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Notes to Accounts of Sanghvi Forging & Engineering Ltd.

Mar 31, 2018

1. Corporate Information:

Sanghvi Forging & Engineering Limited (SFEL) is an ISO 9001:2008 Certified Indian Company engaged in the manufacturer of open and closed die forging products for the oil & gas, defense, ship building, power & other sectors. It also exports products to various foreign countries over the last two decades.

The Company has set up additional 15000 MTPA Heavy Forging Division in recent years (with single piece forging up to 40 MT) to manufacture proof machined products viz. stepped shafts, bars & hollows, blocks, flanged shafts, gear blanks, shells, tube sheets, forging items etc at GIDC Industrial Estate (at plot no. 1401, 1402 & 1403), Waghodia Dist: Vadodara.

(a) Right to vote , dividend and restriction attached to each class of issued capital to be disclosed.

All the Shareholders whose name is entered in the Registered of Members of the Company shall enjoy the same voting rights and be subject to the same liabilities as all other shareholder of the same class.

Nature and purpose of each reserve

(a) Securities premium reserve - The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve. This reserve is utilised in accordance with the provisions of the Companies Act 2013.

(b) General reserve: The reserve arises on transfer portion of the net profit pursuant to the earlier provisions of Companies Act 1956. Mandatory transfer to general reserve is not required under the Companies Act 2013.

The future cash flows in respect of the above, if any, is determinable only on receipt of judgments/decisions pending with relevant authorities. The company does not expect the outcome of matters stated above to have a material adverse effect on the Company’s financial conditions, result of operation or Cash Flow.

Company has received under Section 153C of the Income Tax Act, 1961 for the Assessment Year 2009-10 to 2015-16

Notes : 2 Computation of Earnings per Share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the parent by the weighted average number of Equity shares outstanding during the year. Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.

3 Personal Guarantee Given to Bank against Working capital & Term loan outstanding Amount.

Contributions are made to Recognized Provident Fund/ Government Provident Fund which covers all employees. While both the employees and the Company make predetermined contributions to the Provident Fund .The contributions are normally based on a certain proportion of the employee’s salary. Amount recognized as expense in respect of these defined contribution plans.

In respect of Gratuity, Contributions are made to LIC’s Recognized Group Gratuity Fund Scheme based on amount demanded by LIC of India. Provision for Gratuity is based on actuarial valuation carried by independent actuary as at the year end. Major drivers in actuarial assumptions, typically, are years of service and employee compensation. Employee Benefits commitments are actuarially determined using the ‘Projected Unit Credit’ method. Gains and losses on changes in actuarial assumptions are accounted for in the Profit and Loss account.

Notes : 4 The Company has entered into lease agreements for certain properties including director’s accommodation which are cancellable at the option of the Company or as per agreed terms. The total rent charged to the Statement of Profit and Loss for the year towards such leases amount to RS. 721.46 thousands (P.Y. RS. 606.36 thousands).

Notes : 5 Segment disclosures:

(A) Description of segments and principal activities

The company’s strategic steering committee, consisting of the chief executive officer, the chief financial officer and the manager for corporate planning, examines the group’s performance both from a product and geographic perspective and has identified only one reportable segments of its business.

a) Business Segment:

The company has only one reportable business segment of Forging & Fitting as the primary reportable Business segment for disclosure. The business segments are business of Forging & Fitting and wind energy business.

b) Geographical Segment:

The company has exported during the year and it does require disclosure as a separate reportable segment of Domestic Sales and Export Sale

Notes : 6 Financial Risk Management

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities.

A) Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investments in debt securities. The carrying amount of following financial assets represents the maximum credit exposure:

(i) Trade and Other Receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However credit risk with regards to trade receivable is almost negligible in case of its residential sale and lease rental business as the same is due to the fact that in case of its residential sell business it does not handover possession till entire outstanding is received. No impairment is observed on the carrying value of trade receivables.

(ii) Cash and Cash Equivalents

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Board. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

(B) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure as far as possible that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed condition, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of surplus funds, bank overdrafts, bank loans, debentures and inter-corporate 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.

(C) Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and long-term debt. The Company is exposed to market risk primarily related to commodity prices and the market value of its investments.

(D) Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. 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 debt obligations with floating interest rates.

(E) Commodity rate risk

Exposure to market risk with respect to commodity prices primarily arises from the Company’s purchases and sales of forging products, including the raw material components for such forging products. These are commodity products, whose prices may fluctuate significantly over short periods of time. The prices of the Company’s raw materials generally fluctuate in line with commodity cycles, although the prices of raw materials used in the Company’s forging products business are generally more volatile. Cost of raw materials forms the largest portion of the Company’s cost of revenues. Commodity price risk exposure is evaluated and managed through operating procedures and sourcing policies. As of March 31, 2018, the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

(F) Foreign exchange risk

The Company’s foreign exchange risk arises from foreign currency borrowings (primarily in US Dollars) As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Company’s expenses measured in Indian rupees may decrease or increase and vice-versa.

(ii) Sensitivity

For the years ended March 31, 2018, March 31, 2017 and April 01, 2016, every 5% strengthening in the exchange rate between the Indian rupee and the respective currencies for the above mentioned financial liabilities would decrease the Company’s loss and increase the Company’s equity by approximately RS. 4851284, RS. 4622645 and RS. 4886444 respectively. A 5% weakening of the Indian rupee and the respective currencies would lead to an equal but opposite effect. In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

Notes : 7 Capital management

The company’s objectives when managing capital are to:

- Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- Maintain an optimal capital structure to reduce the cost of capital.

The Company monitors capital on the basis of the carrying amount of debt less cash and cash equivalents as presented on the face of the financial statements. The Company’s objective for capital management is to maintain an optimum overall financial structure.

Consistent with others in the industry, the group monitors capital on the basis of the following gearing ratio:

Notes : 8 First time adoption of IND AS

Explanation to transition to Ind AS

Ind AS 101 -”First-time Adoption of Indian Accounting Standards” requires that all Ind AS and interpretations that are issued and effective for the first Ind AS financial statements which is for the year ended March 31, 2018 for the Company, be applied retrospectively and consistently for all financial years presented, except the Company has availed certain exemptions and complied with the mandatory exceptions provided in Ind AS 101, as described below. The Company has recognised all assets and liabilities whose recognition is required by Ind AS and has not recognised items of assets or liabilities which are not permitted by Ind AS, reclassified items from previous GAAP to Ind AS as required under Ind AS and applied Ind AS in measurement of recognised assets and liabilities. Set out below are the Ind AS 101 optional exemptions availed as applicable and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

De-recognition of financial assets and financial liabilities

The Company has applied the de-recognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after the transition date.

Classification and measurement of financial assets

The Company has assessed conditions for classification of the financial assets on the basis of the facts and circumstances that were exist on the date of transition to Ind AS.

Deemed cost of property, plant and equipment and intangible assets

On transition to Ind AS, the Company has elected to continue with the carrying value of all assets recognised as at April 01, 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment and intangible assets.

Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances as at the date of transition to Ind AS. The Company has elected to apply this exemption for its investments in certain equity instruments.

Notes : 9 First time adoption of IND AS

Business Combinations: -

The Company has elected not to apply Ind AS 103 Business Combinations retrospectively to past business combinations that occurred before the transition date of April 1, 2016. Consequently, the Company has kept the same classification for the past business combinations as in its previous GAAP financial statements.

Fair value measurement of financial assets and financial liabilities at initial recognition

The Company has applied the requirements in paragraph B5.1.2A (b) of Ind AS 109 prospectively to transactions entered into on or after the date of transition to Ind AS. This exemption has been availed by the Company.

Notes on reconciliations between previous GAAP and Ind AS

a) Effect of measuring investments at fair value through profit or loss:

Under previous GAAP, non current investments were stated at cost less provision, if any, for other than temporary diminution in value. Current investments were valued at lower of cost and fair value. Under Ind AS, gains or losses on investments have been measured at fair value through profit or loss.

b) Effect of measuring financial instruments at amortised cost:

Under IND AS the company has measured borrowings and security deposited at amortised cost using effective interest rate method which were not applicable in previous GAAP.

c) Employee benefits

Under previous GAAP, actuarial gains and losses were recognised in statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of re-measurement of net defined benefit liability / asset which is recognised in other comprehensive income in the respective periods.

d) Effect of transition to Ind AS on Standalone Cash Flow Statement for the year ended March 31, 2017

Net increase in cash and cash equivalents represents movement in cash credit facilities considered as a component of cash and cash equivalents under Ind AS which as per previous GAAP, was considered as financing activity. Other Ind AS adjustments are either non cash adjustments or are regrouping among the cash flows from operating, investing and financing activities and has no impact on the net cash flow for the year ended 31st March, 2017 as compared with the previous GAAP.


Mar 31, 2016

1. NOTES FORMING PART OF FINANCIAL STATEMENTS

The future cash flow in respect of the above, if any, is determinable only on receipt of judgments/decisions pending with relevant authorities. The company does not expect the outcome of matters stated above to have a material adverse effect on the Company''s financial conditions, result of operation or cash flow.

2. Related Party Details

(a) Related Party Disclosures

Key Management Personnel

Mr. Babulal S. Sanghvi

Mr. Jayantilal B. Sanghvi

Mr. Naresh B. Sanghvi

Mr. Vikram B. Sanghvi

Relative of Key Management Personnel

Smt. Bhamridevi B. Sanghvi

Smt. Meena J. Sanghvi

Smt. Kiran N. Sanghvi

Smt. Sheetal V. Sanghvi

Mr. Mahesh B Sanghvi

Enterprises under Significant Influence of Key Management Personnel or their Relatives

Babulal Sanghvi (HUF)

Jayantilal Sanghvi (HUF)

Naresh Sanghvi (HUF)

Vikram Sanghvi (HUF)

Babulal Sanghvi (HUF))

Gautam Stainless Pvt. Ltd.

Subsidiary Company

Sanghvi Europe B V, The Netherlands

3. NOTES FORMING PART OF FINANCIAL STATEMENTS (contd...)

4. Segment disclosures:

(a) Business Segment:

The company has only one reportable business segment of Forging & Fitting as the primary reportable Business segment for disclosure. The business segments are business of Forging & Fitting and wind energy business.

(b) Geographical Segment:

The company has exported during the year and it does require disclosure as a separate reportable segment of Domestic Sales and Export Sale

5. Terms and Conditions of Unsecured Loan: Repayment terms - Repayable after 3 years and Interest at 0 to 12 %.

6. Previous financial year''s figures have been regrouped wherever necessary to make them comparable with those of the current year.


Mar 31, 2015

Corporate Information:

Sanghvi Forging & Engineering Limited (SFEL) is an ISO 9001:2008 Certified Indian Company engaged in the manufacturer of open and closed die forging products for the oil & gas, defence, ship building, power & other sectors. It also exports products to various foreign countries over the last two decades.

The Company has set up additional 15000 MTPA Heavy Forging Division in recent years (with single piece forging up to 40 MT) to manufacture proof machined products viz. stepped shafts, bars & hollows, blocks, flanged shafts, gear blanks, shells, tube sheets, forging items etc at GIDC Industrial Estate at plot no. 1401, 1402 & 1403, Waghodia Dist: Vadodara.

1. Contingent Liabilities

A. Disputed Liabilities

(Rs. in '000) As at Asat March 31, 2015 March 31, 2014

* Income Tax on Accounts of Disallowance 6,132.80 2,061.15

* Penalty on Account of Disallowances of Expenses 503.64 571.00

* Service Tax on Account of Cenvat Credit 2,738.52 1,856.16

* Central Sales Tax Demand on Account of 'C' Form 2,789.15 1,902.23

Impact of pending litigation

Future cash flows in respect of the above, if any, is determinable only on receipt of judgments/decisions pending with

relevant authorities. The company does not expect the outcome of matters stated above to have a material adverse effect on the Company's financial conditions, result of operation or cashflow.

2. Related Party Details

(a) Related Party Disclosure

Key Management Personnel Mr. Babulal S. Sanghvi Mr. Jayanti B. Sanghvi Mr. Naresh B. Sanghvi Mr. Vikram B. Sanghvi

Relative of Key Management Personnel Smt. Bhamridevi B. Sanghvi Smt. Meena J. Sanghvi Smt. Kiran N. Sanghvi Smt. Sheetal V. Sanghvi Mr. Mahesh B Sanghvi

Enterprises under Significant Influence of Babulal Sanghvi (HUF) Key Management Personnel or their Relatives Jayanti Sanghvi (HUF) Naresh Sanghvi (HUF) Vikram Sanghvi (HUF) Gautam Stainless Pvt. Ltd. Subsidiary Company Sanghvi Europe B V

3. The Company has entered into lease agreements for certain properties including director's accommodation which are cancellable at the option of the Company or as per agreed terms. The total rent charged to the Statement of Profit and Loss for the year towards such leases amount to 907.63 thousands (P.Y. 896.58 thousands).

4. Segment disclosures:

(a) Business Segment:

The company has only one reportable business segment of Forging & Fitting as the primary reportable Business segment for disclosure. The business segments are business of Forging & Fitting and wind energy business.

(b) Geographical Segment:

The company has exported during the year and it does require disclosure as a separate reportable segment of Domestic Sales and Export Sale

5. Terms and Conditions of Unsecured Loan: Interest free loan.

6. Previous financial year's figures have been regrouped wherever necessary to make them comparable with those of the current year.


Mar 31, 2014

1. Related Party Details

(a) Related Party Disclosure

Key Management Personnel

Shri. Babulal S. Sanghvi

Shri. Jayanti B. Sanghvi

Shri. Naresh B. Sanghvi

Shri. Vikram B. Sanghvi

Relative of Key Management Personnel

Smt. Bhamridevi B. Sanghvi ( Wife of Director & Mother of Directors)

Smt. Meena J. Sanghvi ( Wife of Director)

Smt. Kiran N. Sanghvi ( Wife of Director)

Smt. Sheetal V. Sanghvi (Wife of Director)

Shri. Mahesh B Sanghvi (Son of Director & Brother of Directors)

Enterprises under Significant Influence of Key Management Personnel or their Relatives

Babulal Sanghvi (HUF)

Jayanti Sanghvi (HUF)

Naresh Sanghvi (HUF)

Vikram Sanghvi (HUF)

M/s Gautam Pipeline Product ( Prop: Babulal Sanghvi (HUF))

M/s Gautam Stainless Pvt. Ltd.

2. Contributions are made to Recognised Provident Fund/ Government Provident Fund which covers all employees. While both the employees and the Company make predetermined contributions to the Provident Fund .The contributions are normally based on a certain proportion of the employee''s salary. Amount recognised as expense in respect of these defined contribution plans, aggregate to Rs. 1343.55 Thousands (Previous Year Rs. 1,265.54 Thousands).

In respect of Gratuity, Contributions are made to LIC''s Recognised Group Gratuity Fund Scheme based on amount demanded by LIC of India. Provision for Gratuity is based on actuarial valuation done by independent actuary as at the year end. Major drivers in actuarial assumptions, typically, are years of service and employee compensation. After the issuance of the Accounting Standard 15 on ''Employee Benefits'', commitments are actuarially determined using the ''Projected Unit Credit'' method. Gains and losses on changes in actuarial assumptions are accounted for in the Profit and Loss account.

Category of Plan Assets :The Company''s Plan Assets in respect of Gratuity are funded through the Group Scheme of the LIC of India.

The actuarial calculations used to estimate commitments and expenses in respect of gratuity and compensated absences are based on the following assumptions which if changed, would affect the commitment''s size, funding

3. The Company has entered into agreements in the nature of lease / leave and license agreement with different lessors / licensors for the purpose of establishment of office premises/Residential Accommodations. These are generally in nature of operating lease / leave and license, disclosure required as per Accounting Standard 19 with regard to the above is as under

4. Segment disclosures:

(a) Business Segment:

The company has only one reportable business segment of Forging & Fitting as the primary reportable Business segment for disclosure. The business segments are business of Forging & Fitting and wind energy business.

(b) Geographical Segment:

The company has exported during the year and it does require disclosure as a separate reportable segment of Domestic Sales and Export Sale

Note on restructuring :

Banks have restructured repayment of installment and converted part of WC into WCTL. The salient feature of the sanction includes:

a Sanction of Fresh - Term Loan Rs. 18 crore

a Sanction of Fresh - Working Capital Term Loan Rs. 19.50 crore

* Extended Moratorium on principal of existing term loans upto August - 2015.

5. Terms and Conditions of Unsecured Loan:

(a) Interest free loan, Repayable after 3 years

6. Previous financial year''s figures have been regrouped wherever necessary to make them comparable with those of the current year.


Mar 31, 2013

Corporate Information:

Sanghvi Forging & Engineering Limited (SFEL) is the manufacturer of various forging and machined components for Process & Heavy

Industrial application.

The Company has set up additional 15000 MTPA Heavy Forging Division (with single piece forging up to 40 MT) to manufacture proof machined products viz. stepped shafts, bars & hollows, blocks, flanged shafts, gear blanks, shells, tube sheets, forging items etc at GIDC Industrial Estate(at plot no. 1401, 1402 & 1403), Waghodia Dist: Vadodara.

1. Contributions are made to Recognised Provident Fund/ Government Provident Fund which covers all employees. While both the employees and the Company make predetermined contributions to the Provident Fund .The contributions are normally based on a certain proportion of the employee''s salary. Amount recognised as expense in respect of these defined contribution plans, aggregate to Rs.1265.54 Thousands (Previous Year Rs.903.16 Thousands).

In respect of Gratuity, Contributions are made to LIC''s Recognised Group Gratuity Fund Scheme based on amount demanded by LIC of India. Provision for Gratuity is based on actuarial valuation done by independent actuary as at the year end. Major drivers in actuarial assumptions, typically, are years of service and employee compensation. After the issuance of the Accounting Standard 15 on ''Employee Benefits'', commitments are actuarially determined using the ''Projected Unit Credit'' method. Gains and losses on changes in actuarial assumptions are accounted for in the Profit and Loss account.

2. Segment disclosures:

(a) Business Segment:

The company has only one reportable business segment of Forging & Fitting as the primary reportable Business segment for disclosure. The business segments are business of Forging & Fitting and wind energy business.

(b) Geographical Segment: The company has exported during the year and it does require disclosure as a separate reportable segment of Domestic Sales and Export Sale.

3. Terms and Conditions of Unsecured Loan:

(a) Repayable after 3 years

(b) Interest Charged at the rate of 0 to 12%.

4. Previous financial year''s figures have been regrouped wherever necessary to make them comparable with those of the current year.


Mar 31, 2012

Corporate Information:

Sanghvi Forging & Engineering Limited (SFEL) is the manufacturer of various forging and machined components for Process & Heavy Industrial application.

The Company is setting up 15000 MTPA open die forging unit (with single piece forging up to 40 MT) to manufacture proof machined products viz. stepped shafts, bars & hollows, blocks, flanged shafts, gear blanks, shells, tube sheets, forging items etc at GIDC Industrial Estate (at plot no. 1401, 1402 & 1403), Waghodia Dist: Vadodara.

1. SHARE CAPITAL

(b) Right to vote, dividend and restriction attached to each class of issued capital to be disclosed.

All the Shareholders whose name is entered in the Registered of Members of the Company shall enjoy the same voting rights and be subject to the same liabilities as all other shareholder of the same class.

2) Contingent Liabilities:- (Rs. in '000)

As at As at Particulars March 31, 2012 March 31, 2011

Guarantee Given By Bankers on Behalf of Company

- Bank Guarantee 70776.192 28142.26

- Letter of Credit 502759.42 6514.24

Disputed Liabilities

- Income Tax on Accounts of Disallowance 1825.62 856.62

- Excise Duty on Account of Cenvat Credit 776.34 776.34

- Service Tax on Account of Cenvat Credit 1261.50 1037.24

- Service Tax on Account of Import of Services 0.00 16.07

3) Segment disclosures:

(a) Business Segment:

The Company has identified "Forgings and Fittings" as the only primary reportable business Segment.

4) Repayment of Unsecured Loan:

(i) Repayable after 3 Years

(ii) Interest charged at the rate of NIL, 12%.

5) Previous financial year's figures have been regrouped wherever necessary to make them comparable with those of the current year.

6) During the year company has closed its 100% subsidiary-Sanghvi Middle East FZE. The loss on closure of the business is recognised in the profit & loss during the year.

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