1 Company overview
Gyscoal Alloys Limited (the ‘Company’) is a public limited Company and domiciled in India and is incorporated under the provisions of the Companies Act with its registered office located at Plot No. 2/3 GIDC, Ubkhal, Kukarwada, Tal. Vijapur, Dist.: Mehsana - 382 830. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The company is engaged in the manufacturing of SS products. The financial statements are approved for issue by the company’s Board of Directors on May 28, 2018.
2 Basis of preparation
2.1 Statement of compliance
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. These financial statements are the company’s first Ind AS financial statements. The financial statements up to year ended March 31, 2017 were prepared in accordance with the Accounting standards notified under Companies (Accounting Standards) Rules, 2006 (IGAAP) and other relevant provisions of the Act. Previous period figures in the financial statements have been restated to Ind AS. In accordance with Ind AS 101 First time Adoption of Indian Accounting Standard, the Company has presented reconciliations and explanations of the effects from IGAAP to Ind AS on financial position, financial performance and cash flows in Note No. 5.
2.2 Basis of measurement
The Financial Statements have been prepared on the historical cost basis except for the certain financial assets and liabilities measured at fair value.
- Certain financial assets and liabilities
- defined benefit plans assets
2.3 Functional and presentation currency
Indian rupee is the functional and presentation currency.
2.4 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions.
These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period.
Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements are:
- Useful lives of Property, plant and equipment
- Valuation of financial instruments
- Provisions and contingencies
- Income tax and deferred tax
- Measurement of defined employee benefit obligations
- Export Incentive
3 Recent accounting pronouncements issued but not yet effective
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs (““MCA”“) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018.
The Company has evaluated the effect of this on the financial statements and the impact is not material.
Ind AS 115- Revenue from Contract with Customers: On March 28, 2018, Ministry of Corporate Affairs (““MCA”“) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The amendment will come into force from April 1, 2018.
The Company has evaluated the effect of this on the financial statements and the impact is not material.
4 Transition to Ind AS
These standalone financial statements of Gyscoal Alloys Limited for the year ended March 31, 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 Indian GAAP as the IGAAP.
The transition to Ind AS has resulted in changes in presentation of the financial statements, disclosures in the notes thereto and accounting policies and principles. The accounting policies set out in Note 3 have been applied in preparing the standalone financial statements for the year ended March 31, 2018 and the comparative information.
4.1 First time adoption of Ind AS
An explanation of how transition from IGAAP to Ind AS has affected the company’s financial position, financial performance and cash flows are set hereunder:
4.1.1 Exception to the retrospective application of other Ind AS
a Estimates
Company’s estimates in accordance with Ind AS as at the date of transition to Ind AS (April 01, 2016) are consistent with the estimates made for the same date as per IGAAP.
b Classification of financial assets
The classification of financial assets to be measured at amortised cost is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.
4.1.2 Exemption from other Ind AS
Deemed cost of Property, plant and equipment and Intangible assets
Company has elected to measure all of its Property, Plant and Equipment and Intangible assets at their IGAAP carrying amount as on the date of transition to Ind AS.
Investment in subsidiary and associate
Company has elected to measure its investment in subsidiary and associate in separate financial statements at their IGAAP carrying amount as on the date of transition to Ind AS.
4.2.1 Reconciliation of statement of cash flows
There are no material adjustments to the statement of cash flows as reported under IGAAP.
5.1 Rights, preferences and restrictions attached to shares
The Company has only one class of equity shares referred to as equity shares having a par value of ‘ 10. Each holder of equity share is entitled to one vote per share.
Dividends, if any, is declared and paid in Indian Rupees. The dividend, if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
I n the event of liquidation of the company, the holders of equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.
6 Capital Management
For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other reserves attributable to the equity holders of the Company. The Company’s objective for capital management is to maximize shareholder value and safeguard business continuity. The Company determines the capital requirement based on annual operating plans and other strategic plans. The funding requirements are met through equity and operating cash flows.
7.1.1 Details of securities
Working capital loans from Banks are secured by way of hypothecation of Raw Materials, Work-in-Process, Finished Goods, Stores & Spares, Book Debts etc., and by way of second charge on Company’s immovable properties.
Working capital loans are guaranted by some of the directors of the Company as well as corporate guarantee of other group companies.
As all the above accounts classified by bank as NPA, interest on the same is not charged by the bank in the said accounts. So, the company has made provision of interest payable on such accounts at the interest rates sanctioned by the banks and shown under the other financial liabilities.
Out of the above NPA Accounts, UCO Bank has sold its NPA A/c to M/s. Omkara Assets Reconstruction Pvt. Ltd. (ARC) and the company has acknowledge this assignment of Debt towards the said ARC vide resolution passed in board meeting held on 12th February, 2018.
7.2.1 The default was neither remedied nor the terms of the loans payable were renegotiated, before the financial statements were approved for issue.
8.1 The company is responsible for the governance of the plan.
8.2 Risk to the Plan
Following are the risk to which the plan exposes the entity :
A Actuarial Risk:
There is a risk that benefits will cost more than expected. This can arise due to one of the following reasons:
Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in Obligation at a rate that is higher than expected.
Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption than the Gratuity benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cashflow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.
Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption than the Gratuity benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.
B Investment Risk:
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
C Liquidity Risk:
Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign / retire from the company there can be strain on the cashflows.
D Market Risk:
Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate / government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.
E Legislative Risk:
Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation / regulation. The government may amend the Payment of Gratuity Act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the Defined Benefit Obligation and the same will have to be recognized immediately in the year when any such amendment is made effective.
9 Fair Value Measurement of Financial asset and Financial liabilities
The Fair value of current financial assets and current financial liabilities measured at amortised cost, are considered to be the same as their carrying amount as they are of short term nature. Hence fair value hierarchy is not given for the same.
The carrying amount of non - current financial assets and non - current financial liabilities measured at amortised cost are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled. Hence, fair value hierarchy is not given for the same.
10 Financial Risk Management
The company’s activities expose it to 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 its financial performance. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board of Directors has established a risk management policy to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed periodically to reflect changes in market conditions and the Company’s activities. The Board of Directors oversee compliance with the Company’s risk management policies and procedures, and reviews the risk management framework.
A Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises interest rate risk and currency risk.
i Interest rate risk
Interest rate risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Interest risk arises to the Company mainly from borrowings with variable rates. The Company measures risk through sensitivity analysis. The banks are now finance at variable rate only, which is the inherent business risk.
ii 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 exposed to foreign exchange risk through its sales and purchases from overseas suppliers in foreign currencies. The comapny measures risk through sensitivity analysis.
B Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial assets.
The company’s principal source of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company closely monitors its liquidity position and is attempting to enhance its sources of funding by increasing cash flow generated from its operations and realisations from other proposed measures. The Company measures risk by forecasting cash flows.
C Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk encompasses both, the direct risk of default and the risk of deterioration of credit worthiness.
Credit risk arises primarily from financial assets such as trade receivables, cash and cash equivalent and other financial assets.
I n respect of trade receivables, credit risk is being 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. All trade receivables are also reviewed and assessed for default on a regular basis. The concentration of credit risk is limited due to the fact that the customer base is large. There is no customer representing more that 10% of total balance of trade receivables.
Credit risk arising from cash and cash equivalent and other financial assets is limited as the counterparties are banks and mainly Government companies respectively.
The maximum exposure to the credit risk at the reporting date from trade recievables is as under :
11.1 The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions.
11.2 The related party balances outstanding are routine in nature as per ordinary course of business.
12 Segment Informations
12.1 The Company is engaged in the business of manufacturing of S.S. Products. As there is only one reportable segment, the company has not given segment information.
12.2 Information about major customers
There are no major customers which individually accounted for revenue more than 10% of total revenue of the company.
13 Details of Loan given, Investment made and Guarantee given pursuant section 186 (4) of the Companies Act, 2013 :
Loans given and investments made are given under the respective heads. Loans have been utilized by the recipients for their business purpose. There are no corporate guarantees given by the company in respect of loans as at March 31, 2018.
14 As the company is not covered under the provision of Section 135 of the Companies Act, 2013, details of CSR is not required to be given.
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