Note: 1 - Corporate Information:
Ashima Limited is engaged in manufacture of 100% cotton Yarn Dyed Shirting fabrics and Denim fabrics. It offers a wide range of products including basic denims, ring/slub denims, pigment/discharged print, polyester denim, various yarn dyed fabrics like stripes, chambrays,twills, oxford, herringbones, indigo checks, pique, satin, dobbies, etc. It also operates into ready-to-stitch product under the brand name “ICON”.
The company has a state of the art design studio which can cater to the requirements of the best of the high-end customers. Because of its compact size and the product specific model, it possesses versatility in terms of product offering, ranging from 6's to 12's counts.
A substantial part of the goods manufactured by the company are meant for exports. Apart from direct exports, the company also sells to garment manufacturers nominated by overseas buyers. The company therefore contributes significantly to the government exchequer in terms of foreign currency earnings and also in terms of payment of various direct and indirect taxes.
The company employs substantial work force and has an impeccable record on labour relations. The company is also committed to environment friendly approach across its manufacturing operations and has many innovations and certifications to its credit on that front.
The company is abreast of changing fashion trends affecting product requirements of brands and international customers. To cater to such product innovation and changing fashion trends as well as to strengthen customer servicing capabilities, the company has recently undertaken a comprehensive modernization programme to make targeted investments into the Denim and Spinfab (shirting) divisions.
The company is a public company domiciled in India and is incorporated under the provisions of the Companies Act, 1956 (now Companies Act, 2013) ('the Act"). Its shares are listed on the Bombay Stock Exchange (BSE Limited) and the National Stock Exchange (National Stock Exchange of India Limited) in India. The registered office of the company is located at Texcellence Complex, Near Anupam Cinema, Khokhara-Mehmedabad, Ahmedabad - 380021.
The financial statements for the year ended 31st March, 2018 were authorised for issue in accordance with a resolution of the directors on 19th May, 2018.
* Note:
Company keeps Axed deposits with the Nationalised / Scheduled banks, which can be withdrawn by the company as per its own discretion / requirement of funds, except the deposits ofRs. 253 Lacs, (Rs. 237 Lacs as at 31st March, 2017 and Rs.219 Lacs as at 1st April, 2016) which is not available for free use as per the court order.
C Rights of Equity Shareholders
(a) Holder of equity shares is entitled to one vote per share.
(b) The Company declares and pays dividends in Indian Rupees. The Companies Act, 2013 provides that the Dividend shall be declared only out of the profits of the relevant year or out of the profits of any previous financial year(s) after providing for depreciation in accordance with the provisions of the Act and the Company may transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the Company.
(c) In case of inadequacy or absence of profits in any year, the Company may declare dividend out of free reserves subject to the condition that the rate of dividend shall not exceed average of the rates at which dividend was declared by the Company in three years immediately preceding that year.
(d) In the event of Liquidation of the Company, the holders of shares shall be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts. The amount distributed will be in proportion to the number of equity shares held by the shareholders.
D 1,50,00,000 Equity Shares of Rs.10/- each at par have been issued to a secured creditor by conversion of debt pursuant to scheme of arrangement u/s 391 of The Companies Act, 1956 approved by Hon’ble High Court of Gujarat vide order dated 24th September, 2015.
Securities and Terms of Repayment for Secured Long Term Borrowings: a Preference Shares
1% redeemable non-cumulative preference shares of Rs.100/- each fully paid to be redeemed at par at the end of 20th year from the date of allotment. The Company has an option to redeem the preference shares at par at any time after the end of 12 months from the date of allotment.
Rights of Preference Shareholders
(a) As per Section 47(2) of the Companies Act, 2013, Preference Shareholders shall have right to vote only on resolutions placed before company which directly affect their rights attached to preference shares and any resolution for winding up of the company or for repayment or reduction of share capital shall be deemed directly to affect their rights.
(b) Voting rights of the preference shareholders shall be in proportion as the paid up preference share capital bears to the paid up equity share capital.
(c) Where the dividend in respect of a class of preference shares has not been paid for a period of two years or more, such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.
b Term Loan from Bank
i The Loan is primarily secured by exclusive charge on the Plant and Machineries financed by the said term loan and secondarily secured by charge on the factory land admeasuring about 30,000 Square meters situated at Mithipur, TalukaManinagar, District Ahmedabad of TP Scheme no. 7 (Khokhara- Mehmedabad) and Registration District Sub-District Ahmedabad - 7 (Odhav).
ii Term Loan from bank is Rs.1304 Lacs, bearing interest rate of 8.25% per annum (Axed), which is repayable in 20 equal installments at quarterly rest starting from August-2018.
c Unsecured Loan
The unsecured loans include Rs.750 Lacs in the suspense account representing amount of a cheque drawn on HDFC Bank given by the company to Bank of Bahrain & Kuwait (BBK) and paid to BBK by clearing house because of the delay by HDFC Bank in returning the cheque to BBK. The dispute is the subject matter of notice correspondence between HDFCBank and BBK and under dispute between the company, BBK and HDFC Bank in various courts.
Order dated 18th April, 2016 of the Debt Recovery Tribunal (DRT), Mumbai, directing BBK to refund amount received by it to HDFC and thereupon increase loan amount of Ashima with continuing rate of interest as contractually applicable on the loan amount under intimation to Ashima, was stayed by the Hon’ble Bombay High Court and the stay continued till disposal of the proceedings before DRT. The proceedings at DRT were completed and Order dated 30th June, 2017 was passed directing BBK (Defendant No. 1) and the Company (Defendant No.2) jointly and severally to pay the suit amount with further simple interest @12% per annum. Recovery Proceedings have been initiated.
The Company filed an application before DRT to review its order dated 30th June, 2017. The matter was reserved for orders. However, DRT has reopened the matter for further arguments. The Company has also filed an Appeal at Debt Recovery Appellate Tribunal, Mumbai (DRAT) against the said DRT order of 30th June, 2017, which is pending. In view of this, thesaid amount of Rs.750 Lacs is continued in the suspense account.
* Note: The Company has not received any intimation from suppliers regarding their status under the Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 and hence disclosures regarding the following matters as required under Section 22 of MSMED Act, 2006 have not been given:
a. Principal amount and the interest due thereon remaining unpaid to any suppliers as at the end of accounting year;
b. Interest paid during the year;
c. Amount of payment made to the supplier beyond the appointed day during accounting year;
d. Interest due and payable for the period of delay in making payment;
e. Interest accrued and unpaid at the end of the accounting year; and
f. Further interest remaining due and payable even in the succeeding years, until such date when the interest dues above are actually paid to the small enterprise;
The Company is making efforts to get the confirmations from the suppliers as regard to their status under the MSMED Act.
Significant Estimates :
As regards deferred tax as per Ind AS-12 on “Income Taxes” there is a net deferred tax asset for the past years and for the period up to 31st March, 2018. The Company has taken conservative view of future profitability. Accordingly, the Company has not recognized deferred tax asset.
Note: 2 - Disclosures as required by Ind AS-19 Employee Benefits:
The Company has classified the various benefits provided to employees as under:-
(a) Defined benefit plans Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. The gratuity plan is a funded plan administered by a Trust and t he Co mpany makes contributions to recognised Trust. In accordance with Indian Accounting Standard 19, actuarial valuation was done in respect of the aforesaid defined benefit plans based on the following assumptions.
Economic Assumptions
The discount rate and salary increases assumed are the key financial assumptions and should be considered together; it is the difference or ‘gap’ between these rates which is more important than the individual rates in isolation.
Discount Rate
The discounting rate is based on the gross redemption yield on medium to long term riskfree investments. The estimated term of the benefits/obligations works out to eight years.
Salary Escalation Rate
The salary escalation rate usually consists of at least three components, viz. regular increments, price inflation and promotional increases. In addition to this, any commitments by the management regarding future salary increases and the Company’s philosophy towards employee remuneration are also to be taken into account.
(b) Leave Encashment
Liability for the Leave Encashments for Rs.102 Lacs has been fully provided for by the company.
Note: 3 - Segment Information:
The company’s operations relate only to manufacture and sale of textile and related products and hence primary reporting disclosure is not applicable. The company sells goods in domestic market and also exports them to various countries. However, for the year as well as previous year, export sales, which is the reportable segment, is less than the prescribed threshold of 10% of total revenue, hence secondary segment reporting is not applicable as per Ind AS -108 on Operating Segment.
Note: 4 - Assets Held for Sale and Exceptional items:
Pursuant to the company’s plan to meet the balance funds requirement for secured debt settlement as per court sanctioned scheme as well as funds requirements for its textile operations, the Board of directors of the company has constituted an empowered committee to identify disposable assets, which are not required for its textile operations. Accordingly, the said committee has identified some portion of the land which is not required for the textile operations and the sale proceeds can be utilized for settlement with the creditors and also for the textile operations.
The land identified as disposable assets have been classified as “Non-current assets held for sale” until the same is sold and is disclosed separately in the financial statements. The management of the company expects to dispose off the assets classified as “Non-current held for sale” within a period of 12 months.
The Exceptional items in the Statement of Profit and Loss represents the difference between the sale value and the actual cost of the respective assets classified as asset held for sale, which includes land and other assets. Accordingly, the company has recognized the gain of Rs.14540 Lacs (financial year 2016-17 - Rs.5255 Lacs), which includes an amount of Rs.1945 Lacs (financial year 2016-17 - Rs.1506 Lacs) transferred from Revaluation Reserve to Statement of Profit and Loss on disposal of such assets.
Note: 5 - Financial Instruments:
A Fair values hierarchy:
Financial assets and financial liabilities measured at fair value in the financial statements 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 and 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.
B Risk Management:
The Company’s activities expose it to market risk, liquidity risk, interest risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.
Risk Management is embedded in the company’s operating framework. The Audit Committee of the Board evaluates the Risk Management systems and the Board takes responsibility for the total process of Risk Management in the organization, which includes framing, implementing and monitoring Risk Management Plan.
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:
Credit risk arises from the possibility that customer may not be able to settle its obligations as agreed. The company is exposed to credit risk from trade receivables, bank deposits and other financial assets.
The Company periodically assesses the financial reliability of the counter party taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Party-wise credit is monitored and reviewed accordingly.
Bank deposits:
The company maintains its Cash and cash equivalents and Bank deposits with reputed and highly rated banks. Hence, there is no significant credit risk on such deposits.
Trade Receivable:
The Company is exposed to credit risk in the event of non-payment by customers. Major part of sales is made on ‘Delivery against payment’ basis, hence the credit risk is insignificant. To eliminate credit risk further, the high value sales are made by adequate coverage through Letters of Credit, wherever possible. The Company trades with recognized and credit worthy customers. It is the Company’s policy that all customers who wish to trade on credit terms are subjected to scrutiny and periodic review. In addition, receivable balances are monitored on an on-going basis with the result that the Company’s exposure to bad debts is not significant.
Further, credit risk concentration with respect to trade receivables is mitigated by the Company’s large customer base, widely distributed both economically and geographically. Adequate expected credit losses are recognized as per the assessments based on historic data and prevalent market conditions.
Allowance for bad and doubtful debts amounts toRs. 76 Lacs as at 31st March, 2018. The Company has made allowance of Rs. 24 Lacs (Previous Year-Rs. Nil), against trade receivables ofRs.76 Lacs (Previous year - Rs.52 Lacs).
b Liquidity risk:
a 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, b Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company’s liquidity management policy involves considering the level of liquid assets necessary to meet these.
c Maturities of financial liabilities:
The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities.
c 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 arising from foreign currency transactions, primarily with respect to the US Dollar, GBP and EURO. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Company’s functional currency. The company uses forward contracts for high valued foreign currency transaction to hedge the foreign currency risk.
Foreign currency risk exposure:
The Company’s exposure to foreign currency risk at the end of the reporting period expressed in ' are as follows:
Sensitivity Analysis:
The sensitivity of profit or loss and equity to changes in the exchange rates arises mainly from foreign currency denominated financial instruments: *
d Interest rate risk:
Interest rate risk is the risk that the fair value of future cash flow of the financial instrument may fluctuate because of the change in market interest rates.
The Company’s policy is to minimise interest rate cash flow risk exposures on long-term financing. As at 31st March, 2018, the Company is not exposed to changes in market interest rates through bank borrowings as all its bank borrowings are at Axed interest rate.
Also, the Company opts for investments in Fixed Deposits at Axed interest rates.
e Price risk:
The Company has no significant exposure to price risk arising from investments in mutual funds, as the investments are in debt funds.
Note: 6 - Capital Management:
The Company’s capital management objectives are: a to ensure the Company’s ability to continue as a going concern, b to provide an adequate return to shareholders, c maintain an optimal capital structure to reduce the cost of capital.
Management assesses the Company’s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company’s various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
Note: 7 - First Time Adoption of Ind AS:
The accounting policies set out in the note here have been applied in preparing the financial statements for the year ended 31st March, 2018, the comparative information presented in these financial statements for the year ended 31st March, 2017 and in the preparation of an opening Ind AS balance sheet as at 1st April, 2016 (the Company’s date of transition).
In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position and financial performance is set out in Note 42.
Exemptions and exceptions availed:
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A 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 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 required under other Ind AS. 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 values.
B Estimates:
An entity’s estimates in accordance with Ind ASs 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), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1st April, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP.
C Classification of financial assets:
As per the requirements of Ind AS 101 the Company assessed classification of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
D De-recognition of financial assets and liabilities:
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. The company has followed such policy. However, there were no assets or liabilities to be derecognised.
E Transition to Ind AS- Reconciliations:
The following reconciliations, as provided in Note 42, provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS as required under Ind AS 101:
i. Reconciliation of Equity as at 1st April 2016 (Transition date) and as at 31st March, 2017
ii. Reconciliation of Net Profit for the year ended 31st March, 2017
F Classification and Presentation for Assets held for sale:
Under the previous GAAP, the concept of asset held for sale did not exist. As per Ind AS 105, Non-Current Assets held for sale are required to be identified as held for sale if the carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considerably highly probable.
Ind AS 105 lays down detailed guidelines and criteria in this regard. Based on the assessment performed by the management, certain land and certain other items of property, plant and equipment are classified as held for sale under Ind AS and the same have been presented separately from the other assets. There is no impact on the total equity as a result of this adjustment.
G Discounts to customers:
Under the previous GAAP, discounts to the customers were shown as a part of selling and distribution expenses. Under Ind AS, revenue from sale of products is recognised at net of discounts and incentives to the customers. Thus, sale of products under Ind AS has decreased by '55 Lacs during the previous year with a corresponding decrease in selling and distribution expenses.
@ Effective Interest rate on Long term Borrowings:
- As required under the Ind AS 109, transaction costs incurred towards origination of term loan borrowings were charged to Statement of Profit and Loss account in FY 2016-17. Under Ind-AS, the same has been re-considered as asset and will be recognised in the Statement of Profit and Loss over the tenure of the borrowing as interest expense, computed using the effective interest rate method, with corresponding effect being in Long term borrowings to the extent attributable to current maturity of long term debts.
Under previous GAAP, the transaction cost were charged to Statement of Profit and Loss as and when incurred. Consequently, the profit for the year ended 31st March, 2017 has been increased by Rs.32 Lacs, thereby increasing the retained earnings with a corresponding increase in asset (prepaid expenses).
# Fair Value adjustment and Amortisation effect on Long Term Financial Instrument (Preference Shares):
Preference Shares are considered as debt as per Ind AS, which were included in Equity as per previous GAAP. Under previous GAAP, the company carried the amount of Preference Shares issued at the value at which they were redeemable at a future date. Under Ind-AS, the amount of Preference Shares have been fair valued and discounted to the date of balance sheet for respective years, and the discounted value is carried in the balance sheet. The difference between the fair value and payable amount at future date is adjusted in the retained earnings from the opening balance as at 1st April, 2016. As per the requirement of Ind-AS, the amount is to be amortised each year, which affects the Statement of Profit and Loss of the previous years. The amortisation for the financial year 2016-17 works out to be Rs.36 Lacs, which has reduced the Net Profit and retained earnings of previous year.
$ Other adjustments:
Security Deposits:
Under previous GAAP, the security deposits given and taken by the company were carried at the transacted amount. Under Ind-AS, all financial assets and liabilities are required to be recognised at fair value. Accordingly, the amounts of security deposits (given and taken by the company) have been fair valued and the difference between transacted value and fair value has been recognised as other current asset or liability.
Consequently, security deposits given by the company as at 1st April, 2016 have been reduced by Rs.4 Lacs, the Prepaid expenses as at 1st April, 2016 have increased by Rs.2 Lacs and retained earnings as at 1st April, 2016 has reduced by Rs.2 Lacs. Security Deposits taken by the company as at 1st April, 2016 has reduced by Rs.2 Lacs, the other current financial liabilities as at 1st April, 2016 have increased by Rs.1 Lacs and retained earnings as at 1st April, 2016 have increased by Rs.1 Lacs.
£ Actuarial loss on defined benefit plan:
The Company recognises costs related to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost, including actuarial gains and losses, was charged to Statement of Profit or Loss. Under Ind AS, re-measurements gains and losses (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability) are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.
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 Statement of Profit or Loss but are shown in the Statement of Profit and Loss as ‘other comprehensive income’ include remeasurements of defined benefit plans and fair value gains or (losses) on FVOCI equity instruments and corresponding tax impact thereon.
The amount of actuarial gain and loss on defined benefit plan of Rs.116 Lacs for the previous year ended 31st March, 2017 was grouped under Employee Benefits as per previous GAAP. Under Ind AS, the same has been reduced from Employee Benefits and reclassified as other comprehensive income. The concept of other comprehensive income did not exist under previous GAAP.
Statement of cash flows:
The transition from previous GAAP to Ind AS does not have a material impact on the statement of cash flows.
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