1. CORPORATE INFORMATION
Pranavaditya Spinning Mills Limited (the 'Company') is a limited company incorporated and domiciled in India whose shares are publicly traded. The registered office is located at Office No.2, Plot No.266, Village Alte, Kumbhoj Road, Taluka Hatkanagale, Dist. Kolhapur-416109, Maharashtra, India.
The Company is a Spinning in manufacturing of cotton yarn.
The Financial statements of the Company for the year ended 31st March, 2018 were authorized for issue in accordance with a resolution of the Board of Directors on 30th April, 2018.
2. BASIS OF PREPARATION
Ministry of Corporate Affairs notified road map to implement Indian Accounting Standards ('Ind AS') notified under the Companies (Indian Accounting Standards) Rules,2015 as amended by the Companies (Indian Accounting Standards) (Amendment) Rules, 2016. As per the said road map, the company is required to apply Ind AS starting from financial year beginning on or after 1st April, 2016. Accordingly,the financial statements of the Company have been prepared in accordance with the Ind AS.
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
- Derivative financial instruments,
- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)
The financial statement are presented in Indian Rupees ('INR') and all values are rounded to the nearest lakhs, except otherwise indicated.
(a) Includes receipts of Rs. 88.34 lakhs (previous year Rs. 11.84 lakhs) held with bank as margin money against guarantee given to MSEDCL and Rs. Nil (previous year Rs. 26.50 lakhs) held with bank as margin money against guarantee given to private supplier of Electricity.
(b) Terms / rights attached to equity shares:
(i) The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share, The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
(ii) In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(d) There are no shares reserved for issue under options and contracts/commitments for the sale of shares/ disinvestment.
(e) Nature and purpose of reserves:
Capital Reserve: Standing in books against capital subsidy received for establishing manufacturing unit.
3. INCOME TAX
The major components of Income Tax Expense for the years ended 31 March, 2018 and 31 March, 2017 are:
(a) The company has not received any intimation from other suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/payable as required under the said Act have not been given.
^Carrying amounts comprise of non-current and current provisions.
#Additional provision made during the year and reversal of unused amount are included in the respective head of accounts.
(b) Nature of Provisions:
(i) Provision for Excise duty /Customs Duty / Service Tax Represents the differential duty liability that is expected to materialise in respect of matters in appeal.
(ii) Provision for liigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
(a) Includes Sale to Holding Company Rs. 809.00 lakhs (previous year Rs. 58.57 lakhs).
(a) i) The Board for Industrial and Financial Reconstruction (BIFR) in its order dated 16th Sepetember, 2010 has directed that the Company ceases to be a sick industrial Company within the meaning of section 3 (1) (o) of the SICA as its net worth has turned positive for the year ended 31.03.2010 and its revival is sustainable. It is therefore discharged from the purview of SICA/BIFR.
ii) The unimplemented provisions of SS-07 as may be there would be implemented by the Company/promoters and the concerned agencies and implementation would be monitored by the Board of Directors of the Company.
iii) The Company would complete necessary formalities with the concerned Registrar of Companies as may be required.
(b) The Company had accordingly not made any provision of MAT/ Income Tax in earlier years on the basis of scheme of rehabilitation sanctioned by the BIFR. In their order dated 16.09.2010, the “ Board” has stated that the un implemented provisions of SS-07 would be implemented by the company/ promoters and concerned agencies. Against this order DGIT had filed an appeal before AAIFR challenging the validity of the order. The Company is confident that the directions of BIFR will be upheld and no liability towards MAT/ Income Tax will arise. In case any liability arises, the same will be accounted for as and when arises/ determined.
4. RELATED PARTY DISCLOSURE:
Related party disclosures as required by IND-AS-24 “Related Party Disclosures” are given below:-
Holding Company :
Indo Count Industries Ltd.
Transactions with Related Parties during the year and balances at the end of the year.
5. It is the management's perception that since the Company is exclusively engaged in the activity of manufacture of the cotton yarn which are governed by the same set of risks and returns the same are considered to constitute a single reportable segment in the context of Indian Accounting Standard (Ind AS) 108 on “Operating Segments” issued by the Institute of Chartered Accountants of India.
6. DISCLOSURES AS REQUIRED BY INDIAN ACCOUNTING STANDARD (Ind AS) 19 EMPLOYEE BENEFITS
(a) Defined Contribution Plans:
Amount of Rs. 58.05 lakhs (previous year Rs. 46.42 lakhs) is recognised as an expense and included in Employee Benefits Expense paid under the following defined contribution plans: (Refer Note 27, supra)
(b) Defined Benefit Plans: Gratuity
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount equivalent to 15 days' salary for each completed year of service. Vesting occurs upon completion of five continuous years of service in accordance with Indian law.
The Company makes annual contributions to the Life Insurance Corporation of India, which is funded defined benefit plan for qualifying employees.
Leave Encashment Benefit
The Company provides for leave encashment, a defined benefit retirement plan covering eligible employees. The Leave Encashment Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount equivalent to 15 days' salary for each completed year of service, subject to maximum of 90 days till retirement.
The Company makes annual contributions to the Life Insurance Corporation of India, which is funded defined benefit plan for qualifying employees.
2 Sensitivity Analysis Method
Sensitivity analysis is determined based on the expected movement in liability if the assumptions were not proved to be true on different count.
Expected contribution to the defined benefit plan for the next annual reporting period
(i) The actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out at 31st March, 2018. The present value of the defined benefit obligation and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
(ii) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
(iii) The salary escalation rate is arrived after taking into consideration the seniority, the promotion and other relevant factors, such as, demand and supply in employment market.
7. FINANCIAL INSTRUMENTS - ACCOUNTING CLASSIFICATIONS 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 and other financial institutions 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 lossess 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
During the reporting period ending 31st March, 2018 and 31st March, 2017, there were no transfers between Level 1 and Level 2 fair value measurements.
Description of significant unobservable inputs to valuation:
8. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's financial risk management is an integral part of how to plan and execute its business strategies. The Company's financial risk management policy is set by the Managing Board.
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.
The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommends risk management objectives and policies, which are approved by Senior Management and the Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowing strategies, and ensuring compliance with market risk limits and policies.
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. In order to optimize the Company's position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
The Company is not exposed to significant interest rate risk as at the respective reporting dates.
Foreign Currency Risk
The Company operates internationally and portion of the business is transacted in serveral currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas and purchases from overseas suppliers in various foreign currencies.
Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies.
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.
Credit risk
Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of histrocial bad debts and ageing of accounts receivables. Individual risk limits are set accordingly.
The Company considers the probability of default upon initial recoginition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
- Actual or expected significant adverse changes in business,
- Actual or expected significant changes in the operationg results of the counterparty,
- Financial or economic conditions that are expected to cause a significant change to the counterparty's ability to meet its obligations,
- Significant increases in credit risk on other financial instruments of the same counterparty,
- Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. The Company categorises a loan or receivable for write off when a debtor fails to make contractual payments greater than 2 years past due. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, there are recognised in profit or loss.
The Company measures the expected credit loss of trade receivables and loan from individual customer based on historical trend, industrial practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on historical data, loss on collection of receivable is not material, hence no additional provision considered.
During the year the Company has recognised loss allowance of Rs. Nil Under 12 months expected credit loss model.
No significant changes in estimation techniques or assumptions were made during the reporting period.
Liquidity Risk
Liquidity risk is defined as the risk that the Company will not be able to settle or met its obligations on time or at a resonable price. The Company's treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company's net liquidity position through rolling forecasts on the basis of expected cash flows.
For the purposes of the Company's capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company's Capital Management is to maximise shareholder value. The company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants.
9. DETAILS OF LOANS GIVEN, INVESTMENTS MADE AND GUARANTEE GIVEN COVERED UNDER SECTION 186(4) OF THE COMPANIES ACT, 2013.
There are no loans given, investment made and guarantee given, covered under section 186(4) of the Companies Act, 2013.
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