Mar 31, 2023
1 CORPORATE INFORMATION:
Ratnamani Metals & Tubes Limited (the "Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, applicable in India. Its shares are listed on two stock exchanges in India. The registered office of the Company is located at 17, Rajmugat Society, Naranpura Char Rasta, Naranpura, Ahmedabad, Gujarat. The Company is engaged in the manufacturing of stainless steel pipes and tubes and carbon steel pipes at Kutch, Indrad and Chhatral in the state of Gujarat. The Company caters to both domestic and international markets.
The financial statements were authorized for issue in accordance with a resolution passed in Board Meeting held on May 10, 2023.
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 from time to time) including the Companies (Indian Accounting Standards) Amendment Rules, 2019 and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the standalone financial statements of the Company.
The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments) and derivative financial instruments.
The financial statements are presented in '' and all values are rounded to the nearest Lakhs ('' 00,000), except where otherwise indicated.
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in the normal operating cycle;
⢠Held primarily for the purpose of trading;
⢠Expected to be realised within twelve months after the reporting period; or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in the normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities respectively.
The operating cycle is the time between acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve month as its operating cycle.
The Company''s financial statements are presented in '' , which is also the Company''s functional currency. The Company determines the functional currency and items included in the financial statements are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the Company''s functional currency at the exchange rates prevailing on the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are restated in the functional currency at the exchange rates prevailing on the reporting date of financial statements.
Exchange differences arising on settlement of such transactions and on translation of monetary items are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the initial transactions.
In determining the spot exchange rate to use on initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a nonmonetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration.
The Company measures financial instruments, such as, derivatives at fair value at each Balance Sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market pa rticipants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- 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
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company''s Management determines the policies and procedures for both recurring fair value measurement, such as derivative financial instruments and unquoted financial assets measured at fair value, and for non- recurring fair value measurement.
External valuers are involved for valuation of significant assets, such and unquoted financial assets. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Company''s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Company''s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Company''s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management, in conjunction with the Company''s external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
- Disclosures for valuation methods, significant accounting judgements, estimates and assumptions (refer note 33 and 34)
- Quantitative disclosures of fair value measurement hierarchy (refer note 33.2)
- Financial instruments (including those carried at amortised cost) (refer note 33.1)
PPE and Capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price and borrowing costs if capitalization criteria are met, the cost of replacing part of the property, plant and equipment and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhauling is performed, its cost is recognized in the carrying amount of the PPE as a replacement if the recognition criteria are satisfied. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and cost of parts replaced, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
CWIP comprises of cost of PPE that are yet not installed and not ready for their intended use at the Balance Sheet date.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if applicable.
The Company calculates depreciation on items of property, plant and equipment on a straight-line basis using the rates arrived at based on the useful lives defined under Schedule II of the Companies Act, 2013, except in respect of following fixed assets:
(i) Long Term Lease hold land is amortised over a period of 99 years, being the lease term.
(ii) Furnace and X-ray machines are depreciated at an annual rate of 20% to bring the depreciation rates in line with the useful life of assets as estimated by the Technical Team of the Company.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognised.
Intangible Assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortisation and accumulated impairment losses, if any.
Intangible assets in the form of softwares are amortised on a straight-line basis over six years. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit and Loss.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment
testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use).
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
Assets |
Estimated Useful Life |
Right-of-use of office |
Over the balance |
premises and leasehold period of lease |
|
land |
agreement |
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting policies in relating to Impairment of non-financial assets.
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion
of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment, offices and windmills (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value amounting to ?2 Lakhs. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straightline basis over the lease term.
The Company did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application for lease previously classified as finance leases, i.e. the right to use of assets and lease liabilities equal to the lease assets and liabilities recognised under Ind AS 17. The requirements of Ind AS 116 was applied to those leases from April 1, 2019.
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through Statement of Profit and Loss, transaction costs that are attributable to the acquisition of the financial asset.
The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade
receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section 2.1 (k) Revenue from contracts with customers.
For purposes of subsequent measurement, financial assets are classified in three categories:
- Financial assets instruments at amortised cost (debt instruments)
- Financial assets at fair value through other comprehensive income (FVTOCI)
- Financial assets at fair value through profit or loss (FVTPL) (Derivatives and Equity Instruments)
A ''financial assets'' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade, loans and other receivables.
Financial assets that meet the following conditions are measured initially as well as at the end of each reporting date at fair value, recognised in other comprehensive income (OCI).
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The contractual terms of the asset that give rise on specified dates to cash flows that represent solely payment of principal and interest.
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in the statement of profit and loss.
This category includes derivative instruments and investments in equity instruments which the Company had not irrevocably elected to classify at fair value through OCI. Dividends on such investments are recognised in the statement of profit and loss when the right of payment has been established.
Financial Assets included within the FVTPL category are measured at fair value with all changes recognized in the statement of Profit and Loss.
Investments in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial Statements. All equity investments in scope of Ind AS 109 are measured at fair value. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
A financial asset (or, where applicable, a part of a financial asset or part of similar financial assets) is primarily derecognised (i.e. removed from the Company''s Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Further disclosures relating to impairment of financial assets are also provided in the following notes:
> Disclosures for significant assumptions -see note 2.2
> Financial Assets at FVTPL - see note 2.1 (i)
> Trade receivables and contract assets - see note 6 and 2.1 (k)
The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables.
Under the simplified approach the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. Lifetime ECL are the expected credit losses resulting from all possible default over the expected life of a financial instrument.
The Company considers a financial asset in default when contractual payments are overdue. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss. This amount is reflected under the head ''other expenses'' in the Statement of Profit and Loss.
The Balance Sheet presentation for various financial instruments is described below:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the Balance Sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through Statement of Profit and Loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including cash credit facilities from banks and derivative financial instruments.
For purposes of subsequent measurement, financial liabilities are classified in two categories:
- Financial liabilities at fair value through profit or loss
- Financial liabilities at amortised cost (loans and borrowings)
Financial liabilities at fair value through Statement of Profit and Loss.
Financial liabilities at fair value through Profit and Loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through Profit and Loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through statement of Profit and Loss are designated as such at the initial date of recognition and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/
losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss. This category generally applies to borrowings.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and
financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Compa ny reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and other losses, wherever considered necessary. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Scrap is valued at net realisable value. Cost is determined on a Weighted Average method.
Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, incurred in bringing them in their respective present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated costs necessary to make the sale.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is
the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer.
The specific recognition criteria described below must also be met before revenue is recognised.
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods. The normal credit term is 0 to 180 days upon delivery, usually backed by financial arrangements in some cases.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any). Revenue from the sale of goods is measured at the amount of transaction price (net of variable consideration) allocated to the consideration received or receivable, net of GST, trade discount & other taxes, adjustment for late delivery charges and material returned/rejected.
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of goods provide customers with a right of liquidated damages. The liquidated damages give rise to variable consideration.
The Company applies the practical expedient for short-term advances received from customers. That is, the promised amount of consideration is not adjusted for the effects of a significant financing component if the period between the transfer of the promised good or service and the payment is one year or less.
ii) The Company accounts for pro forma credits, refunds of duty of customs or refunds of sales tax in the year of admission of such claims by the concerned authorities. Benefits in respect of Export Licenses are recognised on application. Export benefits are accounted for as other operating income in the year of export based on eligibility and when there is no uncertainty on receiving the same.
iii) Dividend is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
iv) Interest Income is recognized on time proportion basis taking into account the amounts outstanding and the rates applicable. Interest income is included under the head "other income" in the Statement of Profit and Loss.
v) Revenue from windmills is recognised on unit generation basis, in accordance with the terms of power purchase agreements.
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in note (i) Financial instruments - initial recognition and subsequent measurement.
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services
to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities (advance from customers) are recognised as revenue when the Company performs under the contract.
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company has no obligation, other than the contributions payable to provident fund and superannuation fund. The Company recognises contribution payable to these funds as an expense, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan wherein contributions are made to a separately administered fund. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at each reporting date being carried out using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
⢠Service costs comprising current service costs; and
⢠Net interest expense or income
The liability in respect of unused leave entitlement of the employees as at the reporting date is determined on the basis of an independent actuarial valuation carried out and the liability is recognized in the Statement of Profit and Loss. The Company presents the entire leave as a current liability in the Balance Sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Actuarial gain and loss is recognise in full in the period in which they occur in the Statement of Profit and Loss.
Tax expense comprises of current income tax and deferred tax.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
> When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable Profit and Loss.
> In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against the deductible temporary differences, except:
> When the deferred tax asset arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
> In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.
The Company uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks, interest rate, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
> Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
> Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
> Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss. The Company uses forward currency contracts and interest rate swaps as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments.
The ineffective portion relating to foreign currency contracts is recognised in finance costs.
Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
Cash and cash equivalents in the Balance Sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of charges in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
The Company recognises a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
Government grant are recognised where there is reasonable assurance that the grant will be received, and all attached condition will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. When the Company receives grant of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments.
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.
In the process of applying the Company''s accounting policies, management has made the following judgement, which have the most significant effect on the amounts recognised in the financial statements:
Determining the lease term of contracts with renewal and termination options - Company as lessee.
The Company determines the lease term as the noncancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).
The Company applied t
Mar 31, 2022
CT CORPORATE INFORMATION
Ratnamani Metals & Tubes Limited (the "Company") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, applicable in India. Its shares are listed on two stock exchanges in India. The registered office of the Company is located at 17, Rajmugat Society, Naranpura Char Rasta, Naranpura, Ahmedabad, Gujarat. The Company is engaged in the manufacturing of stainless steel pipes and tubes and carbon steel pipes at Kutch, Indrad and Chhatral in the state of Gujarat. The Company caters to both domestic and international markets.
The financial statements were authorised for issue in accordance with a resolution passed in Board Meeting held on May 18, 2022.
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 from time to time) including the Companies (Indian Accounting Standards) Amendment Rules, 2019 and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the standalone financial statements of the Company.
The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments) and derivative financial instruments.
The financial statements are presented in '' and all values are rounded to the nearest Lakhs ('' 00,000), except where otherwise indicated.
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:a. CURRENT VERSUS NON-CURRENT CLASSIFICATION:
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in the normal operating cycle
⢠Held primarily for the purpose of trading
⢠Expected to be realised within twelve months after the reporting period or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in the normal operating cycle
⢠It is held primarily for the purpose of trading
⢠I t is due to be settled within twelve months after the reporting period or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve month as its operating cycle.
The Companyâs financial statements are presented in '', which is also the Companyâs functional currency. The Company determines the functional currency and items included in the financial statements are measured using that functional currency
Transactions and balances
Transactions in foreign currencies are initially recorded in the Companyâs functional currency at the exchange rates prevailing on the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are restated in the functional currency at the exchange rates prevailing on the reporting date of financial statements.
Exchange differences arising on settlement of such transactions and on translation of monetary items are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the initial transactions.
I n determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration.
The Company measures financial instruments, such as, derivatives at fair value at each Balance Sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- I n the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- 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
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company''s Management determines the policies and procedures for both recurring fair value measurement, such as derivative financial instruments and unquoted financial assets measured at fair value, and for non- recurring fair value measurement.
External valuers are involved for valuation of significant assets, such and unquoted financial assets. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Company''s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Company''s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Company''s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management, in conjunction with the Companyâs external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
- Disclosures for valuation methods, significant accounting judgements, estimates and assumptions (refer note 33 and 34)
- Quantitative disclosures of fair value measurement hierarchy (refer note 33.2)
- Financial instruments (including those carried at amortised cost) (refer note 33.1)
d. PROPERTY, PLANT AND EQUIPMENT (PPE):
PPE and Capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price and borrowing costs if capitalisation criteria are met, the cost of replacing part of the property, plant and equipment and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhauling is performed, its cost is recognised in the carrying amount of the PPE as a replacement if the recognition criteria are satisfied. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed
standard of performance. All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and cost of parts replaced, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
CWIP comprises of cost of PPE that are yet not installed and not ready for their intended use at the Balance Sheet date.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if applicable.
The Company calculates depreciation on items of property, plant and equipment on a straight-line basis using the rates arrived at based on the useful lives defined under Schedule II of the Companies Act, 2013, except in respect of following fixed assets:
(i) Long Term Lease hold land is amortised over a period of 99 years, being the lease term
(ii) Furnace and X-ray machines are depreciated at an annual rate of 20% to bring the depreciation rates in line with the useful life of assets as estimated by the Technical Team of the Company
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognised.
Intangible Assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortisation and accumulated impairment losses, if any.
Intangible assets in the form of software are amortised on a straight-line basis over six years. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of
future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit and Loss.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
g. IMPAIRMENT OF NON-FINANCIAL ASSETS:
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which
are prepared separately for each of the Companyâs CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
I. Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
Assets |
Estimated Useful Life |
Right-of-use of office premises and leasehold land |
Over the balance period of lease agreement |
If ownership of the leased asset transfers to the Company at the end of the lease term or
the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting policies in relating to Impairment of non-financial assets.
II. Lease Liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
III. Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment, offices
and windmills (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value amounting to ''2 Lakhs. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
IV. Leases previously classified as finance leases
The Company did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application for lease previously classified as finance leases, i.e. the right to use of assets and lease liabilities equal to the lease assets and liabilities recognised under Ind AS 17. The requirements of Ind AS 116 was applied to those leases from 1st April, 2019.
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through Statement of Profit and Loss, transaction costs that are attributable to the acquisition of the financial asset.
The classification of financial assets at initial recognition depends on the financial assetâs contractual cash flow characteristics and the Companyâs business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section 2.1(k) Revenue from contracts with customers.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Financial assets instruments at amortised cost (debt instruments)
- Financial assets at fair value through other comprehensive income (FVTOCI)
- Financial assets at fair value through profit or loss (FVTPL) (Derivatives and Equity Instruments)
Financial assets at amortised cost (debt instruments)
A ''financial assetsâ is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade, loans and other receivables.
Financial Assets at FVTOCI
Financial assets that meet the following conditions are measured initially as well as at the end of each reporting date at fair value, recognised in other comprehensive income (OCI).
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The contractual terms of the asset that give rise on specified dates to cash flows that represent solely payment of principal and interest
Financial Assets at FVTPL
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in the
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This category includes derivative instruments and investments in equity instruments which the Company had not irrevocably elected to classify at fair value through OCI. Dividends on such investments are recognised in the statement of profit and loss when the right of payment has been established.
Financial Assets included within the FVTPL category are measured at fair value with all changes recognised in the statement of Profit and Loss.
Equity investments
Investments in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial Statements. All equity investments in scope of Ind AS 109 are measured at fair value. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-throughâ arrangement and either (a) the Company
has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
> Disclosures for significant assumptions - see note 2.2
> Financial Assets at FVTPL - see note 2.1 (i)
> Trade receivables and contract assets - see note 6 and 2.1(k)
The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Company follows ''simplified approachâ for recognition of impairment loss allowance on trade receivables.
Under the simplified approach the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. Lifetime ECL are the expected credit losses resulting from all possible default over the expected life of a financial instrument.
The Company considers a financial asset in default when contractual payments are overdue. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/ expense in the Statement of Profit and Loss. This amount is reflected under the head ''other expensesâ in the Statement of Profit and Loss.
The Balance Sheet presentation for various financial instruments is described below:
Financial assets measured at amortised cost:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the Balance Sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities & Equity Instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through Statement of Profit and Loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including cash credit facilities from banks and derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in two categories:
- Financial liabilities at fair value through profit or loss
- Financial liabilities at amortised cost (loans and borrowings)
Financial liabilities at fair value through Statement of Profit and Loss.
Financial liabilities at fair value through Profit and Loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through Profit and Loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through statement of Profit and Loss are designated as such at the initial date of recognition and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognised in OCI. These gains/ loss are not subsequently transferred to Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss. This category generally applies to borrowings.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and other losses, wherever considered necessary. However, materials and other items held for use in
the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Scrap is valued at net realisable value. Cost is determined on a Weighted Average method.
Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, incurred in bringing them in their respective present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated costs necessary to make the sale.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
The Company has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer.
The specific recognition criteria described below must also be met before revenue is recognised.
i) Sale of Goods
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods. The normal credit term is 0 to 180 days upon delivery, usually backed by financial arrangements in some cases.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration
payable to the customer (if any). Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of GST, trade discounts & other taxes, adjustments for late delivery charges and material returned/rejected.
I f the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of goods provide customers with a right of liquidated damages. The liquidated damages give rise to variable consideration.
The Company applies the practical expedient for short-term advances received from customers. That is, the promised amount of consideration is not adjusted for the effects of a significant financing component if the period between the transfer of the promised good or service and the payment is one year or less
ii) The Company accounts for pro forma credits, refunds of duty of customs or refunds of sales tax in the year of admission of such claims by the concerned authorities. Benefits in respect of Export Licenses are recognised on application. Export benefits are accounted for as other operating income in the year of export based on eligibility and when there is no uncertainty on receiving the same
iii) Dividend is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend
iv) Interest Income is recognised on time proportion basis taking into account the amounts outstanding and the rates applicable. Interest income is included under the head "other income" in the Statement of Profit and Loss
v) Revenue from windmills is recognised on unit generation basis, in accordance with the terms of power purchase agreements
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in note (i) Financial instruments - initial recognition and subsequent measurement.
Contract liabilities (Advance from customers)
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities (advance from customers) are recognised as revenue when the Company performs under the contract.
l. RETIREMENT AND OTHER EMPLOYEE BENEFITS:
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company has no obligation, other than the contributions payable to provident fund and superannuation fund. The Company recognises contribution payable to these funds as an expense, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan wherein contributions are made to a separately administered fund. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at
each reporting date being carried out using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
⢠Service costs comprising current service costs; and
⢠Net interest expense or income
The liability in respect of unused leave entitlement of the employees as at the reporting date is determined on the basis of an independent actuarial valuation carried out and the liability is recognised in the Statement of Profit and Loss. The Company presents the entire leave as a current liability in the Balance Sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Actuarial gain and loss is recognise in full in the period in which they occur in the Statement of Profit and Loss.
Tax expense comprises of current income tax and deferred tax.
Current income tax:
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax items are recognised in
correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred Tax:
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
> When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable Profit and Loss
> I n respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognised for all deductible temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against the deductible temporary differences, except
> When the deferred tax asset arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
> In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date
Deferred tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.
o. DERIVATIVE FINANCIAL INSTRUMENTS:
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks, interest rate, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently
results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
> Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment
> Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment
> Hedges of a net investment in a foreign operation
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss. The Company uses forward currency contracts and interest rate swaps as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognised in finance costs.
Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects
profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
Cash and cash equivalents in the Balance Sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of charges in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
The Company recognises a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
2.2 SIGNIFICANT ACCOUNTING ESTIMATES ANDASSUMPTIONS:
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.
In the process of applying the Companyâs accounting policies, management has made the following judgement, which have the most significant effect on the amounts recognised in the financial statements:
Determining the lease term of contracts with renewal and termination options - Company as lessee.
The Company determines the lease term as the noncancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).
Revenue from contracts with customers
The Company applied the following judgement that significantly affect the determination of the amount and timing of revenue from contracts with customers:
Determining method to estimate variable consideration and assessing the constraint.
Certain contracts with customers include Liquidated Damages that give rise to variable consideration. In estimating the variable consideration, the Company is required to use either the expected value method or the most likely amount method based on which method better predicts the amount of consideration to which
customer will be entitled. The Company determined that the expected value method is the appropriate method to use in estimating the variable consideration for revenue from contract with customer. The selected method that better predicts the amount of variable consideration was primarily driven by the number of volume threshold
Mar 31, 2021
WM CORPORATE INFORMATION
Ratnamani Metals & Tubes Limited (the "Company") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, applicable in India. Its shares are listed on two stock exchanges in India. The registered office of the Company is located at 17, Rajmugat Society, Naranpura Char Rasta, Naranpura, Ahmedabad, Gujarat. The Company is engaged in the manufacturing of stainless steel pipes and tubes and carbon steel pipes at Kutch, Indrad and Chhatral in the state of Gujarat. The Company caters to both domestic and international markets.
The financial statements were authorized for issue in accordance with a resolution passed in Board Meeting held on 2nd June, 2021.
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 from time to time) including the Companies (Indian Accounting Standards) Amendment Rules, 2019 and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the standalone financial statements of the Company.
The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments) and derivative financial instruments.
The financial statements are presented in '' and all values are rounded to the nearest Lakhs ('' 00,000), except where otherwise indicated.
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:a. CURRENT VERSUS NON-CURRENT CLASSIFICATION:
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in the normal operating cycle;
⢠Held primarily for the purpose of trading;
⢠Expected to be realised within twelve months after the reporting period; or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in the normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠I t is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve month as its operating cycle.
The Companyâs financial statements are presented in '', which is also the Companyâs functional currency. The Company determines the functional currency and items included in the financial statements are measured using that functional currency
Transactions and balances
Transactions in foreign currencies are initially recorded in the Companyâs functional currency at the exchange rates prevailing on the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are restated in the functional currency at the exchange rates prevailing on the reporting date of financial statements.
Exchange differences arising on settlement of such transactions and on translation of monetary
items are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the initial transactions.
I n determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration.
The Company measures financial instruments, such as, derivatives at fair value at each Balance Sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- I n the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- 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
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company''s Management determines the policies and procedures for both recurring fair value measurement, such as derivative financial instruments and unquoted financial assets measured at fair value, and for non- recurring fair value measurement.
External valuers are involved for valuation of significant assets, such and unquoted financial assets. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Company''s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Company''s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Companyâs accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management, in conjunction with the Companyâs external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
- Disclosures for valuation methods, significant accounting judgements, estimates and assumptions (refer note 33 and 34)
- Quantitative disclosures of fair value measurement hierarchy (refer note 33.2)
- Financial instruments (including those carried at amortised cost) (refer note 33.1)
d. PROPERTY, PLANT AND EQUIPMENT (PPE):
PPE and Capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price and borrowing costs if capitalisation criteria are met, the cost of replacing part of the property, plant and equipment and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhauling is performed, its cost is recognized in the carrying amount of the PPE as a
replacement if the recognition criteria are satisfied. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and cost of parts replaced, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
CWIP comprises of cost of PPE that are yet not installed and not ready for their intended use at the Balance Sheet date.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if applicable.
The Company calculates depreciation on items of property, plant and equipment on a straight-line basis using the rates arrived at based on the useful lives defined under Schedule II of the Companies Act, 2013, except in respect of following fixed assets:
(i) Long Term Lease hold land is amortised over a period of 99 years, being the lease term.
(ii) Furnace and X-ray machines are depreciated at an annual rate of 20% to bring the depreciation rates in line with the useful life of assets as estimated by the Technical Team of the Company.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognised.
Intangible Assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortisation and accumulated impairment losses, if any.
Intangible assets in the form of softwares are amortised on a straight-line basis over six years. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit and Loss.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
g. IMPAIRMENT OF NON-FINANCIAL ASSETS:
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companyâs CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
I. Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line
basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
Assets |
Estimated Useful Life |
Right-of-use of office premises and leasehold land |
Over the balance period of lease agreement |
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting policies in relating to Impairment of non-financial assets.
II. Lease Liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes
to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
III. Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment, offices and windmills (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value amounting to '' 2 Lakhs. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
IV. Leases previously classified as finance leases
The Company did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application for lease previously classified as finance leases, i.e. the right to use of assets and lease liabilities equal to the lease assets and liabilities recognised under Ind AS 17. The requirements of Ind AS 116 was applied to those leases from 1st April, 2019.
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through Statement of Profit and Loss, transaction costs that are attributable to the acquisition of the financial asset.
The classification of financial assets at initial recognition depends on the financial assetâs contractual cash flow characteristics and the Companyâs business model for managing them. With the exception of trade receivables that do not contain a significant financing component or
for which the Company has applied the practical expedient, are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section 2.1(k) Revenue from contracts with customers.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Financial assets instruments at amortised cost (debt instruments)
- Financial assets at fair value through other comprehensive income (FVTOCI)
- Financial assets at fair value through profit or loss (FVTPL) (Derivatives and Equity Instruments)
Financial assets at amortised cost (debt instruments)
A ''financial assetsâ is measured at the amortised cost if both the following conditions are met
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade, loans and other receivables.
Financial Assets at FVTOCI
Financial assets that meet the following conditions are measured initially as well as at the end of each reporting date at fair value, recognised in other comprehensive income (OCI).
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The contractual terms of the asset that give rise on specified dates to cash flows that represent solely payment of principal and interest.
Financial Assets at FVTPL Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in the statement of profit and loss.
This category includes derivative instruments and investments in equity instruments which the Company had not irrevocably elected to classify at fair value through OCI. Dividends on such investments are recognised in the statement of profit and loss when the right of payment has been established.
Financial Assets included within the FVTPL category are measured at fair value with all changes recognized in the statement of Profit and Loss.
Equity investments
Investments in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial Statements. All equity investments in scope of Ind AS 109 are measured at fair value. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e.
removed from the Companyâs Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-throughâ arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
> Disclosures for significant assumptions - see note 2.2
> Financial Assets at FVTPL - see note 2.1 (i)
> Trade receivables and contract assets - see note 6 and 2.1(k)
The Company recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or
loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Company follows ''simplified approachâ for recognition of impairment loss allowance on trade receivables.
Under the simplified approach the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. Lifetime ECL are the expected credit losses resulting from all possible default over the expected life of a financial instrument.
The Company considers a financial asset in default when contractual payments are overdue. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss. This amount is reflected under the head ''other expensesâ in the Statement of Profit and Loss.
The Balance Sheet presentation for various financial instruments is described below:
Financial assets measured at amortised cost:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the Balance Sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities & Equity Instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through Statement of Profit and Loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including cash credit facilities from banks and derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in two categories:
- Financial liabilities at fair value through profit or loss
- Financial liabilities at amortised cost (loans and borrowings)
Financial liabilities at fair value through Statement of Profit and Loss.
Financial liabilities at fair value through Profit and Loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through Profit and Loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through statement of Profit and Loss are designated as such at the initial date of recognition and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to Profit and Loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss. This category generally applies to borrowings.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial
guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right
to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and other losses, wherever considered necessary. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Scrap is valued at net realisable value. Cost is determined on a Weighted Average method.
Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, incurred in bringing them in their respective present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated costs necessary to make the sale.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
The Company has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer.
The specific recognition criteria described below must also be met before revenue is recognised.
i) Sale of Goods
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the goods. The normal credit term is 0 to 180 days upon delivery, usually backed by financial arrangements in some cases.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any). Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of GST, trade discounts & other taxes, adjustments for late delivery charges and material returned/rejected.
I f the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of goods provide customers with a right of liquidated damages. The liquidated damages give rise to variable consideration.
The Company applies the practical expedient for short-term advances received from customers. That is, the promised amount of consideration is not adjusted for the effects of a significant financing component if the period between the transfer of the promised good or service and the payment is one year or less.
ii) The Company accounts for pro forma credits, refunds of duty of customs or refunds of sales tax in the year of admission of such claims by the concerned authorities. Benefits in respect of Export Licenses are recognised on application. Export benefits are accounted for as other operating income in the year of export based on eligibility and when there is no uncertainty on receiving the same.
iii) Dividend is recognised when the Companyâs right to receive the payment is established,
which is generally when shareholders approve the dividend.
iv) Interest Income is recognized on time proportion basis taking into account the amounts outstanding and the rates applicable. Interest income is included under the head "other income" in the Statement of Profit and Loss.
v) Revenue from windmills is recognised on unit generation basis, in accordance with the terms of power purchase agreements.
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in note (i) Financial instruments - initial recognition and subsequent measurement.
Contract liabilities (Advance from customers)
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities (advance from customers) are recognised as revenue when the Company performs under the contract.
l. RETIREMENT AND OTHER EMPLOYEE BENEFITS:
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company has no obligation, other than the contributions payable to provident fund and
superannuation fund. The Company recognises contribution payable to these funds as an expense, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan wherein contributions are made to a separately administered fund. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at each reporting date being carried out using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
⢠Service costs comprising current service costs; and
⢠Net interest expense or income
The liability in respect of unused leave entitlement of the employees as at the reporting date is determined on the basis of an independent actuarial valuation carried out and the liability is recognized in the Statement of Profit and Loss. The Company presents the entire leave as a current liability in the Balance Sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Actuarial gain and loss is recognise in full in the period in which they occur in the Statement of Profit and Loss.
Tax expense comprises of current income tax and deferred tax.
Current income tax:
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred Tax:
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
> When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable Profit and Loss.
> I n respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against the deductible temporary differences, except:
> When the deferred tax asset arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
> In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.
o. DERIVATIVE FINANCIAL INSTRUMENTS:
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks, interest rate, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
> Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
> Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
> Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss. The Company uses forward currency contracts and interest rate swaps as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognised in finance costs.
Amounts recognised as OCI are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
Cash and cash equivalents in the Balance Sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of charges in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
The Company recognises a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
2.2 SIGNIFICANT ACCOUNTING 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.
I n the process of applying the Companyâs accounting policies, management has made the following judgement, which have the most significant effect on the amounts recognised in the financial statements:
Determining the lease term of contracts with renewal and termination options - Company as lessee.
The Company determines the lease term as the noncancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).
Revenue from contracts with customers
The Company applied the following judgement that significantly affect the determination of the amount and timing of revenue from contracts with customers:
Determining method to estimate variable consideration and assessing the constraint.
Certain contracts with customers include Liquidated Damages that give rise to variable consideration. In estimating the variable consideration, the Company is required to use either the expected value method or the most likely amount method based on which method better predicts the amount of consideration to which customer will be entitled. The Company determined that the expected value method is the appropriate method to use in estimating the variable consideration for revenue from contract with customer. The selected method that better predicts the amount of variable consideration was primarily driven by the number of volume thresholds contained in the contract with the customer. Before adjusting any amount of variable consideration in the transaction price, the Company considers whether the amount of variable consideration is constrained. The Company determined that the estimates of variable consideration are not constrained based on
Mar 31, 2018
1 CORPORATE INFORMATION :
Ratnamani Metals & Tubes Limited (the "Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The registered office of the Company is located at 17, Rajmugat Society, Naranpura Char Rasta, Naranpura, Ahmedabad, Gujarat. The Company is engaged in the manufacturing of stainless steel pipes and tubes and carbon steel pipes at Kutch, Indrad and Chhatral in the state of Gujarat. The Company caters to both domestic and international markets.
The financial statements were authorized for issue in accordance with a resolution passed in Board Meeting held on 22nd May 2018.
2 BASIS OF PREPARATION:
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).
The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments) and derivative financial instruments.
The financial statements are presented in '' and all values are rounded to the nearest Lacs ('' 00,000), except where otherwise indicated.
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a CURRENT VERSUS NON-CURRENT CLASSIFICATION:
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is treated as current when it is:
- Expected to be realized or intended to be sold or consumed in the normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realized within twelve months after the reporting period; or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in the normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve month as its operating cycle.
b FOREIGN CURRENCIES:
The Company''s financial statements are presented in '', which is also the Company''s functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded in the Company''s functional currency at the exchange rates prevailing on the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are restated in the functional currency at the exchange rates prevailing on the reporting date of financial statements.
Exchange differences arising on settlement of such transactions and on translation of monetary items are recognized in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the initial transactions.
c FAIR VALUE MEASUREMENT:
The Company measures financial instruments, such as, derivatives at fair value at each Balance Sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company''s Management determines the policies and procedures for both recurring fair value measurement, such as derivative financial instruments and unquoted financial assets measured at fair value, and for non-recurring fair value measurement.
External valuers are involved for valuation of significant assets, such as unquoted financial assets. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Company''s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Company''s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be premeasured or re-assessed as per the Company''s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management, in conjunction with the Company''s external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarizes accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
- Disclosures for valuation methods, significant accounting judgments, estimates and assumptions (refer note 32 and 33)
- Quantitative disclosures of fair value measurement hierarchy (refer note 32.2)
- Financial instruments (including those carried at amortized cost) (refer note 32.2)
d PROPERTY, PLANT AND EQUIPMENT (PPE):
PPE and Capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price and borrowing costs if capitalization criteria are met, the cost of replacing part of the property, plant and equipment and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhauling is performed, its cost is recognized in the carrying amount of the PPE as a replacement if the recognition criteria are satisfied. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and cost of parts replaced, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
CWIP comprises of cost of PPE that are yet not installed and not ready for their intended use at the Balance Sheet date.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if applicable.
The Company calculates depreciation on items of property, plant and equipment on a straight-line basis using the rates arrived at based on the useful lives defined under Schedule II of the Companies Act, 2013, except in respect of following fixed assets:
(i) Long Term Lease hold land is amortized over a period of 99 years, being the lease term.
(ii) Furnace and X-ray machines are depreciated at an annual rate of 20% to bring the depreciation rates in line with the useful life of assets as estimated by the Technical Team of the Company.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognized.
e INTANGIBLE ASSETS:
Intangible Assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortization and accumulated impairment losses, if any.
Intangible assets in the form of softwareâs are amortized on a straight-line basis over six years. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the Statement of Profit and Loss.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
f IMPAIRMENT OF NON-FINANCIAL ASSETS:
The Company assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the reporting date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.
g BORROWING COSTS:
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
h LEASES:
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee : A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. A leased asset is depreciated over the useful life of the asset. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
i FINANCIAL INSTRUMENTS:
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement.
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through Statement of Profit and Loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Debt instruments - measured at amortized cost
- Debt instruments, derivatives and equity instruments - measured at fair value through Profit and Loss (FVTPL)-
- Equity instruments - measured at fair value through other comprehensive income (FVTOCI)
Debt instruments at amortized cost
A âdebt instrument'' is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss. This category generally applies to trade, loans and other receivables.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization at amortized cost or as FVTOCI, is classified as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
Investments in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial Statements. All equity investments in scope of Ind AS 109 are measured at fair value. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-through'' arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortized cost e.g., loans, debt securities, deposits, trade receivables and bank balance.
b) Financial guarantee contracts which are not measured at FVTPL.
The Company follows âsimplified approach'' for recognition of impairment loss allowance on Trade receivables. Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive, discounted at the original EIR. ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss. This amount is reflected under the head âother expenses'' in the Statement of Profit and Loss. The Balance Sheet presentation for various financial instruments is described below:
Financial assets measured at amortized cost:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the Balance Sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through Statement of Profit and Loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs .The Company''s financial liabilities include trade and other payables, loans and borrowings including cash credit facilities from banks and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through Statement of Profit and Loss.
Financial liabilities at fair value through Profit and Loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through Profit and Loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through statement of Profit and Loss are designated as such at the initial date of recognition and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the Statement of Profit and Loss. The Company has not designated any financial liability at FVTPL.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the Statement of Profit and Loss.
This category generally applies to borrowings.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value through Statement of Profit and Loss (FVTPL), adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs
when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
j INVENTORIES:
Inventories are valued at the lower of cost and net realizable value after providing for obsolescence and other losses, wherever considered necessary. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Scrap is valued at net realizable value. Cost is determined on a Weighted Average method.
Cost includes direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity, incurred in bringing them in their respective present location and condition. Cost of finished goods includes excise duty.
Net realizable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated costs necessary to make the sale.
k REVENUE:
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Based on 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.
However, sales tax/ value added tax (VAT)/ Goods and Service Tax (GST) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognized.
i) Sale of Goods
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of VAT/CST/GST, trade discounts & other taxes, adjustments for late delivery charges and material returned/rejected.
ii) Benefits in respect of Export Licenses are recognized on application. Export benefits are accounted for as other operating income in the year of export based on eligibility and when there is no uncertainty on receiving the same.
iii) Dividend is recognized when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
iv) Interest Income is recognized on time proportion basis taking into account the amounts outstanding and the rates applicable. Interest income is included under the head "other income" in the Statement of Profit and Loss.
v) Revenue from windmills is recognized on unit generation basis, in accordance with the terms of power purchase agreements.
l RETIREMENT AND OTHER EMPLOYEE BENEFITS:
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company has no obligation, other than the contributions payable to provident fund and superannuation fund. The Company recognizes contribution payable to these funds as an expense, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan wherein contributions are made to a separately administered fund. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at each reporting date being carried out using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
- Service costs comprising current service costs; and
- Net interest expense or income
The liability in respect of unused leave entitlement of the employees as at the reporting date is determined on the basis of an independent actuarial valuation carried out and the liability is recognized in the Statement of Profit and Loss. The Company presents the entire leave as a current liability in the Balance Sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Actuarial gain and loss is recognize in full in the period in which they occur in the Statement of Profit and Loss.
m TAXES: Current income tax:
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside the Statement of Profit and Loss is recognized outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred Tax:
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
- When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable Profit and Loss.
- In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against the deductible temporary differences, except:
- When the deferred tax asset arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
- In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside the
Statement of Profit and Loss is recognized outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
n PROVISIONS:
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.
o DERIVATIVE FINANCIAL INSTRUMENTS:
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, cross currency swaps, options, interest rate futures and interest rate swaps to hedge its foreign currency risks and interest rate risks, respectively. Such derivative financial instruments are initially recognized at fair value through the Statement of Profit and Loss (FVTPL) on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivative financial instrument are classified in the Statement of Profit and Loss and reported with foreign exchange gains/(loss) not within results from operating activities. Changes in fair value and gains/(losses) on settlement of foreign currency derivative financial instruments relating to borrowings, which have not been designated as hedge are recorded as finance cost.
p EARNINGS PER SHARE:
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
q CASH AND CASH EQUIVALENT:
Cash and cash equivalents in the Balance Sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of charges in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
r CASH DIVIDEND:
The Company recognizes a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
2.2 SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS:
The preparation of the Company''s financial statements requires management to make judgments, 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.
(a) Defined benefit plans (gratuity benefits)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuation. 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 plans operated in India, 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 India. 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 for India.
Further details about gratuity obligations are given in note 25.
(b) Fair value measurement for 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 judgment is required in establishing fair values. Judgments 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. Refer note 32 and 33 for further disclosures.
Terms/Rights attached to Equity Shares
The Company has only one class of Equity Shares having a par value of '' 2/- per share. Each holder of Equity Shares is entitled to one vote per share. The Company declares and pays dividend in Indian ''. The dividend proposed by the Board of Directors is subject to approval of the Shareholders at the ensuing Annual General Meeting.
For the current financial year 2017-18, the Company has proposed dividend of '' 6.00 per share to equity shareholder (declared in the previous financial year dividend of '' 5.50 per 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 Share holders.
Issued Share Capital
Equity shares of '' 2 each issued, subscribed and fully paid a Short term Borrowings - Cash credit/export packing credit facilities are secured by - i) Hypothecation of Inventories, Books Debts, all other movables; ii) Second charge on Fixed Assets of the Company except, a) 8 wind mills along with related equipments/ machineries situated at Moti Sindholi, Kutch, Gujarat and, b) movable assets in respect of 3Layer PE Coating Line and Offline Welding & Finishing Lines for HSAW plant situated at Survey No.474,village Bhimasar, Tal. Anjar, Dist. Kutch; iii) Personal guarantees of Sh. Prakash M. Sanghvi, Chairman and Managing Director, Sh. Jayanti M. Sanghvi, Whole-time Director and Sh. Shanti M. Sanghvi, Whole-time Director, of the Company; iv) Joint equitable mortgage of all immovable properties held as free-hold and leasehold lands of the Company, except: a) Leasehold land related to 8 wind mills situated at Moti Sindholi, Kutch. b) Lease hold land situated at 3306-09, GIDC Chhatral, Taluka Kalol.
b Short term loans from banks are secured by personal guarantee of Sh. Prakash. M. Sanghvi, Chairman and Managing Director of the Company.
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.
During the year ended 31st March, 2018, the Company has paid dividend to its shareholders. This has resulted in payment of dividend distribution tax (DDT) to the taxation authorities. The Company believes that dividend distribution tax represents additional payment to taxation authority on behalf of the shareholders. Hence dividend distribution tax paid is charged to equity.
There are no Micro, Small and Medium Enterprises, as defined in the Micro, Small, Medium Enterprises Development Act, 2006, to whom the Company owes dues on account of principal amount together with interest and accordingly no additional disclosure have been made. The above information regarding Micro, Small and Medium Enterprise has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the Auditors.
Mar 31, 2017
1 CORPORATE INFORMATION :
Ratnamani Metals & Tubes Limited (the "Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The registered office of the Company is located at 17, Rajmugat Society, Naranpura Char Rasta, Naranpura, Ahmadabad, Gujarat. The Company is engaged in the manufacturing of stainless steel pipes and tubes and carbon steel pipes at Kutch, Indrad and Chhatral in the state of Gujarat. The Company caters to both domestic and international markets.
The financial statements were authorized for issue in accordance with a resolution passed in Board Meeting held on 17th May 2017.
2 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.
For all periods up to and including the year ended 31st March 2016, the Company prepared its financial statements in accordance with Accounting Standards notified under section 133 of the Companies Act, 2013 (the "Act") read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended 31st March 2017 are the first the Company has prepared in accordance with Ind AS. Refer note-37 for information on how the Company adopted Ind AS.
The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities which have been measured at fair value. Refer accounting policy regarding financial instruments.
The financial statements are presented in '' and all values are rounded to the nearest Lacs (Rs, 00,000), except where otherwise indicated.
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a CURRENT VERSUS NON-CURRENT CLASSIFICATION:
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is treated as current when it is:
- Expected to be realized or intended to be sold or consumed in the normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realized within twelve months after the reporting period; or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in the normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve month as its operating cycle.
b FOREIGN CURRENCIES:
The Company''s financial statements are presented in '', which is also the Company''s functional currency. Transactions and balances
Transactions in foreign currencies are initially recorded in the Company''s functional currency at the exchange rates prevailing on the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are restated in the functional currency at the exchange rates prevailing on the reporting date of financial statements.
Exchange differences arising on settlement of such transactions and on translation of monetary items are recognized in the Statement of Profit and Loss with the exception stated under note-37 whereby the exchange differences arising on long-term foreign currency monetary items related to acquisition of PPE recognized in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. 31st March, 2016 are capitalized / recapitalized to cost of PPE and depreciated over the remaining useful life of the asset.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the initial transactions.
c FAIR VALUE MEASUREMENT :
The Company measures financial instruments, such as, derivatives at fair value at each Balance Sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company''s Management determines the policies and procedures for both recurring fair value measurement, such as derivative financial instruments and unquoted financial assets measured at fair value, and for non-recurring fair value measurement.
External values are involved for valuation of significant assets, such as properties and unquoted financial assets, and significant liabilities, such as contingent consideration. Involvement of external values is decided upon annually by the Management after discussion with and approval by the Company''s Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Company''s external values, which valuation techniques and inputs to use for each case.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be premeasured or re-assessed as per the Company''s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management, in conjunction with the Company''s external values, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarizes accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
- Disclosures for valuation methods, significant accounting judgments, estimates and assumptions (refer note-33 and 34)
- Quantitative disclosures of fair value measurement hierarchy (refer note-33.2)
- Financial instruments (including those carried at amortized cost) (refer note-33.2)
d PROPERTY, PLANT AND EQUIPMENT (PPE):
On the date of transition, the Company has elected to continue with the previous GAAP''s carrying amount as deemed cost to measure all the items of property, plant and equipment.
PPE and Capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price and borrowing costs if capitalization criteria are met, the cost of replacing part of the fixed assets and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhauling is performed, its cost is recognized in the carrying amount of the PPE as a replacement if the recognition criteria are satisfied. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of PPE is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing PPE, including day-to-day repair and maintenance expenditure and cost of parts replaced, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items, outstanding in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial statements i.e. 31st March, 2016 and pertaining to the acquisition of a depreciable asset, to the cost of the asset and depreciates the same over the remaining life of the asset.
CWIP comprises of cost of PPE that are yet not installed and not ready for their intended use at the Balance Sheet date.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if applicable.
The Company calculates depreciation on items of property, plant and equipment on a straight-line basis using the rates arrived at based on the useful lives defined under Schedule II of the Companies Act, 2013, except in respect of following fixed assets:
(i) Long Term Lease hold land is amortized over a period of 99 years, being the lease term.
(ii) Furnace and X-ray machines are depreciated at an annual rate of 20% to bring the depreciation rates in line with the useful life of assets as estimated by the Technical Team of the Company.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognized.
e INTANGIBLE ASSETS:
Intangible Assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortization and accumulated impairment losses, if any.
Intangible assets in the form of softwareâs are amortized on a straight-line basis over six years. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the Statement of Profit and Loss.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized. f IMPAIRMENT OF NON-FINANCIAL ASSETS:
The Company assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the reporting date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.
g BORROWING COSTS:
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
h LEASES:
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee :
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. A leased asset is depreciated over the useful life of the asset.
Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
i. FINANCIAL INSTRUMENTS:
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through Statement of Profit and Loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Debt instruments - measured at amortized cost
- Debt instruments, derivatives and equity instruments - measured at fair value through Profit and Loss (FVTPL)
- Equity instruments - measured at fair value through other comprehensive income (FVTOCI)
Debt instruments at amortized cost
A ''debt instrument'' is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss. This category generally applies to trade, loans and other receivables.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization at amortized cost or as FVTOCI, is classified as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
Investments in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial Statements. All equity investments in scope of Ind AS 109 are measured at fair value. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortized cost e.g., loans, debt securities, deposits, trade receivables and bank balance.
b) Financial guarantee contracts which are not measured at FVTPL.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on Trade receivables. Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive, discounted at the original EIR. ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss. This amount is reflected under the head ''other expenses'' in the Statement of Profit and Loss.
The Balance Sheet presentation for various financial instruments is described below:
Financial assets measured at amortized cost:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the Balance Sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through Statement of Profit and Loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including cash credit facilities from banks and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through Statement of Profit and Loss.
Financial liabilities at fair value through Profit and Loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through Profit and Loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through statement of Profit and Loss are designated as such at the initial date of recognition and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the Statement of Profit and Loss. The Company has not designated any financial liability at FVTPL.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the Statement of Profit and Loss.
This category generally applies to borrowings.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value through Statement of Profit and Loss (FVTPL), adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
j INVENTORIES:
Inventories are valued at the lower of cost and net realizable value after providing for obsolescence and other losses, wherever considered necessary. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Scrap is valued at net realizable value. Cost is determined on a Weighted Average method.
Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, incurred in bringing them in their respective present location and condition. Cost of finished goods includes excise duty.
Net realizable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated costs necessary to make the sale.
k REVENUE:
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Based on 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.
However, sales tax/ value added tax (VAT) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognized.
i) Sale of Goods
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of VAT/ CST, trade discounts & other taxes, adjustments for late delivery charges and material returned/ rejected.
ii) The Company accounts for pro forma credits, refunds of duty of customs or excise, or refunds of sales tax in the year of admission of such claims by the concerned authorities. Benefits in respect of Export Licenses are recognized on application. Export benefits are accounted for as other operating income in the year of export based on eligibility and when there is no uncertainty on receiving the same.
iii) Dividend is recognized when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
iv) Interest Income is recognized on time proportion basis taking into account the amounts outstanding and the rates applicable. Interest income is included under the head "other income" in the Statement of Profit and Loss.
v) Revenue from windmills is recognized on unit generation basis. l RETIREMENT AND OTHER EMPLOYEE BENEFITS:
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company has no obligation, other than the contributions payable to provident fund and superannuation fund. The Company recognizes contribution payable to these funds as an expense, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan wherein contributions are made to a separately administered fund. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at each reporting date being carried out using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
- Service costs comprising current service costs; and
- Net interest expense or income
The liability in respect of unused leave entitlement of the employees as at the reporting date is determined on the basis of an independent actuarial valuation carried out and the liability is recognized in the Statement of Profit and Loss. The Company presents the entire leave as a current liability in the Balance Sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Actuarial gain and loss is recognize in full in the period in which they occur in the Statement of Profit and Loss.
m TAXES:
Current income tax:
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside the Statement of Profit and Loss is recognized outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred Tax:
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except:
0 When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable Profit and Loss.
0 In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against the deductible temporary differences, except:
0 When the deferred tax asset arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
0 In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside the Statement of Profit and Loss is recognized outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
n PROVISIONS:
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.
o DERIVATIVE FINANCIAL INSTRUMENTS:
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, cross currency swaps, options, interest rate futures and interest rate swaps to hedge its foreign currency risks and interest rate risks, respectively. Such derivative financial instruments are initially recognized at fair value through the Statement of Profit and Loss (FVTPL) on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivative financial instrument are classified in the Statement of Profit and Loss and reported with foreign exchange gains/(loss) not within results from operating activities. Changes in fair value and gains/(losses) on settlement of foreign currency derivative financial instruments relating to borrowings, which have not been designated as hedge are recorded as finance cost.
p EARNINGS PER SHARE:
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
q CASH AND CASH EQUIVALENT:
Cash and cash equivalents in the Balance Sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of charges in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
r CASH DIVIDEND:
The Company recognizes a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized
Mar 31, 2016
1 CORPORATE INFORMATION
Ratnamani Metals & Tubes Limited (the Company) is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company is engaged in the manufacturing of stainless steel pipes and tubes and carbon steel pipes at Kutch, Indrad and Chhatral in the state of Gujarat. The Company caters to both domestic and international markets.
2 BASIS OF ACCOUNTING
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Account) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets and/or liabilities in future periods.
b. TANGIBLE FIXED ASSETS
Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price and borrowing costs if capitalization criteria are met, the cost of replacing part of the fixed assets and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhauling is performed, its cost is recognized in the carrying amount of the fixed assets as a replacement if the recognition criteria are satisfied. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of parts replaced are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset. In accordance with MCA circular dated 09 August 2012, exchange differences adjusted to the cost of fixed assets are total differences, arising on long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the Statement of Profit and Loss as and when the assets is derecognized.
c. INTANGIBLE FIXED ASSETS
Intangible Assets are carried at cost less accumulated amortization and accumulated impairment, if any.
Intangible assets are amortized on a straight-line basis over six years. The amortization period and the amortization method are reviewed at least at each financial year end.
d. DEPRECIATION AND AMORTISATION
Depreciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives defined under Schedule II except in respect of following fixed assets:
(i) The amount of Long Term Lease hold land: It is amortized in equal installments during the last fifteen years of the residual lease period.
(ii) Furnace and X-ray machines are depreciated at an annual rate of 20% to bring the depreciation rates in line with the useful life of assets as estimated by the Technical Team of the Company.
(iii) The useful life of Wind Mills is estimated as 20 years based on sublease period of the land and the PPA/Wheeling Agreements entered into with the local authorities.
e. INVESTMENTS
Investments that are readily realizable and intended to be held for not more than a year from the date on which investments are made, are classified as current investments. All other investments are classified as non-current investments.
Current investments are carried at lower of cost and fair value determined on an individual investment basis. Non-current investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.
f. INVENTORIES
Raw materials, work-in-process, finished goods, traded goods and stores and spares are valued at lower of cost and net realizable value after providing for obsolescence and other losses, wherever considered necessary. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Scrap is valued at net realizable value. Cost is determined on a Weighted Average method.
Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, incurred in bringing them in their respective present location and condition. Cost of finished goods includes excise duty.
Net realizable value is the estimated selling price in the ordinary course of business.
g. REVENUE
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:
i) Revenue from sale of goods is recognized only when all the significant risks and rewards of ownership of the goods have been passed to the buyer. Revenue from operations (gross) represents the amounts receivable for goods and services sold including excise duty thereon and Export incentives but excludes VAT/CST, trade discounts & other taxes, adjustments for late delivery charges and material returned/rejected.
Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
ii) The Company accounts for pro forma credits, refunds of duty of customs or excise, or refunds of sales tax in the year of admission of such claims by the concerned authorities. Benefits in respect of Export Licenses are recognised on application. Export benefits are accounted for as other operating income in the year of export based on eligibility and when there is no uncertainty on receiving the same.
iii) Interest income is recognized on time proportion basis taking into account the amounts outstanding and the rates applicable. Interest income is included under the head "other income" in the Statement of Profit and Loss.
iv) Dividend is recognized when the Company''s right to receive dividend is established by the Balance Sheet date.
v) Revenue from windmills is recognized on unit generation basis.
h. EMPLOYEE BENEFITS
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company has no obligation, other than the contributions payable to provident fund and super-annotation fund. The Company recognizes contribution payable to these funds as an expenditure, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at each year-end. Actuarial valuation is carried out using the projected unit credit method. Based on the determined valuation, the Company recognizes the amount in full to the Statement of Profit and Loss account. Actuarial gain and loss is recognize in full in the period in which they occur in the Statement of Profit and Loss.
The liability in respect of unused leave entitlement of the employees as at the reporting date is determined on the basis of an independent actuarial valuation carried out and the liability is recognized in the Statement of Profit and Loss. The
Company presents the entire leave as a current liability in the Balance Sheet, since it does not have an unconditional right to defer its settlement beyond 12 months after the reporting date. Actuarial gain and loss is recognized in full in the period in which they occur in the Statement of Profit and Loss.
i. INCOME TAXES
Tax expenses comprise of current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The Company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the Company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
j. FOREIGN CURRENCY TRANSACTIONS
i) Foreign currency transactions are accounted at exchange rates prevailing on the date when the transactions take place or that approximates the actual rate on the date of the transaction. All exchange differences arising in respect of foreign currency transactions are dealt with in statement of profit & loss except in respect of long term liabilities incurred for acquiring fixed assets, in which case such differences are adjusted in the carrying amount of the respective fixed assets and depreciated over the remaining useful life of the assets.
ii) All monetary foreign currency assets and liabilities, if any, as at the Balance Sheet date are restated at the applicable exchange rates prevailing on the reporting date of financial statements.
k. FOREIGN EXCHANGE CONTRACTS ENTERED INTO TO HEDGE FOREIGN CURRENCY RISK OF AN EXISTING ASSETS/LIABILITIES
In respect of forward contracts, the premium or discount is amortized over the period of forward contracts and the proportionate premium/discount for the period up to the reporting date of Balance Sheet is recognized in the Statement of Profit and Loss. The exchange difference measured by the exchange rate between the inception of the forward contracts and reporting date of Balance Sheet is applied on foreign currency amount of the forward contracts and exchange differences on such contracts are recognized in the Statement of Profit and Loss in the period in which the exchange rates changes. Any profit or loss arising on cancellation or renewal of such forward exchange contracts is also recognized as income or expense for the period.
l. BORROWING COSTS
Borrowing costs include interest and amortization of ancillary costs incurred in connection with the arrangement of borrowing.
Borrowing costs those are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is the one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to Statement of Profit and Loss.
m. IMPAIRMENT OF ASSETS
The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the assets. If such recoverable amount of the assets is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the Balance Sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to the maximum of depreciated historical cost.
n. PROVISIONS
A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made. Provisions are not discounted to their present values and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each reporting date and adjusted to reflect the current best estimates.
o. CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. A contingent asset is neither recognized nor disclosed.
p. SEGMENT REPORTING
The Company''s operating businesses are organized and managed separately according to the nature of products provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segment is based on the geographical location of the customers.
The Company accounts for intersegment sales at cost.
Unallocated items include general corporate income and expense items which are not allocated to any business segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
q. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r. CASH AND CASH EQUIVALENT
Cash and cash equivalents for the purposes of cash flow statement comprise of cash at bank and in hand and short-term investments with an original maturity of three months or less.
s. OPERATING LEASE
Leases, where the less or effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
3.2 Terms/Rights attached to Equity Shares
The Company has only one class of Equity Shares having a par value of Rs, 2/- per share. Each holder of Equity Shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the Shareholders at the ensuing Annual General Meeting. 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 Share holders.
External (Foreign) Commercial Borrowing of Rs, 890.27 Lacs (P.Y. Rs, 1,681.60 Lacs) from ICICI Bank Ltd. Hong Kong branch is carrying interest @ 6M Libor 4.52% P.A. The loan is repayable in 12 half yearly installments of USD 6,66,666.67 each from 22.07.2011. The loan is secured by an exclusive charge over movable assets in respect of 3Layer PE Coating Line and Offline Welding & Finishing Lines for HSAW plant situated at Survey No.474, Village Bhimasar, Tal. Anjar, Dist. Kutch.
7.1 Working Capital Loans are secured by - i) Hypothecation of Inventories, Books Debts, all other movables; ii) Second charge on Fixed Assets of the Company except: a) 8 wind mills along with related equipments/machineries situated at Moti Sindholi, Kutch, Gujarat and b) movable assets in respect of 3 Layer PE Coating Line and Offline Welding & Finishing Lines for HSAW plant situated at Survey No.474,village Bhimasar, Tal. Anjar, Dist. Kutch; iii) Personal guarantees of Shri Prakash M. Sanghvi, Chairman and Managing Director, Shri Jayanti M. Sanghvi, Whole-time Director and Shri Shanti M. Sanghvi, Whole-time Director, of the Company; iv) Joint equitable mortgage of all immovable properties held as free-hold and leasehold lands of the Company, except: a) Leasehold land related to 8 wind mills situated at Moti Sindholi, Kutch, b) Lease hold land situated at 3306-09, GIDC Chhatral, Taluka Kalol and
c) 3 Layer PE Coating Line and Offline Welding & Finishing Lines for HSAW plant situated at Survey No.474, Village Bhimasar, Tal. Anjar, Dist. Kutch.
There are no Micro, Small and Medium Enterprise, as defined in the Micro, Small, Medium Enterprises Development Act, 2006, to whom the Company owes dues on account of principal amount together with interest and accordingly no additional disclosure have been made. The above information regarding Micro, Small and Medium Enterprise has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
Note-1 Consolidated tax payable to GIDC is demanded by GIDC, Chhatral modified under circular dated 9/7/2010 for levying and recovering "infrastructure up gradation fund" from the Company. The amount comprises of the per square meter charges towards infrastructure up gradation as well as interest and penalty thereupon. The Company has paid the demand in the current year.
Note-2 Excise duty comprises of various demands from the Excise Authorities for payment of Rs, 3,338.86 Lacs ( P.Y. Rs, 3,315.13 Lacs). The Company has filed appeals against these demands. The Company has been advised by its legal counsel that the demand is likely to be deleted and accordingly no provision for liability has been recognized in the financial statements.
Mar 31, 2015
A. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets and /
or liabilities in future periods.
b. TANGIBLE FIXED ASSETS:
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any, The cost comprises purchase
price and borrowing costs if capitalization criteria are met, the cost
of replacing part of the fixed assets and directly attributable cost of
bringing the asset to its working condition for the intended use. Each
part of an item of property, plant and equipment with a cost that is
significant in relation to the total cost of the item is depreciated
separately, This applies mainly to components for machinery, When
significant parts of fixed assets are required to be replaced at
intervals, the Company recognizes such parts as individual assets with
specific useful lives and depreciates them accordingly. Likewise, when
a major overhauling is performed, its cost is recognized in the
carrying amount of the fixed assets as a replacement if the recognition
criteria are satisfied. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subseauent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of parts replaced are
charged to the Statement of Profit and Loss for the period during which
such expenses are incurred,
The Company adjusts exchange differences arising on translation /
settlement of long-term foreign currency monetary Items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset, In
accordance with MCA circular dated 09 August 2012, exchange differences
adjusted to the cost of fixed assets are total differences, arising on
long-term foreign currency monetary items pertaining to the acquisition
of a depreciable asset for the period. In other words, the Company does
not differentiate between exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost and other exchange difference.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the assets and are recognized in the Statement of Profit and
Loss as and when the assets is derecognized.
c. INTANGIBLE FIXED ASSETS
Intangible Assets are carried at cost less accumulated amortisation and
accumulated impairment, if any. Intangible assets are amortised on a
straight-line basis over sixyears,
d. DEPRECIATION AND AMORTISATION
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives defined under
Schedule II except in respect of following fixed assets:
(i) The amount of Long Term Lease hold land: It is amortised in equal
instalments during the last fifteen years of the residual lease period,
(ii) Furnace and X-ray machines are depreciated at an annual rate of
20% to bring the depreciation rates in line with the useful life of
assets as estimated by the Technical Team of the Company.
(iii) The useful life of Wind Mills is estimated as 20 years based on
sublease period of the land and the PPA/Wheeling Agreements entered
into with the local authorities.
e. INVESTMENTS
Investments that are readily realisable and Intended to be held for not
more than a year from the date on which investments are made are
classified as current investments. All other investments are classified
as non-current Investments,
Current investments are carried at lower of cost and fair value
determined on an individual investment basis. Non-current investments
are carried at cost,
However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
Statement of Profit and Loss.
f. INVENTORIES
Raw materials, work-in-process, finished goods, traded goods and stores
and spares are valued at lower of cost and net realizable value after
providing for obsolescence and other losses, wherever considered
necessary. However, materials and other items held for use In the
production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Scrap is valued at net realisable value. Cost is
determined on a Weighted Average method.
Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity, incurred in
bringing them in their respective present location and condition. Cost
of finished goods includes excise duty.
Net realizable value is the estimated selling price in the ordinary
course of business.
g. REVENUE
i) Revenue from operations is recognized only when it can be reliably
measured and it is reasonable to expect ultimate collection. Revenue
from operations (gross) & Income from operations (gross) represents the
amounts receivable for goods and services sold including excise duty
thereon. Export incentives and VAT/ CST incentives in respect of Kutch
Unit but excludes VAT / CST, trade discounts & other taxes, adjustments
for late delivery charges and material returned / rejected.
Interest income is recognized on time proportion basis taking into
account the amounts outstanding and the rates applicable. Interest
income is included under the head "other income" in the Statement of
Profit and Loss.
ii) The Company accounts for pro forma credits, refunds of duty of
customs or excise, or refunds of sales tax in the year of admission of
such claims by the concerned authorities. Benefits in respect of
Export Licenses are recognised on application. Export benefits are
accounted for as other operating income in the year of export based on
eligibility and when there is no uncertainty on receiving the same.
iil) Dividend is recognized when the Company''s right to receive
dividend is established by the Balance Sheet date,
iv) Revenue from windmills is recognised on unit generation basis,
h. EXCISE DUTY
Excise duty is accounted on the basis of both, payment made in respect
of goods cleared / Services provided, and provided on manufactured
goods remaining in the inventory which is included as a part of
valuation of finished goods and scrap,
i. EMPLOYEE BENEFITS
Retirement benefits in the form of provident fund and superannuation
fund are defined contribution plans. The Company has no obligation,
other than the contributions payable to provident fund and
super-annuation fund. The Company recognises contribution payable to
these funds as an expenditure, when an employee renders the related
service.
In respect of gratuity liability, the Company operates defined benefit
plan. The costs of providing benefits under this plan are determined on
the basis of actuarial valuation at each year-end. Actuarial valuation
is carried out using the projected unit credit method. Based on the
determined valuation, the Company recognizes the amount in full to the
Statement of Profit and Loss account. Actuarial gain and loss Is
recognised in full in the period in which they occur In the Statement
of Profit and Loss,
The liability in respect of unused leave entitlement of the employees
as at the reporting date Is determined on the basis of an independent
actuarial valuation carried out and the liability Is recognized in the
Statement of Profit and Loss. The Company presents the entire leave as
a current liability in the Balance Sheet, since it does not have an
unconditional right to defer its settlement for 12 months after the
reporting date. Actuarial gain and loss is recognise in full in the
period in which they occur in the Statement of Profit and Loss.
ESOS:
In respect of Employees Stock Options, the excess of fair price on the
date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period,
j. INCOME TAXES
Tax expenses comprise current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date, Deferred tax liabilities
are recognized for all taxable timing differences. Deferred tax assets
are recognized for deductible timing differences only to the extent
that there is reasonable certainly that sufficient future taxable
income will be available against which such deferred tax assets can be
realized.
The Company restricts recognition of deferred tax assets to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized. For recognition of
deferred taxes, the timing differences which originate first are
considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized,
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes- down the carrying amount of
deferred tax asset to the extent that It is no longer reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable Income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available.
k. FOREIGN CURRENCY TRANSACTIONS
i) Foreign currency transactions are accounted at exchange rates
prevailing on the date the transactions take place or that approximates
the actual rate on the date of the transaction. All exchange
differences arising in respect of foreign currency transactions are
dealt with In statement of profit & loss except in respect of long term
liabilities incurred for acquiring fixed assets, in which case such
differences are adjusted in the carrying amount of the respective fixed
assets and depreciated over the remaining useful life of the assets.
ii) All monetary foreign currency assets and liabilities, if any, as at
the Balance Sheet date are restated at the applicable exchange rates
prevailing on the reporting date of financial statements.
I. FOREIGN EXCHANGE CONTRACTS ENTERED INTO TO HEDGE FOREIGN CURRENCY
RISK OF AN EXISTING ASSETS / LIABILITIES
In respect of forward contracts, the premium or discount is amortised
over the period of forward contract and the proportionate
premium/discount for the period up to the reporting date of Balance
Sheet is recognized in the Statement of Profit and Loss. The exchange
difference measured by the exchange rate between the inception of the
forward contract and reporting date of Balance Sheet is applied on
foreign currency amount of the forward contract and exchange difference
on such contracts, are recognized in the Statement of Profit and Loss
in the period in which the exchange rates changes. Any profit or loss
arising on cancellation or renewal of such forward exchange contracts
is also recognized as income or expense for the period,
m. FINANCE COSTS
Finance costs include interest and amortisation of ancillary costs
incurred in connection with the arrangement of borrowing. Finance costs
that are directly attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes substantial period of
time to get ready for intended use. All other borrowing cost are
charged to Statement of Profit and Loss.
n. IMPAIRMENT OF ASSETS
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the assets. If
such recoverable amount of the assets is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognized in the Statement of
Profit and Loss. If at the Balance Sheet date there is an indication
that if a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of depreciated historical cost,
o. PROVISIONS
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be reauired to settle the obligation and a reliable estimate can
be made. Provisions are not discounted to its present value and are
determined based on best estimate reauired to settle the obligation at
the Balance Sheet date. These are reviewed at each reporting date and
adjusted to reflect the current best estimates.
p. CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
reauired to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements. A contingent asset is neither recognized not
disclosed.
q. SEGMENT REPORTING
The Companys operating businesses are organised and managed separately
according to the nature of products provided, with each segment
representing a strategic business unit that offers different products
and serves different markets. The analysis of geographical segment is
based on the geographical location of the customers.
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
r. EARNING PER SHARE
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period. The weighted
average number of equity shares outstanding during the period is
adjusted for issue of shares under Employee Stock Option Scheme-2006
that have changed the number of equity shares outstanding. For the
purpose of calculating diluted earnings per share, the net profit for
the period attributable to equity shareholders and the weighted average
number of shares outstanding during the period are adjusted for the
effects of all dilutive potential equity shares.
s. CASH AND CASH EQUIVALENT
Cash and Cash Equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
t. OPERATING LEASE
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased Item, are classified as
operating leases, Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight-line basis over the
lease term,
Mar 31, 2014
A. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets and /
or liabilities in future periods.
b. TANGIBLE FIXED ASSETS
Fixed assets are stated at cost less accumulated depreciation,
impairment losses, and net of tax/ duty / credits availed, if any. Cost
comprises the purchase price and any attributable cost of bringing an
assets to Its working condition for its intended use,
The company adjusts exchange differences arising on translation /
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset. In
accordance with MCA circular dated 09 August 2012, exchange differences
adjusted to the cost of fixed assets are total differences, arising on
long-term foreign currency monetary items pertaining to the acquisition
of a depreciable asset, for the period. In other words, the company
does not differentiate between exchange differences arising from
foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost and other exchange difference.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing assets beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the Statement of Profit and Loss for the period for which
such expenditure are incurred.
Gain or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the assets and are recognized in the Statement of Profit and
Loss as and when the assets is derecognized.
c. INTANGIBLE FIXED ASSETS
Intangible Assets are carried at cost less accumulated amortisation and
accumulated impairement, if any. Intangible assets are amortised on a
straight-line basis over six years.
d. DEPRECIATION
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on those prescribed under the Schedule
XIV to the Companies Act, 1956, except In respect of following fixed
assets:
(i) The amount of Long Term Lease hold land: It is amortised in equal
installments during the last fifteen years of the residual lease
period,
(ii) Furnace and X-ray machines are depreciated at an annual rate of
20% to bring the depreciation rates in line with the useful life of
assets as estimated by the management.
Individual assets not exceeding Rs. 5,000 are depreciated fully in the
year of purchase,
e. INVESTMENTS
Investments that are readily realisable and intended to be held for not
more than a year from the date on which investments are made are
classified as current investments. All other investments are classified
as non-current investments. Current investments are carried at lower of
cost and fair value determined on an individual investment basis.
Non-current investments are carried at cost. Diminution in value, if
any, which is of temporary nature, is not provided.
f. INVENTORIES
Raw materials, work-in-process, finished goods, components, stores and
spares are valued at lower of cost and net realizable value after
providing for obsolescence and other losses, where-ever considered
necessary. However, materials and other items held for use in the
production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Scrap is valued at net realisable value. Cost is
determined on a Weighted Average method,
Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity, incurred in
bringing them in their respective present location and condition, Cost
of finished goods includes excise duty.
Net realizable value is the estimated selling price in the ordinary
course of business.
g. REVENUE
i) Revenue from operations is recognized only when it can be reliably
measured and it is reasonable to expect ultimate collection. Revenue
from operations (gross) & Income from operations (gross) represents the
amounts receivable for goods and services sold including excise duty
thereon, Export incentives and VAT / CST Incentives in respect of Kutch
Unit but excludes VAT / CST, trade discounts & other taxes, adjustments
for late delivery charges and material returned / rejected,
Interest income is recognized on time proportion basis taking into
account the amounts outstanding and the rates applicable.
ii) The Company accounts for pro forma credits, refunds of duty of
customs or excise, or refunds of sales tax in the year of admission of
such claims by the concerned authorities. Benefits In respect of
Export Licenses are recognised on application. Export benefits are
accounted for as other operating income in the year of export based on
eligibility and when there is no uncertainty on receiving the same,
iii) Dividend is recognized when the Company''s right to receive
dividend is established by the balance sheet date.
iv) Revenue from windmill is recognised on unit generation basis.
h. EXCISE DUTY
Excise duty is accounted on the basis of both, payment made in respect
of goods cleared / Services provided and provided on manufactured goods
remaining in the inventory is included as a part of valuation of
finished goods and scrap.
i. EMPLOYEE BENEFITS
Retirement benefits in the form of provident fund and superannuation
fund are defined contribution plans. The company has no obligation,
other than the contributions payable to provident fund and
super-annuation fund. The company recognises contribution payable to
these funds as an expenditure, when an employee renders the related
service,
In respect of gratuity liability, the Company operates defined benefit
plan. The costs of providing benefits under this plan are determined on
the basis of actuarial valuation at each year-end, Actuarial valuation
is carried out using the projected unit credit method. Based on the
determined valuation, the Company recognizes the amount in full to the
statement of profit and loss account, Actuarial gain and loss is
recognise in full in the period in which they occur in the statement of
profit and loss.
The Mobility in respect of unused leave entitlement of the employees as
at the reporting date is determined on the basis of an independent
actuarial valuation carried out and the liability is recognized in the
Statement of Profit and Loss. The Company presents the entire leave as
a current liability in the balance sheet, since it does not have an
unconditional right to defer its settlement for 12 months after the
reporting date. Actuarial gain and loss is recognise in full In the
period in which they occur in the statement of profit and loss.
ESOS:
In respect of Employees Stock Options, the excess of fair price on the
date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period,
j. INCOME TAXES
Tax expenses comprise current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date,
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible tinning
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.
The Company restricts recognition of deferred tax assets to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized. For recognition of
deferred taxes, the timing differences which originate first are
considered to reverse first,
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized,
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write- down is reversed to the extent that it
becomes reasonably certain or virtually certain, as the case may be,
that sufficient future taxable income will be available,
k. FOREIGN CURRENCY TRANSACTIONS
i) Foreign currency transactions are accounted at exchange rates
prevailing on the date the transactions take place or that approximates
the actual rate on the date of the transaction. All exchange
differences arising in respect of foreign currency transactions are
dealt with in statement of profit & loss except in respect of long term
liabilities incurred for acauiring fixed assets, in which case such
differences are adjusted in the carrying amount of the respective fixed
assets and depreciated over the remaining useful life of the assets,
ii) All monetary foreign currency assets and liabilities, if any, as at
the Balance Sheet date are restated at the applicable exchange rates
prevailing on the reporting date of financial statements,
I. FOREIGN EXCHANGE CONTRACT ENTERED INTO TO HEDGE FOREIGN CURRENCY
RISK OF AN EXISTING ASSETS / LIABILITIES
In respect of forward contracts, the premium or discount is amortise
over the period of forward contract and the proportionate premium /
discount for the period up to the reporting date of Balance Sheet is
recognized in the statement of profit and loss. The exchange difference
measured by the exchange rate between the inception of the forward
contract and reporting date of Balance Sheet Is applied on foreign
currency amount of the forward contract and exchange difference on such
contracts, are recognized in the statement of Profit and Loss in the
period in which the exchange rates changes. Any profit or loss arising
on cancellation or renewal of such forward exchange contracts is also
recognized as income or expense for the period.
m. FINANCE COSTS
Finance costs includes interest, bank charges, amortisation of
ancialliary costs incurred in connection with the arrangement of
borrowing.
Finance costs that are directly attributable to the acquisition or
construction of aualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing cost are charged to statement of profit and loss,
n. IMPAIRMENT OF ASSETS
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the assets. If
such recoverable amount of the assets is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognized in the statement of
profit and loss. If at the Balance Sheet date there is an indication
that If a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of depreciated historical cost,
o. PROVISIONS
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates,
p. CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements. A contingent assets is neither recognized not
disclosed,
q. SEGMENT REPORTING
The Companys operating businesses are organised and managed separately
according to the nature of products provided, with each segment
representing a strategic business unit that offers different products
and serves different markets. The analysis of geographical segment is
based on the geographical location of the customers.
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole,
r. EARNING PER SHARE
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period. The weighted
average number of equity shares outstanding during the period is
adjusted for issue of shares under Employee Stock Option Scheme-2006
that have changed the number of equity shares outstanding.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
s. CASH AND CASH EQUIVALENT
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
t. CASH FLOW STATEMENT
Cash flow statement is prepared using the indirect method, whereby
profit before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flow from operating,
investing and financing activities of the Company are segregated based
on the available information.
u. OPERATING LEASE
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
3.4 Shares Reserved for issue under option
The Company reserved issuance of 22,50,000 (R Y. 22,50,000) Equity
Shares of Rs. 2/- each for offering to eligible employees of the Company
under Employees Stock Option Scheme 2006 at a price of Rs. 59.40 per
option plus all applicable taxes, as may be levied in this regard on
the Company. The options were granted on 31 st October, 2006 and have
vested completely. Out of the reserved Equity Shares, 16,83,450 Equity
Shares (R Y. 14,15,609) have been issued till date. The maximum
exercise period is 8 years from the date of grant of options. (Also
refer note no. 30)
5. LONG TERM BORROWINGS (SECURED)
- External (Foreign) Commercial Borrowing of Rs. Nil Lacs (RY. Rs. 2,898.35
Lacs) from ICICI Bank Ltd. Hong Kong branch is carrying Interest for
the first seven years @3M Libor 1.52% R A., eighth year @3M Ubor
2.04% R A., ninth year @3M Libor 2.54% R A. The loan is repayable in
32 quarterly installments of USD 4,06,250.00 each from 22.07.2008. The
loan Is secured by an exclusive charge over all the 8 windmills along
with related equipments/ machineries situated at Moti Sindholi, Kutch,
Gujarat and personal guarantee of Shri Prakash M. Sanghvi, Chairman and
Managing Director of the Company,
- External (Foreign) Commercial Borrowing of Rs. 2,419.60 Lacs (RY Rs.
2,926.93 Lacs) from ICICI Bank Ltd. Hong Kong branch is carrying
interest @ 6M Libor 4.52% RA. The loan is repayable in 12 half yearly
installments of USD 6,66,666.67 each from 22.07.2011. The loan is
secured by an exclusive charge over movable assets in respect of 3Layer
PE Coating Line and Offline Welding & Finishing Lines for HSAW plant
situated at Survey No. 474, village Bhimasar, Tal. Anjar, Dist. Kutch.
7.1 Working Capital Loans are secured by - i) Hypothecation of
Inventories, Books Debts, all other movables; ii) Second charge on
Fixed Assets of the Company except, a) 8 wind mills along with related
equipments/ machineries situated at Motl Slndholi, Kutch, Gujarat and,
b) movable assets In respect of 3Layer PE Coating Line and Offline
Welding & Finishing Lines for HSAW plant situated at Survey
No.474,village Bhimasar, Tal. Anjar, Dist. Kutch; iii) Personal
guarantees of Sh. Prakash M. Sanghvl, Chairman and Managing Director,
Sh. Jayanti. M. Sanghvi, Whole-time Director and Sh. Shanti M. Sanghvi,
Whole-time Director, of the Company; tv) Joint equitable mortgage of
all Immovable properties held as free-hold and leasehold lands of the
Company, except: a) Leasehold land related to 8 wind mills situated at
Moti Sindholi, Kutch. b) Lease hold land situated at 3306-09, GIDC
Chhatral, Taluka Kalol and c) 3Layer PE Coating Line and Offline
Welding & Finishing Lines for HSAW plant situated at Survey No.474,
Village Bhimasar, Tal. Anjar, Dist. Kutch,
7.2 Other Loans and Advances from banks payable on demand are secured
by personal guarantee of Sh. Prakash M. Sanghvi, Chairman and Managing
Director of the Company.
8. TRADE PAYABLES
There are no Micro, Small and Medium Enterprise, as defined in the
Micro, Small, Medium Enterprises Development Act, 2006, to whom the
company owes dues on account of principal amount together with interest
and accordingly no additional disclosure have been made. The above
information regarding Micro, Small and Medium Enterprise has been
determined to the extent such parties have been identified on the basis
of information available with the company. This has been relied upon by
the auditors,
Mar 31, 2013
A. CHANGE IN ACCOUNTING POLICY
Till the previous year, cost of raw materials, work-in-process,
finished goods, components, stores and spares were valued at FIFO
(First-In-First-Out) method. In the current year, the company changed
its accounting policy from the FIFO (First-In-First-Out) method to
weighted Average method. The management believes that such change would
result in a more appropriate presentation of the financial statement in
line with industrial practise.
Consequently, inventories and profit before taxation are higher by Rs.
98.37 Lacs.
b. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets
and/or liabilities in future periods.
c. TANGIBLE FIXED ASSETS
Fixed assets are stated at cost less accumulated depreciation,
impairment losses, and net of tax/duty/credits availed, if any. Cost
comprises the purchase price and any attributable cost of bringing an
assets to its working condition for its intended use.
The company adjusts exchange differences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset. In
accordance with MCA circular dated 09 August 2012, exchange differences
adjusted to the cost of fixed assets are total differences, arising on
long-term foreign currency monetary items pertaining to the acquisition
of a depreciable asset, for the period. In other words, the company
does not differentiate between exchange differences arising from
foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost and other exchange difference.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing assets beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the Statement of Profit and Loss for the period for which
such expenditure are incurred.
Gain or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the assets and are recognized in the Statement of Profit and
Loss as and when the assets is derecognized.
d. INTANGIBLE FIXED ASSETS
Intangible Assets are carried at cost less accumulated amortisation and
accumulated impairement, if any.
Intangible assets are amortised on a straight-line basis over the
estimated useful economic life.
e. DEPRECIATION
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on those prescribed under the Schedule
xrv to the Companies Act, 1956, except in respect of following fixed
assets:
(i) The amount of Long Term Lease hold land: It is amortised in equal
installments during the last fifteen years of the residual lease
period.
(ii) Furnace and X-ray machines are depreciated at an annual rate of
20% to bring the depreciation rates in line with the useful life of
assets as estimated by the management. Individual assets not exceeding
Rs. 5,000 are depreciated fully in the year of purchase.
f. INVESTMENTS
Investments that are readily realisable and intended to be held for not
more than a year from the date on which investments are made are
classified as current investments. All other investments are classified
as non-current investments. Current investments are carried at lower of
cost and fair value determined on an individual investment basis.
Non-current investments are carried at cost. Diminution in value, if
any, which is of temporary nature, is not provided.
g. INVENTORIES
Raw materials, work-in-process, finished goods, components, stores and
spares are valued at lower of cost and net realizable value after
providing for obsolescence and other losses, where-ever considered
necessary. Scrap is valued at net realisable value. Cost is determined
on a Weighted
Average method.
Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity, incurred in
bringing them in their respective present location and condition. Cost
of finished goods includes excise duty.
Net realizable value is the estimated selling price in the ordinary
course of business.
h. REVENUE
i) Revenue from operations is recognized only when it can be reliably
measured and it is reasonable to expect ultimate collection. Revenue
from operations (gross) & Income from operations (gross) represents the
amounts receivable for goods and services sold including excise duty
thereon, Export incentives and VAT/CST incentives in respect of Kutch
Unit but excludes VAT/CST, trade discounts & other taxes, adjustments
for late delivery charges and material returned/rejected.
Interest income is recognized on time proportion basis taking into
account the amounts outstanding and the rates applicable.
ii) The Company accounts for pro forma credits, refunds of duty of
customs or excise, or refunds of sales tax in the year of admission of
such claims by the concerned authorities. Benefits in respect of Export
Licenses are recognised on application.Export benefits are accounted
for in the year of export based on eligibility and when there is no
uncertainty on receiving the same.
iii) Dividend is recognized when the Company''s right to receive
dividend is established by the balance sheet date.
iv) Revenue from windmill is recognised on unit generation basis.
i. EXCISE/SERVICE TAX/CUSTOMS DUTIES/SALES TAX/VALUE ADDED TAX
Excise duty/Service Tax is accounted on the basis of both, payment made
in respect of goods cleared/Services provided and provided on
manufactured goods remaining in the inventory is included as a part of
valuation of finished goods and scrap. The customs duty on raw
materials, stores, spares & components is accounted on clearance
thereof.
Sales tax/Value added tax paid/liability accrued is charged to
Statement of Profit and Loss account.
j. EMPLOYEE BENEFITS
Retirement benefits in the form of provident fund and superannuation
fund are defined contribution plans. The company has no obligation,
other than the contributions payable to provident fund and
super-annuation fund. The company recognises contribution payable to
these funds as an expenditure, when an employee renders the related
service.
In respect of gratuity liability, the Company operates defined benefit
plan. The costs of providing benefits under this plan are determined on
the basis of actuarial valuation at each year-end. Actuarial valuation
is carried out using the projected unit credit method. Based on the
determined valuation, the Company recognizes the amount in full to the
statement of profit and loss account.
Actuarial gain and loss is recognise in full in the period in which
they occur in the statement of profit and loss.
The liability in respect of unused leave entitlement of the employees
as at the reporting date is determined on the basis of an independent
actuarial valuation carried out and the liability is recognized in the
Statement of Profit and Loss. The Company presents the entire leave as
a current liability in the balance sheet, since it does not have an
unconditional right to defer its settlement for 12 months after the
reporting date. Actuarial gain and loss is recognise in full in the
period in which they occur in the statement of profit and loss.
ESOS
In respect of Employees Stock Options, the excess of fair price on the
date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period.
k. INCOME TAXES
Tax expenses comprise current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.
The Company restricts recognition of deferred tax assets to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized. For recognition of
deferred taxes, the timing differences which originate first are
considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
1. FOREIGN CURRENCY TRANSACTIONS
i) Foreign currency transactions are accounted at exchange rates
prevailing on the date the transactions take place or that approximates
the actual rate on the date of the transaction. All exchange
differences arising in respect of foreign currency transactions are
dealt with in statement of profit & loss except in respect of long term
liabilities incurred for acquiring fixed assets, in which case such
differences are adjusted in the carrying amount of the respective fixed
assets and depreciated over the remaining useful life of the assets.
ii) All monetary foreign currency assets and liabilities, if any, as at
the Balance Sheet date are restated at the applicable exchange rates
prevailing on the reporting date of financial statements.
m. FOREIGN EXCHANGE CONTRACT ENTERED INTO TO HEDGE FOREIGN CURRENCY
RISK OF AN EXISTING ASSETS/LIABILITIES
In respect of forward contracts, the premium or discount is amortise
over the period of forward contract and the proportionate
premium/discount for the period up to the reporting date of Balance
Sheet is recognized in the statement of profit and loss. The exchange
difference measured by the exchange rate between the inception of the
forward contract and reporting date of Balance Sheet is applied on
foreign currency amount of the forward contract and exchange difference
on such contracts, are recognized in the statement of Profit and Loss
in the period in which the exchange rates changes. Any profit or loss
arising on cancellation or renewal of such forward exchange contracts
is also recognized as income or expense for the period.
n. FINANCE COSTS
Finance costs includes interest, bank charges, amortisation of
ancialliary costs incurred in connection with the arrangement of
borrowing.
Finance costs that are directly attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing cost are charged to statement of profit and loss.
o. IMPAIRMENT OF ASSETS
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the assets. If
such recoverable amount of the assets is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognized in the statement of
profit and loss. If at the Balance Sheet date there is an indication
that if a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of depreciated historical cost.
p. PROVISIONS
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
q. CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements. A contingent assets is neither recognized nor
disclosed.
r. SEGMENT REPORTING
The Company''s operating businesses are organised and managed separately
according to the nature of products provided, with each segment
representing a strategic business unit that offers different products
and serves different markets. The analysis of geographical segment is
based on the geographical location of the customers.
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
s. EARNING PER SHARE
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period. The weighted
average number of equity shares outstanding during the period is
adjusted for issue of shares under Employee Stock Option Scheme-2006
that have changed the number of equity shares outstanding.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
t. CASH AND CASH EQUIVALENT
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
u. CASH FLOW STATEMENT
Cash flow statement is prepared using the indirect method, whereby
profit before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flow from operating,
investing and financing activities of the Company are segregated based
on the available information.
Mar 31, 2012
A. USE OF ESTIMATES:
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets
and/or liabilities in future periods.
b. PRESENTATIONS AND DISCLOSURE OF FINANCIAL STATEMENTS:
During the year ended 31st March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
c. TANGIBLE FIXED ASSETS:
Fixed assets are stated at cost less accumulated depreciation,
impairment losses, and net of tax/duty/credits availed, if any. Cost
comprises the purchase price and any attributable cost of bringing the
assets to its working condition for its intended use.
d. DEPRECIATION:
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on those prescribed under the Schedule
XIV to the Companies Act, 1956, except in respect of following fixed
assets:
i) Individual assets not exceeding Rs. 5,000: These are depreciated fully
in the year of purchase.
ii) The amount of Long Term Lease hold land: It is amortised in equal
installments during the last fifteen years of the residual lease
period.
e. INTANGIBLE FIXED ASSETS:
Intangible Assets are carried at cost less accumulated amortisation and
accumulated impairment, if any.
Intangible assets are amortised using straight-line basis method at the
rates specified under Schedule XIV to the Companies Act, 1956.
f. INVESTMENTS:
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. Diminution in value, if any, which is of temporary nature, is not
provided.
g. INVENTORIES:
Raw materials, work-in-process, finished goods, components, stores and
spares are valued at lower of cost and net realisable value after
providing for obsolescence, if any. Scrap is valued at net realisable
value. Cost is determined on a FIFO (First-In-First Out) method.
Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity, incurred in
bringing them in their respective present location and condition. Cost
of finished goods includes excise duty.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
h. REVENUE:
i) Revenue from operations is recognised only when it can be reliably
measured and it is reasonable to expect ultimate collection. Sales &
Income from operations represents the amounts receivable for goods sold
including excise duty thereon, and VAT/CST incentives in respect of
Kutch Unit but excludes VAT/CST, trade discounts & other taxes,
adjustments for late delivery charges and material returned/rejected.
Interest income is recognised on time proportion basis taking into
account the amounts outstanding and the rates applicable.
ii) The Company accounts for pro forma credits, refunds of duty of
customs or excise, or refunds of sales tax in the year of admission of
such claims by the concerned authorities. Benefits in respect of Export
Licenses are recognised on application.
iii) Dividend is recognised when the Company's right to receive
dividend is established by the balance sheet date.
i. EXCISE/CUSTOMS DUTIES:
Excise duty on manufactured goods remaining in the inventory is
included as a part of valuation of finished goods and scrap. The
customs duty on raw materials, stores, spares & components is accounted
on clearance thereof.
j. EMPLOYEE BENEFITS:
Retirement benefits in the form of provident fund and superannuation
fund are defined contribution plans. The contributions are charged to
the Statement of Profit and Loss for the year when the contributions
are due. The Company has no obligation, other than the contribution
payable towards these funds.
In respect of gratuity liability, the Company operates defined benefit
plan. The costs of providing benefits under this plan are determined on
the basis of actuarial valuation at each year-end. Actuarial valuation
is carried out using the projected unit credit method.
Accumulated leave, which is expected to be utilised within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
ESOS- In respect of Employees Stock Options, the excess of fair price
on the date of grant over the exercise price is recognised as deferred
compensation cost amortised over the vesting period.
k. INCOME TAXES:
Tax expenses comprise current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognised for all taxable timing
differences. Deferred tax assets are recognised for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India, no deferred tax (asset or
liability) is recognised in respect of timing differences which reverse
during the tax holiday period, to the extent the Company's gross total
income is subject to the deduction during the tax holiday period.
Deferred tax in respect of timing differences which reverse after the
tax holiday period is recognised in the year in which the timing
differences originate. However, the Company restricts recognition of
deferred tax assets to the extent that it has become reasonably certain
or virtually certain, as the case may be, that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
For recognition of deferred taxes, the timing differences which
originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognised deferred
tax assets. It recognises unrecognised deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
l. FINANCIAL DERIVATIVES AND FOREIGN CURRENCY TRANSACTIONS:
i) Foreign currency transactions are accounted at exchange rates
prevailing on the date the transactions take place or that approximates
the actual rate on the date of the transaction. All exchange
differences arising in respect of foreign currency transactions are
dealt with in statement of profit & loss except in respect of long term
liabilities incurred for acquiring fixed assets, in which case such
differences are adjusted in the carrying amount of the respective fixed
assets and depreciated over the remaining useful life of the assets.
ii) All foreign currency assets and liabilities, if any, as at the
Balance Sheet date are restated at the applicable exchange rates
prevailing on the date of financial statements.
m. FOREIGN EXCHANGE CONTRACT ENTERED INTO TO HEDGE FOREIGN CURRENCY
RISK OF AN EXISTING ASSETS/LIABILITIES: In respect of forward contracts
assigned to the foreign currency assets as at Balance Sheet date, the
proportionate premium/discount for the period up to the date of Balance
Sheet is recognised in the statement of profit and loss. The exchange
difference measured by the exchange rate between the inception of the
forward contract and date of Balance Sheet is applied on foreign
currency amount of the forward contract.
n. FINANCE COSTS:
Finance costs includes interest, bank charges, amortisation of
ancilliary costs incurred in connection with the arrangement of
borrowing and applicable gain/loss on foreign currency transactions and
translation arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost. Finance costs that
are directly attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes substantial period of
time to get ready for intended use. All other borrowing cost are
charged to statement of profit and loss.
o. IMPAIRMENT OF ASSETS:
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the assets. If
such recoverable amount of the assets is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognised in the statement of
profit and loss. If at the Balance Sheet date there is an indication
that if a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of depreciated historical cost.
p. PROVISIONS:
A provision is recognised when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
q. CONTINGENT LIABILITY:
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably. The Company does not
recognise a contingent liability but discloses its existence in the
financial statements.
r. SEGMENT REPORTING:
The Company's operating businesses are organised and managed separately
according to the nature of products provided with each segment
representing a strategic business unit that offers different products
and serves different markets. The analysis of geographical segment is
based on the geographical location of the customers.
s. EARNING PER SHARE:
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period. The weighted
average number of equity shares outstanding during the period is
adjusted for issue of shares under Employee Stock Option Scheme-2006
that have changed the number of equity shares outstanding.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
t. CASH AND CASH EQUIVALENT:
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
Mar 31, 2011
A. BASIS OF ACCOUNTING: Financial statements are prepared under
historical cost convention on accrual basis in accordance with the
generally accepted accounting principles in India and the provisions of
the Companies Act, 1956 as adopted consistently by the Company.
B. USE OF ESTIMATES: The preparation of financial statements in
confirmity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amount of assets and liabilities and disclosure of contingent
liabilities at the date of financial statements and the results of
operations during the reporting period. Although these estimates are
based upon managements best knowledge of current events and actions,
actual results could differ from these estimates. Difference between
the actual results and estimates are recognised in the period in which
the results are known/materialised.
C. FIXED ASSETS: The Fixed Assets are shown at cost, net of tax/duty
/credits availed, if any, and include expenses capitalised during
construction period less accumulated depreciation and impairment
losses, if any.
D. DEPRECIATION: The Company has provided depreciation on straight
line method at the rates and the manner specified in Schedule XIV to
the Companies Act, 1956. The amount of Long Term Lease hold land is
amortised in equal installments during the last fifteen years of the
residual lease period.
E. INVENTORIES: Inventories are valued at lower of cost or net
realisable value except for Scrap. Scrap is valued at net realisable
value. Cost is determined on FIFO (First-In-First Out) method.
F. REVENUE:
a) Revenue is recognized only when it can be reliably measured and it
is reasonable to expect ultimate collection. Sales & Income from
operations represent the amounts receivable for goods sold including
excise duty thereon, VAT/CST and Excise incentives in respect of Kutch
Unit but excludes VAT/CST, trade discount & other taxes, adjustments
for late delivery charges and material returned/rejected. Interest
income is recognized on time proportion basis taking into account the
amount outstanding and rate applicable.
b) The Company accounts for pro forma credits, refunds of duty of
customs or excise, or refunds of sales tax in the year of admission of
such claims by the concerned authorities. Benefits in respect of Export
Licenses are recognised on utilisation/ sale of the licenses.
c) Dividend income is recongised when the right to receive is
established.
G. EXCISE / CUSTOMS DUTIES: Excise Duty on manufactured goods
remaining in the inventory is included as a part of valuation of
finished goods. The customs duty on raw materials, stores, spares &
components is accounted on clearance thereof.
H. EMPLOYEE BENEFITS:
RETIREMENT BENEFITS: The Company contributes to group gratuity policy
with Life Insurance Corporation of India as per actuarial valuation as
on the Balance Sheet date for future payment of Gratuity to employees.
Accrued liability towards leave encashment is provided on the balance
of unutilized leaves on the Balance Sheet date.
In respect of eligible employees, the Company contributes to approved
superannuation fund under a definite contribution plan, under the
policy of Life Insurance Corporation of India.
ESOS - In respect of Employees Stock Options, the excess of fair price
on the date of grant over the exercise price is recognized as deferred
compensation cost amortised over the vesting period.
I. FINANCIAL DERIVATIVES AND FOREIGN CURRENCY TRANSACTIONS:
a) Foreign currency transactions are accounted at exchange rates
prevailing on the date the transactions take place. All exchange
differences arising in respect of foreign currency transactions are
dealt with in Profit & Loss Account except in respect of long term
liabilities incurred for acquiring Fixed Assets, in which case such
differences are adjusted in the carrying amount of the respective Fixed
Assets.
b) All foreign currency assets and liabilities, if any, as at the
Balance Sheet date are restated at the applicable exchange rates
prevailing on the date of financial statements.
c) The Company is exposed to currency fluctuations on foreign currency
transactions. With a view to minimize the volatility arising from
fluctuations in the currency rates, the Company follows the formulated
risk management policies including forwards contract and other
derivative instruments. Profit/loss on such transactions including
unsettled transactions at year end is recognised in the Profit and Loss
account.
d) In respect of forward contracts assigned to the foreign currency
assets as at Balance Sheet date, the proportionate premium/discount for
the period up to the date of Balance sheet is recognized in the Profit
and Loss account. The exchange difference measured by the exchange rate
between the inception of the forward contract and date of balance sheet
is applied on foreign currency amount of the forward contract.
J. INCOME TAXES : The expenses comprises of current and deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income-Tax Act,1961 enacted in
India. Deferred income taxes reflects the impact of current year
timining differences between taxable income and accounting income for
the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
K. INVESTMENTS: Investments are stated at cost. Diminution in value,
if any, which is of a temporary nature, is not provided.
L. BORROWING COSTS: Borrowing costs that are directly attributable to
the acquisition or construction of qualifying assets are capitalised as
part of the cost of such assets. A qualifying asset is one that
necessarily takes substantial period of time to get ready for intended
use. All other borrowing cost are charged to Profit and Loss Account
M. IMPAIRMENT OF ASSETS: The Company assesses at each Balance Sheet
date whether there is any indication that an asset may be impaired. If
any such indication exists, the Company estimates the recoverable
amount of the assets. If such recoverable amount of the assets is less
than its carrying amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an impairment loss and
is recognized in the Profit and Loss account. If at the Balance Sheet
date there is an indication that if a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciated historical cost.
N. PROVISION AND CONTINGENT LIABILITIES :
a) Provisions are recognized when the present obligation of a past
event gives rise to a probable outflow, embodying economic benefits on
settlement, and the amount of obligation can be reliably estimated.
b) Contingent Liabilities are disclosed after a careful evaluation of
facts and legal aspects of the matter involved.
c) Provisions and Contingent Liabilities are reviewed at each Balance
Sheet date and adjusted to reflect the current best estimates.
Mar 31, 2010
A. BASIS OF ACCOUNTING: Financial statements are prepared under
historical cost convention on accrual basis in accordance with the
generally accepted accounting principles in India and the provisions of
the Companies Act, 1956 as adopted consistently by the Company.
B. USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets & liabilities and disclosures of contingent
liabilities at the date of financial statements and the results of
operation during the reporting period, although these estimates are
based upon managements best knowledge of current events and actions,
actual results could differ from these estimates.
C. FIXED ASSETS: The Fixed Assets are shown at cost, net of tax/duty
/credits availed, if any, and include expenses capitalised during
construction period.
D. DEPRECIATION: The Company has provided depreciation on straight
line method at the rates and the manner specified in Schedule XIV to
the Companies Act, 1956. The amount of Long Term Lease hold land is
amortised by equal instalments during the last fifteen years of the
residual lease period.
E. INVENTORIES: Inventories are valued at lower of cost or net
realisable value except for Scrap. Scrap is valued at net realisable
value. Cost is determined on FIFO (First-In-First Out) method.
F. REVENUE:
a) Sales & Income from operations represents the amounts receivable for
goods sold including excise duty thereon and VAT/CST incentives in
respect of Kutch Unit but excludes VAT/CST, trade discounts & other
taxes, adjustments for late delivery charges and material
returned/rejected.
b) Excise benefits available to the Company in respect of its unit in
Kutch District of Gujarat in terms of Notification No. 39/2001 of
Central Excise, are netted off from the Excise Duty amount.
c) The Company accounts for pro forma credits, refunds of duty of
customs or excise, or refunds of sales tax in the year of admission of
such claims by the concerned authorities. Benefits in respect of Export
Licenses are recognised on utilisation/sate of the licenses.
d) Dividend income is recognised when the right to receive is
established.
G. EXCISE / CUSTOMS DUTIES: Excise Duty on manufactured goods
remaining in the inventory is included as a part of valuation of
finished goods. The customs duty on raw materials, stores, spares &
components is accounted on clearance thereof.
H. EMPLOYEE BENEFITS:
RETIREMENT BENEFITS: The Company contributes to group gratuity policy
with Life Insurance Corporation of India as per actuarial valuation as
on the Balance Sheet date for future payment of gratuity to employees.
Accrued liability towards leave encashment is provided on the balance
of unutilized leaves on the Balance Sheet date.
In respect of eligible employees, the Company contributes to approved
superannuation fund under a definite contribution plan, under the
policy of Life Insurance Corporation of India.
ESOS - In respect of Employees Stock Options, the excess of fair price
on the date of grant over the exercise price is recognized as deferred
compensation cost amortised over vesting period.
I. FOREIGN CURRENCY TRANSACTIONS:
a) Foreign currency transactions are accounted at exchange rates
prevailing on the date the transactions take place. All exchange
differences arising in respect of foreign currency transactions are
dealt with in Profit & Loss Account except in respect of long term
liabilities incurred for acquiring Fixed Assets, in which case such
differences are adjusted in the carrying amount of the respective Fixed
Assets.
b) All foreign currency assets and liabilities, rf any, as at the
Balance Sheet date are restated at the applicable exchange rates
prevailing on the date of financial statements.
c) The Company is exposed to currency fluctuations on foreign currency
transactions. With a view to minimize the volatility arising from
fluctuations in the currency rates, the Company follows the formulated
risk management policies including forwards contract and other
derivative instruments. Profit/loss on such transactions including
unsettled transactions at year end is recognised in the Profit and Loss
account.
d) In respect of forward contracts assigned to the foreign currency
assets as at Balance Sheet date, the proportionate premium/discount for
the period up to the date of Balance sheet is recognized in the Profit
and Loss account. The exchange difference measured by the exchange rate
between the inception of the forward contract and date of balance sheet
is applied on foreign currency amount of the forward contract.
J. INCOME TAXES: The expenses comprises of current and deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income-tax Act,1961 enacted in
India. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situations
where the company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes- down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
K. INVESTMENTS: Investments are stated at cost. Diminution in value, if
any, which is of a temporary nature, is not provided.
L. BORROWING COSTS: Borrowing costs that are directly attributable to
the acquisition or construction of qualifying assets are capitalised as
part of the cost of such assets. A qualifying asset is one that
necessarily takes substantial period of time to get ready for intended
use. All other borrowing cost are charged to Profit and Loss Account
M. IMPAIRMENT OF ASSETS: The Company assesses at each Balance Sheet
date whether there is any indication that an asset may be impaired. If
any such indication exists, the Company estimates the recoverable
amount of the assets. If such recoverable amount of the assets is less
than its carrying amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an impairment loss and
is recognized in the Profit and Loss account. If at the Balance Sheet
date there is an indication that if a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciated historical cost.
N. PROVISION AND CONTINGENT LIABILITIES:
a) Provisions are recognized when the present obligation of a past
event gives rise to a probable outflow, embodying economic benefits on
settlement, and the amount of obligation can be reliably estimated.
b) Contingent Liabilities are disclosed after a careful evaluation of
facts and legal aspects of the matter involved.
c) Provisions and Contingent Liabilities are reviewed at each Balance
Sheet date and adjusted to reflect the current best estimates.
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