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Notes to Accounts of Precision Camshafts Ltd.

Mar 31, 2018

Note 1. Corporate Information

The financial statements comprise of financial statements of Precision Camshafts Limited (''the Company'') for the year ended 31 March 2018. Precision Camshafts Limited is a Public Limited Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The shares of the Company are listed in two stock exchanges in India. The Company is primarily engaged in the manufacture and sale of camshaft castings and machined camshafts to the Auto industry and the Railways. The Company has its office registered at E 102/103 MIDC Akkalkot road Solapur, Maharashtra, 413006 .

The financial statements were authorised for issue in accordance with the resolution of the Board of Directors of the Company on 28 May 2018.

Exchange Differences on borrowing costs

Company has continued the policy of capitalising exchange differences arising from translation of long-term foreign currency monetary items as per exemption available under Ind AS 101- First time Adoption of Indian Accounting Standards.

Asset under construction

Capital work-in-progress (CWIP) comprises cost of assets that are not yet installed and ready for their intended use at the balance sheet date. Capital work in progress as at 31 March 2018 comprises expenditure for the plant and machinery in the course of construction. Balance of CWIP as at March 31,2018 amounts to Rs. 857.38 Lakhs (31 March 2017: Rs. 890.20 Lakhs)

Property, plant and equipment

The entire block of property, plant and equipment comprising of immovable assets with a carrying amount of Rs. 8,215.06 Lakhs (31 March, 2017: Rs. 8,393.81 Lakhs) and movable assets with a carrying amount of Rs. 15,989.45 Lakhs (31 March, 2017: Rs. 13,165.72 Lakhs ) are subject to first charge to secure the Company''s foreign currency term loan. (Refer Note No. 12)

The company has acquired 95% Equity shares of Memco Engineering Pvt. Ltd.,Nashik On 10 Oct 2017 for Rs. 3,804.35 Lakhs. The enterprise value of the company is negotiated based on a future EBITA multiple. Remaining 5% of the shares will be acquired in September 2018 based on audited financials of March 2018. The entire funding for the above has been done through internally generated profits of the company.

The company has contributed as equity since 06 May 2017 to its wholly owned subsidary in PCL International Holding BV. The equity contribution has been done solely for acquiring the companies in Europe. On 23 March 2018 PCL International Holding BV has acquired MFT Motoren und Fahrzeugtechnik GmbH (MFT) - Germany''s 76% shares by combination of equity & loan. The loan is taken from Bank of Baroda London. The total cost of acquisition is Rs. 2,044.57 Lakhs based on a projected EBITA multiple and remaining 24% will be acquired in 2021 based on financial performance of the year 2021.

The company has contributed Rs. 100 lakhs as 6% cumulative non-convertible preference shares to Memco Engineering Pvt. Ltd.,Nashik. Considering the present lending rates for similar companies, the 6% dividend is not at fair value. The difference between the present lending rate i.e 10.5% and the fixed dividend rate i.e 6% which has given to Memco Engineering Pvt. Ltd. has been derived based on the Net present value for 5 years. The difference between the rates has been considered as Deemed Investment as equity.

Cash at banks earns interest at fixed rates based on fixed deposit receipts made by the company. Fixed deposits are made for varying periods of between 1 month to 48 months, depending on the immediate cash requirements of the Company, and earn interest at the respective short term / long term deposit rates.

As at 31^st March 2018 the Company had available Rs. 4945.78 Lakhs (31^st March 2017 Rs. 1032.11 Lakhs) of undrawn committed borrowing facilities.

Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 10 per share (31 March 2017: Rs. 10 per share). 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. During the year ended 31^st Mar 2018 , the amount of per share dividend proposed by Board of Directors in the board meeting held on 28^th May 2018 as distribution to equity share holders amounted to Rs. 1 (31 March 2017: Rs. 1.5) per equity share. Proposed dividend on equity shares are subject to approval at the annual general meeting and are not recognised as liability ( including dividend distribution tax thereon ) as on 31^st Mar 2018.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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.

Pursuant to the Initial Public Offering (IPO) on 08 February 2016, equity shares having par value of Rs. 10 per share were allotted at a price of Rs. 186 per equity share comprising of fresh issue of 12,903,225 equity shares and offer for sale of 9,150,000 equity shares by selling shareholders. The equity shares of the Company were listed on the BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") with effect from 08 February 2016.

In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the IND AS 102 Share based payments, the cost of equity-settled transactions is measured using the fair value method. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company''s best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

2. Foreign currency loan 1 carries interest at the rate of LIBOR plus 330 bps p.a. The tenure of the loan is 7 years and the loan is repayable in 20 quarterly instalments commencing after 24 months of the weighted average draw down date, viz 1 August 2013. The loan is secured by pari passu charge on all movable and immovable property, plant and equipment (PPE) created by the loan and also includes mortgage of Plot No. D-7, MIDC Chincholi, Solapur. The loan has been secured by the personal guarantee of directors Mr. Yatin S. Shah and Dr. Suhasini Y. Shah.

3 Foreign currency loan 2 carries interest at the rate of LIBOR plus 295 bps p.a. The tenure of the loan is 5 years and 2 months and the loan is repayable in 20 quarterly instalments commencing after 7 months from the sanction of the loan by the bank. viz., 2 November 2013. The loan is secured by pari passu charge on all movable and immovable PPE created by the loan and also includes mortgage of Plot No. D-7, MIDC Chincholi, Solapur. The loan has been secured by the personal guarantee of directors Mr. Yatin S. Shah and Dr. Suhasini Y. Shah. The Company does not have any continuing defaults in repayment of loans and interest during the year and as at the reporting date.

4 Cash credit and packing credit in foreign currency are secured by first pari passu charge by way of hypothecation of current assets including inventories and trade receivables. Further, the facilities are collaterally secured by extension of pari passu charge by way of hypothecation of plant and machinery and equitable mortgage of factory land and building situated at Plot No D5, MIDC Chincholi, Solapur, Unit I situated at Plot No. E-102, 103, Akkalkot Road, MIDC, Solapur and Unit II situated at Plot No. E-90, Akkalkot road, Solapur

5 The carrying amounts of PPE pledged as security for non-current borrowings are disclosed in note 3. And carrying amount of inventories, trade receivables and fixed deposits are pledged as security for short term borrowings.

6. Term loan from banks contain certain covenants relating to debt service coverage ratio, total debt gearing ratio, interest Coverage ratio and Fixed asset coverage ratio. All the ratios mentioned above are within the level stipulated by the banks in its prescribed sanctions. The Company has also satisfied all other debt covenants prescribed in the terms of bank loan.

Note 7: Earnings per share (EPS)

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

Diluted EPS amounts are calculated by dividing the profit attributable to equity share holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into equity shares.

Note 8: Disclosure pursuant to Employee benefits

A. Defined contribution plans:

Amount of Rs. 333.99 Lakhs (March 31, 2017: Rs. 345.23 Lakhs) is recognised as expenses and included in note no. 22 "Employee benefit expense"

B. Defined benefit plans:

The Company has following post employment benefits which are in the nature of defined benefit plans:

(a) Gratuity

The Company has a defined benefit gratuity plan in India (funded). The Company''s defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered fund. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit.

The level of benefits provided depends on the member''s length of service and salary at retirement age.

Plan assets - Gratuity Fund Rs. 437.54 Lakhs

* The amount debited to statement of profit and loss includes gratuity expenses on account of full and final settlement of left employees whose gratuity payments have not been considered for actuarial valuation amounting to Rs. 4.85 Lakhs and Rs. 132.39 Lakhs for the year ended March 31, 2018 and March 31, 2017 respectively. For the year ended March 31, 2018; the amount debited to statement of profit and loss also includes gratuity expenses of Rs. 40 Lakhs provided for promoter director whose gratuity payments have not been considered for actuarial valuation.

Note 9: Share Based Payments

The Company provides share-based payment schemes to its employees. During the year ended 31 March 2018, an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.

On 6 February 2015,the board of directors approved the PCL Employee Stock Option Scheme 2015 ( PCL ESOS 2015 ) for issue of stock options to the employees of the Company. According to the PCL ESOS 2015,the employee selected by the remuneration committee from time to time will be entitled to options. The contractual life (comprising the vesting period and the exercise period) of options granted under PCL ESOS 2015 is 6 years.

The fair value of the share options is estimated at the grant date using Black Scholes pricing model, taking into account the terms and conditions upon which the share options were granted. The exercise price of the share options is the face value i.e. Rs. 10. The contractual term of each option granted is 6 years.

The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

Note 10: Commitments and contingencies

a. Commitments

(i) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances): At 31 March 2018, the Company had commitments of Rs. 3,806.92 Lakhs (31 March 2017: Rs. 556.97 Lakhs)

(ii) The company has a commitment to purchase 5% equity shares of Memco Engineering Pvt. Ltd., Nashik for which it has earmarked bank balance of Rs. 150 Lakhs.

b. Contingent liabilities

(i) Claims against the company not acknowledged as debts (Legal claims)

a. The Collector of Stamps, Solapur has demanded payment of stamp duty of Rs. 31.79 Lakhs (March 31, 2017: Rs. 31.79 Lakhs) for cancellation and issue of equity shares after amalgamation of Precision Valvetrain Components Limited (PVPL) with the Company in year 2007-2008. The Company has filed an appeal against demand made by the Collector of Stamps, Solapur with Controlling Revenue Authority, Pune.

b. The Company is in appeal and the application is pending with "Hon''ble High Court of Judicature Appellate" against the claim made under Employees provident Funds and Miscellaneous Provision Act, 1952 for Rs. 24.23 Lakhs (March 31, 2017: Rs. 24.23Lakhs). The Company has deposited an amount of Rs. 12.12 Lakhs (March 31, 2017: Rs. 12.12 Lakhs) under protest which has been shown under ''Other Assets''.

c. The Company has received an order from the Commissioner of Central Excise Pune for the year 2002-03, 2003-04 and 2004-05 demanding excise duty amounting to Rs. 20.76 Lakhs (March 31, 2017: Rs. 20.76 Lakhs) on sales tax retained under sales tax deferral scheme. The Company has deposited an amount of Rs. 1.56 Lakhs (March 31, 2017: 1.56 Lakhs) under protest.

d. The Company has filled an appeal to CESTAT during the year against the order of service tax appeals for inadmissible cenvat credit amounting to Rs. 11.83 Lakhs on outward transportation for the financial years 2011-12 to 2014-15.

e. The Company has received order from Commissioner of Central Excise for demand of service Tax and interest on payment of bank charges, facilities fees, and legal expenses paid during the year 2011-12 for the availment of ECB loan amounting to Rs. 26.16 Lakhs.

f. The Company has received order from Assessing Officer for demand of income tax amounting to Rs. 1,597.17 Lakhs towards disallowance of ESOP expenditures and other disallowances. The Company has filed appeal against the above order with Commissioner of Income Tax (Appeals) and has paid Rs. 200.00 Lakhs under protest and has adjusted refund due of Rs. 39.60 Lakhs with respect to FY 2006-07.

In all cases the cases mentioned above outflow is not probable, and hence not provided by the Company.

(ii) Corporate Guarantees

Company has given corporate guarantee of Rs. 14,900 Lakhs (approx) on behalf of PCL (International) Holdings B.V. (Netherlands) to the lender bank.

c. Leases

The Company has entered into commercial leases for office premises and guest house. These leases have an average life of between three years with no renewal option included in the contracts. There are no restrictions placed upon the Company by entering into these leases.

During the year the company has given Corporate Guarantee of Rs 14,900 Lakhs (Approx) on behalf of its Wholly Owned Subsidiary PCL (International) Holdings Netherlands to Lender Bank.

Terms and conditions of transactions with related parties.

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for or from any related party trade receivables or trade payables.

Note 11: Segment information

The Company is engaged in manufacturing of Camshafts. Based on similarity of activities/products, risk and reward structure, organisation structure and internal reporting systems, the Company has structured its operations into a single operating segment ; however based on the geographic distribution of activities, the chief operating decision make identified India and outside India as two reportable geographical segments.

Note 12: Fair values

Set out below, is a comparison by class of the carrying amounts and fair value of the Company''s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:

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:

- The fair values of the quoted mutual funds are based on price (i.e. the NAV of the mutual funds) quotations at the reporting date.

- The fair values of derivative forward contracts is determined using the marked-to-market valuation done by the banks.

Note 13: Capital Management

For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders and borrowings. The primary objective of the Company''s capital management is to maximise the shareholder value. The Company manages its capital structure and makes adjustments for compliance with the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The company had issued equity shares in the financial year 2015-16 in order to raise funds for the purpose of building an additional machine shop for machining of various types of camshafts. The Company monitors capital using a gearing ratio, which is net debt divided by total capital. The Company''s policy is to keep the gearing ratio within 60%. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations.

In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

Note 14: Significant accounting judgements, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Share-based payments

The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an Black and Scholes valuation model. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 32.

Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increase and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for the plans ,the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates. Further details about gratuity obligations are given in note 31.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 36 and 37 for further disclosures.

Note 15: Financial risk management objectives and policies

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings; and trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include loans, trade and other receivables, investments in mutual funds and cash and cash equivalents that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

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

The sensitivity analysis in the following sections relate to the position as at 31^st March 2018 and 31^st March 2017.

The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant.

The analysis exclude the impact of movements in market variables on the carrying values of gratuity and other post retirement obligations and provisions

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''s exposure to the risk of changes in market interest rates relates primarily to the Company''s long-term and short-term debt obligations with floating interest rates.

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency) and borrowings of the Company.

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD, EUR and GBP exchange rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives and embedded derivatives. The impact on the Company''s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges and net investment hedges. The Company''s exposure to foreign currency changes for all other currencies is not material.

Commodity risk

The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing manufacture of Camshafts and therefore require a continuous supply majorly of Pig iron, MS Scrap and Resin coated sand. The Company''s exposure to the risk of exchange in key raw material prices are mitigated by the fact that the price increases/decreases from the vendors are passed on to the customers based on understanding with the customers. Hence the fluctuation of prices of key raw materials do not materially affect the statement of profit and loss. Also as at March 31, 2018, there were no open purchase commitments/ pending material purchase order in respect of key raw materials. Accordingly, no sensitivity analysis have been performed by the management.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed subject to the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

An impairment analysis is performed at each reporting date on an individual basis for major clients. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables disclosed in note 8. The Company does not hold collateral as security. The company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. The investment of surplus funds is made in mutual funds and fixed deposits which are approved by the Director. The Company''s maximum exposure to credit risk for the components of the balance sheet at 31 March 2018 and 31 March 2017 is the carrying amounts as illustrated in note 9.

Liquidity risk

The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans, . The Company''s policy is that not more than Rs. 3,500 Lakhs of borrowings should mature in the next 12-month period.

Approximately 100% of the Company''s debt will mature in less than one year at 31 March 2018 (31 March 2017: 63%) based on the carrying value of borrowings reflected in the financial statements. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low.The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

Note 16: Utilisation of money raised through public issue

During the year ended 31 March 2016,the Company had raised Rs. 24,000.00 Lakhs through public issue of fresh equity shares (refer note 10), mainly with an objective of setting-up a new machining facility of ductile Iron and other Camshafts at Solapur and for general corporate purposes. The Company had incurred expenses aggregating Rs. 2,387.33 Lakhs towards the initial public offering which included both issue of fresh equity shares as well as offer for sale of equity shares by existing share holders. Out of the same an amount of Rs. 1,028.12 Lakhs has been recovered from existing share holders in regard to offer for sale. Given below are the details of utilisation of proceeds raised through public issue. During the year ended 31 March 2017, the Company has transferred an amount equivalent to the recovery from selling share holders from IPO account to the normal bank accounts since the same was spent by the Company before such recovery.

The Company has setup a building for new machine shop and started setting up line of machines for machining of ductile iron camshafts from IPO proceeds. Due to delay in OEMS project the schedule of order has been delayed, hence the Company has deferred the purchase of requisite machines as stated in the offer document. As such, the utilisation of IPO Proceeds will get deployed accordingly to the confirmation of schedule from the OEMs.

Note 17: Standards issued but not yet effective

Standards issued but not yet effective up to the date of issuance of the company''s financial statements are listed below. This listing is of standards and interpretations issued, which the company reasonably expects to be applicable at a future date. The company intends to adopt those standards when they become effective.

The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2018 amending Ind AS 115 Revenue from Contracts with Customers, Appendix D to Ind AS 115 Service Concession Arrangements and Appendix B to Ind AS 21, Foreign Currency Transactions and Advance Consideration (corresponding to IFRIC 22). Ind AS 11 Construction Contracts and Ind AS 18 Revenue will be omitted.

Note 18: Previous year comparatives

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

The accompanying notes are an integral part of the financial statements As per our report attached of even date

Mar 31, 2017

Note 1. Corporate Information

The financial statements comprise of financial statements of Precision Camshafts Limited (âthe Companyâ) for the year ended 31 March 2017. Precision Camshafts Limited is a Public Limited Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The shares of the company are listed in two stock exchanges in India. The Company is primarily engaged in the manufacture and sale of camshaft castings and machined camshafts to the Auto industry and the Railways. The Company has its office registered at E 102/103 MIDC Akkalkot road Solapur, Maharshtra, 413006 .

The financial statements were authorised for issue in accordance with the resolution of the Board of Directors on May 22, 2017.

Note 2. Significant accounting policies

2.1 Basis of preparation

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended thereafter (âthe Rulesâ). For all periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP) as amended thereafter. These financial statements for the year ended 31 March 2017 are the first the Company has prepared in accordance with Ind AS. Refer note 39 for information on how the Company adopted Ind AS.

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:

- Derivative financial instruments,

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments Note âoâ of summary of significant accounting policies )

The financial statements are presented in INR and all values are rounded to the nearest rupee, except when otherwise indicated.

Disclosure of EBITDA

Ind AS compliant Schedule III allows line items, sub-line items and sub-totals to be presented as an addition or substitution on the face of the financial statements when such presentation is relevant to an understanding of the companyâs financial position or performance or to cater to industry/sector-specific disclosure requirements. For example, a company may present EBITDA as a separate line item on the face of the statement of profit and loss.

Measurement of EBITDA

The Company has elected to present earnings before interest, tax, depreciation and amortization (EBITDA) as a separate line item on the face of the statement of profit and loss. The company measures EBITDA on the basis of profit/ (loss) from continuing operations. In its measurement, the company does not include depreciation and amortization expense, interest income, finance costs and tax expense.

Capitalised borrowing costs

âCompany has continued the policy of capitalising exchange differences arising from translation of long-term foreign currency monetary items as per exemption available under IND ASâ 101-Ind AS 101- First time Adoption of Indian Accounting Standards.

Asset under construction

Capital work-in-progress (CWIP) comprises cost of assets that are not yet installed and ready for their intended use at the balance sheet date. Capita work in progress as at 31 March 2017 comprises expenditure for the plant and machinery in the course of construction. Balance of CWIP as at March 31, 2017 amounts toRs. 89,020,156 (31 March 2016: Rs. 144,332,847,1 April 2015: Rs. 88,055,581).

Property, plant and equipment

The entire block of property, plant and equipment comprising of immovable assets with a carrying amount of Rs. 839,381,192 ( 31 March, 2016: Rs. 612,336,444, 01 April, 2015: Rs. 606,580,164) and movable assets with a carrying amount of Rs. 1,316,572,461 ( 31 March, 2016: Rs. 1,296,165,643 , 01 April, 2015: Rs. 1,397,368,898) are subject to first charge to secure the Companyâs foregin currency term loan. ( Refer note 12 ) Also refer note 43 on first time adoption of Ind AS.

No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

For terms and conditions relating to related party receivables, refer note 34.

Trade receivables are non-interest bearing and are generally on terms of 30 to 150 days.

Cash at banks earns interest at fixed rates based on FD receipts made by the company. Fixed deposits are made for varying periods of between one month to 36 months, depending on the immediate cash requirements of the Company, and earn interest at the respective short term/long term deposit rates.

At 31 March 2017, the Company had available â1,032,118,188 (31 March 2016: Rs.1,268,890,825; 1 April 2015: Rs.1,619,748,550 ) of undrawn committed borrowing facilities

The Company has pledged a part of its short-term deposits to fulfil collateral requirements. Refer note 12 for details

Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10 per share (31 March 2015: Rs.10 per share). 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.

During the year ended 31 March 2017, the amount of per share dividend proposed by board of directors in the board meeting held on May 22, 2017 as distribution to equity share holders amounted to Rs.1.50 per equity share. Proposed dividends on equity shares are subject to approval at the annual general meeting and are not recognised as a liability (including DDT thereon) as at 31 March 2017.

During the year ended 31 March 2016, the amount of per share interim dividend recognised as distribution to equity share holders amounted to Rs.1 per equity share.

During the year ended 31 March 2015, the amount of per share dividend recognised as distribution to equity shareholders was Rs.0.05 per equity share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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.

Pursuant to the Initial Public Offering (IPO) on February 08, 2016, equity shares having par value of Rs.10 per share were allotted at a price of Rs.186 per equity share comprising of fresh issue of 12,903,225 equity shares and offer for sale of 9,150,000 equity shares by selling shareholders. The equity shares of the Company were listed on the BSE Limited (âBSEâ) and National Stock Exchange of India Limited (âNSEâ) with effect from February 08, 2016.

As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

Aggregate number of equity shares issued as bonus, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date:

Employees (including senior executives) of the Company receive remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the IND AS 102 Share based payments, the cost of equity-settled transactions is measured using the fair value method. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companyâs best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

Refer to note 32 for further details of these plans.

Foreign currency loan 1 carries interest at the rate of LIBOR plus 380 bps p.a. The tenure of the loan is 7 years and the loan is repayable in 20 quarterly installments commencing after 24 months of the weighted average draw down date, viz 1 August 2013. The loan is secured by pari passu charge on all movable and immovable Property, plant and equipment (PPE) created by the loan and also all future PPE, mortgage of Plot No. D-7, MIDC Chincholi, Solapur. The loans have been secured by the personal guarantee of directors Mr. Yatin S. Shah and Dr. Suhasini Y. Shah.

Foreign currency loan 2 carries interest at the rate of LIBOR plus 405 bps p.a. The tenure of the loan is 5 years and 2 months and the loan is repayable in 20 quarterly installments commencing after 7 months from the sanction of the loan by the bank. viz., 2 November 2013. The loan is secured by pari passu charge on all movable and immovable (PPE) created by the loan and also all future PPE, mortgage of Plot No. D-7, MIDC Chincholi, Solapur. The loans has been secured by the personal guarantee of directors Mr. Yatin S. Shah and Dr. Suhasini Y. Shah.

The Company does not have any continuing defaults in repayment of loans and interest during the year and as at the reporting date.

Cash credit and packing credit in foreign currency are secured by first pari passu charge by way of hypothecation of current assets including inventories and trade receivables. Further, the facilities are collaterally secured by extension of pari passu charge by way of hypothecation of plant and machinery and equitable mortgage of factory land and building situated at Plot No.s D5, MIDC Chincholi, Solapur, Unit I situated at Plot No. E-102, 103, Akkalkot Road, MIDC, Solapur and Unit II situated at Plot No. E-90, Akkalkot road, Solapur

Overdraft against fixed deposits oustanding as of March 31, 2016 is secured by fixed deposit of Rs.110,500,000 made with Bank of India and carries interest at the rate of 10.05% p.a. which has been fully repaid during the current year.

The carrying amounts of PPE pledged as security for non-current borrowings are disclosed in note 3. And carrying amount of inventories, trade receivables and fixed deposits are pledged as security for short term borrowings.

Term loan from banks contain certain covenants relating to debt service coverage ratio, total debt gearing ratio, interest Coverage ratio, Fixed asset coverage ratio. All the ratios mentioned above are within the level stipulated by the banks in its prescribed sactions. The Company has also satisfied all other debt covenants prescribed in the terms of bank loan.

Interest payable as per section 16 of the Micro, Small and Medium Enterprises Act, 2006 is Rs.44,617,873 (31 March 2016: Rs.34,610,211) and same is not accrued in the books of accounts.

Sale of goods includes excise duty collected from customers of INR 240,299,494 (31 March 2016: INR 166,320,805). Sale of goods net of excise duty is INR 4,327,014,664 (31 March 2016: INR 4,202,926,491)

Note 3: Income Tax

The major components of income tax expense for the years ended 31 March 2017 and 31 March 2016 are:

The amount relates to deferred tax impact on additional depreciation charged to opening balance of retained earnings on account of re-estimation of useful lives and residual values of all its PPE as at March 31, 2015, to comply with the requirements of Schedule II to Companies Act, 2013.

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

Note 4: Earnings per share

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

Diluted EPS amounts are calculated by dividing the profit attributable to equity share holders of the Company by the weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into equity shares.

The following reflects the profit and share data used in the basic and diluted EPS computation

Note 5: Disclosure pursuant to Employee benefits

A. Defined contribution plans:

Amount of Rs.34,522,651 (March 31, 2016: Rs.28,002,178) is recognised as expenses and included in Note No. 22 âEmployee benefit expenseâ

B. Defined benefit plans:

The Company has following post employment benefits which are in the nature of defined benefit plans:

(a) Gratuity

The Company has a defined benefit gratuity plan in India (funded). The Companyâs defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered fund.

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and salary at retirement age. The fund is governed by Life Insurance Corporation of India (LIC). LIC is liable for administration of the plan assets.

Plan assets - Gratuity Fund Rs.47,233,354

The following table summarise the components of net benefit expense recognised in the statement of consolidated profit or loss and the funded status and amounts recognised in the consolidated balance sheet for the respective plans.

The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

The followings are the expected future benefit payments for the defined benefit plan :

Note 6: Share Based Payments

The Company provides share-based payment schemes to its employees. During the year ended 31 March 2016, an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.

On 6 February 2015, the board of directors approved the PCL Employee Stock Option Scheme 2015 (PCL ESOS 2015) for issue of stock options to the employees of the Company.

According to the PCL ESOS 2015, the employee selected by the remuneration committee from time to time will be entitled to options. The contractual life (comprising the vesting period and the exercise period) of options granted under PCL ESOS 2015 is 6 years.

The fair value of the share options is estimated at the grant date using Black Scholes pricing model, taking into account the terms and conditions upon which the share options were granted. The exercise price of the share options is the face value i.e. Rs.10 . The The contractual term of each option granted is 6 years.

There were no cancellations or modifications to the awards in 31 March 2017 or 31 March 2016.

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year

The weighted average share price at the date of exercise of these options was Rs.10

The weighted average remaining contractual life for the share options outstanding as at 31 March 2017 was one year (31 March 2016: two years).

The weighted average fair value of options granted during the year was â117.46 (31 March 2016: â117.27).

The following tables list the inputs to the models used for the plans for the years ended 31 March 2017 and 31 March 2016, respectively

Note 7: Commitments and contingencies

a. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances): At 31 March 2017, the Company had commitments of INR 55,697,053 (31 March 2016: INR 193,953,623, 1 April 2015: INR 74,049,469)

b. Contingent liabilities Legal claim contingency

a. The Collector of Stamps, Solapur has demanded payment of stamp duty of Rs.3,178,389 (March 31, 2016: Rs.3,178,389) for cancellation and issue of equity shares after amalgamation of Precision Valvetrain Components Limited (PVPL) with the Company in year 2007-2008. The Company has filed an appeal against demand made by the Collector of Stamps, Solapur with Controlling Revenue Authority, Pune.

b. The Company is in appeal and the application is pending with âHonâble High Court of Judicature Appellateâ against the claim made under Employees provident Funds and Miscellaneous Provision Act, 1952 for Rs.2,423,488 (March 31, 2016: Rs.2,423,488). The Company has deposited an amount of Rs.1,211,744 (March 31, 2016: Rs.1,211,744) under protest which has been shown under âOther Assetsâ.

c. The Company has received an order from the Commissioner of Central Excise Pune for the year 2002-03, 2003-04 and 2004-05 demanding excise duty amounting to Rs.2,076,478 (March 31, 2016: Rs.2,076,478) on sales tax retained under sales tax deferral scheme. The Company has deposited an amount of Rs.155,736 (March 31, 2016: 155,376) under protest.

d. The Company has filled an appeal to CESTAT during the year against the order of service tax appeals for inadmissible cenvat credit amounting to Rs.238,329 on outward transportation for the financial years 2013-14 and 2014-15.

f. The Company has received order from Commissioner of Central Excise for demand of interest towards the reversal cenvat credit against Shri Pandurang Bus Service amounting to Rs.2,720,347 for the financial year 201112 to 2013-14

g. The Company has received order from Assesing Officer for demand of income tax amounting to 159,716,941 towards disallowance of ESOP expenditures and other disallowances. The Company has filed appeal against the above order with Commissioner of Income Tax (Appeals) and has paid Rs.20,000,000 under protest.

In all cases the cases mentioned above outflow is not probable, and hence not provided by the Company.

c. Leases

The Company has paid Rs.1,614,640 (31 march 2016: INR1,398,400) during the year towards minimum lease payment. Future minimum rentals payable under non-cancellable operating leases are as follows:

Note 8: Related party transactions

A Names of the related party and related party relationship:

a) Related party where control exists i) Subsidiary

PCL (Shanghai) Co. Ltd (China)

b) Related parties under âInd AS 24- Related Party Disclosuresâ, with whom transactions have taken place during the period

i) Key management personnel (KMP)

Mr. Yatin S Shah , Managing Director Dr. Suhasini Y Shah, Director Mr. Ravindra R. Joshi, Director Mr. Jayant V Aradhye

Mr. Sarvesh N Joshi, Independent Director Mr. Pramod H Mehendale, Independent Director Mr. Vedant V Pujari, Independent Director Mr. Vaibhav S Mahajani, Independent Director

ii) Relatives of key management personnel (RKMP)

Mr. Karan Y Shah, son of Mr. Yatin S Shah Ms. Tanvi Y Shah, daughter of Mr. Yatin S Shah Dr. Manjiri Chitale, mother of Dr. Suhasini Y Shah

iii) Enterprises owned or significantly influenced by key management personnel or their relatives: Kimaya Construction Private Limited

Chitale Clinic Private Limited

Precision Foundation & Medical Research Trust

Yatin S. Shah (HUF)

Cams Technology Limited

iv) Individual having significant influence:

Mr. Jayant Aradhye

v) Relative of individual having significant influence:

Mr. Maneesh Aradhye, son of Mr. Jayant Aradhye Dr. Sunita Aradhye, wife of Mr. Jayant Aradhye Mrs. Rama Aradhye, wife of Mr. Maneesh Aradhye Mr. Vijay Aradhye, brother of Mr. Jayant Aradhye

vi) Joint venture

Ningbo Shenglong PCL Camshaft Co Ltd, China.

PCL Shenglong (Huzhou) Specialized Casting Co Ltd, China.

c) Additional related parties as per Companies Act, 2013 with whom transactions have taken place during the year

i) Company secretary

Mr. Swapneel S Kuber

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in armâs length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 March 2017, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (31 March 2016: INR Nil, 1 April 2015: Nil) except the amount of investment of subsidiary has been provided for entirely as impairment amounting to Rs.11,048,275. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Note 9: Segment information

The Group is engaged in manufacturing of Camshafts. Based on similarity of activities/products, risk and reward structure, organisation structure and internal reporting systems, the Company has structured its operations into one operating segment ; however based on the geographic distribution of activities, the chief operating decision make identified India and outside India as two reportable geographical segments.

Country wise bifurcation of sales - outside India

Asia

China

Europe

Others

Note 10: Fair values

Set out below, is a comparison by class of the carrying amounts and fair value of the Companyâs financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:

The management assessed that cash and cash equivalents, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Note 11: Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Companyâs assets and liabilities.

- The fair values of the unquoted Preference shares (Investment in Cams Technology) have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in managementâs estimate of fair value for these unquoted equity investments.

- The fair values of the quoted mutual funds are based on price (i.e. the NAV of the Mutual funds) quotations at the reporting date.

- The fair values of derivative forward contracts is determined using the Mark-to-market valuation done by the Banks.

Note 12: Capital Management

For the purpose of the Companyâs capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders and borrowings. The primary objective of the Companyâs capital management is to maximise the shareholder value. The Company manages its capital structure and makes adjustments for complaince with the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The company has issued equity shares in the Financial year 2015-16 in order to raise funds for the purpose building an additional machine shop for machining of various types of camshafts.

The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Groupâs policy is to keep the gearing ratio between 60% and 70%. The Group includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations.

In order to achieve this overall objective, the Companyâs capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

Note 13: Significant accounting judgements, estimates and assumptions

The preparation of the Companyâs financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods

Estimates and assumptions

Share-based payments

Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for the plans ,the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.

Further details about gratuity obligations are given in note 31.

Fair value measurement of financial instruments

Note 14: Financial risk management objectives and policies

The Companyâs principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include loans, trade and other receivables, investments in mutual funds and cash and cash equivalents that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Companyâs senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

The sensitivity analyses in the following sections relate to the position as at 31 March 2017 and 31 March 2016.

The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant.

The analyses exclude the impact of movements in market variables on: the carrying values of gratuity and other post retirement obligations and provisions.

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 long-term and short-term debt obligations with floating interest rates.

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency) and borrowings of the company.

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD, EUR and GBP exchange rates, with all other variables held constant. The impact on the Companyâs profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives and embedded derivatives. The impact on the Companyâs pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges and net investment hedges. The Companyâs exposure to foreign currency changes for all other currencies is not material.

Commodity risk

The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing manufacture of Camshafts and therefore require a continuous supply majorly of Pig iron, MS Scrap and Resin coated sand. As on March 31, 2017; no open material purchase order were existed with respect to above mentioned items. Hence the fluctuation of prices in above mentioned items; wont affect materially affect statement of profit and loss. Accordingly no sensitivity analysis has been done by the management.

Credit risk

Trade receivables

Customer credit risk is managed subject to the Companyâs established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

An impairment analysis is performed at each reporting date on an individual basis for major clients. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 8. The Company does not hold collateral as security. The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Companyâs treasury department in accordance with the Companyâs policy. The investment of surplus funds is made in mutual funds and fixed deposits which are approved by the Director.

The Companyâs maximum exposure to credit risk for the components of the balance sheet at 31 March 2017 and 31 March 2016 is the carrying amounts as illustrated in note 9.

Liquidity risk

The Companyâs objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans, . The Companyâs policy is that not more than Rs.450,000,000 of borrowings should mature in the next 12-month period.

Approximately 63% of the Companyâs debt will mature in less than one year at 31 March 2017 (31 March 2016: 34%, 31 March 2015: 21%) based on the carrying value of borrowings reflected in the financial statements. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

The table below summarises the maturity profile of the Groupâs financial liabilities based on contractual undiscounted payments.

Note 15: Utilisation of money raised through public issue

During the year ended 31 March 2016, the Company has raised Rs.2,399,999,850 through public issue of fresh equity shares (refer note 10), mainly with an objective of setting-up a new manufacturing facility of ductile Iron Camshafts at Solapur, Maharashtra. The Company has incurred expenses aggregating Rs.238,733,579 towards the initial public offering which included both issue of fresh equity shares as well as offer for sale of equity shares by existing share holders. Out of the same an amount of Rs.102,812,297 has been recovered from existing share holders in regard to offer for sale. Given below are the details of utilisation of proceeds raised through public issue. During the year ended 31 March 2017, the Company has transferred an amount equivalent to the recovery from selling share holders from IPO account to the normal bank accounts since the same was spent by the Company before such recovery.

Note 16: Standards issued but not yet effective

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of cash flowsâ and Ind AS 102, âShare-based payment.â These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, âStatement of cash flowsâ and IFRS 2, âShare-based payment,â respectively. The amendments are applicable to the Company from April 1, 2017.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and noncash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

Since the Company does not have cash settled awards or awards with net settlement features, this amendment does not have any effect on the financial statements of the Company.

Note 17: First-time adoption of IND AS

These financial statements, for the year ended 31 March 2017, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2017, together with the comparative period data as at and for the year ended 31 March 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at 1 April 2015, the Companyâs date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2015 and the financial statements as at and for the year ended 31 March 2016.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

1. Property, plant and equipment and intangible assets were carried in the consolidated balance sheet prepared in accordance with Indian GAAP at historical cost . The Company has elected to regard those carrying values of property, plant and equipment and intangible assets as the deemed cost at the date of the transition, since there is no change in the functional currency.

2. Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before 1 April 2015.

3. The Company has continued the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP.

4. The foreign currency translation reserve as at April 01, 2015 has been taken as zero in accordance with Ind AS-101.

5. Estimates

The estimates at 1 April 2015 and at 31 March 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:

The investment in CAMS Technology Limited has been designated as FVTPL and accordingly, the fair valuation of the investment has been done using discounted cash flow method. For the purpose of estimating the fair value, the amount and timing of the cash flow has been estimated using the best available data and management expectations at the time of investment as revised from time to time.

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2015, the date of transition to Ind AS and as of 31 March 2016.

1) Investments carried at Fair value through P & L:

Under Indian GAAP, the Company accounted for long term investments as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, the Company has designated the investment in CAMS Technology Ltd. as FVTPL investments based on business model. Ind AS requires FVTPL investments to be measured at fair value. At the date of transition to Ind AS, difference between the instruments fair value and Indian GAAP carrying amount has been recognised in retained earnings.

2) Reclassification of Loans & Advances

The IND AS compliant schedule III specifies the nature and type of assets to be classified as Loans/ Other financial assets. Under IGAAP, certain financial statement line items like capital advances, prepaid expenses etc. were classified under Loan and Advances based on the previous applicable Schedule III. Based on the revised disclosure specification requirements, the line items mentioned above have been reclassified from Loans and advances and Other current assets to Other Financial Assets.

3) Capital Reserve

Under Indian GAAP, the incentives received for specific purpose have to be shown as separate reserve while, and general incentive or grant received can be shown as a part of the general reserve. Under IND AS any general purpose grants or incentives received shall be considered as revenue, while and specific grants received will have to be adjusted to match the valuation of the assets for which it has been used. However, SICOM grant had been received and utilised before March 31, 2015. Therefore, the same has been transferred to Retained earnings.

4) Dividend

Under Indian GAAP, the provision for dividend was recognised if the dividend was decided by the Board prior to the approval of Financials at the AGM. Under IND AS, if an entity declares dividends to holders of equity instruments (as defined in Ind AS 32, Financial Instruments: Presentation) after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period. If dividends are declared after the reporting period but before the financial statements are approved for issue, the dividends are not recognised as a liability at the end of the reporting period since no obligation exists at that time. Such dividends are disclosed in the notes in accordance with Ind AS 1, Presentation of Financial Statements. Accordingly, the interim dividend as on March 31, 2015 had been approved by the Board on June 23, 2015. Hence, the same shall be recognised as a liability in the year ended March 31, 2016.

5) Amortisation of Prepaid ECB Charges

Under Indian GAAP, the loan processing fees were amortised over the repayment period of the loan. Under Ind AS, the Company is required to measure the borrowings using Effective interest rate method. Accordingly, the amount of Long term borrowings has been recalculated under the EIR method and the ECB charges and interest accrued on borrowings have been covered within the revised measurements done under the method.

6) Provisions pertaining to expenses of prior years

Under IND AS, an entity shall correct material prior period errors retrospectively in the first set of financial statements approved for issue after their discovery by either restating the comparative amounts for the prior period presented in which the error occurred or if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. In the year ended March 31, 2016, the Company had provided for certain expenses relating to financial years prior to financial year 2014-15. Since the error relates to the period before the earliest period presented (i.e. profit and loss account for year ended March 31, 2016) the amount has been adjusted in the Retained earnings of opening balance sheet. The corresponding effect of the entry was taken in other provisions which gets clubbed under trade payables.

7) Defined benefit liabilities

Both under Indian GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus the employee benefit cost is increased by Rs.3,178,547 and Remeasurement gains on defined benefit plans has been recognized in the OCI net of tax impact.

8) Deferred tax on exchange differences arising on foreign currency monetary items capitalised

As per IND AS 12, the Group needs to assess and calculate the Deferred tax liability/ asset using balance sheet approach Unlike Indian GAAP, Deferred taxes have been recognised on unrealised loss on long term borrowings capitalised on property,plant and equipment (Refer Note 3). Deferred taxes have also been recognised on consolidation, adjustments such as profit eliminations and undistributed profits of joint ventures. A Deferred tax liability has been created on the balance of unrealised losses, and consolidation, profit eliminations and undistributed profits as on April 01, 2015 and the corresponding effect has been given in the opening balance of Retained earnings. Further, the tax impact on movements in these balances post April 1, 2015 has been debited to statement of profit and loss of 2015-16.

9) Reclassification of Other current liabilities

The Ind AS Compliant Schedule III, specifies the nature and type of liabilities which need to be classified under Other Financial liabilities. Accordingly, amounts shown earlier under Other current liabilities have been reclassified under Other financial liabilities.

10) Revenue from Operations

Under Indian GAAP, the disclosure of revenue was made net of excise in the Profit and loss. However, the Educational Material on Ind AS 18 issued by the ICAI, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty. Accordingly, the revenue from operations has been disclosed gross of excise duty. The corresponding amount of excise has been separately disclosed under expenses in the Financial statements. IND AS 18 defines revenue âas âRevenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflowsâ result in increases in equity, other than increases relating to contributions from equity participantsâ. On clubbing of excise duty under the head revenue from operations, the amount of Excise duty cost borne by EOU (the incremental amount of Excise duty charged for domestic sales of EOU, not agreed to be reimbursed by customers) was also being added to Revenue from Operations. Hence, the same has been netted of against revenue by removing it from Other expenses.

11) Reclassification of Finance Income

The Company presents EBITDA in the statement of profit or loss; Ind AS complaint Schedule III allows companies to present Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the companyâs financial position or performance or to cater to industry/sector-specific disclosure requirements or when required for compliance with the amendments to the Companies Act or under the Indian Accounting Standards. If the nature of expenses is in the nature of interest, tax, depreciation and amortisation, then it should be excluded from EBITDA. Accordingly; the Company has reclassified the interest income on fixed deposits and other interest income from other income to finance income in statement of profit and loss.

Note 18: Details of Specified Bank Notes (SBN):

The details of Specified Bank Notes (SBN) held and transacted during the period from 8th November, 2016 to 30^th December, 2016 are as follows:

Mar 31, 2016

In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, the cost of equity-settled transactions is measured using the intrinsic value method. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company''s best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized in employee benefits expense.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total intrinsic value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Pursuant to the Initial Public Offering (IPO), equity shares having par value of Rs. 10 per share were allotted at a price of Rs. 186 per equity share comprising of fresh issue of 1,29,03,225 equity shares and offer for sale of 91,50,000 equity shares by selling shareholders. The equity shares of the Company were listed on the BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") with effect from February 08, 2016. The Company has incurred expenses of Rs.12,52,33,959 (net of service tax) relating to fresh issue of equity shares which has been adjusted to securities in terms of section 52 of the Companies Act, 2013.

During the year ended 31 March 2015, the Company had split the face value of equity shares from Rs. 100 per share to Rs. 10 per share. As a result, the number of equity shares increased from 4,09,208 equity shares having a face value of Rs. 100 each to 40,92,080 equity shares having a face value of Rs. 10 each. Post the share split, the Company further issued bonus shares in the ratio of 19 equity shares for 1 equity share held. The bonus issue was made out of the securities premium account, capital redemption reserve and partly out of general reserve. Post the bonus issue, the number of equity increased from 40,92,080 shares of Rs. 10 each to 8,18,41,600 shares of Rs. 10 each.

b. Terms/ rights attached to equity sha res

During the year ended 31 March 2016, the amount of per share interim dividend recognized as distribution to equity share holders amounted to Rs. 1 per equity share.

During the year ended 31 March 2015, the amount of per share dividend recognized as distribution to equity shareholders was Rs. 0.05 per equity share.

1. Foreign currency loan amounting to Rs. 90,35,84,000/- carries interest at the rate of LIBOR plus 380 bps p.a. The tenure of the loan is 7 years and the loan is repayable in 20 quarterly installments commencing after 24 months of the weighted average draw down date, viz 1 August 2013. The loan is secured by pari passu charge on all movable and immovable fixed assets and that created by the proposed loan and also all future fixed assets, mortgage of Plot No. D-7, MIDC Chincholi, Solapur. The loans has been secured by the personal guarantee of directors Mr. Yati''n S. Shah and Dr. Suhasini Y. Shah.

2. Foreign currency loan amounting to Rs. 14,35,15,383/- carries interest at the rate of LIBOR plus 405 bps p.a. The tenure of the loan is 5 years and 2 months and the loan is repayable in 20 quarterly installments commencing after 7 months from the sanction of the loan by the bank. viz., 2 November 2013. The loan is secured by pari passu charge on all movable and immovable fixed assets and that created by the proposed loan and also all future fixed assets, mortgage of Plot No. D-7, MIDC Chincholi, Solapur. The loans has been secured by the personal guarantee of directors Mr. Yati''n S. Shah and Dr. Suhasini Y. Shah.

The Company does not have any continuing defaults in repayment of loans and interest during the year and as at the reporting date.

1. Cash credit and packing credit in foreign currency are secured by first pari passu charge by way of hypothecation of current assets including stocks and book debts. Further, the facilities are collaterally secured by extension of pari passu charge by way of hypothecation of plant and machinery and equitable mortgage of factory land and building situated at Plot No.s D5, MIDC Chincholi, Solapur, Unit I situated at Plot No. E-102, 103, Akkalkot Road, MIDC, Solapur and Unit II situated at Plot No. E-90, Akkalkot Road, MIDC, Solapur. Also, the facilities have been secured by the personal guarantee of directors Mr. Yati''n Shah and Dr. Suhasini Shah.The cash credit is repayable on demand and carries interest at the rate of 11.35% to 13.25% p.a. (31 March 2015 : 11.70% to 13.25% p.a.). Packing credit in foreign currency carries interest at the rate of 2.55% to 3.05% p.a. (31 March 2015 : 2.86% to 3.86% p.a.).

2. Overdraft against fixed deposits is secured by fixed deposit of Rs. 11,05,00,000 made with Bank of India and carries interest at the rate of 10.05% p.a.

The Company holds 6,20,00,000 5% redeemable non convertible preference shares of Cams Technology Limited ( CTL ) as at March 31, 2016.

The Management, based on a legal opinion is of the view that CTL is not a subsidiary under the provisions of the Companies Act, 2013. Accordingly, the accounting treatment and disclosures in the financial statements have been made assuming that CTL is not a subsidiary.

A. The Collector of Stamps, Solapur has demanded payment of stamp duty of Rs. 31,78,389 (March 31, 2015: Rs. 31,78,389) for cancellation and issue of equity shares after amalgamation of Precision Valvetrain Components Limited (PVPL) with the Company in year 2007-2008. The Company has filed an appeal against demand made by the Collector of Stamps, Solapur with Controlling Revenue Authority, Pune.

B. The Company is in appeal and the application is pending with "Hon''ble High Court of Judicature Appellate" against the claim made under Employees provident Funds and Miscellaneous Provision Act, 1952 for Rs.24,23,488 (March 31, 2015: Rs. 24,23,488). The Company has deposited an amount of Rs. 12,11,744 (March 31, 2015: Rs.12,11,744) under protest which has been shown under ''Loans and Advances''.

C. The Company has received an order from the Commissioner of Central Excise Pune for the year 2002-03, 2003-04 and 2004-05 demanding excise duty amounting to Rs. 20,76,478 (March 31, 2015: Rs. 20,76,478) on sales tax retained under sales tax deferral scheme. The Company has deposited an amount of Rs. 1,55,736 (March 31,2015: Nil) under protest.

D. The Company has received an showcause from Commissioner, Central Excise Solapur for inadmissible cenvat credit amounting to Rs. 9,65,186 and Rs. 2,38,329 on outward transportation for the financial years 2015-16 and 2014-15 respectively.

In all cases the cases mentioned above outflow is not probable, and hence not provided by the Company.

A Names of the related party and related party relationship:

a) Related party where control exists

i) Subsidiary

PCL (Shanghai) Co. Ltd

b) Related parties under ''Accounting Standard 18- Related Party Disclosures'', with whom transactions have taken place during the period

i) Key management personnel (KMP)

Mr. Yatin S Shah , Managing Director Dr. Suhasini Y Shah, Director Mr. Ravindra R. Joshi, Director

ii) Relatives of key management personnel (RKMP)

Mr. Karan Y Shah, son of Mr. Yatin S Shah Ms. Tanvi Y Shah, daughter of Mr. Yatin S Shah Dr. Manjiri Chitale, mother of Dr. Suhasini Y Shah Late Dr. Vinayak Chitale, father of Dr. Suhasini Y Shah

iii) Enterprises owned or significantly influenced by key management personnel or their relatives:

Kimaya Construction Private Limited Chitale Clinic Private Limited Precision Foundation & Medical Research Trust Yatin S. Shah (HUF)

Cams Technology Limited

iv) Individual having significant influence:

Mr. Jayant Aradhye

v) Relative of individual having significant influence:

Mr. Maneesh Aradhye, son of Mr. Jayant Aradhye Dr. Sunita Aradhye, wife of Mr. Jayant Aradhye Mrs. Rama Aradhye, wife of Mr. Maneesh Aradhye Mr. Vijay Aradhye, brother of Mr. Jayant Aradhye

vi) Joint venture

Ningbo Shenglong PCL Camshaft Co Ltd.

PCL Shenglong (Huzhou) Specialized Casting Co Ltd.

c) Additional related parties as per Companies Act, 2013 with whom transactions have taken place during the year

i) Company secretary

Mr. Swapneel S Kuber

The Company has interests in two joint ventures, both in China.

The Company holds 22.5% interest in Ningo Shenglong PCL Camshafts Co. Limited, situated at Ningbo, China. The joint venture entity is involved in machining and sale of camshafts.

The Company holds 40% interest in PCL Shingling (Huzhou) Specialized Casting Co Ltd. Situated at Huzhou, China.

The Joint venture entity is involved in manufacture and sale of camshafts.

On 6 February 2015, the board of directors approved the PCL Employee Stock Option Scheme 2015 (PCL ESOS 2015) for issue of stock options to the employees of the Company. According to the PCL ESOS 2015, the employee selected by the remuneration committee from time to time will be entitled to options. The contractual life (comprising the vesting period and the exercise period) of options granted under PCL ESOS 2015 is 6 years.

The other relevant terms of the grant are as below:

PCL ESOS 2015

Date of share holders approval 6 February 2015

Number of options granted 3,82,950

Exercise price per option Rs. 10

Intrinsic value Rs. 125.78

Vesting period 3 years

Exercise period 3 years

During the year ended 31 March 2016, the Company has raised Rs. 2,39,99,99,850 through public issue of fresh equity shares (refer note 3(a)), mainly with an objective of setting-up a new manufacturing facility of ductile Iron Camshafts at Solapur, Maharashtra. The Company has incurred expenses aggregating Rs 23,87,33,579 towards the initial public offering which included both issue of fresh equity shares as well as offer for sale of equity shares by existing share holders. Out of the same an amount of Rs. 10,28,12,297 has been recovered from existing share holders in regard to offer for sale. Given below are the details of utilization of proceeds raised through public issue.

NOTE 5: PREVIOUS YEAR FIGURES

Previous year figures have been regrouped/ reclassified wherever necessary to confirm to this year''s classification.

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