Notes to Accounts of Manaksia Aluminium Company Ltd.

Mar 31, 2018

1 Company Overview

Manaksia Aluminium Company Limited (“the Company”) is a public limited company incorporated in India having its registered office situated at 8/1, Lal Bazar Street, Bikaner Building, Kolkata - 700 001. The Company has its shares listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is primarily engaged in the manufacture of value-added secondary aluminium products like Aluminium Rolled Sheets / Coils. The manufacturing units of the Company are located at Haldia & Bankura (West Bengal).

a) Rights, preferences and restrictions attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs.1/-. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

2.1 The Current part of Long Term Borrowings, as above, have been shown under Current Borrowings (Note No.20), as Current Maturities of long term borrowings.

2.2 Rupee Term Loan:

The above loan is secured by First Charge on all Fixed Asset (Movable and Immovable) and is further secured by second charge on current assets of the Company. The loan is repayable in 11 quarterly installments of Rs. 200 Lakhs each. The Rate of Interest on the Rupee Term Loan is 10.80% p.a. The Company had re-paid the term loan fully by December 31st, 2017.

2.3 Hire purchase obligations are secured by hypothecation of vehicles purchased under the respective agreement.

Disclosure of payables to MSME vendors as defined under the “Micro, Small and Medium Enterprise Development Act, 2006” is based on the information available with the Company regarding the status of registration of such vendors under the said Act, as per the intimation received from them on requests made by the Company.

There are no overdue principal amounts/interest payable amounts for delayed payments to such vendors at the Balance Sheet date. There are no delays in payment made to such suppliers during the year or for earlier years and accordingly there is no interest paid or outstanding interest in this regard in respect of payments made during the year or brought forward from previous years.

3. Employee Benefits

I) Defined Contribution Plan

Contribution to defined contribution plan, recognized are charged off during the year as follows :

II) Defined Benefit Plan

Gratuity is paid to employees under the Payment of Gratuity Act 1972 through unfunded scheme. The present value of obligation is determined based on actuarial valuation using Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

f) Sensitivity Analysis

Significant actuarial assumptions for the determination of the define benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The result of sensitivity analysis is given below :

4. Segment Reporting

I) Business Segment

As the Company’s business activity falls within a single primary business segment, viz. “Metal”, the disclosure requirements of Indian Accounting Standard-108 “Operating Segment”, notified under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies ( Accounts ) Amendment Rules, 2014 are not applicable.

II) Geographical Segment

The Company primarily operates out of India and therefore the analysis of geographical segments is demarcated into its Indian and Overseas Operations.

5. Capital Management

The Company’s capital management is intended to create value for shareholders by facilitating the meeting of long term and short term goals of the Company.

The Company determines the amount of capital required on the basis of annual business plan coupled with long term and short term strategic investment and expansion plans. The funding needs are met through cash generated from operations and short term bank borrowings.

The Company monitors the capital structure on the basis of net debt to equity ratio and maturity profile of the overall debt portfolio of the Company. Net debt includes interest bearing borrowings less cash and cash equivalents, other bank balances and current investments.

The table below summarises the capital, net debt and net debt to equity ratio of the Company.

II) Fair Value Hierarchy

All Financial Assets & Financial Liabilities are carried at amortised cost except Current Investments, which have been fair valued using Level 1 Hierarchy.

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

The following table represents the fair value heierarchy of Financial Assets and Financial Liabilities measured at Fair Value on a recurring basis :

III) Financial Risk Management

In the course of its business, the Company is exposed primarily to fluctuations in foreign currency exchange rates, interest rates, equity prices, liquidity and credit risk, which may adversely impact the fair value of its financial instruments. The Company’s focus is on foreseeing the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.

a) Market Risk -

Market Risk Comprises of Foreign Currency Exchange Rate Risk, Interest Rate Risk & Equity Price Risk

i) Exchange Rate Risk

The fluctuation in foreign currency exchange rates may have a potential impact on the Statement of Profit and Loss and Equity, where any transactions are denominated in a currency other than the functional currency of the Company.

The Company’s Exchange Rate Risk exposure is primarily due to Trade Payables, Trade Receivables and Borrowings in the form of Buyers’ Credit denominated in foreign currencies. The Company uses foreign exchange and forward contracts primarily to hedge foreign exchange exposure.

An appreciation/depreciation of the foreign currencies with respect to functional currency of the Company by 1% would result in an decrease/increase in the Company’s Net Profit before Tax by approximately Rs. 30.10 lacs for the year ended 31st March, 2018 (31st March, 2017 : - ‘27.02 lacs)

ii) 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 Company constantly monitors the credit markets and rebalances its financing strategies to achieve an optimal maturity profile and financing cost.

iii) Equity Price Risk

Equity price risk is related to change in market reference price of investments in equity securities held by the Company. The Company has no investments, hence the Company is not primarily exposed to equity price risk.

b) Liquidity Risk -

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.

The Company has obtained fund and non-fund based working capital facilities from various banks. The Company invests its surplus funds in bank fixed deposit and in mutual funds, which carry no or low market risk.

The following table shows a maturity analysis of the Company’s Financial Liabilities on the basis of undiscounted contractual payments :

c) Credit Risk -

Credit risk is the risk of financial loss arising from counter-party failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses both the direct risk of default and the risk of deterioration of creditworthiness.

Financial instruments that are subject to credit risk principally consist of Trade Receivables, Loans Receivables, Investments, Cash and Cash Equivalents and Financial Guarantees provided by the Company. None of the financial instruments of the Company result in material concentration of credit risk.

The Company has a policy of dealing only with credit worthy counter parties as a means of mitigating the risk of financial loss from defaults. The Company manages risks 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.

6. First Time Adoption of Indian Accounting Standards (Ind AS)

These Financial Statements of Company for the year ended March 31, 2018 have been prepared in accordance with Indian Accounting Standards (Ind AS). For the purposes of transition to Ind AS, the Company has followed the guidance prescribed in Ind AS 101-First Time Adoption of Indian Accounting Standard, with April 1, 2016 as the transition date and IGAAP as the previous GAAP.

The transition to Ind AS has resulted in changes in the presentation of the financial statements, disclosures in the notes thereto and accounting policies and principles. The accounting policies set out in Note 2 have been applied in preparing the standalone financial statements for the year ended March 31, 2018 and the comparative information. Exemptions on first time adoption of Ind AS availed in accordance with Ind AS 101 have been set out in note 41.1 below. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s Balance Sheet, Statement of Profit and Loss, is set out in note 41.2 and 41.3.

6.1 Exemptions availed on First Time Adoption of Indian Accounting Standards (Ind AS)

Ind AS 101 “First time Adoption of Indian Accounting Standards” permits Companies adopting Ind AS for the first time to take certain exemptions from the full retrospective application of Ind AS during the transition. The Company has accordingly on transition to Ind AS availed the following key exemptions :

I. Business Combination

In accordance with Ind AS 101, the Company has elected not to restate business combinations that occurred before the date of transition i.e. 1st April 2016. In view of the same, the Indian GAAP carrying amounts of assets and liabilities, that are required to be recognized under Ind AS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with respective Ind AS.

II. Property, Plant & Equipment

In accordance with Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP as deemed cost at the transition date i.e. 1st April 2016 for all the items of property, plant and equipment.

Notes :

1. Under Ind AS, revenue from sale of goods is inclusive of excise duty . Under previous GAAP, sales was shown net of excise duty.

2. Under Ind AS, Acturial Gain/Loss on Gratuity is routed through Other Comprehensive Income instead of profit & loss.

3. Under Ind AS, derivative instruments have been measured at Fair Value Through Profit & Loss (FVTPL).

7. Corresponding comparative figures for the previous year have been regrouped and readjusted wherever considered necessary to conform to the current year presentation.

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Mar 31, 2016

1. Terms/rights attached to each class of shares Equity Shares:

The Company has only one class of equity shares having a par value of Rs.1/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. The Current part of Long Term Borrowings, as above, have been shown under Other Current Liabilities (Note No.9), as Current Maturities of long term debt.

3. Rupee Term Loan:

The above loan is secured by First Charge on all Fixed Asset (Movable and Immovable) and is further secured by second charge on current assets of the Company. The loan is repayable in 11 quarterly installments of Rs. 200 Lakhs each. The Current Rate of Interest on the Rupee Term Loan is 10.60% p.a.

4. The Company''s Working Capital facilities are secured by First Charge on the current assets and second charge on Immovable Fixed Assets ranking pari passu with the respective Working Capital Bankers.

5. Effective from 1^st April 2014, the company had charged depreciation based on the revised remaining useful lives of the assets as per the requirement of Schedule II to the Companies Act 2013. Due to above an amount of Rs. 57.04 Lakhs (net of deferred tax) has been recognized in the opening balance of retained earnings for the Financial year 2014-15, for the assets where remaining useful life as per Schedule II is Nil.

6. Segment Reporting

7. Business Segment - As the Company''s business activity falls within a single primary business segment, viz “Metal”, the disclosure requirements of Accounting Standard-17 "Segment Reporting" is not applicable.

8. Geographical Segment - The company primarily operates in India and therefore the analysis of geographical segments is demarcated into its Indian and overseas operations as under:

9. In terms of the scheme of arrangement under section 391 to 394 of the Companies Act, 1956 (“the Scheme”) between Manaksia Limited, Manaksia Aluminium Company Limited (“the Company”) and other three transferee Companies, Manaksia Limited had demerged its business and undertakings namely; Aluminium Undertaking, Steel Undertaking, CMMC Undertaking and Packaging Undertaking to four separate transferee Companies. Pursuant to the Scheme as approved by Hon''ble High Court of Calcutta vide order dated 24^th March 2014, received on 19^th November 2014, the Aluminium undertaking of Manaksia Limited has been demerged into the company on a going concern basis with effect from 1st October 2013 being the appointed date.

In terms of the Scheme 65,534,050 equity shares of Rs. 1/- each, fully paid-up, of the Company have been issued to the holders of equity shares of Manaksia Limited, whose names were registered in the register of members on the record date, without payment being received in cash, in the ratio of 1 (one) fully paid-up equity share of Rs. 1/- each of the Company for every equity share held in Manaksia Limited. Further, in terms of the Scheme, Share Capital of Rs. 5 lacs prior to allotment of the above shares, has been transferred to Capital Reserve Account.

10. Corresponding comparative figures for the previous year have been regrouped and readjusted wherever considered necessary to confirm to the current year presentation.

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Mar 31, 2015

1. Effective from 1st April 2014, the company has charged depreciation based on the revised remaining useful lives of the assets as per the requirement of Schedule II to the Companies Act 2013. Due to above, depreciation charged for the year ended March 2015, is lower and profit after tax is higher by Rs 88.48 Lakhs. An amount of Rs 57.03 Lakhs (net of deferred tax) has been recognized in the opening balance of retained earnings for the assets where remaining useful life as per Schedule II is Nil.

2. Segment Reporting

a) Business Segment - As the Company's business activity falls within a single primary business segment, viz "Metal", the disclosure requirements of Accounting Standard-17 "Segment Reporting" is not applicable.

b) Geographical Segment - The company primarily operates in India and therefore the analysis of geographical segments is demarcated into its Indian and overseas operations as under:

3.1 In terms of the scheme of arrangement under Section 391 to 394 of the Companies Act, 1956 ("the Scheme") between Manaksia Limited, Manaksia Aluminium Company Limited ("the Company") and other three transferee Companies, Manaksia Limited has demerged its business and undertakings namely; Aluminium Undertaking, Steel Undertaking, CMMC Undertaking and Packaging Undertaking to four separate transferee Companies. Pursuant to the Scheme as approved by Hon'ble High Court of Calcuta vide order dated 24th March 2014, received on 19th November 2014, the Aluminium undertaking of Manaksia Limited has been demerged into the company on a going concern basis with effect from 1st October 2013 being the appointed date. The certified copy of the said order of the high court has been filed with the Registrar of Companies, West Bengal on 23rd November, 2014 and as such the Scheme has become operational form that date.

3.2 The said transfer has been affected at the values appearing in the books of Manaksia Limited as at 30th September, 2013 and recorded as such in book of accounts of the Company. The book value of such assets and liabilities as on that date are detailed out below:

3.3 In terms of the Scheme 65,534,050 equity shares of Rs. 1/- each, fully paid-up, of the Company have been issued to the holders of equity shares of Manaksia Limited, whose names were registered in the register of members on the record date, without payment being received in cash, in the ratio of 1 (one) fully paid-up equity share of Rs. 1/- each of the Company for every equity share held in Manaksia Limited. Consequent to allotment, "Share Suspense Account" amounting to Rs. 655.34 Lacs has been transferred to "Share Capital". Further, in terms of the Scheme, Share Capital of Rs. 5 lacs prior to allotment of the above shares, has been transferred to Capital Reserve Account.

3.4 In terms of the scheme, excess of net assets so recorded, over the amount of share capital to be issued amounting to Rs. 10,509.16 lacs is recognised in these financial statements, as Reserves in the sequence hereunder:

- Firstly, as Security Premium

- The balance as General Reserves

3.5 In terms of the Scheme, Security Premium Account of the Manaksia Limited shall be apportioned among Manaksia Limited, the Company and the other three transferee Companies in proportion of the net assets of all the Companies.

4. The Company has made a provision of Rs. 108.62 Lacs (Previous Year Rs. 145.24 Lacs) towards Entry Tax in relation to mater under litigation/dispute as shown below:

5. Corresponding comparative figures for the previous year have been regrouped and readjusted wherever considered necessary to confirm to the current year presentation.

Current period figures are for 12 months ended 31st March 2015 and previous period figures include the results of Aluminium business of Manaksia Ltd from appointed date of demerger (i.e 1st October 2013) to the end of relevant financial year. Since the reporting period of operational units are not same, these figures are not comparable.