1 COMPANY OVERVIEW
Arrow Textiles Limited (“the Company”) is a Company incorporated on 30th January, 2008 under the provision of the Companies Act applicable in India. The Company is incorporated and domiciled and having principal place of business in India. The registered office is at Plot No.101 - 103, MIDC, Satpur, Nashik - 422 007, Maharashtra, India. The principal business of the company is manufacturing of textile woven labels, fabric printed labels and elastic / woven tape. The shares of the company is listed on the National Stock Exchange of India Limited (NSE) and on the BSE Limited (BSE).
Terms & Rights attached to Equity Shares
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 dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting. The Directors have recommended, subject to approval of shareholders at the ensuing Annual General Meeting, a Dividend for the Year Ended on 2018: 15% (2017: 15%). 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. This distribution will be in proportion to the number of equity shares held by the shareholders.
Brief Description of the Plans:
The Company has various schemes for employee benefits such as Provident Fund, ESIC, Gratuity and Leave Encashment. The Company’s defined contribution plans are Provident Fund (in case of certain employees) and Employees State Insurance Fund (under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952). The Company has no further obligation beyond making the contributions to such plans.
A. Define Benefit Plans:
The Company’s defined benefit plans include Gratuity. The gratuity plan is governed by the Payment of Gratuity Act, 1972 under which an employee who has completed five years of service is entitled to specific benefits. The level of benefits provided depends on the member’s length of service and salary at retirement age.
The Plan typically to expose the Company to actuarial risk such as Interest Risk, Longevity Risk and Salary Risk;
a) Interest Risk:- A decrease in the bond interest rate will increase the plan liability.
b) Longevity Risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
c) Salary Risk: The present value of the defined plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan’s participants will increase the plan’s liability.
The above sensitivity analyses are based on change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
B. Defined Contribution Plans
The Company also has certain defined contribution plans. The contributions are made to registered provident fund, Employee State Insurance Corporation and Labour Welfare Fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plans are as follows:
C. Leave Obligations
The leave obligations cover the Company’s liability for earned leave. The amount of the provision of Rs. 4413.56 (‘000) [31st March, 2017 Rs. 4971.53(‘000)] is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations.
2. INFORMATION IN ACCORDANCE WITH THE REQUIREMENTS OF IND AS 24 ON RELATED PARTY DISCLOSURES A LIST OF RELATED PARTIES
(i) Key Management Personnel’s (KMP):
Mr. Jaydev Mody (JM) - Chairman
Mr. Chand Arora (CA) - Managing Director
Mr. Ulhas Kale (UK) - CFO
Mr. Aurobind Patel (AP) - Director
Dr. Vrajesh Udani (VU) - Director
Mr. Aditya Mangaldas (AM) - Director
Ms. Anjali Mody (ANJ) - Director
Ms. Sushma Vesvikar (SV) - Company Secretary upto 27.03.2017
Ms. Deepika Pandey (DP) - Company Secretary from 15.05.2017 to 11.05.2018
Mr. Saurabh Gangadhare (SG) - Company Secretary from 18.05.2018
(ii) Relatives of KMP:
Mrs. Zia Mody (ZM) - Wife of the Chairman
(iii) Enterprises over which persons mentioned in (i) and (ii) above exercise significant influence with whom company has transactions:
AZB & Partners (AZB)
Freedom Registry Limited (FRL)
3. SEGMENT REPORTING
The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic/ non elastic woven tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primary and secondary segment disclosures prescribed by Ind AS - 108 “Segment Reporting” have not been provided in these financial statements as it is not applicable.
4. CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE
a) Gross amount required to be spent by the Company during the year 2017-18 - Rs. 1342 (‘000) [Previous Year 2016-17 - Rs. 1360 (‘000)]
5. EVENT OCCURRING AFTER BALANCE SHEET DATE:
The Board of Directors has recommended Equity dividend of '1.50/- per share (Previous year Rs. 1.50/- per Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information.
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on 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:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty,
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty’s ability to meet its obligations,
The Company measures the expected credit loss of trade receivables and loan from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.
a) The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt (borrowings as detailed in notes 18, 22 and 24 offset by cash and bank balances) and total equity of the Company.
The Company determines the amount of capital required on the basis of annual as well as long term operating plans and other strategic investment plans. The funding requirements are met through long-term and shortterm borrowings. The Company monitors the capital structure on the basis of total debt to equity ratio and maturity profile of the overall debt portfolio of the Company.
6. LIQUIDITY RISK
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Group’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 sensitivity analyses below have been determined based on the exposure to interest rates for assets and liabilities at the end of the reporting period. For floating rate assets and liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year and the rates are reset as per the applicable reset dates. The basis risk between various benchmarks used to reset the floating rate assets and liabilities has been considered to be insignificant.
If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Company’s Profit for the year would decrease/increase by amount as stated below.
7. OTHER PRICE RISKS
The Company is not significantly exposed to equity price risks / other price risks.
The Company is exposed to Currency Risk arising from its trade exposures and Capital receipt / payments denominated, in other than the Functional Currency. The Company has a detailed policy which includes setting of the recognition parameters, benchmark targets, the boundaries within which the treasury has to perform and also lays down the checks and controls to ensure the continuing success of the treasury function.
The Company has defined strategies for addressing the risks for each category of exposures (e.g. for imports, for loans, etc.). The centralised treasury function aggregates the foreign exchange exposure and takes prudent measures to hedge the exposure based on prevalent macro-economic conditions.
Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.
b) Fair Value Hierarchy and Method of Valuation
Except as detailed in the following table, the Company considers that the carrying amounts of financial instruments recognised in the financial statements approximate their fair values.
Level 1 : Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: Input other than quoted prices included within level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
These are the Company’s first financial statements prepared in accordance with Ind AS. The Company has prepared the its opening balance sheet as per Ind AS as at April 01, 2016 (“transition date”) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from Previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognised assets and liabilities.
In preparing these financial statements, the Company has availed optional exemptions and mandatory exceptions in accordance with Ind AS 101 as explained below:
(a) Past Business Combinations
The Company has elected not to apply Ind AS 103 ‘Business Combinations’ retrospectively to past business combinations that occurred before the transition date.
(b) Deemed Cost for Property, Plant and Equipment and Intangible Assets
The Company has elected to consider the carrying value of all its items of property, plant and equipment and intangible assets recognised in the financial statements prepared under Previous GAAP and use the same as deemed cost in the opening Ind AS Balance Sheet.
(c) Estimates
The Company’s estimates in accordance with Ind ASs at the transition date are in consistent with estimates made for the same date in accordance with previous GAAP after adjustments to reflect any difference in accounting policies.
Transition to Ind AS - Reconciliations
The following reconciliations provide the explanations and quantification of the differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:
I. Reconciliation of Equity as at 1st April, 2016 and as at 31st March, 2017.
II. Reconciliation of Statement of Profit and Loss for the year ended 31st March, 2017.
III. Adjustments to Statement of Cash Flows for the Year Ended 31st March, 2017.
Previous GAAP figures have been reclassified/regrouped wherever necessary to conform with financial statements prepared under Ind AS.
Reconciliations between Previous GAAP and Ind AS
Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliation from previous GAAP to Ind AS.
Footnotes:
A Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were recognised as liability in financial statements as at 01 April 2016. Under Ind AS, such dividends are recognised when it is approved by the shareholders in the general meeting.
B Current investments in mutual funds was measured at lower of cost or net realisable value under previous GAAP. Under Ind AS, investments in mutual funds are measured at fair value with fair value gain or loss being recognises in the statement of profit and loss.
C Under Ind AS, actuarial gains or losses on remeasurement of defined benefit obligation is recognised in other comprehensive income (including its tax effect) which was recognised in statement of profit and loss under previous GAAP.
D Other adjustments includes measurement of borrowings and reversal of foreign exchange fluctuation on foreign currency advances considered as non monetary items.
E In addition to the above adjustments, under Ind AS, the Company has recognised a deferred liability of government grant received earlier for acquisition of property, plant and equipment with corresponding debit to property, plant and equipment. Company recognises government grant income and depreciation on property, plant and equipment straight line basis over the useful lives of underlying assets. This does not have impact on equity or profit.
III. Effect of Ind AS adoption on the Statement of Cash Flow for the year ended 31st March, 2017
The Ind AS adjustments are either non cash adjustments or are regrouping among the cash flows from operating, investing and financing activities. Consequently, Ind AS adoption has no impact on the net cash flow for the year ended 31st March, 2017 as compared with the Previous GAAP.
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