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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 500800ISIN: INE192A01025INDUSTRY: Plantations - Tea & Coffee

BSE   ` 235.00   Open: 232.00   Today's Range 226.75
+6.30 (+ 2.68 %) Prev Close: 228.70 52 Week Range 202.40
Year End :2017-03 

1. Contingent Assets :

Certain insurance/commercial claims are in the final stage of recovery for which amounts are not quantifiable and hence, not reported.

2. Micro enterprises and small enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 have been determined based on the confirmations received in response to intimation in this regard sent by the Company to the suppliers. No interest in terms of Section 16 of Micro, Small and Medium Enterprises Development Act, 2006 or otherwise has either been paid or payable or accrued and remaining unpaid as at March 31, 2017.

3. A provision of Rs. 74.41 Crores created by the Company in earlier years, for its liabilities on account of bank loans availed by its Chinese subsidiary, has been, during the year, adjusted against capital infused into that subsidiary for the purpose of liquidating the said bank loans.

4. Corporate Social Responsibility (CSR)

As per Section 135 of the Companies Act, 2013, a CSR Committee has been formed by the Company.

(a) Gross Amount required to be spent by the Company during the year Rs. 5.31 Crores (Rs. 4.50 Crores).

(b) Amount spent during the year:

Other receipts consist of Rs. 41,500 received for vehicles requisitioned for public purposes and Rs. 1,08,000 received by the referral hospital operated by the Company in the plantation district of Munnar. These receipts were promptly deposited in the bank.

5. Lease

The Company's leasing arrangements are in respect of operating leases for premises (residential, office, godown, etc.) and motor cars.

These operating leasing arrangements which are cancellable ranges between 5 months to 5 years and are usually renewable on mutually agreeable terms. The aggregate lease rentals payable in respect of premises are charged as Rent and in respect of motor cars amounting to Rs. 4.75 Crores (Rs. 4.59 Crores) are charged under Miscellaneous expense under Note 27 of the Statement of Profit and Loss.

* For certain investments categorised under Level 3, cost has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.

** Includes loan amounting to Rs. 24 Crores classified from FVTPL (Level 3) to amortized cost in the financial year 2015-16.

B. Measurement of fair values

The basis of measurement in respect to each class of financial asset and financial liability is disclosed in note 2(i) of the financial statement.

The fair value of liquid mutual funds and long-term equity investment is based on quoted price. Fair values of certain non-current investment are valued based on discounted cash flow/book value/EBITDA multiple approach. Derivative financial instruments are valued based on Black-Scholes-Merton approach/Dollar offset principles.

C. Financial risk management

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

- Credit risk ;

- Liquidity risk ; and

- Market risk

i. Risk management framework

The Risk Management Committee of the Board is entrusted with the responsibility to assist the Board in overseeing and approving the Company's risk management framework. The Company has a comprehensive risk management policy relating to the risks that the Company faces under various categories like strategic, operational, reputational and other risks and these have been identified and suitable mitigation measures have also been formulated. The Risk Management Committee reviews the key risks and the mitigation measures periodically. The Audit Committee has additional oversight in the area of financial risks and control.

ii. Credit risk

Credit risk is the risk that counter-party will not meet its obligations leading to a financial loss. The Company is exposed to credit risk arising from its operating (primarily trade receivables) and financing activities including deposits placed with banks, financial institutions and other corporate deposits. The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of financial assets. Financial assets are classified into performing, under-performing and non-performing. All financial assets are initially considered performing and evaluated periodically for expected credit loss. A default on a financial asset is when there is a significant increase in the credit risk which is evaluated based on the business environment. The assets are written off when the company is certain about the non-recovery.

a. Trade Receivables

The Company has an established credit policy and a credit review mechanism. The Company also covers certain category of its debtors through a credit insurance policy. In such case the insurance provider sets an individual credit limit and also monitors the credit risk.

Management believes that the unimpaired amounts that are past due by more than 90 days are still collectible in full, based on historical payment behavior and analysis of customer credit risk.

b. Financial instruments and cash deposits

The credit risk from balances / deposits with banks, other financial assets and current investments are managed in accordance with the company's approved policy. Investments of surplus funds are made only with approved counter-parties and within the limits assigned to each counter-parties. The limits are assigned to mitigate the concentration risks. These limits are actively monitored by the Company.

iii. Liquidity Risk

Liquidity risk is the risk that the Company may encounter difficulty in meeting its obligations. The Company monitors rolling forecast of its liquidity position on the basis of expected cash flows. The Company's approach is to ensure that it has sufficient liquidity or borrowing headroom to meet its obligations at all point in time. The Company has sufficient short-term fund based lines, which provides healthy liquidity and these carry highest credit quality rating from reputed credit rating agency.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.

iv. Market risk

Market risk is the risk that the fair value of the future cash flows will fluctuate because of changes in the market prices such as currency risk, interest rates risk and commodity price risk.

a) Currency risk

The Company operates in various geographies and is exposed to foreign exchange risk on its various currency exposures. The risk of changes in foreign exchange rates relates primarily to the Company's operating activities and translation risk, which arises from recognition of foreign currency assets and liabilities.

The Company uses various derivative financial instruments governed by its board approved policy, such as foreign exchange forward and option contracts to mitigate the said risk. The counter-party for these contracts is generally a reputed scheduled bank. The Company reports quarterly to a committee of the board, which monitors foreign exchange risks and policies implemented to manage its foreign exchange exposures.

During the year ended March 31, 2017, the company has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign currency exposure on highly probable forecasted transactions. Hedge effectiveness is determined at inception and periodic prospective effectiveness testing is done to ensure that the relationship exists between the hedged items and hedging instruments, including whether the hedging instruments is expected to offset changes in cash flows of hedged items.

b) Interest Rate Risk

Interest 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 interest rate risk can also impact the provision for retrial benefits. The Company generally utilizes fixed rate borrowings and therefore not subject to interest rate risk, since neither the carrying amount nor the future cash flows will fluctuate because of change in the market interest rates.

The Company is not exposed to significant interest rate risk as at the respective reporting dates.

c) Price Risk

The price risk is the risk arising from investments held by the Company and classified in the balance sheet either at fair value through Other Comprehensive Income or at fair value through profit or loss.

The Company's equity investments are mainly strategic in nature and are generally held on a long-term basis. Further, the current investments are in units of liquid mutual fund and these are not exposed to significant price risk.

d) Commodity Risk

The Company is exposed to the fluctuations in commodity prices mainly for tea. Mismatch in demand and supply, adverse weather conditions, market expectations etc., can lead to price fluctuations. The Company manages these price fluctuations by actively managing the sourcing of tea, private purchases and alternate blending strategies without impacting the quality of the blend.

Capital Management

The Company's objective for capital management is to maximize shareholder wealth, safeguard business continuity and support the growth of the Company. The Company determines the capital management requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through optimum mix of borrowed and own funds.

6. Post Retirement Employee Benefits:

(i) Defined Contributions

Amount of Rs. 10.62 Crores (Rs. 10.02 Crores) is recognized as an expense and included in employee benefit expense to the following defined contribution plans:

(ii) Defined Benefits:

Gratuity, Pension and Post Retiral Medical Benefits:

The Company operates defined benefit schemes like retirement gratuity, defined superannuation benefits and post retirement medical benefits. There are superannuation benefits and medical benefits restricted to certain categories of employees/directors in the form of pension, medical and other benefits in terms of a specific policy related to the same

(iii) Provident Fund

The Company operates Provident Fund Schemes and the contributions are made to recognized funds maintained by the Company and for certain categories contributions are made to State Plans. The Company has an obligation to fund any shortfall on the yield of the trust's investments over the administered rates on an annual basis. The Actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumption there is no shortfall as on March 31, 2017 and March 31, 2016.

7. First-time adoption of Ind AS

The Company has prepared financial statements which comply with Ind AS for periods ending on or after March 31, 2016, together with the comparative period data for the year ended March 31, 2016. In preparing these financial statements, the Company's opening balance sheet was prepared as at April 1, 2015, the Company's date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP balance sheet as at April 1, 2015 and its previously published Indian GAAP financial statements as at and for the year ended March 31, 2016.

Notes to reconciliation:

A) Reversal of 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 recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the General Meeting. This has resulted in an increase in equity by Rs. 171.72 Crores and Rs. 171.72 Crores as at March 31, 2016 and April 1, 2015 respectively.

B) Fair value of equity investments through Other Comprehensive Income

Under previous GAAP, current investments were measured at lower of cost or fair value and long-term investments were measured at cost less diminution in the value which is other than temporary. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments were recognized in equity.

C) Amortized cost adjustment on long-term borrowings

Under previous GAAP, redemption premium payable on Debentures were adjusted with Securities Premium in accordance with Section 52 of Companies Act, 2013. Under Ind AS, these Debentures being financial liabilities are measured at amortized cost using the effective interest method and the resultant difference is accounted in the Statement of Profit and Loss. This has resulted in increase in equity by Rs. 10.78 Crores and Rs. 27.26 Crores as at March 31, 2016 and April 1, 2015 respectively.

D) Tax adjustments

Tax adjustments include deferred tax impact on account of differences between previous GAAP and Ind AS. These adjustments have resulted in increase in net profit by Rs. 6.91 Crores for the year ended March 31, 2016.

E) Remeasurement of defined benefit plans

Under Ind AS, remeasurements of defined benefit plans i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of the statement of profit and loss. Under the previous GAAP, these remeasurements were accounted in the statement of profit and loss for the year. As a result of this change, the profit for the year ended March 31, 2016 increased by Rs. 11.33 Crores. There is no impact on the total equity as at March 31, 2016.

Statement of Cash Flow:

There were no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind AS.

8. Unless otherwise stated, figures in brackets relate to the previous year. All the numbers have been rounded off to nearest Crore.