I. COMPANY OVERVIEW

Provogue (India) Limited (the Company) is a listed public company domiciled in India and incorporated on 17th November 1997. The Company is engaged in the business of manufacturing, trading of garments, fashion accessories, textile products and related materials. The equity shares of the Company are listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

a) Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 1 per share. Each holder of equity share is entitled to one vote per share.

In the event of liquidation of the Company, the holder 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.

b) Other Information

(i) Rs. 29.00 lakhs Equity Shares (of Rs. 10 each fully paid) have been issued as preferential allotment at a premium of Rs. 440 per share in the financial year 2006-07.

(ii) Rs. 13.34 lakhs Equity Shares (of Rs. 10 each fully paid) have been issued on conversion of the share warrants issued at Rs. 450 in the ratio of one share per warrant in the financial year 2007-08 and 2008-09.

(iii) Rs. 28.50 lakhs Equity Shares (of Rs. 10 each fully paid) have been issued as preferential allotment at a premium of Rs. 1090 per share in the financial year 2008-09.

(iv) The Company has sub divided the equity share of Rs. 10 each (fully paid up) into 5 (five) equity shares of Rs. 2 each (fully paid up) based on the approval of the share holders in the Annual General Meeting held on 15th September 2008.

(v) Rs. 20.50 lakhs Equity Shares of Rs. 2 each have been extinguished under Buy Back Scheme in the financial year 2009-10.

(vi) During the financial year 2011-12, pursuant to The Scheme of Arrangement, 1143.57 lakhs Equity Shares of Rs. 2/- each have been reduced to 1143.57 lakhs Equity Shares of Rs. 1/- each.

(vii) During the Financial year 2015-16, the credit facilities of the company have been classified under SMA - 2 category with banks. On 16th December 2015, Joint Lender’s Forum (JLF) was formed for corrective action plan.As per discussions in JLF meeting held on 25th January 2016, it was decided to invoke Strategic Debt Restructuring (SDR) as per RBI guidelines.Pursuant to SDR Scheme,the Company on August 09,2016 allotted 11,90,24,732 equity shares of Rs. 1/- per share to SDR Lenders at a price of Rs. 7.66 per share entitling them to collectively hold 51% of post allotement paid up share capital of the Company. The said alloted shares are subject to the lock in requirements upto August 25, 2017.

Term Loans from Banks includes :

Rs. 3568.11 lacs (PY Rs. 4372.82 Lacs) term loan from Bank of India carries interest @ Base Rate 2.50% per annum. The loan is repayable in 60 stepped up monthly installments commencing from April 2013. The loan is secured by First exclusive charge on future credit card cash flows through escrow account mechanism; Second pari passu charge on movable & immovable fixed asset of the company and current asset of the company and further secured by personal guarantee of promoter directors.

Working Capital Loans from Banks includes:

Secured :

(a) Cash Credit Loan:

Rs. 11,372.55 Lacs (31.03.2017 : Rs. 14,877.59 Lacs) - Secured by hypothecation of stocks and book debts, the personal guarantee of promoter directors and further collaterally secured by equitable mortgage of office and factory premises (at Daman) of the Company carrying interest @ 12.50% to 14.75% p.a.

(b) Packing Credit Loan and Foreign Bills Purchased:

Rs. 2,590.21 Lacs (31.03.2017 : Rs. 2,649.86 Lacs) - Secured by hypothecation of stocks and book debts of export division and the personal guarantee of promoter directors and further collaterally secured by equitable mortgage of office and factory premises (at Daman) of the Company carrying interest @ 11% to 13% p.a.

(c) Rs. 279.17 Lacs (31.03.2017 : Rs. 279.17 Lacs) suppliers bills discounting limit from SIDBI, secured by residual charge on movable and current assets of the Company carrying interest @ 13% p.a.

Exceptional items represents :

i) Reversal of interest expense provided post SDR amounting to Rs. 5252.34 lacs, since lenders have classified credit facilities as sub standard due to expiry of stipulated time for SDR as per RBI guidelines. (also refer note 42)

ii) Obsolete inventories written off amounting to Rs. 6,974.38 lacs (Consolidated Rs. 7968.61 lacs) which were non moving since significant period of time.

NOTE 2 : EARNINGS PER EQUITY SHARE

In accordance with Indian Accounting Standard 33 - Earning Per Share, the computation of earning per share is set below:

Note:

The Company does not have any dilutive potential equity shares. Consequently the basic and diluted earning per share of the Company remain the same.

NOTE 3 : COMMITMENTS

Operating leases

A. Leases as lessee

The Corporation enters into non-cancellable operating lease arrangements with various parties. The lease rentals paid/ received for the same are charged to the Statement of Profit and Loss.

i. Future minimum lease payments

At 31st March, the future minimum lease payments under non-cancellable leases are NIL

Defined Benefit Plans

The Company has the following Defined Benefit Plans:

Gratuity: In accordance with the applicable laws, the Company provides for gratuity, a defined benefit retirement plan (“The Gratuity Plan”) covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement (subject to completion of five years of continuous employment), death, incapacitation or termination of employment that are based on last drawn salary and tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation on the reporting date and the Company makes annual contribution to the gratuity fund administered by life Insurance Companies under their respective Group Gratuity Schemes.

Assumptions

With the objective of presenting the plan assets and plan liabilities of the defined benefits plans at their fair value on the balance sheet, assumptions under Ind AS 19 are set by reference to market conditions at the valuation date.

Demographic Assumptions

Mortality in service : Indian Assured Lives Mortality (2006-08)

Sensitivity

The sensitivity of the overall plan liabilities to changes in the weighted key assumptions are:

The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption,the same method used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.

NOTE 4 : SEGMENT REPORTING

(i) Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”) of the group. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and CEO of the group.

The CODM examine the group performance from a geographic perspective and has identified two of its following business as identifiable segments:

a) Domestic

b) Export

NOTE 5 : RELATED PARTY DISCLOSURES AS REQUIRED UNDER INDIAN ACCOUNTING STANDARD 24, “RELATED PARTY DISCLOSURES” ARE GIVEN BELOW:

List of Related Parties and Relationships:

a) Names of related parties and nature of relationship (to the extent of transactions entered into during the year except for control relationships where all parties are disclosed)

Nature of relationship Nature of the party A) Key Management Personnel (KMP) and their relatives

Mr. Nikhil Chaturvedi Managing Director

Mr. Deep Gupta Whole Time Director & CFO

Mr. Akhil Chaturvedi Whole Time Director

Mr. Salil Chaturvedi Director

Mr. Dinesh Arya Director

Ms. Gauri Pote Director

Mr. Hetal Vasant Hakani Director

Mr. Vishant Shetty Company Secretary

b) Enterprises having common Key Managerial Personnel

Prozone Intu Properties Limited

c) Subsidiaries / Step down Subsidiaries :-

Sporting and Outdoor Ad Agency Private Limited (Upto 17th October 2017)

Pronet Interactive Private limited / Pronet Interactive LLP

Millennium Accessories Limited

Profab Fashions (India) Limited

Provogue Infrastructure Private Limited

Faridabad Festival City Private Limited

Acme Advertisements Private Limited

Brightland Developers Private Limited

Classique Creators Private Limited (formerly known as Classique Creators Limited)

Proflippers India Private Limited (formerly known as Proskins Fashions Private Limited)

Standard Mall Private Limited Elite Team HK Limited (Hongkong)

Provogue Holding Limited (Singapore)

* “Major Parties” denotes who account 10% or more of the aggregate for that category of transaction.

** Loans given to Elite Team HK Limited includes gain on foreign exchange fluctuations Note: Related Parties are as disclosed by the Management and relied upon by the auditors.

NOTE 6 : FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT

A. Accounting classification and fair values

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.

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

B. Measurement of fair values

Valuation techniques and significant unobservable inputs

The Fair Value of the Financial Assets & 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.

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

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset 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)

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 is exposed to interest rate risk through the impact of rate changes on interest-bearing liabilities and assets. The Company manages its interest rate risk by monitoring the movements in the market interest rates closely.

Exposure to interest rate risk

Company’s interest rate risk arises primarily from borrowings. The interest rate profile of the Company’s interest-bearing financial instruments is as follows.

Cash flow sensitivity analysis for variable-rate instruments

The sensitivity analysis below have been determined based on the exposure to interest rates for financial instruments at the end of the reporting year and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates :

Other price risk

The Company invests its surplus funds in various Equity and debt instruments . These comprise of mainly liquid schemes of mutual funds (liquid investments), Equity shares, Debentures and fixed deposits. This investments are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. However due to the very short tenor of the underlying portfolio in the liquid schemes, these do not pose any significant price risk.

Market risk

Market Risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

Currency risk

The Company is exposed to currency risk on account of its operating and financing activities. The functional currency of the Company is Indian Rupee. Our exposure are mainly denominated in U.S. dollars. The USD exchange rate has changed substantially in recent periods and may continue to fluctuate substantially in the future. The Company’s business model incorporates assumptions on currency risks and ensures any exposure is covered through the normal business operations. This intent has been achieved in all years presented. The Company has put in place a Financial Risk Management Policy to Identify the most effective and efficient ways of managing the currency risks.

Exposure to currency risk

The currency profile of financial assets and financial liabilities as at March 31, 2018 and March 31, 2017 are as below:

Sensitivity analysis

A reasonably possible strengthening / (weakening) of the Indian Rupee against US dollars at 31st March would have affected the measurement of financial instruments denominated in US dollars and affected profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. In cases where the related foreign exchange fluctuation is capitalised to fixed assets or recognised direclty in reserves, the impact indicated below may affect the Company’s income statement over the remaining life of the related fixed assets or the remaining tenure of the borrowing respectively.

Financial Risk Management Risk management framework

A wide range of risks may affect the Company’s business and operational / financial performance. The risks that could have significant influence on the Company are market risk, credit risk and liquidity risk. The Company’s Board of Directors reviews and sets out policies for managing these risks and monitors suitable actions taken by management to minimise potential adverse effects of such risks on the company’s operational and financial performance.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade and other receivables, cash and cash equivalents and other bank balances. To manage this, the Company periodically assesses financial reliability of customers, taking into account the financial condition, current economic trends and analysis of historical bad debts and ageing of accounts receivable. The maximum exposure to credit risk in case of all the financial instuments covered below is resticted to their respective carrying amount.

(a) Trade and other receivables from customers

Credit risk in respect of trade and other receivables is managed through credit approvals, establishing credit limits and monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

The Company considers the probablity of default upon initial recognition of asset and whether there has been a significant increase in the 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 occuring on assets 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 counterparties ability to meet its obligation

iv) Significant imcrease in credit risk on other financial instruments of the same counterparty

v) 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 a no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. When loans or receivables have been written off, the Company continues to engage in enforcement activity to attemp to recover the receivable due, When recoverables are made, these are recognised as incone in the statement of profit and loss.

The Company measures the expected credit loss of trade receivebles 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.

Liquidity risk

Liquidity is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable 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.

The table below provides details regarding the contractual maturities of significant financial liabilities :

NOTE 7 : CAPITAL MANAGEMENT

For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The Company strives to safeguard its ability to continue as a going concern so that they can maximise returns for the shareholders and benefits for other stake holders. The aim to maintain an optimal capital structure and minimise cost of capital.

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, issue new shares or adjust the dividend payment to shareholders (if permitted). Consistent with others in the industry, the Company monitors its capital using the gearing ratio which is total debt divided by total capital plus total debt.

NOTE 8 : During the financial year 2015-16, the credit facilities of the Company have been classified under SMA- 2 category with banks. On December 16, 2015, Joint Lender’s Forum (JLF) was formed for corrective action plan. As per the discussions in JLF meeting held on 25th January, 2016, it was decided to invoke Strategic Debt Restructuring (SDR) as per RBI guidelines. Pursuant to SDR Scheme, the Company on August 09, 2016 allotted 11,90,24,732 equity shares of Rs. 1/- per share to SDR Lenders at a price of Rs. 7.66 per share entitling them to collectively hold 51% of post allotment paid up share capital of the Company. The said allotted shares were subject to the lock-in requirement up to August 25, 2017. The investors proposal under SDR was not approved by lenders. Accordingly, the Company has reversed interest expense provided post SDR amounting to Rs. 5252.34 lacs, since lenders have classified credit facilities as sub standard due to expiry of stipulated time for SDR as per RBI guidelines.

NOTE 9 : DISCLOSURE WITH REGARDS TO SECTION 186 (4) OF THE COMPANIES ACT, 2013 :

i) For Investment refer note no. 14

ii) For Corporate Guarantees given refer note no. 31(A)(c)

iii) During the year, the Company had given the unsecured loans to certain parties for the General Corporate purpose. The full particulars of the loans given is as below :

Notes :

a) Loans given to Wholly Owned Subsidiaries, Subsidiaries and Joint Ventures were considered as good and fully recoverable by the management. The terms and conditions of loans are not prejudicial to the Interest of the company.

NOTE 10 : The Company has regrouped, reclassified and / or rearranged previous year figures, wherever necessary to conform to current year classification