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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 532805ISIN: INE891D01026INDUSTRY: IT Networking Equipment

BSE   ` 96.90   Open: 95.00   Today's Range 95.00
97.90
+1.45 (+ 1.50 %) Prev Close: 95.45 52 Week Range 64.00
138.50
Year End :2018-03 

*Represents transfer of investment held in Redingote Gulf FZE by Redington International Holdings Ltd on July 10, 2013, to comply with the directive of the Reserve Bank of India

Stock Appreciation Rights (SAR)

The Company has included fair value of the Stock Appreciation Rights (Stock compensation expense) as Investments, in respect of the Stock Appreciation Rights granted to the Directors and employees of Indian and overseas subsidiaries, as required under Ind AS 102 “Share-based payment".

Unrecognized deferred tax assets

Consequent to the sale of the Company's Investment in its wholly owned subsidiary Easy access Financial Services Limited in FY 2013-14 and a land at Delhi in FY 2017-18, there was a Long Term Capital loss, under Income Tax Act, 1961, which resulted in deferred tax asset of Rs, 15.39 crores. Out of this Rs, 2.49 crores was recognized against realized Long Term Capital Gain in an earlier year. The balance Deferred Tax Asset of Rs, 12.90 crores will be recognized as and when there is a Long Term capital Gain. These unrecognized deferred tax asset will expire over a period of 4- 8 years

Terms/rights attached to equity shares

Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting.

Capital Management

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximizing the return to shareholder through the optimization of the debt and equity balance.

The General reserve is used from time to time to transfer profits from retained earnings for appropriation purpose. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to profit or loss.

Retirement Benefit Obligation reserve represents accumulated balances of actuarial gains/losses, arising out of employee defined benefit obligation and will not to be subsequently reclassified to Profit and Loss. This reserve is not a distributable reserve._

Exchange differences relating to the translation of the results and net assets of the Company's foreign operations from their functional currency to the presentation currency are recognized directly in other comprehensive income and accumulated in the foreign currency translation reserve.

The above reserve relates to SARs granted by the Company to the employees and Directors of the Company and its subsidiaries, under the Redington Stock Appreciation Right Scheme, 2017. Further information about SAR scheme is _set out in Note 43.___

The above reserve represents profits generated and retained by the Company post distribution of dividends to the equity shareholders in the respective years. This reserve can be utilized for distribution of dividend by the Company _considering the requirements of the Companies Act, 2013.___

Gratuity (included as part of employee benefits expense in note 28)

The Company provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan') covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment with the Company. The Company’s obligation towards Gratuity is a defined benefit plan and the details of actuarial valuation as at the year-end are given below:

Note A

Contingent liabilities include similar issues for which the Company has received favorable disposition at the Tribunal level in the past.

Note B

The Company had filed an appeal during July 2016 before CESTAT - Delhi against the Service tax demand of Rs, 21.59 crores (including interest and penalty) raised for the period October 2009 to September 2014, determining service tax liability on the HP Indigo Consumables and Spare parts support agreement on which VAT is already paid. CESTAT - Delhi vide its order passed during April 2018 allowed the appeal filed by the Company and set-aside the demand raised in full with consequential reliefs. In the proceedings, the Company had earlier deposited Rs, 4.00 crores under protest and adjusted Cenvat input credit of Rs, 8.59 crores against the tax liability, totaling Rs, 12.59 crores. The Company would be filing for refund of these amounts as per due process of law.

iv. Capital commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs, 15.57 crores (previous Year: Rs, 1.32 crores).

1. OPERATING LEASES

The Company has taken various operating leases for its office premises, which is for a period ranging from 11 months to 9 years.

The following table shows the fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities if the carrying amount is a reasonable approximation of fair value.

The Company enters into foreign exchange forward contracts with banks. These foreign exchange forward contracts are valued using various inputs including the foreign exchange spot and expected forward rates.

2. FINANCIAL RISK MANAGEMENT

The Company's activities expose it to a variety of financial risks such as foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Company's focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk of the Company is credit and foreign exchange risk.

The Company's senior management oversees the management of these risks. The Company's senior management is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the Company. The financial risk committee provides assurance to the Company's senior management that the Company's 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.

A. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company's exposure to the risk of changes in foreign exchange rates is limited to payment in foreign exchange for purchase of goods.

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions.

The un-hedged balances as at March 31, 2018 are primarily on account of purchase of goods where the Company is in the process of hedging and the balance in vendor account which to a larger extent have natural hedge.

Sensitivity analysis:

Sensitivity analysis is carried out for un-hedged foreign exchange risk as at March 31, 2018. For every 1% strengthening of Indian Rupees against all relevant uncovered foreign currency transactions profit before tax would be impacted by loss of Rs, 1.10 crores (previous year Rs, 0.11 crores). Similarly, for every 1% weakening of Indian Rupee against these transactions, there would be an equal and opposite impact on the profit before tax.

B. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company borrows funds to meet its short-term requirements which are at fixed interest rates. Hence, the Company is not exposed to any significant interest rate risk.

C. Credit risk

Credit risk is the risk that the counterparty will not meet its obligations under customer contract, leading to a financial loss. The Company is exposed to credit risk from its sale to small and large format retailers on credit.

The Company mitigates credit risk by strict receivable management, procedures and policies. The Company has a dedicated independent team to review credit and monitor collection of receivables on a pan India basis. Credit insurance is resorted to most of the receivable and in such cases the credit risk is restricted to 15 % of the receivable value.

The concentration of credit risk is limited due to the customer base being large and unrelated. Further, the Company constantly evaluates the quality of trade receivable and provides allowance towards doubtful debts.

D. 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 has built an appropriate liquidity risk management framework for its short, medium and long-term funding and liquidity requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial liabilities.

The following table details the Company's remaining contractual maturity for its non-derivative financial liabilities:

3. RELATED PARTY DISCLOSURES (AS PER IND AS 24 “RELATED PARTY DISCLOSURES"!

1) Key Management Personnel

Mr. Raj Shankar, Managing Director

Mr. M.Raghunandan, Whole time Director (Till May 24, 2016)

Mr. E.H. Kasturi Rangan, Whole time Director (From May 24, 2016)

Refer Note 38 below for remuneration

2) Names of the related parties

Party where the Company has control Redington Employee Share Purchase Trust *_

Parties having Significant Influence on Synnex Mauritius Limited, Mauritius *_

the Company__Harrow Investment Holding Limited (Upto July 13, 2017)_

Subsidiary Companies__Redington International Mauritius Limited, Mauritius*_

__Redington Gulf FZE, Dubai_

__Cadensworth FZE, Dubai_

__Redington Gulf & Co. LLC, Oman_

__Redington Nigeria Ltd, Nigeria_

__Redington Egypt Ltd (Limited liability company), Egypt_

__Redington Kenya Ltd, Kenya_

__Redington Middle East LLC, Dubai_

__Redington QatarWLL, Dubai_

__Ensure Services Arabia LLC, Saudi Arabia_

__Redington Africa Distribution FZE, Dubai_

__Ensure Services Bahrain S.PC, Bahrain_

__Redington Distribution Pte. Limited, Singapore *_

__Redington Bangladesh Limited, Bangladesh_

__Redington Qatar Distribution W.L.L., Qatar_

__Redington Kenya (EPZ) Ltd, Kenya_

__Redington Limited, Ghana_

__Redington Uganda Limited, Uganda_

__Redington Gulf FZE Co, Irag_

__Cadensworth UAE LLC, Dubai_

__Redington Morocco Limited. Morocco_

__Redington Tanzania Ltd.. Tanzania_

__Redington SL (Private) Ltd.. Sri Lanka_

__Redington Turkey Holdings S.A.R.L, Luxembourg_

__Arena Bilgisayar Sanayi Ve Ticaret A.S.. Turkey_

__Arena International FZE. Dubai_

__Ensure IT services (pty) Ltd.. South Africa_

__Pro Connect Supply Chain Solutions Limited. India*_

__Ensure Gulf FZE. Dubai_

__Ensure Technical Services (PTY) Ltd.. South Africa_

__Ensure Middle East Trading LLC. Dubai_

__Ensure Technical Services Kenya Limited. Kenya_

__Ensure Technical Services Tanzania Limited. Tanzania_

__Ensure Services Uganda Limited. Uganda_

__Ensure Solutions Nigeria Limited. Nigeria_

__Redington Rwanda Ltd. Rwanda_

__Redington Kazakhstan LLP. Kazakhstan_

Sensonet Teknoloji Elektronik Ve Bilisim Hizmetleri Sanayi Ve Ticaret A.S.,

__Turkey_

__Pro Connect Supply Chain Logistics LLC. Dubai_

__Ensure Ghana Limited. Ghana_

__Ensure Support Services (India) Limited. India*_

__Ensure Technical Services Morocco Limited (SARL), Morocco_

__Redington Senegal Limited SARL_

__Redington Saudi Arabia Distribution Company, Saudi Arabia_

__Paynet Odeme Hizmetleri A., Turkey_

CDW International Trading FZE, Dubai

(Name changed to CDW International Trading FZCO

__after the balance sheet date)_

__RNDC Alliance West Africa Limited, Nigeria_

__Linkplus Bilgisayar Sistemleri Sanayi ve TicaretA.S, Turkey_

__Redserv Business Solutions Private Limited, India_

__Pro Connect Saudi LLC, Saudi Arabia_

__Redington Distribution Company LLC, Egypt_

__Ensure MiddleEast Technology Solutions LLC, Abu Dhabi_

__Rajprotim Supply Chain Solutions Limited, India_

__Incorporated during the year_

__Citrus Consulting Services FZ-LLC, Dubai_

Arena Mobile lletisim Hizmetleri Ve Tuketici Elektronigi Sanayi Ve Ticaret

__Anonim Sirketi. Turkey_

__Online Elektronik Ticaret Hizmetleri Anonim Sirketi. Turkey_

__Paynet (KIBRIS) Odeme Hizmetleri Limited. Cyprus_

__Ensure Services Limited. Egypt_

__Redington Cote d'Ivoire SARL. Cote d'Ivoire_

Associate__Redington (India) Investments Limited. India_

Subsidiary of Associate_Currents Technology Retail (India) Limited. India*_

*Represents related parties with whom transactions have taken place during the year.

* a) Includes remuneration paid to Mr. Raghunandan amounting to Rs, 0.14 crores.

* b) Salary entitlement for the full financial year 2017-18 for Mr. E.H. Kasturi Rangan is considered in salaries and bonus.

c) Provision for gratuity and compensated absences are based on the actuarial valuation performed on an overall Company basis and hence excluded above.

d) The Company has filed an application with Ministry of Corporate Affairs for reappointment of Mr. Raj Shankar as the Managing Director, since he is a non-resident Indian.

4 MERGER OF CADENSWORTH (INDIA) LIMITED

(i) Cadens worth (India) Limited ("Cadens worth") was engaged in information technology product distribution business and after sales services of information technology products. Cadens worth was a wholly owned subsidiary of the Company.

(ii) Pursuant to the order of National Company Law Tribunal, Chennai bench, Cadens worth (India) Limited, ("transferor") was merged with the Company with an appointed date of April 1, 2016. The order has been made effective on July 26, 2017, upon complying with all the relevant requirements under the Companies Act, 2013.

(iii) The amalgamation has been accounted for under the ‘pooling of interests’ method as prescribed by Ind AS 103 "Business Combination". Given that the merger is a common control transaction, the prior year figures have been restated as if the merger had occurred from the beginning of the preceding period i.e. April 01, 2016. Accordingly, the assets, liabilities and reserves of the transferor company as at April 01, 2016 have been taken over and recorded at their respective book values and in the same form.

(iv) Consequent to the scheme of amalgamation, the authorized share capital of the transferor company stands cancelled. Also since the merger is of the wholly owned subsidiary with its parent company, no shares were exchanged to effect the amalgamation.

* The previously reported amounts are after considering certain immaterial reclassification.

5. CORPORATE SOCIAL RESPONSIBILITY

For the year 2017-18, the Company was required to spend Rs, 5.74 crores (previous year: Rs, 5.82 crores) on "Corporate Social Responsibility (CSR)" against which the Company has spent Rs, 5.75 crores (previous year: Rs, 5.82 crores), being the contribution made by the Company to a Trust formed for the purposes of carrying out CSR activities.

6. SEGMENT REPORTING

Since the Company prepares consolidated financial statements as per Ind AS-108" Operating Segment", segment information has been disclosed in consolidated financial statements.

* Out of the total options granted in 2008, 19,59,830 options were re-priced at Rs, 130/- on January 28, 2009 and 75,000 options were re-priced at Rs, 165/- on May 22, 2009

The variables / assumption used for calculating the fair value of Grant V using the Black Scholes model and their rationale were as follows:

A. Stock price

The closing market price of the Company's share on the date prior to the date of grant as quoted on the National Stock Exchange (NSE) has been considered for the purpose of option valuation.

B. Volatility

Volatility is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Schools option-pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.

In determining volatility, the Company considers the historical volatility of the stock over the most recent period that is generally commensurate with the expected life of the option being valued.

Given that, the Company's stock is publicly traded on NSE and BSE, for the purpose of calculating volatility, the Company has considered the daily volatility of the stock prices on NSE, over a period prior to the date of grant, corresponding with the expected life of the options being valued.

The fair value of an option is very sensitive to this variable. Higher the volatility, higher is the fair value. The rationale being, the more volatile a stock is, the more is its potential to go up (or come down), and the more is the probability to gain from the movement in the price. Accordingly, an option to buy a highly volatile stock is more valuable than the one to buy a less volatile stock.

C. Risk free interest rate

The risk-free interest rate being considered for the calculation is the interest rate applicable for maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities.

D. Exercise Price

Options have been granted primarily at a price of Rs, 348.05 on February 29, 2008. Subsequently, 1,959,830 and 75,000 options were re-priced at a market price of Rs, 130/- and Rs, 165/- on January 28, 2009 and May 22, 2009 respectively. On December 5, 2011 173,212 options were granted at a price of Rs, 396.50 per option.

E. Expected Life of options

Expected Life of options is the period over which the Company expects the options to be exercised. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

The fair value of each award has been determined based on different expected lives of the options that vest each year, as it would be if the award were viewed as several separate awards, each with a different vesting date. A weighted average of all vests has been calculated to arrive at the value of the options. The expected life of option is calculated as the average of the minimum life (vesting period) and the maximum life (i.e. vesting period exercise period). Expected life of option has been estimated on a similar basis for the remaining vests.

F. Expected Dividend yield:

Expected dividend yield has been calculated as an average of dividend yields for the preceding two years to the date of the grant.

7. STOCK APPRECIATION RIGHTS

A. Details of Stock Appreciation Rights

The Company has formulated 'REDINGTON STOCK APPRECIATION RIGHT SCHEME 2017' ("SAR Scheme 2017") with an intent to reward the employees of the Company and its subsidiaries for their performance and to motivate them to contribute to the growth and profitability of the Company. The maximum number of shares to be issued against the Stock Appreciation Rights (SARs) shall not exceed 86,81,681 equity shares of Rs, 2/- each as adjusted for any changes in the capital structure of the Company. Pursuant to the approval of SAR Scheme 2017 by the members of the Company, the Nomination and Remuneration Committee of the Board of Redington (India) Limited on 30th December 2017 approved the grant of 81,79,000 SARs to the employees of the Company and its subsidiaries.

Each SAR entitles the eligible employees and directors to receive equity shares of the Company equivalent to the increase in value of one equity share (‘Appreciation'). Appreciation is calculated by reducing the issue price / base price from the reported closing price of the equity shares in the NSE / BSE where there is highest trading, on the day prior to the date of exercising of these SARs and multiplying the resultant with the number of SARs exercised.

These SARs vest over a period of 3 years from the date of the grant in the following manner:

10% of the SARs vest after a period of one year from the grant date, 20% of the SARs vest after a period of two years from the grant date and 70% of the SARs vest after a period of three years from the grant date. These SARs are exercisable within a period of three years from the respective date of vesting.

Certain SARs granted to the members of senior management team as identified by the Nomination and Remuneration committee have an associated performance condition. Of the total SARs granted to senior management team, 35% of the SARs that would vest at the end of 3 years from the date of the grant are subject to these performance conditions.

The Company has used the Black-Scholes Option Pricing Model to determine the fair value of the SARs based on which the compensation cost for the current year has been computed.

The said stock option scheme is in compliance with the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.

Details of SARs granted are as follows:

A. Details of SAR_Particulars_

Date of grant December 30, 2017

Fair value at grant date Rs, 71.99 per SAR

(weighted-average)__

Exercise/ Base price Rs, 148.50 (15% discount to the Closing Market Price ofRs, 174.60 at NSEon December

29, 2017) date prior to the date of grant

Vesting commences on December 30, 2018

Vesting requirement The SARs granted would be vested subject to the time and performance conditions

as may be decided by the Compensation Committee from time to time.

Maximum term of SARs granted 3 years from the date of vesting

Method of settlement__Equity shares of the Company_

The variables / assumptions used for calculating the fair value using the above model and their rationale are as follows:

i. Stock price

The closing market price of the Company's share on the date prior to the date of grant as quoted on the National Stock Exchange (NSE) has been considered for the purposes of right valuation.

ii. Volatility

Volatility is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes right pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.

In determining volatility, the Company considers the historical volatility of the stock over the most recent period that is generally commensurate with the expected life of the right being valued. Volatility has been calculated based on the daily closing market price of the Company's stock price on NSE over these years.

iii. Risk free interest rate

The risk-free interest rate is considered for the calculation is the interest rate applicable for maturity equal to the expected life of the rights based on the zero-coupon yield curve for Government Securities

iv. Exercise / base price

Exercise / base price of Rs, 148.50 is considered in the above valuation.

v. Expected Life of rights

Expected Life of rights is the period over which the Company expects the rights to be exercised. The minimum life of rights is the minimum period before which the rights cannot be exercised. The maximum life is the period after which the rights cannot be exercised.

The expected life of rights is calculated as the average of the minimum life (vesting period) and the maximum life (i.e. vesting period exercise period).

vi. Expected dividend yield:

Expected dividend yield has been calculated based on the final dividend declared during the preceding financial year.

F. Expense recognized in statement of profit and loss

The Company has recognized costs with respect to those SARs which were issued to the employees and directors of the

Company in the statement of profit and loss under employee benefit expenses. _

G. Amount recognized as cost of investments in subsidiaries /

The Company has recognized the cost of those SARs which were issued to the employees and directors of the subsidiaries '

as the cost of investments.

8. EVENTS AFTER THE REPORTING PERIOD (NON-ADJUSTING)

The Board of Directors at its meeting held on May 21, 2018 has recommended a dividend of Rs, 2.40 per equity share of

Rs, 2/- each (i.e., 120% of face value) for the financial year ended March 31, 2018 (previous year Rs, 2.30 per equity share of _

Rs, 2/- each - i.e., 115% of face value) subject to the approval of shareholders in the ensuing Annual General Meeting.

*For the purpose of this disclosure, the term ‘Specified Bank Notes' shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs, S.O No. 3407(E), dated November 8, 2016.

The above disclosure is not applicable for the current year.

9. The financial statements were approved for issue by the Board of Directors on May 21, 2018.