Note No. 1 General Information
MRO-TEK Realty Limited (formerly known as MRO-TEK Limited) was incorporated in the year 1984. The Company's core business activity is manufacture and supply, as well as distribution of Access and Networking equipment & Solutions. The Company entered into real estate segment during the year 2016. The Company's name has been changed to MRO-TEK REALTY LIMITED with effect from May 11, 2016 and the registered office of the company is shifted to No 6, “ Maruthi Complex “, New BEL Road, Chikkamaranahalli, Bengaluru - 560054 on May 12,2016.
The Equity shares of the Company are listed in Bombay Stock Exchange of India, Mumbai and National Stock Exchange of India Limited, Mumbai.
Note No. 2B First-time adoption - mandatory exceptions, optional exemptions
2B.1 Overall principle
The Company has prepared the opening balance sheet as per Ind AS as of April 1, 2016 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognised assets and liabilities. However, this principle is subject to the certain exception and certain optional exemptions availed by the Company as detailed below.
2B.2 Derecognition of financial assets and financial liabilities
The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after April 1, 2016 (the transition date).
2B.3 Deemed cost for property, plant and equipment, investment property, and intangible assets
The Company has elected to continue with the carrying value of all items of its plant and equipment, investment property, and intangible assets recognised as of April 1, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
2B.4 Determining whether an arrangement contains a lease
The Company has applied Appendix C of Ind AS 17 Determining whether an Arrangement contains a Lease to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.
Balance in Margin Money Deposit are held as security against borrowings, guarantees and commitments Restricted cash balances include the following
* Balance in curren account/s, payable against unclaimed dividend
** FD's totalling to Rs. 35 lacs ( previous year - Rs. 20 lacs) offered as 100% margin money, against LC's & Guarantees, availed from the bank.
* Asset backed drop down Over Draft limits sanctioned by State Bank of India are secured against hypothecation of Book Debts , Inventory and also a first charge on all fixed assets of the Company, movable & immovable as collateral security. **Short Term Loan or already borrowed amount from Mr. Aniruddha Bhanuprasad Mehta at a revised rate of 10.05% p.a. with effect from 1st Jan, 2018, which is lower by 0.20% of the prevailing bank base rate i.e.10.25 %.
* Current Year - Rs. 2,36,394/- was credited to Investor Education Protection Fund as at 26th July, 2017 (During the previous year an amount of Rs.2,27,449/- was credited to Investor Education and Protection Fund as at 14.07.2016) **Current Year - Nil ( Previous Year - Represents a sum of Rs 9 crore as non refundable deposit received as per supplementary agreement dated January 04, 2016, pending the recognition to the Statement of Profit and Loss Account.)
*Central Excise Duty of Rs.4,66,90,550/- was demanded by the dept., for the value Addition 'work done to the imported goods at the Trading unit of the Company during the FY2010-11. Company has filed an appeal before CESTAT and matter is pending before the appellate ' authority.
** Amount excludes Interest of Rs 6,30,32,243 up to March 31, 2018 (Rs 5,60,28,660 up to March 31, 2017) Duty that may become payable in the event of adverse judicial pronouncement.
Segment Reporting
Disclosures pursuant to IND AS 108 prescribed under the Act are
Primary Segment
The Company's primary business segments are Products, Real Estate Development, EMS(Electronic Contract Manufacturing), Solutions
Secondary Segment
The Company's secondary segment is determined based on location of customers / export destinations (Geographical Segment).
The segment revenue in the geographical segments for disclosure are as follows:
Revenue within India includes sales to customers located within India and earnings in India.
Revenue outside India includes sales to customers located outside India and earnings outside India.
Financial Risk Management Objective And Policies
The Company's principal financial liabilities comprise Borrowings and Trade payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include Investments, Trade Receivables, Loans, Cash and Cash Equivalents that derive directly from its operations.
“The Company is exposed to the following risks from its use of financial instruments:
- Credit risk
- Liquidity risk
- Interest rate risk”
“The Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. This note presents information about the risks associated with its financial instruments, the Company's objectives, policies and processes for measuring and managing risk, and the Company's management of capital. The company's risk management policies are established to identify and analyse the risk faced by the company, to set appropriate risk limits and controls and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and group's activities. The company through its training and management standards and procedures aims to maintain a disciplined and constructive control environment in which all employee understand their roles and obligations. “
A. Credit Risk
“Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from company's receivables from customers and loans. The Company is exposed to credit risk as a result of the risk of counterparties defaulting on their obligations. The Company's exposure to credit risk primarily relates to investments, trade receivable and cash and cash equivalents. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assess te credit quality of the counterparties taking into account their financial condition, past experience and other factors.”
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by credit rating agencies.
The companies Trade and other receivables are actively monitored to review credit worthiness of the customers to whom credit terms are granted and also avoid significant concentrations of credit risks.
The company continuously monitors defaults of customers and other counterparties , identified either individually or by the group and incorporates this information into its credit risk controls
Trade receivables consists of large number of customers spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and where appropriate, credit guarantee insurance cover is purchased.
There is no receivabe from single external customer outstanding more than 10% of companies total revenue for the year ended 31 March, 2018
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. The company has an appropriate liquidity Risk management framework for the management of short, medium and long term funding and liquidity management requirements. The company manages liquidity risk by maintaining adequate cash reserves, banking facilities, and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.”
The company's treasury department is responsible for managing the short term and long term liquidity requirements of the company, short term liquidity situation is reviewed daily by treasury. Long Term liquidity position is reviewed on a regular basis by the Board of Directors and appropriate decisions are taken according to the situation.
Typically the company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations, this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Market risk
“Market risk is the risk that changes in the market prices, such as foreign exchange rates, interest rates and equity prices will affect the company's income or the value of its holdings of the financial instruments. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while optimising the return. The company is exposed to interest rate risk arises mainly from debt. The company is exposed to interest rate risk because the fair value of fixed rate borrowings and the cash flows associated with floating rate borrowings will fluctuate with changes in interest rates. The company is also exposed to foreign currency risk on certain transactions that are denominated in a currency other than the respective entity's functional currency hence exposures to exchange rate fluctuations arise The risk is that functional currency value of cash flows will vary as a result of movements in exchange rates.”
ii) foreign currency sensitivity analysis
The company is mainly exposed to currency fluctuation of USD and YEN.
The following table details company's sensitivity to a 10% increase and decrease in the INR against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their transition at the period end for 10% change in foreign currency rates. A positive numbers below indicates an increase in profit or equity where the INR strengthens 10% against the relevant currency. For a 10% weakening of the INR against the relevant currency, there would be a comparable impact on the profit or equity, and the balance below would be negative.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have (increased) / decreased equity and profit or loss by the amounts shown below . This analysis assumes that all other variables, in particular foreign currency rates remains constant .
Capital Management
The company manages its capital to ensure that company will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.
The Capital structure of the company consists of net debt borrowings (Note 21) offset by cash and bank balances (Note 11a and 11b) and total equity of the company.
The company is not exposed to any externally imposed capital requirements
Notes on accounts and other explanatory information
a) Revenue from operations for the current year (FY 2017-18) includes an amount of Rs. 1383.75 Lakhs from the sale of super built up area under construction in line with Development Agreement dated dated 1st January 2016 vide SYNo.54/2, 54/1, 50/6 & 56/ situated Bellary Road, Hebbal.
Revenue from operations for the previous year (FY 2016-17) includes an amount of Rs. 900 Lakhs from real estate development by virtue of recognition of deposit, given by developer, consequent to fulfillment of obligations by the company as per supplementary agreement dated 4th Janyary 2016 and waiver of right to claim refund of same as per the memorandum of understanding entered with the developer on 8th August, 2016.
b) Disclosure under Micro, Small and Medium Enterprises Development Act, 2006 (MSMED):
Dues in respect of, Micro and Small enterprises who have duly registered themselves under the relevant Act and furnished the statutorily required proof thereof, are being regularly met as per agreed terms. Disclosures as required under MSMED are:
The Company's financial statements for the year ended 31 March 2016 are prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 in accordance with the accounting policies notified in Note 1. The adoption of Ind AS has been carried out in accordance with Ind AS 101, with April 1, 2016 as the transition date. In accordance with Ind AS 101, the resulting difference between the carrying amounts of the assets and liabilities in the financial statements under both Ind AS and Indian GAAP as at the transition date have been recognized directly in equity at the transition date. An explanation of how the transition from previous GAAP to Ind AS has affected the financial position, financial performance and cash flows is set out in the following notes:
A. Exceptions:
1) Estimates exception: Upon an assessment of the estimates made under Indian GAAP, the Company has concluded that there was no necessity to revise such estimates under Ind AS, except where estimates were required by Ind AS and not required by Indian GAAP.
2) The Company has classified financial assets in accordance with Ind AS 109 on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
B. Exemptions:
Ind AS 101 allows first time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
1) The Company has elected to apply the deemed cost option available under Para D7AA of Ind AS 101 i.e. all items of property, plant and equipment have been recognised in the financial statements as at the date of transition to Ind AS at the carrying value measured as per previous GAAP. The same election has been made in respect of Intangible assets.
D. Notes to first time adoption
Note 1 Reclassification of actuarial gains and losses on employee benefit expenses
Under Indian GAAP, actuarial gains and losses relating to post employment benefit plans are charged to profit and loss. Under Ind-AS, remeasurements comprising of actuarial gains and losses are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.
Note 2 Deferred tax impact on Ind AS adjustments
Under IGAAP, deferred tax is recognised using the income statement approach i.e. the tax effect of timing differences between accounting income and taxable income for the period. Under Ind AS, the Company has recognised deferred taxes using the balance sheet approach i.e. reflecting the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes.
Note 3 Excise duty
Under IGAAP, revenue from sale of goods is presented net of excise duty on sales. Under Ind AS revenue from sale of goods is presented inclusive of excise duty. Excise duty is presented in statement of profit and loss as an expense.
Note 4 Under Ind AS financial assets and liabilities are measured at fair value at the inception and subsequently at amortised cost or at fair value based on their classification.
Under I-GAAP the financial assets and liabilities were measured at cost.
Note 5 The previous year I-GAAP figures have been reclassified/regrouped to make them comparable with Ind AS presentation.
Note 3 Standards issued but not yet effective
Ind AS 115 - Revenue from contracts with customers. Ind AS 115 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition standards Ind AS 11 and Ind AS 18 This standard will come into force from accounting period commencing on or after 1 April 2018. The Company will adopt the standard on the required effective date.
Note 4 Exceptional Item
a Disposal of investments in RAD MRO Manufacturing Private Limited.
During the year the company has realised amounting to Rs 165.34 Lakhs from RAD MRO Manufacturing Private Limited, The investments in the said equity instruments were disposed due to the dissolution of the board of RAD MRO Manufacturing Private Limited on 31st July 2017. The resultant gain on this amounts to Rs 92.83 Lakhs.
b During the year the company has impaired assets amounting to Rs 7.66 Lakhs ( Previous year Rs 48.21 Lakhs) .
c Retrenchment compensation expenditure incurred during the year Rs Nil ( Previous year Rs 45 Lakhs)
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