1. Corporate information

Milkfood Limited (“the Company”) is a public limited company domiciled in India and incorporated under the provisions of the Indian Companies Act. The registered office of the Company is located at P.O. Bahadurgarh-147021 Distt. Patiala (Punjab), India. Its shares are listed on Bombay Stock Exchange (BSE). The Company is primarily engaged in the manufacture and sale of dairy products. The company has two manufacturing locations, one in the state of Punjab at Patiala and one in the state of Uttar Pradesh at Moradabad.

Footnote:

(i) For details of Property, plant and equipment charged as security of borrowings refer Note 16.

(ii) The company has elected measure item of property, plant and equipment and intangible assets at its carrying value at the transition date except for certain class of assets which are measured at fair value as deemed cost. As a result accumulated depreciation on 01.04.2016 is shown at NIL.

(iii) Estimated amount of capital contracts remaining to be executed is Rs. 8 Lacs (Year 2017 Rs. 20 Lacs, Year 2016 Rs 18 Lacs)

(iv) * includes office equipment.

(v) Casien Plant has remained inactive for the last few years but maintenance is being incurred. Company decided to hold all the assets and machinery of the casein plant asinvestment for strategic alliance in financial year 2017. In current year company considered casein plant as normal PPE due to non disposal off, and charged normal depreciation including for financial year 2016-2017.

Footnotes:

(i) In view of insignifcant amount of bad debts in earlier years, no allowance for expected credit loss is made.

(ii) Considered good by the management. Adjustment in respect of dues from canteen stores Department (Govt.), if any, shall be made in financial year 2018-19.

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

(i) Includes non moving stock of Rs. 46 lakhs (P.Y. 45 Lakhs). Managament is of the opinion that the same will be disposed off during financial year 2018-19 and will realise at a value not less than carrying amount.

(ii) In accordance with guidance note issued by the Institute of Chartered Accountants of India, (ICAI) Certified Emission Reduction (CER) units obtained under Clean Development Mechanism (CDM) are treated as inventory on credit by the United Nations Framework Convention on Climate Change (UNFCCC). CER's are valued at lower of cost or Net Realisable Value (NRV) as per IND AS-2 .

(iii) The mode of valuation of inventories has been stated in Note 2.12

(iv) For details of inventories provided as security for borrowings Refer Note 19.

(i) Advance to Suppliers include an amount of Rs. 284 Lacs due from supplier on account of extinguishment of banks liability of supplier obtained against supplies to the company. Amount is confirmed by the supplier and will be adjusted in the F.Y. 2018-19. Further a sum of Rs. 129 Lacs due from suppliers are confirmed and in the opinion of managment will be adjusted/ recovered in F.Y. 2018-19.

(ii) Includes Rs. 126.51 Lacs( P.YRs. Nil ) GST receivable as on 31.03.2018.

(iii) Represents the realizable value of 97000 CER's (PY 97000 Units) as certified by the consultant. The receivable is classified as short term as company is of the view that the units are likely to be sold in the FY 2018-19.

(i) The Company has only one class of equity shares having a par value of Re. 10 per share. Each holder of equity share is eligible for one vote per share.

(ii) In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(iii) Details of shares held by each shareholder holding more than 5% shares:

Footnotes:

(i) Where the Company issues shares at premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to “Securities Premium account”. The company may issue fully paid-up bonus shares to its members out of balance lying in the securites premium account and the Company can also use this reserve for buy-back of shares.

(ii) Includes revaluation reseve of Rs. 8443 Lacs (Rs. 7890 as on 31.03.2017 and Rs. 7990 Lacs as on 01.04.2016). Also refer to footnote (i) of Note 40.

(iii) The disaggregation of changes in each type of reserve, retained earnings and other comprehensive income are disclosed in Statement of Changes in Equity.

Footnotes:-

(i) (a) Rupee Loan from Canara Bank of Rs. 586 Lacs at interest rate of 12% p.a is payable in monthly installments fromDec'2016 to Jan'2022 (Refer Note No.21)

(b) The Loan of Canara Bank is secured by an exclusive charge on fixed assets to the extent of Rs.19.50 Crores and on pari-passu basis with State Bank of India on balance fixed assets. As per MCA 21 charge registered with Canara bank is of Rs. 20 Crores.

(ii) Rupee Loan from State Bank of India of Rs. 836 Lacs at interest rate 11.95% p.a is payable in monthly installment by June,2021 is secured against Fixed Assets as mentioned in (i)(b) above. (Refer Note 21).

(iii) Vehicle loans are secured against hypothecation of respective vehicles. (Refer Note 21)

(a) Vehicle Loans of Rs.138 Lacs from Kotak Mahindra Prime Limited are repayable in monthly instalments of varied amounts and repayable by Mar' 2021 and carry interest rate of 8.39% to 10.76% p.a .

(b) Vehicle Loans of Rs. 182 Lacs from Kotak Mahindra Prime Limited are repayable by Aug'2019 and carry interest of 14.50% .

(c) Total No.of vehicles financed by Kotak Mahindra Prime Limited: 22.

(iv) Term Loans from Kotak Mahindra Bank Ltd are detailed as under (Refer Note 21) :-

(a) Rupee Loan of Rs. 139 Lacs at interest rate of 15.00% p.a is payable at monthly rests and to be paid by Jan ‘2020.

(v) Term Loan from NBFCs are detaled as under (Refer Note 9) :-

(a) Rupee Loan from Magma Fincorp Ltd of Rs. 13 Lacs at interest rate of 15.00% p.a is payable at monthly rests and to be paid by Oct ‘2018.

(b) Rupee Loan from Bajaj Finance Ltd of Rs. 5 Lacs at interest rate of 15.00% p.a is payable at monthly rests and to be paid by Oct ‘2018.

(c) Rupee Loan from Tata Capital Financial Services Ltd of Rs. 20 Lacs at interest rate of 15.00% p.a is payable at monthly rests and to be paid by Oct ‘2019.

(d) Rupee Loan from Capital First Ltd of Rs. 17 Lacs at interest rate of 15.00% p.a is payable at monthly rests to be paid by June ‘2019.

(vi) Interest free intercorporate deposit of Rs. 50 Lacs from S J Finance and Holding (P) Ltd not payable before 31.03.2019 ascertified by the Management.

Footnote:

(i) Includes amount of Rs.Nil (PY Rs. 8 Lacs) interest on Income Tax refund.

(ii) Includes amount of Rs. 0.40 lacs ( P.Y. Rs. 34 Lacs) towards Misc. balance written back, Insurance claim of Rs. Nil ( P.Y. 2 Lacs) and input tax credit of excise duty on packing material of Rs. 11 Lacs (P.Y. Nil) on closing stock as on transtion date of Goods and Service Tax Act.

Footnote:

(i) No amounts have been written off / provided for or written back during the year in respect of amounts receivable from or payable to related parties.

(ii) Related parties have been identified by the management.

(iii) Figures in bracket relates to the previous year.

* The Company is contesting these demands and the management, based on advise of its advisors, believes that its position will likely be upheld in the appellate process. No expense has been accrued in the standalone financial statements for these demands raised. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations. The Company does not expect any reimbursements in respect of the above contingent liabilities.

In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company's management reasonably does not expect that these legal actions, when ultimately concluded and determined, will have material effect on the Company's results of operations or financial condition.

(B) Defined Benefit Plans

The Company operates one defined benefit plans i.e., gratuity fund for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service.

Note: 2. Financial risk management objectives and policies

The Company's principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include , trade and other receivables, cash and cash equivalents, bank balances and security deposits that are out of regular business operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company's senior management oversees the management of these risks.

(a) Market risk

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

i. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Company's financial instruments will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rate relates primarily to the Company's borrowings with floating interest rates.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on borrowings affected. With all other variables held constant, the Company's profit before tax is affected through the impact on floating rate borrowings, as follows:

ii. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. There does not seem to be any significant risk as transaction in foreign currency are very few.

As there is no significant foreign currency risk, sensitivity analysis showing impact on profit is not calculated.

iii. Commodity price risk

The company does not have significant risk in raw material price variations. In case of any variation in price, the same is passed on to customers through appropriate adjustment to selling prices.

(b) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments if a counterparty default on its obligations. The Company's exposure to credit risk arises majorly from trade and other receivables. Other financial assets like security deposits and bank deposits are mostly with government authorities and nationalised banks and hence, the Company does not expect any credit risk with respect to these financial assets. Trade receivables in respect of sale of Ghee , in majority of cases payment is received in Advance and with respect to SMP, the sale is institutional and expected credit loss is too low considering the past record.

(c) Liquidity risk

The Company's objective is to maintain a balance between continuity of funding and flexibility through the use of bank borrowings and security from consignment agents. The table below summarises the maturity profile of the Company's financial liabilities:

Note: 3. Capital Management

For the purpose of the Company's capital management, capital includes issued equity capital, securities premium and all other equity reserves attributable to the equity shareholders. The primary objective of the Company's capital management is to ensure that it maintains a good credit rating and capital ratios in order to support its business and maximise shareholder value. The Company monitors capital using a gearing ratio, which is net debt divided by total capital. The Company includes within net debt, all non-current and current borrowings reduced by cash and cash equivalents and other bank balances.

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

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.

Note 4. Fair value

Fair value measurement:

(i) All the financial assets and financial liabilities of the company are carried at amortised cost.

(ii) The management assessed that the carrying values of trade and other receivables, deposit, cash and short term deposits, other assets, borrowings, trade and other payables reasonably approximate their fair values because these instruments have short-term maturities.

(iii) It is view of the management that fair value impact of long term security deposits/loan paid or payable would not be material.

Note 5. First time adoption of Ind AS

The Company has prepared financial statements which comply with Ind AS applicable for period ending on 31 March, 2018, together with the comparative period data as at end for the year ended 31 March, 2017 as described in summary of significant accounting policies. In preparing these financial statement the Company's opening balance sheet was prepared as per Ind AS as of 1 April, 2016 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets and liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to certain exceptions and certain optional exemptions availed by the Company (as per Ind AS 101) as detailed below:

(a) Mandatory exceptions:

(i) Accounting estimates:

The Company's estimates in accordance with Ind AS at the date of transition are consistent with previous GAAP (after adjustments to reflect any difference in accounting policies) or are required under Ind AS but not under previous GAAP.

(ii) 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 1 April, 2016 (the transition date)

(iii) Classification and measurement of financial assets:

The Company has determined the classification and measurement of financial assets in terms of whether they meet the amortised cost criteria or the fair value criteria or the fair value criteria based on the facts and circumstances that existed as on the transition date and considering the material impact.

(b) Optional Exemptions:

(i) Deemed cost for property, plant and equipment and intangible assets:

Ind AS 101 permits a first-time adopter to elect to measure fair value of property, plant and equipment and use that its deemed cost at the date of transition to Ind AS.

(ii) When an entity prepares separate financial statements, Ind AS 27 requires it to account for its investments in subsidiaries, joint ventures and associates either at cost or in accordance with Ind AS 109. A first-time adopter may choose either fair value at the entity's date of transition to Ind AS in its separate financial statements or Previous GAAP carrying amount at that date, to measure its investment in subsidiary that it elects to measure using a deemed cost. Accordingly, the Company has elected to measure its investment in subsidiary using the Previous GAAP carrying amount as deemed cost.

The note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April, 2016 and the financial statements as at and for the year ended 31 March, 2017.

(i) Under previous GAAP, PPE was shown at historical cost. Ind AS 101 permits a first-time adopter to elect to continue with the carrying value of its property, plant and equipment under previous GAAP and use that as its deemed cost or to measure fair value of class assets of its property, plant and equipment as on the date of transition to Ind AS, and use that as its deemed cost as at the date of transition.

The company has elected to measure item of property, plant and equipmentand intangible assets at its carrying value at the transition date except for certain class of assets which are measured at fair value as deemed cost.

As a result amount of Rs. 5450/- Lacs {for value refer Note 3 (ii)} towards revaluation and amount of Rs. 148/- Lacs towards reduction in deferred tax liabilities aggregating to Rs. 5598 Lacs was credited to retained earnings on 01.04.2016. The net impact on PPE as at 31.03.2017 of Rs. 5621 Lacs (inclusive of Rs 5450/- Lacs as on 01.04.2016) is due to reduction in depreciation amount of Rs. 173 Lacs on account of scaling down of value of plant & machinery (significant amount pertain to casin plant).

(ii) Under previous GAAP, there is no concept of other Comprehensive Income ( OCI). Under Ind AS specified items of income expenses, gain and loss are required to be presented in OCI.

Both under Previous GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Previous GAAP, the entire cost, including actuarial gains and losses, were charged to profit or loss. Under Ind AS, re-measurement (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 return on plan assets excluding amounts included in net interest on the net defined benefit liability) are recognised immediately in the balance sheet with corresponding debit or credit to retained earnings through other comprehensive income. Thus, employee benefit cost for the year ended March 31, 2017 have been reduced by Rs. 21 Lakhs and re-measurement losses of Rs. 14 Lakhs (net of tax of Rs. 7 Lakhs), on defined benefit plans has been recognised in the other comprehensive income. Net impact during the F.Y.2017-18 is reduction in total comprehensive income by Rs. 25 lakhs.

(iii) Indain GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profit and accounting profit for the period Ind AS 12 requires accounting for deferred taxes using the balance sheet approach, which focuses on temporary difference between the carrying amount of an asset or liabilities in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in deferred tax on new temporary differences which was not required under Indian GAAP. In addition, the various transition adjustment lead to temporary differences and the Company has accounted for such differences. Deferred tax adjustment are recognised in correlation to the underlying transaction either in retained earnings or a separate component in equity.

Due to transition to Ind AS from previous GAAP, following adjustment were made to deferred tax assets (net) as on 31 March, 2017 and 1 April 2016.

Reduction in liability of deferred tax of Rs. 148 Lacs is on account of reduction in value of PPE (other than land & building which was increased by Rs. 8530 Lacs as refer note 3 (ii) substantial portion belonging to case in plant. Deferred tax has been computed in r/o Plant & Machinery representing temprorydiffrences. Charges to statement of profit & loss of31.03.2017, of Rs. 92 lakhs represent the amounts to confirm the figure computed as per Ind AS 12.

(iv) The transition from Previous GAAP to Ind AS did not have a material impact on statement of cash flows.

Note 6.

Standards issued but yet not effective

Ind AS 115 Revenue from Contracts with Customers

Ind AS 115 was notified on 28 March 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under Ind AS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 April 2018. The Company will adopt the new standard on the required effective date using the modified retrospective method. The Company has established an implementation team to implement Ind AS 115 related to the recognition of revenue from contracts with customers and it continues to evaluate the changes to accounting system and processes, and additional disclosure requirements that may be necessary. A reliable estimate of the quantitative impact of Ind AS 115 on the financial statements will only be possible once the implementation project has been completed.

Note 7.

The comparative financial information of the company for the year ended 31 March, 2017 prepared in accordance with Ind AS included in this Financial Statements is based on Financial Statements audited under Indian GAAP by the predecessor auditor Madan& Associates, Chartered accountants vide their report dated 30 May, 2017.

Previous GAAP figures have been reclassified/regrouped wherever necessary to confirm with Financial Statements prepared under Ind AS.