. Government grant for setting up of integrated cold chain facilities

During the year the Company has been granted a sanction of government grants related to assets , under ''Scheme for Cold Chain Value Addition and Preservation Infrastructure for setting up of integrated cold chain facilities for dairy products at Shrirampur , Maharashtra'' of Rs.859.52 lakhs (31 March 2017: Nil) out of which Rs.248.91 lakhs has been received during the financial year (31 March 2017: Nil) .

Government grant income is recognised in profit or loss on a systematic basis over the useful life of the asset and consequently during the year Rs.11.47 lakhs (31 March 2017: Nil ) recognised in income statement under head ''Other operating revenue ''. Long term portion of unamortised government grant of Rs.759.67 lakhs (31 March 2017: Nil ) is recognised under head ''Other non current liabilities'' , whereas current portion of unamortised government grant of Rs. 88.38 lakhs (31 March 2017: Nil )is recognised under head ''Other current liabilities'' .

17. Loan to subsidiary company

I n the earlier years, the Company had given loans to Cheese Land Agro (India) Private Limited (CAIPL) (Subsidiary company). The balance outstanding as at 31 March 2017 was 14,545.07 lakhs (11,551.56 lakhs - interest free, disclosed as non-current financial assets-loans and 2,993.51 disclosed as current financial assets-loans since the same was repayable on demand) and interest accrued on current borrowings '' 224.57 lakhs. The non-current loans was due for repayment on 31 March 2019 along with interest.

As per the revised terms, interest @ 7.5% p.a. was payable on all the loans.

During the current year, the Company has received the entire loan amount outstanding along with interest accrued thereon by 14 August 2017. It has received interest @ 7.5% for the period from 1 April 2017 to 30 June 2017. However, for the period from 1 July 2017 till 14 August 2017, the company has given waiver to Cheese Land Agro (India) Private Limited (CAIPL) (Subsidiary company) from payment of interest.

The Company has accounted for interest income amounting to Rs.255.86 (31 March 2017 : Rs.1,675.68 lakhs being notional interest on interest free loans as per Ind AS 109)."

18. The previous year''s financial statements were audited by a firm other than MSKA & Associates .

19. Prior year comparatives

Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year classification/ disclosure.

Mar 31, 2017

The Company has unused tax credit in the form of MAT credit amounting to Rs.241.66 lakhs (31 March 2016 : Rs. Nil) that are available for offsetting for 15 years against future tax payable by the Company. These will expire in March 2032.

Significant management judgment is required in determining provision for income tax, deferred income tax assets and liabilities. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered.

1. CAPITAL WORK IN PROGRESS

Capital work-in-progress (CWIP) as at 31 March 2017 majorly comprises of plant and equipment for setup of milk collection centers at various locations. As at 31 March 2016, CWIP majorly comprised of milk cooling equipment under installations at various locations. As at 01 April 2015, CWIP majorly comprises of plant and equipment for setup of milk collection centers in progress at various locations.

2. INVENTORIES

The write down of inventories to net realizable value as at 31 March 2017 amounted to Rs.69.38 lakhs (31 March 2016: Rs. Nil;

1 April 2015: Rs.11.68 lakhs). The write down are included in changes in inventories of finished goods, stock-in-trade and work in progress)

3. TRADE RECEIVABLES

Trade receivables include Rs.Nil (31 March 2016: Rs.4,970.81 lakhs; 1 April 2015: Rs. Nil) due from Sunfresh Agro Industries Private Limited (subsidiary company of the Company) having common directors.

The Company''s exposure to credit risk and loss allowances related to trade receivables are disclosed in note 46

4 Aggregate number of bonus shares issued and shares issued for consideration other than cash during the five years immediately preceding the reporting date:

During the year ended 31 March 2015, after consolidation of equity shares, the Company had issued 66,666,796 fully paid up bonus shares in the ratio of 14 bonus shares against every 1 equity share of H10/- each held by the shareholders on 12 March 2015, by utilizing share premium.

5. Rights, preferences and restrictions attached to the shares:

The Company has a single class of equity shares having a par value of H10 per share. Accordingly all equity shares rank equally with regard to dividend and share in the Company''s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of equity shareholders are in proportion to their share of paid up equity capital of the Company.

Nature and purpose of other reserves Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilized in accordance with the provisions of the Act.

Remeasurement of defined benefit liability (asset)

Remeasurement of defined benefit liability (asset) comprises actuarial gains and losses.

Note a - During the previous year, the Company had undertaken an IPO which also included an Offer for Sale of 4,915,925 equity shares by the existing shareholders (i.e. Selling Shareholders). In the IPO, the Company had issued and allotted 26,247,421 equity shares of Rs.10 each fully paid up at a price of Rs. 115 per share with a discount of Rs.5 per share to retail individual investors.

The total IPO proceeds of Rs.35,618.75 lakhs have been allocated between the Company and the Selling Shareholders in proportion to the number of shares issued / offered by each of them after deducting their respective proportion of IPO expenses.

The Company had utilized an amount of Rs.1,659.07 lakhs of its own share of IPO expenses from the securities premium raised through IPO in accordance with the provisions of section 52(2)(c) of the Companies At, 2013.

6. EARNINGS PER SHARE (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.

Notes:

a) Details of repayment, interest rate, pre-payment and security provided for term loan from banks outstanding as on 31 March 2017:

During the year the Company has obtained a new term loan amounting to Rs.3,750 lakhs from Kotak Mahindra Bank to make prepayment of loan taken from Indostar Capital Finance Private Limited. The loan carries an interest rate from 9.65% p.a to 10.00% p.a and is repayable in 20 monthly installments starting from November 2018, with installments ranging between Rs.90 lakhs to Rs.220 lakhs. In case of prepayments, a prepayment penalty of 1% p.a. shall be payable. In the event of default the lender will cancel the outstanding commitments under the facility, recall/ accelerate all amounts outstanding under the facility, levy additional interest and enforce security. The loan has been secured by way of creation of the following security:

1. First ranking charge over the Company''s entire fixed assets.

2. Second ranking pari passu charge over the Company''s current assets (present & future) by way of hypothecation.

3. First ranking charge by way of registered mortgage on the following lands and building thereon:

i) Survey No. D-37/4 owned by MIDC, leased to the Company.

ii) Survey No. 121/2 owned by the Company.

iii) Survey No. 121/3 and 121/2A owned by Mr. Sarangdhar Nirmal, leased to the Company.

b) Details of repayment, interest rate, pre-payment and security provided for term loan from NBFC outstanding as on 31 March 2016 and 1 April 2015

The Company had availed a term loan from Indostar Capital Finance Private Limited i.e. NBFC. The loan was sanctioned for Rs.9,000 lakhs, and carried interest rate of 13.00% p.a. (31 March 2016 : 13.00% p.a to 13.50% p.a.; 1 April 2015 : 13.50% p.a.) payable monthly on floating basis linked to Kotak Mahindra Bank Base Rate. During the previous year, out of the fund received through IPO the Company had made a partial prepayment of Rs.4,620 lakhs. The balance amount of Rs.3,750 lakhs was repayable in 20 monthly installments starting from November 2018, with installments ranging between Rs.90 lakhs to Rs.220 lakhs. During the current year, the Company has prepaid the balance outstanding loan amounting to Rs.3,750 lakhs.

In case of prepayments, a prepayment penalty of 2% p.a. shall be payable. In the event of default the lender will cancel the outstanding commitments under the facility, recall / accelerate all amounts outstanding under the facility, levy additional interest and enforce security. The loan was secured by way of creation of the following security in favor of IL & FS Trust Company Limited (being the Security Trustee):

1. First ranking charge over the Company''s moveable fixed assets / properties by way of hypothecation.

2. First ranking charge over the Designated Account & all rights, title, interest, benefits, claims & demands whatsoever of Company in, to, under and in respect of the said account by way of hypothecation.

3. Second ranking charge over the Company''s Current assets (present & future) by way of hypothecation.

4. First ranking charge by way of registered mortgage on the following lands and all the present & future structures thereon:

i) Survey No. 121/2 adm. 0.81 Hectares owned by the Company.

ii) Survey No. 121/3 or 121/2A adm. 0.39 Hectares owned by Mr. Sarangdhar R. Nirmal & leased to the Company.

iii) Plot D37/4 , TTC MIDC Industrial Area, Turbhe, Navi Mumbai.

5. Personal guarantee of Mr. Sarangdhar R. Nirmal and Mr. Vivek S. Nirmal.

c) Details of repayment, interest rate and security provided for vehicle loans from loans outstanding as on 31st March 2017:

The vehicle loans from other banks are secured against such vehicles and carry interest rate ranging from 7.77% to 11.50% p.a. (31 March 2016 : 9.70% - 11.50%; 1 April 2015 : 10.09% - 12.50%)

The Company''s exposure to interest rate and liquidity risk are disclosed in note 46.

Note:

a) Details of loans from bank repayable on demand:

These loans are from various banks under multiple banking arrangements and in the nature of cash credit facilities repayable on demand and carry interest rate ranging from 8.65% p.a. to 9.50% p.a. (31 March 2016 : 9.45% to 12.00%; 1 April 2015 :

11.50% to 12.25%). These term loans have been secured by way of creation of the following security in favour of IL & FS Trust Company Limited (being the Security Trustee):

1. First ranking pari passu charge over the Company''s Current assets (present & future) by way of hypothecation.

2. Second ranking pari passu charge over the Company''s Fixed movable assets (present & future) by way of hypothecation.

3. Second ranking pari passu charge by way of registered mortgage on the following lands and all the present & future structures thereon:

i) Survey No. 121/2 adm. 0.81 Hectares owned by the Company.

ii) Survey No. 121/3 or 121/2A adm. 0.39 Hectares owned by Mr. Sarangdhar R. Nirmal and leased to the Company.

iii) Plot D37/4, TTC MIDC Industrial Area, Turbhe, Navi Mumbai.

4. Personal guarantee of Mr. Sarangdhar R. Nirmal and Mr. Vivek S. Nirmal.

The Company''s exposure to interest rate and liquidity risk are disclosed in note 46.

Note:

a) Includes payable to directors Rs.5.19 lakhs (31 March 2016 : Rs.5.08 lakhs; 1 April 2015 : Rs.30.08 lakhs)

Notes:

c) On October 09, 2015, a search was conducted by the Income Tax Department pursuant to the provisions of section 132(1) and section 133A of the Income Tax Act, 1961 at the offices of the Company at Shrirampur, Pune and Navi Mumbai and also at the offices of the subsidiaries of the Company and the residence of Executive Directors residing at Shrirampur. The Company has not received any demand notice with respect to the search.

During the current year, the Company has decided to file an application with the Hon''ble Income Tax Settlement Commission (ITSC) with respect to the expected litigations which may arise pursuant to the survey carried out by the Income Tax authorities for AY 2010-11 to AY 2016-17. As on 31 March 2017, the Company is in process of filing the said application with ITSC.

Based on best estimate, management has carried an evaluation of possible tax obligation that may arise out of the said litigation. As per the management evaluation, the Company will have to pay additional tax amounting to Rs.208.81 lakhs [(including interest thereon)(gross of excess provision for earlier year written back Rs.196.81 lakhs)] for assessment years 2010-11 to 2016-17 and provide for additional deferred tax liability charge due to write off of certain fixed assets in tax block for which depreciation claim would not be allowed by the tax authorities amounting to Rs.283.39 lakhs. Accordingly, total provision made pursuant to above matter amounts to Rs.492.19 lakhs.

The Company believes that they will not have any additional tax liability or penalty (if any) other than already accounted into books of accounts based on management best estimate.

Notes:

a) The Company has taken land on lease from Directors and relatives of directors for a period ranging from 10 years to 30 years starting from October, 1999. In terms of the said lease agreement, the Company is required to pay an annual rent of H8,190 p.a. However, the Company has received a letter of waiver from them indicating that the total rent payable since inception of the lease till March 2017 has been waived and that the Company is not required to pay any lease rent for the above referred period.

7. OPERATING LEASES

The Company has entered into operating lease arrangements for office space. Lease arrangements provide for cancellation by either party and also contain a clause for renewal of the lease agreement and there are no non-cancellable arrangements. Total lease rental expenses for operating leases recognized in Statement of Profit and Loss is Rs.121.93 lakhs (31 March 2016 : Rs.136.63 lakhs)

8. ISSUE OF SHARES CONSEQUENT TO INITIAL PUBLIC OFFERINGS (IPO):

Consequent to completion of the IPO, the Company had issued 26,247,421 equity shares of H10 each fully paid up to the subscribers at a price of H115 per share with a discount of H5 per share to retail individual investor as per the terms of the Issue. The equity shares of the Company got listed on the National Stock Exchange of India Limited and Bombay Stock Exchange of India Limited on September 21, 2015.

The IPO proceeds have been utilized for the purposes for which the funds have been raised by the Company. The unutilized funds were parked by the Company in cash credit account with scheduled commercial banks, in order to save considerable amount of interest cost.

9. EXPENDITURE IN RELATION TO INITIAL PUBLIC OFFERING

During the year ended 31 March 2015, the Company had filed Draft Red Herring Prospectus with SEBI in connection with the proposed issue of Equity Shares of the Company by way of fresh issue and/ or an offer for sale by the existing shareholders. Accordingly, expenses incurred by the Company aggregating to Rs.266.84 lakhs in connection with filing of Draft Red Herring Prospectus and other related expenses were shown under Other current financial assets. During the year ended 31 March 2016, the same were partly adjusted towards the securities premium account and partly recovered from the existing shareholders (to the extent of shares offered for sale by existing shareholders, the expenses incurred by the Company for the proposed issue were recoverable from them) as per the provisions of the Companies Act, 2013.

10. CORPORATE SOCIAL RESPONSIBILITY (CSR)

As per provisions of section 135 of Companies Act 2013, the Company was required to spend Rs.15.47 lakhs (31 March 2016 : Rs.14.59 lakhs) being 2% of average net profits made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy on the activities specified in Schedule VII of the Act. The Company has spent Rs. 21.01 lakhs (31 March 2016 : Rs.14.59 lakhs) towards Corporate Social Responsibility activities.

11. LIABILITIES RELATING TO EMPLOYEE BENEFITS

The Company contributes to the following post-employment defined benefit plans.

(i) Defined Contribution Plans:

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund, which is a defined contributions plans. The Company has no obligation other than to make specified contributions. The contribution are charged to the Statement of Profit and Loss as they accrue. The amount recognized as an expense towards contribution to Provident Fund is Rs.104.84 lakhs (31 March 2016: Rs.86.09 lakhs). The contributions payable to these plans by the Company are at rates specified in the rules of the scheme.

(ii) Defined Benefit Plan:

Actuarial gains and losses in respect of defined benefit plans are recognized in Other Comprehensive Income. The Defined Benefit Plan comprise of Gratuity. Gratuity is a benefit to an employee based on 15 days last drawn salary for each completed year of service.

B. Defined benefit obligations

i. Actuarial assumptions

The discount rate is based on the prevailing market yield of Indian government securities as at Balance sheet date for the estimated terms of obligation.

Salary Escalation Rate : The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors

ii. Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

12. FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT

A. Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy

B. Measurement of fair values

Valuation techniques and significant unobservable inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.

Financial instruments measured at fair value

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual fund investments. The fair value of all investments in mutual funds is valued using the closing NAV as at the reporting period.

B. Measurement of fair values (contd.)

(ii) Valuation techniques used to determine fair value

Specific valuation techniques used to value the financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

(iii) Valuation processes

The finance team performs the valuation of financial assets and liabilities required for financial reporting purposes. The fair valuation results are reviewed by the CFO.

i. Risk management framework

The Company''s activities expose it to market risk, liquidity risk and credit risk.

This note explains the sources of risk to which the Company is exposed to and how the entity manages the risk.

ii. Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs.10,911.37 lakhs and Rs.11,479.98 lakhs as of 31 March 2017 and 31 March 2016, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers located in India. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company computes the expected credit loss allowance for trade receivables based on available external and internal credit risk factors such as the ageing of its dues, market information about the customer, industry information and the Company''s historical experience for customers.

The following table gives details in respect of revenue generated from top ten customers:

Credit risk exposure

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:

The Company believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behavior.

Cash and cash equivalents

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 domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units and certificates of deposit which are funds deposited at a bank for a specified time period.

iii. Liquidity risk

As of 31 March 2017, the Company had a working capital of Rs.14,669.09 lakhs and as at 31 March 2016 of Rs.26,198.64 lakhs. The working capital of the Company for this purpose has been derived as follows:

The working capital as at 31 March 2017 calculated above includes cash and cash equivalents of Rs.7,660.89 lakhs and deposits with banks of Rs.5,586.28 lakhs. Also, the working capital as at 31 March 2016 calculated above includes cash and cash equivalents of Rs.531.02 lakhs and deposits with banks of Rs.5.40 lakhs.

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments.

Sensitivity analysis

Interest rate risk

Exposure to interest rate risk

Company''s interest rate risk arises from borrowings. The interest rate profile of the Company''s interest-bearing financial instruments is as follows:

Fair value sensitivity analysis for fixed-rate instruments

A change of 100 basis points in interest rate would have increased or decreased profit or loss by Rs.200.21 (31 March 2016: Rs.130.99; 1 April 2015: Rs. 123.38). This analysis assumes that all other variables remain constant.

Cash flow sensitivity analysis for variable-rate instruments

Capital Management

For the purpose of the Company''s capital management, capital includes issued capital, share premium and all other equity reserves attributable to equity holders.

The Company monitors capital using debt-equity ratio, which is total debt less investments divided by total equity.

13. EXPLANATION OF TRANSITION TO IND AS

As stated in Note 2, these are the first financial statements prepares in accordance with Ind AS. For the year ended 31 March 2016, the Company had prepared its financial statements in accordance with Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act. (''previous GAAP'')

The accounting policies set out in Note 3, have been applied in preparing these financial statements for the year ended 31 March 2017 including the comparative information for the year ended 31 March 2016 and the opening Ind AS balance sheet on the date of transition i.e. 1 April 2015.

In preparing its Ind AS balance sheet as at 1 April 2015 and in presenting the comparative information for the year ended 31 March 2016, the Company has adjusted amounts reported previously in its financial statements prepared in accordance with previous GAAP. This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with previous GAAP, and how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows.

Optional exemptions availed and mandatory exemptions

In preparing these financial statements the Company has applied the below mentioned optional exemptions and mandatory exemptions.

A. Optional exemptions availed

1 Property, plant and equipment and intangible assets:

As per Ind AS 101 an entity may elect to:

(i) measure an item of property plant and equipment at the date of transition at its fair value and use that fair value as its deemed cost at that date

(ii) use a previous GAAP revaluation of an item of property, plant and equipment at or before the date of transition as deemed cost at the date of the revaluation, provided the revaluation was, at the date of the revaluation, broadly comparable to:

- fair value;

- or cost or depreciated cost under Ind AS adjusted to reflect, for example, changes in a general or specific price index.

The elections under (i) and (ii) above are also available for intangible assets that meets the recognition criteria in Ind AS 38, Intangible Assets, (including reliable measurement of original cost); and criteria in Ind AS 38 for revaluation (including the existence of an active market).

(iii) use carrying values of property, plant and equipment and intangible assets as on the date of transition to Ind AS (which are measured in accordance with previous GAAP and after making adjustments relating to decommissioning liabilities prescribed under Ind AS 101) if there has been no change in its functional currency on the date of transition.

As permitted by Ind AS 101, the Company has elected to carry all items of property, plant and equipment and intangibles at fair value.

2 Business combinations

As per Ind AS 101, at the date of transition, an entity may elect not to restate business combinations that occurred before the date of transition. If the entity restates any business combinations that occurred before the date of transition, then it restates all later business combinations, and also applies Ind AS 110, consolidated Financial Statements, from that same date.

The Company has opted not to restate any business combination on or before 1 April 2015.

B. Mandatory exemptions

1 Estimates:

As per Ind AS 101, an entity''s estimates in accordance with Ind AS at the date of transition to Ind AS at the end of the comparative period presented in the entity''s first Ind AS financial statements, as the case may be, should be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies.

As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under previous GAAP, those estimates should be made to reflect conditions that existed at the date of transition (for preparing opening Ind AS balance sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS).

The Company''s estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the previous GAAP are listed below:

- Fair valuation of financial instruments carried at FVTPL

- Determination of the discounted value for financial instruments carried at amortized cost.

2 Derecognition of financial assets and liabilities:

As per Ind AS 101, an entity should apply the derecognition requirements in Ind AS 109, Financial Instrument, prospectively for transactions occurring on or after the date of transition to Ind AS. However, an entity may apply the derecognition requirements retrospectively from a date chose by it if the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.

The Company has elected to apply the derecognition principles of Ind AS 109 prospectively as reliable information was not available at the time of initially accounting for these transactions.

3 Classification and measurement of financial assets:

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortized cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortized cost has been done retrospectively except where the same is impracticable.

Notes to the reconciliation: a Property, plant and equipment:

As permitted by Ind AS 101, the Company has elected to carry all items of property, plant and equipment and intangibles at fair value as on the date of transition.

The impact arising from the change is summarized as follows:

b Investments:

In accordance with Ind AS 109, financial assets representing investment in mutual funds and equity shares of entities other than subsidiaries have been fair valued. The Company has designated all investments which have been fair valued as fair value through profit and loss as permitted by Ind AS 109. Under the previous GAAP, the application of relevant accounting standards resulted in all these investments being carried at cost or market value which ever is lower.

c Loans:

In accordance with Ind AS 109, financial assets representing loans have been fair valued. The Company has initially fair valued loans given to its subsidiary and subsequently carried it at amortized cost as permitted by Ind AS 109.

d Borrowings at amortized cost:

Based on Ind AS 109, financial liabilities in the form of borrowings have been accounted at amortized cost using the effective interest rate method.

e Proposed dividend:

Under previous GAAP, dividends proposed by the board of directors after the reporting date but before the approval of financial statements were considered to be adjusting event and accordingly recognized (along with related dividend distribution tax) as liabilities at the reporting date. Under Ind AS, dividends so proposed by the board are considered to be non-adjusting event. Accordingly, provision for proposed dividend and dividend distribution tax recognized under previous GAAP has been reversed.

f Excise duty:

Under previous GAAP, revenue from sales of goods was presented net of the excise duty on sales. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. Excise duty is presented in the Statement of Profit and Loss as an expense. This has resulted in an increase in the revenue from operations and cost of material for the year ended 31 March 2016.

g Actuarial gain and loss:

Under Ind AS, all actuarial gains and losses are recognized in other comprehensive income. Under previous GAAP the Company recognized actuarial gains and losses in profit and loss. Accordingly, actuarial loss recognized in the Statement of profit and loss has been recognized under other comprehensive income under Ind AS for the year ended 31 March 2016. However, this has no impact on total comprehensive income and total equity as on 31 March 2016.

h Deferred tax assets (net) :

The above changes (decrease)/ increased the deferred tax liability as follows based on a tax rate of 34.61%:

14. RELATED PARTY RELATIONSHIPS, TRANSACTIONS AND BALANCES

a) Key Management Personnel (KMP)

Mr. Sarangdhar R. Nirmal, Chairman and Managing Director

Mr. Vivek S. Nirmal, Joint Managing Director

Mr. Raviraj Vahadane, Chief Financial Officer (from 27 April 2016)

Mr. Amit Gala, Chief Financial Officer (from 12 December 2015 upto 26 April 2016)

Mr. Keyur Shah, Chief Financial Officer (upto 11 December 2015)

Ms. Priya Nagmoti, Company Secretary

b) Names of the related parties with whom transactions were carried out during the period and description of relationship: Trust which directly controls reporting Company and in which KMPs are interested.

Nirmal Family Trust

Subsidiary Companies

Cheese Land Agro (India) Private Limited

Sunfresh Agro Industries Private Limited

Relatives of KMPs:

Mrs. Vijaya S. Nirmal Mrs. Nidhi V. Nirmal Mrs. Sneha Nirmal Astunkar

Enterprises / proprietary concerns in which KMPs or their relatives exercise significant influence :

Nirmal Gograss LLP

Prabhat Agro. Multi State Co-Operative Society Limited

Notes:

a) Figures in bracket relate to the previous year.

* The Company has taken Land on lease from Directors and relatives of directors for a period ranging from 10 years to 30 years starting from Oct, 1999. In terms of the said lease agreement, the Company is required to pay an annual rent of Rs.8,190 p.a. However, the Company has received a letter of waiver from them indicating that the total rent payable since inception of the lease till March 2017 has been waived and that the Company is not required to pay any lease rent for the above period.

** Amortized cost as at 31 March 2017 Rs.14,545.07 lakhs (31 March 2016: Rs.13,093.9 lakhs).

15. LOAN TO SUBSIDAIRY COMPANY

In the earlier years, the Company had advanced interest free loans to Cheese Land Agro (India) Private Limited (CAIPL) (wholly owned subsidiary) amounting to Rs.15,300.38 lakhs. As per the original repayment terms, part of the loan amounting to Rs.3,748.82 lakhs was repayable on 31 March 2016 and balance loan amounting to Rs.11,551.56 lakhs is repayable on 31 March 2017.

During the previous year ended 31 March 2016, out of the loan due for repayment on 31 March 2016, CAIPL repaid Rs.755.31 lakhs on due date. The repayment terms of the balance loan amounting to Rs.2,993.51 lakhs was revised in Board Meeting held on 18 May 2016. As per the revised terms, the loan and interest (@ 7.5% p.a) thereon is repayable on demand.

Further, the Board, in its meeting held on 13 February 2017, has approved extension of the loan term due for repayment on 31 March 2017 to 31 March 2019 along with interest.

As per the provisions of Ind AS 109 - "Financial Instruments" the aforesaid outstanding loans have been accounted at fair value on transaction date and carried at amortized cost at each balance date. With respect to interest free loans, the Company has accounted notional interest income amounting to Rs.1,739. 81 lakhs and Rs.1,451.17 lakhs for the year ended 31 March 2016 and 31 March 2017 respectively.

With respect to loan amounting to Rs.2,993.51 lakhs, for which terms were revised during the current year, the Company has recognized interest income of Rs.224.51 lakhs.

* Represents SBN transacted up to 8 November 2016, which were recorded in books of account after 8 November 2016, as certified by the management and relied upon by the auditors.

16. PROPOSED DIVIDEND

The Board of Directors of the Company at their meeting held on 23 May 2017 have recommended a final dividend for the year 2016-17 at the rate of H0.40 per equity share of H10 each. The said dividend is payable subject to its declaration by the shareholders of the Company in the ensuing Annual General Meeting of the Company.

17. The previous year''s financial statements were audited by a firm other than B S R & Associates LLP.

Mar 31, 2016

A. Ordinary equity shares of ''Rs,10 each

B. 0.01% Compulsorily Convertible Preference Shares

During the previous year, the Company had only one class of Preference shares i.e. 0.01% Compulsorily Convertible Preference Shares having par value of '' 10 each. These preference shares were compulsorily convertible into equity shares any time after June 30, 2013 as per the terms and conditions of Share Subscription Agreement dated September 21, 2012 executed between India Agri Business Fund Ltd., REAL Trust, the Company, Nirmal Family Trust, Mr. Sarangdhar R. Nirmal, Mr. Kishor R. Nirmal, Mr. Arvind J. Nirmal and Mr. Vivek S. Nirmal, which has been replaced and superseded by the Shareholder''s Agreement dated May 17, 2013 executed between India Agri Business Fund Ltd., REAL Trust, Society De Promotion Et De Participation Pour La Cooperation Economique, the Company, Nirmal Family Trust, Mr. Sarangdhar R. Nirmal, Mr. Kishor R. Nirmal, Mr. Arvind J. Nirmal and Mr. Vivek

S. Nirmal. These preference shares ranked for dividend in priority to equity shares and in case of any winding up of the Company, entitled to rank as regards repayment of capital upto the commencement of winding up, in priority to the equity shares of the Company.

a) The Company is contesting the demands related to Income Tax matters and the management believes that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demands raised. The management believes that the ultimate outcome of this proceedings will not have a material adverse effect on the Company''s financial position and results of operations.

1 COMPLIANCE WITH MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006

The Company has amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006 (''MSMED Act'') ^{as at} p^{eriod end} (Amount in C)

2 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE ''ACCOUNTING STANDARD 15 (REVISED) EMPLOYEE BENEFITS'' ARE AS under:

(A) Defined Contribution Plan

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund and Employee''s State Insurance Corporation, which is a defined contributions plans. The Company has no obligation other than to make specified contributions. The contribution are charged to the Statement of Profit and Loss as they accrue. The amount recognized as an expense towards contribution to Provident Fund and Employee''s State Insurance Corporation is '' 8,608,588 (2015 : '' 8,762,386). The contributions payable to these plans by the Company are at rates specified in the rules of the scheme.

(B) Defined Benefit Plan

i) Actuarial gains and losses in respect of defined benefit plans are recognized in the Statement of Profit and Loss.

ii) The Defined Benefit Plan comprise of Gratuity. Gratuity is a benefit to an employee based on 15 days last drawn salary for each completed year of service.

(Amount in C)

3 ISSUE OF SHARES ON CONSEQUENT TO INITIAL PUBLIC OFFERINGS (IPO):

Consequent to completion of the IPO, the Company issued 26,247,421 equity shares of '' 10 each fully paid up to the subscribers at a price of Rs. 115 per share with a discount of '' 5 per share to retail individual investor as per the terms of the Issue. The equity shares of the Company got listed on the National Stock Exchange of India Limited and BSE Limited on September 21, 2015.

4 RELATED PARTY DISCLOSURES

a) Individuals having control over the Company (Key management personnel)

Mr. Sarangdhar R. Nirmal, Chairman & Managing Director Mr. Vivek S. Nirmal, Joint Managing Director Mr. Kishor R. Nirmal (upto 09 March 2015)

Mr. Arvind J. Nirmal (upto 09 March 2015)

Mr. Keyur Shah, Chief Financial Officer (upto 11 December 2015)

Mr. Amit Gala, Chief Financial Officer (from 12 December 2015 upto 26 April 2016)

Ms. Priya Nagmoti, Company Secretary

b) Names of the related parties with whom transactions were carried out during the period and description of relationship : Trust which has substantial interest in reporting Company and in which KMPs are interested.

Nirmal Family Trust

Subsidiary Companies

Cheese Land Agro (India) Private Limited Sunfresh Agro Industries Private Limited

Relatives of key management personnel:

Mrs. Vijaya S. Nirmal Mrs. Nidhi V. Nirmal Mrs. Sneha Nirmal Astunkar

Enterprises / proprietory concerns in which key management personnel or their relatives exercise significant influence:

Nirmal Gograss LLP

Prabhat Agro. Multi State Co-Operative Society Limited

Notes:

a) Figures in bracket relate to the previous year.

b) The remuneration to KMPs does not include provision for gratuity as it is determined on actuarial basis for the Company as a whole.

* The Company has taken Land on lease from Directors and relatives of directors for a period ranging from 10 years to 30 years starting from October, 1999. In terms of the said lease agreement, the Company is required to pay an annual rent of Rs. 8,190 p.a. However, the Company has received a letter of waiver from them indicating that the total rent payable since inception of the lease till March 2016 has been waived and that the company is not required to pay any lease rent for the above period.

With respect to transactions with related parties, the Company is of view that such transactions have been carried out at armâs length and conditions/provisions as laid down in section 188 of the Companies Act, 2013 have been complied with.

5 Expenditure in relation to initial public offering

During the previous year ended 31 March 2015, the Company had filed Draft Red Herring Prospectus with SEBI in connection with the proposed issue of Equity Shares of the Company by way of fresh issue and / or an offer for sale by the existing shareholders. Accordingly, expenses incurred by the Company aggregating to '' 26,683,983 in connection with filing of Draft Red Herring Prospectus and other related expenses were shown under Other current assets. The same were partly adjusted towards the securities premium account and partly recovered from the existing shareholders (to the extent of shares offered for sale by existing shareholders, the expenses incurred by the Company for the proposed issue were recoverable from them) as per the provisions of the Companies Act, 2013.

6 CORPORATE SOCIAL RESPONSIBILITY (CSR)

As per provisions of section 135 of Companies Act 2013, the Company was required to spend Rs. 1,458,813 (2015: Rs. 1,031,251) being 2% of average net profits made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy on the activities specified in Schedule VII of the Act. The Company has spent Rs. 1,458,813 (2015: Rs. 1,031,251) towards Corporate Social Responsibility activities.

7 PROPOSED DIVIDEND

The Board of Directors of the Company at their meeting held on May 18, 2016 have recommended a final dividend for the year 201516 at the rate of Rs. 0.40 per share on 97,676,131 Equity shares of Rs. 10 each i.e. 4% of the paid up share capital of the Company thus involving the total dividend payment of Rs. 39,070,452 and payment of dividend distribution tax of Rs. 7,953,825. The said dividend is payable subject to its declaration by the shareholders of the Company in the ensuing Annual General Meeting of the Company.

8 PRIOR YEAR COMPARATIVES

Previous year figures have been regrouped / reclassified wherever necessary to correspond with the current year classification/disclosure.

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