1. Corporate Information
VTM Limited was established in 1946 with the founding principles of setting standards in weaving by ensuring that the best of weaving technology was always available. Today, the Company is well-established with unique capabilities that allows to cater to exotic constructions in weaving. It has also expanded the capabilities to include special weaves and combinations. 254 state-of-the-art looms take pride of place in the manufacturing unit. 92 Sulzer machines, 147 Air jets , 9 Jacquard and 6 Rapier machines work in tandem to produce 1.65 million meters of fabric every month. It is also equipped with adequate equipment to cater to special fabric manufacturing in fine counts and complex specifications.
2. Basis of preparation of financial statements Statement of Compliance
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 ('the Act') (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
Use of estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognized prospectively in current and future periods.
Functional and presentation currency
These financial statements are presented in Indian Rupees (INR), which is the Company's functional currency. AH financial information presented in INR has been rounded to the nearest Lakhs (up to two decimals).
The financial statements are approved for issue by the Company's Board of Directors on April 22,2019.
2 A. Critical accounting estimates and management judgements
In application of the accounting policies, which are described in note 2, the management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and assumptions are based on historical experience and other factors that are considered to be relevant.
Information about significant areas of estimation, uncertainty and critical judgements used in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:
Property, Plant and Equipment (PPE)
The residual values and estimated useful life of PPEs, Intangible Assets and Investment Properties are assessed by the technical team at each reporting date by taking into account the nature of asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement and maintenance support. Upon review, the management accepts the assigned useful life and residual value for computation of depreciation/amortisation. Also, management judgement is exercised for classifying the asset as investment properties or vice versa.
Current tax
Calculations of income taxes for the current period are done based on applicable tax laws and management s judgement by evaluating positions taken in tax returns and interpretations of relevant provisions of law.
Deferred Tax Assets
Significant management judgement is exercised by reviewing the deferred tax assets at each reporting date to determine the amount of deferred tax assets that can be retained/' recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
Fair value
Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. In applying the valuation techniques, management makes maximum use of market inputs and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.
Impairment of Trade Receivables
The impairment assessment for trade receivables are done based on assumptions about risk of default and expected loss rates. The assumptions, selection of inputs for calculation of impairment are based on management judgement considering the past history, market conditions and forward looking estimates at the end of each reporting date.
Impairment of Non-financial assets (PPE)
The impairment assessment of non-financial assets is determined based on estimation of recoverable amount of such assets. The assumptions used in computing the recoverable amount are based on management judgement considering the timing of future cash flows, discount rates and the risks specific to the asset.
Defined Benefit Plans and Other long-term employee benefits
The cost of the defined benefit plan and other long term employee benefits, and the present value of such obligation are determined by the independent actuarial valuer. An actuarial valuation involves making various assumptions that may differ from actual developments in future. Management believes that the assumptions used by the actuary in determination of the discount rate, future salary increases, mortality rates and attrition rates are reasonable. Due to the complexities involved in the valuation and its long-term nature, this obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities could not be measured based on quoted prices in active markets, management uses valuation techniques including the Discounted Cash Flow (DCF) model, to determine its fair value. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is exercised in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility.
Provisions and contingencies
The recognition and measurement of other provisions are based on the assessment of the probability of an outflow of resources, and on past experience and circumstances known at the reporting date. The actual outflow of resources at a future date may therefore vary from the figure estimated at end of each reporting period.
Recent accounting pronouncements
Standards issued but not yet effective
Ind AS 116 Leases: On March 30,2019, Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace the existing leases Standard, Ind AS 17 Leases, and related Interpretations.
The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019.
The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of profit and loss. The Standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17. The Company has evaluated the requirements of the above standards and the effect on the financial statements is not considered to be significant.
Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The effect on adoption of Ind AS 12 Appendix C is not considered to be significant.
Amendment to Ind AS 12 - Income taxes : On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, 'Income Taxes', in connection with accounting for dividend distribution taxes. The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.
Effective date for appi ication of this amendment is annual period beginning on or after Apri 11, 2019. The Company is currently evaluating the effect of this amendment on the financial statements.
Amendment to Ind AS 19 - plan amendment, curtailment or settlement: On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, 'Employee Benefits', in connection with accounting for plan amendments, curtailments and settlements. The amendments require an entity: to use updated assumptions to determine current service cost and net interest for the reminder of the period after a plan amendment, curtailment or settlement; and to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company does not have any impact on account of this amendment
1} The Company has no Holding or Subsidiary Companies
2) During the last five years immediately preceding the date of Balance Sheet, the Company has neither issued any shares as bonus shares nor for consideration other than cash and has not bought back any shares,
3) The Company had split its Rs 10/- paid up shares into Re 1/- paid up shares in October 2012
4) Rights, preferences and restrictions in respect of equity shares issued by the Company
a The company has issued only one class of equity shares having a par value of Re 1 each. The equity shares of the company having par value of Re. 1/- rank pari-passu m all respects including voting rights and entitlement to dividend.
b. The Company declares dividend on equity shares. In the event of declaration of interim dividend, the same is as per the decision of the Board of Directors. Final dividend is proposed by Board of Directors and approved by the shareholders of the Company at the Annual General Meeting.
c. In the event of liquidation, shareholders will be entitled to receive the remaining assets of the company after distribution of all preferential amounts The distribution Mill be proportionate to the number of equity shares held by the shareholder.
1) Term loan mated from Exim Bank of India by securing first charge on (he specific assets procured under ATUF Scheme - repayable in 5 years on half yearly basis, commencing from December 2016.
2) Term loan availed from Exim Bank of India by securing first charge on the specific assets procured under ATUF Scheme -repayable in 5 years on half yearly basis, commencing from September 2018
Dues to Micro and Small Enterprises have been determined to the extent such parries have been identified on the basis of information collected by the management represents tire principal amount payable to these enterprises. There are no interest due and outstanding as at the reporting date. Please refer note 42.
3. Operating Segments
The company is engaged In the business of Textiles" and therefore, has only one re portable segment in accordance with ind AS 108 ’Operating Segments'
(b) Non current assets
The manufacturing facilities of the Company are situated in India and no non-current assets are held outside India.
There are no unfulfilled conditions and other contingencies attached to government assistance that has been recognised in the financial statements.
4. Financial Instruments
Capital management
The Company manages its capital 10 ensure Shat entities in the Company will be able to continue as going concern, white maximising the return to stakeholders trough the optimisation of the debt and equity balance.
The Company determines the amount of capital required ond the basis of annual operating plans and long-term product and other strategic investment plans. The funding requirements are met through equity long term and short-term borrowings.
For the purposes of the Company's capital management capital includes issued capital and other equity reserves attributable to the equity holders.
Financial risk management objectives
The treasury function provides services to the business. Co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk including currency risk, interest rate risk and other price risk}, credit risk and liquidity risk.
The Company seeks to minimise (he effects of these risks by using natural hedging financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company's policies approved by the board of directors, which provide written principles on foreign exchange risk, the use of financial derivatives, and the investment of excess liquidity. The Company does net enter into or (trade financial instruments. including derivative financial instruments, for speculative purposes.
Market risk
Marker risk is the risk of any loss in future earnings in realizable fair values or in future cash flows that may result from a change in the price of a financial instrument. The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Company actively manages its currency and interest rata exposures through its finance division and uses derivative Instruments such as forward controls Md currency swaps, wherever required: to mitigate the risks from such exposures. The use of derivative instruments is subject to limit and regular monitoring by appropriate levels of management.
Foreign currency risk management
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company actively manages its currency rate exposures through a centralised treasury division and uses natural helping principles to mitigate the risks from such exposures The use of derivative instrument, if any. is suited to limits end regular monitoring try appropriate levels of management.
Foreign currency sensitivity analysis
Movement m function# currencies of the various operations at the Company against major foreign currencies may impact the Company's revenues from its operations. Any weakening of the functional currency may impact 8ie Company's cost of imports and cost of borrowings and consequently may increase the cost of financing this Company’s capital expenditure. The foreign exchange rate sensitivity is calculated for each currency by aggregation of tae net foreign exchange rate exposure of a currency and a simultaneous parallel foreign exchange rates shift in the foreign exchange rates of each currency by 2%. which represents managements assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 2% change in foreign currency rates. The estimated sensitivity impact ml! be around 1- Rs. 2 lakhs (Previous year Rs. 0.92 lakhs), which is considered to be immaterial to the size of operations of the Comply.
In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect (he exposure during the year.
Credit risk management
Credit risk arises when a customer or counterparty does not meet is obligations under a customer contract or financial instrument leading to a financial loss. The Company is exposed to credit risk from its operating activities primarily trade receivables and from its financing/ investing activities, including deposits with hanks, mutual fund investments, investments in debt securities and foreign exchange i?arisac.5ron$. The Company has no significant concentrator of credit risk with any counterparty.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure is the total of the carrying amount of balances with banks, short term deposits with banks, trade receivables, margin money and other financial assets excluding equity investments.
(a) Trade Receivables
Trade receivables are consisting of a large number of customers The Company has credit evaluation policy tor each customer and. based on the evaluation, credit limit of each customer is defined Wherever the Company assesses the credit risk as high, the exposure *s backed by either bank, guarantee either of credit or security deposits
The Company does not have higher concentration of credit risks to a single customer. As per simplified approach, the Company makes provision of expected credit Josses on trade receivable using a provision matrix to mitigate the risk of default in payments and makes appropriate provision at each reporting date wherever outstanding is for loiter period and Involves higher risk.
(b) Investments, Derivative Instruments, Cash and Cash Equivalents and Bank Deposits
Credit Risk on cash and cash equivalents deposit with the banks/financial institutions is generally low as the said deposits nave been made with the banks/financial institutions who have been assigned high credit rating by international and domestic rating agencies.
Credit Risk on Derivative Instruments is generally low as the Company enters into the Derivative Contracts with the reputed Banks.
Investments of surplus funds are made only with approved Financial Institution & Counterparty. Investments primarily issued investment in units of quoted Mutual Funds, quoted Bonds, Non-Convertible Debentures issued by Government Semi-Government Agencies PSU Bonda/High investment grade Corporates etc. These Mutual Funds and Counterparties W* a* credit risk. The Company has standard operating procedures and investment policy for deployment of surplus liquidity. which allows investment In debt securities end mutual fund securities of debt and arbitrage Gaieties and restricts the exposure in equity markets.
Offsetting related disclosures
Offsetting of cash and cash equivalents to borrows as per the loan agreement is available only to the hank in the event of 3 default. Company does not have the right to offset in case of the counter party's bankruptcy, therefore, these disclosures are not required.
Liquidity risk management
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure mat funds are available for use as per requirements. The Company invests its surplus funds in bank fixed deposit and mutual kinds, which carry minimal mark to market risks. The Company also constantly monitors funding options available in tie debt and capital markets with a view to maintaining finance flexibility.
5. Retirement benefit plans
Defined contribution plans
in accordance with Indian law, eligible employees of the Company are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of She covered employees' salary The contributions, as specified under the law, are made to Die Provident fund as well as Employee Stale Insurance Fund,
The total expense recognised in profit or loss of Rs 59,36 lakhs (for the year ended March 31,2018: Rs. 66,66 lakhs} represents contribution payable to these plans by he Company at rates specified in the rules of the plan
Defined benefit plans
(a) Gratuity
Gratuity is payable as per Payment of Gratuity Act. 1972. In terms of the same, gratuity is computed by multiplying last drawn salary (basic salary including dearness Allowance if any) by completed years of continuous service with part thereof in excess of six months and again by 1526 The Ad provides for a vesting period of 5 years for withdrawal and retirement and a monetary ceiling on gratuity payable to an employee on separation, as may be prescribed under the Payment of Gratuity Act, 1972, from time to time. However, in cases where an enterprise has more favourable terms in this regard, the same has been adopted.
(b) Compensated absences
As per the policy of the Company, compensated absences are not entitled to be carped forward to (tie subsequent financial year and lapse at die end of the reporting period. Accordingly, no liability towards compensated absences are recognised in these financial statements.
|