NOTE 1 : CORPORATE INFORMATION
Orient Bell Limited (hereinafter referred as the Company) was incorporated on May 18, 1977 and is engaged in the manufacturing, trading and selling of ceramic and floor tiles. The Company is a public limited company incorporated and domiciled in India and has its registered office at Sikandrabad, Uttar Pradesh, India. The Company has its primary listings on Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. The financial statement are approved by the Board of Directors in their Board Meeting held on May 22, 2019.
NOTE 2 : STATEMENT OF COMPLIANCE
The Financial Statements are prepared on an accrual basis under historical cost Convention. These financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) as prescribed under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules 2015 as amended and other relevant provisions of the Companies Act, 2013, as applicable.
The Accounting Policies are applied consistently to all the periods presented in the financial statements.
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 and defined benefit plans — Plan assets measured at fair value at the end of each reporting period, as explained in the relevant accounting policies mentioned.
The financial statements are presented in ‘ and all values are rounded to the nearest Lakhs except otherwise stated.
Going Concern
The board of directors have considered the financial position of the Company at 31st March 2019, the projected cash flows and financial performance of the Company for at least twelve months from the date of approval of these financial statements as well as planned cost and cash improvement actions, and believe that the plan for sustained profitability remains on course.
The board of directors have taken actions to ensure that appropriate long-term cash resources are in place at the date of signing the accounts to fund the Company’s operations.
Recent accounting pronouncement
In March 2019, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2019, notifying amendments to Ind AS 12 ‘Income Taxes’, introduced the Appendix ‘C’ to Ind AS 12 ‘Uncertainty over Income Tax Treatments’, amendments to Ind AS 19, ‘Employee Benefits’ and also introduced new standard Ind AS 116 ‘Leases’. These amendments rules are applicable to the Company from April 1, 2019.
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 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 & Loss. The Standard also contains enhanced disclosure requirements for lessees.
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. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which are to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax Credits and tax rates.
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. It is relevant to note that the amendment does not amend situations where the entity pays a tax on dividend which is effectively a portion of dividends paid to taxation authorities on behalf of shareholders.
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 remainder 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.
The Company is currently evaluating the effect of this amendment on the standalone financial statements.
Application of New Accounting Pronouncements
The following Ind AS pronouncements pursuant to issuance of the Companies (Indian Accounting Standards) Amendment Rules 2018, were applied by the Company during the year.
- Ind AS 115, Revenue from contracts with customers with effect from April 1, 2018.
- Appendix B to Ind AS 21, Foreign Currency Transactions and advance consideration with effect from April 1, 2018.
a) The Company has determined its security deposits are not in the nature of loans and accordingly have been classified as part of other financial assets.
b) Out of the above security deposit Rs.10 lakh (March 31, 2018: Rs.10 Lakh) pertains to the related parties.
c) Fixed Deposits with a carrying amount of ‘ Nil (March 31, 2018 : Rs.0.42 Lakh) are subject to first charge to secure the Company’s loans from banks.
d) Fixed Deposits with a carrying amount of Rs.3.65 Lakh (March 31, 2018 : Rs.3.56 Lakh) are pledged with Government Authorities.
a) The Company has no receivables which have significant increase in credit risk (Refer Note 45).
b) No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person.
c) Nor any trade or other receivable are due from firms or private companies in which any director is a partner, director or a member.
d) Trade receivables are generally on terms of not more than 90 days.
a) Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates.
b) Fixed Deposits with a carrying amount of ‘ Nil (March 31, 2018 : Rs.15 Lakh) are subject to first charge to secure the Company’s loans from banks.
c) For the purpose of the statement of cash flow, cash and cash equivalents are same given above.
a) 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 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. During the year ended March 31, 2019, the amount of per share dividend proposed as distributions to equity shareholders was Rs.0.50 per share (March 31, 2018: Rs.0.50 per share). 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.
a) For Movement during the period in Other Equity, refer “Statement of Change in Equity”.
b) Nature and Purpose of Other Reserves
(i) Capital Reserves
Capital Reserve was carried forward under the previous GAAP from the books of Amalgmating Company at the time of Amalgamation.
(ii) Security Premium Reserve
The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve. The reserve will be utilised in accordance with provisions of the Companies Act 2013.
(iii) Capital Restructuring
Capital Restructuring reserve was carried forward under the previous GAAP from the books of Amalgmating Company at the time of Amalgamation.
(iv) Amalgamation Reserve
Amalgamation reserve was created under the previous GAAP on the basis of scheme of amalgamation of Bell Ceramics Limited with the Company as approved by the High Court of Allahabad and Gujrat in the year ended March 31, 2012.
(v) Share Options Outstanding Account
The fair value of the equity-settled share based payment transactions with employees is recognised in Statement of Profit and Loss with corresponding credit to Employee Stock Options Outstanding Account.
(vi) 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 in earlier years. Mandatory transfer to general reserve is not required under the Companies Act 2013.
(vii) 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.
All the profits made by the Company are transferred to retained earnings from statement of profit and loss. However retained earnings includes Rs.4,340.04 Lakh (March 31, 2018 : Rs.4,401.25 Lakh) on account of amount transferred from revaluation reserve which is not available for distribution (to the extent of value of depreciable assets).
a) For Interest rate and Liquidity risk related disclosures, refer note 45.
b) The Nature of Security for Term Loan are :
i) The above Secured Loans, Rs.4,102.63 Lakh (March 31, 2018: Rs.1,760.08 Lakh) are secured by way of first pari passu charge on entire fixed assets excluding assets having specific charge, both present and future, and collaterally by way of second pari passu charge on the current assets of the Company. These pertains to various bankers and financial institution namely, Tata Capital Financial Services Ltd, ICICI Bank, IDFC Bank and Axis Bank.
ii) Vehicle loans are secured by way of hypothecation of respective vehicles with the various Bankers and Financial Institution namely Daimler Financial Services India Pvt. Ltd., HDFC Bank, ICICI Bank and Axis Bank.
c) The Nature of Security for Cash Credit & Working Capital Loan are :
i) The Company has a consortium of Various bankers namely State Bank of India, Punjab National Bank, IDBI Bank, Indus Ind Bank , IDFC Bank and Axis Bank (hereafter called the “Consortium”) for Non Current Borrowings (secured).
ii) The above Cash Credit and Working Capital Loans Rs.4,301.76 Lakh (March 31, 2018: Rs.3,935.33 Lakh) are primarily secured by way of first pari passu charge on entire current assets of the Company and collaterally by way of second pari passu charge on the entire fixed assets excluding assets having specific charge, both present & future.
iii) The demand loans are repayable on demand and carries interest rate ranges from 8.50% to 11.75% per annum
d) Maturity Profile- Secured Term Loans
e) The term loan(s) carries rate of interest ranging between 8.70% to 12.10% per annum.
f) Maturity Profile- Unsecured Loans
g) The nature of guarantee for Unsecured Loans are :
Unsecured loan from Bank is secured against property of Promoter at Kolkata.
h) Trade deposits are not in the nature of borrowings and hence are re-grouped from Borrowings to Other Financial Liabilities as at March 31, 2019.
a) Trade deposits are repayable on cessation of business transaction with dealers. The trade deposits carry rate of interest @ 7% per annum.
b) Trade deposits are not in the nature of borrowings and hence are re-grouped from Borrowings to Other Financial Liabilities as at March 31, 2019 and March 31, 2018.
c) There are no amounts due for payment to the Investor Education and Protection Fund under Section 125 of the Companies Act, 2013 as March 31, 2019 (March 31, 2018: Nil,).
b) MAT paid can be carried forward for a period of 15 years and can be set off against the future tax liabilities. MAT is recognised as a deferred tax asset only when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realized.
a) Trade payables are non-interest bearing and are normally settled within 90-day terms except for SME’s (if any) which are settled within 45 days.
b) Trade payables to related parties amounts to Rs.921.24 Lakh as at March 31, 2019 (March 31, 2018 : Rs.690.96 Lakh)
c) Trade payables includes Rs.252.31 lakhs as at March 31, 2019 (March 31, 2018 : ‘ Nil) on account of acceptances.
d) As per Schedule III of the Companies Act, 2013 and notification number GSR 719 (E) dated November 16, 2007 & as certified by the management, the amount due to Micro, & small enterprises as defined in Micro, Small and Medium Enterprises Development Act, 2006 is as under:
Disclosure of payable to vendors as defined under the “Micro, Small and Medium Enterprise Development Act, 2006” is based on the information available with the Company regarding the status of registration of such vendors under the said Act and as per the intimation received from them on requests made by the Company. There are no overdue principal amounts / interest payable amounts for delayed payments to such vendors at the Balance Sheet date except disclosed above.
a) 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 . This has resulted in lower reported revenue from operations in the current year in comparison to the revenue from operations to the extent was reported under the pre-GST structure of indirect taxes. Accordingly, the Revenue from operations for the year ended March 31, 2019 are not comparable with year ended March 31, 2018 presented in the financial statement to the extent was reported inclusive of Excise Duty. The following additional information is being provided to facilitate such understanding:
b) Performance Obligation
Revenue is recognised upon transfer of control of products to the customers.
During the year, the Company has not entered into long term contracts with customers and accordingly disclosure of unsatisfied or remaining performance obligation (which is affected by several factors like changes in scope of contracts, periodic revalidations, adjustment for revenue that has not been materialized, tax laws etc.) is not applicable to the Company.
c) Disaggregation of Revenue: The table below presents disaggregated revenues from contracts with customers on the basis of geographical spread of the operations of the Company. The Company believes that this disaggregation best depicts how the nature, amount of revenues and cash flows are affected by market and other economic factors:
e) Trade Receivables and Contract Balances
For Trade Receivables, refer Note No. 11.
Further, the Company has no contracts where the period between the transfer of the promised goods or services to the customer and payment terms by the customer one year. In light of above;
- it does not adjust any of the transaction prices for the time value of money, and
- there is no unbilled revenue as at March 31, 2019.
b) The Company has spent Rs.44.87 Lakh (March 31, 2018 : Rs.34.46 Lakh) towards various schemes of Corporate Social Responsibility as prescribed under section 135 of the Companies Act, 2013. The details are as follows:
(iii) Above includes a contribution of Rs.42.25 Lakh (March 31, 2018: Rs.33.82 lakh) to an entity (Godavari Foundation) over which KMP has significant influence and which is a Trust registered under section 12A of the Income Tax Act, 1961, with the main objectives of working in the areas of social, economic and environmental issues such as rural development programme, granting aid to Institutions, school, colleges etc for Orphan Children and for poor students/people for their education and social welfare and estabilishing and maintaining schools, tube well for general public and also engaged in women empowerment by enhancing their means and capabilities to meet the emerging opportunities.
c) Operating Lease
The Company’s significant lease agreements are in the nature of operating leases for premises used at various depots and showrooms. These lease agreements are cancellable by either parties thereto as per the terms and conditions of the agreements. In respect of these leases, lease rent of Rs.387.03 Lakh (March 31, 2018: Rs.445.82 Lakh) is debited to Statement of Profit and Loss. This amount includes amount on account of amortisation of Deferred Security deposit in accordance with Ind AS 109 and also lease equalisation reserve (net of reversal) charge for the year ended March 31, 2019.
NOTE 3 : INCOME TAX
The major components of income tax expense for the years ended March 31, 2019 and March 31, 2018 are:
NOTE 4 : EARNINGS PER SHARE (EPS)
Earning per share (EPS) is determined based on the net profit attributable to the shareholder before other comprehensive Income. Basic earning per share is computed using the weighted average number of equity shares outstanding during the year whereas Diluted Earning per share is computed using the weighted average number of common and dilutive equivalent shares including Employee Stock Options except for the case where the result becomes anti-dilutive.
(a) For the year ended March 31, 2019, the dilution is considered on account of non vested ordinary shares under Employee Stock Option Scheme, 2018 in accordance with Para 48 of Ind As 33.
NOTE 5 : 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.
The contribution payable to these schemes by the Company are at the rates specified in the rules of the schemes.
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. The method is used in following cases :-
i) Gratuity Scheme
The Company has defined benefit gratuity plan. Gratuity is calculated as 15 days salary for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination/ resignation. The benefit vests on completing 5 years of service by the employee. The Company makes provision of such gratuity asset/ Liability in the books of accounts on the basis of acturial valuation as per projected unit credit method; net with annual contribution made by Company to insurer to provide gratuity benifits by taking scheme of insurance.
ii) Compensated Absences
The Company operates compensated absences plan wherein all permanent employees of the company are entitled to the benefit equivalent to 21 days leave salary for every completed year of service subject to maximum 50 (March 31, 2018: 60) accumulations of leaves except in case of Dora Workers/SKD Workers where maximum accumulation is 60/30 days respectively. The salary for calculation of earned leave is last drawn salary. The same is payable during service, on retirement, withdrawal of scheme, resignation by employee and upon death / disability of employee.
Other than above, the Company has changed its policy for encashment of accumulated leaves beyond 60/50/30 days as applicable, i.e. the same will lapse after the end of financial year. Therefore the Company has not recognised any short term leave encashment expense for the year ended March 31, 2019. However the Company has recognised Rs.39.75 Lakh for the year ended March 31, 2018 in respect of same.
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). These have been provided on accrual basis, based on year end actuarial valuation.
The Sensitivity analysis above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occuring at the end of the reporting period.
Sensitivities due to morality and withdrawals are insignificant and hence ignored.
Sensitivities as to rate of inflation, rate of increase of pensions in payments, rate of increase of pensions before retirement & life expectancy are not applicable being a lump sum benefit on retirement.
NOTE 6 : CONTINGENT LIABILITIES (TO THE EXTENT NOT PROVIDED FOR) AND COMMITMENTS
(i) Commitments
Estimated amount of contracts remaining to be executed on capital account (net of advances) and which have not been provided for in the financial statements, amounts to Rs.41.54 Lakh (March 31, 2018: Rs.1,584.71 Lakh). The Company does not have any other long term commitments or material non-cancellable contractual commitments, which may have a material impact on the financial statements.
(ii) Contingent Liabilities
a) The Company has reviewed all its pending claims, litigations and other proceedings and has adequately provided for wherever required. However, wherever 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, the Company has disclosed the same as Contingent Liabilities (pending resolution of the respective proceedings).
The Company does not expect the outcome of these proceedings to have a material or adverse effect on financial position of the Company. Also, the Company does not expect any reimbursements in respect of the above contingent liabilities.
c) The Company has not made the provision of bonus for the F.Y. 2014-15 on account of retrospective amendment made by The Payment of Bonus (Amendment) Act , 2015 keeping in view the disposal of writ petition vide order no. WP(C) NO. 3024/2016 (C) dated 27th January 2016 passed by the Hon’ble Kerala High Court.
d) The Company is in the process of evaluating the impact of the recent Supreme Court Judgment in case of “Vivekananda Vidyamandir And Others Vs The Regional Provident Fund Commissioner (II) West Bengal” and the related circular (Circular No. C-I/1(33)2019/Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employees’ Provident Fund Organisation in relation to non-exclusion of certain allowances from the definition of “basic wages” of the relevant employees for the purposes of determining contribution to provident fund under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952.
NOTE 7 : CAPITAL MANAGEMENT
The Company’s objective for managing capital is to ensure:
- ability to continue as a going concern, so that the Company can continue to provide returns to shareholders and benefits for other stakeholders, and
- maintain optimal capital structure to reduce the cost of capital.
The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.
The Company monitors capital structure using Gearing Ratio, which is calculated as under:
(a) No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2019 and March 31, 2018.
(b) For the purpose of Capital Management, capital includes issued equity capital & all other reserve attributable to the equity holders of the Company.
NOTE 8 : DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENCY EXPOSURE
The Company does not have any long term contracts including derivative contracts for which there are any material forseeable losses. The amount of foreign currency exposure that are not hedged by derivative instruments or otherwise are as under :-
NOTE 9 : SEGMENT INFORMATION
According to Ind AS 1 08, identification of operating segments is based on Chief Operating Decision Maker (CODM) approach for making decisions about allocating resources to the segment and assessing its performance. In Orient Bell Limited, the decision makers view the operating results internal division wise (Ceramic, Vitrified Polished). Accordingly, such segments may be presented under Ind AS 1 08. However, these segments have been aggregated because the core principles, economic characteristics, nature of products, production process, distribution method, regulatory environment and type of customers in all the divisions are similar. Hence the disclosure requirement of Ind AS 108 of “Segment Reporting” is not considered applicable. Further the Company sells its products mostly within India with insignificant export income and does not have any operation in economic environment with different risk and returns, hence its considered operating in single geographical segment.
Major Customer: No single customers contributed 1 0% or more to the Company’s revenue for year ended March 31, 201 9 and March 31, 2018.
d) Other Transaction
The Company has taken Unsecured loan from Bank against the collateral security on the immovable property of Mr. Mahendra K. Daga (Key Managerial Personnel).
e) 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 carried interest rate. The unsecured loan from bank are secured against the property of Key Managerial Personnel. No expenses has been recognized in the current year in respect of bad or doubtful debts/advances and further no specific provision for doubtful debts/advances has been made in respect of outstanding balances.
f) The remuneration of Key Managerial Personnel does not include amount in respect of Gratuity and Leave Encashment payable as the same are not determinable as individual basis for the KMP. The aforesaid liabilities of Gratuity and Leave Encashment are provided for company as whole.
g) Disclosure in respect of Share Based Payments to related party-Refer Note No. 42.
b) The members of the Company had approved ‘Orient Bell Employee Stock Option Scheme 2018’. The plan envisaged grant of share options to eligible employees at market price as defined in Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.
Each Employee Stock Option vested in an Employee under the Scheme entitles the holder thereof to apply for and be allotted one equity share of the Company of ‘10 each upon exercise thereof. The Exercise price is ‘‘10’. The exercise period commences from the date of vesting in respect of options granted under the Scheme and ends upon the expiry of three years from the date of each vesting.
c) The maximum number of shares allocated for allotment under 2018 Share Schemes is 2,00,000 (two lakhs) equity share of ‘10/each. The schemes are monitored and supervised by the Compensation Committee of the Board of Directors in compliance with the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and amendments thereof from time to time.
NOTE 10 : FAIR VALUE DISCLOSURE
Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments Here the disclosure is made for non-current financial assets and non-current financial liabilities, carrying value of current financial assets and current financial liabilities including trade receivable, cash and cash equivalent, other bank balances, other financial assets, trade payables, current borrowing, other current financial liabilities etc. represent the best estimate of fair value.
The management assessed that fair value of these short term financial assets and liabilities significantly approximate their carrying amount largely due to short term maturities of these instruments.
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:
a) Fair value for security deposits (other than perpetual security deposits) has been presented based on the discounting factor as at the reporting date. 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.
b) For other financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
NOTE 11 : FAIR VALUE 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 insignificant 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
(i) Valuation technique used to determine fair value:
Security Deposit : Discounted Cash Flow Method using risk adjusted discount rate.
(ii) There have been no transfers between level 1 and level 2 category during the year ended on respective reporting date given above.
NOTE 12 : FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s principal financial liabilities comprise trade and other payables, 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 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 market risk, credit risk and liquidity risk . The Company’s senior level oversees the management of these risks.
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 and commodity risk.
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 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 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 sensitivity is the impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities. The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO exchange rates, with all other variables held constant.
B. Credit Risk
Credit risk is the risk that counterparty will default on its contractual obligations resulting in finance loss to the Company. Credit risk arise from Cash and cash equivalents, deposit with banks, trade receivables and other financial assets measure at amortised cost. The Company continuously monitors defaults of customers and other counterparties and incorporate this information into its credit risk control.
The Company also uses expected credit loss model to assess the impairment loss in Trade receivables and makes an allowance of doubtful trade receivables using this model.
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. It maintains adequate sources of financing including loans from banks at an optimised cost.
NOTE 13 : SUBSEQUENT EVENT : DIVIDEND PAID AND PROPOSED
(a) Dividend paid and Proposed
(b) 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 14 :
In view of the management, the current assets have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the balance sheet as at March 31, 2019.
Note 15 :
The financial statements of the Company for the year ended 31st March, 2019 were approved by the Board of Directors and authorised for issue on May 22, 2019.
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