1. Employee Benefits
As per Ind AS “Employee Benefits” (Ind AS - 19), the disclosures of Employee Benefits as defined in the Standard are given below:
1. Defined contribution plans
The Company makes contributions at a specified percentage of payroll cost towards Employees Provident Fund (EPF) for qualifying employees.
The Company has recognized the following amounts in the Statement of Profit & Loss.
2. Defined Benefit Plans
Gratuity is payable to all eligible employees of the company on superannuation, death and resignation in terms of the provision of the payment of Gratuity Act. The present value of obligations is determined based on actuarial valuation using Projected Unit Credit Method, which recognized each period of service as given rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
3. SEGMENT REPORTING
The Company operates in a single business segment i.e. manufacture of steel and steel products such as seamless tubes and rolled products and as such there are no primary and secondary segments as per the requirement of (Ind AS - 108) on “Operating Segment”. The Company has no reportable geographical segment. No single customer contributes more than 10% or more of total revenue.
4. RELATED PARTY DISCLOSURE Name of related party Relationship
Welspun Steel Limited Enterprise having significant influence over the Company
WS Alloy Holding Pvt. Ltd.(merged in Enterprise having significant influence over the Company (w.e.f.
Welspun Steel Limited w.e.f. 21ST August 2017) 9th May, 2015 and up to 21ST August 2017)
Rank Marketing LLP Enterprise having significant influence over the Company
Wide Screen Holding Pvt Ltd Enterprise having significant influence over the Company
MGN Agro Properties Pvt Ltd Enterprise having significant influence over the Company
((Krishiraj Trading Limited merged with MGN Agro Properties Pvt Ltd w.e.f. 27th September 2016)
Key Managerial Personnel
Anuj Burakia Whole Time Director
Narendra Bhandari Chief Finance Officer
Nilesh Javekar Company Secretary
Non-Executive Director
Atul Desai Non-Executive Director & Independent Director
Ashok Jain Non-Executive Director & Independent Director
Amita Karia Non-Executive Director & Independent Director
Hanuman Kanodia Non-Executive Director
Aneel Lasod Non-Executive Director (w.e.f. 14th February 2017)
V S Iyer Non-Executive Director (upto 12th January 2017)
38 Financial Instruments
Accounting Classification and Fair Value Measurements
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 a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks/financial institutions/others approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value 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. (Rs. In Lacs)
6. Financial risk management objectives and policies
The risk management policies of the Company are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.
The Management has overall responsibility for the establishment and oversight of the Company’s risk management framework.
In performing its operating, investing and financing activities, the Company is exposed to the Credit risk, Liquidity risk and Market risk.
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, deposits and derivative financial instruments.
Credit risk on financial assets
Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner consist principally of cash balances with banks, cash equivalents and receivables, and other financial assets. The maximum exposure to credit risk is: the total of the fair value of the financial instruments and the full amount of any loan payable commitment at the end of the reporting year. Credit risk on cash balances with banks is limited because the counterparties are entities with acceptable credit ratings. Credit risk on other financial assets is limited because the other parties are entities with acceptable credit ratings.
As disclosed in Note 9, cash and cash equivalents balances generally represent short term deposits with a less than 90-day maturity.
As part of the process of setting customer credit limits, different credit terms are used. The average credit period generally granted to trade receivable customers is about 90-360 days. But some customers take a longer period to settle the amounts.
In the opinion of management, trade receivable, Financial assets, Cash and cash equivalent, Balance with Bank, Loans and other financial assets have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the balance sheet.
The Company has recognized Rs 135 Lacs towards any loss allowance as the Company expect that there is no credit loss on trade receivables.
7. Foreign currency risk
The Company has Sales and Purchase in foreign currency. Consequently, the Company is exposed to foreign exchange risk.
The company evaluates exchange rate exposure arising from foreign currency transactions and the company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.
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.
Company has interest rate risk exposure mainly from changes in rate of interest on borrowing & on deposit with bank. The interest rate is disclosed in the respective notes to the financial statements of the Company. The following table analyse the breakdown of the financial assets and liabilities by type of interest rate: (Rs . iacs)
Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including debt and overdraft from banks at an optimized cost.
The Company maximum exposure to credit risk for the components of the balance sheet at 31 March 2018 and 31 March 2017 is the carrying amounts. The liquidity risk is managed on the basis of expected maturity dates of the financial liabilities. The average credit period taken to settle trade payables is about 90 days. The other payables are with short-term durations. The carrying amounts are assumed to be a reasonable approximation of fair value.
At present, the Company does expect to repay all liabilities at their contractual maturity. In order to meet such cash commitments, the operating activity is expected to generate sufficient cash inflows.
8. Capital management
For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximize the shareholder value.
The Company manages its capital structure and makes adjustments in 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 dividend 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’s policy is to keep optimum gearing ratio. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents. (Rs. In Lacs)
9. First time adoption of IND AS
These are the Company’s first financial statements prepared in accordance with Ind AS.
The Company has adopted Indian Accounting Standards (Ind AS) notified by the Ministry of Corporate Affairs with effect from 1st April, 2017, with a transition date of 1st April, 2016. Ind AS 101-First-time Adoption of Indian Accounting Standards requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements which is for the year ended 31st March, 2018 for the company, be applied retrospectively and consistently for all financial years presented. Consequently, in preparing these Ind AS financial statements, the Company has availed certain exemptions and complied with the mandatory exceptions provided in Ind AS 101, as explained below. The resulting difference in the carrying values of the assets and liabilities as at the transition date between the Ind AS and Previous GAAP have been recognized directly in equity (retained earnings or another appropriate category of equity).
Set out below are the Ind AS 101 optional exemptions availed as applicable and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A. Optional Exemptions availed (i) Deemed Cost
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment and intangible assets covered by Ind AS 38 - Intangible Assets as recognized 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. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
B. Applicable mandatory exceptions
(i) Estimates
An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).
Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Investment in equity instruments carried at FVPL or FVOCI;
- Investment in debt instruments carried at FVPL.”
(ii) Classification and measurements of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
Transition to Ind AS -
Reconciliations
The following reconciliations provide the explanation and qualification of the differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101 “First Time Adoption of Indian Accounting Standards”.
(i) Reconciliation of Total Equity: (Rs. In Lacs)
Notes to Equity reconciliations and statement of total comprehensive income reconciliation with previous GAAP
A Loan processing fees are recorded at amortized cost as per the fair value rate under Ind AS, carried at transaction value under previous GAAP
B Forward Contract are measured at Mark to market rate under Ind AS, forward contract measured at cost under previous GAAP
C Leasehold land is amortized basis the lease period starting from 16 Sep 1995. Amortization expenses till 01st April 2016 is reclass on 01st April 2016.
D Re-measurements gain or loss with regard to actuarial gains or losses on provision for gratuity to be recorded in Other comprehensive income under Ind AS.
Previous GAAP figures have been reclassified / regrouped wherever necessary to confirm with the financial statements prepared under Ind AS.
Notes to first time adoption:
Note 10: Cumulative Redeemable preference shares
The Company has issued non-convertible redeemable preference shares. The preference shares carry fixed cumulative dividend which is non-discretionary. Under Indian GAAP, the preference shares were classified as equity and dividend payable thereon was treated as distribution of profit.
Under Ind AS, non-convertible redeemable preference shares are classified as financial liability as per Ind AS 32 and accounted at fair value. Interest on financial liability is recognized using the effective interest method.
Note 2: Reconciliation of cash flows
The Ind AS adjustments are either non cash adjustments or are regrouping among the cash flows from operating, investing and financing activities. Consequently, Ind AS adoption has no impact on the net cash flow for the year ended 31st March, 2016 as compared with the previous GAAP.
Note 3: Fair valuation of other financial instruments
Under Indian GAAP, interest free borrowing is initially measured at the transaction value at the time of initial measurement without any adjustments in regard to the fair value. Under Ind AS, interest free borrowings are to be initially measured at fair value. Subsequently these liabilities are measured at amortized cost.
Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognized
in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Under previous GAAP, these transaction costs were charged to profit or loss as and when incurred.
Under Indian GAAP, interest free security deposit given is measured at the transaction value at the time of initial measurement without any adjustments in regard to the fair value. Under Ind AS, interest free security deposit is to be initially measured at fair value. As at the date of transition, the interest free security deposit has been recognized at fair value based on the facts and circumstances which existed at the date of initial measurement by giving corresponding effect to retained earnings for the period from initial measurement to the date of transition and to other current assets (pre-paid expense) for the remaining period of deposit post the date of transition.
Note 11: Re-measurements of post-employment benefit obligations
Under Ind AS, re-measurements 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 profit or loss. Under the previous GAAP, these re-measurements were forming part of the profit or loss for the year.
Note 12: Deferred tax
Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP.
In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity.
Note 13: Retained earnings
Retained earnings as at April 1, 2016 has been adjusted consequent to the above Ind AS transition adjustments.
Note 7: Other comprehensive income
Under Ind AS, all items of income and expense recognized in a period should be included in statement of profit and loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in statement of profit and loss but are shown in the statement of profit and loss as ‘OCI’ includes re-measurements of defined benefit plans. The concept of OCI did not exist under previous GAAP.
Note 14: Property, plant and equipment
The Company has adopted the exemption under Ind AS 101 and has considered previous GAAP carrying amount as the deemed cost for the Opening Balance sheet as at April 1, 2016. Accordingly the Gross block of each class of Property, plant and equipment has been netted off with their respective accumulated depreciation balances as at April 1, 2016 under Previous GAAP to arrive at the deemed cost for the purpose of opening Ind AS balance sheet.
15. PREVIOUS YEAR’S FIGURES
Previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year’s classification/disclosure.
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