Notes to Accounts of Sandhar Technologies Ltd.

Mar 31, 2018

1. Gratuity and other post-employment benefit plans

A. Defined contribution plan

The Company makes contributions, determined as a specified percentage of employee salaries, towards Provident Fund, National pension scheme and Employee state insurance scheme (''ESI'') which are collectively defined as defined contribution plan. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of Profit and Loss as they accrued.

B. Defined benefit plan

The Company has a defined benefit gratuity plan for its employees, governed by the Payment of Gratuity Act, 1972. Every employee who has rendered at least five years of continuous service gets a gratuity on departure at the rate of fifteen days of last drawn salary for each completed year of service or part thereof in excess of 6 months. The scheme is funded with insurance companies in the form of qualifying insurance policies. Gratuity benefits are valued in accordance with the Payment of Gratuity Act, 1972. During the year, the maximum amount payable to an employee as per the Payment of Gratuity Act, 1972 has been increased from H10 Lacs to H20 Lacs.

The most recent actuarial valuation of present value of the defined benefit obligation for gratuity were carried out as at 31 March 2018. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

2. Gratuity and other post-employment benefit plans (contd..)

Sensitivities due to mortality and withdrawals are not material and hence impact of change not calculated.

Sensitivities as to rate of inflation, rate of increase of pensions in payment, rate of increase of pensions before retirement and life expectancy are not applicable being a lump sum benefit on retirement.

Gratuity expense expected to be incurred in the next year is H279.14 Lacs (previous year H238.13 Lacs).

Expected maturity analysis:

Other long-term employee benefits:

During the year ended 31 March 2018, the Company has incurred an expense on compensated absences amounting to H197.03 lacs (previous year H272.60 lacs). The Company determines the expense for compensated absences basis the actuarial valuation of present value of the obligation, using the Projected Unit Credit Method.

The Company has availed Capital investment subsidy of H30 Lacs in earlier years. As per the terms and conditions, the Company has to continue production for specified number of years failing which amount of availed subsidy along with interest, penalty etc. will have to be refunded. The amount of commitment is not quantifiable.

The Company has purchased a land at Pune wherein the Company shall commence the construction on the land and commence production within three years from the date of sub lease deed.

* It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the respective proceedings as it is determinable only on receipt of judgements / decisions pending with various forums/ authorities

Note A:

i) Show cause notice received in respect of credit taken on freight outward for the period 2005-2006 and 2016-2017. The reply has been submitted and personal hearing is awaited with Assistant Commissioner, Central Excise. The amount involved is RS,9.93 (31 March, 2017: RS,59.70; 1 April, 2016: H47.13).

ii) Show cause notice received in respect of credit taken on manpower supply for the period 2005-2006 to 2014-15 (up to Feb-15). The matter is pending for personal hearing with the Additional Commissioner, Commissioner, and Joint Commissioner, Central Excise. The amount involved is RS,261.07 (31 March, 2017: RS,261.07; 1 April, 2016: H261.07).

iii) Show cause notice received in respect of credit taken on the Services on Commercial and Industrial construction work for the period 2006-2007 and 2008-09 to 2010-11. The matter is pending with Additional Commissioner, Central Excise and CESTAT, Chandigarh. The amount involved is H10.35 (31 March 2017: RS,10.43, 1 April 2016: RS,10.43).

iv) Show cause notices received in respect of credit taken on outdoor catering & courier services for the period 2005-2006 to 2011

12. The matter is pending with the Superintendent and Deputy Commissioner, Central excise. The amount involved is RS,1.05 (31 March 2017: RS,1.23, 1 April 2016: RS,1.23).

v) Show cause notices received in respect of credit taken on various services such clearing and forwarding agency services, Construction and industrial Construction, repair & maintenance, travel agent, pandal, authorized service station & outward freight, for the period 2004-05 to 2016-17 (up to Mar-2017). The personal hearing attended & final order awaited from Assistant Commissioner, LTU New Delhi. The amount involved is RS,35.14 (31 March 2017: RS,40.21, 1 April 2016: H38.82).

Note B:

i) In respect of Assessment Year 2010-11, demand was raised on account of TDS benefit not given by the Assessing Authority. The rectification letter for the same been filed and the matter is pending with Assistant Commissioner of Income Tax for rectification. The amount involved is RS,7.60 (31 March 2017: RS,7.60, 1 April 2016: H7.60).

ii) In respect of Assessment Year 2010-11, Commissioner of Income Tax (Appeal), LTU ordered for the calculation of the liability for disallowances under section 14-A and referred the case to Assessing officer which is pending with the said authority. The amount involved is RS,5.10 (31 March 2017: RS,5.10, 1 April 2016: RS,5.10).

iii) In respect of Assessment Year 2011-12 & 2012-13 demand was raised due to disallowance of certain expenses and also certain penalty proceedings on the above issue. The matter is pending with Commissioner of Income Tax (Appeal), LTU and appeal is partly allowed by authority. Further appeal has been filed with ITAT. The amount involved is RS,24.61 (31 March 2017: RS,24.61, 1 April 2016: RS,164.00).

iv) In respect of Assessment Year 2011-12, demand was raised due to short payment of TDS under section 201 (1A). The matter is pending with Commissioner of Income Tax (Appeal), LTU. The amount involved is RS,12.69 (31 March 2017: RS,12.69, 1 April 2016: RS,12.69).

v) In respect of assessment year 2013-14, intimation under section 143(1) has been received in which deduction under Chapter-VIA & advance tax benefit was not given by authorities. Letter for rectification of mistake has been filed with the authorities, and the same has been rectified. The amount involved is RS, NIL (31 March 2017: RS, NIL, 1 April 2016: RS,502.43)

vi) In respect of assessment year 2013-14, demand was issued against expenses disallowed under section 35(2AB) for which deduction under Chapter-VIA was claimed. The appeal has been filed with CIT (A)-LTU-Saket. The amount involved is H64.54 ( 31 March 2017: H NIL, 1 April 2016: H NIL)

3. Contingent liabilities and commitments (to the extent not provided for) (contd..)

vii) In respect of assessment year 2014-15, demand was issued against expenses disallowed under section 35(2AB) for which deduction under Chapter-VIA was claimed. The appeal has been filed with ITAT. The amount involved is H3.12 (31 March 2017: H NIL, 1 April 2016: H NIL)

Note C:

i) In respect of Financial Year 2000-2001, demand was raised on account of non-payment of Local Area Development Tax (LADT) by the Company. The matter is pending with Joint Excise & Taxation Commissioner (Appeals). The amount involved is H1.27 (31 March 2017: H1.27, 1 April 2016: H1.27).

ii) In respect of Financial Year 2012-13, demand was raised on account of non-issuance of proper statutory form. The appeal has been filed with The Joint Commissioner of Commercial Taxes (Appeal), Bangalore. The assessment has been completed and final order received. The amount involved is RS, Nil (31 March 2017: RS, NIL, 1 April 2016: H2.62)

iii) In respect of Financial Year 2009-10, demand was raised due to calculation mistake while calculating difference amount between Form 100 and Form 240 as per KVAT. The letter has been filed on 18th February 2016 with The Joint Commissioner of Commercial Taxes, Bangalore. The amount involved is RS, Nil (31 March 2017: RS, Nil, 1 April 2016: H2.05).

iv) In respect of Financial Year 2009-10, demand was raised on account of incorrect amount taken of Direct Export in the order. The application has been filed on 03rd February 2016 with The Joint Commissioner of Commercial Taxes, Bangalore. The amount involved is RS, Nil (31 March 2017: RS, Nil, 1 April 2016: RS,2.70)

Note D:

i) In respect of Pathredi Land, Rajasthan State Industrial Development and Investment Corporation has issued a letter dated October 23, 2015 whereby demand of H761.04 has been raised for allowing a time extension for making additional investment in the project on land allotted to the Company (31 March 2017: H761.04, 1 April 2016: H761.04). The Company has filed a request letter to waive off the same.

ii) In respect of Chakan Land, Maharashtra Industrial Development Corporation has issued a letter dated March 3, 2015, asking Company to pay an additional amount aggregating to H76.48 for a further time extension (31 March 2017: H76.48, 1 April 2016: H76.48). The Company is in process to file the waiver letter to Maharashtra Industrial Development Corporation.

Based on the status of cases and as advised by Company''s tax/legal advisors, wherever applicable, the management believes that the Company has strong chance of success and hence no provision against matters disclosed in "Claims against the Company not acknowledged as debts" are considered necessary.

Note E:

In relation to 32(2) above guarantee given by the Company:

To facilitate grant of financing facilities to the Company''s Joint Ventures and Subsidiaries, Company has given Corporate Guarantees to banks. As at the year-end, the outstanding Corporate Guarantee/Stand by-Letter of Credits so given amounts to H9,316.54 (31 March 2017: H7,879.01, 1 April 2016: H7,302.66).

4. Related party transactions

For the purpose of these financial statements, parties are considered to be related to the Company, if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

A. Name of Related Party and Relationship

Enterprises under common control Sanjeevani Impex Private Limited

Sandhar Intelli-Glass Solutions Limited (formerly known as SLD Auto Ancillary Limited)

Sandhar Info systems Limited Sandhar Estate Private Limited YSG Estates Private Limited Sandhar Enterprises KDB Investment Private Limited Jubin Finance & Investment Limited Raasaa Retail Private Limited Haridwar Estates Private Limited Subsidiary companies Sandhar Tooling Private Limited

PT Sandhar Indonesia (closed w.e.f. 29th August 2016)

Sandhar Technologies Barcelona S.L.

Sandhar Breniar Project, S.L.

Sandhar Technologies De Mexico S de RL de CV

Sandhar Technologies Poland sp. z o.o

Sandhar EURO Holdings B.V. (Closed on 2nd January 2017)

Sandhar Strategic System Private Limited (w.e.f. 9th September 2016) Joint Ventures Indo Toolings Private Limited

Sandhar Han Sung Technologies Private Limited

Sandhar Ecco Green Energy Private Limited

Jinyoung Sandhar Mechatronics Private Limited

Sandhar Amkin Industries Private Limited ( w.e.f. 6th September 2017)

Sandhar Daewha Automotive Systems Private Limited ( w.e.f. 20th

June 2017)

Individual owning an interest in the voting power Mr. Jayant Davar of reporting enterprise that gives them significant influence over the Company

Key Managerial Personnel Mr. Jayant Davar (Co-Chairman-cum-Managing Director)

Mr. Arvind Joshi (Whole time Director, C.F.O. & Company Secretary) Relatives of Key Managerial Personnel and relatives Mr. D. N. Davar (Chairman) of Individual owning an interest in the voting power Mrs. Monica Davar of reporting enterprise that gives them significant Master Neeljay Davar influence over the Company Mrs. Santosh Davar

Mrs. Poonam Juneja Mrs. Urmila Joshi

Enterprises over which relatives of Key Managerial Swaran Enterprises (Mrs. Santosh Davar is a Partner)

Personnel are able to exercise significant influence Shorah Realty LLP

C. Terms and conditions of transactions with related parties

All transactions with these related parties are priced on arm''s length basis and resulting outstanding balances at the year-end are unsecured and interest free and are to be settled in cash. The Company has not recorded any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

The management assessed that the fair values of short term financial assets and liabilities significantly approximate their carrying amounts largely due to the short-term maturities of these instruments. Accordingly, management has not disclosed fair values for financial instruments such as trade receivables, trade payables, cash and cash equivalents, other current assets, interest accrued on fixed deposits, other current liabilities etc.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Long-term fixed-rate and variable-rate Receivables/Borrowings are evaluated by the company based on parameters such as interest Rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

The fair value of unquoted instruments, is calculated by arriving at intrinsic value of the investee. The fair value of loans from banks and other financial liabilities, obligations under finance leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

The Company has entered into derivative financial instruments with financial institutions/ banks through Cross currency interest rate swap and principals swap.

Such derivatives are valued using valuation techniques, which employs the use of market observable inputs. Valuation technique applied by the company is Mark to Market as provided by the bank as on the date of valuation.

Discount rates used in determining fair value:

The interest rates used to discount estimated future cash flows, where applicable, are based on the discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period.

The Company maintains policies and procedures to value financial assets or financial liabilities using the best and most relevant data available. In addition, the Company internally reviews valuation, including independent price validation for certain instruments.

5. Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial statements that are

(a) recognised and measured at fair value and

(b) measured at amortised cost and for which fair values are disclosed in the financial statements.

To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into three levels presecribed under the accounting standard.

All financial instruments for which fair value is recognised or disclosed are categorised with in 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 prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The company has an established control framework with respect to the measurements of fair values. This includes a valuation team and has overall responsibility for overseeing all significant fair value measurements and reports directly to the Chief Finance Officer. The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified. Significant valuation issues are reported to the Company''s audit committee.

The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.

6. Financial risk management objectives and policies

The Company is primarily engaged in the manufacturing and assembling of automotive components such as lock-set, mirrors and various sheet metal components including cabins for two wheelers, four wheelers and off road vehicle industry. The Company''s principal financial liabilities, comprises loans and borrowings, trade and other payables and finance lease obligation. The main purpose of these financial liabilities is to support the Company''s operations. The Company''s principal financial assets include investments in equity, employee advances, trade and other receivables, security deposits, cash and short-term deposits that derive directly from its operations. The Company also enters into derivative transactions viz. CCIRS and Principal Swaps.

The Company has exposure to the following risks arising from financial instruments

- Market risk (see (b));

- Credit risk (see (c)); and

- Liquidity risk (see (d)).

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements.

a) Risk Management Framework

The Company''s activities makes it susceptible to various risks. The company has taken adequate measures to address such concerns by developing adequate systems and practices. The Company''s overall risk management program focuses on the unpredictability of markets and seeks to manage the impact of these risks on the Company''s financial performance.

The Company''s senior management oversee the management of these risks and advises on financial risks and the appropriate financial risk governance framework for the Company. The board provides assurance to the shareholders that the Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken.

The Company''s risk management policies are established to identify and analyse the risks faced by the company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and company''s activities. The company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company''s audit committee oversees how management monitors compliance with the company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements

7. Financial risk management objectives and policies (contd..)

b) Market Risk

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

The sensitivity analyses in the following sections relate to the position as at 31 March 2018 and 31 March 2017.The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of floating to fixed interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant in place at 31 March 2018.

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

The following assumptions have been made in calculating the sensitivity analyses:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 March 2018 and 31 March 2017.

c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s long-term debt obligations with fixed interest rates.

The Company enters Cross Currency Interest Rate Swaps to manage its Forex and interest rate risk, in which it agrees to exchange, at specified intervals, the difference between floating and fixed rate interest amounts calculated by reference to an agreed-upon notional principal amount.

The Company does not account for fixed rate financial assets or financial liabilities at fair value through profit or loss, and the company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Interest Rate sensitivity

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant

Currency risk

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

The Company manages its foreign currency risk by entering into derivatives. When a derivative is entered into for the purpose of hedging, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure.

Sensitivity Analysis

Any changes in the exchange rate of foreign currency against INR is not expected to have significant impact on the Company''s profit due to the short credit period. Accordingly, a 1% appreciation/depreciation of the INR as indicated below, against the USD would have increased/reduced profit by the amounts shown below. This analysis is based on the foreign currency exchange rate variances that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variable remains constant.

The Company''s listed & non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the equity price risk through diversification and by placing limits on total equity instruments. Reports on the equity portfolio are submitted to the Company''s senior management on a regular basis. The Company''s Board of Directors reviews and approves all equity investment decisions.

Credit risk

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

Trade receivables

Ind AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each date of statements of financial position whether a financial asset or a company of financial assets is impaired. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.

Company''s exposure to customers is diversified and some customer contributes more than 10% of outstanding accounts receivable as of 31st March, 2018, 31st March, 2017 and 1st April, 2016, however there was no default on account of those customers in the past.

Before accepting any new customer, the Company assesses the potential customer''s credit quality and defines credit limits to customer. Limits and scoring attributed to customers are reviewed on periodic basis.

The Company performs credit assessment for customers on an annual basis and recognizes credit risk, on the basis lifetime expected losses and where receivables are due for more than six months.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Corporate finance department in accordance with the Company''s policy. Investments of surplus funds are made only in schemes of alternate investment fund/or other appropriate avenues including term and recurring deposits with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company''s Board of Directors on an annual basis. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

The Company places its cash and cash equivalents and term deposits with banks with high investment grade ratings, limits the amount of credit exposure with any one bank and conducts on-going evaluation of the credit worthiness of the banks with which it does business. Given the high credit ratings of these banks, the Company does not expect these banks to fail in meeting their obligations. The maximum exposure to credit risk for the components of the balance sheet at 31 March 2018, 31 March 2017 and 01 April 2016 is represented by the carrying amount of each financial asset.

d) Liquidity risk

Liquidity risk refers to the risk that the company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, buyers credit and bank loans. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

8. Capital management

The Company’s capital management objectives are:

The Board policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital employed, as well as the level of dividends to equity shareholders.

The Company manages capital risk by maintaining sound/optimal capital structure through monitoring of financial ratios, such as debt-to-equity ratio and net borrowings-to-equity ratio on a monthly basis and implements capital structure improvement plan when necessary.

The Company uses debt ratio as a capital management index and calculates the ratio as Net debt divided by total equity. Net debt and total equity are based on the amounts stated in the financial statements.

9. Segment Reporting

The Company is engaged in the business of manufacturing and assembling of automotive components. The Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by industry classes. All operating segments'' operating results are reviewed regularly by CODM to make decisions about resources to be allocated to the segments and assess their performance. CODM believes that these are governed by same set of risk and returns hence CODM reviews as one balance sheet component. Further, the economic environment in which the company operates is significantly similar and not subject to materially different risk and rewards.

The operating segment of the Company is identified to be "Automotive components" as the CODM reviews business performance at an overall Company level as one segment. Further export turnover of the Company is less than 10% of the total turnover; therefore, disclosure relating to geographical segment is also not applicable.

Accordingly, as the company operates in a single business and geographical segment, the reporting requirements for primary and secondary disclosures under Indian Accounting Standard - 108 Operating Segment have not been provided in the financial statements.

10. Explanation of the transition to Ind AS

I. As stated in Note 2, these are the Company''s first financial statements prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies.

The accounting policies set out in Note 2 have been applied in preparing these financial statements for the year ended 31 March 2018 including the comparative information for the year ended 31 March 2017 and the opening Ind AS balance sheet on the date of transition i.e. 1 April 2016.

In preparing its Ind AS balance sheet as at 1 April 2016 and in presenting the comparative information for the year ended 31 March 2017, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP. In preparing these financial statements, the Company has availed itself of certain exemptions and exceptions in accordance with Ind AS 101. This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with previous GAAP, and how the transition from previous GAAP to Ind AS has affected the Company''s financial performance and cash flows.

11. Explanation of the transition to Ind AS (contd..)

Optional Exemptions applied

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

a) Business Combination:

Company has opted for exemption under Ind AS 101 with respect to Business Combinations whereby Company has elect not to apply Ind AS 103 retrospectively to past business combinations i.e. to (business combinations that occurred before the date of transition to Ind ASs).

b) Deemed cost exemption on Property, Plant and Equipment

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment and investment property as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for decommissioning liabilities This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.

Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

c) Investment in subsidiaries:

As per the requirements of Ind AS 27, Company has opted to record its equity investment in subsidiary at cost. Ind AS 101 provides that while measuring investment at cost, an entity shall measure that investment at one of the following amounts in its separate opening Ind AS Balance Sheet:

(i) cost determined in accordance with Ind AS 27; or

(ii) deemed cost. The deemed cost of such an investment shall be its

(a) fair value at the entity''s date of transition to Ind ASs in its separate financial statements; or

(b) previous GAAP carrying amount at that date.

Accordingly, Company has opted to record its investment in subsidiary at previous GAAP carrying amount at transition date.

d) Leases:

Ind AS 101 permits that if there is any land lease newly classified as finance lease then the first time adopter may recognise assets and liability at fair value on that date; and any difference between those fair values is recognized in retained earnings.

Company has therefore classified land leases with multi decade lease periods as finance lease as on transition date.

Mandatory Exemptions availed

a) Estimates

The estimates at 1 April 2016 and at 31 March 2017 are consistent with those made for the same dates in accordance with previous GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:

- Impairment of financial assets based on expected credit loss model.

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2016, the date of transition to Ind AS and as of 31 March 2017.

b) Impairment of Financial asset:

As on 1 April 2016, the date of transition to Ind AS, Company is unable to determine whether there have been significant increases in credit risk since initial recognition without undue cost or effort. Company therefore recognize a loss allowance based on lifetime ECL at each reporting date until the financial instrument is derecognized.

c) Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances existing as on the date of transition to the Ind AS. Further, the standard permits measurement of financial assets accounted at amortised cost based on the fact and circumstances existing at the date of transition if retrospective application is impracticable. Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.

(i) Under Indian GAAP, the security deposits have been recorded at transaction value however under Ind AS security deposit paid, being a financial asset, has been recorded initially at fair value & subsequently at amortised cost.

i. Share Issue Expenses:

Share issue expenses pertaining to financial year 2015-16, expensed off under previous GAAP in 2016-17, has been adjusted against retained earnings as at 1 April 2016.

j. Deferred Taxes:

IGAAP requires deferred taxes recognition using income statement approach, which focuses on differences between accounting profits and taxable profits for the year. Under Ind AS 12, the Company is required to account for the deferred taxes using balance sheet approach which focuses on difference between carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 has resulted in recognition of deferred tax on new temporary differences which were not required under IGAAP. Further the Company has recognised deferred taxes on temporary differences arising from transitional adjustments in retained earnings (refer note 15). The minimum alternate Tax (MAT) has been adjusted with deferred tax liabilities while in Indian GAAP the same has been classified in loans and advances amounting to H49.71 lacs.

k. Provisions

Under Indian GAAP, proposed dividend including dividend tax are recognised in the period to which it relate, irrespective of when they are declared. In Ind AS, proposed dividend is recognised as a liability in the period in which it is declared by the company (usually when approved by the shareholders in the general meeting). In case of the company, the declaration of dividend occurs after period end. Therefore the liability recorded for dividend as at 1 April 2016 has been derecognized against retained earnings as on 1 April 2016

l. Defined benefit liabilities (net):

Both under Indian GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements 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.

m. Other comprehensive income

Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Items that have been reclassified from Statement of Profit and Loss to Other Comprehensive Income includes remeasurement of defined benefit plans. Hence, Indian GAAP profit or loss to profit is reconciled to total comprehensive income as per Ind AS.

o. Excise duty

Under Indian GAAP, revenue from sale of goods was presented as net of excise duty. However, under Ind AS, revenue from sale of goods is presented inclusive of excise duty. Excise duty on sale of goods is separately presented on the face of statement of profit and loss. Thus sale of goods under Ind AS has increased by H13,475.16 lacs with a corresponding increase in Excise Duty expense.

12. Research & Development (R & D) Expenses

The Company has incurred following expenditure on its Research and Development center at Gurgaon approved and recognised by the Ministry of Science & Technology, Government of India.

*This includes amount of H26.82 which is not allowed as deduction under section 35(2AB) of Income Tax Act 1961 as R&D Expenditure