1) Company Overview
ARSS infrastructure Projects Limited (the company) is a public limited company incorporated and domiciled in India. The company has its primary listings on the BSE Limited and National Stock Exchange of India Limited, in India. The company is engaged in execution of contracts of various infrastructure projects including road work, bridge work, railway tracking and irrigation projects.
(i) The leasehold land pertains to land under lease agreement with Orissa Industrial Infrastructure Development Corporation to be amortized over the lease tenure of Sixty-Four Years.
(ii) Details of property plant & equipment pledged as security - Refer Note No. 52
(iii) Refer Note No. 56 for estimated useful life of different class of Property ,Plant & Equipment.
(iv) The amount of intangible asset is below rounding off norms of the company.
(v) Plant and Equipment includes capital stores to the tune of 31 lakhs as on 31st March 2018 ,Rs. 5 lakhs as on 31st March 2017 & Rs.8 Lakhs as on 1st April 2016.
(vi) The Company has made downward revaluation of its fixed assets during the year resulting a revaluation loss of Rs.9510.76 lakhs
**Total Claimed Receivable amounting to Rs.148555 Lakhs is under dispute / arbitration. Same are subject to the outcome of arbitration and /or Reconciliation proceedings arising out of various contractual obligations. The element of realisable profit and actual expenditure incurred has been considered and amount of '133044Lakhs is accounted based on reasonable certainty of realisation of the same and are considered good and realisable by the Management
*Fixed deposit with carrying amount of INR 3,363 lakhs including interest accrued on the same (31stMarch,2017: INR 5,807 lakhs and 1st April,2016:INR 6,186 lakhs) are pledged against bank guarantees as security deposit ,EMD and Margin account.
(i) The company has only one class of equity shares having a par value of ' 10/- per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian Rupees.
(ii) 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.
(iii) The company has issued during the year 78,94,736 number of equity shares in persuant to CDR condition
(E) There are no shares reserved for issue under options and contracts or commitments for the sale of shares or disinvestment.
(F) For the period of five years immediately preceding the date at which the balance sheet prepared the company has not :
(i) Allotted any shares as fully paid up pursuant to contract without payment being received;
(ii) Allotted any shares as fully paid up by way of bonus; and
(iii) Bought back any shares
(i) Rupee loan from bank carries interest @ 10 % to 10.5% p.a.The loans are repayable in quarterly installments from 01.10.2013. The above loans are secured by way of mortgage of land and building, assets acquired out of such loan and also backed by personal guarantee of Promoters.
(ii) Rupee loan from NBFCs Carries interest @9% to 12% p.a and are repayable in monthly instalments. The above loans are secured by way of mortgage on assets acquired out of such loan. The Loans are repayable over 3 to 5 years.
(iii) Term Loan (TL) under CDR and governed by Master Restructuring Agreement(MRA) dated 6th September 2012, with State Bank of India, Punjab National Bank, ICICI Bank Ltd., IDBI Bank Ltd., State Bank of Bikaner & Jaipur & Bank of India. The amount repayable is over a period from FY 2016-17 to 2020-21.
(iv) This loan is secured by equitable mortgage of immovable property of the Company and promoters, pari-passu charge on plant & machinery of the company (excluding land & office flat & equipments on which other lenders are having first charge) and irrevocable and unconditional personal guarantees of the Directors and pledge of shares held by promoters in the Company.
(v) Interest rate for all term loan are subject to periodic review.
(vi) Refer the note no. 58 for detail disclosure on repayment schedule and rate of interest.
(vii) Current Borrowings from others represents amounts borrowed from related party.
(viii) Debt component of Equity Instruments includes redeemable preference share capital issued under CDR package.
Note 2 : Income Tax Expenses
This note provides an analysis of the company’s income tax expenses, show amounts that are recognized directly in equity and how the tax expenses is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the company’s tax position.
(b) Reconciliation of tax expenses and the accounting profit multiplied by India’s tax rate :
During current year and previous year the company has incurred loss hence there is no current tax required to be payable under Income Tax Act,1961. Accordingly, reconciliation of tax expenses is not required.
NOTE 3 : Risk exposure of Defined Benefits Obligations
Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:
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 asset investments is maintained with LIC India. These are subject to interest rate risk and the fund manages interest rate risk to minimize risk to an acceptable level.
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 plan funds maintained with the SBI Life.
Inflation risks :
In the gratuity plans, the payment are not linked to inflation, so there is less material risk.
(ii) Fair value hierarchy:
This section explains the judgments and estimates made in determining the fair values of the financial instruments that are
(a) recognized and measured at fair value, and
(b) measured at amortized cost and for which fair values are disclosed in the financial statements.
To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into three levels prescribed under the Ind AS 113 “Fair Value Measurements An explanation of each level follows underneath the table.
Level 1 : This hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of all equity instruments(including bonds) which are traded in the stock exchange is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.
Level 2 : Fair value of financial instruments that are not traded in an active market (for example, traded bonds, over the counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument as observable, the instrument is included in level 2.
Level 3 : If one or more of the significant inputs is not based on observable data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification assets.
(iii) As per Ind AS 107 “Financial Instrument: Disclosure, fair value disclosures are not required when the carrying amounts reasonably approximate the fair value. Accordingly fair value disclosures have not been made for the following financial instruments:-
1. Trade receivables
2. Cash and cash Equivalent
3. Loans
4. Borrowings
5. Trade payables
6. Capital creditors
7. Other payables
Note No. 4 : Financial risk management
The company’s few portion of activities are exposed to variety of financial risks i.e. market risk, credit risk and liquidity risk. The company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
(A) Credit risk
Credit risk refers to the risk of default on its obligation by the counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily trade receivables from customers other than government entities .These Trade receivables are typically unsecured and are derived from revenue earned from domestic and foreign customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the company uses expected credit loss model to assess impairment loss or gain. the company uses a matrix to compute the expected credit loss allowance for trade receivable .
Credit risk management
Credit risk is managed on instrument basis. For Banks and financial institutions ,only high rated banks /institutions are accepted. For other financial instruments, the company assesses and maintains an internal credit rating system. The finance function consists of a separate team who assess and maintain internal credit rating system.
(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, the 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. This is generally carried out at local level in accordance with practice and limits set by the company. These limits vary by locations to take into account the liquidity of the market in which the entity operates. In addition, the company’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
Note No. 5: Capital management
(a) Risk management
The company’s objectives when managing capital are to;
- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders; and
- maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return on capital to shareholders or issue new shares. The company monitors capital using gearing ratio, which is net debt divided by total Equity. Net debt comprises of long term and short term borrowings less cash and bank balances. Equity includes equity share capital and reserves that are managed as capital. The gearing at the end of reporting period was as follows:
Note -6
Segment Reporting As per Ind AS 108 “Operating Segments
Based on the policy set out under Significant Accounting Policy , the company follows “management Approach “ for the purpose of deciding operating segments. The operating results of each major project locations are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to that location and assess its performance. Accordingly , the company has decided not to treat each project location as its operating segments considering huge number of project locations and its permanency .
Note-7
Additional Disclosures As per Ind AS 108 “Operating Segments
(i) Revenue From Customers Exceeding 10% of Total revenue
As per Para 34 of Ind AS 108 ,if revenues from transactions with a single external customer amount to 10 per cent or more of an entity’s revenues, the company is required to disclose that fact, the total amount of revenues from each such customer, and the identity of the segment or segments reporting the revenues. The details of such disclosure is as below :
(ii) Extent of Reliance on Major Customers
Extent of Reliance on Major Customers of the company can be depicted by assessing their sales chunck compared to total revenue of the operation. The percentage of group of major customer to its total revenue is as below :
.NOTE - 8
Recognition of Corporate Guarantee as Financial Liability
Financial guarantee is a contractual right of the lender to receive cash from the guarantor, and a corresponding contractual obligation of the guarantor to pay the lender, if the borrower defaults. The contractual right and obligation exist because of a past transaction or event (assumption of the guarantee), even though the lender’s ability to exercise its right and the requirement for the guarantor to perform under its obligation are both contingent on a future act of default by the borrower. A contingent right and obligation meet the definition of a financial asset and a financial liability, even though such assets and liabilities are not always recognized in the financial statements. Based on the measurement principles laid down under Ind AS 109 “Financial Instrument :Recognition and Measurement, the fair value of all those financial guarantee contracts reasonable below to the materiality threshold limit set by the company. Accordingly the entity has made appropriate disclosure in Note 43 without additionally recognizing any financial assets or liability.
NOTE - 9
Micro, Small and Medium Enterprises (MSME) Dues Disclosure
There are no Micro and Small enterprises to whom the Company owes dues which are outstanding for a period of more than 45 days as at the balance sheet date. The above information and that given under Current liabilities regarding Micro, Small and Medium enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.
Note 10-First Time adoption of Ind AS
The accounting policy set out in Note 2 have been applied in preparing the financial statements for the year ended 31st March 2018,the comparative information presented in these financial statements for the year ended 31st March 2017 and in the preparation of an opening Ind AS Balance sheet at 1st April 2016( transition date ).In preparing its opening Ind AS balance sheet, the company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards ) Rules,2006 (as amended) and other relevant provisions of the Act (Previous GAAP).An explanation of how the transition from previous GAAP to Ind AS has affected the company’s financial position, financial performance and cash flows is set out in the following tables and notes.
A. Exemption Availed
1. Deemed Cost for Property, Plants & Equipments
Ind As 101 permits a first time adopter to elect to continue with the carrying value for all of its Property , Plant & Equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition . Accordingly the company has elected to measure all of its Property, Plant & Equipment, Intangible assets at their previous GAAP carrying value.
2. Designation of previously recognized financial instruments.
Ind AS 101 allows an entity to designate investments in equity instruments at FVTOCI on the basis of the facts and circumstances at the date of transition to Ind AS. The company has elected to apply this exemption for its investment in equity investments.
3. Deemed Cost For Investment In Joint Ventures
Ind As 101 allows a first time adopter to measure the investments in joint ventures one of the following amounts in its standalone opening Ind As Balance Sheet
i) Cost determined in accordance with Ind As 27
ii) Deemed Cost
Deemed Cost of such an investment shall be either of fair value at the date of transition or previous GAAP carrying amount at that date. The company has opted previous GAAP carrying amount as deemed cost of Investments In Joint Ventures at transition date.”
B. Mandatory Exceptions
1. Estimates
An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies). Ind AS estimates as at 1st April,2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Investment in equity instruments carried at FVTPL or FVOCI; and
- Impairment loss/gain on Financial assets”
2. Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
3. De-recognition of financial assets and liabilities
Ind AS 101 requires a first time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.
C. Transition to Ind AS -Reconciliation
The following reconciliations provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS 101:
I) Reconciliation of Balance sheet as at April 1,2016 and March 31, 2017
II) Reconciliation of Statement of Profit and Loss for the year ended March 31, 2017
III) Reconciliation of Equity as at April 1,2016 and March 31, 2017
The presentation requirements under Previous GAAP differs from Ind AS and hence, Previous GAAP information has been regrouped for ease of reconciliation with Ind AS. The Regrouped Previous GAAP information is derived from the Financial Statements of the Company prepared in accordance with Previous GAAP.”
Notes to first time adoption
1. Property, Plant and Equipment :
a) As per paragraph six of Ind AS 105” Non-Current Assets Held for sale and Discontinued Operations “ An entity shall classify a non current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Accordingly the company has classified an amount of Rs. 107 Lakhs as on transition date and Rs.2 Lacs as on comparative date as Asset held for Disposal.
b) As per paragraph eight of Ind AS 16 “Property, Plant and Equipment” Stores & Spares, which meet the definition of Property, Plant and Equipment shall be recognised as Property,Plant and Equipment else will be recognised as Inventories in accordance with Ind AS 2 “Inventories” Accordingly the company has recognised an amount of Rs.8 Lakhs as on transition date and Rs.5 Lacs as on comparative date as Asset held for Disposal.
Considering above two adjustments the net Ind AS impact on “Property, Plant and Equipment” Rs.99 lakhs(107 lakhs-8 lakhs) as on transition date and Rs.5 lakhs in comparative period.”
2. Deferred Taxes
Under previous GAAP, deferred taxes were recognised based on Profit & loss approach i.e. tax impact on difference between the accounting income and taxable income. Under Ind AS 12 “Income Taxes “ deferred tax is recognised by following balance sheet approach i.e. tax impact on temporary difference between the carrying value of asset and liabilities in the books and their respective tax base. Consequently the impact is as below :-
# As on Transition date i.e. 1st April 2016 :: Rs.418Lakhs of deferred tax assets additional
# As on Comparative date i.e. 31st Mar 2017 :: Rs. 336Lakhs of deferred tax assets additional”
3. Impairement of Trade receivables
As per Ind AS 109 Financial Instrument “Recognition and Measurement “ the company is required to apply expected credit loss model for recognising the impairment loss on trade receivables. Accordingly, the company has created additional allowances for impairment loss (exclusive of fully credit impaired receivables) to the tune of following amounts :-
#As on Transition date i.e. 1st April 2016 :: Rs.264Lakhs
# As on Comparative date i.e. 31st Mar 2017 :: Rs. 328 Lakhs reversal”
4. Reclassification and Regrouping
As per Ind AS 101 “First-time Adoption of Indian Accounting Standards “reclassify items that it recognised in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Ind AS. Accordingly the company has reclassified certain items based on its nature.
5. Preference Share Capital
As per paragraph Nineteen of Ind AS 32 “Financial Instruments: Presentation” if an entity doesn’t have an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the obligation meets the definition of a financial liability.
Accordingly the company has recognised Preferential Capital issued in accordance with CDR scheme as Financial Liability under Non-Current Borrowings.”
6. Discounting of Deffered Consideration
Deferred consideration in the nature of retention money, security deposits or withhold money should be discounted in order to arrive at the fair value of the consideration receivable from the contract in accordance with para 12 of IndAS 11, Construction contracts. Accordingly revenue has been reduced to the extent of Rs.231 lakhs in comparative period.
7. Profit Elimination in Investment in Joint Ventures
In accordance with paragraph 10 of Ind AS 27 “Separate Financial Statements” the entity has accounted investment in Joint Venture at cost in its separate financial statement. Accordingly , there is remeasurement of value of investment in joint venture to the tune of Rs.52 lakhs in comparative period.
8. Other comprehensive income
Under Ind AS , all items of income and expenses recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expenses that are not recognised in profit and loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes re-measurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP
9. Other Equity
Other Equity has been adjusted consequent to the above Ind AS transition adjustments.
Note - 11
Figures for the previous year have been re-arranged and re-grouped wherever necessary.
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