1. Financial Risk Management Financial risk
In the course of its business, the Company is exposed to a number of financial risks: credit risk, liquidity risk and market risk . This note presents the Company's objectives, policies and processes for managing its financial risk and capital. The key risks and mitigating actions are also placed before the Board of Directors of the Company. The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities.
The Company manages the risk through the finance department that ensures that the Company's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company's policies and risk objectives. The activities are designed to:
- protect the Company's financial results and position from financial risks
- maintain market risks within acceptable parameters, while optimizing returns; and
- protect the Company's financial investments, while maximizing returns.
(A) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. Credit risk arises on liquid assets, financial assets, trade and other receivables.
In respect of its investments the Company aims to minimize its financial credit risk through the application of risk management policies.
Trade receivables are subject to credit limits, controls and approval processes. Basis the historical experience, the risk of default in case of trade receivable is low. Provision is made for doubtful receivables on individual basis depending on the customer ageing, customer category, specific credit circumstances and the historical experience of the Company.
The gross carrying amount of trade receivables is Rs, 414.44 as at 31 March 2018, Rs, 238.00 lakhs as at 31 March
2017 and Rs, 210.06 lakhs as at 1 April 2016.
The Company has majorly trade receivables outstanding from India amounting to Rs, 369.78 lakhs as at 31 March
2018 (31 March 2017 - Rs, 205.17 lakhs; 1 April 2016 - Rs, 176.88 lakhs) except amount receivable from related party amounting to Rs, 44.66 as at 31 March 2018 (31 March 2017 - Rs, 32.83 lakhs; 1 April 2016 - Rs, 33.18 lakhs). There are no significant amounts due by more than 180 days and not provided for. Management believes that these are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk.
The Company maintains exposure in cash and cash equivalents, term deposits with banks, Loans, Security deposits and other financial assets.
Security deposits are interest free deposits given by the Company for properties taken on lease. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of Security deposits is Rs, 1,411.62 lakhs as at 31 March 2018, Rs, 1,389.86 lakhs as at
31 March 2017 and Rs, 1,356.55 lakhs as at 1 April 2016.
Advances are given to subsidiaries and joint venture for various operational requirements. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of loans and advances is Rs, 142.14 lakhs as at 31 March 2018, Rs, 339.50 lakhs as at 31 March
2017 and Rs, 122.96 lakhs as at 1 April 2016.
The Company has given inter-corporate deposits (ICD) only to entities authorised by the Board of Directors amounting to Rs, Nil as at 31 March 2018, Rs, 3,202.62 lakhs as at 31 March 2017 and Rs, 3,209. 79 as at 1 April 2016 including interest respectively.
(B) 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.
The current ratio of the Company as at 31 March 2018 is 1.01 (As at 31 March 2017 is 1.58; As at 1 April 2016 is 2.01) whereas the liquid ratio of the company as at 31 March 2018 is 0.54 (As at 31 March 2017 is 1.18; As at 1 April 2016 is 1.58)
(C) Market Risk
The Company is exposed to risk from movements in foreign currency exchange rates and market prices that affect its assets, liabilities and future transactions.
(i) Foreign currency risk
The Company is exposed to foreign exchange risk arising from various currency exposures on account of procurement of goods and services, primarily with respect to US Dollar, Singapore Dollar, EURO and AED. The Company's management regularly reviews the currency risk. However, at this stage the Company has not entered into any forward exchange contracts or other arrangements to cover this risk as the risk is not material.
2. Capital Management
The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to its shareholders.
The capital structure of the Company is based on management's judgment of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. It considers the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets.
The Company's policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.
3. Share based payments
a) Kaya ESOP 2014:
The Board of Directors of the Company had granted 135,771 stock options to certain eligible employees pursuant to the Kaya Limited Employee Stock Option Scheme 2014 and Kaya Limited Employee Stock Option Scheme
2014 (Kaya Middle East FZC) (together referred as ‘Kaya ESOP 2014'). One stock option is represented by one equity share of Kaya Limited. The vesting date for Kaya Limited Employee Stock Option Scheme 2014 and Kaya Limited Employee Stock Option Scheme 2014 (Kaya Middle East FZC) was 31 March, 2016 and 31 March 2017, respectively. The Exercise Period is of one year from the vesting date. The Scheme is administered by the Board of Kaya Limited.
b) Kaya ESOP 2016:
During the previous year, the Board of Directors of the Company has granted 253,893 stock options at ' 732 per option, to certain eligible employees of the Company and Kaya Middle East FZC (subsidiary company), pursuant to the Kaya ESOP 2016 - Scheme I. One stock option is represented by one equity share of Kaya Limited. The Options granted under Kaya ESOP 2016 - Scheme I shall vest over 3 years from the Grant Date in the following manner:
- 20% of the Options granted will be vested at the end of first year from the grant date;
- 30% of the options will be vested at end of second year from the grant date;
- 50% of the options will be vested at the end of third year from the grant date.
During the year, the Board of Directors of the Company has granted 27,400 stock options at ' 1063.80 per option and 14,700 stock options at ' 1063.80 per option, to certain employees of the Company and Kaya Middle East FZC (subsidiary company), pursuant to the Kaya ESOP 2016 - Scheme II & Scheme III, respectively. One stock option is represented by one equity share of Kaya Limited.
4. Leases
The Company has entered into several operating lease arrangements for its office premises and Skin clinics for a period ranging from 3 to 9 years and, is renewable on a periodic basis at the option of the lessor and / or lessee. Under these arrangements, generally refundable interest free deposits have been given.
* Including Contingent Rent Rs, 10.67 lakhs (31 March 2017 - Rs, 19.40 lakhs; 1 April 2016 - Rs, 16.05 lakhs)
5. Segment information
Operating Segments are reported in a manner consistent with the internal reporting provided to the Chief operating decision maker (“CODM”) of the Company. The CODM who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Chairman and Managing Director of the Company.
The Company operates only in one business segment i.e. “ Sale of skin care and hair care products and services” which is reviewed by CODM and all the activities incidental thereto are within India, hence Company does not have any reportable segments as per Ind AS 108 “Operating Segments”. Further, no single customer contributes to more than 10% of the Company's revenue.
6. Post retirement benefit plans
I. Defined contribution plan:
The Company has defined contribution plan. Contributions are made to prescribed funds for employees at the specified rates as per respective regulations. The contributions are made to funds administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual or constructive obligation. The expense recognized during the year under defined contribution plan is as under:
II. Defined benefit plan:
Gratuity:
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972, Employees who are in continuous service for a period of 5 years or more are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contribution to recognized funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
The above sensitivity analysis are based on a 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 recognized in the balance sheet.
H. Risk exposure
The Company is exposed to below risks, pertaining to its defined benefit plans.
Asset volatility : The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan assets has investments in insurance/equity managed fund, fixed income securities with high grades, public/private sector units and government securities. Hence assets are considered to be secured.
Changes in bond yields : A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans' bond holdings.
* Since the earnings/(loss) per share computation based on dilutive weighted average number of shares is anti-dilutive, the basic and diluted earnings/(loss) per share is the same.
* Specified Bank Notes (SBNs) mean the bank notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees as defined under the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs no. S.O. 3407(E), dated 8 November, 2016.
The disclosures in the financial statements regarding holdings as well as dealings in specified bank notes during the period from 8 November 2016 to 30 December 2016 have not been made since they do not pertain to the financial year ended 31 March 2018. However amounts as appearing in the audited Standalone Ind AS financial statements for the period ended 31 March 2017 have been disclosed.
7. The Company in light of losses incurred in the past years is not required to spend any amount towards Corporate Social Responsibility for the year 2017-2018.
8. Figures for the previous year have been audited by a firm of chartered accountants other than B S R & Co. LLP.
9. Disclosure as per Section 186 of the Companies Act, 2013 and SEBI regulations
The details of loans, guarantees and investments under Section 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014 and as per Regulation 53(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations are as follows:
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