1. CORPORATE OVERVIEW
Innovative Tech Pack Limed (referred to as “ITPL” “The company hereinafter “)is a listed entity incorporated in India. The registered office of the company is located at Plot No. 51, Roz-Ka-Meo, Industrial Area Sohna, Mewat Haryana- 122103, India.
The Company is engaged in the business of Manufacturing & Reselling of Plastic Bottles, Jars, Containers, and Pre-forms & its Caps.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
a) Basis of preparation and compliance with Ind As
(i) For all periods upto and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with Generally Accepted Accounting Principles (GAAP) in India and complied with the accounting standards (Previous GAAP) as notified under Section 133 of the Companies Act, 2013 read together with Rule 7 of the Companies (Accounts) Rules, 2014, as amended, to the extent applicable, and the presentation requirements of the Companies Act, 2013.
In accordance with the notification dated February 16, 2015, issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (Ind AS) notified under Section 133 read with Rule 4A of Companies (Indian Accounting Standards) Rules, 2015, as amended, and the relevant provisions of the Companies Act, 2013 (collectively, “Ind AS”) with effect from April 1, 2016 and the Company is required to prepare its financial statements in accordance with Ind AS for the year ended March 31, 2018. These financial statements as and for the year ended March 31, 2018 (the “Ind AS Financial Statements”) are the first financial statements, the Company has prepared in accordance with Ind AS.
(ii) These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013. The financial statements have also been prepared in accordance with the relevant presentation requirements of the Companies Act, 2013. The Company adopted Ind AS from 1st April, 2017.
(iii) Up to the year ended 31st March, 2017, the Company prepared its financial statements in accordance with the requirements of previous Generally Accepted Accounting Principles (GAAP), which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. These are the Company's first Ind AS financial statements. The Company has followed the provisions of Ind AS 101-“First Time adoption of Indian Accounting Standards” (Ind AS 101), in preparing its opening Ind AS Balance Sheet. The date of transition to Ind AS is 1st April, 2016. Details of the exceptions and optional exemptions availed by the Company and principal adjustments along with related reconciliations are detailed in Note 31 (First-time Adoption).
(iv) These financial statements were approved for issue by the Board of Directors on May 30, 2018.
b). Basis of Preparation
The financial statements are prepared in accordance with the going concern basis using historical cost convention, except for certain items that are measured at fair values, as explained in the accounting policies.
The Financial Statements of the Company have been prepared to comply with the Indian Accounting standards (‘Ind AS'), including the rules notified under the relevant provisions of the Companies Act, 2013.
Company's Financial Statements are presented in Indian Rupees ('), which is also its functional currency and all values are rounded to the nearest lakhs ('00,000), except when otherwise indicated.
Fair value measurement
Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of Ind AS 102 - Share-based Payment, leasing transactions that are within the scope of Ind AS 17 - Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 - Inventories or value in use in Ind AS 36 - Impairment of Assets.
The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period; they are recognised in the period of the revision and future periods if the revision affects both current and future periods.
c). Functional and presentation currency
These Ind AS Financial Statements are prepared in Indian Rupee which is the Company's functional currency.
All financial information presented in Rupees has been rounded to the nearest lakhs with two decimals.
d). Operating Cycle
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013 and Ind AS 1 - Presentation of Financial Statements based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents.
(a) Rights, preferences and restrictions attached to Equity Shares
The company has only one class of equity shares . Each Holder of equity share is entitled to one vote per share .In the event of liquidation of the company, the holders of the equity shares shall be entitled to receive remaining assets of the company , after adjustment of all the preferential payments. The distribution will be made in the proportion of holding of equity shares. The Dividend proposed ( if any)by the board is subject to approval of shareholders in the following Annual General Meeting
The Company has issued 6,00,0000 convertible share warrants on preferential basis to Mr. Ketineni Sayaji Rao, promoter of the Company having Face Value of Rs. 1/- per warrant at a premium of Rs.33.37/- per warrant on 10th November 2016. The company has received 25% of total consideration and balance 75% is to be received at the time of allotment of equity shares pursuant to exercise of option of conversion into equity shares against such warrants. Warrant holder is entitled to one equity shares of Rs. 1/-each fully paid up for each Warrant within a period of 18 months from the date of allotment of warrant at such price as may be arrived at in accordance with the SEBI (ICDR) Regulations.
Convertible share warrants has been converted into Equity share on 23-April-2018 to Mr. Ketineni Sayaji Rao.
‘Borrowings- There is no amount of default as on the balance sheet date in repayment of loans and interest.
** Term Loan from Axis Bank Ltd. is secured by way of first charge on currents assets(Present and future) & moveable fixed assets (Excluding Machineries and vehicles is specifically charged with respective lenders) of the company and having equitable mortgage on Factory Land and Buildings situated at Plot No. 32, Sector-4, Pantnagar ,Uttarkhand &situated at 51, Roz ka Meo, Sohna, Gurgaon. The Credit Facility is further having equitable mortgage on commercial office space situated at 803-805, 8th Floor, Tower 2, Assochem Business Cresterra, Sector-135, Noida in the Mr. K. Sayaji Rao& on residential property situated at 20/27, Prakasam Road, Vijaywada in the name of Mrs. K. Pratibha Rao. The Credit Facility is further secured by Personal guarantees of Mr. K. Sayaji Rao, Mr. K. Satish Rao & Mrs. K. Pratibha Rao, Directors of the company. The Rate of interest is MCRL 2.75% i.e 11.00% p.a
** Term Loans(Other than Axis Bank Ltd.) represents loans taken for acquiring vehicle/ equipments from Banks and NBFCs ranging interest from 08%-18% p.a. ,with maturity period over one year and are secured by hypothecation of the respective assets
*** All loans are guaranteed by Promoters Directors personally
* Working Capital loan from Axis Bank Ltd. is secured by way of first charge on currents assets(Present and future) & moveable fixed assets (Excluding Machineries and vehicles is specifically charged with respective lenders) of the company and having equitable mortgage on Factory Land and Buildings situated at Plot No. 32, Sector-4, Pantnagar ,Uttarkhand &situated at 51, Roz ka Meo, Sohna, Gurgaon. The Credit Facility is further having equitable mortgage on commercial office space situated at 803-805, 8th Floor, Tower 2, Assochem Business Cresterra, Sector-135, Noida in the Mr. K. Sayaji Rao& on residential property situated at 20/27, Prakasam Road, Vijaywada in the name of Mrs. K. Pratibha Rao. The Credit Facility is further secured by Personal guarantees of Mr. K. Sayaji Rao, Mr. K. Satish Rao & Mrs. K. Pratibha Rao, Directors of the company.
3. Commitments and Contingencies
As per information available with the management there is a contingent liability of Rs. 69 Lakhs (Previous Year NIL) as at 31st March, 2018.
4. Defined benefit plan
Disclosures including sensitivity analysis in respect of gratuity and leave encashment have been made as per the valuation of employee benefit done for the year ended 31-03-18
The Company off sets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
5. Corporate Social Responsibility (CSR)
CSR amount required to be spent as per section 135 of the Companies Act, 2013 read with schedule 7, thereof by the company during the year is Rs. 10.58 Lakhs (Previous Year Nil).
6. Segment Reporting
The Company is engaged in manufacturing of pet jars/bottles and caps. Considering the nature of Company's business and operations, there are no separate reportable segments (business or geographical) in accordance with the requirements of Indian Accounting Standard 108 ‘Segment Reporting'. The Chief Operational Decision Maker(CODM) monitors the operating results as one single segment for the purpose of making decisions about resource allocation and performance assessment and hence, there are no additional disclosures to be provided other than those already provided in the financial statements.
7. In the opinion of the Management and to the best of their knowledge and believe, the value on realization of current assets, Loan & Advances in the ordinary course of business would not be
8. Balance of Trade Receivable / Payable Loans / Advances are subject to confirmation.
9. Financial Risk Management Objective And Policies
The company is exposed to market risk, credit risk and liquidity risk. The Group's senior management oversees the management of these risks. It is the Company's policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.
a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings. The company is exposed to interest rate risk on variable rate long term borrowings.
The company has elaborate risk management systems to inform Board members about risk management and minimization procedures.
The sensitivity analyses in the following sections relate to the position as at 31-03-18 and 31-03-17.
i. Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The company is not exposed to any foreign currency risk as there is no transaction in foreign currency. Particulars of un-hedged foreign currency exposures as at the Balance Sheet date are NIL (previous year NIL). Hence, no further disclosure is required under this section.
ii. Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Any changes in the interest rates environment may impact future rates of borrowing. The Company mitigates this risk by maintaining a proper blend of Fixed & Floating Rate Borrowings. The following Table shows the blend of Company's Fixed & Floating Rate Borrowings in Indian Rupee:
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.
iii. Price Risk
Commodity price fluctuation can have an impact on the demand of bottles/ caps for particular product therefore, company continuously keep on track the commodity price movement very closely and take advance production decision accordingly.
In addition to the above company also maintain a strategic buffer inventory to ensure that such disruptions do not impact the business significantly.
b) Credit risk
Credit risk arises from the possibility that the counterparty will default on its contractual obligations resulting in financial loss to the company. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions and other financial instruments.
To manage this, the Company periodically assesses the financial reliability & credibility of customers, taking into account the financial conditions, current economic trends, and analysis of historical bad debts and ageing of accounts receivable.
The Company has well defined sales policy to minimize its risk of credit defaults. Outstanding customer receivables are regularly monitored and assessed. Impairment analysis is performed based on historical data at each reporting date on an individual basis. However a large number of minor receivables are regularly monitored and assessed.
c) Liquidity Risk
Liquidity risk is defined as the risk that company will not be able to settle or meet its obligation on time or at a reasonable price. The company's treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risk are overseen by senior management. Management monitors the company's net liquidity position through rolling, forecast on the basis of expected cash flows.
10. Capital Management
a. Risk Management
The group's objectives when managing capital are:
i) safeguard their ability to continue as a going concern , so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
ii) maintain an optimal capital structure to reduce the cost of capital
In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares.
Fair value hierarchy
The fair value 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 a forced or liquidation sale. The Company maintains policies and procedures to value financial assets or financial liabilities using the best and most relevant data available. The fair values of the financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation techniques,
Level 1: Quoted prices (unadjusted) in the active markets for identical assets or liabilities.
Level 2: Other techniques for which all the inputs which have a significant effect on the recorded fair values are observable, either directly or indirectly
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data
Assumptions and valuation technique used to determine fair value
The following methods and assumptions were used to estimate the fair values
i. Fair value of cash and deposits, trade receivables, trade payables, and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
ii. Long-term variable-rate borrowings are evaluated by the Company based on parameters such as interest rates, specific country risk factors, credit risk and other risk characteristics. Fair value of variable interest rate borrowings approximates their carrying values.
11. Standards issued but not yet effective Ind AS 115 revenue from Contracts with Customers
Amended Ind AS 115 was notified on March 28, 2018 and establishes a five step model to account for revenue arising from contracts with customers. The revenue standard with supersede all current revenue recognition requirements under Ind AS. This standard will come in to force from accounting period commencing on or after April 01, 2018. The company is evaluating the requirements of the Amended and the effect on the financial statements is being evaluated.
12. Previous year’s figures
These have been regrouped / reclassified where necessary, to confirm to current year's classification.
13. Reconciliation
These financial statements, for the year ended 31 March 2018, have been prepared in accordance with Ind AS, for the purposes of transition to Ind AS, the company has followed the guidance prescribed in Ind AS 101- First time adoption of Indian Accounting Standards, with April 01, 2016 as the transition date and IGAAP as the previous GAAP.
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company's opening balance sheet was prepared as at 1 April 2016, the date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.
The following reconciliations provide a quantification of the effect of significant differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:
- Equity as at 1st April, 2016;
- Equity as at 31st March, 2017;
- Balance Sheet as at 1st April, 2016
- Balance Sheet as at 31st March, 2017
- Profit & Loss a/c as on 31st March'2017
- Total comprehensive income for the year ended 31st March, 2017
Explanations for reconciliation of Balance Sheet and Total Comprehensive Income as previously reported under Previous GAAP to Ind AS
In preparing these financial statements, the Company has availed certain exemptions and exceptions from retrospective application of certain requirements under Ind AS, as explained below:
1. Company decides to use IND AS 101 exemption for continuing its Plant, Property &Equipment (Except Lease Hold Land Measure at fair value as per IND AS 17) at previous GAAP carrying amount.
2. IND AS 101 does not require IND AS 17 to be applied retrospectively to Lease hold lands and it's allow prospective application of Lease hold Land at the date of transition to IND AS. Based on the exemption of IND AS 101, Company classify its lease hold lands as finance leaseas on 1st April, 16 i.e. on the date of transition & recognize assets and liabilities at fair value on that date and difference is recognised in retained earnings.
3. Loan Processing Fees/transaction cost are considered for calculating effective interest rate under IND AS. Further, the impact for the periods subsequent to the date of transition is reflected in statement of Profit & Loss.
4. Company valued its Investment in Subsidiaries, Jointly Controlled entities and Associates at cost i.e. previously GAAP carrying amount at the transition date i.e. 01st April'16.
5. Security Deposit: Under Ind AS 109- financial instruments, security deposit are required to be valued at fair value and difference between cost and fair value is to be amortised over the period of security as rental expenses and consequently interest income to be booked using effective interest method in statement of Profit & loss.
6. Dividend: Under previous GAAP, dividends on Equity shares recommended by the Board of Directors after the end of the reporting period but before the financial statements were approved for issue were recognised in the financial statements as a liability. Under Ind AS, such dividends together with dividend distribution tax are recognised when approved by the members in the General Meeting.
7. Expected Credit Loss:Under Ind AS, expected life time credit provision is made on trade receivables. Under previous GAAP, the provision for doubtful debts was made using ageing analysis and an individual assessment of recoverability.
8. Deferred Tax -The additional Deferred Tax liability / Asset has also been recognised due to different accounting treatment in respect of certain items as per Ind AS at the tax rate at which they are expected to be reversed.
9. Actuarial Gain/Loss -Under Ind AS, re-measurements, i.e. actuarial gains and losses included in the net gratuity expense on the net defined liability are recognised in other comprehensive income instead of profit or loss.
10. Other Comprehensive Income- Under Ind AS, other comprehensive income adjustments are on account of actuarial gain/ loss on defined benefit plan - gratuity, net of tax effect.
11. Under previous GAAP, revenue from sale of products was presented net of excise duty under revenue from operations. Whereas, under Ind AS, revenue from sale of products includes excise duty. The corresponding excise duty expense is presented separately on the face of the Statement of profit and loss.
12. Dismantling Provision: The Company has availed the exemption for dismantling liability as at the date of transition and accordingly measured the liability as at the date of transition which is not significant & material, hence not considered.
13. Estimates: Upon an assessment of the estimates made under Previous GAAP, the Company has concluded that there was no necessity to revise such estimates under Ind AS, except where revision in estimates was necessitated as required by Ind AS. The estimates used by the Company to present the amounts in accordance with Ind AS reflect conditions existing as at 1st April, 2016, the date of transition to Ind AS and as at 31st March, 2017 and 31st March, 2018.
14. There were no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind-AS.
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