1 CORPORATE INFORMATION
Radhe Developers (India) Limited is a public limited company incorporated and domiciled in India in the year 1995 and has its registered office in Ahmedabad, Gujarat, India. The Company has its primary listing on the BSE Limited. The company offers residential, commercial, plotting and related projects. It has niche in various aspects like design, timely completion of the project etc.
2. KEY ACCOUNTING ESTIMATES
a) Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value are measured using valuation techniques. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments.
b) Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cashflow (DCF) model. The cash flows are derived from the budget and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
c) Taxes
Deferred tax assets are recognised for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
d) Defined benefit plan
The cost of the defined benefit plans and other post-employment benefits and the present value of the obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter that is subject to change the most is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at intervals in response to demographic changes. Future salary increases are after considering the expected future inflation rates for the country.
3. RECENT ACCOUNTING PRONOUNCEMENTS
The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. The Ministry of Corporate Affairs(“MCA”) has issued certain amendments to Ind AS through (Indian Accounting Standards) Amendment Rules, 2018. These amendments maintain convergence with IFRS by incorporating amendments issued by International Accounting Standards Board(IASB) into Ind AS and has amended the following standards:
1. Ind AS 115-Revenue from Contract with Customers
2. Ind AS 21-The effect of changes in foreign exchanges rates
3. Ind AS 40-Investment Property
4. Ind AS 12-Income Taxes
5. Ind AS 28-Investment in Associates and Joint Ventures
6. Ind AS 112-Disclosure of Interest in Other Entities
The amendment will come into force from April 1, 2018. The Company has evaluated the effect of this on the financial statements and the impact is not material.
Ind AS 115, Revenue from Contract with Customers: On March 28, 2018, the MCA notified the Ind AS 115. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.
The effective date for adoption of Ind AS 115 is financial period beginning on or after April 1, 2018.
4. TRANSITION TO IND AS
These financial statements are the Company’s first standalone financial statements prepared in accordance with Ind AS based on the permissible options and exemptions available to the Company in terms of Ind AS 101 ‘First time adoption of Indian Accounting standards’. For periods up to and including the year ended on March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (previous GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on March 31, 2018, together with the comparative period data as at and for the year ended March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1, 2016, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its previous GAAP financial statements, including the balance sheet as at April 1, 2016 and the financial statements as at and for the year ended March 31, 2017.
6.1 Optional exemptions availed
1 Deemed Cost
The Company has elected to measure certain items of Property, plant and equipment at fair value at the date of transition to Ind AS and adopted the fair values as deemed cost for those items of Property, plant and equipment. The resulting changes have been recognised in retained earnings.
The Company has elected to measure all its intangible assets at the previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS.
2 Fair value measurement of financial assets or financial liabilities at Initial Recognition
Company has elected to apply requirement in paragraph B5.1.2A of Ind AS 109 prospectively to transactions entered into on or after the date of transition to Ind ASs.
6.2 Applicable mandatory exceptions
1 Estimates
The estimates at April 1, 2015 and at March 31, 2016 are consistent with those made for the same dates in accordance with previous GAAP (after adjustments to reflect any differences in accounting policies, if any) apart from the following items where application of previous GAAP did not require estimation:
- FVTPL investments
- FVTOCI - debt securities
- Impairment of financial assets based on expected credit loss model
2 Classification and measurement of financial assets
As required under Ind AS 101, the classification of financial assets to be measured at amortised cost or fair value through other comprehensive income is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.
6.3 Reconciliation between previous GAAP and Ind AS
1 Reconciliation of equity between previous GAAP and Ind AS
2 Total comprehensive income reconciliation for the year ended March 31, 2017
i Fair valuation of Long Term Loans and Deposit
Under previous GAAP, Loans and deposit given without any interest are measured at transaction value. Ind AS requires all such financial assets are measured at fair value on intial recognition (Opening Balance Sheet date) and subsequently impact shall be given in profit and loss account by unwinding of interest component.
ii Fair valuation of investments
Under previous GAAP, the current investments were measured at lower of the cost or market value. Ind AS requires all investments to be measured at fair value at the reporting date and all changes in the fair value subsequent to the transition date to be recognised either in the statement of profit and loss or other comprehensive income (based on the category in which they are classified).
iii Tax impacts on Ind AS adjustments
The impact of transition adjustments together with Ind AS mandate of using balance sheet approach (against profit and loss approach under previous GAAP) for computation of deferred tax has resulted in changes in the taxes. The resulting changes have been recognised in the retained earnings on the date of transition and the changes in the taxes in the subsequent periods are recognised in the statement of profit and loss or other comprehensive income, as the case may be.
iv Re-measurement gain / loss on defined benefit plan
The re-measurement losses arising primarily due to change in actuarial assumptions has been recognised in other comprehensive income under Ind AS as compared to statement of profit and loss under previous GAAP.
7 Adjustments to Statement of Cash Flows for the year ended 31st March, 2017
7.1 Alps BPO Services Ltd. is under liquidation since 31st March, 2008. So, the Fair valuation of Equity shares of Alps BPO Services Ltd. is taken as Nil
8.1 Rights, Preferences and restrictions attached to equity shares
The company has one class of equity shares having a par value of Rs. 10 each. Each shareholder is eligible for one vote per share held. The dividend proposed by board of directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of Liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferencial amounts, in proportion to their shareholding.
9.1 Loan from Bank of India for Rs. 400 lakhs is secured through mortgaged on unsold units of Radiance Residency Project as on 14th March, 2017, repayable in 24 monthly installments, out of which 23 installments of Rs. 16.70 lakhs and 24th installment of Rs. 15.9 lakhs shall start from October, 2018. Notwithstanding the repayment schedule, the Company has to repay 50% of the sale value of units as and when individual units of Radiance Residency shall be sold.
10 EMPLOYEE BENEFITS
A. Defined contribution plans:
The Company deposits amount of contribution to government under PF and other schemes operated by government.
Amount of Rs. 2.36 Lakhs (P.Y. : Rs. 3.07 Lakhs) is recognised as expenses and included in Note 32 “Employee benefit expense”
B. Defined benefit plans:
The Company has following post employment benefits which are in the nature of defined benefit plans:
(a) Gratuity
The Company operates gratuity plan wherein every employee is entitled to the benefit as per scheme of the Company, for each completed year of service. The benefit vests only after five years of continuous service, except in case of death/disability of employee during service. The vested benefit is payable on separation from the Company, on retirement, death or termination.
11 RELATED PARTY DISCLOSURES
Related party disclosures, as required by Ind AS 24, “ Related Party Disclosures”, are given below.
(A) Particulars of related parties and nature of relationships
(B) Related party transactions and balances
Terms and conditions of transactions with related parties
The details of material transactions and balances with related parties are given below:
12 SEGMENT INFORMATION
Primary operating segment
In Line with Ind AS 108 on Operating Segment and basis of the review of operations being done by the senior management, the operations of group falls under real estate business which is considered to be the only reportable segment by the management.
1 Information about product and services:
2 Information about geographical areas
3 Information about major customers
Revenues from one of the customer of the Company for the year ended 31 March, 2018 were Rs. 117.53 Lakhs (approximately 11.77% of total revenues) which is more than 10% of the total revenues.
Revenues from single customer of the Company for the year ended 31 March, 2017 does not exceed 10% or more of entity’s revenues with any customer.
13 FAIR VALUES
1 Carrying value and fair value
Given below is the comparison by class of the carrying value and fair value of the Company’s financial instruments.
2 Quantitative disclosures fair value measurement hierarchy for assets
Company have one Investment in quoted equity shares of Alps BPO Services Ltd. which is under liquidation processs since 2008, and last traded prices are also not available on exchanges. These investments are valued at FVTPL and Fair value of the shares are taken as NIL for all three Balance Sheet date. For the fair value measurement hierarchy for assets it has been construed as Level - I financial asset.
3 Quantitative disclosures fair value measurement hierarchy for liabilities
There are no such liabilities in the company which are measured at FVTPL or at FVTOCI.
14 FINANCIAL RISK MANAGEMENT
The Company’s principal financial liabilities comprise of loans and borrowings, trade payables and other financial liabilities. The loans and borrowings are primarily taken to finance and support the Company’s operations. The Company’s principal financial assets include investments, loans, cash and cash equivalents, trade receivables and other financial assets.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management ensures that 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. It is the Company’s policy that no trading in fianancial instruments for speculative purposes may be undertaken.
1. 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 or Net assset value(“NAV”) risk in case of investment in mutual funds. Financial instruments affected by market risk include investments, trade receivables, trade payables, loans and borrowings and deposits.
The sensitivity analysis in the following sections relate to the position as at March 31, 2018 and March 31, 2017.
The sensitivity of the relevant profit and loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2017 and March 31, 2016.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instr um ent w i l l fl u ctuate beca u s e of changes in market interest rat es. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates. Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on loans and borrowings. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:
Company has not taken variable interest rate loan from bank during the F.Y. 2016-17. Hence, no impact on profit in said year due to increase or decrease in interest rate.
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.
Foreign currency risk
Company operates in the business of real estate project development in Ahmedabad location of Guajart. Company does not deal with foreign currency so there is no risk of foreign currency obsereved with respect to the company. Other market risks
Company has not made any investments in Shares or Mutual fund which are having market sensitivity.
2 Credit Risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions and foreign exchange transactions.
Trade receivables
Company have a policy of transferring the unit / plot or any other construction only after the receipt of last payment, so control over possession as well as legal title must not be transferred untill all the payments are received. So company does not have any default ration with respect to trade receivables.
Cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties who meet the minimum threshold requirements under the counterparty risk assessment process. The Company monitors the ratings, credit spreads and financial strength of its counterparties.
3 Liquidity Risk
The Company monitors its risk of shortage of funds through using a liquidity planning process that encompasses an analysis of projected cash inflow and outflow.
The Company’s objective is to maintain a balance between continuity of funding and flexibility largely through cashflow generation from its operating activities and the use of bank loans. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding.
The table below summarises the maturity profile of the Company’s financial liabilities (including future interest payable) based on contractual undiscounted payments.
15 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 primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder’s value.
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes, within net debt, interest bearing loans and borrowings, trade and other payables, less cash and short-term deposits.
In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018, March 31, 2017 and April 1, 2016.
16 OTHER NOTES
i PAYMENT TO AUDITORS
Details of payment to Auditors are as follows:
ii 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 standalone financial statements of the Company prepared in accordance with previous GAAP.
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