1.1 The Company overview:
JK Agri Genetics Limited (JKAGL) is a public limited company incorporated and domiciled in India and its shares are publicly traded on the Bombay Stock Exchange (‘BSE’), in India. The Registered office of the company is situated at 7, Council House Street, Kolkata-700 001, West Bengal (India). JKAGL is engaged in research and development, production, processing and marketing of Cotton, Maize, Paddy, Pearl Millet, Sorghum, Mustard, Wheat, Sorghum Sudan grass, Fodder beet, Tomato, Okra, Chillies and other vegetable seeds. The company’s manufacturing facilities are located at Survey no. 509/2, Village: Gundlapochampally, District: Ranga Reddy - 501401 Telangana and at Ranpur, Kota, Rajasthan These financial statements were approved and adopted by board of directors of the Company in their meeting held on 7th May, 2018.
Note:
The Company has elected to measure the items of Property, Plant and Equipments at their fair value at the date of transition. (Refer Note No.58)
On Lease hold premises
@ Net carrying Amount of Rs. 99.64 lacs as at 31.03.2018 (Previous year Rs. 105.21 lacs).
# Net carrying Amount of Rs. 624.89 lacs as at 31.03.2018 (Previous year Rs. 742.83 lacs).
Note:
The Company has elected to measure the items of Other Intangible Assets at their Previous GAAP carrying value at the date of transition to IND AS.
@The indefinite life intangible assets (J.K. SEEDS - Brand), no indication of impairment noticed (Refer Note no. 58)
# Being amortized over a period of 5 Years, being useful life as determined.
2. Terms/right attached to equity shares:
a. The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share.
b. In the event of winding up the equity shareholders will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportionate to the number of equity shares held by the shareholders.
c. The Dividend proposed by the Board of Directors is subject to the approval of share holders in the ensuing Annual General Meeting except in the case of interim dividend.
Notes:
1. Term loan from Bank of Rs. 450 lacs taken from bank is secured by second charge on the entire current assets of the company viz., stocks & book debts, etc., both present and future, first charge on the entire Property, Plant and Equipments of the Company including land at Dundigal village, Telangana and Land at Ranpur, Kota Rajasthan, excluding certain specified assets. It is further secured by Hypothecation of entire intangible assets of the Company including the Brand and Patents. Repayable in 3 Equal quarterly Installments during FY 2018-19.
2. Term loan others of Rs. 107.15 lacs (net of Rs. 18.03 lacs for deferred Government grants) taken from Biotechnology Industry Research Assistance Council (BIRAC) is secured by First Charge on movable properties of the Company including its movable Plant and Machinery, spares, tools and accessories and other movables, both present and future (Except Book debts) and is repayable in 9 equal half yearly installments by 2022-23.
3. Unsecured Loan of Rs. 249.24 lacs (Net of Rs. 45.48 lacs for deferred Government Grants) taken from CSIR is repayable in 4 equal yearly installments by 2021-22.
# Working Capital borrowings are secured by hypothecation of entire current assets viz stocks and book debts etc., both present and future, of the Company and by a second charge on entire fixed assets of the Company including land at Dundigal village, Telangana and Ranpur, Kota, (Rajasthan) and excluding certain specified Fixed assets.
Note No. 3
Contingent liabilities, not provided for in respect of :
(i) Claims by certain parties against the company not accepted and not provided for Rs. 239.11 lacs (Net of Rs. 99.94 lacs indemnified by another party) (Previous Year Rs. 134.42 lacs (Net of Rs. 99.00 lacs indemnified by another party)).
(ii) Income Tax (matters in appeals) of Rs. 221.43 lacs (Previous year Rs. 560.71 lacs). In respect of certain disallowances and additions made by the Income Tax authorities, appeals are pending before the Appellate Authorities and adjustment, if any, will be made after the same are finally determined.
Note No. 4
Company acted as a facilitator and has extended guarantees to Yes Bank Limited Rs. 3707.95 lacs (Previous year Rs. 3097.36 lacs) for loans provided to the farmers, grouped under trade payables / trade advances.
Note No. 5
Pursuant to the Scheme of Arrangement and Demerger transfer of authorized Capital of Rs. 4250 lacs divided into 50,00,000 preference share capital of Rs. 85/- each is pending for transfer from Florence Investech Limited to the Company as authorized capital divided into 4,25,00,000 unclassified shares of Rs. 10 each as per the Scheme. In the absence of receipt of requisite approvals, it is been decided not to pursue this matter any further.
Note No. 6
Estimated amount of contracts net of advances amounting to Rs. 6.18 lacs (Previous year Rs. Nil) remaining to be executed on capital account.
Note No. 7
The Company has challenged the notice of the Income Tax assessing officer for reopening of the income tax assessment order for the year ended 31.03.2009 (Assessment year 2009-10), in High Court of Calcutta. Hon’ble High court of Calcutta vide its order dated 26.03.2015 has granted interim stay.
Note No. 8
a) Income tax calculation has been made considering certain expenses/adjustments available as assessed by the management.
b) The Company has filed a Writ Petition before the Hon’ble High Court of Calcutta seeking directions for acceptance of revised Income Tax returns by the Income Tax Department, ("the Department") for the Financial years 2005-06 to 2010-11, which had been treated as nonest by the department vide its Notice dated 17th February, 2014. The above revised returns were filed by the Company with the Department pursuant to the Scheme of Arrangement and Demerger (the Scheme) approved by Hon'ble High court of Calcutta on 17th October, 2012, giving impact of the Scheme from 1st April, 2005, during the financial year 2012-13.
Note No. 9
Based on information available with the Company in respect of MSME (‘The Micro Small & Medium Enterprises Development Act 2006’). The details are as under:
i) Principal and Interest amount due and remaining unpaid as at 31st March 2018 Rs. Nil (previous year Rs. Nil).
ii) Interest paid in terms of section 16 of the MSME Act during the year - Nil (previous year - Nil).
iii) The amount of Interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified - Nil (previous year - Nil).
iv) Payment made beyond the appointed day during the year - Nil (previous year - Nil).
v) Interest Accrued and unpaid as at 31st March 2018- Nil (previous year - Nil).
Note No. 10
Foreign Currency exposure not hedged as at Balance sheet Date:
Net receivable Rs. 687.77 lacs - US $ 216712 & AED 3082800 (Previous year Rs. 113.73 lacs - US $ 175400), Net payable Rs. 0.01 lacs - Euro 20 ('0.01 lacs - Euro 20) and Buyers Credit of Rs. 117.18 lacs - US $ 180170 (Previous year Nil)
Note No. 11 Segment Information:
The Company is engaged primarily into Agri & Allied products. The Company has only one business segment as identified by management namely “Agri & Allied products”. Segments have been identified taking into account nature of product and differential risk and returns of the segment.
Note No. 12
Royalty payable on BG II Cotton Sales has been provided as per the Central Government Notification No.S.O.686(E) Dated 8th March, 2016.
Note No. 13 Lease
Operating Lease
Factory Premises and Vehicles have been obtained on lease. Lease rentals in case of factory premises on cancellable lease have escalation clause while there is no escalation in case of Vehicles except for change in taxes, if any. There are no significant restrictions imposed by Lease agreements. There are no sub leases.
Note No. 14
Financial Risk Management Objectives and Policies.
The Company's Financial Risk Management is an integral part of how to plan and execute its Business Strategies. The Company's Financial Risk Management Policy is set by the Board. The Company's activities are exposed to a variety of financial risks from its operations. The key financial risks include market risk (including foreign currency risk, interest rate risk and commodity risk etc.), credit risk and liquidity risk.
15. Market Risk: Market risk is the risk of loss of future earnings, fair values or future cash flows that may results from change in the price of a financial instrument. The value of a financial instrument may change as result of change in the interest rates, foreign currency exchange rates, equity prices and other market changes may affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments and deposits, foreign currency receivables, payables and loans and borrowings. Market risk comprises mainly three types of risk:
Interest rate risk, currency risk and other price risk such as equity price risk and commodity risk.
The Company has an elaborate risk management system to inform Board Members about risk management and minimization procedures.
a) 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. The Company makes certain imports and exports in foreign currency & therefore is exposed to Foreign Exchange Risk. The Company evaluates exchange rate exposure arising from foreign currency transactions. The Company has not undertaken any hedging activities for foreign exchange.
b) Interest Rate Risk :-
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Any changes in the interest rates environment may impact future rates of borrowing. The Company mitigates this risk by maintaining a proper blend of Fixed & Floating Rate Borrowings. The following Table shows the blend of Company's Fixed & Floating Rate Borrowings in Indian Rupee:
The Company regularly scans the Market & Interest Rate Scenario to find appropriate Financial Instruments & negotiates with the Lenders in order to reduce the effect Cost of Funding.
Interest Rate Sensitivity: The following table demonstrates the sensitivity to a reasonably possible change in interest rates on financial assets affected. With all other variables held constant, the Company’s profit / (Loss) before tax is affected through the impact on finance cost with respect to our borrowing, as follows:
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.
(c) Commodity Price Risk and Sensitivity:
Commodity price fluctuations can have an impact on the demand of seeds for particular crop. Therefore, we track the commodity price movements very closely and take advance production decisions accordingly.
In addition to the above, Company also maintains a strategic buffer inventory to ensure that such disruptions do not impact the business significantly.
16. Credit Risk:
Credit risk is the risk that counterparty might not honor 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).
Trade Receivables: Customer credit risk is managed based on company's established policy, procedures and controls. The company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.
Credit risk is reduced by receiving pre-payments and export letter of credit to the extent possible. The Company has a well defined sales policy to minimize its risk of credit defaults. Outstanding customer receivables are regularly monitored and assessed. Impairment analysis is performed based on historical data at each reporting date on an individual basis. However a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively.
17. Advance to suppliers are net of provision/loss allowances made for Doubtful advances of Rs. 13.52 lacs (Previous year Rs. 24.45 lacs).
17.1. ECL impairment loss allowance (or reversal) recognized during the period as income/ expense in the Statement of Profit and Loss under the head ‘Other expenses’.The balance sheet presentation for financial instruments is described below:
i) Financial assets measured as at amortised cost: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the company does not reduce impairment allowance from the gross carrying amount.
ii) Financial Assets includes Rs. 1823.61 lacs towards Trade Receivables and Security Deposit of Rs. 121.68 lacs shown under the heading "Deposit with Government Authorities and others" from Rajasthan Government. In view of the fact that the materials supplied met all the quality specifications and was accepted by the government, the receivable is considered good and recoverable. During the year the Hon'ble High Court of Rajasthan, Jaipur, allowed our petition file under sec 11 of the Arbitration and Conciliation Act, 1996 and appointed Retired Supreme Court Judge as arbitrator.
iii) During the year company also has initiated legal proceedings on Uttar Pradesh Seed Development Corporation (UPSDC) for recovery of the overdue outstanding of Rs. 952 lacs for which we have also made expected credit loss allowance in the books of accounts. Company filed an application in Hon’ble High Court of Uttar Pradesh to appoint an arbitrator and thereby notices have been issued to UPSDC.
17.2d. Some of the balances of debtors, loans & advances and current liabilities are in the process of confirmation/ reconciliation.
17.3 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 is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due. The Company relies on a mix of borrowings and operating cash flows to meet its needs for funds. The current committed lines of credit are sufficient to meet its short to medium term expansion needs. The Company monitors rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowings facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.
Note No. 18
Capital Risk Management:
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company’s primary objective when managing capital is to ensure that it maintains an efficient capital structure and healthy capital ratios and safeguard the Company’s ability to continue as a going concern in order to support its business and provide maximum returns for shareholders. The Company also proposes to maintain an optimal structure to reduce the cost of capital. For the purpose of the Company’s capital management, capital includes issued capital, securities premium and all other equity reserves. Net debt includes, interest bearing loans and borrowings, less cash and cash equivalents.
Note No. 19
Fair Value of Financial Assets and Liabilities:
Set out below, is a comparison by class of the carrying amounts and fair value of the financial instruments of the Companies
Fair Valuation Techniques:
The Company maintains policies and procedures to value Financial Assets & Financial Liabilities using the best and most relevant data available. The Fair Values of the Financial Assets and Liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade receivables, trade payables and other financial liability at carrying value because their carrying amounts are a reasonable approximation of the fair values due to their short term nature.
The Company does not have any asset or liabilities that can be grouped into Level 1 to Level 3 for Fair value measurement
Note No. 20
During the year the Company has received a grant of Rs. 14.80 lacs (Previous year Rs. 11.10 lacs) from BIRAC, the same is netted from other expenses.
Note No. 21
Previous year’s figures have been re-grouped/re-classified/recast wherever necessary and figures less than Rs. 500 have been shown as actuals in bracket.
Note No. 22
Impairment Testing of Intangible Assets
The Brands are considered to have an Indefinite useful life on the basis of the expected longevity and tested for impairment annually, in case there is any indication for impairment of carrying value. Based on internal analysis and relevant factors, the Management is of the opinion that, the brand is expected to continue to generate cash flows for an undetermined period.
Note No. 23 RECONCILIATION
These financial statements, for the year ended 31 March 2018, have been prepared in accordance with Ind AS, for the purposes of transition to Ind AS, the company has followed the guidance prescribed in Ind AS 101-First time adoption of Indian Accounting Standards, with April 01, 2016 as the transition date and IGAAP as the 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 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1 April 2016, the date of transition to Ind AS. This 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.
The following reconciliations provide a quantification of the effect of significant differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:
- Equity as at 1st April, 2016;
- Equity as at 31st March, 2017;
- Balance Sheet as at 1st April, 2016
- Balance Sheet as at 31st March, 2017
- Total comprehensive income for the year ended 31st March, 2017.
In preparing these financial statements, the Company has availed certain exemptions and exceptions from retrospective application of certain requirements under Ind AS, as explained below:
a) Exemptions from retrospective application:
Property, Plant & Equipment: The Company has elected to measure items of PPE at the date of transition to Ind AS at their fair value. Company has used the fair value of assets, which is considered as deemed cost on transition. The impact on fair valuation of Property, Plant and Equipment on transition from previous GAAP is ' 869.95 lacs and accordingly impact (net of deferred tax) been given in other equity.
Intangibles Assets: The Company has opted to continue with the carrying value for all its intangible assets as recognised in the previous GAAP financial statements as their deemed cost on the date of transition i.e. 1st April, 2016.
Leases: For arrangements entered into prior to 1st April, 2015, the Company has assessed all arrangements for Embedded Lease based on conditions prevailing as at the date of transition (i.e. 1st April, 2016)
(b) Exceptions from full retrospective application:
Government loans: The Company has adopted previous GAAP regarding book values of Unsecured & secured Loan at the date of transition to Ind AS as the carrying amount of the loan in the Opening Ind AS Balance sheet and applied Ind AS 109 (Financial Instruments) and Ind AS 20 (Accounting for Government Grants and Disclosure of Government Assistance) prospectively.
Estimates: Upon an assessment of the estimates made under Previous GAAP, the Company has concluded that there was no necessity to revise such estimates under Ind AS, except where revision in estimates was necessitated as required by Ind AS. The estimates used by the Company to present the amounts in accordance with Ind AS reflect conditions existing as at 1st April, 2016, the date of transition to Ind AS and as at 31st March, 2017 and 31st March, 2018.
Explanations for reconciliation of Balance Sheet and Total Comprehensive Income as previously reported under Previous GAAP to Ind AS
A.(i) Fair value as deemed cost - Property Plant and Equipment : The company has opted the option of fair value as deemed cost for Property Plant and Equipments as on the date of transition to Ind AS.This has resulted in the increase of Rs. 975.25 lacs in the value Property Plant and Equipment with corresponding increase in retained earning of Rs. 869.65 and deferred tax liability of Rs. 105.60 lacs. Fair value as deemed cost on the transition date for respective category of PPE is as under.
The above has resulted in additional depreciation charged to Profit or Loss Account by Rs. 9.77 lacs during the Financial Year Ended 31st March, 2017.
A. (ii) Dismantling Provision : The Company has availed the exemption for dismantling liability as at the date of transition and accordingly measured the liability as at the date of transition, the liability prior to transition is adjusted in opening retained earnings.
B. Brand - The company has adopted to use its previous GAAP carrying value as deemed cost on the date of transition to Ind AS. The life of the intangible asset have been considered indefinite as per Ind AS 38, vis-a-vis previous GAAP wherein intangible assets which have only finite life.
C. Security Deposit : Under Ind AS 109- financial instruments, security deposit are required to be valued at fair value and difference between cost and fair value is to be amortised over the period of security as rental expenses and consequently interest income to be booked using effective interest method in statement of Profit & loss.
D. Government Grants : The company has received loans from DBT and BIRAC at concessional rate. The loans are recognised at fair value using prevailing market interest of loan. The difference between the gross proceeds and fair value of the loan is the benefit derived from lower rate of interest and is recognised as deferred income. Loan as at 1st April 2015 was carried at historical cost (Exemption availed).
E. Dividend : Under Indian GAAP, Proposed Dividend was recognised as liability in the period to which it was related. Under Ind AS Proposed Dividend is recognised as liability in the period in which it is approved by shareholders.
F. Actuarial Gain/Loss - The impact of change in actuarial assumption and experience adjustments for defined benefit obligation towards gratuity liability is accounted in the Statement of Other Comprehensive Income (net of tax impact). Due to this, for the period ended March 31, 2016, tax credit there on is shown in OCI and reversal in Statement of Profit and loss.
G. Expected Credit Loss : Under I GAAP, the Company has created provision for impairment of trade receivables in respect of specific amounts. Under Ind AS, impairment losses of Rs. 654.90 lacs have been determined on the expected credit loss model (ECL) with corresponding impact to retained earnings (net of deferred Tax) and Rs. 52.34 lacs under Current Loans. The Company has made a loss allowance based on ECL policy which has been recognised in retained earning on the date of transition to Ind AS. The loss allowance (ECL) of Rs. 79.73 lacs (Net of deferred Tax) for the year ended 31st March, 2017 has been recognized in the statement of Profit or Loss Account.
H. Deferred Tax - The additional Deferred Tax liability / Asset has also been recognised due to different accounting treatment in respect of certain items as per Ind AS at the tax rate at which they are expected to be reversed. on transition to Ind AS, the MAT Credit Entitlement being in the nature of deferred tax assets, has been netted from deferred tax liabilities/assets.
I. Under Ind As revenues is recognised at the fair value of the consideration received or receivable. As a result, discounts are required to be reduced from sales. Therefore a sum of Rs. 243.82 has been reduced from sales with corresponding decrease in other expenses.
Note No. 24
Standards issued but not yet effective
Ind AS 115 revenue from Contracts with Customers
Amended Ind AS 115 was notified on 28th March 2018 and establishes a five step model to account for revenue arising from contracts with customers. The new revenue standard with supersede all current revenue recognition requirements under Ind AS. This standard will come into force from accounting period commencing on or after 1st April, 2018. the Company is evaluating the requirements of the amendments and the effect on the financial statements is being evaluated.
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