Mar 31, 2023
The company has one class of equity shares having a par value of Re. 1 per share (March 31, 2022 : Re. 1). Each shareholder is eligible for one vote per share held. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
The Company has bought back 1,66,66,666 equity shares of Re. 1 each at a price of H 120 per equity share in accordance with the provisions of Companies Act, 2013 and SEBI (Buy-Back of Securities) Regulations, 2018. The settlement of bids by the Clearing Corporation on the stock exchange was completed on July 14, 2021.
(a) Capital Redemption Reserve
Capital Redemption Reserve is created 1) when preference shares are redeemed out of profits of the Company, a sum equal to the nominal amount of the shares to be redeemed has to be transferred to this reserve and 2) when company purchases its own shares out of free reserves, a sum equal to the nominal value of shares so purchased has to be transferred to this reserve. This reserve may be used for paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares.
(b) Capital Reserve
Out of total, Capital Reserve of H 142.66 crore related to Gujarat high court approved composite scheme of arrangement between group companies. Balance H 4.82 crore was accrued on Forfeiture of Share warrants. Capital reserve is not available for distribution.
(c) Securities Premium
Securities premium Account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(d) General Reserve
General Reserve is a free reserve and is available for distribution as dividend, issue of bonus shares, buyback of the Company''s securities. It was created by transfer of amounts out of distributable profits.
(e) Share-based Payment Reserve
The share options-based payment reserve is used to recognise the grant date fair value of options issued to employees under Employee stock option plan.
The management has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The management transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
This reserve represents own equity shares held by Welspun India Employees Welfare Trust.
The Shareholders of the Company, by resolutions passed by way of Postal Ballot, results of which were declared on July 30, 2022, approved, inter alia, acquisition of equity shares by Welspun India Employees Welfare Trust for implementation of Welspun India Employee Benefit Scheme - 2022. Welspun India Employees Welfare Trust (âTrustâ) was formed with objects of welfare of employees of the Company and subsidiaries, inter alia, by way of acquiring, holding and allocating equity shares of the Company to eligible employees by way of stock options. By March 31, 2023, the Trust has acquired cumulative equity shares 97,68,566 of the Company for a total acquisition cost of H 74.71 crores. No options have so far been granted to any employee or director.
(i) The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-process, finished goods, semi finished goods, stores, spares and book debts and other current financial assets of the Company and second charge on entire fixed assets of the Company.
(ii) The bills of the vendors evidencing supply of material are discounted on presentation and the vendors are directly paid by the banks and the Company bears the discounting charge upfront. Later on the due date (depending on the tenor of financing), the Company pays the discounting bank the principal amount. This financing is unsecured and therefore there is no hypothecation against stock or debtors.
(iii) Commercial paper is an unsecured short term debt instrument issued by the Company generally for the period up to 181 days to meet the regular working capital requirements.
(iv) The rate of interest on the current borrowings except current maturities of long term debt are in the range of 2.60% to 6.85% (March 31, 2022 : 4.50% to 6.00%)
(v) The company have filled the quarterly returns or statements with the banks according to the sanctioned working capital facilities, which are in agreement with the books of accounts.
Contribution to Gratuity Fund (Funded Defined Benefit Plan)
The Company operates a gratuity plan through the âWelspun India Limited Employees Gratuity Trustâ. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier.
These defined benefit plans expose the Company to actuarial risk such as longitivity risks, interest rate risks, market (investment) risks.
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the Defined Benefit Obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the Defined Benefit Obligation as recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
Funding is done only for employees more than 5 years in the firm, for less than 5 years employees are paid separately.
Expected contributions to post-employment benefit plans for the year ending March 31, 2024 are H 18.20 crore.
Promoting education, healthcare, empowerment of women and socially backward, ensuring environmental sustainability, disaster relief, livelihood enhancement project, development of art and culture, CSR capacity building of own personnel.
* This includes amount spent for distribution of Indian National Flag as per MCA circular No. 08/2022 dated July 26, 2022 amounting to H 7.00 Crore
This note provides an analysis of the Company''s income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Company''s tax positions.
The Company has create current tax provision under the new tax regime based on normal tax rates i.e 25.17% (previous year: old tax regime 34.94%). The company has created deferred tax @25.17% (previous year: 25.17%, based on management estimates that the company is expected to move to new tax regime from the 2022-23).
The carrying amount of trade receivable, current loans, current portion of interest accrued on fixed deposit, bonds and certificates, cash and cash equivalents, bank balances other than cash and cash equivalents, trade payable, capital creditors, current security deposits (liability) and other current financial liabilities are considered to be approximately same as their fair value, due to their short-term nature and have been classified as level 3 in the fair value hierarchy. Similarly, carrying values of government grants, TUF and incentive and interest subvention due to it sovereign nature and expected collection term are considered to approximate their fair value and have been classified as level 3 in the fair value hierarchy.
The fair value for loans, security deposits, advance recoverable in cash, fixed deposit with bank, interest accrued on fixed deposit and investments in preference shares is calculated based on cash flows discounted using a current lending rates. Further, security deposits, advance recoverable in cash and investments in preference share are classified as level 3 fair value in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
The fair value for long term security deposits are based on discounted cash flow using a current borrowing rate. They are classified as level 3 fair value in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
The carrying amount of long term borrowings is approximately equal to it''s fair value since the borrowings are at floating rate of interest. Also, the carrying amount of short term borrowing is considered to be approximately same as it''s fair value due to it''s short term nature.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
Current financial asset and current financial liabilities have fair values that approximate to their carrying amounts due to their short-term nature. Non current financial assets and non current financial liabilities have fair values that approximate to their carrying amounts as it is based on the net present value of the anticipated future cash flows.
The above mentioned grouping into Level 1 to Level 3, is described below.
Level 1: This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, exchange traded funds and mutual funds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (such as traded bonds, debentures, government securities and commercial papers) is determined using Fixed Income Money Market and Derivatives Association of India (FIMMDA) inputs and valuation techniques which maximise 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. The mutual funds are valued using the closing Net Assets Value (NAV). NAV represents the price at which the issuer will issue further units and will redeem such units of mutual fund to and from the investors.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted preference shares and security deposits included in level 3.
There are no internal transfers of financial assets and financial liabilities between Level 1, Level 2 and Level 3 during the period. The Company''s policy is to recognise transfers into and transfers out of fair value hierarchy level as at the end of reporting period.
Specific valuation techniques used to value financial instruments include:
⢠the use of quoted market prices or dealer quotes for similar instruments
⢠NAV quoted by mutual funds
⢠the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
⢠the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. This team reports directly to the chief financial officer (CFO).
Discussions of valuation processes and results are held between the CFO, and the valuation team meets once every three months, in line with the Company''s quarterly reporting periods.
The main level 3 inputs for preference shares used by the Company are derived and evaluated as follows:
⢠Discount rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
⢠Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from credit risk grading determined by the Company''s internal credit risk management team.
⢠Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.
Changes in level 2 and 3 fair values are analysed at the end of each reporting period during the quarterly valuation discussion between the CFO and the valuation team. As part of this discussion the team presents a report that explains the reason for the fair value movements.
The Company''s risk management is carried out by a central treasury department under policies approved by the Board of Directors. Company''s treasury team identifies, evaluates and hedges financial risks in close cooperation with the Company''s respective department heads. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and nonderivative financial instruments, and investment of excess liquidity.
Credit risk arises from cash and cash equivalents, investments carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to wholesale customers including outstanding receivables.
Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with bank and financial institution, foreign exchange transactions and other financial instruments.
The Company determines default by considering the business environment in which the Company operates and other macro-economic factors. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a
significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty''s ability to meet its obligations;
iv) Significant increase in credit risk on other financial instruments of the same counterparty;
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company.
Trade receivables are typically unsecured and are derived from revenue earned from customers. Credit risk has 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 uses a provision matrix and forward-looking information and an assessment of the credit risk over the expected life of the financial asset to compute the expected credit loss allowance for trade receivables.
Concentrations of credit risk with respect to trade receivables are limited, due to major customers being subsidiaries of the Company which in turn have a large and diverse customer base. No single customer (other than the Group Companies) contributed for 10% or more of the revenue in any of the years presented.
Expected credit loss for trade receivables as at March 31, 2023 is 1.34 crores (March 31, 2022: H1.33 crores) During the year and previous years, the Company made no write-offs of trade receivables.
The Company does not expect to receive future cash flows or recoveries from collection of cash flows previously written off.
The Company maintains exposure in cash and cash equivalents, term deposits with banks, Derivative financial instruments, investments in government securities and bonds, and investments in mutual funds. The Company has diversified portfolio of investment with various number of counter-parties which have good credit ratings, good reputation, good past track records and reviews and hence the risk is reduced. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Company.
Liquidity risk refers to the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or other financial assets. 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 bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Non utilised fund based limit can be utilised under Non Fund based limit. Maximum limit for fund based is H 2,423.00 crores (March 31, 2022 : H 2,105.83 crores) and for Non fund based is H 1,169.50 crores (March 31, 2022 : H 1,051.03 crores)
The tables below analyse the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for:
⢠all non derivative financial liabilities, and
⢠net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
(i) Foreign currency risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/ payables. The use of foreign currency forward contracts is governed by the Company''s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company''s risk management policy and procedures.
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible bonds and short term loans. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
(a) Exposure
The Company is mainly exposed to the price risk due to its investment in mutual funds and bonds. The price risk arises due to uncertainties about the future market values of these investments. In order to manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio in accordance with the limits set by the risk management policies.
The table below summarises the impact of increases/decreases of 0.75% increase in price of Mutual Fund / Bond.
The Company''s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company''s overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other long term borrowings. The Company''s policy is to use short-term and long-term borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the net debt to equity ratio. The Company is not subject to any externally imposed capital requirements.
Net debt are long term and short term debts as reduced by cash and cash equivalents (including restricted cash and cash equivalents) and short-term investments. Equity comprises of all components including other equity.
I n order to achieve this overall objective, the Companies 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, in certain cases, may permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2023 and March 31, 2022.
Note 28 : Standards notified but not yet effective
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards) Amendment Rules, 2023 dated March 31, 2023 to amend the following Ind AS which are effective from April 1, 2023.
The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. It has also been clarified how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective for annual reporting periods beginning on or after April 1, 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. The amendments are not expected to have a material impact on the Companies financial statements.
The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ''significant'' accounting policies with a requirement to disclose their ''material'' accounting policies and adding guidance on
how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to Ind AS 1 are applicable for annual periods beginning on or after April 1, 2023. Consequential amendments have been made in Ind AS 107. The Company is currently revisiting their accounting policy information disclosures to ensure consistency with the amended requirements.
The amendments narrow the scope of the initial recognition exception under Ind AS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.
The amendments should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, at the beginning of the earliest comparative period presented, a deferred tax asset (provided that sufficient taxable profit is available) and a deferred tax liability should also be recognised for all deductible and taxable temporary differences associated with leases and decommissioning obligations. Consequential amendments have been made in Ind AS 101. The amendments to Ind AS 12 are applicable for annual periods beginning on or after April 1, 2023.
Note 30 : Contingent Liabilities (a) Description on matters considered as contingent liabilities: |
||
Description |
As at March 31, 2023 |
As at March 31, 2022 |
(Kin Crores) |
(K in Crores) |
|
Excise, Customs and Service Tax Matters |
6.39 |
6.13 |
Income Tax Matters |
7.83 |
7.83 |
Stamp Duty Matter |
0.45 |
0.45 |
Sales Tax |
1.71 |
1.84 |
Corporate Guarantees (Refer Note 32) |
1,498.21 |
1,645.48 |
(i) It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings. (ii) The Company does not expect any reimbursements in respect of the above contingent liabilities. Note 31 : Capital and Other Commitments (a) Capital Commitments |
||
Description |
As at March 31, 2023 |
As at March 31, 2022 |
(Kin Crores) |
(K in Crores) |
|
Estimated value of Contracts in Capital Account remaining to be executed (Net of Capital Advances) |
7.71 |
42.33 |
(b) Other Commitments |
||
Description |
As at March 31, 2023 |
As at March 31, 2022 |
(K in Crores) |
(K in Crores) |
|
Commitment for purchase of power and steam from Welspun Captive Power Generation Limited over the next three years. |
- |
1,061.20 |
Commitment for purchase of power on job work basis from Welspun Captive Power Generation Limited over the next three years. |
122.18 |
- |
Commitment for loan to or investment in Welspun Flooring Limited. |
172.14 |
196.14 |
Commitment for loan to or investment in Welspun Advanced Materials (India) Limited. |
30.00 |
58.75 |
Commitment for loan to or investment in Anjar Terry Towels Limited. |
123.80 |
123.80 |
As at the end of current year, the outstanding potential equity shares had an anti-dilutive effect on EPS. Hence, there is no dilution of EPS of the Company for the current year.
Note 34 : Buy-back of equity shares
During previous year the Company had made an offer for buy-back of fully paid-up equity shares of Re, 1 each of the Company, not exceeding 1,66,66,666 equity shares (representing approximately 1.66% of the total number of equity shares in the issued, subscribed and paid up equity capital) at a price of H 120 per equity share, not exceeding H 200 crore on a proportionate basis by way of tender offer in accordance with the provisions of Companies Act, 2013 and SEBI (Buy-Back of Securities) Regulations, 2018. The tendering period for the buyback offer opened on June 22, 2021 and closed on July 05, 2021. Total 1,66,66,666 equity shares were bought back at a price of H120 per equity share and total amount utilised in buy-back was H 200 crore. The settlement of bids by the Clearing Corporation on the stock exchange was completed on July 14, 2021. Accordingly, the equity share capital was reduced by H1.67 crore and the premium on buy-back of H198.33 crore was adjusted against Securities Premium account. Consequently, the Company has transferred an amount of H 1.67 crore being the nominal value of shares purchased from Securities Premium Account to Capital Redemption Reserve as per the requirement of Section 69 of the Companies Act 2013.
The Company has lease contracts for various items of commercial property and other equipment used in its operations. Leases of commercial property generally have lease terms between 2 and 16 years while other equipment generally have lease terms between 2 and 4 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain certain financial ratios. There are several lease contracts that include extension and termination options and variable lease payments, which are further discussed below.
The Company also has certain leases with lease terms of 12 months or less and leases with low value. The Company applies the ''short-term lease'' and ''lease of low-value assets'' recognition exemptions for these leases.
The Company had total cash outflows for leases of H 8.45 crore in March 31, 2023 (H 9.14 crore in March 31, 2022). There are no non-cash additions to right-of-use assets and lease liabilities. There are no future cash outflows relating to leases that have not yet commenced.
The Company has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Company''s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
The Company has entered in to lease agreement with Welspun Captive Power Generation Limited in respect of Boiler. This is accounted as finance lease as the material risks and rewards are transferred to the lessee.
The effective interest rate contracted is 7.35 % per annum (FY 2021-22: 7.35%).
Note 45 : Share Based Payments
On July 31, 2021 and November 26, 2021, Nomination and Remuneration Committee of the company made grants of 30,00,000 and 3,00,000 stock options (âESOPsâ) respectively, under Welspun India Limited Employee Stock Option Scheme (âWELSOP 2005â) representing an equal number of equity shares of face value of Re. 1 each in the Company, at an exercise price (closing market price on date of grants) to certain employees of the Company and certain employees / non-independent directors of the subsidiaries. The salient features of the Scheme are as under:
(i) Vesting: Options to vest over a period of four years from the date of their grants as under
⢠20% of the Options granted to vest at each of the 1st and 2nd anniversaries of the date of grant.
⢠30% of the Options granted to vest at each of the 3rd and 4th anniversaries of the date of grant.
(ii) Exercise: Options vested with an employee will be exercisable within 3 years from the date of their vesting by subscribing to the number of equity shares in the ratio of one equity share for every option at the Exercise Price. In the event of cessation of employment due to death, resignation or otherwise, the Options may lapse or be exercisable in the manner specifically provided for in the Scheme.
(iii) Method Used: The Fair value of Equity-settled share-based payment are estimated using Black-Scholes-Merton formula.
The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. The expected term of the share options and SARs is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
1. The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
2. The following table depicts the details of balances outstanding in respect of transactions undertaken with a company struck-off under section 248 of the Companies Act, 2013:
3. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
4. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
5. The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
6. The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
7. The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961)
Note 47 : Events after reporting period
The Board of Directors in its meeting held on April 27, 2023, has approved the buy-back of fully paid -up equity shares of face value of Re. 1/- each of the Company, at a price H 120 per equity share (maximum buyback price) and for an amount of H 195 crore (maximum buy-back size) by way of tender offer in accordance with the provisions contained in the SEBI (Buy-back of Securities) Regulations, 2018 and the Companies Act, 2013 and rules made thereunder.
Note 48 : The figures for the previous year are re-arranged/ re-grouped, wherever necessary.
Mar 31, 2022
(i) All title deeds of immovable property are held in the name of the Company.
(ii) Property, plant and equipment pledged as security - Refer to note 11(a) for information on property, plant and equipment pledged as security by the Company.
(iii) Contractual obligations - Refer to note 31 (a) for disclosure of contractual commitments for the acquisition of property, plant and equipment.
(iv) Additions to fixed assets during the year include capital expenditure of '' Nil (Previous Year : '' 10.45 million) incurred on in-house Research and Development activities [Refer Note 38]
(i) Out of total debenture investment in Welspun Flooring Limited, '' Nil (Previous Year : '' 1,564.39 million) is out of conversion of loan given and interest accrued thereon.
(ii) Out of total debenture investment in Welspun Advanced Materials (India) Limited, '' Nil (Previouse Year : '' 120 million) is out of conversion of loan given.
(iii) Investment in Welspun Flooring Limited includes equity component of preference shares of '' 1,850 million.
(vi) Rights, preferences and restrictions attached to equity shares
The company has one class of equity shares having a par value of Re. 1 per share (March 31, 2021 : Re. 1). Each shareholder is eligible for one vote per share held. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(vii) Buyback in the peirod of five years immediately preceeding March 31, 2022 [Refer Note 34]
The Company has bought back 1,66,66,666 equity shares of Re. 1 each at a price of '' 120 per equity share in accordance with the provisions of Companies Act, 2013 and SEBI (Buy-Back of Securities) Regulations, 2018. The settlement of bids by the Clearing Corporation on the stock exchange was completed on July 14, 2021.
(a) Capital Redemption Reserve
Capital Redemption Reserve is created 1) when preference shares are redeemed out of profits of the Company, a sum equal to the nominal amount of the shares to be redeemed has to be transferred to this reserve and 2) when company purchases its own shares out of free reserves, a sum equal to the nominal value of shares so purchased has to be transferred to this reserve. This reserve may be used for paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares.
Out of total, Capital Reserve of '' 1,426.59 million related to Gujarat high court approved composite scheme of arrangement between group companies. Balance '' 48.18 million was accrued on Forfeiture of Share warrants. Capital reserve is not available for distribution.
(c) Securities Premium
Securities premium Account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(d) General Reserve
General Reserve is a free reserve and is available for distribution as dividend, issue of bonus shares, buyback of the Company''s securities. It was created by transfer of amounts out of distributable profits.
(e) Share-based Payment Reserve
The share options-based payment reserve is used to recognise the grant date fair value of options issued to employees under Employee stock option plan.
The management has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The management transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
(i) The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-process, finished goods, semi finished goods, stores, spares and
book debts and other current financial assets of the Company and second charge on entire fixed assets of the Company.
(ii) The bills of the vendors evidencing supply of material are discounted on presentation and the vendors are directly paid by the banks and the Company bears the discounting charge upfront. Later on the due date (depending on the tenor of financing), the Company pays the discounting bank the principal amount. This financing is unsecured and therefore there is no hypothecation against stock or debtors.
(iii) Commercial paper is an unsecured short term debt instrument issued by the Company generally for the period up to 181 days to meet the regular working capital requirements.
(iv) The rate of interest on the current borrowings except current maturities of long term debt are in the range of 4.50% to 6.00% (March 31, 2021 : 4.75% to 7.90%)
Deferred income relates to government grant for the purchase of property, plant and equipment and are credited to statement of profit or loss on a straight-line basis over the expected lives of the related assets. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other operating income.
(i) Value Added Tax (VAT)/State Goods and Service Tax (SGST) Concession: Reimbursement of VAT/SGST collected on end product/intermediate product to the extent of the eligible capital investments in plant and machinery for the specified period as per the Scheme.
(ii) Merchandise Exports from India Scheme (MEIS): Company is entitled for reward under MEIS computed at specified rates on FOB value of exports to specified countries.
Contribution to Gratuity Fund (Funded Defined Benefit Plan)
The Company operates a gratuity plan through the âWelspun India Limited Employees Gratuity Trustâ. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier.
These defined benefit plans expose the Company to actuarial risk such as longitivity risks, interest rate risks, market (investment) risks.
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the Defined Benefit Obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end
of the reporting period, which is the same method as applied in calculating the Defined Benefit Obligation as recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
Funding is done only for employees more than 5 years in the firm, for less than 5 years employees are paid separately.
Expected contributions to post-employment benefit plans for the year ending March 31, 2023 are '' 204.58 million.
Promoting education, healthcare, empowerment of women and socially backward, ensuring environmental sustainability, disaster relief, livelihood enhancement project, development of art and culture, CSR capacity building of own personnel.
This note provides an analysis of the Company''s income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Company''s tax positions.
The Company has continued to create current tax provision under the old tax regime based on normal tax rates i.e 34.94%. Based on management estimates the company is expected to move to new tax regime from the subsequent year and hence deferred tax has been created at the rate of 25.17%.
The carrying amount of trade receivable, current loans, current portion of interest accrued on fixed deposit, bonds and certificates, cash and cash equivalents, bank balances other than cash and cash equivalents, trade payable, capital creditors, current security deposits (liability) and other current financial liabilities are considered to be approximately same as their fair value, due to their short-term nature and have been classified as level 3 in the fair value hierarchy. Similarly, carrying values of government grants, TUF and incentive and interest subvention due to it sovereign nature and expected collection term are considered to approximate their fair value and have been classified as level 3 in the fair value hierarchy.
The fair value for loans, security deposits, advance recoverable in cash, fixed deposit with bank, interest accrued on fixed deposit and investments in preference shares is calculated based on cash flows discounted using a current lending rates. Further, security deposits, advance recoverable in cash and investments in preference share are classified as level 3 fair value in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
The fair value for long term security deposits are based on discounted cash flow using a current borrowing rate. They are classified as level 3 fair value in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
The carrying amount of long term borrowings is approximately equal to it''s fair value since the borrowings are at floating rate of interest. Also, the carrying amount of short term borrowing is considered to be approximately same as it''s fair value due to it''s short term nature.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
There are no internal transfers of financial assets and financial liabilities between Level 1, Level 2 and Level 3 during the period. The Company''s policy is to recognise transfers into and transfers out of fair value hierarchy level as at the end of reporting period.
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- NAV quoted by mutual funds
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
The following table presents the changes in level 3 items for the periods ended March 31, 2022 and March 31, 2021 :
The above mentioned grouping into Level 1 to Level 3, is described below.
Level 1: This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, exchange traded funds and mutual funds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (such as traded bonds, debentures, government securities and commercial papers) is determined using Fixed Income Money Market and Derivatives Association of India (FIMMDA) inputs and valuation techniques which maximise 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. The mutual funds are valued using the closing Net Assets Value (NAV). NAV represents the price at which the issuer will issue further units and will redeem such units of mutual fund to and from the investors.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted preference shares and security deposits included in level 3.
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. This team reports directly to the chief financial officer (CFO).
Discussions of valuation processes and results are held between the CFO, and the valuation team meets once every three months, in line with the Company''s quarterly reporting periods.
Note 26 : Financial Risk Management
The Company''s activities are exposed to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The main level 3 inputs for preference shares used by the Company are derived and evaluated as follows:
⢠Discount rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
⢠Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from credit risk grading
determined by the Company''s internal credit risk management team.
⢠Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.
Changes in level 2 and 3 fair values are analysed at the end of each reporting period during the quarterly valuation discussion between the CFO and the valuation team. As part of this discussion the team presents a report that explains the reason for the fair value movements.
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company.
Trade receivables are typically unsecured and are derived from revenue earned from customers. Credit risk has 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 uses a provision matrix and forward-looking information and an assessment of the credit risk over the expected life of the financial asset to compute the expected credit loss allowance for trade receivables.
Concentration of credit risk with respect to trade receivables are limited, due to major customers being subsidiaries of the Company which in turn have a large and diverse customer base. The following table gives details in respect of percentage of revenue generated (sale of products, sale of scrap and job work and processing charges) from the top ten customers.
The Company''s risk management is carried out by a central treasury department under policies approved by the Board of Directors. Company''s treasury team identifies, evaluates and hedges financial risks in close cooperation with the Company''s respective department heads. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Credit risk arises from cash and cash equivalents, investments carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to wholesale customers including outstanding receivables.
Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with bank and financial institution, foreign exchange transactions and other financial instruments.
The Company determines default by considering the business environment in which the Company operates and other macro-economic factors. This definition of default is determined by considering the business environment in which the Company operates and other macro-economic factors. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forward looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty''s ability to meet its obligations;
iv) Significant increase in credit risk on other financial instruments of the same counterparty;
The Company does not expect to receive future cash flows or recoveries from collection of cash flows previously written off.
The Company maintains exposure in cash and cash equivalents, term deposits with banks, Derivative financial instruments, investments in government securities and bonds, and investments in mutual funds. The Company has diversified portfolio of investment with various number of counter-parties which have good credit ratings, good reputation, good past track records and reviews and hence the risk is reduced. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Company.
Liquidity risk refers to the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or other financial assets. 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 tables below analyse the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for:
⢠all non derivative financial liabilities, and
⢠net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows.
(i) Foreign currency risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/payables. The use of foreign currency forward contracts is governed by the Company''s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company''s risk management policy and procedures.
The Company is mainly exposed to the price risk due to its investment in mutual funds and bonds. The price risk arises due to uncertainties about the future market values of these investments. In order to manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio in accordance with the limits set by the risk management policies.
(ii) Cash flow and fair value interest rate risk
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible bonds and short term loans. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
The Company''s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company''s overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other long term borrowings. The Company''s policy is to use short-term and long-term borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the net debt to equity ratio. The Company is not subject to any externally imposed capital requirements.
Net debt are long term and short term debts as reduced by cash and cash equivalents (including restricted cash and cash equivalents) and short-term investments. Equity comprises of all components including other equity.
In order to achieve this overall objective, the Companies 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, in certain cases, may permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2022 and March 31, 2021.
Note 28 : Estimation uncertainty relating to the global health pandemic on COVID-19
The Company has adopted measures to curb the spread of infection of COVID-19 in order to protect the health of its employees and ensure business continuity with minimal disruption including remote working, maintaining social distancing, sanitization of work spaces etc. The Companies operations, revenue and consequently profit during the year were impacted due to COVID-19. The Company has considered the possible effects that may result from outbreak of COVID-19 in the preparation of this financial statements including the recoverability of carrying amounts of financial and non-financial assets and liquidity assessment based on future cash flow projections and also actualised excess liabilities / provisions. In building the assumptions relating to the possible uncertainties in the global economic conditions as at the date of approval of these financial statements, the Company has used internal and external sources of information and expects that the carrying amount of the assets will be recovered. The impact of the global health pandemic may be different from that estimated as at the date of approval of these financial statements.
Note 30 : Contingent Liabilities |
||||||
(a) |
Description on matters considered as contingent liabilities: |
|||||
Description |
As at March 31, 2022 |
As at March 31, 2021 |
||||
(D million) |
(D million) |
|||||
Excise, Customs and Service Tax Matters |
61.27 |
58.23 |
||||
Income Tax Matters |
78.33 |
200.40 |
||||
Stamp Duty Matter |
4.46 |
4.46 |
||||
Sales Tax |
18.42 |
16.95 |
||||
Corporate Guarantees (Refer Note 32) |
16,454.74 |
11,656.17 |
||||
(i) It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings. |
||||||
(ii) The Company does not expect any reimbursements in respect of the above contingent liabilities. |
||||||
Note 31 : Capital and Other Commitments |
||||||
(a) |
Capital Commitments |
|||||
Description |
As at March 31, 2022 |
As at March 31, 2021 |
||||
(D million) |
(D million) |
|||||
Estimated value of Contracts in Capital Account remaining to be executed (Net of Capital Advances) |
423.26 |
837.06 |
||||
(b) Other Commitments |
||||||
Description |
As at March 31, 2022 |
As at March 31, 2021 |
||||
(D million) |
(D million) |
|||||
Commitment for purchase of power and steam from Welspun Captive Power Generation Limited over the next three years. |
10,611.99 |
8,516.15 |
||||
Commitment for loan to or investment in Welspun Flooring Limited. |
1,961.38 |
947.88 |
||||
Commitment for loan to or investment in Welspun Advanced Materials (India) Limited. |
587.50 |
660.00 |
||||
Commitment for loan to or investment in Anjar Terry Towels Limited. |
1,238.00 |
- |
||||
Note 32 : Disclosure required under Sec 186(4) of the Companies Act 2013 |
||||||
Details of corporate guarantees issued by the Company and liability outstanding against corporate guarantees as on March 31, 2022. |
||||||
Name of Related Party |
Purpose of Corporate Guarantee |
Corporate Guarantee Amount (D million) |
Liability Outstanding against Corporate Guarantees issued (D million) |
|||
Welspun Global Brands Limited |
Working Capital |
8,200.00 |
5,035.99 |
|||
Welspun Flooring Limited |
Working Capital/ Term Loan/ Forward Contract Risk |
12,635.00 |
8,677.06 |
|||
Welspun Advanced Materials (India) Limited |
Term Loan/ Export obligations under EPCG |
3,519.60 |
2,741.69 |
|||
Total |
24,354.60 |
16,454.74 |
Details of corporate guarantees issued by the Company and liability outstanding against corporate guarantees as on March 31, 2021. |
||||
Name of Related Party |
Purpose of Corporate Guarantee |
Corporate Guarantee Amount (D million) |
Liability Outstanding against Corporate Guarantees issued (D million) |
|
Welspun Global Brands Limited |
Working Capital |
6,900.00 |
3,628.57 |
|
Welspun Flooring Limited |
Working Capital/ Term Loan/ Forward Contract Risk |
12,610.00 |
7,462.55 |
|
Welspun Advanced Materials (India) Limited |
Term Loan/ Export obligations under EPCG |
2,519.00 |
289.00 |
|
CHT Holdings Limited |
Working Capital/ Term Loan |
1,058.88 |
276.05 |
|
Total |
23,087.88 |
11,656.17 |
||
Note 33 : Earnings per Share |
||||
Particulars |
Year ended March 31, 2022 |
Year ended March 31, 2021 |
||
Profit after Tax (A) ('' million) |
3,921.30 |
5,266.70 |
||
Weighted average number of equity shares outstanding during the year (B) |
99,27,61,680 |
1,004,725,150 |
||
Number of Shares for Diluted Earnings Per Share (C) |
99,27,72,714 |
1,004,725,150 |
||
Basic earnings per share (A)/(B) |
3.95 |
5.24 |
||
Diluted earnings per share (A)/(C) |
3.95 |
5.24 |
||
Nominal value of an equity share (Re.) |
1.00 |
1.00 |
As at the end of current year, the outstanding potential equity shares had an anti-dilutive effect on EPS. Hence, there is no dilution of EPS of the Company for the current year.
Note 34 : Buy-back of equity shares
The Company had made an offer for buy-back of fully paid-up equity shares of Re, 1 each of the Company, not exceeding 1,66,66,666 equity shares (representing approximately 1.66% of the total number of equity shares in the issued, subscribed and paid up equity capital) at a price of '' 120 per equity share, not exceeding '' 2,000 million on a proportionate basis by way of tender offer in accordance with the provisions of Companies Act, 2013 and SEBI (Buy-Back of Securities) Regulations, 2018. The tendering period for the buyback offer opened on June 22, 2021 and closed on July 05, 2021. Total 1,66,66,666 equity shares were bought back at a price of ''120 per equity share and total amount utilised in buy-back was '' 2,000 million. The settlement of bids by the Clearing Corporation on the stock exchange was completed on July 14, 2021. Accordingly, the equity share capital was reduced by '' 16.67 million and the premium on buy-back of '' 1,983.33 million was adjusted against Securities Premium account. Consequently, the Company has transferred an amount of '' 16.67 million being the nominal value of shares purchased from Securities Premium Account to Capital Redemption Reserve as per the requirement of Section 69 of the Companies Act 2013.
The Company has lease contracts for various items of commercial property, plant and machinery and other equipment used in its operations. Leases of plant and machinery generally have lease term of 13 years, commercial property generally have lease terms between 2 and 16 years while other equipment generally have lease terms between 2 and 4 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain certain financial ratios. There are several lease contracts that include extension and termination options and variable lease payments, which are further discussed below.
The Company also has certain leases with lease terms of 12 months or less and leases with low value. The Company applies the ''short-term lease'' and ''lease of low-value assets'' recognition exemptions for these leases.
The Company had total cash outflows for leases of '' 91.35 million in March 31, 2022 ('' 85.38 million in March 31, 2021). There are no non-cash additions to right-of-use assets and lease liabilities. There are no future cash outflows relating to leases that have not yet commenced.
The Company has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Company''s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
The Company has entered in to lease agreement with Welspun Captive Power Generation Limited in respect of Boiler. This is accounted as finance lease as the material risks and rewards are transferred to the lessee.
Note 44 : Standards notified but not yet effective
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standard) Amendment Rules 2022 dated March 23, 2022 to amend the following Ind AS which are effective from April 01, 2022.
(i) Onerous Contracts - Costs of Fulfilling a Contract - Amendments to Ind AS 37
The amendments to Ind AS 37 specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a âdirectly related cost approachâ. The costs that relate directly to a contract to provide goods or services include both incremental costs for example direct labour and materials and an allocation of other costs directly related to contract activities for example an allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling that contract. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract.
The amendments are effective for annual reporting periods beginning on or after 1 April 2022. The Company is currently assessing the impact of the amendments to determine the impact they will have on the Companies accounting policy disclosures.
(ii) Property, Plant and Equipment: Proceeds before Intended Use - Amendments to Ind AS 16
The amendments modified paragraph 17(e) of Ind AS 16 to clarify that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from the directly attributable costs considered as part of cost of an item of property, plant, and equipment.
The amendments are effective for annual reporting periods beginning on or after 1 April 2022. The amendments are not expected to have a material impact on the Company.
(iii) Ind AS 109 Financial Instruments - Fees in the â10 per centâ test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other''s behalf.
The amendments are effective for annual reporting periods beginning on or after 1 April 2022. The amendments are not expected to have a material impact on the Company.
(iv) Reference to the Conceptual Framework -Amendments to Ind AS 103
The amendments replaced the reference to the ICAI''s âFramework for the Preparation and Presentation of Financial Statements under Indian Accounting Standardsâ with the reference to the âConceptual Framework for Financial Reporting under Indian Accounting Standardâ without significantly changing its requirements.
The amendments also added an exception to the recognition principle of Ind AS 103 Business Combinations to avoid the issue of potential ''day 2'' gains or losses arising for liabilities and contingent liabilities that would be within the scope of Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets or Appendix C, Levies, of Ind AS 37, if incurred separately.
It has also been clarified that the existing guidance in Ind AS 103 for contingent assets would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements under Indian Accounting Standards.
The amendments are effective for annual reporting periods beginning on or after 1 April 2022. The amendments are not expected to have a material impact on the Company.
Note 46 : Share Based Payments
On July 31, 2021 and November 26, 2021, Nomination and Remuneration Committee of the company made grants of 3,000,000 and 300,000 stock options (âESOPsâ) respectively, under Welspun India Limited Employee Stock Option Scheme (âWELSOP 2005â) representing an equal number of equity shares of face value of Re. 1 each in the Company, at an exercise price (closing market price on date of grants) to certain employees of the Company and certain employees / non-independent directors of the subsidiaries. The salient features of the Scheme are as under:
Note 47 : Other Statutory Information
(i) Vesting: Options to vest over a period of four years from the date of their grants as under
⢠20% of the Options granted to vest at each of the 1st and 2nd anniversaries of the date of grant.
⢠30% of the Options granted to vest at each of the 3rd and 4th anniversaries of the date of grant.
(ii) Exercise: Options vested with an employee will be exercisable within 3 years from the date of their vesting by subscribing to the number of equity shares in the ratio of one equity share for every option at the Exercise Price. In the event of cessation of employment due to death, resignation or otherwise, the Options may lapse or be exercisable in the manner specifically provided for in the Scheme.
1. The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
2. The Company has identified transaction with one struck off company i. e. Pan Club Hotels Private Limited as vendor with whom transaction during the year amounts to '' Nil ( 2020-21 : '' 0.22 million)
3. The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
4. The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
5. The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
6. The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
7. The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
The figures for the previous year are re-arranged/ re-grouped, wherever necessary.
The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. The expected term of the share options and SARs is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
Mar 31, 2021
Capital Redemption Reserve is created 1) when preference shares are redeemed out of profits of the Company, a sum equal to the nominal amount of the shares to be redeemed has to be transferred to this reserve and 2) when company purchases its own shares out of free reserves, a sum equal to the nominal value of shares so purchased has to be transferred to this reserve. This reserve may be used for paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares.
Out of total, Capital Reserve of ''1,426.59 million related to Gujarat high court approved composite scheme of arrangement between group companies. Balance '' 48.18 million was accrued on Forfeiture of Share warrants. Capital reserve is not available for distribution.
The Hon''ble National Company Law Tribunal, Ahmedabad Bench vide it''s order pronounced on May 10, 2019 (the âââOrderââ) sanctioned the Scheme of Amalgamation of Prasert Multiventure Private Limited (ââPMPLââ) with Welspun India Limited (ââWILââ). The amalgamation of PMPL with WIL is accounted as combination of entities, and not a âââbusiness combinationââ, with effective date of May 21, 2019 (date on which the order was filed with the Ministry of Corporate Affairs). The said accounting has no significant impact on these financial results.
Securities premium Account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(d) General Reserve
General Reserve is a free reserve and is available for distribution as dividend, issue of bonus shares, buyback of the Company''s securities. It was created by transfer of amounts out of distributable profits.
The management has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The management transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
(i) The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-process, finished goods, semi finished goods, stores, spares and book debts and other current financial assets of the Company and second charge on entire fixed assets of the Company.
(ii) The bills of the vendors evidencing supply of material are discounted on presentation and the vendors are directly paid by the banks and the Company bears the discounting charge upfront. Later on the due date (depending on the tenor of financing), the Company pays the discounting bank the principal amount.
(iii) Commercial paper is an unsecured short term debt instrument issued by the Company generally for the period up to 181 days to meet the regular working capital requirements.
(iv) The rate of interest on the current borrowings are in the range of 4.75% to 7.90% (March 31, 2020 : 6.15% to 9%)
Value Added Tax (VAT)/State Goods and Service Tax (SGST) Concession: Reimbursement of VAT/SGST collected on product sold to the extent of the eligible capital investments in plant and machinery for the specified period as per the Scheme.
Merchandise Exports from India Scheme (MEIS): Company is entitled for reward under MEIS computed at specified rates on FOB value of exports to specified countries.
The Ministry of Textile, Government of India, had issued Notification number CG-DL-E-15012020-215423 dated January 14, 2020, withdrawing the entitlement under Merchandise Exports from India Scheme (MEIS) with retrospective effect from March 7, 2019 on certain products exported by the Company and its subsidiary. Without prejudice to the Company''s claim, the Company had reversed the MEIS benefit accrued on the affected products, of '' 946.94 million for the period March 07, 2019 to September 30, 2019 and reduced from Revenue from Operations.
Contribution to Gratuity Fund (Funded Defined Benefit Plan)
The Company operates a gratuity plan through the âWelspun India Limited Employees Gratuity Trustâ. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier.
These defined benefit plans expose the Company to actuarial risk such as longitivity risks, interest rate risks, market (investment) risks.
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability/asset recognised in the balance sheet.
The Company monitors funding levels on an annual basis and the current agreed contribution rate is 12% of the basic salaries. Funding is done only for employees more than 5 years in the firm, for less than 5 years employees are paid separately.
Expected contributions to post-employment benefit plans for the year ending March 31, 2022 are '' 191.97 million.
Note 24 : Exceptional Items-(Income)
The Company received final approval from trial court dated October 28, 2019 for its settlement agreement which was intended to resolve all pending legal claims in the United States concerning past marketing and labeling of the Company''s premium cotton home textile products. Accordingly, the management based on expert advice had reversed the unutilized provision aggregating '' 431.60 million during the previous year.
This note provides an analysis of the Company''s income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Company''s tax positions.
The carrying amount of trade receivable, current loans, current portion of interest accrued on fixed deposit, bonds and certificates, cash and cash equivalents, bank balances other than cash and cash equivalents, trade payable, capital creditors, current security deposits (liability) and other current financial liabilities are considered to be approximately same as their fair value, due to their short-term nature and have been classified as level 3 in the fair value hierarchy. Similarly, carrying values of government grants, TUF and incentive and interest subvention due to it sovereign nature and expected collection term are considered to approximate their fair value and have been classified as level 3 in the fair value hierarchy.
The fair value for loans, security deposits, advance recoverable in cash, fixed deposit with bank, interest accrued on fixed deposit and investments in preference shares is calculated based on cash flows discounted using a current lending rates. Further, security deposits, advance recoverable in cash and investments in preference share are classified as level 3 fair value in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
The fair value for long term security deposits are based on discounted cash flow using a current borrowing rate. They are classified as level 3 fair value in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
The carrying amount of long term borrowings is approximately equal to it''s fair value since the borrowings are at floating rate of interest. Also, the carrying amount of short term borrowing is considered to be approximately same as it''s fair value due to it''s short term nature.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
Level 1: This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, exchange traded funds and mutual funds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (such as traded bonds, debentures, government securities and commercial papers) is determined using Fixed Income Money Market and Derivatives Association of India (FIMMDA) inputs and valuation techniques which maximise 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. The mutual funds are valued using the closing Net Assets Value (NAV). NAV represents the price at which the issuer will issue further units and will redeem such units of mutual fund to and from the investors.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted preference shares and security deposits included in level 3.
There are no internal transfers of financial assets and financial liabilities between Level 1, Level 2 and Level 3 during the period. The Company''s policy is to recognise transfers into and transfers out of fair value hierarchy level as at the end of reporting period.
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- NAV quoted by mutual funds
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. This team reports directly to the chief financial officer (CFO).
Discussions of valuation processes and results are held between the CFO, and the valuation team at least once every three months, in line with the Company''s quarterly reporting periods.
The main level 3 inputs for preference shares used by the Company are derived and evaluated as follows:
- Discount rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
- Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from credit risk grading determined by the Company''s internal credit risk management team.
- Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.
Changes in level 2 and 3 fair values are analysed at the end of each reporting period during the quarterly valuation discussion between the CFO and the valuation team. As part of this discussion the team presents a report that explains the reason for the fair value movements.
The Company''s risk management is carried out by a central treasury department under policies approved by the Board of Directors. Company''s treasury team identifies, evaluates and hedges financial risks in close cooperation with the Company''s respective department heads. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Credit risk arises from cash and cash equivalents, investments carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to wholesale customers including outstanding receivables.
Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with bank and financial institution, foreign exchange transactions and other financial instruments.
The Company determines default by considering the business environment in which the Company operates and other macro-economic factors. This definition of default is determined by considering the business environment in which the Company operates and other macro-economic factors. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty''s ability to meet its obligations;
iv) Significant increase in credit risk on other financial instruments of the same counterparty;
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees.
The Company does not expect to receive future cash flows or recoveries from collection of cash flows previously written off.
The Company maintains exposure in cash and cash equivalents, term deposits with banks, Derivative financial instruments, investments in government securities and bonds, and investments in mutual funds. The Company has diversified portfolio of investment with various number of counter-parties which have good credit ratings, good reputation, good past track records and reviews and hence the risk is reduced. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Company.
Liquidity risk refers to the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or other financial assets. 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 tables below analyse the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for:
- all non derivative financial liabilities, and
- net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows.
(i) Foreign currency risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/payables. The use of foreign currency forward contracts is governed by the Company''s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company''s risk management policy and procedures.
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible bonds and short term loans. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
The Company is mainly exposed to the price risk due to its investment in mutual funds and bonds. The price risk arises due to uncertainties about the future market values of these investments. In order to manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio in accordance with the limits set by the risk management policies.
The table below summarises the impact of increases/decreases of 0.75% increase in price of Mutual Fund / Bond.
The Company''s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company''s overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other long term borrowings. The Company''s policy is to use short-term and long-term borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the net debt to equity ratio. The Company is not subject to any externally imposed capital requirements.
Net debt are long term and short term debts as reduced by cash and cash equivalents. Equity comprises of all components including other equity.
For Impact of COVID-19 on capital management, refer Note 29.
The Company''s strategy is to maintain a gearing ratio within 2:1. The gearing ratios were as follows:
In order to achieve this overall objective, the Companies 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, in certain cases, may permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2021 and 31 March 2020.
Note 29 : Estimation uncertainty relating to the global health pandemic on COVID-19
''The Company has adopted measures to curb the spread of infection of COVID-19 in order to protect the health of its employees and ensure business continuity with minimal disruption including remote working, maintaining social distancing, sanitization of work spaces etc. The Company''s operations, revenue and consequently profit during the year ended March 31, 2021 were impacted due to COVID-19. The Company has considered the possible effects that may result from outbreak of COVID-19 in the preparation of this financial including the recoverability of carrying amounts of financial and non-financial assets and liquidity assessment based on future cash flow projections. In building the assumptions relating to the possible uncertainties in the global economic conditions as at the date of approval of these financial, the Company has used internal and external sources of information and expects that the carrying amount of the assets will be recovered. The impact of the global health pandemic may be different from that estimated as at the date of approval of these financial.
- All transactions were made on normal commercial terms and conditions and at market rates.
- All outstanding balances are unsecured and repayable in cash.
Note 35 : Buy-back of equity shares
The Board of Directors in its meeting held on May 14, 2021, has approved the buy-back of fully paid -up equity shares of face value of '' 1/- each of the Company, at a price ''120 per equity share (maximum buy-back price) and for an amount of '' 20,000 Lacs (maximum buy-back size) by way of tender offer in accordance with the provisions contained in the SEBI (Buy-back of Securities) Regulations, 2018 and the Companies Act, 2013 and rules made thereunder.
The Company has lease contracts for various items of property, plant and machinery, vehicles and other equipment used in its operations. Leases of plant and machinery generally have lease term of 13 years, while motor vehicles and other equipment generally have lease terms between 3 and 5 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain certain financial ratios. There are several lease contracts that include extension and termination options and variable lease payments, which are further discussed below.
The Company had total cash outflows for leases of '' 85.38 million in March 31, 2021 ('' 98.20 million in March 31, 2020). There are no non-cash additions to right-of-use assets and lease liabilities. There are no future cash outflows relating to leases that have not yet commenced.
The Company has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Companyâs business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.
Mar 31, 2019
1. Corporate Information
Welspun India Limited (herein referred to as âWILâ or âthe Companyâ) is public limited company incorporated and domiciled in India. The address of its registered office is âWelspun Cityâ, Village Versamedi, Tal. Anjar, Dist. Kutch, Gujarat - 370110, India. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is a leading manufacturer of wide range of home textile products, mainly terry towels, bed linen products and rugs. The financial statements were authorized for issue by the board of directors on May 24, 2019.
Notes:
(i) Property, plant and equipment pledged as security - Refer to note 11(a) for information on property, plant and equipment pledged as security by the Company.
(ii) Contractual obligations - Refer to note 32 (a) for disclosure of contractual commitments for the acquisition of property, plant and equipment.
(iii) Additions to fixed assets during the year include capital expenditure of Rs. 32.75 million (Previous Year : Rs. 31.28 million) incurred on in-house Research and Development activities [Refer Note 39 ]
(iv) The Company has given certain assets on operating lease, details of which are given below:
Notes:
(a) Fixed Deposits of Rs. Nil (March 31, 2018 : Rs. 114.58 million) are earmarked for repayment of Current Maturities of Long Term Borrowings.
(b) These are restricted bank balances. The restrictions are on account of balances held in unpaid dividend bank accounts.
(v) Rights, preferences and restrictions attached to equity shares
The company has one class of equity shares having a par value of Rs. 1 per share (March 31, 2018 : Rs. 1). Each shareholder is eligible for one vote per share held. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
Note: Nature and purpose of reserves and surplus and other reserves
(a) Capital Redemption Reserve
Capital Redemption Reserve is created 1) when preference shares are redeemed out of profits of the Company, a sum equal to the nominal amount of the shares to be redeemed has to be transferred to this reserve and 2) when company purchases its own shares out of free reserves, a sum equal to the nominal value of shares so purchased has to be transferred to this reserve. This reserve may be used for paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares.
(b) Capital Reserve
Out of total, Capital Reserve of Rs. 1,426.54 million related to Gujarat high court approved composite scheme of arrangement between group companies. Balance Rs. 48.18 million was accrued on Forfeiture of Share warrants. Capital reserve is not available for distribution.
(c) Securities Premium
Securities premium Account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(d) General Reserve
General Reserve is a free reserve and is available for distribution as dividend, issue of bonus shares, buyback of the Companyâs securities. It was created by transfer of amounts out of distributable profits.
(e) FVOCI equity investments
The management has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The management transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
Notes :
(i) The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-process, finished goods, semi finished goods, stores, spares and book debts and other current financial assets of the Company and second charge on entire fixed assets of the Company.
(ii) The bills of the vendors evidencing supply of material are discounted on presentation and the vendors are directly paid by the banks and the Company bears the discounting charge upfront. Later on the due date (depending on the tenor of financing), the Company pays the discounting bank the principal amount. This financing is unsecured and therefore there is no hypothecation against stock or debtors.
(iii) Commercial paper is an unsecured short term debt instrument issued by the Company generally for 90 days to meet the regular working capital requirements.
Note:
Fixed Deposits of Rs. Nil (March 31, 2018 : Rs. 114.58 million) are earmarked for repayment of the above Current Maturities of Long Term Loans.
Note : The opening provision which was fully utilised during the year was towards return of goods by the customers, refund to the customers, cost of rework, inventory write-down, legal fees and other related expenses relating to the traceability issue. Refer Note 25 âExceptional Items-Expenseâ with respect to provision made during the year and closing balance as at March 31, 2019.
The Company has tax loss(Long Term Capital Loss) of Rs. 431.85 million which are available for offsetting up to two years against furture taxable profits. Deferred tax assets has not been recognised in respect of these losses due to lack of reasonably certainty with respect of utilisation of these losses against future long term capital losses.
Note :
Deferred income relates to government grant for the purchase of property, plant and equipment and are credited to statement of profit or loss on a straight-line basis over the expected lives of the related assets. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other operating income.
(i) Value Added Tax (VAT)/State Goods and Service Tax (SGST) Concession: Reimbursement of VAT/SGST collected on end product/intermediate product to the extent of the eligible capital investments in plant and machinery for the specified period as per the Scheme.
(ii) Merchandise Export Incentive Scheme (MEIS): Company is entitled for reward under MEIS computed at specified rates on FOB value of exports to specified countries.
II. Defined Benefit Plan
Contribution to Gratuity Fund (Funded Defined Benefit Plan)
The Company operates a gratuity plan through the âWelspun India Limited Employees Gratuity Trustâ. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier.
Risk exposure
These defined benefit plans expose the Company to actuarial risk such as longitivity risks, interest rate risks, market (investment) risks.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability/ asset recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
j) Defined benefit liability and employer contributions
The Company monitors funding levels on an annual basis and the current agreed contribution rate is 12% of the basic salaries. Funding is done only for employees more than 5 years in the firm, for less than 5 years employees are paid separately.
Expected contributions to post-employment benefit plans for the year ending March 31, 2020 are Rs. 103.50 million.
The weighted average duration of the defined benefit obligation is 11 years (March 31, 2018 : 10 years). The expected maturity analysis of undiscounted gratuity is as follows:
III Other Employee Benefit
The liability for compensated absences as at year end is Rs. 174.43 million (March 31, 2018 : Rs. 149.63 million).
Note 2 : Exceptional Items-Expense
The Company has been facing litigation in the United States surrounding the Companyâs premium cotton home textile products, including the consolidated putative class action suit (consolidated during the quarter ended December 31, 2016). To avoid the burden, cost, and uncertainty of continued litigation in the United States surrounding the provenance of its premium cotton home textile products, the Company have entered into a settlement agreement subsequent to year end. The settlement agreement provides monetary payments to settlement class members not to exceed an aggregate US Dollars 36 million. The Exceptional Item, aggregating to Rs. 2,080.24 million and Rs. Nil for the year ended March 31, 2019 and March 31, 2018 respectively, represents a provision for the settlement costs that have been estimated by the management based on expert advise which includes monetary payments or vouchers for all class members in the U.S. who submit claims subject to validation by an independent third party, fees payable to legal counsel, and costs related to the administration of the settlement. The settlement agreement is subject to approval by the appropriate courts in the United States and regulators, and is intended to resolve legal claims in the United States concerning the past marketing and labelling of the Companyâs premium cotton home textile products.
Note 3 : Income tax expense
This note provides an analysis of the Companyâs income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Companyâs tax positions.
The carrying amount of trade receivable, current loans, current portion of interest accrued on fixed deposit, bonds and certificates, cash and cash equivalents, bank balances other than cash and cash equivalents, government grants, TUF and incentive, trade payable, capital creditors, current security deposits (liability) and other current financial liabilities are considered to be approximately same as their fair value, due to their short-term nature and have been classified as level 3 in the fair value hierarchy.
The fair value for loans, security deposits, advance recoverable in cash, fixed deposit with bank, interest accrued on fixed deposit and investments in preference shares is calculated based on cash flows discounted using a current lending rates. Further, security deposits, advance recoverable in cash and investments in preference share are classified as level 3 fair value in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
The fair value for long term security deposits are based on discounted cash flow using a current borrowing rate. They are classified as level 3 fair value in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
The carrying amount of long term borrowings is approximately equal to itâs fair value since the borrowings are at floating rate of interest. Also, the carrying amount of short term borrowing is considered to be approximately same as itâs fair value due to itâs short term nature.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
(ii) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3, as described below.
Level 1: This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, exchange traded funds and mutual funds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (such as traded bonds, debentures, government securities and commercial papers) is determined using Fixed Income Money Market and Derivatives Association of India (FIMMDA) inputs and valuation techniques which maximise 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. The mutual funds are valued using the closing Net Assets Value (NAV). NAV represents the price at which the issuer will issue further units and will redeem such units of mutual fund to and from the investors.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted preference shares and security deposits included in level 3.
There are no internal transfers of financial assets and financial liabilities between Level 1, Level 2 and Level 3 during the period. The Companyâs policy is to recognise transfers into and transfers out of fair value hierarchy level as at the end of reporting period.
iii) Valuation technique used to determine fair value:
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- NAV quoted by mutual funds
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
(iv) Fair value measurements using significant unobservable inputs (level 3) for FVPL instruments
The following table presents the changes in level 3 items for the periods ended March 31, 2019 and March 31, 2018:
v) Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements. See (iii) above for the valuation techniques adopted
vi) Valuation processes :
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. This team reports directly to the chief financial officer (CFO).
Discussions of valuation processes and results are held between the CFO, and the valuation team at least once every three months, in line with the Companyâs quarterly reporting periods.
The main level 3 inputs for preference shares used by the Company are derived and evaluated as follows:
- Discount rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
- Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from credit risk grading determined by the Companyâs internal credit risk management team.
- Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.
Changes in level 2 and 3 fair values are analysed at the end of each reporting period during the quarterly valuation discussion between the CFO and the valuation team. As part of this discussion the team presents a report that explains the reason for the fair value movements.
Note 4 : Financial Risk Management
The Companyâs activities are exposed to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The Companyâs risk management is carried out by a central treasury department under policies approved by the Board of Directors. Companyâs treasury team identifies, evaluates and hedges financial risks in close cooperation with the Companyâs respective department heads. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(A) Credit risk
Credit risk arises from cash and cash equivalents, investments carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to wholesale customers including outstanding receivables.
(i) Credit Risk Management
Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with bank and financial institution, foreign exchange transactions and other financial instruments.
The Company determines default by considering the business environment in which the Company operates and other macro-economic factors. This definition of default is determined by considering the business environment in which the Company operates and other macro-economic factors. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterpartyâs ability to meet its obligations;
iv) Significant increase in credit risk on other financial instruments of the same counterparty;
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company.
Trade Receivable
Trade receivables are typically unsecured and are derived from revenue earned from customers. Credit risk has 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 uses a provision matrix and forward-looking information and an assessment of the credit risk over the expected life of the financial asset to compute the expected credit loss allowance for trade receivables.
Concentrations of credit risk with respect to trade receivables are limited, due to major customers being subsidiaries of the Company which in turn have a large and diverse customer base. The following table gives details in respect of percentage of revenue generated from the top ten customers.
During the year and previous years, the Company made no write-offs of trade receivables, it does not expect to receive future cash flows or recoveries from collection of cash flows previously written off.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, Derivative financial instruments, investments in government securities and bonds, and investments in mutual funds. The Company has diversified portfolio of investment with various number of counter-parties which have good credit ratings, good reputation, good past track records and reviews and hence the risk is reduced. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Company.
(B) Liquidity Risk
Liquidity risk refers to the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or other financial assets. 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.
(i) Financing arrangements
The Company had access to the following undrawn borrowing facilities at the end of the reporting period:
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice.
(ii) Maturities of Financial liabiliities
The tables below analyse the Companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for:
- all non derivative financial liabilities, and
- net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows.
(C) Market risk
(i) Foreign currency risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/ payables. The use of foreign currency forward contracts is governed by the Companyâs strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Companyâs risk management policy and procedures.
(b) Foreign currency sensitivity
The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments and foreign forward exchange contracts.
(EURO sensitivity also calculated for EURO/USD forward contracts outstanding as on March 31, 2019)
* Holding all other variables constant
(ii) Cash flow and fair value interest rate risk
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible bonds and short term loans. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
(a) Interest rate risk exposure
The exposure of the Companyâs borrowing to interest rate changes at the end of the reporting period are as follows:
(iii) Price risk
(a) Exposure
The Company is mainly exposed to the price risk due to its investment in mutual funds and bonds. The price risk arises due to uncertainties about the future market values of these investments. In order to manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio in accordance with the limits set by the risk management policies.
(b) Sensitivity
The table below summarises the impact of increases/decreases of 0.75% increase in price of Mutual Fund / Bond.
Note 5 : Capital management
(a) Risk Management
The Companyâs objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Companyâs overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other long term borrowings. The Companyâs policy is to use short-term and long-term borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the net debt to equity ratio. The Company is not subject to any externally imposed capital requirements.
Net debt are long term and short term debts as reduced by cash and cash equivalents (including restricted cash and cash equivalents) and short-term investments. Equity comprises of all components including other equity.
The Companyâs strategy is to maintain a gearing ratio within 2:1. The gearing ratios were as follows:
The following table summarizes the capital of the Company:
(i) Loan covenants
Under the terms of the major borrowing facilities, the Company is required to comply with the following financial covenants:
- the approved range for gearing ratio is 2 times to 2.57 times, and
- the ratio of Debt Service Coverge Ratio (DSCR) must be atleast 1.2 times.
The Company has complied with these covenants throughout the reporting period. As at 31 March 2019, the DSCR ratio was 1.90 times (March 31, 2018 : 2.15 times).
Note 6 : Contingent Liabilities
a. Description on matters considered as contingent liabilities:
(i) It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.
(ii) The Company does not expect any reimbursements in respect of the above contingent liabilities.
b. There are numerous interpretative issues relating to the Supreme Court (SC) judgement on PF dated 28th February, 2019. As a matter of caution, the Company has made a provision on a prospective basis from the date of the SC order. The Company will update its provision, on receiving further clarity on the subject.
Note 7
The Company has issued corporate guarantees aggregating Rs. 19,900.31 million as at the year end March 31, 2019 (March 31, 2018: Rs. 14,768.03 million) on behalf of Welspun Global Brands Limited (WGBL), Welspun Captive Power Generation Limited (WCPGL), CHT Holdings Limited (CHTHL) and Welspun Flooring Limited (WEFL). Liability outstanding in the books of above-mentioned companies for which corporate guarantees have been issued aggregates Rs. 5,271.29 million as at March 31, 2019 (March 31, 2018: Rs. 3,237.71 million)
Note 8 : Offsetting financial assets and financial liabilities
There are no financial assets or financial liabilities which are subject to offsetting as at March 31, 2019 and March 31, 2018 since, the entity neither has enforceable right or an intent to settle on net basis or to realise the asset and settle the liability simultaneously. Further, the Company has no enforceable master netting arrangements and other similar arrangements as at March 31, 2019 and March 31, 2018.
Note 9 : Leases
Where the Company is a lessee:
Operating Lease
The Company has taken various residential, office premises, godowns, equipment and vehicles under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months to sixty months.
The Company has non-cancellable leases for office premises. Future minimum lease rentals payable under non-cancellable leases as at March 31 are as follows:
Note 10 : Standards issued but not yet effective up to the date of Financial Statements
The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Companyâs financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.
Ind AS 116 - Leases
Ind AS 116 Leases was notified by MCA on March 30, 2019 and it replaces Ind AS 17 Leases, including appendices thereto. Ind AS 116 is effective for annual periods beginning on or after April 1, 2019. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. The standard includes two recognition exemptions for lessees - leases of âlow-valueâ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
Lessees will be also required to re-measure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset.
Lessor accounting under Ind AS 116 is substantially unchanged from todayâs accounting under Ind AS 17. Lessors will continue to classify all leases using the same classification principle as in Ind AS 17 and distinguish between two types of leases: operating and finance leases.
The Company intends to adopt these standards from April 1, 2019. As the Company does not have any material leases, therefore the adoption of this standard is not likely to have a material impact in its Financial Statements.
Ind AS 12 - Appendix C to Ind AS 12 Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of Ind AS 12 and does not apply to taxes or levies outside the scope of Ind AS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:
- Whether an entity considers uncertain tax treatments separately
- The assumptions an entity makes about the examination of tax treatments by taxation authorities
- How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
- How an entity considers changes in facts and circumstances
An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed. In determining the approach that better predicts the resolution of the uncertainty, an entity might consider, for example, (a) how it prepares its income tax filings and supports tax treatments; or (b) how the entity expects the taxation authority to make its examination and resolve issues that might arise from that examination.
The interpretation is effective for annual reporting periods beginning on or after 1 April 2019, but certain transition reliefs are available. The Company will apply the interpretation from its effective date. The Company does not expect any significant impact of the amendment on its financial statements.
Amendments to Ind AS 109: Prepayment Features with Negative Compensation
Under Ind AS 109, a debt instrument can be measured at amortised cost or at fair value through other comprehensive income, provided that the contractual cash flows are âsolely payments of principal and interest on the principal amount outstandingâ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to Ind AS 109 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.
The amendments should be applied retrospectively and are effective for annual periods beginning on or after 1 April 2019. The Company does not expect this amendment to have any impact on its financial statements.
Amendments to Ind AS 19: Plan Amendment, Curtailment or Settlement
The amendments to Ind AS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to:
- Determine current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event.
- Determine net interest for the remainder of the period after the plan amendment, curtailment or settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event; and the discount rate used to remeasure that net defined benefit liability (asset).
The amendments also clarify that an entity first determines any past service cost, or a gain or loss on settlement, without considering the effect of the asset ceiling. This amount is recognised in profit or loss.
An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or settlement. Any change in that effect, excluding amounts included in the net interest, is recognised in other comprehensive income.
The amendments apply to plan amendments, curtailments, or settlements occurring on or after the beginning of the first annual reporting period that begins on or after 1 April 2019. These amendments will apply only to any future plan amendments, curtailments, or settlements of the Company
Amendments to Ind AS 28: Long-term interests in associates and joint ventures
The amendments clarify that an entity applies Ind AS 109 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in Ind AS 109 applies to such long-term interests.
The amendments also clarified that, in applying Ind AS 109, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying Ind AS 28 Investments in Associates and Joint Ventures.
The amendments should be applied retrospectively in accordance with Ind AS 8 for annual reporting periods on or after 1 April 2019. Since the Company does not have such long-term interests in its associate and joint venture, the amendments will not have an impact on its financial statements.
Amendments to Ind AS 103: Party to a Joint Arrangements obtains control of a business that is a Joint Operation
The amendments clarify that, when an party to a joint arrangement obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.
An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 April 2019. These amendments are currently not applicable to the Company but may apply to future transactions.
Amendments to Ind AS 111: Joint Arrangements
A party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in Ind AS 103. The amendments clarify that the previously held interests in that joint operation are not remeasured.
An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 April 2019. These amendments are currently not applicable to the company but may apply to future transactions.
Amendments to Ind AS 12: Income Taxes
The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.
An entity applies those amendments for annual reporting periods beginning on or after 1 April 2019. These amendments are currently not applicable to the company but may apply in future.
Amendments to Ind AS 23: Borrowing Costs
The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.
An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 April 2019. These amendments are currently not applicable to the company but may apply in future.
Note 11 : As per Ind AS 108 - âOperating Segmentâ, segment information has been provided under the Notes to Consolidated Financial Statements.
Note 12 : Events occurring after the reporting date:
(a) âThe Honâble National Company Law Tribunal, Ahmedabad Bench vide itâs order pronounced on May 10, 2019 (the âOrderâ) sanctioned the Scheme of Amalgamation of Prasert Multiventure Private Limited (âPMPLâ) with Welspun India Limited (âWILâ). The amalgamation of PMPL with WIL is merely a combination of entities and not a âbusiness combinationâ and hence the amalgamation will be accounted for, effective from the date of filing of the Order with MCA.
(b) Refer note 29(b) for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing annual general meeting.
Note 13 : The figures for the corresponding previous year have been regrouped/reclassified wherever necessary, to make them comparable.
Mar 31, 2018
1. Corporate Information
Welspun India Limited (herein referred to as âWILâ or âthe Companyâ) is public limited company incorporated and domiciled in India. The address of its registered office is âWelspun Cityâ, Village Versamedi, Tal. Anjar, Dist. Kutch, Gujarat - 370110, India. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is a leading manufacturer of wide range of home textile products, mainly terry towels, bed linen products and rugs. The financial statements were authorized for issue by the board of directors on May 16, 2018.
Notes:
(a) Fixed Deposits of Rs. 114.58 million (March 31, 2017 : Rs. 110 million) are earmarked for repayment of Current Maturities of Long Term Borrowings
(b) These are restricted bank balances. The restrictions are on account of balances held in unpaid dividend bank accounts.
(v) Rights, preferences and restrictions attached to equity shares
The company has one class of equity shares having a par value of Re. 1 per share (March 31, 2017 : Re. 1). Each shareholder is eligible for one vote per share held. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(vi) Shares allotted as fully paid up pursuant to contract(s) without payment being received in cash (during 5 years immediately preceding March 31, 2018)
10,475,496 equity shares of Rs. 10 each fully paid were issued in January 2013 to the erstwhile shareholders of Welspun Global Brands Limited (Formerly known as Welspun Retail Limited) pursuant to the composite scheme of arrangement between Welspun Global Brands Limited, the Company and Welspun Retail Limited without payment being received in cash.
Note Nature and purpose of reserves and surplus and other reserves
(a) Capital Redemption Reserve
Capital Redemption Reserve is created 1) when preference shares are redeemed out of profits of the Company, a sum equal to the nominal amount of the shares to be redeemed has to be transferred to this reserve and 2) when company purchases its own shares out of free reserves, a sum equal to the nominal value of shares so purchased has to be transferred to this reserve. This reserve may be used for paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares.
(b) Capital Reserve
Out of total, Capital Reserve of Rs. 1,426.54 million related to Gujarat high court approved composite scheme of arrangement between group companies. Balance Rs. 48.18 million was accrued on Forfeiture of Share warrants. Capital reserve is not available for distribution.
(c) Securities premium Account
Securities premium Account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(d) General Reserve
General Reserve is a free reserve and is available for distribution as dividend, issue of bonus shares, buyback of the Companyâs securities. It was created by transfer of amounts out of distributable profits.
(e) FVOCI equity investments
The management has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The management transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
Notes :
(i) The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-process, finished goods, semi finished goods, stores, spares and book debts and other current financial assets of the Company and second charge on entire fixed assets of the Company.
(ii) The bills of the vendors evidencing supply of material are discounted on presentation and the vendors are directly paid by the banks and the Company bears the discounting charge upfront. Later on the due date (depending on the tenor of financing), the Company pays the discounting bank the principal amount. This financing is unsecured and therefore there is no hypothecation against stock or debtors.
(iii) Commercial paper is an unsecured short term debt instrument issued by the Company generally for 90 days to meet the regular working capital requirements.
Notes:
(a) Rs. 0.45 million was due for payment to the Investor Education and Protection Fund under Section 125 of the Companies Act, 2013 and was paid during the year
(b) Fixed Deposits of Rs. 114.58 million (March 31, 2017 : Rs. 110 million) are earmarked for repayment of the above Current Maturities of Long Term Loans.
Note : Above provision is towards return of goods by the customers, refund to the customers, cost of rework, inventory write-down, legal fees and other related expenses relating to the traceability issue as more elaborated in Note 24 âExceptional Itemsâ.
Note :
Deferred income relates to government grant for the purchase of property, plant and equipment and are credited to statement of profit or loss on a straight-line basis over the expected lives of the related assets. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other operating income.
(i) Value Added Tax (VAT)/State Goods and Service Tax (SGST) Concession: Reimbursement of VAT/SGST collected on end product/intermediate product to the extent of the eligible capital investments in plant and machinery for the specified period as per the Scheme.
(ii) Merchandise Export Incentive Scheme (MEIS): Company is entitled for reward under MEIS computed at specified rates on FOB value of exports to specified countries.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.
When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability/ asset recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
Note 2: Exceptional items
(a) During the previous year, the Company had made provision towards Exceptional Items (refund to the customers, inventory write-down, legal fees etc.) relating to the traceability issue. The Company has reassessed the outstanding provision/ liability as at year ended March 31, 2018 and no significant additional provision is considered necessary.
(b) Relating to the traceability issue, four putative class action suits filed in USA against the Company and its subsidiary viz., Welspun USA Inc. by certain consumers were consolidated in one of the courts during the quarter ended December 31, 2016 and are proceeding as a single putative class action. The court proceedings are in a preliminary stage and it cannot be determined at present whether the consolidated putative class action suit will be permitted to proceed as a class action and therefore the monetary impact, if any, of the final outcome of the law suit is currently un-ascertainable.
Note 3 : Income tax expense
This note provides an analysis of the Companyâs income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Companyâs tax positions.
The carrying amount of trade receivable, current loans, current portion of interest accrued on fixed deposit, bonds and certificates, cash and cash equivalents, bank balances other than cash and cash equivalents, government grants, TUF and incentive, trade payable, capital creditors, current security deposits (liability) and other current financial liabilities are considered to be approximately same as their value, due to their short-term nature.
The fair value for loans, security deposits, advance recoverable in cash, fixed deposit with bank, interest accrued on fixed deposit and investments in preference shares is calculated based on cash flows discounted using a current lending rates. Further, security deposits, advance recoverable in cash and investments in preference share are classified as level 3 fair value in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
The fair value for long term security deposits are based on discounted cash flow using a current borrowing rate. They are classified as level 3 fair value in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
The carrying amount of long term borrowings is approximately equal to itâs fair value since the borrowings are at floating rate of interest. Also, the carrying amount of short term borrowing is considered to be approximately same as itâs fair value due to itâs short term nature.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
(ii) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3, as described below.
Level 1: This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, exchange traded funds and mutual funds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing Net Assets Value (NAV). NAV represents the price at which the issuer will issue further units and will redeem such units of mutual fund to and from the investors.
Level 2: The fair value of financial instruments that are not traded in an active market (such as traded bonds, debentures, government securities and commercial papers) is determined using Fixed Income Money Market and Derivatives Association of India (FIMMDA) inputs and valuation techniques which maximise 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. This is the case for unlisted preference shares and security deposits included in level 3.
There are no internal transfers of financial assets and financial liabilities between Level 1, Level 2 and Level 3 during the period. The Companyâs policy is to recognise transfers into and transfers out of fair value hierarchy level as at the end of reporting period.
iii) Valuation technique used to determine fair value:
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis. All of the resulting fair value estimates are included in level 2 except for unlisted preference shares, where the fair values have been determined based on present values where the fair values have been determined based on presentvalues and the discount rates used were adjusted for counterparty or own credit risk.
(iv) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the periods ended March 31, 2018 and March 31, 2017:
v) Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements. See (ii) above for the valuation techniques adopted
vi) Valuation processes :
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. This team reports directly to the chief financial officer (CFO).
Discussions of valuation processes and results are held between the CFO, and the valuation team at least once every three months, in line with the Companyâs quarterly reporting periods.
The main level 3 inputs for preference shares used by the Company are derived and evaluated as follows:
- Discount rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
- Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from credit risk grading determined by the Companyâs internal credit risk management team.
- Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.
Changes in level 2 and 3 fair values are analysed at the end of each reporting period during the quarterly valuation discussion between the CFO and the valuation team. As part of this discussion the team presents a report that explains the reason for the fair value movements.
Note 4 : Financial Risk Management
The Companyâs activities are exposed to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The Companyâs risk management is carried out by a central treasury department under policies approved by the Board of Directors. Companyâs treasury team identifies, evaluates and hedges financial risks in close cooperation with the Companyâs respective department heads. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(All amounts are in Rs millions, unless otherwise stated)
(A) Credit risk
Credit risk arises from cash and cash equivalents, investments carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to wholesale customers including outstanding receivables.
(i) Credit Risk Management
Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with bank and financial institution, foreign exchange transactions and other financial instruments.
The Company determines default by considering the business environment in which the Company operates and other macro-economic factors. This definition of default is determined by considering the business environment in which the Company operates and other macro-economic factors. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterpartyâs ability to meet its obligations;
iv) Significant increase in credit risk on other financial instruments of the same counterparty;
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company
Trade Receivable
Trade receivables are typically unsecured and are derived from revenue earned from customers. Credit risk has 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 uses a provision matrix and forward-looking information and an assessment of the credit risk over the expected life of the financial asset to compute the expected credit loss allowance for trade receivables.
The following table gives details in respect of percentage of revenue generated from the top ten customers.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, Derivative financial instruments, investments in government securities and bonds, and investments in mutual funds. The Company has diversified portfolio of investment with various number of counter-parties which have good credit ratings, good reputation, good past track records and reviews and hence the risk is reduced. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Company.
Expected credit loss for trade receivables under simplified approach:
During the year and previous years, the Company made no write-offs of trade receivables, it does not expect to receive future cash flows or recoveries from collection of cash flows previously written off.
(B) Liquidity Risk
Liquidity risk refers to the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or other financial assets. 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.
(i) Financing arrangements
The Company had access to the following undrawn borrowing facilities at the end of the reporting period:
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice.
(ii) Maturities of Financial liabiliities
The tables below analyse the Companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for:
- all non derivative financial liabilities, and
- net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows.
(C) Market risk
(i) Foreign currency risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/payables. The use of foreign currency forward contracts is governed by the Companyâs strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Companyâs risk management policy and procedures.
(a) Foreign currency risk exposure
The Companyâs exposure to foreign currency risk at the end of the reporting period in India Rupees are as follows :
(b) Foreign currency sensitivity
The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments and foreign forward exchange contracts.
(ii) Cash flow and fair value interest rate risk
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible bonds and short term loans. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
(iii) Price risk
(a) Exposure
The Company is mainly exposed to the price risk due to its investment in mutual funds and bonds. The price risk arises due to uncertainties about the future market values of these investments. In order to manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio in accordance with the limits set by the risk management policies.
(b) Sensitivity
The table below summarises the impact of increases/decreases of 0.75% increase in price of Mutual Fund / Bond.
(c) As at the Balance Sheet date, the foreign currency exposure not hedged by a derivative instrument or otherwise aggregates Rs. Nil million (March 31, 2017 : Rs. 53.23 million) for receivables (net of provisions) and Rs. 679.08 million (March 31, 2017 : Rs. 194.15 million) for payables.
Note 5 : Capital Management
(a) Risk Management
The Companyâs objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Companyâs overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other long term borrowings. The Companyâs policy is to use short-term and long-term borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the net debt to equity ratio. The Company is not subject to any externally imposed capital requirements.
Net debt are long term and short term debts as reduced by cash and cash equivalents (including restricted cash and cash equivalents) and short-term investments. Equity comprises all components excluding other components of equity (which comprises the cash flow hedges, translation of foreign operations and available-for-sale financial investments).
The Companyâs strategy is to maintain a gearing ratio within 2:1. The gearing ratios were as follows:
The following table summarizes the capital of the Company:
(i) Loan covenants
Under the terms of the major borrowing facilities, the Company is required to comply with the following financial covenants:
- the approved range for gearing ratio is 2 times to 2.57 times, and
- the ratio of Debt Service Coverge Ratio (DSCR) must be atleast 1.2 times.
The Company has complied with these covenants throughout the reporting period. As at 31 March 2018, the DSCR ratio was 2.15 times (March 31, 2017 : 3 times).
(a) It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.
(b) The Company does not expect any reimbursements in respect of the above contingent liabilities.
Note 6 : The Company has issued corporate guarantees aggregating Rs. 14,768.03 million as at the year end March 31, 2018 (March 31, 2017: Rs.7,426.42 million) on behalf of Welspun Global Brands Limited (WGBL), Welspun Captive Power Generation Limited (WCPGL), CHT Holdings Limited (CHTHL) and Welspun Flooring Limited (WEFL). Liability outstanding in the books of above-mentioned companies for which corporate guarantees have been issued aggregates Rs. 3,237.71 million as at March 31, 2018 (March 31, 2017: Rs. 3,413.04 million)
Note 7 : Offsetting financial assets and financial liabilities
There are no financial assets or financial liabilities which are subject to offsetting as at March 31, 2018 and March 31, 2017 since, the entity neither has enforceable right or an intent to settle on net basis or to realise the asset and settle the liability simultaneously. Further, the Company has no enforceable master netting arrangements and other similar arrangements as at March 31, 2018 and March 31, 2017.
Note 8 : Leases
Where the Company is a lessee:
Operating Lease
The Company has taken various residential, office premises, godowns, equipment and vehicles under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months to sixty months.
The aggregate rental expenses of all the operating leases for the year are Rs. 80.51 million (Previous Year: Rs. 86.85 million).
Note 9 : Disclosure pursuant to the Regulation 34(3) read with Para A of Schedule V of SEBI listing Regulations, 2015.
Note 10 : As per Ind AS 108 - âOperating Segmentâ, segment information has been provided under the Notes to Consolidated Financial Statements
Note 11 : Events occurring after the reporting date:
Refer Note 28(b) for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing annual general meeting.
Note 12 : The figures for the corresponding previous year have been regrouped/reclassified wherever necessary, to make them comparable.
Mar 31, 2017
General Information
Welspun India Limited (herein referred to as âWILâ or âthe Companyâ) is public limited company incorporated and domiciled in India. The address of its registered office is âWelspun Cityâ, Village Versamedi, Tal. Anjar, Dist. Kutch, Gujarat - 370110, India. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is a leading manufacturer of wide range of home textile products, mainly terry towels, bed linen products and rugs.
The financial statements were authorized for issue by the board of directors on April 25, 2017
Note 1: Critical estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Companyâs accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements
Critical estimates and judgements
i) Estimation of current tax expense and deferred tax
The calculation of the Companyâs tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profits/losses and/or cash flows. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. (Refer Note 25).
Recognition of deferred tax assets/ liabilities
The recognition of deferred tax assets/ liabilities is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. To determine the future taxable profits, reference is made to the latest available profit forecasts (Refer Note 14).
ii) Estimation of Provisions & Contingent Liabilities.
The Company exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities which is related to pending litigation or other outstanding claims. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual liability may be different from the originally estimated as provision (Refer Note 30).
iii) Estimated useful life of Property, Plant and Equipment
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 assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs 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, such as changes in technology. For the relative size of the Companyâs property, plant and equipment and intangible assets (Refer Notes 3 and 4).
iv) Estimation of Provision for Inventory
The Company writes down inventories to net realisable value based on an estimate of the realisability of inventories. Write downs on inventories are recorded where events or changes in circumstances indicate that the balances may not realised. The identification of write-downs requires the use of estimates of net selling prices of the down-graded inventories. Where the expectation is different from the original estimate, such difference will impact the carrying value of inventories and write-downs of inventories in the periods in which such estimate has been changed. Refer Note 8 for details of inventory and provisions.
v) Estimation of Impairment for equity Investments in Subsidiaries
To test the impairment of equity investment in one of subsidiaries, market related information and estimates are used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount include estimated long term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent managementâs best estimate about future developments. Changes in the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Companyâs impairment evaluation and hence results.
vi) Estimation of Defined Benefit Obligation
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employments plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations.
The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations. In determining the appropriate discount rate, the Company considers the interest rates of government bonds of maturity approximating the terms of the related plan liability. Refer Note 20 for the details of the assumptions used in estimating the defined benefit obligation.
vii) Estimation of grant income
The company has accrued income for Government grant related to fixed assets, in the ratio of related expenses, based on eligibility amount. Estimates are involved in calculation of grant income where the eligibility amount is not confirmed by the government but application is made and the Company is complying all terms & conditions for eligibility. There were no material deviations in the past when company booked income based on estimates awaiting eligibility amount from Government.
viii) Estimated fair value of Financial Instruments.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Management uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. For details of the key assumptions used and the impact of changes to these assumptions see Note 26.
ix) Exceptional items
Exceptional items are expense items recorded in the year in which they have been determined by management as being material by their size or incidence and are presented separately within the results of the Company. The determination of which items are disclosed as exceptional items will affect the presentation of profit for the year and requires a degree of judgement. Details relating to exceptional items reported during the year are set out in Note 24.
(iii) Rights, preferences and restrictions attached to equity shares Equity Shares:
The company has one class of equity shares having a par value of Rs.1 per share (March 31, 2016 : Rs.1, March 31, 2015 : Rs.10) Each shareholder is eligible for one vote per share held. The dividend, in case proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(iv) Shares allotted as fully paid up pursuant to contract(s) without payment being received in cash (during 5 years immediately preceding March 31, 2017)
10,475,496 equity shares of Rs.10 each fully paid were issued in January 2013 to the erstwhile shareholders of Welspun Global Brands Limited (Formerly known as Welspun Retail Limited) pursuant to the composite scheme of arrangement between Welspun Global Brands Limited, the Company and Welspun Retail Limited without payment being received in cash.
(v) Shares reserved for issue under options
Information relating to Welspun India Limited Employee Stock Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period is set out in note 32.
Note: Nature and purpose of reserves and surplus and other reserves
(a) Capital Redemption Reserve
Capital Redemption Reserve is created 1) when preference shares are redeemed out of profits of the Company, a sum equal to the nominal amount of the shares to be redeemed has to be transferred to this reserve and 2) when company purchases its own shares out of free reserves, a sum equal to the nominal value of shares so purchased has to be transferred to this reserve. This reserve may be used for paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares.
(b) Capital Reserve
Out of total, Capital Reserve of Rs.1,426.54 million related to Gujarat high court approved composite scheme of arrangement between group companies. Balance Rs.48.18 million was accrued on Forfeiture of Share warrants. Capital reserve is not available for distribution.
(c) Securities premium Account
Securities premium Account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(d) General Reserve
General Reserve is a free reserve and is available for distribution as dividend, issue of bonus shares, buyback of the Companyâs securities. It was created by transfer of amounts out of distributable profits.
(e) FVOCI equity investments
The management has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The management transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
Notes :
(i) The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-process, finished goods, semi finished goods, stores, spares and book debts and other current financial assets of the Company and second charge on entire fixed assets of the Company
(ii) The bills of the vendors evidencing supply of material are discounted on presentation and the vendors are directly paid by the banks and the Company bears the discounting charge upfront. Later on the due date (depending on the tenor of financing), the Company pays the discounting bank the principal amount. This financing is unsecured and therefore there is no hypothecation against stock or debtors
(iii) Commercial paper is an unsecured short term debt instrument issued by the Company generally for 90 days to meet the regular working capital requirements.
Note 2 : Other operating income
(a) Value Added Tax (VAT) Concession: Reimbursement of VAT collected on end product/intermediate product to the extent of the eligible capital investments in plant and machinery for the specified period as per the Scheme.
(b)Merchandise Export Incentive Scheme (MEIS): Company is entitled for reward under MEIS computed at specified rates on FOB value of exports to specified countries.
Note 3 : Employee benefits expense
The Company has classified the various benefits provided to employees as under :-
I) Defined Contribution Plans
II) Defined Benefit Plan
Contribution to Gratuity Fund (Funded Defined Benefit Plan)
The Company operates a gratuity plan through the âWelspun India Limited Employees Gratuity Trustâ. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier.
Risk exposure
These defined benefit plans expose the Company to actuarial risk such as longitivity risks, interest rate risks, market (investment) risks.
a) Major Assumptions
b) Change in the Present Value of Obligation
c) Change in Fair Value of Plan Assets
d) Reconciliation of Present Value of Defined Benefit Obligation and the Fair Value of Assets
e) Amount recognised in the Balance sheet
f) Expenses Recognised in the Statement of Profit and Loss
g) Expenses recognized in the Other Comprehensive Income
h) Sensitivity Analysis
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
i) The major categories of plans assets are as follows:
j) Defined benefit liability and employer contributions
The Company monitors funding levels on an annual basis and the current agreed contribution rate is 12% of the basic salaries. The Company considers that the contribution rates set at the last valuation date are sufficient to eliminate the deficit over the agreed period and that regular contributions, which are based on service costs, will not increase significantly. Further funding is done only for employees more than 5 years in the firm, for less than 5 years employees are paid separately.
Expected contributions to post-employment benefit plans for the year ending March 31, 2018 are Rs.96.74 million.
The weighted average duration of the defined benefit obligation is 11 years (2016 -12 years, 2015 - 12 years). The expected maturity analysis of undiscounted gratuity is as follows:
III) Other Employee Benefit
The liability for compensated absences as at year end is Rs.127.32 million (March 31, 2016 : Rs.93.28 million, March 31, 2015 : Rs.88.03 million).
Note 4 : Exceptional Items
(a) During the quarter ended September 30, 2016, the Company had made provision aggregating Rs.4,605.60 million towards return of goods by the customers, refund to the customers, cost of rework, inventory write-down, legal fees and other related expenses relating to the traceability issue. After certain agreements during the period, the Company has reassessed the outstanding provision/ liability as at March 31, 2017 towards the aforesaid issue, and based on the present state of information and knowledge available with the Company, no significant additional provision is considered necessary.
(b) All four putative class action suits filed during the previous quarters in USA against the Company and its subsidiary Welspun USA by certain consumers who purchased the products manufactured by the Company were consolidated in one of the courts during the quarter ended December 31, 2016 and are proceeding as a single putative class action. During the quarter ended March 31, 2017 a consolidated amended complaint was filed for the action. Pursuant to the stipulation of the parties and the courtâs scheduling order, the parties have agreed to conduct a time bound mediation. No formal response to the complaint will be due pending this mediation. These actions are in a preliminary stage and it cannot be determined at present whether it will be permitted to proceed as a class action. The monetary impact that may arise upon the final outcome of the law suit in the event of any adverse result or outcome is currently un-ascertainable.
Note 5 : Income tax expense
This note provides an analysis of the Companyâs income tax expense, show amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Companyâs tax positions.
(i) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3, as described below:-
Level 1: This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, exchange traded funds and mutual funds that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing Net Assets Value (NAV). NAV represents the price at which the issuer will issue further units and will redeem such units of mutual fund to and from the investors.
Level 2: The fair value of financial instruments that are not traded in an active market (such as traded bonds, debentures, government securities and commercial papers) is determined using Fixed Income Money Market and Derivatives Association of India (FIMMDA) inputs and valuation techniques which maximise 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. This is the case for unlisted preference shares and security deposits included in level 3.
There are no internal transfers of financial assets and financial liabilities between Level 1, Level 2 and Level 3 during the period. The Companyâs policy is to recognise transfers into and transfers out of fair value hierarchy level as at the end of reporting period.
(ii) Valuation technique used to determine fair value:
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date
-the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2 except for unlisted preference shares, where the fair values have been determined based on present values where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.
(iii) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the periods ended March 31, 2017 and March 31, 2016:
(iv) Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements. See (ii) above for the valuation techniques adopted
(v) Valuation processes
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values. This team reports directly to the chief financial officer (CFO).
Discussions of valuation processes and results are held between the CFO, and the valuation team at least once every three months, in line with the Companyâs quarterly reporting periods.
The main level 3 inputs for preference shares used by the Company are derived and evaluated as follows:
- Discount rates are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
- Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from credit risk grading determined by the Companyâs internal credit risk management team.
- Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.
Changes in level 2 and 3 fair values are analysed at the end of each reporting period during the quarterly valuation discussion between the CFO and the valuation team. As part of this discussion the team presents a report that explains the reason for the fair value movements.
(vi) Fair value of Financial assets and liabilities measured at amortised cost
The carrying amount of trade receivable, current loans, current portion of interest accrued on fixed deposit, bonds and certificates, cash and cash equivalents, bank balances other than cash and cash equivalents, trade payable, capital creditors, current security deposits (liability) and other current financial liabilities are considered to be approximately same as their value, due to their short-term nature.
The fair value for loans, security deposits, advance recoverable in cash, fixed deposit with bank, interest accrued on fixed deposit and investments in preference shares is calculated based on cash flows discounted using a current lending rates. Further, security deposits, advance recoverable in cash and investments in preference share are classified as level 3 fair value in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
The fair value for long term security deposits are based on discounted cash flow using a current borrowing rate. They are classified as level 3 fair value in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
The carrying amount of long term borrowings is approximately equal to itâs fair value since the borrowings are at floating rate of interest. Also, the carrying amount of short term borrowing is considered to be approximately same as itâs fair value due to itâs short term nature.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
Note 6 - Financial Risk Management
The Companyâs activities are exposed to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments
The Companyâs risk management is carried out by a central treasury department under policies approved by the Board of Directors. Companyâs treasury team identifies, evaluates and hedges financial risks in close cooperation with the Companyâs respective department heads. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(All amounts are in âmillions, unless otherwise stated)
(A) Credit risk
Credit risk arises from cash and cash equivalents, investments carried at amortised cost and deposits with banks and financial institutions, as well as credit exposures to wholesale customers including outstanding receivables.
(i) Credit Risk Management
Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with bank and financial institution, foreign exchange transactions and other financial instruments.
The Company determines default by considering the business environment in which the Company operates and other macro-economic factors. This definition of default is determined by considering the business environment in which the Company operates and other macro-economic factors. The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterpartyâs ability to meet its obligations;
iv) Significant increase in credit risk on other financial instruments of the same counterparty;
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company.
Trade Receivable
Trade receivables are typically unsecured and are derived from revenue earned from customers.
Credit risk has 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 uses a provision matrix and forward-looking information and an assessment of the credit risk over the expected life of the financial asset to compute the expected credit loss allowance for trade receivables.
Concentrations of credit risk with respect to trade receivables are limited, due to the Companyâs customer base being large and diverse. The following table gives details in respect of percentage of revenue generated from the top ten customers.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, Derivative financial instruments, investments in government securities and bonds, and investments in mutual funds. The Company has diversified portfolio of investment with various number of counter-parties which have good credit ratings, good reputation, good past track records and reviews and hence the risk is reduced. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Company.
Expected credit loss for trade receivables under simplified approach:
During the year and previous years, the Company made no write-offs of trade receivables, it does not expect to receive future cash flows or recoveries from collection of cash flows previously written off.
(B) Liquidity Risk
Liquidity risk refers to the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or other financial assets. 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.
(i) Financing arrangements
The Company had access to the following undrawn borrowing facilities at the end of the reporting period:
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice.
(ii) Maturities of Financial liabiliities
The tables below analyse the Companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for:
- all non derivative financial liabilities, and
- net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows.
(C) Market risk
(i) Foreign currency risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments, highly probable forecast transactions and foreign currency required at the settlement date of certain receivables/payables. The use of foreign currency forward contracts is governed by the Companyâs strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Companyâs risk management policy and procedures.
(a) Foreign currency risk exposure
The Companyâs exposure to foreign currency risk at the end of the reporting period in India Rupees are as follows :
(b) Foreign Currency Sensitivity
The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments and foreign forward exchange contracts.
(ii) Cash flow and fair value interest rate risk
The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The Company uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like non-convertible bonds and short term loans. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
(a) Interest rate risk exposure
The exposure of the Companyâs borrowing to interest rate changes at the end of the reporting period are as follows:
As at the end of the reporting period, the Company had the following variable rate borrowings outstanding:
(b) Sensitivity
Profit or loss is sensitive to higher/lower interest expense from borrowings as a result of changes in interest rates.
(iii) Price risk
(a) Exposure
The Company is mainly exposed to the price risk due to its investment in mutual funds and bonds. The price risk arises due to uncertainties about the future market values of these investments. In order to manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio in accordance with the limits set by the risk management policies.
(b) Sensitivity
The table below summarises the impact of increases/decreases of 0.75% increase in price of Mutual Fund / Bond.
(c) As at the Balance Sheet date, the foreign currency exposure not hedged by a derivative instrument or otherwise aggregates Rs.5.36 million (March 31, 2016 : Rs.13.38 million) for receivables (net of provisions) and Rs.166.50 million (March 31, 2016 : Rs.10.14 million) for payables.
Note 7 - Capital Management
(a) Risk Management
The Companyâs objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Companyâs overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other long term borrowings. The Companyâs policy is to use short-term and long-term borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the net debt to equity ratio. The Company is not subject to any externally imposed capital requirements.
Net debt are long term and short term debts as reduced by cash and cash equivalents (including restricted cash and cash equivalents) and short-term investments. Equity comprises all components excluding other components of equity (which comprises the cash flow hedges, translation of foreign operations and available-for-sale financial investments).
The Companyâs strategy is to maintain a gearing ratio within 2:1. The gearing ratios were as follows:
The following table summarizes the capital of the Company:
(i) Loan covenants
Under the terms of the major borrowing facilities, the Company is required to comply with the following financial covenants:
- the approved range for gearing ratio is 2 times to 2.57 times, and
- the ratio of Debt Service Coverge Ratio (DSCR) must be atleast 1.2 times.
The Company has complied with these covenants throughout the reporting period. As at 31 March 2017, the DSCR ratio was 3 times (March 31, 2016 : 4.70 times).
Note 8 - Contingent Liabilities
(a) It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.
(b) The Company does not expect any reimbursements in respect of the above contingent liabilities.
(c) Description of contingent liabilities.
Excise, Customs, Service Tax and Sales Tax Matters
Welspun India Limited has ongoing disputes with Indian tax authorities mainly relating to availment of cenvat credit and input tax credit on certain items. As of March 31, 2017, Welspun India Limited has demands from various indirect tax authorities in Indian jurisdiction, which are being contested by the Company on appeal amounting to Rs.341.48 million.
Income Tax Matters
Welspun India Limited has ongoing disputes with Indian Income tax authorities relating to tax treatment of certain items. These mainly includes disallowed expenses, tax treatment of certain expenses claimed by the Company as deductions, and computation of, or eligibility of, certain tax incentives or allowances. As of March 31, 2017 Welspun India Limited has contingent liability in respect of demands from direct tax authorities in India which are amounting to Rs.52.30 million.
Note 9 - Details of Employees Stock Options
On June 30, 2009, the Company issued Employee Stock Options (ESOP) under the Employee Stock Options Scheme (the âSchemeâ) to employees of the Company with a right to subscribe to equity shares (âNew Optionsâ) at a price of Rs.35.60 per equity share (closing market price as on June 30, 2009). The salient features of the Scheme are as under:
(i) Vesting: Options to vest over a period of four years from the date of their grants as under:
- 20% of the Options granted to vest at each of the 1st and 2nd anniversaries of the date of grant.
- 30% of the Options granted to vest at each of the 3rd and 4th anniversaries of the date of grant.
(ii)Exercise: Options vested with an employee will be exercisable within 3 years from the date of their vesting by subscribing to the number of equity shares in the ratio of one equity share for every option at the Exercise Price. In the event of cessation of employment due to death, resignation or otherwise, the Options may lapse or be exercisable in the manner specifically provided for in the Scheme.
There are no options outstanding as at March 31, 2017.
The Company has availed the exemption provided by Ind AS 101 regarding share based payment transactions and accordingly has not applied Ind AS 102 - Share based payment to equity instruments that vested before date of transition to Ind AS (Refer Note 45).
Note 10
The Company has issued corporate guarantees aggregating Rs.7,426.42 million as at the year end March 31, 2017 (March 31, 2016: Rs.7,562.68 million and for March 31, 2015: Rs.8,960.83 million) on behalf of Welspun Global Brands Limited (WGBL), Welspun Captive Power Generation Limited (WCPGL) and CHT Holdings Limited (CHTHL). Liability outstanding in the books of above-mentioned companies for which corporate guarantees have been issued aggregates Rs.3,413.04 million as at March 31, 2017 (March 31, 2016: Rs.2,851.34 million and as on March 31, 2015: Rs.3,198.89 million).
Note 11 - Leases
Where the Company is a lessee:
Operating Lease
The Company has taken various residential, office premises, godowns, equipment and vehicles under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months to sixty months.
The aggregate rental expenses of all the operating leases for the year are Rs.86.85 million (Previous Year: Rs.79.50 million).
The above information and that given in Note 10 (c) - âTrade Payableâ regarding micro and small enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.
Note 12
Details of Research and Development expenses incurred during the year, debited under various heads of Statement of Profit and Loss are given below:
Note 13: Offsetting financial assets and financial liabilities
There are no financial assets or financial liabilities which are subject to offsetting as at March 31, 2017, March 31, 2016 and April 1, 2015 since, the entity neither has enforceable right or an intent to settle on net basis or to realise the asset and settle the liability simultaneously. Further, the Company has no enforceable master netting arrangements and other similar arrangements as at March 31, 2017, March 31, 2016 and April 1, 2015.
Note 14 : First-time adoption of Ind AS
Transition to Ind AS
These are the Companyâs first financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended March 31, 2017, the comparative information presented in these financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS balance sheet at April 1, 2015. In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected The Companyâs financial position, financial performance and cash flows is set out in the following tables and notes.
A. Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A.1 Ind AS optional exemptions A.1.1 Business combinations
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date.
The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.
A.1.2 Deemed cost for Property, Plant and Equipment (PPE) and Intangible assets
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties.
Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
A.1.3 Deemed cost for Investments in subsidiaries
The Company has elected to measure its investments in subsidiaries at its previous GAAP carrying values which shall be the deemed cost as at the date of transition.
A.1.4 Designation of previously recognised financial instruments
Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS.
The Company has elected to apply this exemption for its investment in equity investments of AYM Syntex Limited and Khaitan Chemicals and Fertilizers Limited.
A.1.5 Share-based payment transaction
The Company has availed the exemption provided by Ind AS 101 regarding share based payment transactions and accordingly has not applied Ind AS 102 - Share based payment to equity instruments that vested before date of transition to Ind AS.
A.2 Ind AS mandatory exceptions A.2.1 Estimates
An entityâs estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Upon an assessment of the estimates made under Previous GAAP, the Company has concluded that there was no necessity to revise such estimates under Ind AS, except where estimates were required by Ind AS and not required by Previous GAAP.
A.2.2Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
A.2.3Impairment of financial assets
Ind AS 101 requires an entity to use reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognised and compare that to the credit risk at the date of transition to Ind AS.
B. Reconciliations between previous GAAP and Ind AS
Ind AS 101 requires reconciliations of its equity reported in accordance with previous GAAP to its equity in accordance with Ind AS and a reconciliation to its total comprehensive income in accordance with Ind AS for the latest period in the entityâs most recent annual financial statements.
Welspun India Limited has chosen to provide reconciliation of amount reported in accordance with previous GAAP to amount reported under Ind AS for each line item of balance sheet and statement of profit and loss as an additional disclosure.
C. Notes to first-time adoption:
Note 1: Fair valuation of investments
Under the previous GAAP, investments were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value at initial and subsequent recognition at fair value (other than equity investment in subsidiaries which are carried at cost and preference shares which are subsequently measured at amortised cost). The resulting fair value changes of these investments (other than equity instruments designated as at FVOCI) have been recognised in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended March 31, 2016. This increased the retained earnings by Rs.293.09 million as at March 31, 2016 (April 1, 2015 - Rs.84.66 million).
The profit for the year ended March 31, 2016 higher by Rs.208.43 million as result of recognising interest income using effective interest rate method.
Further, the resulting fair value changes of investments in Bonds and Mutual Funds has decreased retained earnings by Rs.9.75 million as at March 31, 2016 (April 1, 2015 - increased by Rs.24.20 million). The profit for the year ended March 31, 2016 lower by Rs.33.95 million as a result of recognising the same at market value.
Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognised in FVOCI - Equity investments reserve as at the date of transition and subsequently in the other comprehensive income for the year ended March 31, 2016. This increased FVOCI - Equity investments reserve by Rs.22.02 million as at March 31, 2016 (April 1, 2015 - Rs.22.18 million)
Note 2: Investment in preference shares of subsidiaries (valued at amortised cost)
Under the previous GAAP, investment in preference shares of subsidiaries is recorded at the transaction price. Under Ind AS, investment in preference shares is treated as financial asset. Such asset is recorded at fair value at initial recognition and subsequently measured at amortised cost using effective interest rate method (except those subsequently measured at fair value). The difference between fair value and transaction price on initial recognition is recognised as additional investment in subsidiary. As a result of this adjustment, retained earnings as at March 31, 2016 is higher by Rs.181.36 million (April 1, 2015 -higher by Rs.124.58 million). The profit for the year ended March 31, 2016 higher by Rs.56.78 million as result of recognising interest income using effective interest rate method.
Note 3: Security deposits
Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, the group has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent. Consequent to this change, the amount of security deposits decreased by Rs.7.92 million as at March 31, 2016 (April 1, 2015 - Rs.5.65 million). The prepaid rent increased by Rs.8.26 million as at March 31, 2016 ( April 1, 2015 - Rs.5.65 million). Total equity decreased by Rs.NIL as on April 1, 2015. The profit for the year and total equity as at March 31, 2016 increased by Rs.0.34 million due to notional interest income of Rs.10.14 million recognised on security deposits which is partially offset by amortization of prepaid rent of Rs.9.80 million.
Note 4: Government Grants:
The Company receives VAT incentives from the government of Gujarat under Gujarat Textile Policy 2012 based on the amount of capital expenditure made on eligible investments. The impact of change in method of recognising grants has resulted in decrease in the equity by Rs.504.07 million as at March 31, 2016 (April 01, 2015- Rs.855.30 million) and profit for the year ended March 31, 2016 increased by Rs.351.23 million.
Further, under previous GAAP, Government grant received as âCapital Contributionâ was deducted from related property, plant and equipment and depreciation was provided on net property, plant and equipment balance. However, under Ind AS, such grant is shown separately in the balance sheet as âDeferred Incomeâ income is accrued in the ratio of depreciation on related assets. Consequent to the above, the total equity as at March 31, 2016 decreased by Rs.NIL (April 1, 2015 - NA) and profit for the year ended March 31, 2016 decreased by Rs.NIL. Revenue for the year is increased by 1.29 million and corresponding impact on depreciation Rs.1.29 million.
Note 5: Proposed dividend
Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of Rs.60.47 million as at March 31, 2016 (April 1, 2015 - Rs.906.83 million) included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.
Note 6: Excise duty
Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty.
Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended March 31, 2016 by Rs.392.23 million. There is no impact on the total equity and profit.
Note 7: Variable Consideration
Under previous GAAP, Claims, discounts and rebates paid to customers were recorded as part of expenses in the Statement of Profit and Loss. However, under Ind AS, these expenses are netted off against Revenue. This change has resulted in decrease in total revenue and total expenses for the year ended March 31, 2016 by Rs.181.82 million. Further, under previous GAAP, cash discounts received were recorded as part of other income in the statement of profit or loss. However, under Ind AS, these are netted off against cost of material consumed. This change has resulted in decrease in other income and cost of material consumed for the year ended March 31, 2016 by Rs.18.33 million. There is no impact on the total equity and profit.
Note 8: Re-measurements of post-employment benefit obligations
Under Ind AS, re-measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these re-measurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31, 2016 decreased by Rs.3.76 million. There is no impact on the total equity as at March 31, 2016.
Note 9: Deferred tax
Deferred taxes impact of the above adjustments, wherever applicable have been recognised on transition to Ind AS.
Note 10: Retained earnings
Retained earnings as at April 1, 2015 has been adjusted consequent to the above Ind AS transition adjustments.
Note 11: Other comprehensive income
Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as âother comprehensive incomeâ includes re-measurements of defined benefit plans and fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP.
Note 12 : Supplier financing
Under previous GAAP, acceptances are disclosed as part of Trade payables. However under Ind AS, the Company need to look at the substance of the arrangement and need to determine whether the original trade payable has been extinguished or not based on the fact of arrangements. Company has analysed its arrangements with the vendors and banks and has determined that the trade payables has been extinguished under the arrangement and should be de-recognised resulting in new liability to bank which has been presented under short-term borrowings. This change has resulted in an increase in borrowings and corresponding decrease in trade payables by Rs.3,448.31 million as at March 31, 2016 (Rs.2,556.36 million as at April 1, 2015). There is no impact on the total equity and profit.
Note 15 : Events occurring after the reporting date:
Refer Note 28(b) for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing annual general meeting.
Mar 31, 2015
(i) Rights, preferences and restrictions attached to shares Equity
Shares:
The company has one class of equity shares having a par value of Rs.10
per share. Each shareholder is eligible for one vote per share held.
The dividend, in case proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting,
except in case of interim dividend. In the event of liquidation, the
equity shareholders are eligible to receive the remaining assets of the
Company after distribution of all preferential amounts, in proportion
to their shareholding.
(e) Shares alloted as fully paid up pursuant to contract(s) without
payment being received in cash (during 5 years immediately preceeding
March 31,2015):
10,475,496 equity shares of Rs. 10 each fully paid were issued in
January 2013 to the erstwhile shareholders of Welspun Global Brands
Limited (Formerly known as Welspun Retail Limited) pursuant to the
composite scheme of arrangement between Welspun Global Brands Limited,
the Company and Welspun Retail Limited without payment being received
in cash.
2 : Long-term Borrowings
(a) Nature of security and terms of repayment for secured debentures :
The Company has alloted 1,000 debentures on March 31,2015 aggregating
to Rs. 1,000 million, which carry interest rate of 10.40% p. a. payable
half yearly. These debentures are redeemable at the end of 3 years from
the date of allotment.
The Company is in the process of creating security against these
debentures by way of first pari passu charge on the fixed assets of the
Company.
II Defined Benefit Plan
Contribution to Gratuity Fund (Funded Defined Benefit Plan)
1. The Company operates a gratuity plan through the "Welspun India
Limited Employees Gratuity Trust". Every employee is entitled to a
benefit equivalent to fifteen days salary last drawn for each completed
year of service in line with the Payment of Gratuity Act, 1972. The
same is payable at the time of separation from the Company or
retirement, whichever is earlier.
The liability for leave entitlement and compensated absences as at year
end is Rs. 88.03 million (March 31,2014: Rs. 60.79 million).
3 : Contingent Liabilities
(Rs. million)
As at As at
Description March 31, 2015 March 31,2014
Excise, Customs and Service Tax Matters 341.24 344.28
Income Tax Matters 135.77 135.77
Stamp Duty Matter 4.46 4.46
Sales Tax 55.41 30.96
Claims against Company not acknowledged
as debts 2.24 2.24
a) It is not practicable for the Company to estimate the timing of cash
outflows, if any, in respect of the above pending resolution of the
respective proceedings.
b) The Company does not expect any reimbursements in respect of the
above contingent liabilities.
4 The Company has issued corporate guarantees aggregating Rs. 8,960.83
million as at the year end (March 31, 2014: Rs. 9,913.94 million) on
behalf of Welspun Global Brands Limited (WGBL) (formerly known as
Welspun Retail Limited), Welspun USA Inc. (WUSA), Welspun Captive Power
Generation Limited (WcPGL) and CHT Holdings Limited (CHTHL). Liability
outstanding for which corporate guarantees have been issued aggregates
Rs. 3,198.89 million as on March 31,2015 (March 31,2014: Rs. 4,809.63
million).
5 In the previous year, with effect from July 1,2013, the management
re-assessed the method of providing depreciation on its plant and
machinery (other than electrical installations) after taking into
consideration the type of assets, nature of their use etc. Based on the
re-assessment, the Company changed the method of providing depreciation
from straight- line method to reducing balance method as it was
considered that it would result in more appropriate preparation and
presentation of the Financial Statements of the Company. Accordingly,
depreciation was recalculated under the reducing balance method for the
period from the date on which the assets came into use upto June 30,
2013 in accordance with Accounting Standard 6 "Depreciation
Accounting" notified under Section 211(3C) [Companies (Accounting
Standards) Rules, 2006, as amended]. The incremental depreciation of
Rs. 4,630.96 million for the period upto June 30, 2013 arising from the
change was provided in the previous year. In addition to the
aforementioned incremental depreciation, depreciation for the period
July 1, 2013 to March 31,2014 was higher by Rs.107.13 million due to
the change in the method. Accordingly, depreciation and amortization
expenses for the year ended March 31,2014 was higher by Rs. 4,738.09
million.
6 The Company has utilised deferred tax assets recognized in earlier
period aggregating Rs. 310.70 million on the incremental unabsorbed
Income-tax depreciation arising out of its treatment of certain Excise
and Value Added Tax incentives as 'capital receipts' for income tax
purposes. Income Tax authorities have passed orders treating these
incentives as revenue in nature. The Company has filed an appeal
against the aforesaid orders. If the final decision in the matter is
eventually decided against Welspun India Limited, then the current tax
expense could be higher by Rs. 310.70 million.
On June 30, 2009, the Company issued Employee Stock Options (ESOP)
under the Employee Stock Options Scheme (the "Scheme") to employees
of the Company with a right to subscribe to equity shares ("New
Options") at a price of Rs. 35.60 per equity share (closing market
price as on June 30, 2009). The salient features of the Scheme are as
under:
i) Vesting: Options to vest over a period of four years from the date
of their grants as under:
- 20% of the Options granted to vest at each of the 1st and 2nd
anniversaries of the date of grant.
- 30% of the Options granted to vest at each of the 3rd and 4th
anniversaries of the date of grant.
ii) Exercise: Options vested with an employee will be exercisable
within 3 years from the date of their vesting by subscribing to the
number of equity shares in the ratio of one equity share for every
option at the Exercise Price. In the event of cessation of employment
due to death, resignation or otherwise, the Options may lapse or be
exercisable in the manner specifically provided for in the Scheme.
The compensation costs of stock options granted to employees are
accounted by the Company using the intrinsic value method as permitted
by the SEBI Guidelines and the Guidance Note on Accounting for Employee
Share Based Payments issued by the Institute of Chartered Accountants
of India in respect of stock options granted. The value of underlying
share has been determined by an independent valuer. Since, on the date
of grant of option, quoted market price of the underlying equity shares
of the Company was equal to the exercise price of an option, no expense
or liability arising from the Scheme has been recognised.
7 : Segment Information for the year ended March 31,2015.
i) Information about Primary Business Segment
The Company is exclusively engaged in the business of Home Textiles
which, in the context of Accounting Standard 17 on Segment Reporting is
considered to constitute a single primary segment. Thus, the segment
revenue, segment results, total carrying amount of segment assets,
total carrying amount of segment liabilities, total cost incurred to
acquire segment assets, total amount of charge for depreciation during
the period are all as reflected in the financial statements for the
year ended March 31,2015 and as on that date.
ii) Information about Secondary Geographical Segments:
The Company is primarily engaged in sales to customers located in
India. Consequently the Company does not have separate reportable
geographical segments for March 2015.
8 : Related Party Disclosures
i) Relationships
(a) Control
Holding Company
Krishiraj Trading Limited (KTL) (through own shareholding and through
shares held by its subsidiary company) (Refer Note 3(b))
Subsidiary Companies
Besa Developers and Infrastructure Private Limited (BESA)
Welspun Global Brands Limited (WGBL) (Formerly known as Welspun Retail
Limited (WRL)
Welspun Holdings Private Limited, Cyprus (WHPL)
Welspun Home Textiles UK Limited (WHTUKL)
(Held through WHPL)
Welspun UK Limited (WUKL) (Held through CHTL)
CHT Holdings Limited (CHTHL) (Held through WHTUKL)
Welspun USA Inc., USA (WUSA)
Welspun Decorative Hospitality LLC (WDHL)
Welspun Captive Power Generation Limited (WCPGL)
Anjar Integrated Textile Park Developers Private Limited (AITPDPL)
Welspun Anjar SEZ Limited (WASEZ)
Kojo Canada Inc. (Held through WDHL)
Welspun Mauritius Enterprises Limited (WMEL)
Novelty Home Textiles SA de CV (NHTSC) (Held through WMEL)
Christy Home Textiles Limited (CHTL)
(Held through CHTHL)
Christy 2004 Limited (CHT 2004) (Held through WUKL)
Christy Welspun GmbH (CWG) (Held through WUKL)
Christy UK Limited (CUKL) (Held through CHTL)
ER Kingsley (Textiles) Limited (ERK) (Held through CHTL)
Christy Lifestyle LLC, USA (CLL)
Welspun Zucchi Textiles Limited (WZTL) (with effect from January 30,
2015)
(c) Enterprises over which Key Management Personnel or relatives of
such personnel exercise significant influence or control and with whom
transactions have taken place during the year
Welspun Investments and Commercials Limited (WICL)
Welspun Corp Limited (WCL)
Welspun Steel Limited (WPSL)
Welspun Tradings Limited (WTL)
Welspun Wintex Limited (WWL)
Welspun Mercantile Limited (WML)
Welspun Energy Limited (WEL)
Welspun Logistics Limited (WLL)
Welspun Syntex Limited (WSL)
Welspun Realty Private Limited (WRPL)
Mertz Securities Limited (MSL)
Welspun Polybuttons Limited (WPBL)
Wel-treat Enviro Management Organisation Limited (WEMO)
Welspun Maxsteel Limited (WMSL)
Welspun Projects Limited ( WPL)
Methodical Investment and Trading Company Private Limited (MITCPL)
Welspun FinTrade Limited (WFTL)
Welspun Finance Limited (WFL)
Welspun Foundation for Health and Knowledge (WFHK)
Welspun Infra Developers Limited (WIDL)
Technopak Advisors Private Limited (TAPL)
Welspun Infratech Limited (W INFRA)
(d) Key Management Personnel
Balkrishan Goenka (BKG) Rajesh Mandawewala (RRM) Dipali Goenka (DBG)
(e) Relatives of Key
Management Personnel
Radhika Goenka (RBG) Abhishek Mandawewala (ARM) Khushboo Mandawewala
(KAM) Yash Mandawewala (YRM)
9 : Leases
Where the Company is a lessee:
Operating Lease
The Company has taken various residential, office premises, godowns,
equipment and vehicles under operating lease agreements that are
renewable on a periodic basis at the option of both the lessor and the
lessee. The initial tenure of lease is generally for eleven months to
sixty months.
The aggregate rental expenses of all the operating leases for the year
are Rs. 65.96 million (Previous Year: Rs. 86.25 million).
10 : Derivative Instruments outstanding as at March 31,2015 :
The Company is exposed to foreign currency fluctuations on foreign
currency assets/ liabilities, payables denominated in foreign currency.
In line with the company's risk management policies and procedures,
the Company enters into foreign currency forward contracts and swap
contracts to manage its exposure. These contracts are for a period of
maximum twelve months and forecasted transactions are expected to occur
during the same period.
11 : Interest in Joint Venture
a. The Company has the following investment in a jointly controlled
entity:
b. The Company's share of contingent liability of WZTL is Rs. Nil
(March 31,2014: Rs. 32.07 million).
12 Prior year comparatives have been reclassified to conform with the
current year's presentation, wherever applicable.
Mar 31, 2014
General Information
Welspun India Limited (WIL) is a leading manufacturer of wide range of
home textile products, mainly terry towels, bed linen products and
rugs. The Company is a public limited company and is listed on the
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
1.(a) Rights, preferences and restrictions attached to shares Equity
Shares:
The company has one class of equity shares having a par value of Rs.10
per share. Each shareholder is eligible for one vote per share held.
The dividend, in case proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting,
except in case of interim dividend. In the event of liquidation, the
equity shareholders are eligible to receive the remaining assets of the
Company after distribution of all preferential amounts, in proportion
to their shareholding.
(b) Shares alloted as fully paid up pursuant to contract(s) without
payment being received in cash (during 5 years immediately preceeding
March 31, 2014):
10,475,496 equity shares of Rs. 10 each fully paid were issued in
January 2013 to the erstwhile shareholders of Welspun Global Brands
Limited (Formerly known as Welspun Retail Limited) pursuant to the
composite scheme of arrangement between Welspun Global Brands Limited,
the Company and Welspun Retail Limited without payment being received
in cash.
Note :
The working capital loans, which includes cash credit and packing
credit from banks, are secured by hypothecation of raw materials,
stock-in-process, finished goods, semi finished goods, stores, spares
and book debts and other current assets of the Company and second
charge on entire fixed assets of the Company.
Note :
Acceptance includes unsecured vendor financing of Rs. 1,262.69 million
(Previous year Rs. 111.09 million) from various banks.
Note:
There are no amounts due for payment to the Investor Education and
Protection Fund under Section 205C of the Companies Act, 1956 as at the
year end.
II Defined Benefit Plan
Contribution to Gratuity Fund (Funded Defined Benefit Plan)
The Company operates a gratuity plan through the "Welspun India Limited
Employees Gratuity Trust". Every employee is entitled to a benefit
equivalent to fifteen days salary last drawn for each completed year of
service in line with the Payment of Gratuity Act, 1972. The same is
payable at the time of separation from the Company or retirement,
whichever is earlier.
2 Contingent Liabilities
(Rs. million)
As At As At
Descrlption March 31, 2014 March 31, 2013
Excise, Customs and
Service Tax Matters 344.28 632.08
Income Tax Matters 135.77 135.77
Stamp Duty Matter 4.46 4.46
Sales Tax 30.96 30.96
Claims against Company not
acknowledged as debts 2.24 3.66
(a) It is not practical for the Company to estimate the timing of cash
outflows, if any, in respect of the above pending resolution of the
respective proceedings.
(b) The Company does not expect any reimbursements in respect of the
above contingent liabilities.
3 The Company has issued corporate guarantees aggregating Rs. 9,913.94
million as at the year end (March 31, 2013: Rs. 8,852.01 million) on
behalf of Welspun Global Brands Limited (WGBL) (formerly known as
Welspun Retail Limited), Welspun USA Inc. (WUSA), Welspun Home Textiles
UK limited (WHTL), Welspun Captive Power Generation Limited (WCPGL) and
CHT Holdings Limited (CHTHL). Liability outstanding for which corporate
guarantees have been issued aggregates Rs. 9,065.94 million as on March
31, 2014 (March 31, 2013: Rs. 7,672.85 million)
4 During the quarter ended September 30, 2013, the management
re-assessed the method of providing depreciation on its plant and
machinery (other than electrical installations) after taking into
consideration the type of assets, nature of their use etc. Based on the
re-assessment, the Company changed the method of providing depreciation
from straight-line method to reducing balance method as it was
considered that it would result in more appropriate preparation and
presentation of the Financial Statements of the company. Accordingly,
depreciation was recalculated under the reducing balance method for the
period from the date on which the assets came into use upto June 30,
2013 in accordance with Accounting Standard 6 "Depreciation Accounting"
notified under Section 211(3C) [Companies (Accounting Standards) Rules,
2006, as amended]. The incremental depreciation of Rs. 4,630.96
million for the period upto June 30, 2013 arising from the change has
been provided during the year. In addition to the aforementioned
incremental depreciation, depreciation for the period July 1, 2013 to
March 31, 2014 is higher by Rs.107.13 million due to the change in the
method. Accordingly, depreciation and amortization expenses for the
year ended March 31, 2014 is higher by Rs. 4,738.09 million and profit
before tax for the year ended March 31, 2014 is lower by Rs. 4,738.09
million with a consequential impact on profit after tax for the year.
Had the method of depreciation not been changed, profit before tax for
the year ended March 31, 2014 would have been Rs. 5,184.42 million as
against the profit before tax of Rs. 446.33 million.
5 The Company has utilised deferred tax assets recognized in earlier
period aggregating Rs. 310.70 million on the incremental unabsorbed
Income-tax depreciation arising out of its treatment of certain Excise
and Value Added Tax incentives as ''capital receipts'' for income tax
purposes. Income Tax authorities have passed orders treating these
incentives as revenue in nature. The Company has filed an appeal
against the aforesaid orders. If the final decision in the matter is
eventually decided against Welspun India Limited, then the current tax
expense could be higher by Rs. 310.70 million.
6 During an earlier year, the Company had inadvertently made certain
investments aggregating Rs. 1,197.29 million in the bonds issued by
certain public sector undertakings without obtaining prior approval of
the shareholders by way of a special resolution as required under
Section 372A of the Companies Act, 1956. Subsequently, these
investments were sold. Further, the Company had filed a suo motu
application to the Company Law Board in the financial year 2012-13 for
compounding of this offence. The offence committed under Section 372A
was compounded against the Company, managing director, company
secretary and a former director on payment of Rs. 2,000 by each of the
aforesaid defaulters.
7 Details of Employees Stock Options
On June 30, 2009, the Company issued Employee Stock Options (ESOP)
under the Employee Stock Options Scheme (the "Scheme") to employees of
the Company with a right to subscribe to equity shares ("New Options")
at a price of Rs. 35.60 per equity share (closing market price as on
June 30, 2009). The salient features of the Scheme are as under:
(i) Vesting: Options to vest over a period of four years from the date
of their grants as under:
* 20% of the Options granted to vest at each of the 1st and 2nd
anniversaries of the date of grant.
* 30% of the Options granted to vest at each of the 3rd and 4th
anniversaries of the date of grant.
(ii) Exercise: Options vested with an employee will be exercisable
within 3 years from the date of their vesting by subscribing to the
number of equity shares in the ratio of one equity share for every
option at the Exercise Price. In the event of cessation of employment
due to death, resignation or otherwise, the Options may lapse or be
exercisable in the manner specifically provided for in the Scheme.
The compensation costs of stock options granted to employees are
accounted by the Company using the intrinsic value method as permitted
by the SEBI Guidelines and the Guidance Note on Accounting for Employee
Share Based Payments issued by the Institute of Chartered Accountants
of India in respect of stock options granted. The value of underlying
share has been determined by an independent valuer. Since, on the date
of grant of option, quoted market price of the underlying equity shares
of the Company was equal to the exercise price of an option, no expense
or liability arising from the Scheme has been recognised.
8 Segment Information for the year ended March 31, 2014.
(i) Information about Primary Business Segment
The Company is exclusively engaged in the business of Home Textiles
which, in the context of Accounting Standard 17 on Segment Reporting,
issued by the Institute of Chartered Accountant of India, is considered
to constitute a single primary segment. Thus, the segment revenue,
segment results, total carrying amount of segment assets, total
carrying amount of segment liabilities, total cost incurred to acquire
segment assets, total amount of charge for depreciation during the
period are all as reflected in the financial statements for the year
ended March 31, 2014 and as on that date.
(ii) Information about Secondary Geographical Segments:
The Company is exclusively engaged in sales to customers located in
India. Consequently the Company does not have separate reportable
geographical segments for March 2014.
b. The Company''s share of contingent liability of WZTL is Rs. 32.07
million (March 31, 2013: Rs. 32.07 million).
9 Leases
Where the Company is a lessee:
Operating Lease
The Company has taken various residential, office premises, godowns,
equipment and vehicles under operating lease agreements that are
renewable on a periodic basis at the option of both the lessor and the
lessee. The initial tenure of lease is generally for eleven months to
sixty months.
The aggregate rental expenses of all the operating leases for the year
are Rs. 86.25 million (Previous Year: Rs. 99.78 million).
* Provision for doubtful loans and advance of Rs.15.56 million (March
31, 2013 : Nil) has been made.
** On March 27, 2013, Welspun AG, an erstwhile wholly owned subsidiary
of the Company was liquidated. Hence, loan given to Welspun AG,
Switzerland has been written off.
10 Derivative Instruments outstanding as at March 31, 2014 :
The Company is exposed to foreign currency fluctuations on foreign
currency assets/ liabilities, payables denominated in foreign currency.
In line with the company''s risk management policies and procedures, the
Company enters into foreign currency forward contracts and swap
contracts to manage its exposure. These contracts are for a period of
maximum twelve months and forecasted transactions are expected to occur
during the same period.
(a) Net Loss on derivative instruments of Rs. 68.02 million recognised
in Hedging Reserve as on March 31, 2014, is expected to be recycled to
the Statement of Profit and Loss by March 2015.
(b) As at the Balance Sheet date, the foreign currency exposure not
hedged by a derivative instrument or otherwise aggregates Rs. 494.15
million (March 31, 2013 Rs.124.25 million) for receivables (net of
provisions) and Rs. 1,009.31 million (March 31, 2013 Rs. 1,418.08
million) for payables.
Mar 31, 2013
1. General Informaton
Welspun India Limited (WIL) is a leading manufacturer of wide range of
home textle products, mainly terry towels, bed linen products and rugs.
The Company is a public limited company and is listed on the Bombay
Stock Exchange (BSE) and the Natonal Stock Exchange (NSE).
2 Contngent Liabilites
(Rs. million)
Descripton As At March As At March
31, 2013 31, 2012
Excise, Customs and Service Tax Maters 696 46 677 48
Income Tax Maters 135 77
Stamp Duty Mater 4 46 4 46
Sales Tax 36 81 36 44
Corporate Guarantees (Refer Note 35) 7,672.85 7,705.13
Bank Guarantees 82 49 166 89
Claims against Company not
acknowledged as debts 3 66 5 51
3 The Company has issued corporate guarantees aggregatng Rs. 8,852.01
million as at the year end (March 31, 2012: Rs. 8,891.90 million) on
behalf of Welspun Retail Limited (WRL), Welspun USA Inc. (''WUSA''),
Welspun Home Textles UK limited (''WHTL''), Welspun Captve Power
Generaton Limited (WCPGL) and CHT Holdings Limited (''CHTHL''). Liability
outstanding against which corporate guarantees have been issued
aggregates Rs. 7,672.85 million as on March 31, 2013 (March 31, 2012:
Rs. 7,705.13 million)
4 During an earlier year, the Company had recognised deferred tax
assets aggregatng Rs. 296.58 million on the incremental unabsorbed
Income-tax depreciaton arising out of its treatment of certain Excise
and Value Added Tax incentves as ''capital receipts'' for income tax
purposes. Income Tax authorites have passed orders treatng these
incentves as revenue in nature. The Company has fled appeals against
the aforesaid orders. If the fnal decision in the mater is eventually
decided against Welspun India Limited, then the carrying value of the
Minimum Alternate Tax Credit Enttlement assets at the year end could be
signifcantly impacted.
5 The composite scheme of arrangement (the "Scheme") between Welspun
Global Brands Limited (WGBL) (Transferor Company), the Company (First
Transferee Company) and Welspun Retail Limited ("WRL"- Second
Transferee Company) was approved by the High Court of Gujarat at
Ahmedabad by its order dated November 26, 2012. The order has been fled
with the Registrar of Companies on December 7, 2012. Pursuant to the
Scheme 10,475,496 equity shares of Rs. 10 each included in Share
Suspense Account were alloted during the year.
6 The Company''s wholly owned subsidiary in Switzerland, Welspun AG
(WAG) has been liquidated on March 27, 2013. Consequently, the Company
has writen of investment in WAG aggregatng Rs.739.12 million and
outstanding loan and advances aggregatng Rs.1,304.43 million from WAG.
The investment and loan had been fully provided in earlier years.
Accordingly, the provision has been writen back during the year.
Further, the company had made an incremental provision for the
aforesaid doubtul loan arising out of the restatement upto the date of
liquidaton of the foreign currency balance as at March 31, 2012. The
provision aggregatng Rs. 83.85 million has been included in
extraordinary items and the corresponding gain on restatement is neted
of in other expenses.
7 During the previous year, the Company had inadvertently made certain
investments aggregatng Rs. 1,197.29 million in the bonds issued by
certain public sector undertakings without obtaining prior approval of
the shareholders by way of a special resoluton as required under Secton
372A of the Companies Act, 1956. Subsequent to March 2012, these
investments were sold. Further, the Company has fled a suo motu
applicaton to the Company Law Board in the Financial Year 2012-13 for
the compounding of this ofence and adjudicaton by the Company Law Board
is pending.
8 Details of Employees Stock Optons
On June 30, 2009, the Company issued Employee Stock Optons (ESOP) under
the Employee Stock Optons Scheme (the "Scheme") to employees of the
Company with a right to subscribe to equity shares ("New Optons") at a
price of Rs. 35.60 per equity share (closing market price as on June
30, 2009) with an opton to existng grantees, who were granted optons on
May 17, 2006 ("Old Optons"), to receive New Optons on surrender of Old
Optons. All employees holding Old Optons on June 30, 2009 chose to
surrender the Old Optons. The salient features of the Scheme are as
under:
(i) Vestng : Optons to vest over a period of four years from the date
of their grants as under:
- 20% of the Optons granted to vest at each of the 1st and 2nd
anniversaries of the date of grant.
- 30% of the Optons granted to vest at each of the 3rd and 4th
anniversaries of the date of grant.
(ii) Exercise : Optons vested with an employee will be exercisable
within 3 years from the date of their vestng by subscribing to the
number of equity shares in the rato of one equity share for every opton
at the Exercise Price. In the event of cessaton of employment due to
death, resignaton or otherwise, the Optons may lapse or be exercisable
in the manner specifcally provided for in the Scheme.
9 Segment Informaton for the year ended March 31, 2013.
(i) Informaton about Primary Business Segment
The Company is exclusively engaged in the business of Home Textles
which, in the context of Accountng Standard 17 on Segment Reportng,
issued by the Insttute of Chartered Accountants of India, is considered
to consttute a single primary segment. Thus, the segment revenue,
segment results, total carrying amount of segment assets, total
carrying amount of segment liabilites, total cost incurred to acquire
segment assets, total amount of charge for depreciaton during the
period are all as refected in the fnancial statements for the year
ended March 31, 2013 and as on that date.
(ii) Informaton about Secondary Geographical Segments:
The Company is exclusively engaged in sales to customers located in
India. Consequently the Company does not have separate reportable
geographical segments for March 2013.
10 Interest in Joint Venture
a. The Company has accounted the investments in Joint Venture in
Welspun Zucchi Textles Limited (WZTL) in accordance with Accountng
Standard 13, Accountng for Investments.
b. The Company''s share of contngent liability of WZTL is Rs. 32.02
million (March 31, 2012: Rs. 29.76 million).
c. The Company''s share of the aggregate amounts of assets and
liabilites as on March 31, 2013 and income and expenditures of WZTL for
the year ended March 31, 2013 are as under :
11 Leases
Where the Company is a lessee:
Operatng Lease
The Company has taken various residental, ofce premises, godowns,
equipment and vehicles under operatng lease agreements that are
renewable on a periodic basis at the opton of both the lessor and the
lessee. The inital tenure of lease is generally for eleven months to
sixty months.
The aggregate rental expenses of all the operatng leases for the year
are Rs. 99.78 million (Previous Year: Rs. 76.30 million).
12 Derivatve Instruments outstanding as at March 31, 2013 :
The Company is exposed to foreign currency fuctuatons on foreign
currency assets/ liabilites, payables denominated in foreign currency.
In line with the company''s risk management policies and procedures, the
Company enters into foreign currency forward contracts and swap
contracts to manage its exposure. These contracts are for a period of
maximum twelve months and forecasted transactons are expected to occur
during the same period.
13 Prior year comparatves have been reclassifed to conform with the
current year''s presentaton, wherever applicable.
Mar 31, 2011
1. Contingent Liabilites:
Description As at As at
March 31, March 31,
2011 2010
Rs.million Rs. million
Excise, Customs and Service Tax
Alleged improper re-credit of duty paid 318.58 318.58
through PLA under Notification no.
39/2001-CE dated July 31, 2001 in respect
of goods sold from the factory during the
period from February 2006 to September
2007. The Assistant Commissioner of
Central Excise passed the order against
the Company.The Company paid pre-deposit
of Rs. 100 million as required by Central
Excise authorities and obtained stay on
payment of remaining amount. The case was
remanded back to the lower authority to
consider the claim of the Company by
Commissioner Appeals.
Further, separate show cause notice had
been issued by Commissioner of Central
Excise seeking recovery of allegedly
improper re-credit of duty along with
interest and penalty. The Company is
in the process of filing reply against
this show cause notice. The case is
remanded back by Tribunal to lower
authority and directed them for
reassessments of liability vide order
dated March 29, 2011.
Alleged improper grant of refund for 69.57 69.57
duty paid through PLA by Assistant
Commissioner under Rule 18 of Central
Excise Rules during the period from
September 2005 to July 2006. The
Commissioner (Appeals) of Customs
and Central Excise had passed the
order against the Company. TheCompany
has filed Revision Application with
the Joint Secretary,Ministry of
Finance, Department of Revenue.
Alleged improper Cenvat credit availed 3.67 3.50
and non-payment of excise duty under
Notification No. 214/86 -CE dated
25-03-1986, on furnace oil used for
manufacturing of goods on job work
during the period April 2002 to May 2005.
The Company has filed its reply against
the show cause notices issued by Joint
Commissioner and Commissioner of Customs
and Central Excise, Daman.
Alleged improper abatement of service 50.46 47.98
tax on payments made to Goods Transport
Agency under Notification No. 32/04-ST
dated December 31,2004. The Company has
filed its reply against the show cause
notice issued by the Commissioner of
Central Excise and Customs, Daman.
Alleged availment of service tax credit - 0.16
based on improper documents.The Company
has received an order from Commissioner,
Central Excise andCustoms, Daman
demanding the amount of duty, interest
and penalty.The Company filed an appeal
against the order with Commissioner of
CentralExcise & Customs (Appeals), Daman
Alleged improper Cenvat credit availed on 2.00 1.91
"racks"classified as capitalgoods, which
are used for storage of finished goods.
The Companyreceived an order from
Additional Commissioner, Central Excise
&Customs; Daman dated 11.02.2009
demanding the amount of duty,interest
and penalty. The Company paid Rs.0.69
million under protest and filed
an appeal against the order with
Commissioner of Central Excise &
Customs (Appeals), Daman in March 2009.
The Company has obtained stay order with
respect to the payment of duty.
Alleged improper availment of Cenvat - 0.04
credit on service tax paid oninsurance
premium paid for availing insurance
services that are not used in or in
relation to manufacture of final
products. During the year Commissioner
of Central Excise and Customs (Appeals),
Daman decided this matter in favour of
the Company.
Alleged non-reversal of cenvat credit 10.52 96.40
contained in raw material stock,raw
material in process and raw material
contained in finished stock on exit
from cenvat scheme. The Commissioner
of Central Excise issued a show cause
notice seeking recovery of the non-
reversed amount. During the year, the
Company has received favorable order
with respect to part of the amount in
dispute.The Company has filed an appeal
before Commissioner of Central Excise
and Customs (Appeals) for the balance
amount disallowed.
Alleged erroneous sanction of refund of 3.04 3.04
service tax by Assistant Commissioner
of Central Excise. The Deputy Commissioner
of Central Excise issued a show cause
notice regarding recovery of the refund
erroneously sanctioned. The Company has
submitted its reply to the Deputy
Commissioner of Central Excise.
Alleged improper availment of Cenvat 20.24 -
credit on service tax paid on sales
commission.The Company has received
a show-cause notice from Assistant
Commissioner of Central Excise and
Customs, Vapi against which a reply
has been filed by the Company.
Alleged improper availment of Cenvat 7.49 -
credit on service tax on outward
freight of transportation for export
clearance. The Company has received
a show-cause notice from Additional
Commissioner Central Excise Custom
and Service Tax (Daman) against
which reply has been submitted to
Commissioner of Central Excise.
Alleged improper availment of Cenvat 0.04 -
credit on service tax on commission
on sales. The Company has submitted
its reply for the show cause notice
received to Commissioner of Central
Excise.
Alleged misinterpretation of Notification 1.24 -
No 4/ 2006-2007 under the Customs Act for
which a reply to the show causes notice
has been submitted.
Alleged availment of Cenvat credit on 0.20 -
service tax. The Company has received an
order from Commissioner, Central Excise
and Customs, demanding the amount of duty,
interest and penalty. The Company has filed
an appeal against the order with
Commissioner of Central Excise and Customs
(Appeals).
Alleged dual availment of duty drawback 1.14 -
and DEPB scheme simultaneously. Appeal of
Central Excise department was rejected by
Central Excise and Customs (Appeals). The
Central Excise Department has filed
appeal with Revisionary Authority,
New Delhi.
Alleged improper payment of service tax on 0.35 -
services received and used in export of
goods and applied for refund under 17/2009
-ST without taking credit of the same.
The department has rejected the refund
claims made by the Company and issued a
show cause notice dated March 7, 2011.
The Company has filed its reply against
the show cause notice to Deputy
Commissioner, Central Excise Division,
Gandhidham.
Alleged availment by the Company re-credit 3.74 -
under 39/2001-CE to the extent of balance of
cenvat credit lying as at 31-03-2005, which
was rejected by the department. The show
cause notice is being contested by the
Company with Additional Commissioner of
Central Excise and Service tax on the
grounds of devoid of merits.
Stamp Duty :
Disputed stamp duty liability on De-merger 4.46 4.46
Scheme. The Company paid Rs.1.74 million
under protest.
Sales Tax :
The Deputy Commissioner of Sales Tax has 1.28 1.17
issued an assessment order for the financial
year 2003 to 2004 and raised the demand on
purchase of Furnace oil during the year 2003
to 2004 in respect of purchases made by the
Company at a concessional rate of tax. The
Company had deposited Rs. 0.09 million under
protest and has filed an appeal with the
Joint Commissioner of Sales Tax, Vadodra.
The Deputy Commissioner of Sales Tax has 7.87 7.31
issued an assessment order for the
financial year 2004 to 2005 and raised the
demand on purchase of Furnace oil during
the year 2004 to 2005 in respect of purchases
made by the Company at a concessional rate
of tax. The Company has filed an appeal with
the Joint Commissioner of Sales Tax, Vadodra.
The Assistant Commissioner of Sales Tax has 1.46 1.32
passed an order vide No.3442 dated February
24, 2005 on purchase of Furnace oil during
the year 2000-2001 at a concessional rate of
tax. Deputy Commissioner Sales Tax
re-assessed and passed revised order vide
No.3181/83 on December 5,2005 increasing the
original demand. The Tribunal has granted
stay order for this matter
Others:
Claims against the Company not acknowledged 7.85 2.89
as debts
Bills discounted in respect of export
debtors - 75.96
4. During the year, the Company has recognised deferred tax assets
aggregating Rs. 303.64 million on the incremental unabsorbed Income-tax
depreciation arising out of its treatment of certain Excise and Value
Added Tax incentives as Ãcapital receipts' for income tax purposes
based on the favorable decision received from the Commissioner of
Income Tax (Appeals) in its own case and judgment in re Commissioner of
Income Tax, Mumbai v/s. Reliance Industries Limited of the Honourable
High Court of Judicature at Bombay. However, the judgment given by the
High Court of Judicatue at Bombay has been challenged by the tax
authorites in the apex court. If the final decision in the mater is
eventually decided against the Company, then the carrying value of the
deferred tax assets at the year end could be significantly impacted.
2. Pursuant to loan agreement with Welspun USA Inc., the loan
outstanding as on March 31,2011, aggregating Rs. 111.49 million
recoverable from Welspun USA Inc. is to be converted into equity
investments and pending conversion modalities, the same has been
disclosed as Share Application Pending Allotment and grouped under
Loans and Advances.
3. Borrowing Costs aggregating Rs. Nil (Previous Year: Rs. 15.46
million) (net of interest subsidy of Rs. Nil; Previous Year: Rs. 13.18
million) atributable to the acquisition or construction of qualifying
assets are capitalised during the year as part of the cost of such
assets.
4. (a) In the meeting of the Board of Directors of the Company held on
May 11, 2011, it was resolved that the business of Welspun Mexico S.A.
de C.V. (a wholly-owned downstream subsidiary of Welspun AG which, in
turn, is a wholly owned subsidiary of the Company), involved in
manufacturing decorative bedding products for Welspun AG, shall be
re-organised in view of the adverse law and order conditions in the
region in which the manufacturing premises of Welspun Mexico S.A. de
C.V is situated which has severely impacted its business prospects and
its ability to contain the sustained losses and reverse the accumulated
losses. Further, there has been breach of the lease agreement by the
landlord necessitating the vacating of the premises. The aforesaid
business reorganization involves exiting the current manufacturing
premises of Welspun Mexico S.A. de C.V. and setting up trading
activities only in new premises, disposing of the assets and
discontinuing the employment of the majority of its employees. The
Board of Directors further resolved in the aforesaid meeting that the
consequential impairment in the value of the Company's investments in
Welspun AG, and loans given to Welspun AG, shall be determined and
recognized. Other than the business of Welspun Mexico S.A. de C.V,
Welspun AG does not have any substantial business actvities. As at
March 31, 2011, the Company had investments, aggregating Rs. 739.12
million, in Welspun AG, and outstanding loans at zero rate of interest,
aggregating Rs. 936.23 million, and other advances, aggregating Rs 1.68
million, due from Welspun AG. Accordingly, a provision of Rs. 739.12
million towards diminution in the value of investments in Welspun AG,
and a provision of Rs 937.91 million towards the aforesaid loans and
advances to Welspun AG, have been recognized and disclosed as
extraordinary items in the Profit and Loss Account for the year.
(b) As at March 31, 2011, the Company has trade receivables aggregating
Rs. 696.02 million, due from a related Company, Welspun Retail Limited
(WRL), (March 31,2010: Rs. 475.93 million). Of the said amount Rs.
108.33 million (March 31, 2010: Rs. 52.07 million) is outstanding for
more than one year. WRL continues to incur significant losses from
operations which could impact its ability to settle the aforesaid
receivables. In order to turnaround its operations, WRL has made a
robust plan for widening its reach in the market by using new marketing
strategies with aggressive cost reduction programs. Accordingly, in the
opinion of the Management, the aforesaid receivable from the said
related Company as at March 31, 2011 is considered good and
recoverable.
8. Consequent to the demerger of the marketing arm of the Company
efective April 1, 2009, the Company is dependent upon Welspun Global
Brands Limited (WGBL) for all marketing of its products and WGBL is the
Company's principal customer as regards international sales of its
products. Most of the domestic sales of the Company are made to WRL, a
subsidiary of WGBL. The Company does not have any long term definitive
agreements with either WGBL or WRL for marketing the Company's
products. In the event that WGBL or WRL ceased to purchase or market
the Company's products, it could have an adverse effect on the business
of the Company.
5. The Company has issued a corporate guarantee of Rs. 3,593 million
(March 31, 2010: Rs. 3,593 million) on behalf of WGBL in favor of a
consortium of bankers in relation to post-shipment debt facilities
provided by them to WGBL. WGBL has also given a corporate guarantee of
Rs. 5,887.40 million (March 31, 2010: Rs. 5,887.40 million) in favour
of the consortium of bankers in relation to pre-shipment debt
facilities provided by them to the Company. If WGBL is unable to meet
their obligation to bankers as they fall due, the Company would be
required to pay the guaranteed amounts, which could adversely affect
its financial condition and cash flows.
6.(a) The Company has allotted 15,603,000 equity shares of Rs. 10 each
at Rs. 100 per share on April 19,2010 to Qualified Institutional Buyers
(QIBs) in accordance with Chapter VIII of the Securities and Exchange
Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009. The equity share issue expenses related to Qualified
Institutional Placement (QIP) aggregating Rs. 87.64 million has been
adjusted against Securities Premium Account as per Section 78 of the
Act.
(b) Pursuant to the resolution passed in the Annual General Meeting of
the Company held on August 31, 2010 for approval of final dividend for
the year ended March 31, 2010; the Company has declared final dividend
for equity and preference shareholders of Rs. 106.10 million and paid
dividend tax thereon of Rs. 17.63 million (including dividend of Rs.
15.60 million to QIBs referred supra and dividend tax thereon of Rs.
2.6 million). The final dividend paid to QIBs for the year has been
presented as Final Dividend for Previous Year as an appropriation in
the Profit and Loss Account for the year.
7. On June 30, 2009, the Company issued Employee Stock Options under
the Employee Stock Options Scheme (the "Scheme") to employees of the
Company and its subsidiaries with a right to subscribe to equity shares
("New Options") at a price of Rs. 35.60 per equity share (closing
market price as on June 30, 2009) with an option to existing grantees,
who were granted options on May 17, 2006 ("Old Options"), to receive
New Optons on surrender of Old Options. All employees holding Old
Options on June 30, 2009 chose to surrender the Old Options. The
salient features of the Scheme are as under:
(i) Vesting: Options to vest over a period of four years from the date
of their grants as under:
- 20% of the Options granted to vest at each of the 1st and 2nd
Anniversaries of the date of grant.
- 30% of the Options granted to vest at each of the 3rd and 4th
Anniversaries of the date of grant.
(ii) Exercise: Options vested with an employee will be exercisable
within 3 years from the date of their vesting by subscribing to the
number of equity shares in the ratio of one equity share for every
option, at the Exercise Price. In the event of cessation of employment
due to death, resignation or otherwise the Options may lapse or be
exercisable in the manner specifically provided for in the Scheme.
The compensation costs of stock options granted to employees are
accounted by the Company using the intrinsic value method. Since, on
the date of grant of option, quoted market price of the underlying
equity shares of the Company was equal to the exercise price of an
option, no expense or liability arising from the Scheme has been
recognised.
The fair value of the options as per the ÃBlack Scholes' model as on
the date of grant was Rs. 17.49. Had the Company adopted fair value
method in respect of options granted, the employee compensation cost
would have been higher by Rs. 9.11 million (March 31,2010: Rs.13.33
million), Loss after Tax would have been higher by Rs. 6.27 million
(March 31, 2010: Profit after tax would have been lower by Rs. 8.80
million) and the basic loss per share would have been higher by Rs.
0.07 (March 31, 2010: basic earnings per share would have been lower by
Rs. 0.12) and diluted loss per share would have been higher by 0.07
(March 31, 2010: diluted earnings per share would have been lower by
Rs. 0.17), respectively.
8. Pursuant to High Court Order, 500,000 (March 31, 2010 : 500,000)
0% Redeemable Preference Shares of Rs. 100 each fully paid up are
redeemable at par on or after repayment of all outstanding term
liabilities and preference shares held by banks and financial
institutions as on April 1, 2000 and interest and dividend thereon.
Accordingly, the Preference Shares are expected to be redeemed by
January 2012.
9. (a) Term loans from banks including interest thereon are secured
by way of first charge on entire movable and immovable properties of
the Company, both present and future, ranking pari passu, subject to
prior charge on specific assets as per 13(b) below.
(b) In addition to 13(a) above, term loans from Banks Rs. 11,442.60
million (March 31, 2010: Rs. 3,880.09 million) and interest thereon,
are secured by lien on fixed deposits of the Company.
(c) The working capital loans, which includes cash credit and packing
credit from banks, are secured by hypothecation of raw materials,
stock-in-progress, finished and semi finished goods, stores and spares
and book debts and other current assets of the Company and second
charge on entire fixed assets of the Company and by a Corporate
Guarantee issued by Welspun Global Brands Limited.
10. Loan/ Deposits of Rs. Nil (March 31, 2010: Rs. 48.18 million) were
given to Companies in which some of the Directors are interested as
members.
11. Interest in Joint Venture
(a) The Company has accounted the investments in Joint Ventures in
Welspun Zucchi Textiles Limited (WZTL) and MEP Cotton Limited (MCL) in
accordance with Accounting Standard 13, Accounting for Investments.
(b) The Company's share of contingent liability of WZTL is Rs. 13.88
million (March 31, 2010: Rs.14.85 million).
(c) The Company's share of the aggregate amounts of assets and
liabilities as on March 31, 2011 and income and expenditures of WZTL
for the year ended March 31, 2011 are as under
12. Additional information pursuant to Part II of Schedule VI to the
Companies Act, 1956.
a) Licensed Capacity Not Applicable
As per the Industrial Policy declared in July 1991, as amended in April
1993, no licences are required for the products manufactured by the
Company.
Installed Capacity as at March 31, 2011 (As certified by Management)
Cotton Terry Towels 41,500 (March 31, 2010 : 41,500) M.T.
Cotton Yarn 33,130 (March 31, 2010 : 33,130) M.T.
Bed Sheets 45,000 (March 31, 2010 : 45,000) 000' Mtrs
Rugs 10,151 (March 31, 2010 : 10,151) M.T.
13. Derivative Instruments outstanding as at March 31, 2011:
The Company is exposed to foreign currency fluctuations on foreign
currency assets/ liabilities, forecasted receivable, payables
denominated in foreign currency.
In line with the company's risk management policies and procedures, the
Company enters into foreign currency forward contracts and swap
contracts to manage its exposure. These contracts are for a period of
maximum twelve months and forecasted transactions are expected to occur
during the same period.
(a) The following are outstanding foreign currency forward, swaps and
other derivative contracts against the future forecasted payables.
(b) The movement in Hedging Reserve during the year ended March 31,
2011 for derivatives designated as Cash Flow Hedges is as follows:
The entire balance of Hedging Reserve Account as at March 31, 2009 of
Rs. 294.94 million pertaining to ÃMarketing Division' of the Company
was transferred to Welspun Global Brands Limited with effect from April
1, 2009, pursuant to demerger and transfer of ÃMarketing Division' to
Welspun Global Brands Limited
c) As at the Balance Sheet date, the foreign currency exposure not
hedged by a derivative instrument or otherwise aggregates Rs. 1,127.20
million (March 31, 2010 Rs. 678.77 million) for receivables and Rs.
1,008.75 million (March 31, 2010 Rs. 825.21 million) for payables.
14 (i). Related Party Disclosures
(i) Relationships
(a) Subsidiary Companies Welspun AG (WAG)
Besa Developers and Infrastructure
Private Limited (BESA)
Welspun Mexico S.A. de C.V (WMEX)
(Held through WAG)
(b) Joint Venture Welspun Zucchi Textiles Limited (WZTL)
Companies MEP Cotton Limited (MCL) (up to January
31, 2010)
(c) Associate Company Welspun USA Inc., USA (WUSA)
Welspun Holdings Private Limited,
Cyprus (WHPL)
Welspun Captive Power Generation Limited
(WCPGL)
(with effect from January 27, 2011)
(d) Enterprises over wh Welspun Global Brands Limited (WGBL)
ich Key Management Per Welspun Investments and Commercials
sonnel or relatives of Limited (WICL)
such personnel exercise Welspun Sorema Europe, S.A. (SOREMA)
significant influence Welspun UK Limited (WUKL)
or control and with Welspun Home Textiles Limited (WHTL)
whom transactions have Welspun Retail Limited (WRL
taken place during Welspun Corp Limited (WCL) (Formerly
the year known as Gujarat Stahl
Rohren Limited (WGSRL))
Welspun Power and Steel Limited
(WPSL)
Welspun Syntex Limited (WSL)
Welspun Trading Limited (WTL)
Welspun Wintex Limited (WWL)
Welspun Mercantile Limited (WML)
Krishiraj Trading Limited (KTL)
Welspun Logistics Limited (WLL)
Welspun Realty Private Limited (WRPL)
Vipuna Trading Limited (VTL)
Mertz Securities Limited (MSL)
Welspun Polybuttons Limited (WPBL)
Wel-treat Enviro Management Organisation
Limited (WEMO)
Remi Metals Gujarat Limited (RMGL)
Welspun Maxsteel Limited (WMSL)
Welspun Projects Limited ( WPL)
Methodical Investment and Trading
Company Private Limited (MITCPL)
Welspun FinTrade Limited (WFTL)
Welspun Finance Limited (WFL)
Welspun Foundation for Health and
Knowledge (WFHK)
Welspun Urja Gujarat Private Limited
(WUGPL)
(e) Key Management B.K.Goenka (BKG)
Personnel M. L. Mital (MLM)
R. R. Mandawewala (RRM)
(Upto October 31, 2009)
(f) Relatives of Key
Management Personnel Dipali Goenka (DBG)
15. In accordance with the Company's policy given in Note 1(x) (a)
above, net exchange loss of Rs. 42.64 million (Previous Year: net
exchange gain Rs. 104.29 million) has been accounted in the Profit and
Loss Account.
16. Segment Information for the year ended March 31, 2011.
(i) Information about Primary Business Segment
The Company is exclusively engaged in the business of Home Textiles
which, in the context of Accounting Standard 17 on Segment Reporting,
issued by the Institute of Chartered Accountants of India, is
considered to constitute a single primary segment. Thus, the segment
revenue, carrying amount of segment assets and capital expenditure
incurred to acquire segment assets during the year are all as refected
in the financial statements for the year ended March 31, 2011 and as on
that date.
(iii) Notes:
(a) The Segment revenue in the geographical segments considered for
disclosure are as follows:
-Revenue within India includes sales to customers located within India
and earnings in India.
-Revenue outside India includes sales to customers located outside
India, earnings outside India and export benefits on sales made to
customers located outside India.
(b) Segment revenue and assets include the respective amounts
identified to each of the segments and amounts allocated on a
reasonable basis.
17. Leases
B. Where the Company is a lessee:
Operating Lease
The Company has taken various residential, office premises, godowns,
equipment and vehicles under operating lease agreements that are
renewable on a periodic basis at the option of both the lessor and the
lessee. The initial tenure of lease is generally for eleven months to
sixty months.
The aggregate rental expenses of all the operating leases for the year
are Rs. 94.32 million (Previous Year: Rs. 84.13 million).
18. Prior year comparatives have been reclassified to conform with the
current year's presentation, wherever applicable.
Mar 31, 2010
1. Contingent Liabilities
As At As At
March 31, 2010 March 31, 2009
Description
(Rs. million) (Rs. million)
Excise, Customs and Service Tax
Alleged excess clearance of cotton
yarn in Domestic Tariff Area over
and above the limit specified in - 19.45
para 9.9 (b) of the Exim Policy
1997-2002. The Company had deposited
Rs. 0.70 million under protest and
filed an appeal with the Customs,
Excise and Service Tax Appellate
Tribunal (CESTAT), Ahmedabad against
the order passed by Commissioner
(Appeals) of Central Excise and
Customs. The case has been settled
in the Companys favour during the
year.
Alleged improper re-credit of duty
paid through PLA under Notification
no. 39/2001 ÃCE dated July 318.58 318.58
31, 2001 in respect of goods sold
from the factory during the period
from February 2006 to September 2007.
The Assistant Commissioner of Central
Excise had passed the order against the
Company. The Company has paid pre
deposit of Rs 100 million as
required by Central Excise authorities
and obtained stay on payment of
remaining amount. The case has been
remanded back to the lower authority to
consider the claim of the Company by
Commissioner Appeals. Further, during
the year, a separate show cause notice
has been issued by Commissioner of
Central Excise seeking recovery of
allegedly improper re-credit of duty
along with interest and penalty. The
Company is in the process of filing
reply against this show cause notice.
Alleged improper grant of refund for
duty paid through PLA by Assistant
Commissioner under Rule 69.57 69.28
18 of Central Excise Rules during the
period from September 2005 to
July 2006. The Commissioner (Appeals)
of Customs and Central Excise has
passed the order against the Company.
The Company has filed Revision
Application with the Joint Secretary,
Ministry of Finance, Department of Revenue.
Alleged improper cenvat credit availed
and non payment of excise duty
under Notification No. 3.50 3.33
214/86 Ã CE dated 25-03-1986, on
furnace oil used for manufacturing
of goods on job work during the
period April 2002 to March 2008.
The Company has filed its reply
against the show cause notices
issued by Joint Commissioner and
Commissioner of Customs and Central
Excise, Daman. Based on the review
and comments made by the Committee
of Chief Commissioners, the
Commissioner has made an application
to CESTAT to withdraw his order
passed in April 2008 in respect of
non payment of excise duty.
Alleged improper abatement of
service tax on payments made to Goods
Transport Agency under 47.98 45.51
Notification No. 32/04-ST dated
3-12-2004. The Company has filed its
reply against the show cause notice
issued by the Commissioner of
Central Excise & Customs, Daman.
Alleged service tax credit based on
improper documents. The Company has
received an order from 0.16 0.15
Commissioner, Central Excise & Customs,
Daman demanding the amount of duty,
interest and penalty. The Company
filed an appeal against the
order with Commissioner of Central
Excise & Customs (Appeals), Daman
Alleged improper cenvat credit availed
on "racks" classified as capital
goods, which are used for 1.91 1.82
storage of finished goods.
The Company received an order from
Additional Commissioner, Central
Excise & Customs, Daman dated
11.02.2009 demanding the amount of
]duty, interest and penalty.
The Company has paid Rs. 0.70
million under protest and filed an
appeal against the order with
Commissioner of Central Excise &
Customs (Appeals), Daman in March 2009.
Alleged improper availment of cenvat
credit on service tax paid on
insurance premia paid for 0.04 0.03
availing insurance services that are
not used in or in relation to
manufacture of final products.
The Company has received a show-cause
notice from Assistant Commissioner
of Central Excise and Customs,
Vapi against which it has filed a
reply. The Company has paid Rs. 0.02
million under protest.
Alleged non-reversal of cenvat
credit contained in raw material stock,
raw material in process and 96.40 -
raw material contained in finished stock
on exit from cenvat scheme. The
Commissioner of Central Excise has
issued a show cause notice seeking
recovery of the non-reversed amount.
The Company has submitted its reply to
the Commissioner of Central Excise.
Alleged erroneous sanction of refund
of service tax by Assistant
Commissioner of Central Excise. 3.04 -
The Deputy Commissioner of Central
Excise has issued a show cause
notice regarding recovery of the
refund erroneously sanctioned. The
Company has submitted its reply to
the Deputy Commissioner of Central
Excise.
As At As At
March 31, 2010 March 31, 2009
Description
(Rs. million) (Rs. million)
Stamp Duty :
Disputed stamp duty liability on
De-merger Scheme. The Company has
paid Rs. 1.74 million under 4.46 4.46
protest.
Sales Tax :
The Deputy Commissioner of Sales
Tax has issued an assessment order for
the financial year 2003- 1.17 1.07
04 and raised the demand on purchase
of Furnace oil during the year
2003-04 in respect of purchases made
by the Company at a concessional
rate of tax. The Company has deposited
Rs. 0.09 million under protest
and has filed an appeal with the Joint
Commissioner of Sales Tax, Vadodra.
The Deputy Commissioner of Sales Tax
has issued an assessment order for
the financial year 2004- 7.31 6.75
05 and raised the demand on purchase
of Furnace oil during the year
2004-05 in respect of purchases made
by the Company at a concessional
rate of tax. The Company has filed an
appeal with the Joint Commissioner of
Sales Tax, Vadodra.
The Assistant Commissioner of Sales
Tax has passed an order vide No.
3442 dated February 24, 2005 1.32 -
on purchase of Furnace oil during
the year 2000-01 at a concessional
rate of tax. Deputy Commissioner
Sales Tax re-assessed and passed
revised order vide No. 3181/83 on
December 5, 2005 increasing the
original demand. The Company had filed
an appeal with Joint Commissioner,
Baroda on October 1, 2006. The demand
has been confirmed by the Joint
Commissioner. The Company is in
process of filing an appeal before the
Appellate Tribunal.
FEMA :
The Appellate Tribunal for Foreign
Exchange, New Delhi has issued an
order for contravention of the - 0.90
provision of Section 18(2) of the
Foreign Exchange Regulation Act, 1973
read with Section 49(3) and
(4) of Foreign Exchange Management
Act, 1999 in respect of non-
realisation of export proceeds. The
Company had paid Rs. 0.45 million
under protest and preferred an
appeal with the Appellate Tribunal
for Foreign Exchange (ATFE), New Delhi.
The said appeal was dismissed by ATFE
and the Company has paid the balance
amount Rs. 0.45 million in the current
year.
Others:
Accumulated dividend on cumulative
redeemable preference shares - 17.41
Claims against the Company not
acknowledged as debts 2.89 2.65
Bills discounted in respect of
export debtors 75.96 684.55
As At As At
Description March 31, 2010 March 31, 2009
(Rs. million) (Rs. million)
2. (a) Guarantees given by banks
on behalf of the Company 111.85 30.67
(b) Corporate Guarantees /
Undertakings given by the Company :
- Guarantee issued in lieu of the
indemnity and undertaking provided in
an earlier year in 679.56 724.89
favour of Bank of India, Manchester
Branch, for securing loan of GBP 10
million (March 31, 2009 : GBP 10
million) granted to Welspun Home
Textiles UK Limited for acquisition
of CHT Holdings Limited.
- Guarantees aggregating USD 8.62
million (March 31, 2009 : USD 7.92
million) on behalf 387.04 401.75
of Welspun USA Inc. (WUSA) to Nautica
Apparel Inc. in respect of all payment
obligations of WUSA under license
agreements entered between WUSA and
Nautica Apparel Inc.
As At As At
March 31, 2010 March 31, 2009
Description
(Rs. million) (Rs. million)
- Guarantee on behalf of Welspun
Mexico SA de CV (WELMEX) (Subsidiary
Company) to 300.00 300.00
HSBC México, S.A. Institución de Banca
Múltiple, Grupo Financiero (HSBC Mexico)
to secure repayment of advances,
credit and such other facilities extended
/ to be extended by HSBC Mexico to WELMEX
- Guarantee of USD 19 million (March 31,
2009: USD 19 million) on behalf of
WELMEX to 853.10 963.68
Verde Chihuahua Industrial S de RL de
CV (Verde), in respect of all payments
by WUSA as a tenant under lease agreement
between WELMEX and Verde.
- Guarantee of USD 1.12 million (March
31, 2009: USD 1.12 million) on
behalf of WELMEX 50.29 56.81
to Nautica Apparel Inc. in respect of all
payment obligations of WELMEX under the
License Agreement entered between WELMEX
and Nautica Apparel Inc.
- Guarantee on behalf of Welspun Global
Brands Limited (WGBL) in favour
of Bank of India 210.00 210.00
to secure repayment of loans extended /
to be extended by Bank of India to WGBL.
- Guarantee of USD 18 million (March 31,
2009 : Nil) on behalf of
Welspun USA, Inc. 808.20 * -
(WUSA) in favour of Bank of Baroda, New
York (USA) Branch to secure repayment of
loans extended / to be extended by Bank
of Baroda to WUSA.
- Guarantee on behalf of Welspun Global
Brands Limited (WGBL) in favour
of consortium 3,593.00 * -
of Bankers led by State Bank of Bikaner
and Jaipur ("SBBJ Consortium") to secure
repayment of facilities extended/ to be
extended by SBBJ Consortium to
WGBL. In addition guarantee extends to
facility of 20% of ad-hoc fund based
Working Capital limit under the Gold
Card Scheme [Also refer Note 9(e) below].
(c) In accordance with the EPCG Scheme,
imports of capital goods are
allowed to be made 29.13 55.41
duty free and under Advance License
Scheme, imports of raw material are
allowed to be made duty free, subject to
the condition that the Company will fulfill,
in future, a specified amount of export
obligation within a specified time.
Based on the current operating plan,
the Company would fulfill its export
obligation within the specified time
period. Amount of duty saved on imports
of above goods against which export obligation
is yet to be fulfilled.
(d) Estimated amount of contracts
(net of advances) remaining to be
executed on capital 1,046.73 36.22
account and not provided for.
* These guarantees are subject to approval of the shareholders under
Section 372A of the Companies Act, 1956.
3. On November 30, 2009, Welspun India Limited entered into a
subordination agreement with its wholly owned subsidiary, Welspun AG.
By virtue of this agreement, loans aggregating Rs. 371.30 million were
converted into a subordinated loan at zero rate of interest. The
exchange difference of Rs. 12.89 million arising on translation of this
subordinated loan is accounted in Foreign Exchange Translation Reserve.
4. As on April 1, 2009, the Company was holding 3,320,000 equity
shares of Rs.10 each of MEP Cotton Limited, a joint venture with Mr. K.
K. Mittal formed for ginning of cotton. The Company transferred its
entire shareholding in MEP Cotton Limited to Welspun Investments and
Commercials Limited at book value on February 1, 2010.
5. On July 25, 2009, the Company invested in 184,210 shares of Welspun
USA Inc. for a consideration of Rs. 33.92 million (USD 700,000).
6. On September 24, 2009, the Company invested in 1,500 shares of
Welspun Holdings Private Limited for a consideration of Rs. 116.13
million (GBP 1,500,000).
7. (a) The Company has investments aggregating Rs. 739.12 million in
its wholly owned subsidiary in Switzerland, Welspun AG (WAG). Further,
the Company has given a subordinated loan of Rs. 371.30 million at zero
rate of interest and other loans aggregating Rs. 105.27 million.
Interest accrued on such loans aggregated Rs. 42 million as at March
31, 2010. The accumulated losses of WAG as at March 31, 2010 aggregated
Rs. 910.62 million. The Company considers WAG a strategic long term
investment. Based upon the financial support of the Company and the
future growth plans of embarking in the domestic market with aggressive
cost reduction programs, WAG is expected to yield positive results in
the coming years. Accordingly, in the opinion of the management, the
aforesaid investments and the loan amounts including interest accrued
on such loans outstanding as at March 31, 2010 are considered good and
recoverable.
(b) As at March 31, 2010, the Company has trade receivables aggregating
Rs. 475.93 million due from a related Company, Welspun Retail Limited
(WRL). Of the said amount Rs. 159.75 million is outstanding for more
than 180 days. WRL continues to incur significant losses from
operations which could impact its ability to settle the aforesaid
receivables. In order to turnaround its operations, WRL has made a
robust plan for widening its reach in the market by opening new stores,
using new marketing strategies with aggressive cost reduction programs.
Accordingly, in the opinion of the management, the aforesaid receivable
from the said related Company as at March 31, 2010 is considered good
and recoverable.
(a) The Scheme of Arrangement between Welspun India Limited (WIL),
Welspun Global Brands Limited (WGBL) and Welspun Investments and
Commercials Limited (WICL) and their respective members and creditors
(the "Scheme") was approved by the High Court of Gujarat at Ahmedabad
by its order dated May 8, 2009. Pursuant to the Scheme, assets and
liabilities of the marketing division of WIL (as tabulated in (c)
below) were transferred to WGBL with effect from the appointed date
(April 1, 2009). Upon the transfer, WGBL issued one equity share of Rs.
10 each credited as fully paid up to the shareholders of WIL for every
ten equity shares held by them in WIL. Accordingly, 7,308,952 equity
shares of Rs. 10 each of WGBL were allotted to the shareholders of WIL
on July 14, 2009. Further, 500,000 equity shares held by WIL in WGBL as
at March 31, 2009 were cancelled.
(b) Further, as per the Scheme, the assets and liabilities of the
Investment and Treasury Division of WIL were transferred to WICL with
effect from the appointed date. Upon the transfer, WICL issued one
equity share of Rs. 10 each credited as fully paid up to the
shareholders of WIL for every 20 equity shares held by them in WIL.
Accordingly, 3,654,476 equity shares of Rs. 10 each of WICL were
allotted to the shareholders of WIL on July 14, 2009. Further, 50,000
equity shares held by WIL in WICL as at March 31, 2009 were cancelled.
(c) Transfer of assets, liabilities and reserves pursuant to the Scheme
(d) As a result of the demerger, the Company is dependent upon WGBL for
all marketing of its products and WGBL is the companys only customer
as regards international sales of its products. Further, as a result of
the demerger, all retail brands used in relation to the Companys
products are owned by WGBL. Further, with effect from April 1, 2009,
most of the domestic sales of the Company are made to WRL, a subsidiary
of WGBL. The Company does not have any long term definitive agreements
with either WGBL or WRL for marketing the Companys products. In the
event that WGBL or WRL ceased to purchase or market the Companys
products, it could have an adverse effect on the business of the
Company.
(e) Consequent to the demerger, the Company has issued a corporate
guarantee of Rs. 3,593 million on behalf of WGBL in favour of a
consortium of bankers in relation to post-shipment debt facilities
provided by them to WGBL. WGBL has also given a corporate guarantee of
an equivalent amount in favour of the consortium of bankers in relation
to pre-shipment debt facilities provided by them to the Company. If
WGBL is unable to meet their obligation to bankers as they fall due,
the Company would be required to pay the guaranteed amounts, which
could adversely affect its financial condition and cash flows.
8. Pursuant to the Scheme, with effect from April 1, 2009, authorised
share capital of the Company stood as Rs. 800,000,000 divided into
75,000,000 equity shares of Rs. 10 each and 500,000 Redeemable preference
shares of Rs. 100 each. Further, during the year, the authorised share
capital has been increased by Rs. 500,000,000 by creating 50,000,000 equity
shares of Rs. 10 each, pursuant to the resolution passed by the
shareholders at the Extra Ordinary General Meeting held on December 14,
2009.
9. Subsequent to the year end, the Company has issued 15,603,000
equity shares of Rs. 10 each at Rs. 100 per share pursuant to a
Qualified Institution Placement in accordance with Chapter VIII of the
Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009.
10. On June 30, 2009, holders of outstanding 1, 290,000 options
surrendered their options. The Company then granted 22, 65, 000
Employee Stock Options under the Employee Stock Options Scheme (the
"Scheme") to Employees of the Company and its subsidiaries with a right
to subscribe to equity shares at a price of Rs. 35.60 per equity share
(closing market price as on June 30, 2009) (Exercise Price).
The salient features of the Scheme are as under:
(i) Vesting: Options to vest over a period of four years from the date
of their grants as under :
- 20% of the Options granted to vest at each of the 1st and 2nd
Anniversaries of the date of grant.
- 30% of the Options granted to vest at each of the 3rd and 4th
Anniversaries of the date of grant.
(ii) Exercise: Options vested with an employee will be exercisable
within 3 years from the date of their vesting by subscribing to the
number of equity shares in the ratio of one equity share for every
option, at the Exercise Price. In the event of cessation of employment
due to death, resignation or otherwise the Options may lapse or be
exercisable in the manner specifically provided for in the Scheme.
Information in respect of options outstanding as at March 31, 2010
The compensation costs of stock options granted to employees are
accounted by the Company using the intrinsic value method. Since, on
the date of grant of option, quoted market price of the underlying
equity shares of the Company was equal to the exercise price of an
option, no expense or liability arising from the Scheme has been
recognised.
The fair value of the options as per the Black Scholes model is Rs.
17.49. Had the Company adopted fair value method in respect of options
granted, the employee compensation cost would have been higher by Rs.
13.33 million, Profit After Tax lower by Rs. 8.80 million and the basic
and diluted earning per share would have been lower by Rs. 0.12 and by
0.17 respectively.
13. 500,000 (March 31, 2009 : 500,000) 0% Redeemable Preference Shares
of Rs. 100 each fully paid up are redeemable at par on or after
repayment of all outstanding term liabilities and preference shares
held by banks and financial institutions as on April 1, 2000 and
interest and dividend thereon.
14. a) Term loans from banks including interest thereon are secured by
way of first charge on entire movable and immovable properties of the
Company,both present and future, ranking pari passu, subject to prior
charge on specific assets as per 14(b) below and on current assets as
per 14(c) and (d) below against borrowing from banks for working capital
finance.
b) In addition to 14(a) above, term loans from Banks Rs. 3,880.09
million (March 31, 2009 : Rs. 4,215.75 million) and interest thereon,
are secured by lien on fixed deposits of the Company.
c) The working capital loan towards overdraft facility aggregating Rs.
Nil (March 31, 2009 : Rs. 266.50 million) is secured by Technology
Upgradation Fund subsidy receivable from Government of India for
textile industries towards term loan borrowing by the Company and
against collateral of post dated cheques and a subservient charge on
Companys entire current assets.
d) The working capital loans (other than referred in 14(c) above),
which includes cash credit, packing credit, and from banks, are secured
by hypothecation of raw materials, stock-in-progress, finished and semi
finished goods, stores and spares and book debts and other current
assets of the Company and second charge on entire fixed assets of the
Company and by a Corporate Guarantee issued by Welspun Global Brands
Limited.
15. (a) Sundry Debtors include Rs. Nil (March 31, 2009: Rs. 1,121.08
million) due from subsidiaries as below:
*Less than Rs.10,000
** Ceased to be a subsidiary effective April 1, 2009.
(b) Loan/ Deposits of Rs. 48.18 million (March 31, 2009: Rs. Nil) given
to companies in which some of the Directors are interested as members.
16. Interest in Joint Venture
(a) The Company has accounted the investments in Joint Ventures in
Welspun Zucchi Textiles Limited (WZTL) and MEP Cotton Limited (MCL) in
accordance with Accounting Standard 13, Accounting for Investments.
(b) The Company sold all of its shares in MCL on February 1, 2010.
(c) The Companys share of contingent liability of WZTL and MCL is
Rs.14.85 million (March 31, 2009: Rs. 7.43 million) and Rs. Nil (March
31, 2009 : Rs.15.61 million), respectively.
(d) The Companys share of the aggregate amounts of assets and
liabilities as on March 31, 2010 and income and expenditures of WZTL
and MCL for the year ended March 31, 2010 are as under:
16. Managerial Remuneration and Sitting Fees paid/ payable to
directors:
Note: Provisions for leave entitlement and post retirement benefits
which are based on actuarial valuations done on an overall company
basis are excluded above.
Computation of Net Profit for the year ended March 31, 2010 in
accordance with Section 198 of the Companies Act, 1956:
17. Disclosure for Micro and Small Enterprises:
* less than Rs. 1,000
The above information and that given in Schedule 12 - "Current
Liabilities and Provisions" regarding micro and small enterprises has
been determined to the extent such parties have been identified on
the basis of information available with the Company
18. Details of Purchase and Sale of Investments during the year ended
March 31, 2010
19. Additional information pursuant to Part II of Schedule VI to the
Companies Act, 1956.
Notes:
1. Previous Year figures are given in brackets.
2. Terry Towel production includes captive consumption of 2,817.96 MT
(Previous Year : Nil)
3. Cotton Yarn production includes captive consumption of 30,013.42 MT
(Previous Year : 26,455.80 MT).
4. Sales Rugs includes Nil (Previous Year : 309.54 MT) of Rs. Nil
(Previous Year : Rs.118.83 million) sold during Trial Run.
5. Sales Others Includes Rs. Nil (Previous Year Rs. 0.58 million) sold
during Trial Run.
20 Disclosure of Derivative Instruments
A. Derivative instruments outstanding at the year end :
B. As of the Balance Sheet date, the foreign currency exposure not
hedged by a derivative instrument or otherwise aggregates Rs. 678.77
million (March 31, 2009 : Rs. 913.17 million) for receivables and Rs.
543.52 million (March 31, 2009 : Rs. 860.86 million) for payables.
The following table summarizes activity in the Hedging Reserve related
to all derivatives classified as cash flow hedges during the year ended
March 31, 2010
Note:
The entire balance of Hedging Reserve Account as at March 31, 2009 of
Rs. 294.95 million pertaining to marketing Division of the Company was
transferred to Welspun Global Brands Limited (WGBL) with effect from
April 1, 2009 pursuant to demerger and transfer of Marketing Division
as referred in Note 9 above, to WGBL.
21 The Company has classified the various benefits provided to
employees as under :-
Note:
Includes Gratuity Fund balance of Rs. 5.75 million held by the employee
group gratuity trust of the Company, for the employees transferred to
the Welspun Global Brands Limited pursuant to the scheme of demerger of
the Company.
The liability for leave entitlement and compensated absences as at year
end is Rs. 39.17 million (March 31, 2009: Rs. 41.53 million).
22 (i). Related Party Disclosures
* Ceased to be a subsidiary effective April 1, 2009 ** Ceased to be an
associate effective April 1, 2009
23. In accordance with the Companys policy given in Note 1(x)(a)
above, net exchange gain of Rs. 104.29 million (Previous Year: net
exchange loss of Rs. 1,060.59 million) has been accounted in Profit and
Loss Account.
24. Borrowing Costs aggregating Rs. 15.46 million; Previous Year: Rs.
99.99 million (net of interest subsidy of Rs. 13.18 million; Previous
Year: Rs. 90.66 million) attributable to the acquisition or
construction of qualifying assets are capitalised during the year as
part of the cost of such assets.
25. Segment Information for the year ended March 31, 2010. (i)
Information about Primary Business Segment
The Company is exclusively engaged in the business of Home Textiles
which, in the context of Accounting Standard 17 on Segment Reporting,
issued by the Institute of Chartered Accountants of India, is
considered to constitute a single primary segment. Thus, the segment
revenue, segment results, total carrying amount of segment assets,
total carrying amount of segment liabilities, total cost incurred to
acquire segment assets, total amount of charge for depreciation during
the year are all as reflected in the financial statements for the year
ended March 31, 2010 and as on that date.
(iii) Notes:
(a) The Segment revenue in the geographical segments considered for
disclosure are as follows:
- Revenue within India includes sales to customers located within India
and earnings in India.
- Revenue outside India includes sales to customers located outside
India, earnings outside India and export benefits on sales made to
customers located outside India.
(b) Segment revenue and assets include the respective amounts
identified to each of the segments and amounts allocated on a
reasonable basis.
26. Leases
B. Where the Company is a lessee: Operating Lease
The Company has taken various residential, office premises, godowns,
equipment and vehicles under operating lease agreements that are
renewable on a periodic basis at the option of both the lessor and the
lessee. The initial tenure of lease is generally for eleven months to
sixty months.
The aggregate rental expenses of all the operating leases for the year
are Rs. 84.13 million (Previous Year: Rs. 88.97 million). 78
27. Earnings per Share
28. As required by the Clause 32 of the listing agreement, the
following disclosure is made:
* ceased to be a subsidiary effective April 1, 2009. ** ceased to be
an associate effective April 1, 2009.
29.Prior year comparatives have been reclassified to conform with the
current years presentation, wherever applicable. Prior year amounts
are not strictly comparable with the current years amounts due to
reason stated in Note 9(a) above.
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