NOTE 1: CORPORATE INFORMATION

Pearl Global Industries Limited is a public limited Company domiciled in India and has its registered office at A-3, Community Centre, Naraina Industrial Area, Phase-II, New Delhi-110028. The company is primarily engaged in manufacturing, sourcing and export of ready to wear apparels through its facilities and operations in India and overseas. The Company has its primary listings on Bombay Stock Exchange and National Stock Exchange in India.

The financial statements were authorised for issue in accordance with a resolution of the Board of Directors on May 29, 2018.

NOTE 2: BASIS OF PREPARATION AND MEASUREMENT

Statement of Compliance: The financial statements have been prepared as a going concern in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act, 2013 (“the Act”) read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.

Upto the year ended 31st March, 2017, the Company prepared the financial statements in accordance with the requirements of previous GAAP, which includes standards notified under the Companies (Accounting Standards) Rules, 2006 and other relevant provisions of the Act. These are the Company’s first Ind AS financial statements. The date of transition to the Ind AS is 1st April, 2016. Refer to note 48 for the details of first-time adoption exemptions availed by the Company.

Basis of Preparation and presentation: The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below. Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.

The principal accounting policies are set out below.

All assets and liabilities have been classified as current or noncurrent according to the Company’s operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current non-current classification of assets and liabilities.

The financial statements are presented in ‘ and all values are rounded to the nearest lakhs upto two decimal places except otherwise stated.

Recent accounting pronouncements

In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying amendments to Ind AS 12 ‘Income Taxes’, Ind AS 21, ‘The effects of changes in foreign exchange rates and also introduced new revenue recognition standard Ind AS 115 ‘Revenue from contracts with customers’. These amendments rules are applicable to the Company from April 1, 2018.

Ind AS 115 ‘Revenue from Contracts with Customers’ (Ind AS 115)

Ministry of Corporate Affairs (‘MCA’) has notified new standard for revenue recognition which overhauls the existing revenue recognition standards including Ind AS 18 - Revenue. The new standard provides a control-based revenue recognition model and provides a five step application principle to be followed for revenue recognition:

(i) Identification of the contracts with the customer

(ii) Identification of the performance obligations in the contract

(iii) Determination of the transaction price

(iv) Allocation of transaction price to the performance obligations in the contract (as identified in step ii)

(v) Recognition of revenue when performance obligation is satisfied.

The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8

- Accounting Policies, Changes in Accounting Estimates and Errors

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

The management is yet to assess the impact of this new standard on the Company’s financial statements.

Amendment to Ind AS 12

The amendment to Ind AS 12 requires the entities to consider restriction in tax laws in sources of taxable profit against which entity may make deductions on reversal of deductible temporary difference (may or may not have arisen from the same source) and also consider probable future taxable profit. The Company is evaluating the requirements of the amendment and its impact on the financial statements.

Amendment to Ind AS 21

The amendment to Ind AS 21 requires the entities to consider exchange rate on the date of initial recognition of advance consideration (asset/liability) for recognising related expense/income on the settlement of said asset/ liability. The Company is evaluating the requirements of the amendment and its impact on the financial statements.

a) The Company has availed the exemption available under Ind AS 101, whereas the carrying value of property, plant and equipment has been carried forwarded at the amount as determined under the previous GAAP as its deemed cost. The Company has disclosed the cost as at April 01, 2016 net of accumulated depreciation. However, information regarding gross carrying amount of assets, accumulated depreciation has been disclosed by the Company separately as follows :

b) The above assets includes Gross block of land of Rs. 159.54 lakhs (March 31, 2017: Rs. 159.54 lakhs, April 01, 2016: Rs. 159.54 lakhs) & Gross block of building of Rs. 234.35 (March 31, 2017: Rs. 234.35, April 01, 2016: Rs. 234.35) situated at Narshingpur, Tehsil District Gurgaon(Haryana) for which the company has executed a construction project agreement with DLF Retail Developers Limited on November 30, 2007. However, as certified by the Management, the work has not started during the financial year 2017-18 due to pending receipt of license from the concerned authority.

c) In the earlier years, the Company had initiated the process of converting its leasehold land (situated at Plot A-3, Naraina, New Delhi) into freehold land. However, the deed is yet to be transferred in the name of the Company as at March 31, 2018.

d) Borrowing cost of ‘ Nil (March 31, 2017 : Rs. 67.68 Lakhs; April 01, 2016 : Nil) has been capitalised during the year.

Estimation of fair value

The fair valuation is based on current prices in the active market for similar properties. The main inputs used are quantum, area, location, demand, restrictive entry to the complex,age of building and trend of fair market rent.

This valuation is based on valuations performed by an accredited independent valuer. Fair valuation is based on replacement cost method. The fair value measurement is categorised in level 2 fair value hierarchy.

(c) The Company has availed the exemption available under Ind AS 101, whereas the carrying value of property, plant and equipment has been carried forwarded at the amount as determined under the previous GAAP as its deemed cost. The Company has disclosed the cost as at April 01, 2016 net of accumulated depreciation. However, information regarding gross carrying amount of assets, accumulated depreciation has been disclosed by the Company separately as follows :

a) The Company has availed the exemption available under Ind AS 101, whereas the carrying value of property, plant and equipment has been carried forwarded at the amount as determined under the previous GAAP as its deemed cost. The Company has disclosed the cost as at April 01, 2016 net of accumulated depreciation. However, information regarding gross carrying amount of assets, accumulated depreciation has been disclosed by the Company separately as follows :

a) Out of the total Fixed Deposits held in the name of the Company the fixed deposit with carrying value of Rs. 876.56 lakhs (March 31, 2017 ‘1,440.52 lakhs; April 1, 2016: Rs. 985.04 lakhs) are pledged as security with various banks.

B) TERMS/ RIGHTS ATTACHED TO EQUITY SHARES:

The Company has only one class of equity shares having a par value of ‘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. 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. During the year ended March 31, 2018, the amount of per share dividend recognised for the financial year 2016-17 as distributions to equity shareholders was Rs. 3 per share (during the year ended March 31, 2017 amount recognised for financial year 2015-16: Rs. 0.5 per share). Final dividend of Rs. 2 per share for financial year 2017-18 has been proposed and is not recognised as liability in the financial statements for the year ended March 31, 2018.

Nature and purpose of reserves

a) General reserve

The Company has transferred a portion of the net profit of the Company before declaring dividend to general reserve pursuant to the earlier provisions of Companies Act, 1956.Mandatory transfer to general reserve is not required under the Companies Act, 2013.

b) Securities Premium

The amount received in excess of face value of the equity shares is recognised in securities premium.

c) Capital Redemption Reserve

This Reserve has been created at the time of merger of other companies in earlier years in accordance with the provisions of the Companies Act, 2013.

d) Amalgamation Reserve

This Reserve has been created at the time of merger of other companies in earlier years in accordance with the provisions of the Companies Act, 2013.

e) Re-measurement net defined benefit plans

Differences between the interest income on plan assets and the return actually achieved, and any changes in the liabilities over the year due to changes in actuarial assumptions or experience adjustments within the plans, are recognised in ‘Other comprehensive income’ and subsequently not reclassified to the Statement of Profit and Loss

f) Retained Earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.

g) Out of the above, reserve on account of revaluation of assets of Rs. 395.30 lakhs (March 31, 2017 ‘393.84 lakhs ; April 01, 2016 Rs. 388.48 lakhs) is not avaliable for distribution.

a) The nature of security for secured loans are :

(i) Corporate Term Loan (Kotak Bank) is secured by charge on immovable property situated at Plot No. 446, Phase-V, Udyog Vihar Industrial Estate, Haryana along with present and future structures including all present and future development rights. The loan is also secured by personal guarantee of the Promoter Director.

(ii) Corporate Term Loan (Andhra Bank) is secured by first and exclusive charge on the entire fixed assets including machineries,land and building at Chennai and Bangalore Plant of the Company. In addition, Equitable Mortgage of Land & Building located at Survey No- 262A in Aryapakkam Village at Kancheepuram measuring 4.8053 acre in Company’s name.

(iii) Corporate Term Loan (HDFC Bank) is secured by exclusive charge over movable fixed aseets of the Company, both present and future. The loan is also secured by personal guarantee of one of the Promoter Director of the Company and exclusive charge by way of equitable mortagage on industrial plot no.446, Udyog Vihar, Phase- V, Gurugram, Haryana.

(iv) Vehicle loans are secured against hypothecation of respective vehicles.

c) The term loan(s) carries rate of interest ranging between 9.75% to 12.00% per annum.

d) The nature of Security for short term borrowings are as under:

- First pari-passu charge on movable fixed assets and whole of current assets including stocks of raw material, semi finished goods, finished goods, book debts, consumable stores and spares.

- Mortgage of the properties situated at Plot No. H -597-603, RICCO Industrial Area, Bhiwadi, Distt. Alwar, Rajasthan and Plot No 16-17, Phase VI, Udyog Vihar,Gurgoan (Haryana).

- Fixed Deposit of Rs. 79.47 lakhs (March 31, 2017: Rs. 101.77 lakhs ; April 01 2016: Rs. 79.47)

- Personal Guarantee by the promoter director of the Company

Note:

(a) There are no amounts due for payment to the Investor Education and Protection Fund Under Section 125 of the Companies Act, 2013 as at the year end.

(b) The company’s exposure to currency and liquidity risk related to trade payables is disclosed in note 44.

a) Trade payable are generally on a credit of not more than 90 days.

b) This amount includes amount due to related parties (refer note 47)

c) It does not include any amount due to transferred to Investor Education and Protection Fund.

d) As per Schedule III of the Companies Act, 2013 and notification number GSR 719 (E) dated November 16, 2007, the amount due to Micro & Small Enterprises as defined in Micro, Small and Medium Enterprises Development Act, 2006 is as under :

NOTE 3 : GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS_

a) Defined contribution plans

The Company makes contribution towards Employees Provident Fund and Employee’s State Insurance scheme. Under the rules of these schemes, the Company is required to contribute a specified percentage of payroll costs. The company during the year recognised the following amount in the Statement of Profit and Loss account under company’s contribution to defined contribution plan.

b) Defined benefit plans

In accordance with Ind AS 19 “Employee benefits”, an actuarial valuation on the basis of “Projected Unit Credit Method” was carried out, through which the Company is able to determine the present value of obligations. “Projected Unit Credit Method” recognizes each period of service as giving rise to additional unit of employees benefit entitlement and measures each unit separately to built up the final obligation.

i) Gratuity scheme

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age.

a) Gratuity in case of Gurgaon Division (Funded & maintained by Life Insurance Corporation of India)

b) Gratuity in case of Chennai & Banglore Division (Unfunded)

ii) Other long term employee benefits

As per the Company’s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during the service, on early retirement, on withdrawal of scheme, at resignation by employee and upon death of employee. The scale of benefits is determined based on the seniority and the respective employee’s salary. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method.

Re-measurements, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest and if applicable), is reflected immediately in Other Comprehensive Income in the statement of profit and loss. All other expenses related to defined benefit plans are recognised in statement of profit and loss as employee benefit expenses. Re-measurements recognised in Other Comprehensive Income will not be reclassified to statement of profit and loss hence it is treated as part of retained earnings in the statement of changes in equity. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Curtailment gains and losses are accounted for as past service costs.

c) The following tables summarize the components of net benefit expense recognised in the Statement of profit and loss and the funded status and amounts recognised in the balance sheet for the defined benefit plan (viz. gratuity and compensated absences).Leave encashment include earned leaves and sick leaves. These have been provided on accrual basis, based on year end actuarial valuation.

d) The following tables summarise the components of net benefit expense recognised in the Statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plans:

NOTE 4 : CAPITAL MANAGEMENT_

For the purpose of 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 maximise 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 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 includes within net debt, interest bearing borrowings, trade and other payables, less cash and cash equivalents.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements.

NOTE 5 : DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENCY EXPOSURE_ Forward currency contracts

a) For the year ended March 31, 2018, the Company has outstanding mark to market forward contracts amount to Rs. 215.55 lakhs (March 31, 2017: Rs. 1,120.27 lakhs ; April 1, 2016 : Rs. 215.06 lakhs) relating to derivative financial instruments. These commitments with respect to foreign currrency forward contracts have been entered into by the Company to hedge against future receipts from customers in the ordinary course of business. These arrangements are designed to address significant exchange exposures and are reviewed/ renewed by the Management on a revolving basis as required.

b) The following table represents the aggregate contracted principal amount of Company’s Derivative contracts outstanding:

Management has assessed that trade receivables, cash and cash equivalents, other bank balances, trade payables, Interest accrued on borrowings and current maturities of long term borrowings approximate their carrying amounts largely due to the short-term maturities of these instruments.

Long-term borrowing includes vehicle loan and corporate loans obtained from banks and Financial institutions. Management determines vehicle loan and corporate loan to be at the market rate of interest as at the reporting date, accordingly, the carrying value of such long-term borrowing approximates fair value.

c) Discount rate used in determining fair value

The interest rate used to discount estimated future cash flows, where applicable, are based on the incremental borrowing rate of borrower which in case of financial liabilities is average market cost of borrowings of the Company and in case of financial asset is the average market rate of similar credit rated instrument. The company maintains policies and procedures to value financial assets or financial liabilities using the best and most relevant data available.

The fair value of the financial assets and liabilities is 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:

i) Fair values of the Company’s interest-bearing borrowings, loans and investment in preference shares in subsidiary are determined by using DCF method using discount rate that reflects the rate as at the end of the reporting period.

ii) Fair value for security deposits paid & received (other than perpetual security deposits) has been presented based on the discounting factor as at the reporting date.

iii) Fair value for all other non-current assets and liabilities is equivalent to the amortised cost, interest rate on them is equivalent to the market rate of interest.

iv) For other financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

v) Specific valuation techniques used to value financial instruments include:

- The fair values of investments In mutual fund units is based on The net asset value (‘NAV’) as stated by the issuers of these mutual fund units in the published statements as at Balance Sheet date. NAV represents the price at which The issuer will issue further units of mutual fund and The price at which issuers will redeem such units from the investors.

- Investment in quoted equity instruments of entities other than subsidiaries has been determined on the basis of quoted rates available from securities markets in India.

- The fair value of derivative financial instruments (forward exchange contract) has been determined on the basis of mark to market valuation.

NOTE 6 : FAIR HIERARCHY_

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level input that has a significant effect on the fair value measurement are observable, either directly or indirectly.

Level 3: Valuation techniques for which the lowest level input which has a significant effect on the fair value measurement is not based on observable market data.

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities

* Management has assessed that trade receivables, cash and cash equivalents, other bank balances, trade payables, Interest accrued on borrowings and current maturities of long term borrowings approximate their carrying amounts largely due to the short-term maturities of these instruments.

There have been no transfers between Level 1 and Level 2 during the period.

Specific valuation techniques used to value financial instruments. (refer note 42 c(iv))

NOTE 7 : FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES_

The Company’s principal financial liabilities comprises of trade and other payables, borrowings, current maturity of borrowings, interest accrued and capital creditors. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations.

The Company’s principal financial assets includes Investment in mutual funds, loans to related parties, security deposits, trade receivables, cash and cash equivalents, deposits with bank, interest accrued in deposits, receivables from related and other parties and interest accrued thereon.

The Company is exposed to credit risk, liquidity risk and market risk. The Company’s senior level management oversees the management of these risks and is supported by Treasury department that advises on the appropriate financial risk governance framework.

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. Financial instruments affected by market risk borrowings, short term deposits and derivative financial instruments.

The sensitivity analyses in the following sections relate to the position as at March 31, 2018 and March 31, 2017.

i) 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. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to interest rate risk. The Company manages its net exposure to interest rate risk related to borrowings, by balancing a proportion of fixed rate and floating rate borrowing in its total borrowing portfolio. To manage this portfolio mix, the Company may enter into currency rate swap arrangements and/ or interest rate swap arrangements, which allows the company to exchange periodic payments based on a notional amount and agreed upon fixed and floating interest rates.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the portion of borrowings affected. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

ii) Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in exchange rates. Foreign currency risk senstivity is the impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities on unhedged exposures. The following tables demonstrate the sensitivity to a reasonably possible change in USD, EURO and GBP exchange rates, with all other variables held constant.

B. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

i) Trade receivables

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating. Outstanding customer receivables are regularly monitored.

The ageing analysis of trade receivables as of the reporting date is as follows:

An impairment analysis is performed at each reporting date on an individual basis for major clients. The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 42. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets.

ii) Financial instruments and cash deposits

Credit risk from balances with banks, investment in mutual funds and loan to related parties is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s Board of Directors on an annual basis, and may be updated throughout the year subject to approval of the Company’s finance committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

C. 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, 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 loans from banks at an optimised cost.

NOTE 8 : SEGMENT INFORMATION_

a) The company’s operating segments are established on the basis of those components of the group that are evaluated regularly by the Executive Committee (the ‘Chief Operating Decision Maker’ as defined in Ind AS 108 - ‘Operating Segments’), in deciding how to allocate resources and in assessing performance. The Company has presented segment information on geographical basis in the consolidated financial statements.

b) The Company revenue from sale of garments to external customer are as follows:

c) All non- current assets are located within India:

d) Revenue from major customer: During the year the Company generates 90% of its external revenues from eleven (11) customers.

vi) As per the order dated July 13, 2016 issued by Hon’ble Madras High Court, minimum wages shall be paid to the employees retrospectively from December 2014 to June 2016. However, the management is of the view that the wages have to be paid only to the employees working presently in the company and also no PF & ESI is required to be deducted . Accordingly, the minimum wages, ESI and PF of past employees of Rs. 288.51 lakhs, Rs. 8.06 lakhs and Rs. 69.25 lakhs respectively has not been recorded in books of account. Further, Company has also not accounted for the PF contribution of Rs. 65.33 lakhs and ESI contribution of Rs. 12.88 lakhs due on the wage arrears paid to the present employees during the year ended March 31, 2017

vii) Several Legal Cases of labour pending at labour Court, Civil Court and High Court.

viii) Corporate Guarantee given by the Company (as per Section 186(4) of the Companies Act 2013)

- To Standard Chartered Bank, Hongkong Branch for securing credit facilities to its wholly owned subsidiary Pearl Global (HK) Limited, Hong Kong for USD 12,000,000 equivalent to Rs. 7804.80 lakhs (March 31, 2017 USD 12000000 equivalent to Rs. 7,780.80 lakhs ; April 01, 2016 USD 12,000,000 equivalent to Rs. 7,959.60 lakhs)

- To Standard Chartered Bank, Bangladesh Branch for securing credit facilities to its subsidiary Norp Knit Industries Limited, Bangladesh for BDT 900,000,000 equivalent to INR 6,930.00 lakhs (March 31, 2017 : BDT 900,000,000 equivalent to Rs. 71,100.00 lakhs April 01 ,2016: BDT 775,000,000 equivalent to Rs. 6,432.50 lakhs)

Above Corporate Guarantees have been given for businesses purpose.

Notes

a-i) Pending resolution of the respective proceedings, it is difficult for the company to estimate the timings of cash outflows, if any, in respect of the above as it is determinable only on receipt of judgement/decisions pending with various forums/authorities.

a- ii) The company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The company does not expect the outcome of these proceedings to have a materially adverse effect on its financial position. The company does not expect any reimbursements in respect of the above contingent liabilities.

VI) Terms and conditions of transactions with related parties

All the transaction with the related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free except the interest bearing loan and settlement occurs in cash.

NOTE 9 : FIRST TIME ADOPTION OF IND AS_

As stated in note 2 (a), the financial statements for the year ended 31 March 2018 would be the first annual financial statements prepared in accordance with Ind AS. For year up to and including the year ended March 31, 2017, the Company has prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013 and other relevant provisions of the Act (‘previous GAAP’).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ended 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 Company’s 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.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

a) Mandatory exceptions

i) Estimates

The estimates at April 01, 2016 and at March 31, 2017 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies, if any).

ii) De-recognition of financial assets:

The company has applied the de-recognition requirements in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.

iii) Classification and measurement of financial assets: i. Financial Instruments:

Financial assets like security deposits received and security deposits paid, has been classified and measured at amortised cost on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Since, it is impracticable for the Company to apply retrospectively the effective interest method in Ind AS 109, the fair value of the financial asset or the financial liability at the date of transition to Ind AS by applying amortised cost method, has been considered as the new gross carrying amount of that financial asset or the financial liability at the date of transition to Ind AS.

iv) Impairment of financial assets: (Trade receivables and other financial assets)

At the date of transition to Ind AS, the Company has determined that there significant increase in credit risk since the initial recognition of a financial instrument would require undue cost or effort, the Company has recognised a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognised (unless that financial instrument is low credit risk at a reporting date).

b) Optional exemptions

i. Deemed cost-Previous GAAP carrying amount: (PPE and Intangible) :

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 (Indian GAAP) and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities, if any. This exemption can also be used for Intangible Assets covered by Ind AS 38. Accordingly, the company has elected to measure all of its property, plant and equipment, capital work in progress and intangible assets at their previous GAAP carrying value.

ii. Leases :

Appendix C to Ind AS 17 requires the first-time adopter to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangements for embedded leases based on conditions in place as at the date of transition.

iii. Investment in subsidiaries :

Ind AS 101 provide an option to measure investments in subsidiaries at cost in accordance with Ind AS 27 at either fair value on date of transition or Previous GAAP carrying values. The Company has elected to use the carrying amount as its deemed cost on the date of transition to Ind AS.

iv. Foreign currency translation

Under Indian GAAP, the Group recognised translation differences on foreign operations in a separate component of equity. Under Ind AS, Cumulative currency translation differences for all foreign operations are deemed to be zero as at 1st April 2016. The resulting adjustment was recognised against retained earnings as at transition date.

v. Business combination

Ind AS 101 allows a first-time adopter not to apply Ind AS 21 Effects of changes in Foreign Exchange Rates retrospectively for business combinations that occurred before the date of transition to Ind AS. In such cases, where the entity does not apply Ind AS 21 retrospectively to fair value adjustments and goodwill, the entity treats them as assets and liabilities of the acquirer entity and not as the acquiree.

f) Footnotes to the reconciliation of equity as at April 01, 2016 and March 31, 2017 and profit or loss for the year ended March 31, 2018:

i. Carrying value of investment in subsidiaries in equity shares

Under previous GAAP, investment in subsidiaries were non current investments, hence were carried at cost. Whereas under Ind AS, Company has elected the option of carrying value of Investment in subsidiaries on the date of transition to Ind AS and using the carrying value as its deemed cost.

ii. Fair value of investment in preference shares of subsidiary

Under previous GAAP, investment in redeemable preference shares were non current investments, hence were carried at cost, whereas under Ind AS, the same are initially discounted and subsequently recorded at amortized cost at the end of every financial reporting period. Detail of investment in preference shares are given as here under:

iii. Fair value of investment in equity shares of entity other than subsidiary

Under previous GAAP, investment in equity shares were non current investments, hence were carried at cost, whereas under Ind AS, such investments has been classified and measured as fair value through profit and loss at each reporting date:

iv. Property, plant and equipment

On the date of transition, Opening balance of Land includes Rs. 452.29 lakhs on account of revaluation done on 31.03.2002 and the opening balance of Building includes Rs. 59.32 lakhs on account of reduction in revaluation done on 31.03.2002. However during the financial year ended March 31,2017, in compliance with para 32 of revised Accounting Standard(Previous GAAP)-10 “Property, Plant & Equipment” the Company adopted the option of cost model for recognition of fixed assets for entire class of property, plant and equipment and accordingly as per para 91 of the revised Accounting standard, the Company adjusted the existing revaluation reserve of Rs. 392.97 lakhs against the carrying amount of relevant items of property, plant and equipment. However with the applicability of Ind AS, Company has elected Ind AS 101 exemption and continue with the carrying value for all of its property, plant and equipment as its deemed cost as at the date of transition i.e. April 1, 2016.

v. Security deposit paid

Under Previous GAAP, the security deposits paid for lease rent are shown at the transaction value whereas under Ind AS, the same are initially discounted and subsequently recorded at amortized cost at the end of every financial reporting period. Accordingly, the difference between the transaction and discounted value of the security deposits paid is recognized as deferred asset and is amortized over the period of the lease term (along with current and noncurrent classification). Further, interest is accreted on the present value of the security deposits paid for lease rent (along with current and non- current classification).

vi. Security deposit received

Under Previous GAAP, the security deposits received for lease rent are shown at the transaction value whereas under Ind AS, the same are initially discounted and subsequently recorded at amortized cost at the end of every financial reporting period. Accordingly, the difference between the transaction and discounted value of the security deposits received is recognized as deferred liability and is amortized over the period of the lease term (along with current and non- current classification). Further, interest is accreted on the present value of the security deposits received for lease rent (along with current and non- current classification).

vii. Borrowings

As required under Ind AS 109 transactions cost incurred towards origination of borrowings have been deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in the profit and loss over the tenure of the borrowing as interest expenses, computed using the effective interest rate method corresponding effect being in Long term borrowings and to the extent attributable to current maturity of long term debts.

Under the previous GAAP, these transaction costs were charged to statement of profit and loss as and when incurred. Consequently, borrowings as at transition date have been reduced with a corresponding adjustment to retained earnings.

viii. Proposed Dividend

Under Previous GAAP, proposed dividends and related dividend distribution tax was recognised as a provision in the year to which they relate, irrespective of when they are declared. Under Ind AS, dividends and related dividend distribution tax are recognised as a liability in the year in which it is approved by the shareholders in the Annual General Meeting of the Company.

ix. Excise Duty

Under Previous GAAP, excise duty was netted off against sale of goods. However, under Ind AS, excise duty is included in sale of goods and is separately presented as expense on the face of Statement of Profit and Loss. Thus, sale of goods under Ind AS has increased with a corresponding increase in expenses.

x. Lease equalisation payable

Under Previous GAAP, operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term. Whereas under Ind AS, lease equalisation reserve is derecognised as operating lease payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost.

xi. Lease Equalisation Receivable

Under Previous GAAP, operating lease payments are recognized as an income in the statement of profit and loss on a straight-line basis over the lease term. Whereas under Ind AS, lease equalisation reserve is derecognised as operating lease payments from the lessor are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost.

xii. Prior period expenses

Under previous GAAP, Company has recognised expenses pertaining to period prior to transition date in the financial year 2016-17. This has been shown as a prior period expenses. However, Ind AS requires the Company to correct the prior period errors retrospectively by restating the comparative amounts for the prior period presented in the which the error occurred. Further, where the amount of prior period pertains to the period before the earliest prior period presented, opening balances of the earliest period presented are to be restated.

xiii. Fair valuation of mutual fund

Under previous GAAP, investment made in mutual funds shown as current investments are valued at fair value and corresponding Investment Revaluation Reserve was created, whereas under Ind AS, such investments has been classified and measured as fair value through profit and loss at each reporting date.

xiv. Employee benefits

Both under Previous GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Previous GAAP, the entire cost, including actuarial gains and losses, are charged to statement of Profit and Loss. Under Ind AS, re-measurements (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 books with a corresponding debit or credit to retained earnings through OCI.

xv. Income on corporate guarantee

Under previous GAAP, income on corporate guarantee was not recoginised in the statement of Profit and Loss whereas under Ind AS income on corporate guarantee measured at fair value issued to subsidiaries has been recoginised in the statement ofProfit and Loss.

xvi. Deferred tax

Previous 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 relating to various transition adjustments which are recognised in correlation to the underlying transaction either in retained earnings as a separate component in equity.

xvii. Other comprehensive income

Items of income and expense that are not recognised in profit and loss but are shown in ‘other comprehensive income’ includes re-measurements gain/(loss) of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP. As a consequence, re-measurement gain/(loss) of defined benefit plans has been regrouped from employee benefit expense to other comprehensive income.

NOTE 10 : IMPACT OF IMPLEMENTATION OF GOODS AND SERVICES TAX (GST) ON THE FINANCIAL STATEMENTS_

Consequent to the introduction of goods and services Tax (GST) with effect from 1 July 2017, VAT/Sales Tax, Excise Duty etc. have been subsumed into GST and accordingly the GST is not recognised as part of revenue from operations and excise duty as a seperate expense line item as per the requirements of Ind AS. This has resulted in lower reported revenue from operations in the current year in comparison to the revenue from operations reported under the pre-GST structure of indirect taxes. Accordingly, the Revenue from operations for the year ended March 31, 2018 are not comparable with year ended March 31, 2017 presented in the financial results which are reported inclusive of Excise Duty. The following additional information is being provided to facilitate such understanding:

NOTE 11 :

The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company regularly updates the documentation for the International transactions entered into with the associated enterprises during the period as required under law. The Management is of the opinion that its international transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation for the year ended March 31, 2018.

NOTE 12:

No material events have occurred between the balance sheet date to the date of issue of these financial statements that could affect the values stated in the financial statements.

NOTE 13:

The company has reclassified previous year figures to conform to Ind AS Classification.

NOTE 14:

The balances of trade receivables, trade payables, financial assets and other assets given are subject to reconciliation and confirmation as on March 31, 2018 and have realisation in ordinary course of business atleast equal to amount at which they are stated in the financial statements.

NOTE 15:

Figures have been rounded off to the nearest lakhs upto two decimal places except otherwise stated.