1. GENERAL INFORMATION:

Nitta Gelatin India Limited (‘the Company'/‘NGIL'), a public limited company, operates in the business of manufacture and sale of ossein, gelatin, collagen peptide. The Company's shares are listed for trading on BSE Limited in India.

a. Deemed carrying cost

For property, plant and equipment existing as on the date of transition to Ind AS, i.e., 1 April 2016, the Company has used previous GAAP carrying value as deemed costs.

b. Contractual obligations Refer Note 3.32

c. Capitalised borrowing cost

There is no borrowing costs capitalised during the year ended 31 March 2018 (31 March 2017: Nil).

d. Property, plant and equipment pledged as security Refer note 3.28

Note: a. Deemed carrying cost

For intangible assets existing as on the date of transition to Ind AS, i.e., 1 April 2016, the Company has used previous GAAP carrying value as deemed costs.

b. Contractual obligations

There are no contractual commitments for the acquisition of intangible assets

(a) 6 % Optionally Convertible Non-Cumulative Preference Shares (OCPS) of Rs. 10 each, fully paid up of Reva Proteins Limited, the option for conversion into equity shares is to be exercised within six years from the date of allotment (23 March 2016). The outstanding OCPS which are not converted will get redeemed in two equal tranches at the end of the 7th and 8th year commencing from such date of allotment of OCPS.

(a) The Board of Directors have appproved a scheme of merger of its subsidiary company - Reva Proteins Limited with the Company, in their meeting held on 3rd February 2018 in view of the operational synergies emerging out of the said restructuring. The scheme provides for inssuance of 4,444,444 numbers of Redeemable Preference shares of Rs.10/- each to Nitta Gelatin Inc., as consideration for their equity holding of 4,800,000 shares in Reva Proteins Limited. The merger is proposed to be undertaken through a Scheme of amalgamation under Section 230-232 of the Companies Act, 2013 to be filed with the National Company Law Tribunal with the appointed date 1st April 2017 or as may be directed by the National Company Law Tribunal and is subject to approval by the shareholders, lenders, creditors and other regulatory approvals in this regard. The Company has filed an application before the Bombay Stock Exchange and is awaiting approval from them for the said merger.

Further, the operations of the subsidiary have been consistent with the projections of the management and in view of the above and the cash flows that will be generated in the near future, no provision has been considered necessary for the remaining value of non-current equity investments amounting to ' 131,845,715 and advance amounting to Rs.78,917,577 due from the said subidiary.

- Balance with banks in Deposit accounts include deposits held as security against Letter of Credits/ Guarantee.

-- Not due for deposit in the investor education and protection fund

Export incentives receivable includes:

(a) Claims amounting to Rs.20,818,015 (31 March 2017: Rs.20,818,015) under Duty Entitlement Pass Book (DEPB) Scheme recognised as income in earlier years. The Company had also availed Duty Drawback benefit for the corresponding periods amounting to Rs.4,151,031 (31 March 2017: Rs.4,151,031) The Dy. Director General of Foreign Trade vide letter dt 03 October 2011 had informed the company that the dual benefit of DEPB as well as Duty Drawback cannot be allowed and advised that either DEPB benefit or Duty Drawback on the export product may be availed. The Company has been legally advised that it is entitled to both benefits as per the relevant regulations, based on which representations have been filed before higher authorities. During the year, the Grievance Committee of the Directorate General of Foreign Trade have heard the Company's grievance application and remanded the matter back to the original adjudicating authorities for re-examining and for issuing necessary clarification based on the provisions of Foreign Trade Policy. Though the management is of the opinion that these claims are fully recoverable, provision has been created in the accounts towards Duty Drawback claim for the relevant period as a matter of abundant caution.

(b) Claim for duty drawback on furnace oil consumed relating to earlier years amounting to Rs.6,461,789 (31 March 2017: Rs.6,461,789) which has been decided against the company by the division bench of the Hon'ble High Court of Kerala. The Company has sought further appeal before Hon'ble Supreme Court and although the Company is hopeful of favourable order, provision has been created in respect of such disputed claims in the books of account as a matter of abundant caution.

Balance with banks in Deposit accounts include Rs.10,377,873 (31 March 2017: Rs.9,186,963) with a maturity period of less than 12 months, which are held as security against Letter of Credits/ Guarantee and Buyers Credit and Rs.Nil (31 March 2017: Rs.58,298,318) being other short term deposits with a maturity period of less than 12 month.

Assets held for sale represents cost of plant and machinery proposed to be sold by the Company for which provisions have been made in the current year due to loss in value based on technical evaluation and non completion of disposal action as planned.

(b) Terms/ Rights attached to equity share:

The Company has only one class of shares referred to as equity shares with a face value of ' 10 each. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed/declared by the Board of Directors is subject to approval/regularisation of the shareholders' in the ensuing Annual General Meeting. 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, in proportion to the number of equity shares held by the shareholders.

The company has issued 929,412 Nos of Optionally Convertible Non-Cumulative Preference Shares (OCPS) with a face value of Rs. 170/- each for cash at par on a preferential basis to M/s. Nitta Gelatin Inc., Japan, a significant share holder. Each holder of Preference shares is entitled to a preferential right for fixed dividend of 5.4029% (5 % 6 months USD Libor as on record date ie, 17.04.2015) per annum on the face value of the OCPS, on a non-cumulative basis payable on prorata basis from date of allotment, if declared. The OCPS is convertible into an equal number of equity shares of face value of Rs 10/- each within 18 months from the date of allotment (i.e 28.04.2015), in one or more financial years, at a price of Rs 170/- each (inclusive of a premium of Rs. 160/- per share). All outstanding Optionally Convertible Non- Cumulative Preference Shares, which are not converted into equity shares at the end of the 18 months from the date of allotment are redeemable at par at the expiry of seven years from date of allotment or except as is otherwise repayable on the exercise of a put and call option at the expiry of five years from date of allotment subject to such approvals as may be required. No OCPS was converted into equity shares till the completion of the period of 18 months from the date of allotment.

- Does not include gratuity and compensated absences as these are provided in the books on the basis of actuarial valuation for the Company as a whole and hence individual figures cannot be determined.

-- Represents guarantees given in respect of loans taken by Reva Proteins Limited from banks/ financial institutions. During the year, the Company has given guarantee for loan taken by Reva Proteins Limited amounting to Rs.Nil (31 March 2017: Rs.30,000,000 ) in compliance with Section 186 of the Companies Act, 2013.

# Net of Provision for impairment of investments Rs.170,403,998 (previous year Rs.170,403,998).

2. Segment Information

The Company is engaged in the manufacture and sale of products which form part of one product group which represents one operating segment, as the Chief Operating Decision Maker (CODM), reviews business performance at an overall company level. Entity-wide disclosure as required by Ind AS 108 "Operating Segment” are as follows:

3. (i) Central Excise authorities have issued show cause notices proposing to withdraw CENVAT credit availed by the company on Hydrochloric Acid used in the manufacture of Ossein consumed for Gelatin production amounting to Rs.35,074,543 (31 March 2017 Rs.35,074,543) which has been disputed by the company. Though no demand has been raised by the department, based on legal advice received, the company has created a provision of Rs.13,229,289 (31 March 2017 Rs.13,229,289) as a matter of abundant caution and the balance amount of Rs. 21,845,254 (31 March 2017 Rs.21,845,254) has been disclosed as a contingent liability.

4. (ii) The Central Sales Tax authorities had raised demand on assessment for an earlier year amounting to Rs.2,874,385 (31 March 2017 Rs.2,874,385) which has been disputed in appeal. Though the management is of the opinion that these demands are not fully sustainable, provision has been created in the accounts for the aforesaid amount as a matter of abundant caution.

5. (iii) The Sales Tax authorities had raised demand for entry tax on furnace oil for an amount of Rs.2,200,998 in an earlier year and was under appeal. Against the demand an amount of Rs.1,100,494 was deposited under protest and later a provision of equivalent amount was created for the doubtful deposit. The Supreme Court has held that levy of entry tax on furnace oil is valid constitutionally and the company has made additional provision of Rs.1,100,494, being the balance as per the demand as a matter of abundant caution.

6.(i) The Income Tax authorities has made certain disallowances on assessments completed for earlier years, which are pending on appeal before the appellate authority. In the opinion of the management no provision is considered necessary for the same at this stage.

The Company has received tax orders from the Income Tax authorities reducing brought forward losses (including unabsorbed depreciation) amounting to Rs.8,235,581 (31 March 2017 Rs.8,235,581), primarily on denial of certain expenditure upon completion of tax assessmet for the assement years 2006-07, 2007-08 and 2008-09. There is no tax demand on account of the above. The Company's appeal against the said demads are pending before appellate authorities in various stages of litegation.

Further, the Company has received the tax orders from the transfer pricing authorities redusing brought forward losses (including unabsorbed depreciation) amount to Rs.51,206,777 (31 March 2017 Rs.51,206,777), primarily on tranfer pricing adjustment upon completion of tax assessment for assessment years 2006-07, 2007-08 and 2008-09. There is no tax demand on account of the above. The Company's appeal against the said demads are pending before appellate authorities in various stages of litegation.

The Company is contesting these litigations and the management believes that its position will be likely to be upheld in the appellate process and therefore will not impact these financial statements. Consiquently no provision has been created in the financial statements for the above.

7.(ii) The sales tax authorities had raised demands on assessment for some earlier years amounting to Rs.5,218,932 (31 March 2017 Rs.34,888,363) (net of bank guarantees), excluding interest on demand not quantified by the management, which had been disputed by the Company on appeal. Based on legal advice, no provision is considered necessary towards the said demands and the amount involved is disclosed as contingent liability.

8.(iii) Includes demands raised by the Central Excise Authorities (including penalty thereon but excluding interest) for higher excise duties on a product of the Company and towards cenvat credits availed aggregating to Rs.1,293,274 (31 March 2017 Rs.1,293,274) which have been disputed by the company before the appellate authorities; and show cause notices received from such authorities for service tax on certain deemed services and ineligible cenvat credit availed aggregating to Rs.6,469,623 (31 March 2017 Rs.6,131,372), which have been represented before adjudicating authorities. In the opinion of the management these demands/ show cause notices issued are not sustainable, so no provision is considered at this stage.

9.(iv) During an earlier year, an amount of Rs.71,484,400 was demanded as water cess for extraction of river water for industrial use during the period from 01 April 1979 to 31 December 2010, in accordance with a Government Order issued on 25 July 2009. The Company had been legally advised that the demands may not be fully sustainable in law and had filed a writ petition before the Hon'ble High Court of Kerala against the proceedings, which is pending.

The Company had also made a representation to the Secretary (Water resources), Government of Kerala which is pending consideration of the Government. Pursuant to discussions with Government authorities, the Company had entered into an agreement for payment of such charges for the periods subsequent to 01 January 2011. Further, a provision of Rs.6,183,200 towards disputed charges for the period from 25 July 2009 to 31 December 2010, being periods subsequent to issue of the Government order, was made in the accounts in an earlier year as a matter of abundant caution.

In the opinion of the management, having regard to the legal advice, no provision is considered necessary for charges for periods from 01 April 1979 to 24 July 2009 amounting to Rs.65,301,200, being periods prior to the issue of the Government order which has been disclosed as contingent liability.

10. The customs authorities have issued show cause notice-cum-demand proposing classify/ reassess import of a certain item of raw materials, which has been objected by the Company. During the year, the Commissioner of Customs had issued an order confirming demand of Rs.87,714,969, penalty of Rs.109,120,912. The Company has filed appeal before the appellate authorities which is pending for disposal at this stage. As per the independent legal advice, the proposal of the department is legally incorrect and the matter has not reached finality as the appellate proceedings are pending for adjudication and hence no provision is considered necessary at this stage

11. Estimated amount of contracts remaining to be executed on capital account - Rs.9,780,290 (31 March 2017 Rs.26,007,513)

12. a. In respect of Capital Goods imported at concessional rate of duty under the Export Promotion Capital Goods Scheme, the Company has an export obligation of approximately Rs.1,700,000 (31 March 2017 Rs.1,690,000) which is required to be fulfilled at different dates until 2020. In the event of non fulfillment of the export obligation, the Company will be liable for the Customs duties and penalties as applicable.

b. In respect of Raw materials imported at concessional rate of duty under the Advance Authorisation Scheme, the Company has an export obligation of approximately Rs.6,27,70,000 (31 March 2017: Rs.624,80,000 ) which is required to be fulfilled at different dates until 2016. In the event of non fulfillment of the export obligation, the Company will be liable for the Customs duties and penalties as applicable. The DGFT is not considering the companies application for the extension of time for the fulfilment of export obligation, due to dispute on classification of the imported raw material as per note 3.31.3 above. Since the company's dispute on classification / reassessment of the raw material is pending for adjudication before the appellate tribunal and the company is hopeful of a favourable decision based on legal opinion received, no provision is considered necessary at this stage.

13. In the opinion of the management, Current financial assets and Other current assets, have the value at which they are stated in the Balance Sheet, if realised in the ordinary course of business.

14. Disclosure with respect to operating leases

The lease expenses for cancellable operating leases during the year ended 31 March 2018 is Rs.5,340,632 (31 March 2017: Rs.3,637,702)

The Company's significant leasing arrangements in respect of operating leases for office premises, which includes both cancellable leases generally range between 4 months to 11 months and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as rent under note 3.26 to the financial statements.

15. Capital management

For the purpose of the Company's capital management, capital includes issued capital, additional paid up capital and all other equity reserves attributable to the equity holders of the company. The primary objective of the Company's capital management is to maximise the share holder value.

In order to achieve this overall objective, The Company's capital management, amongst other things, aims to ensure that it meets financial convenants attached to the interest bearing loans and borrowings that define capital structure requirements. Breeches in meeting the financial coventants would permit the bank to immediately call loans and borrowings. There have been no breeches in the financial covenants of any interest bearing loan and borrowing in the current period.

The Company manages its capital structure and makes adjustments in the light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure the Company may adjust the divident payment to shareholders, return capital to shareholders or issue new shares. The company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, trade payables less cash.

16. A. Defined benefit plan

The Company has gratuity fund for its employees. The Company provides for gratuity for employees as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity at the rate of 15 days basic salary for each year of service until the retirement age. As at 31 March 2018 and 31 March 2017 the plan assets were invested in insurer managed funds.

16 B. Defined contribution plan

The Company provides benefits in the nature of defined contribution plans viz, provident fund, employee state insurance scheme and superannuation fund for qualifying employees. Under these Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised Rs.25,466,227 (31 March 2017: Rs.28,917,668) towards contribution for mentioned funds in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the Schemes.

C. Sensitivity analysis

Description of Risk Exposures

Valuations are performed on certain basic set of pre-determined assumptions which may vary over time. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:

Interest Rate Risk: The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of liability (as shown in financial statements).

Liquidity Risk: This is the risk that the Company is not able to meet the short term benefit payouts. This may arise due to non availability of enough cash/cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.

Salary Escalation Risk: The present value of the above benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase in salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.

Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.

Regulatory Risk: Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (for example, increase in the maximum liability on gratuity of 2,000,000).

Asset Liability Mismatching or Market Risk: The duration of the liability is longer compared to duration of assets exposing the company to market risks for volatilities/fall in interest rate.

Investment Risk: The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:

Sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. There are no changes from the previous period in the methods and assumptions used in preparing the sensitivity analysis.

There is no change in the method of valuation for the prior period.

16. D. Long Term Employee Benefits

Compensated absences (Vesting and Non Vesting): Unfunded Obligation

The management assessed that the fair value of cash and cash equivalents, trade receivables, loans, other financial assets, trade payables, working capital loans and other financial liabilities approximate the carrying amount largely due to short-term maturity of this instruments.

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

(ii) Fair value of financial assets and liabilities measured at amortised cost

The management assessed that for amortised cost instruments, fair value approximate largely to the carrying amount.

(iii) Fair value hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for financial instruments.

Level 2: the fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.

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

Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The valuation techniques uses the exchange rates provided by banks for revaluation of balance in forward contracts as on the reporting dates.

(iv) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

- the fair value of quoted investments is determined using the market value for the investment. The fair value estimates are included in level 1.

- the fair value of foreign exchange forward contracts is determined using market observable inputs, including prevalent forward rates for the maturities of the respective contracts and interest rate curves as indicated by banks and third parties.

- the fair value of other equity instruments have been computed based on income approach using a discounted cash flow model, which discounts the estimated cash flows using the appropriate discount rates.

17. Financial risk management

The Company's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company's focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on it's financial performance. The primary market risk to the Company is foreign exchange exposure risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company's exposure to credit risk is influenced mainly by the individual characteristic of each customer.

The Company's risk management activity focuses on actively securing the Company's short to medium-term cash flows by minimising the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns.

The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Company is exposed are described below.

(A) Credit risk analysis

Credit risk is the risk that a counterparty fails to discharge an obligation to the Company, resulting in a financial loss. The Company is exposed to this risk for various financial instruments. The Company's maximum exposure to credit risk is limited to the carrying amount of financial assets, as summarised below:

A1 Trade and other receivables

Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India, USA, Japan and Europe. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company is exposed to a concentration of customer risk with respect to its trade receivable balances. At the reporting date, trade receivable balance from three customer represented 73% (2017 - 73%) of the total trade receivable balances, respectively. On account of adoption of Ind AS 109, Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain. The provision for expected credit loss takes into account available external and internal credit risk factors and Company's historical experience for customers.

A2 Cash and cash equivalents

The credit risk for cash and cash equivalents, and derivative financial instruments is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

Financial assets that are neither past due nor impaired

Cash and cash equivalents, advances recoverable, loans and advances to employees, security deposit and other financial assets are neither past due nor impaired.

Financial assets that are past due but not impaired

There is no other class of financial assets that is past due but not impaired.

(B) Liquidity risk

Liquidity risk is that the Company might be unable to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, usually on a month on month basis. Long-term liquidity needs for a 360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.

The Company's objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.

The Company's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

(C) Market risk

The Company is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk, which result from both its operating and investing activities.

(C1) Foreign currency sensitivity

The Company operates internationally and a significant portion of the business is transacted in USD, JPY and EURO currencies and consequently the Company is exposed to foreign exchange risk through its sales and purchases from overseas suppliers in various foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company's operations are adversely affected as the rupee appreciates/ depreciates against these currencies.

Foreign currency denominated financial assets and liabilities which expose the Company to currency risk are disclosed below. These include outstanding derivatives contracts entered into by the Company and unhedged foreign currency exposures.

Sensitivity

The following table details the Company's sensitivity to a 1% increase and decrease in the ' against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 1% change in foreign currency rates, with all other variables held constant. A positive number below indicates an increase in profit or equity where ' strengthens 1% against the relevant currency. For a 1% weakening of ' against the relevant currency, there would be a comparable impact on profit or equity, and the balances below would be negative.

Derivative financial instruments

The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.

(C2) Interest rate risk

(i) Liabilities

The Company's policy is to minimise interest rate cash flow risk exposures on long-term financing. At 31 March 2018, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. The Company's investments in fixed deposits all pay fixed interest rates.

Interest rate risk exposure

Below is the overall exposure of the Company to interest rate risk:

(ii) Assets

The Company's fixed deposits are carried at amortised cost and are fixed rate deposits. 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.

18. First time adoption of Ind AS

These are the Company's first financial statements prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (‘previous GAAP').

Accordingly, the Company has prepared the standalone financial statements for the comparitive period as at and for the year ended 31 March 2017 that comply with the applicable Ind AS, 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 Company's date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its previous GAAP financial statements, including the balance sheet as at 1 April 2016 and the comparitive financial statements as at and for the year ended 31 March 2017.

A Ind AS optional exemptions

A1. Deemed cost for property, plant and equipment, and intangible assets

Ind AS 101 First-time Adoption of Indian Accounting Standards, 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 and intangible assets at their previous GAAP carrying value.

A2. Deemed cost for investments in subsidiaries

Ind AS 101 First-time Adoption of Indian Accounting Standards, permits a first-time adopter to elect to continue with the carrying value for investments in subsidiaries 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. Accordingly, the Company has elected to measure its investments in subsidiaries in the standalone financial statements at their previous GAAP carrying value.

A3. Lease

Appendix C to Ind AS 17, Leases, requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, Leases, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101, First-time Adoption of Indian Accounting Standards, provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material. The Company has elected to apply this exemption for such contracts/ arrangements.

B. Ind AS mandatory exemptions

B1. Estimates

In accordance with Ind AS, as at the date of transition to Ind AS an entity's estimates shall be consistent with the 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 except impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition this was not required under the previous GAAP

B2. 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 Financial Instruments 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; or

b) The retrospective application or restatement requires assumptions about what management's intent would have been in that period; or

c) 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.

B3. De-recognition of financial assets and liabilities

Ind AS 101 First-time Adoption of Indian Accounting Standards, requires a first-time adopter to apply the de-recognition provisions of Ind AS 109, Financial Instruments, prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 First-time Adoption of Indian Accounting Standards, allows a first-time adopter to apply the de-recognition requirements in Ind AS 109, Financial Instruments, retrospectively from a date of the entity's choosing, provided that the information needed to apply Ind AS 109, Financial Instruments, 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, Financial Instruments, prospectively from the date of transition to Ind AS.

C. Reconciliations between previous GAAP and Ind AS

Ind AS 101 First-time Adoption of Indian Accounting Standards, 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 as at the periods specified below.

C1. Reconciliation of other equity

The Company has also prepared a reconciliation of equity as at 31 March 2017 and 1 April 2016 under the previous GAAP with the equity as reported in these financial statements under Ind AS, that reflect the impact of Ind AS on the components of statement of Balance sheet which is presented below:

C5. Reconcilation of Cash flow statement for the year ended 31 March 2017

The transition from previous GAAP to Ind AS has not made a meterial impact on the statement of cash flows.

C6 Notes 1 Issue of preference shares

The Company has issued optionally convertible redeemable preference shares to its significant shareholder Nitta Gelatin Inc. However the option of conversion had expired on the date of transition. The preference shares carry fixed cumulative dividend which is non-discretionary. Hence, the instrument has been considered as a pure liability instrument. Under the Previous GAAP, the preference shares were classified as equity and dividend payable thereon was treated as distribution of profit. Under Ind AS 32, Financial Instruments: Presentation, such instruments are separated into liability and equity components based on the terms of the contract. The difference between carrying value of financial liability and fair value on initial recognition has been considered as equity contribution by the holding company and shown as part of ‘Other equity'. Interest expense on financial liability is charged to the Statement of Profit and Loss using the effective interest method.

2 Borrowings from related parties

Under the Previous GAAP, all financial liabilities were carried at cost. Under Ind AS 109, Financial Instruments, borrowings from Nitta Gelatin Inc have been measured at amortised cost. The difference between carrying value of borrowings and fair value on initial recognition has been considered as equity contribution by the company and shown as part of ‘Other equity'. Interest expense on amortised cost is charged to the Statement of Profit and Loss using the effective interest method.

3 Fair valuation of investments

Investments in preference shares have been measured at fair value through profit or loss (FVTPL) as against cost less diminution of other than temporary nature, if any, under the Previous GAAP. The difference between the fair value and previous GAAP carrying value on transition date has been recognized as an adjustment to opening retained earnings. Subsequent fair value changes have been recorded in the Statement of Profit and Loss.

4 Measurement of investments at fair value through OCI

Under the Previous GAAP, the Company accounted for long term investments in quoted and unquoted equity shares as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, the Company has designated such investments as FVOCI investments. Ind AS requires FVOCI investments to be measured at fair value. At the date of transition to Ind AS, difference between the instruments fair value and Indian GAAP carrying amount has been recognised as a separate component of equity, in the FVOCI reserve, net of related deferred taxes.

5 Expected credit loss assessment for trade receivables

Under the Previous GAAP, the Company has created a provision for impairment of receivables only with respect to specific amount for losses incurred . Under Ind AS 109, Financial Instruments, impairment allowance has been determined based on Expected Loss model (ECL). On application of the ECL model, the Company impaired part of its trade receivable on 1 April 2016 which has been adjusted with retained earnings. The impact for year ended on 31 March 2017 has been recognised in the Statement of Profit and Loss.

6 Financial guarantee

Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified subsidiary fails to make a payment when due in accordance with the terms of a debt instrument. Under the Previous GAAP, there was no requirement to account for financial guarantees given by the Company. Under Ind AS, financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109, ‘Financial Instruments' and the amount recognized less cumulative amortization.

7 Adjustment for proposed dividend

Under the Previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend included under provisions has been reversed with corresponding adjustment to retained earnings.

8 Leasehold land

Under the Previous GAAP, the leasehold land had been capitalized under property, plant and equipment and depreciation on the same had been claimed. Under Ind AS 17 Leases, all leases have to be assessed as per the criteria of finance and operating lease. Accordingly, the Company has classifed the arrangement for leasehold land as an operating lease. The net block appearing under PPE has been reclassfied to Prepaid lease rentals and the aforementioned depreciation has been reclassified as rent expense.

9 Excise duty

Under the Previous GAAP, revenue from sale of goods was presented net of excise duty whereas under Ind AS the revenue from sale of goods is presented inclusive of excise duty. Accordingly, the excise duty has been included in revenue and other expenses respectively.

10 Foreign exchange forward contracts

Under the Previous GAAP, the company had adopted the principles of hedge accounting as per Accounting standard 30, Financial Instruments: Recognition and Measurement, and accordingly designated the foreign exchange forward contracts in a cash flow hedge relationship. However, for certain hedge relationships all the conditions for hedge accounting were not met. Consequent to above, the unrealised gain/(loss) on such hedges have been reclassified to opening retained earnings on the transition date and to the Statement of profit and loss for the year ended 31 March 2017, respectively. In addition to above, the Company had not recorded the consequent deferred tax impact on the aforesaid adjustments which have now been given effect in these financial statement.

11 Foreign exchange gain/ (loss) on PCFC loans

Under the Previous GAAP the Company had recorded the gain/ loss on PCFC loans in the hedging reserve which has been adjusted in the opening retained earnings and statement of profit and loss for the year ended 31 March 2017 respectively. In addition to above, the Company had not recorded the consequent deferred tax impact on the aforesaid adjustments which have now been given effect in these financial statement.

12 Impairment of investments

Under the Previous GAAP, the Company had not recorded impairment on its investments in one of the subsidiary. Accordingly, the same has been recorded as an adjustment in the opening retained earnings.

13 Defined benefit obligation

Both under the Previous GAAP and Ind AS, the Company recognized costs related to its postemployment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements comprising of actuarial gains and losses are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus the employee benefit cost is reduced by such amount with a corresponding adjustment on defined benefit plans has been recognized in the OCI net of tax.

14 Deferred tax

Under the Previous GAAP, deferred tax was accounted using the income statement approach, on the timing differences between the taxable profit and accounting profits for the period. Under Ind AS 12, Income Tax, deferred taxes are recognized following the balance sheet approach on the temporary differences between the carrying amount of asset or liability in the balance sheet and its tax base.

15 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, effective portion of gains and losses on cash flow hedging instruments and fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under Previous GAAP.

16 Other equity

Adjustments to retained earnings as at 1 April 2016 and 31 March 2017 has been adjusted consequent to the above Ind AS transition adjustments.