Note - 1
Other equity (i) Nature and purpose of other reserves
General reserve
General reserve is created out of the accumulated profits of the Company as per the provisions of Companies Act. Retained earnings
All the profits made by the Company are transferred to retained earnings from statement of profit and loss.
Securities premium reserve
Securities premium reserve represents the amount received in excess of par value of securities (equity shares). Premium on redemption of securities is accounted in security premium available. Where security premium is not available, premium on redemption of securities is accounted in statement of profit and loss. Section 52 of Companies Act, 2013 specify restriction and utilisation of security premium.
Other comprehensive income
Other comprehensive income represents balance arising on account of changes in fair value of FVOCI equity instruments and gain/(loss) booked on re-measurement of defined benefit plans.
Nature of security
(i) The secured working capital loans from banks are secured by hypothecation of stock in trade and book debts and other current assets of the Company both present and future on pari-passu basis and also secured by second pari-passu charge on the immovable properties and entire fixed assets (both present and future) of the Company. These loans are further secured by personal guarantee of Managing Director of the Company.
(ii) The secured working capital loans are secured by subservient charge on all the current assets and movable fixed assets of the borrower (both present and future) of the Company. These loans are further secured by personal guarantee of Managing Director of the Company.
* Changes in tax rate
The reduction of the Indian corporate tax rate from 30% to 25% is effective from 1 April 2018. As a result, the relevant deferred tax balances have been remeasured. Deferred tax expected to reverse in the year to 31 March 2019 has been measured using the effective rate that will apply in India for the period (25%).
The impact of the change in tax rate has been recognised in tax expense of statement of profit or loss, except to the extent that it relates to items previously recognised outside the statement of profit or loss.
Note - 2
Discontinued operations
(i) Description
Pursuant to official notification issued on Bombay Stock Exchange (“BSE”) dated 2 August 2017 and 7 September 2017 for electrical motor business of its “Electricals” division and official notification issued on Bombay Stock Exchange (“BSE”) dated 5 October 2017 for fine blanking components business of its “Fine blanking components” division, the Company has discontinued both the divisions due to lack of viable orders, profitability and capital investment requirements for new technology. Consequently, revenue and expenses, gains and losses relating to the discontinuation of these divisions have been eliminated from profit or loss from the Company’s continuing operations and are shown as a single line item in the statement of profit or loss.
(ii) The fair values of the Company’s interest-bearing borrowings, loans and receivables are determined by applying discounted cash flows (‘DCF’) method, using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own nonperformance risk as at 31 March 2018 was assessed to be insignificant.
Note - 3
Financial risk management
The Company’s activities expose it to credit risk, liquidity risk and market risk. The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.
(A) Credit risk
Credit risk is the risk that a counterparty fails to discharge its obligation to the Company. The Company’s exposure to credit risk is influenced mainly by cash and cash equivalents, trade receivables and financial assets measured at amortised cost. The Company continuously monitors defaults of customers and other counterparties and incorporates this information into its credit risk controls.
(a) Credit risk management
(i) Credit risk rating
The Company assesses and manages credit risk of financial assets based on following categories arrived on the basis of assumptions, inputs and factors specific to the class of financial assets. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.
A: Low B: Medium C: High
Life time expected credit loss is provided for trade receivables.
Based on business environment in which the Company operates, a default on a financial asset is considered when the counter party fails to make payments within the agreed time period as per contract. Loss rates reflecting defaults are based on actual credit loss experience and considering differences between current and historical economic conditions.
Assets are written off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or a litigation decided against the Company. The Company continues to engage with parties whose balances are written off and attempts to enforce repayment. Recoveries made are recognised in statement of profit and loss.
ii) Concentration of trade receivables
The Company’s exposure to credit risk for trade receivables is presented as below. Loans and other financial assets majorly represents loans to employees and deposits given for business purposes.
(ii)Expected credit loss for trade receivables under simplified approach
The Company’s trade receivables pertaining to income from sale of products and services has higher credit risk and accordingly allowance for expected credit loss is created using provision matrix approach.
(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.
Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates.
© Market risk
(I) Foreign exchange risk
The Company has international transactions and is exposed to foreign exchange risk arising from foreign currency transactions (imports and exports). Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company’s functional currency. The Company does not hedge its foreign exchange receivables/payables.
(ii) Interest rate risk Liabilities
The Company’s fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
The Company’s variable rate borrowing is subject to interest rate. Below is the overall exposure of the borrowing:
(iii) Price risk
The Company’s exposure to price risk arises from investments held and classified as FVOCI. To manage the price risk arising from investments, the Company diversifies its portfolio of assets.
Sensitivity analysis
Profit or loss and equity is sensitive to higher/lower prices of instruments on the Company’s profit for the year -
Note - 4
Capital management Risk 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 equity less cash and cash equivalents as presented on the face of balance sheet.
The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.
Note - 5
Related party transactions
In accordance with the requirements of Ind AS 24 the names of the related party where control exists/ able to exercise significant influence along with the aggregate transactions and year end balances with them as identified and certified by the management are given below:
i) Parties where control exists:
(a) Holding Company:
- M/s Anadi Investments Private Limited
(b) Subsidiary:
- Majestic IT Services Limited
- Emirates Technologies Private Limited
(c) Key Management Personnel (KMP) and their Relatives:
- Mr. Mahesh Munjal (Managing Director)
- Ms. Aashima Munjal (Joint Managing Director)
- Mr. Aayush Munjal (Whole Time Director)
- Ms. Juhi Garg (Company Secretary) with effect from 3rd October 2017
- Mr. Rahul Tiwari (Company Secretary) till 30th August 2017
- Mr. Rajpal Singh Negi (Chief Financial Officer) with effect from 14th November 2017
- Mr. Prakash Chander Patro (Chief Financial Officer) till 30th August 2017
- Mr. Vikas Nanda (Independent Director) with effect from 14th February 2017
- Mr. Mohamad Abdul Zahir (Independent Director)
- Mr. Shavinder Singh Khosla (Independent Director)
- Mr. G.P. Sood (Independent Director) till 14th February 2017
(d) Enterprises over which Key Management Personnel is able to exercise significant influence with whom transactions has been undertaken:
- M/s Munjal Showa Limited
- M/s OK Hosiery Mills Private Limited
Excise duty/sales tax paid under protest amounting to Rs. 4.02 lakhs (previous years 31 March 2017 and 1 April 2016: Rs. 3.51 lakhs and Rs. 3.51 lakhs respectively) is appearing under the head balance with government authorities.
(a) 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.
(b) The Company does not expect any reimbursement in respect of the above contigent liabilities.
(c) Future cash outflows in respect of the above are determinable only on receipt of judgements/decisions pending with various forums/authorties.
Note - 6
Leases disclosure as lessee Operating leases
The Company has taken on lease certain assets with lease term of 3 months, which are subject to renewal at mutual consent thereafter. These arrangements can be terminated by either party after giving due notice. The other information pursuant to Ind AS 17 is given hereunder:
Note - 7
Disclosures as per Indian Accounting Standard (Ind AS) 108 “Operating Segments”
a) Operating segments
Management currently identifies the Company’s three service lines as its operating segments as follows:
Fine blanking components Electricals
Facility management services During the year ended 31 March 2018, Company has discontinued the ‘Fine Blanking Components’ and ‘Electrical’ operations and have included in Discontinued Operations.
b) Segment revenue and expenses
Revenue and expenses directly attributable to the segment is considered as ‘Segment Revenue and Segment Expenses’.
c) Segment assets and liabilities
Segment assets and liabilities include the respective directly identifiable to each of the segments.
These operating segments are monitored by the Company’s chief operating decision maker and strategic decisions are made on the basis of segment operating results. Segment performance is evaluated based on the profit of each segment.
The following tables presen
t revenue and profit information and certain asset and liability information regarding the Company’s reportable segments for the years ended 31 March 2018 and 31 March 2017.
Geographical information
The operations of the Company are mainly carried out in India and therefore, geographical information is not disclosed. Information about major customer
During the year ended 31 March 2018 revenue of approximately 38.49% (previous year 31 March 2017: 46.41%) are derived from a single external customer under ‘Electrical Segment’.
B First time adoption of Ind AS
These are the Company’s first financial statements prepared in accordance with Ind AS.
The accounting policies have been applied in preparing the financial statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (the Company’s date of transition). An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.
C Ind AS optional exemptions
1 Deemed cost for property, plant and equipment and intangible assets
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment 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 de-commissioning 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, intangible assets at their previous GAAP carrying value.
2 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 at the date of transition to Ind AS. The Company has elected to apply this exemption for its investment in equity investments.
D Ind AS mandatory exemptions 1 Estimates
An entity’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
a) Investment in equity instruments carried at FVTPL or FVOCI
b) Impairment of financial assets based on expected credit loss model.
2 Classification and measurement of financial assets and liabilities
The classification and measurement of financial assets will be made considering whether the conditions as per Ind AS 109 are met based on facts and circumstances existing at the date of transition.
Financial assets can be measured using effective interest method by assessing its contractual cash flow characteristics only on the basis of facts and circumstances existing at the date of transition and if it is impracticable to assess elements of modified time value of money i.e. the use of effective interest method, fair value of financial asset at the date of transition shall be the new carrying amount of that asset. The measurement exemption applies for financial liabilities as well.
Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. It is impracticable to apply the changes retrospectively if:
a) The effects of the retrospective application or retrospective restatement are not determinable;
b) The retrospective application or restatement requires assumptions about what management’s intent would have been in that period;
The retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates that existed at that time.
3 De-recognition of financial assets and liabilities
Ind AS 101 requires a first-time adopter to apply the derecognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
E Other reconciliations between previous GAAP and Ind AS
Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS.
Note - 1
Borrowings Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Under previous GAAP, these transaction costs were shown as prepaid expense under non-current/current assets as and when incurred. Accordingly, borrowings as at 31 March 2017 have been reduced with a corresponding adjustment to prepaid expense head in non-current/current asset respectively.
Note - 2.
Provision for trade receivables using provision matrix approach.
Under previous GAAP, provision for trade receivables is recognised on specific identification method based on management assessment of recoverability of trade receivables. As per Ind AS 109, the Company is required to apply expected credit loss model (provision matrix approach) for recognising the allowance for doubtful receivables.
Note - 3
Investments designated at fair value through other comprehensive income
Under previous GAAP, investments are shown at cost. Under Ind AS, such instruments are required to be evaluated under Ind AS 109 which requires the Company to account for such instruments either at amortised cost or fair value. Ind AS requires the Company to record the fair value gains or (losses) on FVOCI equity instruments in case of fair value instrument. Accordingly ‘Investments’ has been increased with a corresponding adjustment to other comprehensive income
Note - 4
Remeasurement of post-employment benefit obligations Under Ind AS, actuarial gains and losses on defined benefit plan liabilities and plan assets are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, such measurements were charged to profit or loss for the respective year.
Note - 5.
Prior period errors Under Ind AS, prior period errors need to be restated retrospectively and such restatement is made in the earliest comparative period presented and the amount of the adjustment is made in the opening balance of retained earnings of earliest year presented.
Note - 6
Leases
The Company has applied the transition provision of Ind AS 17, “Leases”, and has assessed all arrangement as at the date of transition. Basis the assessment the Company has done the accounting for vehicle given on finance lease. The accounting has been done retrospectively and the impact on transition date has been recognised in retained earnings. For lease accounting on transition, Property, Plant and Equipment is derecognised and current/non-current other financial assets recognised. Difference towards reversal of retrospective depreciation and finance lease recognised as revenue instead of recovery of lease receivable adjusted against retained earnings.
Note - 7
Tax impact on adjustments Under previous GAAP, deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required Under previous GAAP
Note - 8
Minimum alternate tax Ind AS 12 requires classification of MAT credit as deferred tax asset. Accordingly, the Company has reclassified MAT credit from loans and advances to deferred tax asset on each reporting date. There is no impact on the total equity or profit as a result of this adjustment.
Note - 9
Retained earnings Retained earnings as at 1 April 2016 has been adjusted consequent to the above Ind AS transition adjustments.
Note - 10
Other comprehensive income Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes re-measurements of defined benefit plans and fair value gains or (losses) on FVOCI equity instruments and their corresponding income tax effects. The concept of other comprehensive income did not exist under previous GAAP
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