1 CORPORATE AND GENERAL INFORMATION

Ludlow Jute & Specialities Limited , which has remained in the forefront of product innovation and technological breakthroughs was built by Ludlow Corp. of the U.S.A on the bank of the river Hooghly at Chengail in Howrah district of West Bengal. The management has been making adequate investment in modernization and installation of specialized equipment, but it also has heralded the introduction of a number of value added products as the blending of jute with other natural/manmade fibres. Ludlow has developed products like Jute Mesh/Scrim for Roofing Felt, Agriculture, Horticulture and Webbing for Furniture Industry, Rubber Bonded jute cloth for Landscaping, special fabrics for Furnishing and Apparel, Soil Saver known as Geo-textile and Carpet-backing Cloth.

2 BASIS OF ACCOUNTING

2.1 Statement of Compliance

The financial statement are prepared in accordance with Indian Accounting Standards (“Ind- AS”) as prescribed under Section 133 of the Companies Act, 2013 (“the Act”), as notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by Companies (Indian Accounting Standard ) Amendment Rules, 2016 and other accounting principles generally accepted in India.

The financial Statements for all periods up to and including the year ended 31st March 2017, were prepared in accordance with the accounting standards notified under Section 133 of the Companies Act 2013, read with Rule 7 of The Companies (Accounts) Rules, 2014,the Companies Act, 2013 and in accordance with the Generally Accounting Principal in India.

These financial statements for the year ended 31st March 2018 are the first the Company has prepared in accordance with Indian Accounting Standards (“Ind-AS”). Further, in accordance with the Rules, the Company has restated its Balance Sheet as at 1st April 2016 also as per Ind-AS. For preparation of opening balance sheet under Ind-AS as at 1st April 2016, the Company has availed exemptions and first time adoption policies in accordance with Ind-AS 101 “First-time Adoption of Indian Accounting Standards”, the details of which have been explained thereof in the “Notes to Reconciliation of Balance Sheet & Equity as at 1st April 2016 and 31st March, 2017 and Profit or Loss for the year ended 31st March, 2017.” (Refer note 52(iv)).

2.2 Basis of Measurement

The financial statements have been prepared on historical cost convention on accrual basis except for following assets and liabilities which have been measured at fair value or revalued amount:

(i) Financial assets and liabilities (including derivative instruments) that is measured at Fair value/ Amortised cost;

(ii) Plan assets under defined benefit plans - Measured at fair value.

(iii) Property Plant and Equipment being Land-Measured at Fair Value.

2.3 Functional and Presentation Currency

The Financial Statements have been presented in Indian Rupees (INR), which is also the Company’s functional currency. All financial information presented in INR has been rounded off to the nearest lakhs as per the requirements of Schedule III, unless otherwise stated.

2.4 Use of Estimates and Judgements

The preparation of financial statements require judgements, estimates and assumptions to be made that affect the reported amount of assets and liabilities including contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between actual results and estimates are recognized in the period prospectively in which the results are known/ materialized.

2.5 Operating Cycle

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013 and Ind AS 1 “Presentation of Financial Statements”. The Company has ascertained its operating cycle as twelve months for the purpose of current and non-current classification of assets and liabilities.

b) Terms /Rights attached to Shareholders

The Company has only one class of issued shares i.e. Equity Shares having par value of Rs.10 per share. Each holder of Equity Shares is entitled to one vote per share and equal right for dividend. The dividend proposed by the Board of Directors is subject to the approval of 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 payment of all preferential amounts, in proportion to their shareholding.

c) R.V. Investment & Dealers Limited is the Holding Company of this Company.

d) Details of shareholders holding more than 5% shares in the Company :

e) No Equity Shares have been reserved for issue under options and contracts/commitments for the sale of shares/disinvestment as at the Balance Sheet date.

f) The company has neither alloted any equity shares for consideration other than cash nor has issued any bonus shares nor has bought back any shares during the period of five years preceeding the date at which Balance Sheet is prepared.

g) No securities which are convertible into Equity/Preference shares have been issued by the Company during the year.

h) No calls are unpaid by any directors or officers of the company during the year.

Nature & Purpose of Reserves

Securities Premium Reserve : The Reserve represents the premium on issue of shares and can be utilized in accordance with the provisions of the Companies Act, 2013.

General Reserve : The Reserve is created by an appropriation from one component of equity (generally retained earnings) to another, not being an item of Other Comprehensive Income. The same can be utilised by the company in accordance with the provisions of the Companies Act, 2013.

Retained Earnings : This reserve represents the cumulative profits of the Company and effects of remeasurement of defined benefit obligations. This reserve can be utilised in accordance with the provisions of the Companies Act 2013.

Item of other Comprehensive Income (Re-Measurement of defined benefit plans) : Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the Balance Sheet with a charge or credit recognised in Other Comprehensive Income (OCI) in the period in which they occur. Re-measurement recognised in OCI is reflected immediately in retained earnings and will not be reclassified to Statement of Profit and Loss.

a) Rupee Term Loan from Bank @ 11.70% interest p.a. is repayable in 10 semi-annual instalment for Rs.146.00 between March 2012 to September 2016, 10 semi - annual instalments for Rs.150.00 between September 2013 to March 2018, in 9 semi-annual instalments for Rs. 405.41 from April 2015 to April 2019,and 9 semi - annual instalment for Rs.148.21 between January 2013 to January 2017. The primary security against such loan is hypothecation of machineries purchased under the Term Loan.

b) Term loan of Rs.84.64 @ 11.70% interest p.a., is secured by hypothecation of machineries and 1st. pari passu charges on entire assets both present and future and repayable in 9 half yearly instalment of Rs.9.40 each starting after 6 months of disbursement i.e 25.11.2015.

c) Term loan of Rs. 155.00 @ 8.90% interest p.a., is secured as exclusive charge over all the assets of the Company funded by the specified bank and subservient charge over all the current Assets and Movable Fixed Assets of the Company (both present & future) and repayable in 20 quarterly instalments of Rs.7.75 each starting after 1 year from date of disbursement i.e 16.05.2018.

d) Term loan of Rs. 850.12 @ 8.95% interest p.a., is secured as exclusive charge over all the assets of the Company funded by the specified bank and subservient charge over all the current Assets and Movable Fixed Assets of the Company (both present & future) and repayable in 20 quarterly instalments of Rs. 42.51 each starting after 2 years from the date of disbursement i.e 03.10.2019.

Working Capital Borrowings of Rs.3,083 (P.Y. - Rs.2,226) are unsecured while the balance Working Capital Borrowings are secured. Working Capital Borrowings in Rupee is secured against hypothecation of entire stocks and trade receivable together with bank’s pari passu 1st charge on entire assets both present and future of the Company.

3. EMPLOYEE BENEFITS

In accordance with the revised Ind AS 19 on Employee Benefits, the requisite disclosure are as follows :

a) Defined Contribution Plans : The amount recognized as expense for the Defined Contribution Plans are as under:-

b) Defined Benefit Plans : Benefits are of the following types :

i) Gratuity Plan

Every employee who has completed continuous five years or more of service is entitled to gratuity on terms not less favourable than the provisions of the Payment of Gratuity Act, 1972.

ii) Provident Fund

Provident Fund (other than government administered) as per the provisions of Employees Provident Funds and Miscellaneous Provisions Act, 1952.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for Gratuity Plan:

4. A quantitative sensitivity analysis for significant assumption as at 31 March 2018 are as shown below :

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant, The results of sensitivity analysis is given below :

Please note that the sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Funding arrangements and Funding Policy :

The Company has purchased an insurance policy to provide for payment of gratuity to the employees every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.

5. In respect of provident funds for eligible employees maintained by a trust, in the nature of defined benefits plan, shortfall towards ‘interest rate guarantee liability’ amounting to Rs.35.58 lacs upto 31.03.18, as per actuarial valuation in respect of contribution towards such funds has been provided and included as expenses in ‘Contribution to PF & Other Fund’ under the heading “Employees Benefit Expenses”.

6. Segment Reporting

For management’s purpose, the Company’s business activities fall within two business segment viz. Jute Goods & Power. The disclosure requirements as per Ind AS 108 “Operating Segments” is given below :

(iii) Other Disclosures

a) The Company’s operations predominantly relate to Jute and other product is Power. Accordingly, these business segments comprise the primary basis of segmental information set out in these financial statements.

b) Inter-segment transfers are based on prevailing market prices.

c) The accounting policies adopted for segment reporting are in line with the accounting policy of the Company.

d) The Operating Segments have been reported in a manner consistent with the internal reporting and evaluation by Chief Operating Decision Maker (CODM).

7. Related Party Transactions

As defined in Indian Accounting Standard 24, ‘Related Party Disclosures’ are given below :-

8. Corporate Social Reporting

1) In accordance with the Guidance Note on Accounting for Expenditure on Corporate Social Responsibility Activities, the requisite disclosure are as follows :

Expenditure incurred on CSR activities :

9. There being uncertainties in realization from Insurance claims, the same are accounted for on settlement/realization.

10. Certain Trade Receivable, Loans and Advances and Trade Payable are subject to confirmation In the opinion of the management the value of Trade Receivables and Loans & Advances on realization in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet.

11. The Company has not received any memorandum as required to be filed by the suppliers with the notified authority under Micro, Small and Medium enterprises development Act, 2006 for claiming their status as micro, small or medium enterprises. Consequently the amount paid/payable to such parties during the year is Rs.Nil. (Previous Year Rs.Nil).

12. Capital Management

The Company objective to manage its capital is to ensure continuity of business while at the same time provide reasonable returns to its various stakeholders but keep associated costs under control. In order to achieve this, requirement of capital is reviewed periodically with reference to operating and business plans that take into account capital expenditure and strategic Investments. Sourcing of capital is done through judicious combination of equity / internal accruals and borrowings, both short term and long term. Net debt to Equity ratio is used to monitor capital.

The management has assessed that the fair values of cash and cash equivalents, trade receivables, trade payables, short term borrowings, and other current financial liabilities approximates their carrying amounts largely due to the shortterm maturities of these instruments. The management has assessed that the fair value of floating rate instruments approximates their carrying value.

The following methods and assumptions were used to estimate the fair values :

(a) The investments being listed, the fair value has been taken at the market rates of the same on the reporting dates. They are classified as Level 1 fair values in the fair value hierarchy.

(b) The values of non current borrowings are based on the discounted cash flows using a current borrowing rate. They are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including own credit risks, which was assessed as on the balance sheet date to be insignificant.

iii) Fair Value Hierarchy

The following are the judgements 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 amortised cost and for which fair value 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 the three levels of fair value measurement as prescribed under the Ins AS 113 “Fair Value Management”. An explanation of each level follows underneath the tables :

Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels

Level 1 : Quoted prices (unadjusted) in active market for identical assets or liabilities.

Level 2 : Inputs other than quoted price including within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3 : Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of counterparty. This is the case with listed instruments where market is not liquid and for unlisted instruments.

During the year ended 31st March 2018 and 31st March 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfer into and out of Level 3 fair value measurements.

13. Financial risk management objectives and policies

The Company’s activities expose it to the following risks :

a) Credit risk

b) Liquidity risk

c) Market risk

a) Credit Risk

Credit risk is the risk that counter party will not meet its obligations under a financial instruments 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, investments, foreign exchange transactions and other financial instruments.

Trade receivables : Customer credit risk is managed by the Company subject to the Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and major customers are generally secured by obtaining security deposits/bank guarantee or other forms of credit insurance. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivable disclosed in note 12.

b) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Typically the Company ensures that it has sufficient cash on demand to meet expected short term operational expenses. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans/internal accruals. The table below provides details regarding the remaining contractual maturities of significant financial liabilities at the reporting date.

c) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises four type of risks: Commodity Price Risk, Foreign Exchange Risk, Interest Rate Risk and Other Price Risk.

1) Commodity Price Risk : The Company primarily imports raw jute , stores and spare items etc. It is exposed to commodity price risk arising out of movement in prices of such commodities. Such risks are monitored by tracking of the prices and are managed by entering into fixed price contracts, where considered necessary.

2) Foreign Currency Risk : The Company has Foreign Currency Exchange Risk on imports of input materials, Capital Equipment(s) in foreign currency for its business. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. Certain transactions of the Company act as a natural hedge as a portion of both assets and liabilities are denominated in similar foreign currencies. For the remaining exposure to foreign exchange risk, the Company adopts a policy of selective hedging based on risk perception of the management using derivative, wherever required, to mitigate or eliminate the risk.

The following table demonstrates the sensitivity in the US Dollars (USD); Euro (EUR) and Sterling Pound (GBP) to the Indian Rupee with all other variables held constant.

i) Exposure to currency risk

The Company’s exposure to foreign currency risk at the end of the reporting period are as follows :

3) Interest rate risk : The fair value or future cash flows of a financial instrument fluctuates due to changes in market interest rates. The Company’s exposure to the interest rate risk relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company is exposed to risk due to interest rate fluctuation on long term borrowings. Such borrowings are based on fixed as well as floating interest rate. Interest rate risk is determined by current market interest rates, projected debt servicing capability and view on future interest rate. Such interest rate risk is actively evaluated and is managed through portfolio diversification and exercise of prepayment/refinancing options where considered necessary.

4) Other Price Risk : The Company’s exposure to equity securities price risk arises from investments held by the Company and classified in the Balance Sheet at Fair Value through Profit and Loss. Having regard to the nature of securities, intrinsic worth, intent and long term nature of securities held by the Company, fluctuation in their prices are considered acceptable and do not warrant any management.

14. The Board of Directors of the Company has recommended to pay a final dividend @ 20% (Rs.2.00 per share on Face Value of Rs.10/) amounting to Rs.215.46 lakhs (which will attract liability towards Dividend Distribution Tax amounting to Rs.44.29 lakhs) subject to the approval of shareholders in the Annual General Meeting.

15. Transition to Ind AS

These financial statements, for the year ended 31 March 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with generally accepted accounting principles in India (Previous GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on or after 31 March 2018, together with the comparative period data as at and for the year ended 31st March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening statement of financial position was prepared as at 1st April 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 as at 1st April 2016 and the financial statements as at and for the year ended 31st March 2017.

Exceptions and Exemptions Applied

Ind AS 101 “First-time adoption of Indian Accounting Standards” (hereinafter referred to as Ind AS 101) allows first time adopters certain mandatory exceptions and optional exemptions from the retrospective application of certain Ind AS, effective for 1st April, 2016 opening balance sheet. In preparing these Standalone financial statements, the Company has applied the below mentioned mandatory exceptions and optional exemptions.

I. Applicable Mandatory Exceptions

(i) Estimates

As per para 14 of Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to IND AS at the end of the comparative period presented in the entity’s first Ind AS financial statements, as the case may be, should be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies. As per para 16 of the standard, where application of Ind AS requires an entity to make certain estimates that were not required under previous GAAP, those estimates should be made to reflect conditions that existed at the date of transition or at the end of the comparative period. The Company’s estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statement that were not required under the previous GAAP are listed below:

- Fair Valuation of financial instruments carried at FVTPL

- Determination of the discounted value for financial instruments carried at amortized cost.

(ii) Classification and measurement of financial assets

Para B8 - B8C of Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortized cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable. Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortized cost has been done retrospectively.

II. Optional Exemptions Availed

(i) Property Plant and Equipment and Intangible Assets

The company has elected to measure items of Property Plant & Equipment and Intangible Assets at its carrying value at the Transition Date except for land which is measured at fair value as deemed cost.

(ii) Determining whether an arrangement contains a Lease

Para D9-D9AA of Ind AS 101 includes an optional exemption that permits an entity to apply the relevant requirements in Appendix C of Ind AS 17 “Leases” for determining whether an arrangement existing at the date of transition contains a lease by considering the facts and circumstances existing at the date of transition (rather than at the inception of the arrangement). The Company has applied the above transitional provision and has assessed all the arrangements at the date of transition.

(iii) Investments in Subsidiaries

As permitted by para D14 & D15 of Ind AS 101, the Company has elected to measure the investments in equity shares of subsidiaries at Deemed Cost calculated at the previous GAAP carrying amount as on the date of transition, as the company has elected to measure such investments at Cost under Ind AS 27 “Separate Financial Statements”.

15. (iv) Notes to the reconciliation of Balance Sheet & Equity as at April 1, 2016 and March 31, 2017 and Profit or Loss for the year ended March 31, 2017.

Explanations to the material adjustments made in the process of Ind AS transition from previous GAAP

I) Fair Valuation as deemed Cost for Property Plant & Equipment

The Company have considered fair value for one item property i.e. Land measuring 149.48 acres situated in Chengail, Howrah, West Bengal in India with favourable impact of Rs.11095.66 lakhs in accordance with stipulations of Ind AS 101 with the resultant impact of accumulation in reserves.

II) Long term borrowings

Under Indian GAAP, the Company accounted for long term borrowings measured at transaction value. Under IND AS, the Company has recognised the long term borrowings at amortised cost using effective interest rate (EIR).

III) Fair Valuation of Financial Instruments

Under the Indian GAAP, investments in equity instruments and mutual funds were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments(other than equity instruments designated at FVOCI) have been recognised in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended 31st March 2017.

IV) Proposed Dividend & Dividend Distribution Tax

Under Indian GAAP till F.Y. 2015-16 proposed dividends including Dividend Distribution Taxes (DDT) were recognized as a liability in the period to which they relate, irrespective of when they were declared. Under Ind AS, a proposed dividend is recognized as a liability in the period in which it is declared by the Company (usually when approved by shareholders in a general meeting) or paid. Since declaration of dividend occurs after period end in the Company, the Provision for proposed dividend has been derecognized against retained earnings on 1st April 2016 and Liabilities recognized in the year ended 31st March 2017.

V) Re-classifications

a) Assets / liabilities which do not meet the definition of financial asset / financial liability have been reclassified to other asset / liability.

b) Remeasurement gain/loss on long term employee defined benefit plans are re-classified from statement of profit and loss to OCI.

c) Jute Manufacturing Cess on sales was earlier netted off with Sales, now have been presented separately.

VI) Leases

a) Under Ind AS, where the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases, straight lining of lease is not required. The same was required under AS-19. The Company has initially recognised security deposit paid to the lessor at fair value and subsequently at amortised cost as per Ind AS 109.

VII) Deferred Revenue

Under Indian GAAP, grants received from government agencies against specific fixed assets (Property, Plant and Equipment) are adjusted to the cost of the assets. Under Ind AS the same has been presented as deferred revenue being amortised in the statement of profit & loss on a systematic basis.

VIII) Stores and Spares

The Company accounted for certain spares which are capable of being used for more than one accounting period or which can be used specifically only in combination with another fixed assets as part of inventories under IGAAP. Under Ind AS, any asset which satisfies the criteria of Ind AS 16 mentioned above needs to be accounted for as a part of Property, plant and equipment. Accordingly, the Company has done an assessment of the relevant inventory and reclassified such items from inventory to Property, plant and equipment.

IX) Forward Contract

Under Ind AS mark to market gain/loss on restatement of forward contract as at the reporting date has been recognized in the statement of profit & loss.

X) Bill Discounting

Under IGAAP, trade receivables derecognised by way of bills of exchange were shown as contingent liability since there was a recourse clause. Under Ind AS, the trade receivable have been restated with corresponding recognition of short term borrowings of Rs.246.40 as on 31st March, 2017 and Rs.595.68 as on 1st April, 2016.

XI) Deferred tax

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP.

In addition, the various transitional adjustments lead to temporary differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity.

16. Previous GAAP figures have been reclassified/regrouped to conform the presentation requirements under Ind AS and the requirements laid down in division - II of the Schedule - III of the Companies Act, 2013.