Mar 31, 2016
1. Company Overview
A. DIGJAM Textiles Limited (âThe Companyâ) was incorporated as a company limited by shares on June 17, 2015 under the Companies Act, 2013 as a wholly owned subsidiary of erstwhile Digjam Limited. A Scheme of Amalgamation (âthe Schemeâ) u/s 391 to 394 of the Companies Act, 1956 and the corresponding provisions of Companies Act, 2013 as applicable, between erstwhile Digjam Limited (the âAmalgamating Companyâ) with the Company (the âAmalgamated Companyâ) was sanctioned by the Hon''ble High Court of Gujarat vide Order dated February 17, 2016. The said Scheme became effective on March 17, 2016 upon filing of the certified copy of the Order with the Registrar of Companies, Gujarat and pursuant thereto, the entire business and undertaking of the Amalgamating Company stands transferred to and vested in the Company as going concern without any further act, instrument, deed as and from the Appointed Date under the Scheme i.e. close of business on June 30, 2015.The name of the Company was changed to âDigjam Limited'' w.e.f March 23, 2016 in terms of the Scheme of Amalgamation. The Company is engaged in the business of trading in all kinds of textiles and manufacturing of high quality woollen/worsted fabrics at Jamnagar, Gujarat under the brand âDIGJAMâ.
B. In terms of the Scheme, the Company shall allot 8,76,41,621 fully paid up Equity Shares of Rs. 10 each at a premium of Rs. 5 per Equity share and 5,00,000 - 8% Non-convertible Redeemable Preference Shares of Rs. 100 each at par fully paid-up in the ratio of 1 share for every 1 share held in the Amalgamating Company. Pending allotment of such shares as at March 31, 2016 (Record Date), the face value of shares to be issued has been accounted under the respective Share Capital Suspense Accounts and the share premium under Securities Premium Suspense Account. The said allotment was completed on April 29, 2016 and the Equity Shares are to be listed on BSE and NSE as provided in the Scheme.
C. The amalgamation has been accounted for as per âThe Purchase Methodâ prescribed under Accounting Standard 14- âAccounting for Amalgamationsâ (AS 14) issued by the Institute of Chartered Accountants of India and notified by the Central Government. Accordingly, all the assets and liabilities of the Amalgamating Company were recorded in the books of the Company, at respective fair values, as determined by an approved valuer/the management, as at the Appointed Date. Accordingly, the difference of Rs. 2,47,99,675 between the value of net assets of the Amalgamating Company as recorded in the Company''s books and the amount credited to Share Capital Suspense Account and Securities Premium Suspense Account and cancellation of inter-company balances and inter-company investments has been credited to Capital Reserve.
D. Pursuant to the Scheme of Amalgamation, the Authorised Share Capital of the Amalgamating Company stands combined with the Authorised Share Capital of the Company and the Authorised Share Capital of the Company is reflected accordingly.
2. Significant Accounting Policies
2.1 Basis of Preparation of Financial Statements
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 (âthe Actâ).The financial statements have been prepared on accrual basis under the historical cost convention, except that the Assets & Liabilities of the Amalgamating Company, transferred to and vested in the Company are recorded at their respective fair values, as on the appointed date.
2.2 Use of estimates
The preparation of the financial statements in conformity with Indian GAAP required the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates as are recognised in the periods in which the results are known/materialise.
2.3 Fixed Assets
Fixed assets are stated at cost of acquisition (i.e. fair value on the Appointed Date as determined under the Scheme of Amalgamation) less depreciation and Impairment, if any. The cost is inclusive of freight, duties, taxes, incidental expenses related to acquisition/installation. Fixed assets acquired and put to use for project purposes are capitalized when the project is ready for intended use and all costs and revenues till then are capitalized with the project cost. Projects under which tangible fixed assets are not yet ready for their intended use are carried as capital-work-in-progress at cost comprising direct cost, related incidental expenses and attributable interest.
2.4 Depreciation and Amortisation
Depreciation on tangible fixed assets except Building and Plant & Machinery has been charged under Straight Line Method as per the useful life prescribed in Schedule II to the Companies Act, 2013. Depreciation on Building and Plant & Machinery has been charged on Straight Line Method over the useful life of assets as determined by the Value while evaluating fair value. Amortisation in respect of intangible assets is provided on straight line basis over the period of underlying contract or estimated period of its economic life.
2.5 Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date for any indication of impairment based on internal/ external factors. An impairment loss is recognised wherever the carrying amount of the assets exceeds the recoverable amount. The impairment loss is charged to the Statement of Profit & Loss in the year in which an asset is identified as impaired. An impairment loss recognised in prior accounting periods is reversed if there has been change in the estimate of the recoverable amount.
Long Term investments are stated at cost less provision for diminution in value other than temporary, if any.
Inventories include stock-in-transit/bonded warehouses and with others for manufacturing/processing/replacement. Inventories are valued at lower of cost and net realizable value, cost is determined on the weighted average method. Finished goods and process stock include cost of conversion and other costs incurred in bringing the inventories to their present location and condition.
2.8 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sale of goods: Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer (on despatch to the buyer) and are reported net of turnover/trade discounts, returns and claims.
Income from Services: Revenue is recognized on accrual basis.
Dividend income on investments is accounted for when the right to receive the payment is established.
Interest income is accounted on time proportion basis taking into account the amount outstanding and applicable interest rate.
Others: Wherever it is not possible to determine the quantum of accrual with reasonable certainty, e.g. Insurance & other claims, these continue to be accounted for on cash basis.
2.9 Employee Benefits
Contributions to Provident Fund and Superannuation Fund, which are defined contribution schemes, are made to a government administered Provident Fund and to recognised trust respectively, and are charged to the statement of Profit and Loss as incurred. The Company has no further obligations beyond its contributions to these funds.
Provision for gratuity, under a LIC administered fund, and compensated absences, which are in the nature of defined benefit plans, are provided based on actuarial valuations based on projected unit credit method, as at the balance sheet date.
Termination benefits are recognized as expense as and when incurred.
2.10 Borrowing Cost
Borrowing cost relating to (i) funds borrowed for acquisition/construction of qualifying assets are capitalised up to the date the assets are put to use, and (ii) funds borrowed for other purposes are charged to the statement of Profit and Loss.
2.11 Research & Development Expenditure
Research and Development expenses of revenue nature are charged to the statement of Profit and Loss under respective heads of account and capital expenditure is added to the cost of Fixed Assets in the year in which it is incurred.
Leases where the lessor retains substantially all the risks and rewards of ownership of the leased asset, are classified as operating leases. Operating lease payments are recognized as expense in the statement of Profit and Loss as per the terms of the lease.
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.
Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their reliability.
2.14 Government Grants
Where the grant or subsidy relates to an asset, its value is deducted in arriving at the carrying amount of the related asset. Project capital subsidy is credited to Capital Reserve. Other government grants or subsidies including export incentives are credited to the statement of Profit and Loss or deducted from related expenses.
2.15 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources to settle the obligation in respect of which a reliable estimate can be made. Contingent liabilities, if any, are not recognized in the accounts but are disclosed by way of notes. Contingent assets are neither recognized nor disclosed in the financial statements.
2.16 Foreign Currency Transactions and Forward Contracts
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate prevailing at time of transaction. Monetary items denominated in foreign currencies and outstanding at the year-end are translated at year-end rates. Exchange differences arising on settlement of monetary items at rates different from those at which they were initially recorded are recognized as income or as expenses in the statement of Profit & Loss for the year in which they arise. Premium/discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts if such contracts relate to monetary items as at the balance sheet date. Any profit or loss arising on cancellation or renewal of such forward exchange contract is recognised as income or expense in the period in which such cancellation or renewal is made.
2.17 Segment reporting
The Company identifies primary segments based on dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with accounting policies of the company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
2.18 Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.19 Operating Cycle
Based on the nature of products/activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as twelve months for the purpose of classification of assets and liabilities as current and non-current.
In terms of the Scheme, the paid-up Equity Share Capital of Rs. 5,00,000 held by the erstwhile holding Company stands cancelled. (Refer Note No. 1B)
3.1 Equity shares having a par value of Rs.10 each carry one vote per share without restrictions and are entitled to dividend, as and when declared. All shares rank equally with regard to the Company''s residual assets after distribution of all preferential amounts.
The Non-Convertible Redeemable Preference Shares of Rs. 100 each to be allotted under the Scheme of Amalgamation on the same terms and conditions on which the said shares were allotted by the Amalgamating Company and are entitled to dividend @ 8% p.a. (non-cumulative) in preference to the Equity Shares but are not entitled to vote at the General Meeting of the Company unless dividend has been in arrears for minimum 2 years. For purpose of determination/accrual of all rights (including the right of redemption), the date of allotment viz. March 27, 2015 is deemed to be the relevant date. The Preference Shares are non-participating and shall have preferential right to repayment in the case of winding up or repayment of capital of the amount of the share capital paid-up.
The Non-Convertible Redeemable Preference Shares are redeemable at par at the end of 10 years from March 27, 2015 with an option to the Company to redeem at any time earlier thereto.
3.4 Shareholders holding more than 5% shares in the Company*
I. Equity Shares of Rs. 10 each
Central India General Agents Ltd.: 1,65,14,000 Shares; 18.84%
ICICI Bank Ltd. 87,63,381 Shares; 10.00%
Birla Holdings Ltd.: 72,50,000 Shares; 8.27% iPro Capital Ltd.: 70,00,000 Shares; 7.99%
Sukriti Education Society: 48,09,881 Shares; 5.49%
II. 8% Non- Convertible Redeemable Preference Shares of Rs. 100 each Central India General Agents Ltd.: 5,00,000 Shares; 100.00%
* reflects proportionate number of shares that have since been allotted on April 29, 2016 under the Scheme. Percentages have been rounded to the nearest second decimal place.