Mar 31, 2023
Provisions and contingent liabilities Provisions
A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate
of the expenditure required to settle the present obligation at the reporting date. Provisions are determined by discounting the
expected future cash flows (where the effect of time value of money is material, representing the best estimate of the expenditure
required to settle the present obligation at the reporting date) at a pre-tax rate that reflects current market assessments of the time
value of money and the risk specific to the liability. The unwinding of discount is recognized as finance cost.
A contingent liability is a possible obligation that arises from past events and the existence of which will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent
liabilities are disclosed by way of note to the standalone Ind AS financial statements.
2.14 Investment in subsidiaries
Investment in subsidiaries are shown at cost less impairment losses if any. Where the carrying amount of an investment is greater
than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is transferred to
the standalone statement of profit and loss.
On disposal of investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the
standalone statement of profit and loss.
a) Initial recognition and initial measurement
The financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially
measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
b) Classification and subsequent measurement
i) Financial assets
On initial recognition, a financial asset is classified and measured at
⢠amortized cost;
⢠fair value through other comprehensive income (FVOCI) - debt investment;
⢠fair value through other comprehensive income (FVOCI) - equity investment; or
⢠fair value through profit and loss (FVTPL)
Financial assets are not re-classified subsequent to their initial recognition, except if and in the period the Company changes
its business model for managing financial assets.
A financial asset is measured at amortized cost if it meets both the following conditions and is not designated as at FVTPL:
⢠the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
⢠the contractual terms of the financial assets give rise on a specified date to cash flows that are solely payments ofprincipal
and interest on the principal amounts outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
⢠the asset is held within a business model whose objective is achieved by both collecting contractual cash flow and selling
financial assets ; and
⢠the contractual terms of the financial assets give rise on a specified date to cash flows that are solely payments ofprincipal
and interest on the principal amounts outstanding.
On initial recognition of an equity investment that is not held for trading, the Company irrevocably elects to present
subsequent changes in the investment''s fair value in OCI (designated as FVOCI-equity investment). This election is made on
an investment-to-investment basis.
All financial assets not classified as amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition,
the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized
cost or at FVOCI as at FVTPL, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise
arise.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost. The
impairment methodology applied depends on whether there has been a significant increase in credit risk.
In accordance with Ind AS 109, the Company applies expected credit loss ("ECL") model for measurement and recognition of
impairment loss. The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables. The
application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment
loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has
been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is
used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in subsequent period,
credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition,
then the Company reverts to recognizing impairment loss allowance based on 12 month ECL.
Derecognition of financial assets
A financial asset is derecognized only when:
⢠the Company has transferred the rights to receive cash flows from the financial asset; or
⢠retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash
flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards
of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the Company has not transferred
substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the
financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset.
ii) Financial liabilitiesClassification, subsequent measurement and gains and losses
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated
upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred
for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the
Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separate embedded
derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on
liabilities held for trading are recognized in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of
recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable
to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to standalone statement of
profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such
liability are recognized in the standalone statement of profit or loss. The Company has not designated any financial liability as at fair
value through profit and loss.
Amortized cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the Effective
Interest Rate ("EIR") method. Gains and losses are recognized in profit or loss when the liabilities are derecognized.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortization is included as finance costs in the standalone statement of profit and loss.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the
holder for a loss it incurs because the specified party fails to make a payment when due in accordance with the terms of a debt
instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss
allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
Derecognition of financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company
also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially
different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between
the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in the
standalone Statement of Profit and Loss.
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the
Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to
realize the asset and settle the liability simultaneously.
2.16 Derivative financial instruments and hedge accounting
The Company holds derivative financial instruments to hedge its foreign currency risk exposure.
Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes
therein are generally recognized in the standalone statement of profit and loss.
The Company designates their derivatives as hedge instruments to hedge the variability in cash flows associated with highly
probable forecast transactions arising from changes in foreign exchange rates.
At inception of designated hedging relationships, the Company documents the risk management objective and strategy for
undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging
instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each
other.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivatives
is recognized in OCI and accumulated in the other equity under ''effective portion of cash flow hedges''. The effective portion of
changes in the fair value of the derivative that is recognized in OCI is limited to the cumulative change in fair value of the hedged
item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the
derivative is recognized immediately in the standalone statement of profit and loss.
When the hedged forecast transaction subsequently results in the recognition of a non-financial item such as inventory, the amount
accumulated in other equity is included directly in the initial cost of the non-financial item when it is recognized. For all other hedged
forecast transactions, the amount accumulated in other equity is reclassified to the standalone statement of profit and loss in the
same period or periods during which the hedged expected future cash flows affect the standalone statement of profit and loss.
If a hedge no longer meets the criteria for hedge accounting or the hedging instruments is sold, expires, is terminated or is exercised,
then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount
that has been accumulated in other equity remains there until, for a hedge of a transaction resulting in recognition of a non-financial
item, it is included in the non-financial item''s cost on its initial recognition or, for other cash flow hedges, it is reclassified to the
standalone statement of profit and loss in the same period or periods as the hedged expected future cash flows affect the standalone
statement of profit and loss.
If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in other equity are
immediately reclassified to the standalone statement of profit and loss.
Changes in fair value of foreign currency derivative instruments not designated as cash flow hedges are recognized in the standalone
statement of profit and loss and reported within foreign exchange gains, net within results from operating activities.
The basic earnings per share is computed by dividing the net profit attributable to owners of the Company for the year by the
weighted average number of equity shares outstanding during the reporting period.
The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving
basic earnings per share and also the weighted average number of equity shares which could have been issued on the conversion
of all dilutive potential equity shares.
Dilutive potential equity shares are deemed converted as of the beginning of the reporting date, unless they have been issued at a
later date. In computing diluted earnings per share, only potential equity shares that is dilutive and which either reduces earnings
per share or increase loss per share are included.
2.18 Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquid investments with
original maturities of three months or less.
For the purpose of cash flow statement, cash and cash equivalent includes cash in hand, in banks, demand deposits with banks and
other short-term highly liquid investments with original maturities of three months or less, net of outstanding bank overdrafts that
are repayable on demand and are considered part of the cash management system.
Cash flows are reported using the indirect method, whereby net profit for the period is adjusted for the effects of transactions of a
non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses
associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company
are segregated.
The Company recognizes a liability to make dividend distributions to equity holders of the Company when the distribution is
authorized, and the distribution is no longer at the discretion of the Company. Final dividends on shares are recorded as a liability
on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the
Company''s Board of Directors.
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur
expenses (including revenues and expenses relating to transactions with other components of the Company), whose operating
results are regularly reviewed by the Company''s chief operating decision maker to make decisions about resources to be allocated
to the segment and assess its performance, and for which discrete financial information is available. Operating segments of the
Company are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
2.22 Recent accounting pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian
Accounting Standards) Rules as issued from time to time. On 31 March 2023, MCA amended the Companies (Indian Accounting
Standards) Amendment Rules, 2023, as below:
Ind AS 1 - Presentation of financial statements
This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies.
The effective date for adoption of this amendment is annual periods beginning on or after April 1,2023. The Company has evaluated
the amendment and the impact of the amendment is insignificant in the standalone financial statements.
Ind AS 8 - Accounting policies, change in accounting estimates and errors
This amendment has introduced a definition of ''accounting estimates'' and included amendments to Ind AS 8 to help entities
distinguish changes in accounting policies from changes in accounting estimates. The effective date for adoption of this amendment
is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendment and there is no impact on its
Standalone financial statements.
This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise
to equal and offsetting temporary differences. The effective date for adoption of this amendment is annual periods beginning on or
after April 1,2023. The Company has evaluated the amendment and there is no impact on its standalone financial statements.
Mar 31, 2018
Note 16.1 : Deferred revenue arising from government grant
The Company has received government grants in the form of import duty exemption and subsidy on purchase of capital goods and purchase of raw materials to be used for production of goods for exports, based on the terms of the respective schemes. The Company recognises such grants in statement of profit or loss on a systematic basis over the period in which the related expenses (the related costs for which the grants are intended to compensate) are incurred and charged to the income statement. The Company has presented such amortisation of deferred income as a deduction from the related expenses.
Note 17.1: The weighted average effective interest rate on the bank loans is 5.51 % per annum (6.91% as at 31 March 2017). Note 17.2: Working capital limits are secured against present and future inventory and trade receivables on pari-passu basis. Information about the Company''s exposure to interest rate, currency and liquidity risk are disclosed in note 34.
The interest income earned on financial assets that are not designated as at fair value through profit or loss pertains to interest income earned on account of discounting of the rental deposits.
Note 28.1 : The above amounts have been arrived at based on the notice of demand or the assessment orders, as the case may be, and the Company is contesting these claims with the respective authorities. Outflows including interest and other consequential payments, if any, arising out of these claims would depend on the outcome of the decisions of the appellate authorities and the Company''s rights for future appeals before the judiciary. The Company doesn''t expect any reimbursements in respect of the above contingent liabilities.
Note 28.2 : These claims relate to demands resulting from disallowances of deductions claimed and other adjustments, which are being contested by the Company. These cases are pending at various forums with respective authorities. Outflows, if any, arising out of the claims would depend upon the outcome of the decision of the appellate authority and the Company''s right for future appeals before judiciary. The Company doesn''t expect any reimbursements in respect of the above contingent liabilities.
Note 28.3 : These claims relate to demands arising from difference pertaining to transfer price assessed in terms of Customs Valuation Rules, 1988.
b. As Lessee :
The Company has taken office premises, accommodations and vehicles under operating lease (cancellable lease). Such leases are generally with the option of renewal against increased rent and premature termination. Lease payments are renegotiated at the time of renewal.
Lease rental expense under cancellable operating leases during the year was Rs, 280.59 lacs (previous year: Rs, 183.32 lacs).
The Company is obligated under non-cancelable operating leases for land, building and plant and machinery. Lease rental expense under non-cancellable operating leases during the year was Rs, 381.17 lacs (previous year: Rs, 323.68 lacs).
During the year, the Company completed the construction of integrated ultra-fine count cotton yarn spinning facility and commenced the commercial production on 5 February 2018. Expenses capitalized on initial recognition of the resulting PPE, include the costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Note 31 : Segment Reporting
The Managing Director and Chief Executive Officer of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, Operating Segments. The Company is structured into a single segment of Home Textiles value chain, and accordingly the CODM evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by the products portfolio and segment information has been presented accordingly.
The geographical information analyses the Company''s revenue from external customer and non-current assets of its single reportable segment by the Company''s country of domicile (i.e. India) and other countries. In presenting the geographical information, segment revenue has been based on the geographical location of the customer and segment assets which have been based on the geographical location of the assets.
Revenue from major customers.
Customers contributing 10% or more of Company''s revenue (2 customers amounting to Rs, 117,305.93 Lacs in 2017-18 and 2 customers amounting to Rs, 106,471.72 Lacs in 2016-17.)
b) All non -current assets other than financial instruments, deferred tax assets of the Company are located in India.
Note 34: Financial instruments
Note 34.1 : Categories of financial instruments:
Accounting classification and fair value
The following table shows the carrying amount and fair value of financial assets and financial liabilities including their levels in fair value hierarchy:
Fair value hierarchy
The section explains the judgment and estimates made in determining the fair values of the financial instruments that are:
a) recognised and measured at fair value
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 Indian Accounting Standard. Lacs)
* Current maturities of long term borrowings aggregating Rs, 8,876.24 lacs and Rs, 5,414.22 lacs as at 31 March 2018 and 31 March 2017 respectively, form part of other financial liabilities.
Investment in equity shares of subsidiaries are not appearing as financial asset in the table above being investment in subsidiaries accounted under Ind AS 27, Separate Financial Statements which is scoped out under Ind AS 109.
Fair Value Hierarchy
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes investment in equity, preference securities, mutual funds and debentures that have quoted price.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unquoted equity securities.
Fair Valuation Method
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
Financial Assets:
The Company has not disclosed the fair values for loans, trade receivables, cash and cash equivalents including other bank balances, unbilled revenue and other financial assets because their carrying amounts are a reasonable approximation of their fair value.
Current Investments : Fair value of quoted mutual funds units is based on quoted market price at the reporting date.
Financial Liabilities:
Borrowings: It includes loans taken from banks and financial institution, cash credit and bill discounting facilities. Borrowings are classified and subsequently measured in the financial statements at amortized cost. Considering that the interest rate on loans is reset on yearly basis, the carrying amount of the loan would be a reasonable approximation of its fair value.
Trade payables and other financial liabilities: Fair values of trade payables and other financial liabilities are measured at carrying value, as most of them are settled within a short period and so their fair values are assumed almost equal to the carrying values.
Note 34.2 : Financial risk management:
The Company''s activities expose to financial risks: credit risk, liquidity risk and market risk.
Risk management framework
The Company''s board of directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Company''s Audit Committee oversees how management monitors compliance with the Company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal auditor. Internal Audit function includes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
i. Credit risk:
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. Bank deposits includes an amount of Rs, 2,895.32 lacs held with a bank having high quality credit rating which is individually in excess of 10% or more of the Company''s total bank deposits for the year ended 31 March 2018. None of the other financial instruments of the Company result in material concentration of credit risk.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs, 107,998.97 lacs and Rs, 92,138.52 lacs as at 31 March 2018, and 31 March 2017, respectively, being the total of the carrying amount of balances with banks, bank deposits, current investments, trade receivables and other financial assets excluding cash in hand and equity investments.
Geographical concentration of trade receivables is allocated based on the location of the customers.
ii. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company''s reputation.The Company believes that the working capital and its cash and cash equivalent are sufficient to meet its short and medium term requirements."
Management monitors rolling forecast of the Company''s liquidity position and cash and cash equivalents on the basis of expected cash flows. This is generally carried out by the Management of the Company in accordance with practice and limits set by the Company. In addition, the Company''s liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
A) Financing arrangement
The Company maintains the following line of credit:
(a) Terms loans taken from bank aggregating to Rs, 62,413.49 Lacs repayable in various quarterly and yearly instalments with interest rate ranging from 4.80% to 9.95% per annum. Term Loan from financial institutions aggregating to Rs, 62,036.04 Lacs with interest rate ranging from 9.95% - 11.55% per annum. These are secured by first pari passu charge on the entire movable and immovable fixed assets of the Company, present and future.
(b) Working capital loans from banks carry an effective interest rate of 5.51% per annum., computed on a monthly basis on the actual amount utilized, and are repayable on demand. These are secured by pari passu charge by way of hypothecation of stock and book debts of the Company and second pari passu charge on the movable (other than those exclusively charged) and immovable fixed assets of the Company.
(c) The Company has taken receivable bill discounting facility from banks which are payable within 120 days from date of bill discounted.
The table below provides details regarding the contractual maturities of significant financial liabilities as at 31 March 2018 and 31 March 2017. The amounts are gross and undiscounted contractual cash flow and includes contractual interest payment and exclude netting arrangements:
* Includes current matures of long term borrowings (Refer note 19) and current borrowings (Refer note 17)
# Excludes current matures of long term borrowings
As disclosed in note 14, the Company has secured bank loan that contains loan covenants. A future breach of covenants may require the Company to repay the loan earlier than indicated in the above table. Except for these financial liabilities, it is not expected that cash flows included in maturity analysis could occur significantly earlier.
iii. Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices w ill affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
a) Foreign currency risk:
The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the respective functional currency of the Company. The functional currency of the Company is ''. The currencies in which these transactions are primarily denominated are USD, GBP etc.
Management monitors the movement in foreign currency and the Company''s exposure in each of the foreign currency. Based on the analysis and study of movement in foreign currency, the Company decides to exchange its foreign currency. A significant portion of the Company''s revenues are in foreign currencies, while a significant portion of its costs are in Indian rupees. As result, if the value of the Indian rupee appreciates relative to foreign currencies, the Company''s revenues measured in Indian rupees m ay decrease. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and m ay continue to fluctuate substantially in the future. Consequently, the Company uses derivative and non-derivative financial instruments, such as foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognised assets and liabilities. All hedging activities are carried out in accordance with the Company''s internal risk management policies, as approved by the Board of Directors, and in accordance with the applicable regulations where the Company operates.
Interest rate risk
Interest rate risk primarily arises from floating rate borrowing, including various revolving and other lines of credit. The Company''s investments are primarily in short-term investments, which do not expose it to significant interest rate risk. The Company''s borrowings comprises of term loan, working capital loan and bill discounting which carries variable rate of interest, which expose it to interest rate risk.
Note 34.3: Capital management
The Company''s policy is to maintain a stable and strong capital base structure with a focus on total equity so as to uphold investor, creditor and market confidence and to sustain future development and growth of the business. The Company monitors the return on capital as well as the level of dividends on its equity shares. The Company''s objective when managing capital is to maintain an optimal structure so as to maximize shareholder value and safeguard its ability to continue as a going concern.
The Company monitors capital using a ratio of ''adjusted net debt''to ''equity''. For the purpose of Company''s capital management, adjusted net debt is defined as aggregate on non-current borrowing, current borrowing and current maturities of long-term borrowings less cash and cash equivalents, deposits and current investments and total equity includes issued capital and all other equity reserves.
Note 35: Related party disclosures
Note 35.1: Name of related parties and description of relationship
Subsidiaries (including step subsidiaries) Himatsingka Wovens Private Limited
Himatsingka Holdings North America, Inc. ( formerly known as Himatsingka America , Inc.)
Himatsingka America, Inc. (Merged entity of DWI Holdings, Inc. and Divatex Home Fashions, Inc.)
Himatsingka Singapore Pte Ltd Himatsingka Europe Limited Giuseppe Bellora S.r.l.
Twill & Oxford LLC
Associates Himatsingka Energy Private Limited
Key management personnel D.K. Himatsingka - Executive Chairman (w.e.f. 21 May 2016)
Shrikant Himatsingka - Managing Director & Chief Executive Officer (w.e.f. 21 May 2016) V.Vasudevan-Executive Director (w.e.f. 21 May 2016)
Sangeeta Kulkarni-Independent Director (w.e.f. 21 May 2016)
Rajiv Khaitan - Independent Director
Dr.K.R.S Murthy - Independent Director
Berjis M Desai - Independent Director (up to 23 May 2017)
K.P. Rangaraj-Chief Financial officer (w.e.f. 2 August 2017)
Ashutosh Halbe-Interim Chief Financial Officer (from 5 July 2017 to 2 August 2017)
K.P. Pradeep-Chief Financial officer (up to 7 January 2017)
Ashok Sharma-Company Secretary
Aditya Himatsingka - Executive Director (up to 23 May 2017)
Entities over which key management Bihar Mercantile Union Limited (BMU) personnel or relatives of such personnel VSJ investments Pvt Ltd (formerly known as Credit Himatsingka Private Limited [CHPL]) are able to exercise significant influence Khaitan & Co LLP
Jacaranda Design LLC
1. On 25 May 2018, the board of directors recommended a final dividend of Rs, 2.50 per equity share (total dividend of Rs, 2,461.43 lacs (excluding dividend distribution tax )) be p aid to the shareholders for financial year 2018-2019, which need to be approved by shareholders at the Annual General Meeting.
2. Subsequent to the year end, the Board of Directors of the Company vide their meeting dated 25 May 2018 has approved the Scheme of arrangement between Himatsingka Wovens Private Limited ("HWPL"), Himatsingka Seide Limited and their respective shareholders in which retail business of HWPL will be demerged into the Company.
Note 42 : Approval of Financial Statements
The financial statements were approved by the board of directors on 25 May 2018.
Mar 31, 2017
NOTE 1: GENERAL INFORMATION
1.1: Company Overview
Himatsingka Seide Limited (âthe Companyâ) is a public limited Company incorporated in India and listed on Bombay Stock Exchange and National Stock Exchange. The Company is primarily engaged in manufacturing of home textiles, mainly in bedding, drapery and upholstery products, made of cotton, silk, and blends.
The Company has investments in various subsidiaries across the globe, covering the United States of America, Italy, Singapore and Dubai which are into distribution of home textile products. The Company along with its subsidiaries represents a vertically integrated home textile group that manufactures, retails and distributes bedding, bath, drapery, upholstery and lifestyle accessory products.
The registered office of the Company is 10/24, Kumara Krupa Road, High Grounds, Bengaluru-560 001.
Note 2.1.1
The Company has elected to use fair value in its Opening Ind AS Balance Sheet (as at April 01 2015) as deemed cost for Land and Building. Accordingly, the Land and Building is carried at fair value of Rs.15,542.50 Lakhs and Rs.13,007.85 Lakhs respectively, Carrying amount reported under previous GAAP was Rs.747.38 Lakhs and Rs.10,000.82 Lakhs respectively. The difference between the fair value and carrying amount reported under previous GAAP of Rs.17,802.14 Lakhs has been taken to Retained Earnings as at April 01, 2015 (Transition Date).
The fair value of the above mentioned assets as at April 01, 2015 has been arrived at, on the basis of a valuation carried out as at March 31, 2015 by Messrs Manjunath Enterprise, Chartered Engineer registered with the Institution of Engineers (India), having appropriate qualification and experience in the valuation of Land and Building. For the land at Doddabalapur and Bengaluru, the fair value was derived using the market approach considering the prevailing market rate in the vicinity of the subject land parcel and also considering available details of recent transactions of similar land parcels adjusted for factors such as negotiation margin, land use, road location etc. For the Buildings, the fair value was dervied using the Depreciated Replacement Cost method (DRC). DRC has been worked out using the replacement value determined based on the existing conditions and specifications of the Building with depreciation having been deducted from such replacement value. Straight Line Method of depreciation based on age and total life of the asset has been used.
Note 2.1.2
Land includes Rs.37.51 Lakhs (As at March 31, 2016 Rs.37.51 Lakhs) (As at April 01, 2015 Rs.37.51 Lakhs) being the share in land jointly owned with others. During 2003-04, the Khata in respect of one of the Companyâs properties was merged with those of other adjacent properties to facilitate better utilization of the property by joint construction and entitlement of proportionate undivided share of the amalgamated property.
Note 2.1.3
Certain property, plant and equipment are pledged against borrowings, the details relating to which have been described in Note 14 pertaining to borrowings.
Note 2.1.4
The above assets are owned and used by the Company and the employees of the Company other than those assets which are given on lease. Also refer Note 29 (a) for assets given on operating lease.
Note 3.1:
As per Ind AS 101 the Company chose to value investments in subsidiaries at deemed cost. Such deemed cost is previous GAAP carrying amounts for all subsidiaries except for investment in Giuseppe Bellora S.r.l. whose fair value has been considered as the deemed cost. Accordingly the investment in Giuseppe Bellora S.r.l. is restated to its fair value of Rs.7,151.12 Lakhs as against its carrying value reported under previous GAAP of Rs.18,099.27 Lakhs. The difference between the fair value and carrying amount reported under previous GAAP of Rs.10,948.15 Lakhs has been taken to Retained Earnings as at April 01, 2015 (Transition Date).
The fair value of the above mentioned Investment as at April 01, 2015 has been arrived at, on the basis of a valuation carried out as at March 31, 2015 by Sandesh Hegde, registered with Institute of Chartered Accountants of India and American Institute of Certified Public Accountants, having appropriate qualification and experience in the valuation of investment. The equity value was arrived using Income and Market approach by using Discounted Cash Flow Method, Guideline Transaction Method and Guideline Public Company Method. The valuer arrived at the fair value by using weighted average method by assigning equal weights to all the three methods.
Note 3.2:
During the current year, the Company incorporated a subsidiary viz. Himatsingka Europe Limited, registered in England. The Company has on March 30, 2017 transferred the investment in Giuseppe Bellora S.r.l to this subsidiary, at the fair value determined on the date of such transfer, as a part of its Group restructuring. The difference in the carrying value and the fair value as at March 30, 2017 was taken to the statement of profit and loss, included in Note 26. As at March 31, 2017 the subsidiary is yet to commence its operations.
Note 3.3:
The above disclosed cost of investment includes a cummulative total of adjustments made in the nature of âdeemed equityâ arising from accounting for the financial guarantees provided to loans taken by subsidiaries free of cost. The subsidiary wise value of deemed equity included in the carrying value is:
Note 3.4:
The Company has invested in above subsidiaries to manage the retail and distribution business across the globe.
Note No. 4.1:
The loans to related parties represent inter-corporate deposits given to the wholly owned subsidiaries for growing business needs. These are provided at an interest rate of 8.5% p.a. These financial assets are carried at amortized cost. Additional information about these deposits have been set out in Note 35.
Note 5.1: Credit period
The average credit period on sale of goods ranges from 60 to180 days. No interest is charged on trade receivables on delayed payments.
Before accepting any new customer, the internal team assesses the potential customerâs credit quality and defines credit limits for the customer. Of the trade receivables balance as at March 31, 2017, Rs.31,444.54 (as at March 31, 2016 of Rs.17,122.12; as at April 1, 2015 of Rs.9,594.41) is due from related parties. There are no other customers who represent more than 10% of the total balance of trade receivables for the respective financial years.
Note 5.2: Expected credit loss allowance
The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. The Company has had no past history of any credit loss and based on such past experience and expectation in the future, credit loss has been provided for.
Note 5.3: Transfer of Financial Assets
During the year, the Company discounted trade receivables with an aggregate carrying amount of Rs.70,951.36 Lakhs with a Bank for cash proceeds of Rs.63,734.59 Lakhs. If the trade receivables are not paid at maturity, the Bank has the right to request the Company to pay the unsettled balance. As the Company has not transferred the significant risks and rewards relating to these trade receivables, it continues to recognize the full carrying amount of the receivables and has recognized the cash received on the transfer as secured borrowing, and recorded the differential as interest cost. At the end of the reporting period, the carrying amount of the trade receivables that have been transferred but have not been derecognized amounted to Rs.15,403.42 Lakhs and the carrying amount of the associated liability is Rs.14,637.79 Lakhs. (Refer Note 17)
Notes:
6.1: The deposits maintained by the Company with banks comprise of time deposits, which can be withdrawn by the Company at any point without prior notice or penalty on the principal.
6.2: Other Bank Balances represent earmarked balances in respect of unpaid dividends and dividend payable.
6.3: The details of Specified Bank Notes (SBN) held and transacted during the period November 8, 2016 to December 30, 2016 is provided in the table below:
i) There is no movement in the shares outstanding from the prior yearsâ to the current year.
ii) Details of the rights, preferences and restrictions attaching to each class of shares:
The Company has only one class of equity share, having a par value of Rs.5/-. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amount. However, as on date no such preferential amount exist. The distribution will be in proportion to number of equity shares held by the shareholders.
Note 7.1: Employee Benefit
a) Defined benefit plans
In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity plan). The Gratuity plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employeeâs last drawn eligible salary and the years of employment with the Company. The Company provides the gratuity benefit through annual contributions to a fund managed by the Insurer included as part of âContribution to provident and other fundsâ in Note 23 Employee benefit expense. Under this plan, the settlement obligation remains with the Company.
Description of Risk Exposures
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary over time. Thus, the Company is exposed to various risks in providing the above gratuity benefit which are as follows:
A) Interest Rate Risk: The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
B) Investment Risk: The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
C) Salary Escalation Risk: The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the planâs liabilty.
D) Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
E) Liquidity Risk: This is the risk that the Company is not able to meet the short-term gratuity payouts. This may arise due to non availabilty of enough cash/cashequivalent to meet the liabilities or holding of illiquid assets not being sold in time.
In respect of the plan in India, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at March 31, 2017 by Mr. Khushwant Pahwa, Fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.
Sensitivity Analysis
Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below 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.
A) If the discount rate is 100 basis points higher (lower), the defined benefit obligation would decrease by 6.4% (increase by 7.3%). (as at March 31, 2016: decrease by 7.4% (increase by 8.5%))
B) If the expected salary growth increases/(decreases) by 1%, the defined benefit obligation would increase by 7.3% (decrease by 6.5%). (as at March 31, 2016: increase by 8.6% (decrease by 7.6%))
C) If the attrition rate increases/(decreases) by 50%, the defined benefit obligation would decrease by 1.6% (increase by 2.9%). (as at March 31, 2016: decrease by 0.9% (increase by 1.4%))
D) If the Mortality rate increases/(decreases) by 10%, the defined benefit obligation would increase by 0.2% (decrease by 0.2%). (as at March 31, 2016: increase by 0.3% (decrease by 0.3%))
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 as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
Asset Liability Matching Strategies
The Company has purchased insurance policy, which is basically a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance Company, as part of the policy rules, makes payment of all gratuity liability occurring during the year (subject to sufficiency of funds under the policy). The policy, thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in a increase in liability without corresponding increase in the asset).
Effect of Plan on Entityâs Future Cash Flows
A) Funding Arrangements and Funding Policy
The Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance Company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.
B) The Company expects to make a contribution of â Nil during the next financial year.
C) The weighted average duration of the benefit obligation at March 31, 2017 is 7 years (as at March 31, 2016 is 8 years).
D) Maturity profile of defined benefit obligation:
b) Defined contribution plans:
The Company makes Provident Fund and Superannuation Fund contributions to defined contribution plans for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised the following contributions in the Statement of profit and loss.
Note 8.1: Deferred Revenue arising from government grant
The Company has received government grants in the form of import duty exemption and subsidy on purchase of capital goods and purchase of raw materials, to be used for production of goods for exports, based on the terms of the respective schemes. The Company recognises such grants in statement of Profit or Loss on a systematic basis over the period in which the related expenses (the related costs for which the grants are intended to compensate) are incurred and charged to the income statement. The Company has presented such amortisation of deferred income as a deduction from the related expenses.
Note 9.1: The weighted average effective interest rate on the bank loans is 6.91% per annum (10.01% as at March 31, 2016 and 10.36% as at April 1, 2015)
Note 9.2: Working capital limits are secured against present and future inventory and trade receivables on pari-passu basis.
Note 10.1: The average credit period on purchases of major goods is between 30 days to 90 days. No interest is charged on the trade payables. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
Note 11.1: The above amounts have been arrived at based on the notice of demand or the Assessment Orders, as the case may be, and the Company is contesting these claims with the respective authorities. Outflows including interest and other consequential payments, if any, arising out of these claims would depend on the outcome of the decisions of the appellate authorities and the Companyâs rights for future appeals before the judiciary. No reimbursements are expected.
Note 11.2: These claims relate to demands resulting from disallowances of deductions claimed and other adjustments, which are being contested by the Company. These cases are pending at various forums with respective authorities. Outflows, if any, arising out of the claims would depend upon the outcome of the decision of the appellate authority and the Companyâs right for future appeals before judiciary. No reimbursements are expected.
Note 11.3: These claims relate to demands arising from difference pertaining to transfer price assessed in terms of Customs Valuation Rules, 1988.
NOTE 12: SEGMENT REPORTING
The CEO & MD of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, Operating Segments. The Company is structured into a single segment of Home Textiles value chain, and accordingly the CODM evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators for the only identifiable segment.
The information relating to revenue from external customers and location of non-current assets of its single reportable segment has been disclosed as below
i) Geographical revenues are segregated based on the location of the customers who are invoiced or in relation to which the revenue is otherwise recognised
Refer to Note 20.3 for revenue from major customers.
ii) All non-current assets other than financial instruments, deferred tax assets of the Company are located in India.
The management assessed that fair value of cash and cash equivalents, trade receivables, loans, borrowings, trade payables and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estmate the fair value/amortized cost:
1) Long-term fixed-rate receivables/borrowings are evaluated by the Company based on parameters such as interest rates, specific country risk factors, individual losses and creditworthiness of the receivables.
2) The fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other non-current financial liabilities are estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or discount rate, the fair value of the unquoted instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model, of which the significant unobservable inputs are disclosed in the tables below. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
3) Fair values of the Companyâs interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuerâs borrowing rate as at the end of the reporting period. The own non- performance risk as at March 31, 2017 was assessed to be insignificant.
4) The Company enters into derivative financial instruments only with banks and financial institutions with investment grade credit ratings. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves etc. As at March 31, 2017, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and other financials instruments recognised at fair value.
Fair Value Hierarchy
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities measured at fair value using level 2 inputs on a recurring basis as at March 31, 2017, March 31, 2016 and April 01, 2015:
There have been no transfers among level 1, 2 and 3 during the years.
Derivative financials instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.
Note 12.2: Capital Management:
The key objective of the Companyâs capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business.
The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants. The Company monitors capital using debt equity ratio, which is total debt divided by total equity. The capital structure of the Company consists of net debt (borrowings as detailed in Note 14.1 and 17 offset by cash and bank balances) and the total equity of the Company.
The amount of future dividends of equity shares will be balanced with efforts to continue to maintain an adequate liquidity status.
Note 12.3: Financial risk management:
Risk management framework
The Companyâs board of directors has overall responsibility for the establishment and oversight of the Companyâs risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Companyâs risk management policies. The committee reports regularly to the board of directors on its activities.
The Companyâs activities expose it to a variety of financial risks: liquidity risk, credit risk and market risk. The Companyâs primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Companyâs risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Companyâs activities. The Board of Directors and the Audit Committee is responsible for overseeing the Companyâs risk assessment and management policies and processes.
a) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Companyâs reputation. The Company believes that the working capital and its cash and cash equivalent are sufficient to meet its short and medium term requirements.
The following tables detail the Companyâs remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods and its non-derivative financial assets. The contractual maturity is based on the earliest date on which the Company may be required to pay.
b) Credit risk:
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Companyâs receivables from customers and investment securities. Credit risk is managed 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.
Trade receivables: The Companyâs exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.
Refer Note 20.3 and Note 10.2 for the details in respect of revenue and receivable from top customers.
Credit risk on current investments, cash & cash equivalent and derivatives is limited as the Company generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in fixed deposits and short-term liquid mutual fund units.
c) Market Risk
Market risk is the risk of loss of any future earnings, in realizable fair values or in future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short-term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk and interest rate risk and the market value of its investments. Thus, the Companyâs exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.
Commodities risk:
Exposure to market risk with respect to commodity prices primarily arises from the Companyâs purchase of raw material, mainly comprising cotton, silk, dyes and chemicals. All these raw material inputs are commodity products, whose prices may fluctuate significantly over short periods of time. The prices of the Companyâs raw materials generally fluctuate in line with commodity cycles, where the Company does not have much control. Commodity price risk exposure is evaluated and managed through operating procedures and sourcing policies.
Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs debt obligations with floating interest rates and investments.
The Company holds hedging instruments to mitigate the risk of changes in interest rate on foreign currency loans. The counterparty to these contracts is generally a bank or a financial institution. These instruments are valued based on quoted prices for similar assets and liabilities in active markets.
Foreign currency risk:
The Companyâs foreign currency risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in USD, GBP and Euros) and foreign currency borrowings (in USD and GBP). A significant portion of the Companyâs revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Companyâs revenues measured in Indian rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, the Company uses derivative and non-derivative financial instruments, such as foreign exchange forward contracts, and foreign currency financial liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognised assets and liabilities.
All hedging activities are carried out in accordance with the Companyâs internal risk management policies, as approved by the Board of Directors, and in accordance with the applicable regulations where the Company operates.
The following table gives details in respect of outstanding foreign exchange forward contracts in relation to Sell Contracts:
The amounts of monetary assets and monetary liabilities shown in the above table are unhedged are hence directly subject the risk of fluctuation in the respective foreign currencies. The following table details the Companyâs sensitivity to a 1% increase and decrease in the INR against the relevant foreign currencies net of hedge accounting impact. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents managementâs assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 1% change in foreign currency rates, with all other variables held constant. A positive number below indicates an increase in profit or equity where INR strengthens 1% against the relevant currency. For a 1% weakening of INR against the relevant currency, there would be a comparable impact on profit or equity, and such balances are indicated in negative.
Terms & Conditions:
Sales:
The sales to related parties are in the ordinary course of business. Sale transactions are based on prevailing price lists and memorandum of understanding signed with related parties. For the year ended March 31, 2017, the Company has not recorded any loss allowances for trade receivables from related parties.
Purchases:
The purchases from related parties are in the ordinary course of business. Purchase transactions are based on normal commercial terms and conditions and market rates.
Guarantees to subsidiaries:
Guarantees provided to the lenders of the subsidiaries are for availing term loans and working capital facilities from the banks and for general business purpose.
NOTE 13: TRANSITION TO IND AS
Note 13.1: First-time adoption of Ind-AS
The Companyâs financial statements for the year ended March 31, 2017 are prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015. The adoption of Ind AS was carried out in accordance with Ind AS 101, using April 1, 2015 as the transition date. Ind AS 101 requires that all Ind AS standards and interpretations that are effective for the Ind AS financial statements for the year ended March 31, 2017, be applied consistently and retrospectively for all fiscal years presented. All applicable Ind AS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the financial statements under both Ind AS and Indian GAAP as at the transition date have been recognized directly in equity at the transition date.
The following reconciliations provide the effect of transition to Ind AS from IGAAP in accordance with Ind AS 101:
1) Equity as at April 01, 2015 and March 31, 2016
2) Net profit and total comprehensive income for the year ended March 31, 2016 and
3) Cash flow movement for the year ended March 31, 2016.
Note 13.2: Notes on Reconciliation
1.1 Previous GAAP balances have been regrouped to comply with the Companies (Accounting Standard) Rules, 2006, certain account balances have been regrouped as per the format prescribed under Division II of Schedule III to the Companies Act 2013.
1.2 Ind AS 101 (First-time Adoption of Indian Accounting Standards) allows first-time adopters exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the exemption in its financial results for its Property, Plant and Equipment, as well as Intangible Assets (referred to as âfixed assetsâ in aggregate). The Company has opted to determine the deemed cost of such fixed assets as of April 01, 2015 to be represented by the fair value of the land and buildings and restating certain other items of fixed assets in accordance with Ind AS wherein these fixed assets were grossed up for the capital subsidies received in prior years (net of amortisation). Accordingly, the increase in the carrying value of theses fixed assets to their deemed costs resulted in higher depreciation charge for the year/period. The amortisation of the capital subsidy has been netted against the depreciation of the relevant fixed asset.
1.3 Under previous GAAP, the Company had charged off certain loan origination/upfront fees paid to the banks for facilitating the term loans, as finance cost in the respective year of incurrence. Under Ind AS, such financial liabilities, classified to be carried at amortized cost basis, have resulted in a change in the current period finance cost (net) with an adjustment to the retained earning balance as of April 01, 2015. Borrowings and other financial liabilities which were recognized at historical cost under previous GAAP have been recognized at amortized cost under Ind AS with the difference been adjusted to opening retained earnings. Under previous GAAP, transaction costs incurred in connection with borrowings were amortized equally over the tenure of the borrowings. Under Ind AS, transaction costs are deducted from the initial recognition amount of the financial liability and charged over the tenure of borrowing using the effective interest method.
1.4 Under previous GAAP, the interest free employee loans and security deposits, with fixed terms, were considered at historical cost. Under Ind AS these financial assets have been adjusted to be carried at amortized cost. The notional cost of interest on deposits under Ind AS has been recognised as rental expense and the notional cost of interest on loans given to employees has been recognised as employee benefit expense. The interest accrual has been recognised as interest income earned on financial assets that are not designated as at fair value through profit or loss.
1.5 The Company has recognised the deferred tax impact arising from Ind AS adjustments as well as evaluated the status of the deferred tax asset arising from carried forward tax losses existing as of March 31, 2015 not recognised as per previous GAAP in the absence of virtual certainty and has adjusted the same in the reserves as of April 01, 2015. Based on the utilisation of the carried forward tax losses during the period(s), such reversal of deferred tax asset is recognised in statement of profit and loss.
1.6 The Company uses derivative financial instruments(hedging instruments) to manage risks associated with foreign currency exchange fluctuations relating to certain highly probable forecasted transactions. The hedging instruments initially measured at fair value are remeasured at subsequent reporting dates. Under the previous GAAP, changes in the fair value of these hedging instruments designated and effective, as hedge of future cash flows, were recognized directly in a Hedge Reserve (grouped under reserves and surplus) until the occurrence of the forecast transaction at which time the same was recognized in the Statement of profit and loss. As per Ind AS requirements changes in the fair value are routed through Other Comprehensive income, after adjustment of the deferred tax, to be disclosed in the statement of equity as a Hedge Reserve. On occurrence of the forecast transaction, the effective portion of these derivatives are adjusted against the underlying hedged item and ineffective portion is recognized as expense in the Statement of profit and loss.
1.7 Measurement of financial guarantee contracts given free of cost to subsidiaries leading to increase in investment value and other income.
1.8 The Company has elected to continue with the carrying value of all of its investments in subsidiaries, other than its investment in one subsidiary, recognised as of April 01, 2015 (transition date) measured as per the previous GAAP as its deemed cost as at the date of transition and in case of that one subsidiary, the Company has elected to fair value the investment as of April 01, 2015 (transition date) as its deemed cost as at the date of transition.
1.9 Under previous GAAP, dividends proposed by the Board of Directors after balance sheet date but before the approval of the financial statements by the shareholders at the Annual General Meeting, were considered as adjusting events. However, under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend recognized as on transition date has been reversed with corresponding adjustment to opening retained earnings and dividend in the subsequent period has been recognized in the year of approval in the general meeting.
2) The movement in cash flow from operating activities: There is movement arising mainly on account of reclassification of bill discounting from trade receivables to short borrowings and payment made for upfront costs which has been adjusted against long term borrowings.
3) The movement in cash flow from investing activities: There is movement arising mainly on account of GAAP adjustments made to the profit on write off of ineligible costs on acquisition and measurment of financial assets at amortized cost.
4) The movement in cash flow from financing activities: There is movement arising mainly on account of reclassification of bill discounting from trade receivables to short borrowings and payment made for upfront costs which has been adjusted against long term borrowings.
5) Unpaid dividend bank accounts aggregating to Rs.22.81 Lakhs as at March 31, 2016 (April 01, 2015 : Rs.12.71 Lakhs) considered as cash and cash equivalents under Previous GAAP has been considered under investing activities.
Note 13.3: There is no amount due and outstanding as at Balance sheet date to be credited to the Investor Education and Protection Fund.
NOTE 14: EVENTS AFTER REPORTING PERIOD
On May 23, 2017, the board of directors recommended a final dividend of Rs.2.50 per equity share (total dividendof Rs.2,461.43 Lakhs (excluding dividend distribution tax)) be paid to the shareholders for financial year 2016-2017, which will be approved by shareholders at the Annual General Meeting.
NOTE 15: APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved for issue by the board of directors on May 23, 2017.
Mar 31, 2016
NOTE 1. - EXPENDITURE TOWARDS CORPORATE SOCIAL RESPONSIBILITY
The Company has devised the CSR policy as required under section 135 of
the Companies Act, 2013 and the relevant rules made thereunder. Gross
amount required to be spent by the Company during the year: Rs. 150
Lakhs. (Previous year: Rs. 89.83 Lakhs) Amount spent during the year
for purposes other than construction/acquisition of any asset was Rs.77
Lakhs (Previous year: Rs. 1 Lakh) and balance to be paid as at March
31,2016 on such activities was Rs. Nil. (Previous year Rs. Nil)
NOTE 2. - SEGMENT REPORTING
Since the Company prepares consolidated financial statements, segment
information has not been provided in these standalone financial
statements.
NOTE 3. - There is no amount due and outstanding as at Balance sheet
date to be credited to the Investor Education and Protection Fund.
NOTE 4. - DETAILS OF DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN
CURRENCY EXPOSURES
1. Forward covers
a) The Company has designated certain highly probable forecasted
foreign currency transactions and certain forward contracts to sell and
buy foreign currency as hedged items and hedging instruments
respectively, in a Cash Flow Hedge to hedge the foreign exchange risk
arising out of fluctuations between the India rupee and foreign
currency. The exchange fluctuations arising from marking to market of
the hedging instruments, to the extent relatable to the hedge being
effective has been recognised in a Hedge reserve account in the Balance
sheet. Accordingly, exchange fluctuations gains amounting to Rs.
1,329.49 Lakhs as at March 31, 2016 (Previous year: Rs. 934.83 Lakhs)
have been recognized in the Hedge Reserve account. These exchange
differences will be considered in Statement of Profit and Loss as and
when the forecasted transactions occur.
2. Interest rate swap
The Company has entered into an interest rate swap for hedging its cash
flows arising from the floating interest rate exposure on borrowings in
foreign currency of USD 8,000,000, which has a mark to market loss of
Rs.65.62 Lakhs (previous year: Rs.55.19 Lakhs), taken to hedge reserve
being an effective hedge.
NOTE 5. NOTES RELATING TO CASH FLOW STATEMENT
i) Cash and cash equivalents include balances with scheduled banks on
dividend account not available for use by the Company: Rs.22.81 Lakhs
(Previous year: Rs.12.71 Lakhs)
ii) Interest paid includes Rs.146.35 Lakhs (Previous year: Nil) ,
interest capitalised to capital work in progress as borrowing cost.
iii) Cash and cash equivalents comprises of:
NOTE 6. Previous year''s figures have been regrouped / reclassified
wherever necessary to correspond with the current year''s classification
/ disclosure.
Mar 31, 2015
1 There is no movement in the shares outstanding from the prior year
to the current year.
2 Details of the rights, preferences and restrictions attaching to
each class of shares :
The Company has only one class of equity share, having a par value of
Rs.5/-. Each holder of equity shares is entitled to one vote per share.
In the event of liquidation of the Company, the holders of the equity
shares will be entitled to receive any of the remaining assets of the
Company, after distribution of all preferential amount. However, as on
date no such preferential amount exist. The distribution will be in
proportion to number of equity shares held by the shareholders.
3 RELATED PARTY DISCLOSURES
Nature of relationship Names of the related parties
Wholly owned subsidiaries Himatsingka Wovens Private Limited
(WOS) (HWPL)
Himatsingka America, Inc. (Hima)
Divatex Home Fashion, Inc. (Divatex)
DWI Holdings, Inc. (DWI)
Himatsingka Singapore Pte Ltd (HSPL)
Giuseppe Bellora S.p.A. (GB)
Other subsidiaries (OS) Twill & Oxford LLC (T&O)
GBT SrL
Key management personnel (KMP) A.K. Himatsingka (AKH) - Vice Chairman
D.K. Himatsingka (DKH) - Managing
Director
Aditya Himatsingka (ADH) - Executive
Director
Jayashree Poddar (JP) - Executive
Director
Shrikant Himatsingka (SKH) - Executive
Director
Dilip J. Thakkar - Chairman
Rajiv Khaitan - Independent Director
Dr.K.R.S Murthy - Independent Director
Berjis M Desai - Independent Director
Pradeep K.P - Chief Financial officer
Ashok Sharma - Company Secretary
Relatives of key management Amitabh Himatsingka
personnel (Relatives) Rajshree Himatsingka
Ranjana Himatsingka
Supriya Himatsingka
Priyadarshini Himatsingka
Akanksha Himatsingka
Enterprises owned or Bihar Mercantile Union Limited (BMU)
significantly influenced
by KMP, directors or
their relatives
(Referred as "Enterprises") Credit Himatsingka Private Limited
(CHPL)
Khaitan & Co LLP
D.K. Himatsingka HUF
Satin Reed America, Inc. (SR)
4 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT
PROVIDED FOR)
As at As at
31.03.2015 31.03.2014
Rs. in lakhs Rs. in lakh
(a) Contingent liabilities
(i) Claims against the Company
not acknowledged
as debts
Taxation matters#
Income tax 464.79 536.72
Excise duty 374.38 341.80
Others 35.25 35.25
(ii) Corporate guarantee given
towards credit
facilities
on behalf of subsidiaries
Financial institutions 12,531.50 100.00
Banks 7,711.62 18,428.67
others 401.55 384.90
(iii) Bill discounted 5,985.10 -
* The above amounts have been arrived at based on the notice of demand
or the Assessment Orders, as the case may be, and the Company is
contesting these claims with the respective authorities. Outflows
including interest and other consequential payments, if any, arising out
of these claims would depend on the outcome of the decisions of the
appellate authorities and the Company's rights for future appeals before
the judiciary. No reimbursements are expected.
(b) Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for (Net of advances)*
Tangible assets 83.30 647.29
* Does not include value of materials to be supplied to the ongoing
civil work.
5 There is no amount due and outstanding as at Balance sheet
date to be credited to the Investor Education and Protection Fund.
6 DETAILS ON DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN
CURRENCY EXPOSURES
1. Forward covers
(a) The Company has designated certain highly probable forecasted
foreign currency denominated sales transactions and certain forward
contracts to sell foreign currency as hedged items and hedging
instruments respectively, in a Cash Flow Hedge to hedge the foreign
exchange risk arising out of fluctuations between the India rupee and
foreign currency. The exchange fluctuations arising from marking to
market of the hedging instruments, to the extent relatable to the hedge
being effective has been recognised in a Hedge reserve account in the
Balance sheet. Accordingly, exchange fluctuations gains amounting to
Rs. 934.83 lakhs as at March 31, 2015 (Previous year : Rs. 805.81
lakhs) have been recognized in the Hedge Reserve account. These
exchange differences will be considered in Statement of Profit and Loss
as and when the forecasted transactions occur.
2. Interest rate swap
The Company has entered into an interest rate swap for hedging its cash
flows arising the floating interest rate exposure on borrowings in
foreign currency of USD 8,000,000, which has a mark to market loss of
Rs.55.19 lakhs (previous year: Rs.14.69 lakhs), taken to hedge reserve
being an effective hedge.
3. During the previous year, the Company had designated certain
Pre-shipment credit 'PCFC' which was taken in foreign currency (US
dollars) against confirmed sales orders in hand considered as firm
commitments as hedged items and hedging instruments respectively, in a
Fair value Hedge to hedge the foreign exchange risk arising from
fluctuations in the exchange rate of Indian rupee and the US dollar
between the contract acceptance and fulfillment dates. The exchange
loss (net) on restatement of hedging instruments to the extent hedge is
considered effective amounting to Rs. 49.50 lakhs had been accounted as
'Mark-to-Market of fair value derivatives' under 'Other current
liabilities' in the financial statements.
7 In the previous year, the Company made an application for
capital and revenue subsidy under the 'mega project' of the 'Suvarna
Vasthra Neethi Scheme 2008-13 for its investments in the Bed Linen and
Co-generation Power Plants. Based on the application, the amount
eligible and specified in the scheme for subsidy pertaining to power
consumption was accrued as receivable.
8 In the previous year, the Company invested an amount of
Rs.1,189.00 lakhs in its subsidiary Giuseppe Bellora S.p.A towards
funding of certain one time restructuring costs on account of a change
in business model. This amount was written off as an exceptional item.
9 Previous year's figures have been regrouped / reclassified
wherever necessary to correspond with the current year's classification
/ disclosure..
Mar 31, 2014
NOTE 1A - EMPLOYEE BENEFITS
In accordance with applicable Indian laws, the Company provides for
gratuity, a defi ned benefit retirement plan (Gratuity plan). The
Gratuity plan provides a lump sum payment to vested employees, at
retirement or termination of employment, an amount based on the
respective employee''s last drawn salary and the years of employment
with the Company. The Company provides the gratuity benefit through
annual contributions to a fund managed by the Insurer (ICICI Prudential
Life Insurance). Under this plan, the settlement obligation remains
with the Company, although the Employees Gratuity Trust administers the
plan and determines the contribution premium required to be paid by the
Company.
Defined contribution plans
The Company makes Provident fund, Superannuation Fund and Employee
State Insurance contributions to defi ned contribution plans for
qualifying employees. Under the schemes, the Company is required to
contribute a specifi ed percentage of the payroll costs to fund the
benefits. The contributions payable to these plans by the Company are
at rates specifi ed in the rules of the schemes. The Company recognized
the following contributions in the Statement of Profit and loss.
NOTE 2 - SEGMENT REPORTING
Since the Company prepares consolidated financial statements, segment
information has not been provided in these unconsolidated financial
statements.
As at As at
31.03.2014 31.03.2013
Rs. in lakhs Rs. in lakhs
NOTE 30 - CONTINGENT LIABILITIES AND COMMITMENTS
(TO THE EXTENT NOT PROVIDED FOR)
Contingent liabilities
Claims against the Company not
acknowledged as debts
Taxation matters#
Income tax 536.72 465.77
Excise duty 341.80 341.80
Value added tax - 140.20
Service tax - 4.28
Others 35.25 35.25
Corporate guarantee given towards
credit facilities on behalf of
subsidiaries
Financial institutions 100.00 221.21
Banks 18,428.67 18,988.98
Others 384.90 173.93
Bill discounted - -
# The above amounts have been arrived at based on the notice of demand
or the Assessment Orders, as the case may be, and the Company is
contesting these claims with the respective authorities. Outflows, if
any, arising out of these claims would depend on the outcome of the
decisions of the appellate authorities and the Company''s rights for
future appeals before the judiciary. No reimbursements are expected.
NOTE 3 - There is no amount due and outstanding as at Balance sheet
date to be credited to the Investor Education and Protection Fund.
NOTE 4 - Details of Forward covers, Options and Derivative
transactions
1. Forward covers
(a) The Company has designated certain highly probable forecasted US
dollar denominated sales transactions and certain forward contracts to
sell US dollars as hedged items and hedging instruments respectively,
in a Cash Flow Hedge to hedge the foreign exchange risk arising out of
fluctuations between the India rupee and the US dollar. The exchange
fluctuations arising from marking to market of the hedging
instruments, to the extent relatable to the hedge being effective has
been recognised in a Hedge reserve account in the Balance Sheet.
Accordingly exchange fluctuations gains amounting to Rs. 805.81 lakhs as
at March 31, 2014 (Previous year : Rs.327.09 lakhs) have been recognized
in the Hedge Reserve account. These exchange differences will be
considered in Statement of Profit and Loss as and when the forecasted
transactions occur.
2. Interest rate swap
The Company has entered into an interest rate swap for hedging its cash
flows arising the fl oating interest rate exposure on borrowings in
foreign currency of USD 8,000,000, which has a mark to market loss of
Rs.14.69 lakhs (previous year: Rs.117.08 lakhs), taken to hedge reserve
being an effective hedge.
3. During the year, the Company has designated certain Pre-shipment
credit ''PCFC'' which is taken in foreign currency (US dollars) against
confirmed sales orders in hand considered as firm commitments as
hedged items and hedging instruments respectively, in a Fair value
Hedge to hedge the foreign exchange risk arising from fluctuations in
the exchange rate of Indian rupee and the US dollar between the
contract acceptance and fulfi llment dates. The exchange loss (net) on
restatement of hedging instruments to the extent hedge is considered
effective amounting to Rs.49.50 lakhs has been accounted as
Rs.Mark-to-Market of fair value derivatives'' under Rs.Other current
liabilities'' in the financial statements.
NOTE 5 - NOTES RELATING TO CASH FLOW STATEMENT
(i) The cash flow statement has been prepared under the "Indirect
Method" as set out in the Companies (Accounting Standards) Rules, 2006.
(ii) Cash and cash equivalents include balances with scheduled banks on
dividend account not available for use by the Company: Rs.20.98 lakhs
(Previous year: Rs.24.02 lakhs)
NOTE 6 - Previous year''s figures have been regrouped / reclassifi ed
wherever necessary to correspond with the current year''s classifi
-cation / disclosure.
Mar 31, 2013
NOTE 1 Â SeGMeNT RePoRTING
Since the Company prepares consolidated fnancial statements, segment
information has not been provided in these unconsolidated fnancial
statements.
As at As at
31.03.2013 31.03.2012
Rs. in lakhs Rs. in lakhs
NoTe 2 Â
CoNTINGeNT LIAbILITIeS ANd CoMMITMeNTS
(To THe exTeNT NoT PRovIded FoR)
Contingent liabilities
Claims against the Company not
acknowledged as debts Taxation
matters# Income tax 465.77 465.77
Excise duty 341.80 341.80
Value added tax 140.20 140.20
Service tax 4.28 54.84
Others 35.25 35.25
Corporate guarantee given towards
credit facilities on behalf of
subsidiaries Financial institutions 221.21 342.42
Banks 18,988.98 20,278.92
Others 173.93 163.00
Bill discounted 8.26
# The above amounts have been arrived at based on the notice of demand
or the Assessment Orders, as the case may be, and the Company is
contesting these claims with the respective authorities. Outfows, if
any, arising out of these claims would depend on the outcome of the
decisions of the appellate authorities and the Company''s rights for
future appeals before the judiciary. No reimbursements are expected.
NoTe 3 Â The Company had in the prior year commenced the activity of
improving operating and reporting process through an implementation of
an ERP system. The below mentioned costs have been identifed to be
relating to the implementation process and have accordingly been
capitalized as part of the asset / capital work in progress:
NoTe 4 Â There is no amount due and outstanding as at Balance sheet
date to be credited to the Investor Education and Protection Fund.
NoTe 5 Â Exceptional items represent the impact of the transactions
arising against a derivative contract designated as fair value through
proft and loss. On August 9, 2012, the liability on account of this
contract crystallised at Rs. 1,554 lakhs which has been fully settled.
NoTe 5 Â NoTeS ReLATING To CASH FLoW STATeMeNT
i) The cash fow statement has been prepared under the "Indirect Method"
as set out in the Companies (Accounting
Standards) Rules, 2006. ii) Cash and cash equivalents include balances
with scheduled banks on dividend account not available for use by the
Company: Rs. 24.02 lakhs (Previous year: Rs. 29.23 lakhs). iii)
Interest paid is inclusive of and purchase of fxed assets excludes,
interest capitalised: Rs. Nil (Previous year: Rs. 2.96 lakhs). iv)
Cash and cash equivalents comprises of:
NoTe 7 Â Other income includes, Rs. 294.29 lakhs on account of
reversal of impairment loss recognised in respect of the spun yarn unit
in the earlier years, in view of adequate increase in value in use
arising out of cash fows from alternate use of assets from the current
year.
NoTe 8 Â Previous year''s fgures have been regrouped / reclassifed
wherever necessary to correspond with the current year''s classifcation
/ disclosure.
Mar 31, 2012
1) Change in Accounting Policy:
The Company is exposed to currency fluctuations risk of firm
commitments and highly probable transactions and follows a risk
management policy of hedging this risk through a combination of forward
contracts, options and other derivative contracts ("hedging
instruments"). During the year, with effect from April 1, 2011, the
Company has adopted the principles of derivative and hedge accounting
specified under Accounting Standard 30 (AS 30), "Financial Instruments:
Recognition and Measurement", to the extent they have not been dealt
with and do not conflict with the accounting standards as notified
under Section 211 (3C) of the Companies Act, 1956. On the date of
application of the principles of AS 30 by the Company, all the
outstanding derivative contracts were designated to be either at fair
value through profit and loss or as cash flow hedges.
The gains or losses on designated hedging instruments that qualify as
effective cash flow hedges are recorded in 'Hedge Reserve' account at
each period end, and are transferred to the Statement of Profit and
Loss in the same period during which the hedged transaction affects the
Statement of Profit and Loss, or recognized directly into the Statement
of Profit and Loss to the extent such hedges are considered
ineffective. When a forecasted transaction is no longer expected to
occur, the gains or losses that were previously recognized in the
'Hedge Reserve' are transferred to the Statement of Profit and Loss
immediately. The effectiveness of the hedge is tested by the Company at
each period end.
The changes in fair values of instruments designated at fair value
through profit and loss are adjusted in the Statement of Profit and
Loss.
Prior to the adoption of the principles under AS 30, foreign hedging
instruments were marked to market as at the Balance Sheet date and
provision for losses, if any, were dealt with in the Statement of
Profit and Loss, except where there was any significant uncertainty.
Unrealised gains, if any, on such derivatives were not recognised in
the Statement of Profit and Loss.
The impact of change in policy is as follows:
i) The loss on fair valuation of a derivative contract as at April 1,
2011, amounting to Rs. 1,973.44 lakhs has been adjusted to the opening
balance of reserves, in accordance with the transitional provisions
under AS 30. In respect of such derivative contract, a loss of Rs.
159.92 lakhs has been recognized in the Statement of Profit and Loss
for the year ended March 31, 2012 as a movement in the fair value
during the year and has been disclosed as an exceptional item (Refer
Note 37). In view of significant uncertainty regarding the exchange
rates on maturity of contract and consequential liability, if any,
under this contract, the mark to market loss on this contract was not
recongised in the previous years.
ii) The fair valuation loss amounting to Rs. 171.44 lakhs with regard
to the derivative contracts designated as cash flow hedges, being
effective as at March 31, 2012, has been recognized in Hedging Reserve
account, to be transferred to the Statement of Profit and loss on the
occurrence of the highly probable sale.
NOTE 2 - The Revised Schedule VI has become effective from 1 April,
2011 for the preparation of financial statements. This has
significantly impacted the disclosure and presentation made in the
financial statements. Previous year's figures have been regrouped /
reclassified wherever necessary to correspond with the current year's
classification / disclosure.
NOTE 3 - NOTES RELATING TO CASH FLOW STATEMENT
i) The cash flow statement has been prepared under the "Indirect
Method" as set out in the Companies (Accounting Standards) Rules, 2006.
ii) Cash and cash equivalents include balances with scheduled banks on
dividend account not available for use by the Company: Rs. 29.23 lakhs
(Previous year: Rs. 42.50 lakhs).
iii) Interest paid is inclusive of and purchase of fixed assets
excludes, interest capitalised: Rs. 2.96 lakhs (Previous year: Rs. 3.50
lakhs).
Mar 31, 2011
1 Contingent liabilities
i) Contingent liabilities not provided for:
31.03.2011 31.03.2010
Rs. in lakhs Rs. in lakhs
Income tax 4,918.81 1,938.99
Entry tax - 10.00
Excise duty 265.40 275.12
Customs duty - 20.15
Value added tax 140.20 140.20
Claims against the company
not acknowledged as debts 27.96 -
2 Details of Forward covers, Options and Derivative transactions
3) Derivative contracts
The Company is exposed to currency fluctuations on foreign currency
assets and cash flows denominated in foreign currency. The
Company follows a policy of covering the risks arising out of foreign
exchange fluctuations through a combination of forward contracts
and options.
One of the foreign exchange derivative contract has a duration of 60
months, to sell US Dollars on a monthly basis at fixed rate subject to
certain conditions. The contract also obligates the Company to pay a
notional amount of Swiss Franc and receive notional amount of Rupees
based on the Swiss Franc to US Dollar exchange rates during a specified
monitoring period in the year 2012. There is significant uncertainty
regarding the exchange rates that may be prevalent at that time and
consequently the liability if any, under the contract. Due to this
uncertainty, as in the previous year, no provision has been made in the
financial statements as at 31 March 2011.
The marked to market valuation, as indicated by the bank, is a loss of
Rs.1957.34 lakhs (Previous year: Rs.1136.68 lakhs) as on March 31,
2011.
4 1) Defined benefit plans:
In accordance with applicable Indian laws, the Company provides for
gratuity, a defined benefit retirement plan (Gratuity Plan). The
Gratuity Plan provides a lump sum payment to vested employees, at
retirement or termination of employment, an amount based on the
respective employee's last drawn salary and the years of employment
with the Company. The Company provides the gratuity benefit through
annual contributions to a fund managed by the Insurer (ICICI Prudential
Life Insurance). Under this plan, the settlement obligation remains
with the Company, although the Employees Gratuity Trust administers the
plan and determines the contribution premium required to be paid by the
Company.
Note:
1. Salary escalation considered takes into account the inflation,
seniority, promotion and other relevant factors
2. The information on composition of the plan assets held by the funds
managed by the insurer is not provided since the same is not available.
5 During 2003-04, the Khata in respect of one of the Company's
properties was merged with those of other adjacent properties to
facilitate better utilisation of the property by joint construction and
entitlement of proportionate undivided share of the amalgamated
property.
6 There is no amount due and outstanding as at Balance sheet date to
be credited to the Investor Education and Protection Fund.
7 Notes relating to cash flow statement
(a) The cash flow statement has been prepared under the "Indirect
Method" asset out in the Companies (Accounting Standards) Rules, 2006.
(b) Cash and cash equivalents include balances with scheduled banks on
dividend account not available for use by the Company: Rs.42.48 lakhs
(Previous year: Rs.51.10 lakhs).
(c ) Cash and cash equivalents include restricted cash being security
deposit with bank against ECGC premium: Rs.2.50 lakhs (Previous
year: Rs.2.50 lakhs).
(d) Interest paid is inclusive of and purchase of fixed assets excludes,
interest capitalised: Rs.3.50 lakhs (Previous year: Rs.277.19 lakhs).
8 Pursuant to shareholders' approval in the Annual General Meeting
held on September 26, 2007, the Company has on October 9, 2007,
allotted 5,800,000 warrants to promoters/ promoter group, at an issue
price of Rs.130/- convertible into equity shares at the same price
within 18 months from the date of issue. The Company has allotted
256,000 equity shares each on November 28, 2007, January 2, January 31
and March 7, 2008 on conversion of equivalent number of warrants out of
the above.
The promoters / promoter group, have not exercised by April 08, 2009 as
required in accordance with the terms of the issue, the option to
convert the remaining 4,776,000 warrants issued on a preferential
basis, into equivalent number of equity shares. The validity of the
said warrants, therefore, has lapsed and the application money of
Rs.620.88 lakhs paid on 4,776,000 lapsed warrants has been forfeited
and transferred to capital reserve.
9 The Company is primarily in the business of 'Home Textiles',
consequently no segmental disclosures have been made.
10 Related party disclosures
Relationship Names of the related parties
Wholly owned Himatsingka Wovens DWI Holdings, Inc.
subsidiaries Private Limited
Himatsingka America
Inc.
Other Himatsingka Singapore Giuseppe Bellora
subsidiaries pte ltd S.p.A.
Twill & Oxford LLC GBT SrL
Divatex Home Fashions,
Inc.
Key management A.K. Himatsingka
personnel - Vice Chairman
(Referred D K. Himatsingka
as KMP ) - Managing Director
Aditya Himatsingka
- Executive Director
Shrikant Himatsingka
- Executive Director
Relatives of Amitabh Himatsingka Supriya Himatsingka
KMP (Referred
as Relatives ) Rajshree Himatsingka Priyadarshini
Himatsingka
Ranjana Himatsingka Akanksha Himatsingka
Enterprises
owned or Bihar Mercantile
signifcantly Union Limited D.K.Himatsingka
infuenced by HUF
KMP, Directors " Satin Reed (America) Credit Himatsingka
or their Inc Private Limited
relatives
(Referred Khaitan & Co
as Relative
enterprises")
11 Previous year figures have been regrouped/recast, wherever
necessary.
Mar 31, 2010
1. The cash flow statement has been prepared under the "Indirect
Method" as set out in the Companies (Accounting Standards) Rules, 2006
2. Cash and cash equivalents include balances with scheduled banks on
dividend account Rs. 51.10 lakhs (Previous year Rs. 55.13 lakhs) which
are not available for use by the company.
3. Cash and cash equivalents Include restricted cash of Rs. 2.50 lakhs
(Previous year Rs.2.50 lakhs) being security deposit with bank against
ECGC premium
4. Interest paid is inclusive of and purchase of Fixed Assets
excludes,interest capitalised Rs.277.19 lakhs (Previous year Rs.181.27
lakhs)
5. Details of Forward covers, Options and Derivative transactions
1) a. The following are the outstanding Forward Exchange Contracts
entered into by the company as on 31st March, 2010
b. Currency Swaps (other than forward exchange contracts stated above)
to hedge against fluctuations in changes in exchange rate
3) Derivative contracts
The Company is exposed to currency fluctuations on foreign currency
assets and cash flows denominated in foreign currency The Company
follows a policy of covering the risks arising out of foreign exchange
fluctuations through a combination of forward contracts and options.
i) During the year the Company accounted for a mark to market gain of
Rs.853.18 lakhs as an exceptional item in the profit and loss account,
on settlement of a foreign exchange derivative contract.
ii) The only existing foreign exchange derivative contract has a
duration of 60 months, to sell US Dollars on a monthly basis at fixed
rate subject to certain conditions. The contract also obligates the
Company to pay a notional amount of Swiss Franc and receive notional
amount of Rupees based on the Swiss Franc to US Dollar exchange rates
during a specified monitoring period in the year 2012. There is
significant uncertainty regarding the exchange rates that may be
prevalent at that time and consequently the liability, if any, under
the contract. Due to this uncertainty, as in the previous year, no
provision has been made in the financial statements as at 31 March 2010.
The marked to market valuation, as indicated by the bank, is a loss of
Rs 1136.68 lakhs (previous year Rs.2188.45 lakhs) as on March 31, 2010.
6. A) Defined benefit obligations
In accordance with applicable Indian laws, the Company provides for
gratuity, a defined benefit retirement plan (Gratuity Plan) The
Gratuity Plan provides a lump sum payment to vested employees, at
retirement or termination of employment, an amount based on the
respective employeeÃs last drawn salary and the years of employment
with the Company. The Company provides the gratuity benefit through
annual contributions to a fund managed by the Insurer (ICICI Pru).
Under this plan, the settlement obligation remains with the Company,
although the Employees Gratuity Trust administers the plan and
determines the contribution premium required to be paid by the Company.
Note:
1. Salary escalation considered takes into account the infation,
seniority, promotion and other relevant factors.
2. The information on composition of the plan assets held by the funds
managed by the insurer is not provided since the same is not available.
7. Pursuant to Shareholders approval in the Annual General Meeting
held on September 26, 2007, the Company has on October 9,2007, allotted
5,800,000 warrants to promoters/ promoter group, at an issue price of
Rs.130/- convertible into equity shares at the same price within 18
months from the date of issue. The Company has allotted 256,000 equity
shares each on November 28 2007, January 2, January 31 and March 7,
2008 on conversion of equivalent number of warrants out of the above.
The promoters/promoter group, have not exercised by April 08, 2009 as
required in accordance with the terms of the issue the option to
convert the remaining 4,776,000 warrants issued on a preferential
basis, into equivalent number of equity shares The validity of the said
warrants, therefore, has lapsed and the application money of Rs.620.88
lakhs paid on 4,776,000 lapsed warrants has been forfeited and
transferred to capital reserve.
8. The disclosure of Segmental information has not been made since
the same is reported in the Consolidated financial statements.
9. Previous year figures have been regrouped/recast, wherever
necessary.