1. Reporting entity

Greenply Industries Limited (the ‘Company’) is a public company domiciled in India having its registered office situated at Makum Road, P.O. Tinsukia, Assam-786125, India. The Company has been incorporated under the provisions of the Indian Companies Act and its equity shares are listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. The Company is primarily involved in manufacturing of plywood, medium density fibre boards (MDF) and trading of wallcovers and allied products.

The Company has three overseas and one domestic wholly owned subsidiary companies namely:

(a) Greenply Trading Pte. Limited., incorporated in Singapore, is engaged into trading of Medium Density Fibreboards and allied products. It has invested into a Joint Venture Company viz. Greenply Alkemal (Singapore) Pte. Limited., incorporated in Singapore which is engaged into trading of veneers.

(b) Greenply Holdings Pte. Limited, Singapore.

(c) Greenply Middle East Limited, incorporated in Dubai, is engaged into trading of veneers and operates as an investment vehicle. It has invested into a wholly owned subsidiary company Greenply Gabon SA, Gabon, West Africa, which is engaged into manufacturing of veneers.

(d) Greenpanel Industries Limited, incorporated in India, to carry on the sales and marketing of Medium Density Fibreboards (MDF) and allied products.

2. Basis of preparation

a. Statement of compliance

These standalone financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 as amended, notified under Section 133 of the Companies Act, 2013 (‘Act’) and other relevant provisions of the Act. The standalone financial statements are authorised for issue by the Board of Directors of the Company at their meeting held on 29 May 2018. The details of the Company’s accounting policies are included in note 3

b. Functional and presentation currency

These standalone financial statements are presented in Indian Rupees (‘), which is also the Company’s functional currency. All amounts have been rounded off to the nearest lakhs, unless otherwise indicated.

c. Basis of measurement

The standalone financial statements have been prepared on historical cost basis, except for the following items:

d. Use of estimates and judgements

In preparing these standalone financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Management believes that the estimates using in the preparation of the standalone financial statements are prudent and reasonable. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Judgements

I nformation about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the standalone financial statements is included in the Note 38 - lease classification.

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the standalone financial statements for the every period ended is included in the following notes:

- Note 4 - useful life and residual value of property, plant and equipment;

- Note 31 - measurement of defined benefit obligations: key actuarial assumptions;

- Note 35 - recognition of deferred tax assets:

- Note 37 - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources;

- Note 42 - impairment of financial assets: key assumptions used in estimating recoverable cash flows

e. Measurement of fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. The management has overall responsibility for overseeing all significant fair value measurements and it regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified. Significant valuation issues are reported to the Company’s audit committee.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

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

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

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in note 41.

3A. Standards issued but not yet effective Appendix B to Ind AS 21, Foreign currency transactions and advance consideration

On 28 March 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from 1 April 2018. The Company has evaluated the effect of this on the standalone financial statements and the impact is not material.

Ind AS 115- Revenue from Contract with Customers

On 28 March 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach)

The effective date for adoption of Ind AS 115 is financial periods beginning on or after 1 April 2018.

The Company will adopt the standard on 1 April 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended 31 March 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is expected to be insignificant.

Notes:

(a) General borrowing costs capitalised during the year amounting to Rs.850.43 lakhs (31 March 2017: Rs.384.83 lakhs), with a capitalisation rate of 9.37% (31 March 2017: 9.13%)

(b) As at 31 March 2018, capital work-in-progress with a carrying amount of Rs.76,922.75 lakhs (31 March 2017: Rs.21,583.85 lakhs) are subject to charge to secured borrowings (see Note 19).

4. Other intangible assets

See accounting policy in note 3(e) and (g)

Total carrying amount of inventories is pledged as securities against borrowings, refer note 19.

The write-down of inventories to net realisable value during the year amounted to Rs.371.32 lakhs (31 March 2017: Rs. Nil). These are recognised as expenses during the respective period and included in changes in inventories of stock in trade.

Notes:

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

(b) Information about the Company’s exposure to credit and currency risks, and loss allowances related to trade receivables are disclosed in note 42. Provision as disclosed above is on case to case basis as identified by the management. Expected credit loss provision, as required by Ind AS 109, of Rs.821.72 lakhs (31 March 2017: Rs.502.33 lakhs) has been netted off with considered good amount in the above disclosure.

(c) For terms and conditions of trade receivables owing from related parties, see note 39.

(d) For receivables secured against borrowings, see note 19.

* The Company, on 12 August 2016, has issued and alloted 19,45,525 equity shares of face value of Rs.1 each through Qualified Institutional Placement (QIP) to Qualified Institutional Buyers at the issue price of Rs.257 per equity share, aggregating to Rs.5,000 lakhs for setting-up of new medium density fibreboard (MDF) manufacturing unit in Chittoor, Andhra Pradesh. The Company had complied with requisite provisions of the Companies Act, 2013 and SEBI, as applicable.

(b) Rights, preferences and restrictions attached to equity share

The Company has a single class of equity shares with par value of Rs.1 per share. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets on winding up. The equity shareholders are entitled to receive dividend as declared by the Company from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable has not been paid. Failure to pay any amount called up on shares may lead to their forfeiture.

On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts, in proportion to the number of equity shares held.

(c) Particulars of shareholders holding more than 5% shares of fully paid up equity shares

(d) The Company has not reserved any shares for issue under options and contracts/commitments for the sale of shares/disinvestment.

(e) The Company for the period of five years immediately preceding the reporting date has not:

(i) Allotted any class of shares as fully paid pursuant to contract(s) without payment being received in cash.

(ii) Allotted fully paid up shares by way of bonus shares.

(iii) Bought back any class of shares.

Description, nature and purpose of reserve:

(i) Security premium reserve: Security premium reserve is credited when shares are issued at premium. It is utilised in accordance with the provisions of the Act, to issue bonus shares, to provide for premium on redemption of shares or debentures, write-off equity related expenses like underwriting costs etc.

(ii) General reserve: The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes or as allowed by the Companies Act, 2013.

(iii) Retained earnings: It comprises of accumulated profit/ (loss) of the Company.

(iv) Other comprehensive income (OCI): It comprise of remeasurements of the net defined benefit plans on actuarial valuation of gratuity.

(B) Details of security

(a) Term loan from Landesbank Baden-Wurttemberg of Rs.29,406.99 lakhs (31 March 2017: Rs.17,814.91 lakhs) is secured by exclusive charge on Main Press Line of MDF plant at Chittoor, Andhra Pradesh along with any other movable fixed assets financed by Landesbank Baden-Wurttemberg.

(b) Other term loans of Rs.19,058.45 lakhs (31 March 2017: Rs.11,709.76 lakhs) are secured by:

(i) First pari passu charge on immovable fixed assets of the Company at Kriparampur (West Bengal), Pantnagar (Uttarakhand) and Chittoor (Andhra Pradesh).

(ii) First pari passu charge on all movable fixed assets of the Company except assets specifically charged to other lender(s) (including the main press line of MDF plant at Pantnagar (Uttarakhand) and main press line of MD plant at Chittoor (Andhra Pradesh) along with any other movable fixed assets exclusively charged to Landesbank Baden- Wurttemberg).

(iii) Second pari passu charge on all current assets of the Company.

(c) Secured Loan against vehicles and equipments are in respect of finance of vehicles, secured by hypothecation of the respective vehicles.

(d) Working capital loans of Rs.3,570.87 lakhs (31 March 2017: Rs.3,405.70 lakhs) are secured by:

(i) First pari passu charge on all current assets of the Company.

(ii) Second pari passu charge on immovable fixed assets of the Company at Kriparampur (West Bengal), Pantnagar (Uttarakhand) and Chittoor (Andhra Pradesh).

(iii) Second pari passu charge on all movable fixed assets of the Company except assets specifically charged to other lender(s) (including the main press line of MDF plant at Pantnagar (Uttarakhand) and main press line of MDF plant at Chittoor (Andhra Pradesh) along with any other movable fixed assets exclusively charged to Landesbank Baden-Wurttemberg).

(e) Foreign currency loan - buyers credit of Rs.5,256.54 lakhs (31 March 2017: Rs.2,605.89 lakhs) and Rupee loans - bill discounting of Rs.4,319.77 lakhs (31 March 2017: Rs.4,756.68 lakhs) is secured by letter of credit/letter of undertaking issued by banks.

(a) There is no amount due and outstanding to be credited to Investor Education and Protection Fund as at 31 March 2018.

(b) Information about the Company’s exposure to currency and liquidity risks related to the above financial liabilities is disclosed in note 42.

Government grants have been received for the import of certain items of property, plant and equipment under export promotion capital goods (EPCG) scheme of Government of India. The Company has certain export obligations against such benefits availed which the Company will fulfill within the required time period under the scheme. For contingencies attached to these grants, refer note 37.

Post the applicability of Goods and Service Tax (GST) with effect from 1 July 2017, revenue from operations are disclosed net of GST, whereas excise duty formed part of Expenses in previous year. Accordingly, revenue from operations and Expenses for the year ended 31 March 2018 are not comparable with the previous year presented in the standalone financial statements.

Notes:

(a) Defined contribution plan: Employee benefits in the form of provident fund is considered as defined contribution plan and the contributions to Employees’ Provident Fund Organisation established under The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 is charged to the Standalone Statement of Profit and Loss of the year when the contributions to the respective funds are due.

(b) Defined benefit plan: Retirement benefits in the form of gratuity is considered as defined benefit obligations and is provided for on the basis of third party actuarial valuation, using the projected unit credit method, as at the date of the Standalone Balance Sheet.

Every Employee who has completed five years or more of service is entitled to gratuity on terms not less favourable than the provisions of The Payment of Gratuity Act, 1972.

As the Company has not funded its liability, it has nothing to disclose regarding plan assets and its reconciliation.

(d) Amount incurred as expense for defined contribution to Provident Fund is Rs.696.05 lakhs (31 March 2017 Rs.675.25 lakhs)

Claim against the Company not acknowledged as debt:

Cash outflows for the above are determinable only on receipt of judgments pending at various forums/ authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial position.

Guarantees outstanding:

The Company had issued guarantees in favour of banker on behalf of its joint venture company - Greenply Alkemal (Singapore) Pte. Limited for the purpose of availing working capital loan. This guarantee was issued in USD.

The Company had issued counter guarantees in favour of banker on behalf of its wholly owned subsidiary company - Greenply Trading Pte. Limited and Greenply Middle East Limited, for the purpose of availing working capital loan. These guarantees was issued in USD.

5. Operating leases

See accounting policy in note 3(m)

(a) Future minimum lease rentals payable under non cancellable operating lease

The Company has taken certain vehicles under non-cancelable operating leases. Lease rental expense under non-cancellable operating lease during the year amounted to Rs.195.13 lakhs (31 March 2017: Rs.159.74 lakhs). Future minimum lease payments under non-cancellable operating lease is as below:

(b) The Company has taken certain commercial premises and equipment under cancellable operating leases. These lease agreements are normally renewed on expiry. Lease payments recognised in Standalone Statement of Profit and Loss with respect to operating leases Rs.911.60 lakhs (31 March 2017: Rs.801.25 lakhs) has been included as rent in note 34 ‘Other expenses’.

6. Related party disclosure

a) Related parties where control exists Wholly owned subsidiary companies:

i) Greenply Trading Pte. Limited, Singapore

ii) Greenply Holdings Pte. Limited, Singapore

iii) Greenply Middle East Limited, Dubai

iv) Greenply Gabon SA, Gabon (Subsidiary of Greenply Middle East Limited, Dubai)

v) Greenpanel Industries Limited, India (w.e.f. 13.12.2017)

Company in which a Subsidiary is a Joint Venture Partner:

i) Greenply Alkemal (Singapore) Pte. Limited, Singapore

(Joint venture of Greenply Trading Pte. Limited, Singapore with Alkemal Singapore Pte. Limited, Singapore)

b) Other Related parties with whom transactions have taken place during the year Key Management Personnel (KMP)

i) Mr.Shiv Prakash Mittal, Executive Chairman

ii) Mr. Rajesh Mittal, Managing Director

iii) Mr. Shobhan Mittal, Joint Managing Director & CEO

iv) Mr. Sanidhya Mittal, Executive Director (w.e.f. 07.02.2018)

v) Mr. Susil Kumar Pal, Non-Executive Independent Director

vi) Mr. Vinod Kumar Kothari, Non-Executive Independent Director

vii) Mr. Anupam Kumar Mukerji, Non-Executive Independent Director

viii) Mr. Upendra Nath Challu, Non-Executive Independent Director

ix) Ms. Sonali Bhagwati Dalal, Non-Executive Independent Director

x) Mr. Moina Yometh Konyak, Non-Executive Independent Director (died on 08.01.2018)

xi) Mr. V. Venkatramani, Chief Financial Officer

xii) Mr. Kaushal Kumar Agarwal, Company Secretary & Vice President - Legal

Relatives of Key Management Personnel (KMP)

i) Mrs. Chitwan Mittal (Wife of Mr. Shobhan Mittal)

ii) Mrs. Surbhi Poddar (Daughter of Mr. Rajesh Mittal)

iii) Mr. Sanidhya Mittal (Son of Mr. Rajesh Mittal)

c) Enterprises controlled by Key Management Personnel or their relatives

i) Prime Holdings Private Limited

ii) Trade Combines (Partnership Firm)

iii) RS Homcon Limited

iv) Mastermind Shoppers Private Limited

v) Greenlam Industries Limited

As the future liability for gratuity and compensated encashment is provided on an actuarial basis for the Company as a whole, the amount pertaining to each key management personnel is not separately ascertainable and, therefore, not included above. Based on the recommendation of the Nomination and Remuneration Committee, all decisions relating to the remuneration of the KMPs are taken by the Board of Directors of the Company, in accordance with shareholders’ approval, wherever necessary.

g) Terms and conditions of transactions with related parties

Purchase from related parties are made in the ordinary course of business and on terms equivalent to those that prevail in arm’s length transactions with other vendors. Outstanding balances at the year-end are unsecured and will be settled in cash and cash equivalents.

The Company has not recorded any impairment of receivables relating to amounts owed by a related parties. This assessment is undertaken in each financial year through examining the financial position of the related parties and the market in which the related party operates.

The loan given to related parties is made in the ordinary course of business and on terms at arm’s length price. Outstanding balances at the year-end is unsecured and will be settled in cash and cash equivalents. The interest on loan given to subsidaries is fixed at arm length rate at 12 months USD Libor plus 500 basis points.

The guarantees given to related parties is made in the ordinary course of business and on terms at arm’s length price. The commission on such guarantees have been recovered at arm length price as per safe harbour rules of Income Tax Act.

h) Details of loans, investments and guarantee covered under Section 186(4) of the Companies Act, 2013

(i) Details of loans

Loan given to Greenply Middle East Limited bears interest rate of 12 months USD Libor plus 5% p.a. and is repayable at various dates on or before 11 February 2024. The said loan has been given for business requirements. (refer note 8).

(ii) Details of investments

Particulars of investments as required under Section 186(4) of the Companies Act, 2013 have been disclosed in note 7.

7. Accounting classifications and fair values

See accounting policy in note 3(c)

The fair values of financial assets and liabilities, together with the carrying amounts shown in the Standalone Balance Sheet are as follows:

8. Fair value measurement

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

The Company has established the following fair value hierarchy that categories the value into 3 levels. The inputs to valuation techniques used to measure fair value of financial instruments are:

Level 1: The hierarchy uses quoted prices in active markets for identical assets or liabilities. The fair value of all bonds which are traded in the stock exchanges is valued using the closing price or dealer quotations as at the reporting date.

Level 2: The fair value of financial instruments that are not traded in an active market (for example traded bonds, over the counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on company specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

Financial assets and liabilities measured at fair value - recurring fair value measurements are as follows:

The management assessed that trade receivables, cash and cash equivalent, other bank balances, trade payable, cash credits and other financial assets and liabilities approximate their carrying amounts largely due to the short term maturities of these instruments.

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

(a) The fair value of the quoted investments are based on market price at the respective reporting date.

(b) The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves based on report obtained from banking partners.

(c) The fair value of forward foreign exchange contracts is calculated as the present value determined using forward exchange rates and interest rate curve of the respective currencies based on report obtained from banking partners.

9. Financial risk management

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

(i) Credit risk

(ii) Liquidity risk

(iii) Market risk

Risk management framework

The Company’s principal financial liabilities, other than derivatives, comprises of borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company operations. The Company’s principal financial assets, other than derivatives include trade and other receivables, investments and cash and cash equivalents that derive directly from its operations.

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimise potential adverse effects of market risk on its financial performance. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. Foreign currency options contract are entered to hedge certain foreign currency risk exposures and interest rate swaps to hedge variable interest rate exposures. The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. The Company’s risk management assessment and policies and processes are established to identify and analyse 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.

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital.

The sources of risks which the Company is exposed to and their management is given below:

(i) Credit risk

Credit risk is the risk of financial loss of the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company receivables from customers and loans. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing/investing activities, including deposits with bank, foreign exchange transactions and financial guarantees. The Company has no significant concentration of credit risk with any counterparty. The carrying amount of financial assets represent the maximum credit risk exposure.

Trade receivable

The management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references.

Exposure to credit risks

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry. Details of concentration percentage of revenue generated from top customer and top five customers are stated below:

Trade receivables are primarily unsecured and are derived from revenue earned from customers. Credit risk is managed through credit approvals, establishing credit limits and by continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. As per simplified approach, the Company makes provision of expected credit loss on trade receivables using a provision matrix to mitigate the risk of default payments and makes appropriate provisions at each reporting date whenever is for longer period and involves higher risk. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the credit loss allowance for trade receivables. The said provision has been netted off under trade receivables.

(ii) Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Company’s finance team is responsible for liquidity, finding as well as settlement management. In addition, Processes and policies related to such risks are overseen by senior management. Management monitors the Company’s liquidity position through rolling forecasts on the basis of expected cash flows.

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 conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Exposure to liquidity risk

The table below provides details regarding the remaining contractual maturities of financial liabilities at the reporting date based on contractual undiscounted payments.

(iii) Market risk

Market risk is the risk of loss of future earnings, fair value or future cash flows that may result from a change in the price of a financial instrument . The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that effect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and borrowings. The Company uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by the management.

(a) Currency risk

Foreign currency risk is the risk impact related to fair value or future cash flows of an exposure in foreign currency, which fluctuate due to changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the foreign currency borrowings, import of raw materials and spare parts, capital expenditure, exports of finished goods. The Company evaluates exchange rate exposure arising from foreign currency transactions. The Company follows established risk management policies and standard operating procedures. It uses derivative instruments like foreign currency swaps and forwards to hedge exposure to foreign currency risk.

Exposure to currency risk

The Company’s exposure to foreign currency at the end of the reporting period are as follows:

Sensitivity analysis

A reasonably possible strengthening (weakening) of the USD and EURO against Indian rupee at 31 March would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

(b) Interest rate risk

I nterest 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 exposure to the risk of changes in market interest rates related primarily to the Company’s short term borrowing with floating interest rates. For all long term borrowings with floating rates, the risk of variation in the interest rates in mitigated through interest rate swaps. The Company constantly monitors the credit markets and rebalances its financing strategies to achieve an optimal maturity profile and financing cost.

Exposure to interest rate risk

The interest rate profile of the Company ‘s interest bearing financial instruments at the end of the reporting period are as follows

Sensitivity analysis

Fixed rate instruments that are carried at amortised cost are not subject to interest rate risk for the purpose of sensitive analysis.

A reasonably possible change of 100 basis points in variable rate instruments at the reporting dates would have increased or decreased profit or loss by the amounts shown below:

10. Capital management

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain furture development of the business. The management monitors the return on capital, as well as the level of dividends to equity shareholders.

The Company’s objective when managing capital are to: (a) to maximise shareholders value and provide benefits to other stakeholders and (b) maintain an optimal capital structure to reduce the cost of capital.

For the purpose of the Company’s capital management, capital includes issued equity share capital and other equity reserves attributable to the equity holders.

The Company monitors capital using debt-equity ratio, which is total debt less liquid investments divided by total equity

In addition, the Company has financial covenants relating to the banking facilities that it has taken from all the lenders like interest service coverage ratio, Debt to EBITDA, current ratio etc. which is maintained by the Company.

11. Segments information

In accordance with Ind AS 108 “Operating Segments”, segment information has been given in the consolidated financial statements of the Company, and therefore, no separate disclosure on segment information is given in these standalone financial statements.

12. Taxation

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulations under Sections 92-92F of the Income-Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documents for the international transactions entered into with the associated enterprises during the financial year. The management is of the opinion that its international transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense for the year and that of provision for taxation.

13. Government grant (Ind AS 20): Other operating revenue includes incentives against scheme of budgetary support under Goods and Services Tax Regime for the units set-up in Rudrapur-MDF, Uttarakhand and Tizit, Nagaland of Rs.1,934.61 lakhs (31 March 2017 Rs. Nil) and incentive against refund of excise duty for the unit set-up in Tizit, Nagaland till 30 June 2017 of Rs.753.93 lakhs (31 March 2017 Rs.620.87 lakhs).

Proposed dividends on equity shares are subject to approval at the annual general meeting and are not recognised as a liability (including dividend distribution tax thereon) as at 31 March 2018.

14. The standalone financial statements of the previous year were audited by a firm of chartered accountants other than B S R & Co. LLP.

15. Previous year’s figures have been regrouped/reclassified wherever necessary to conform to current year’s classification/disclosure.