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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   ` 79.75   Open: 81.50   Today's Range 79.40
-1.15 ( -1.44 %) Prev Close: 80.90 52 Week Range 78.45
Year End :2017-03 

1. Financial risk management:

These financial risk management policies are applied in order to mitigate potential adverse impact on the financial performance. The note below explains how the Company's exposure to various risks, such as market risk (foreign exchange and interest rate risk) credit risk, liquidity risk and capital risk are addressed/mitigated.

1. Market Risks

a. Foreign exchange risk:

The Company enters into transactions denominated in foreign currencies. In order to mitigate risks arising on account of foreign currency fluctuations, the Company has set the following policies with respect to foreign exchange risk management.

The Company, wherever applicable have used foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions. Most of the transactions of the Company are in Indian rupees and transactions in foreign currencies are majorly hedged by a forward cover.

Sensitivity analysis:

The Company applies 10% as the sensitivity rate while ascertaining foreign currency exposure. Accordingly 10% strengthen of Indian Rupees against all relevant uncovered foreign currency transactions would have impacted profit before tax by Rs, 109.13 Lakhs (Previous year Rs, 405.85 Lakhs). Similarly for 10% weakening of Indian Rupees these transactions, there would be an equal and opposite impact on the profit before tax.

b. Interest rate risk management

The Company funds at fixed interest rates. Hence the Company is not required to determine the sensitivity analyses with regard to interest rate risk

2. Credit risk management

Credit risk is minimized through conservative credit policy by the Company. Credit insurance is also taken to mitigate the credit risk. The Company sells to both small retailers and large format retailers, giving them a credit period of 30- 60 days. 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. The efficacy of this process is proven by the fact that receivables more than 6 months are only 5% of the total receivable.

3. Liquidity risk management

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 assets and financial liabilities.

The following table details the Company's remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company will be required to pay.

4. Capital risk 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.

5 Related party disclosures (As per Ind AS 24)

6) 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 37 below for remuneration

7) Names of the related parties

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

Parties having Significant Synnex Mauritius Limited, Mauritius *

Influence on the Company Harrow Investment Holding Limited, Mauritius *

Subsidiary Companies Nook Micro Distribution Limited, India (Refer Note:43)

Cadensworth (India) Limited, India*

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 Qatar WLL, Qatar

Ensure Services Arabia LLC, Saudi Arabia

Redington Africa Distribution FZE, Dubai

Ensure Services Bahrain S.P.C, Bahrain

Redington Distribution Pte. Limited, Singapore *

Redington Bangladesh Limited, Bangladesh

Subsidiary Companies Redington Qatar Distribution W.L.L., Qatar

Redington Kenya (EPZ) Ltd, Kenya

Redington Limited, Ghana

Redington Uganda Limited, Uganda

Africa Joint Technical Services, Libya

Redington Gulf FZE Co, Iraq

Cadensworth UAE LLC, Dubai

Redington Morocco Limited, Morocco

Redington Tanzania Ltd., Tanzania

Redington SL (Private) Ltd., Sri lanka

Redington Angola Limited, Angola

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

ProConnect 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

ProConnect Supply Chain Logistics LLC, Dubai

Ensure Ghana Limited, Ghana

Ensure Support Services (India) Limited, India*

Ensure Technical Services Morocco Limited (SARL), Morocco

Adeo Bilisim Danismanlik Hizmetleri San. Ve Tic. A.S. (“ADEO”), Turkey **

Redington Senegal Limited SARL

Redington Saudi Arabia Distribution Company, Saudi Arabia

Paynet Odeme Hizmetleri A.S., Turkey

CDW International Trading FZE, Dubai

RNDC Alliance West Africa Limited, Nigeria

Linkplus Bilgisayar Sistemleri Sanayi ve Ticaret A.S, Turkey

Incorporated during the year

Redserv Business Solutions Private Limited, India ProConnect Saudi LLC, Saudi Arabia Redington Distribution Company LLC, Egypt Ensure MiddleEast Technology Solutions LLC, Abu Dhabi Rajprotim Supply Chain Solutions Limited, India 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.

** Disposed during the year

Related Parties are as identified by the management.

Pursuant to the notification by the Ministry of Corporate Affairs, the petition for the approval of the Scheme filed with the Hon'ble Madras High Court has been transferred to National Company Law Tribunal (NCLT), Chennai Bench.

Pending approval of the Scheme by NCLT, the results of the said subsidiary as at and for the Year Ended March 31, 2017 have not been included in the Standalone Financial Results.

8. Merger of Nook Micro Distribution Limited

Nook Micro Distribution Limited (“Nook / Transferor Company”), an erstwhile wholly owned subsidiary of the Company was engaged in trading on IT, Consumer Durable and Telecom products. The Board of Directors of the Company, in their meeting held on August 3, 2015 had approved a scheme of amalgamation of Nook with the Company, with effect from 1st April 2015. The Scheme was sanctioned by the Hon'ble High Court of Judicature at Madras vide their Order dated March 11, 2016 and the assets and liabilities of the Transferor Company were transferred to and vested with the Company with effect from the Appointed date - April 1, 2015. Since this is the common control transaction, as per Appendix C of Ind AS 103, the impact of the scheme has been considered in the earliest period presented, i.e. the balance sheet as on April 1, 2015 (Refer Note 48 for the effect of the merger on the opening balance sheet on the date of transition to Ind AS)

9. For the year 2016-17, the Company is required to spend Rs, 540.97 Lakhs (Previous year: Rs, 516.78 Lakhs) on "Corporate Social Responsibility (CSR)" against which the Company has spent Rs, 540.00 Lakhs, being the contribution made by the Company to a Trust formed for the purposes of carrying out CSR activities. In the previous financial year, CSR activities were performed out of the funds/ provision earmarked for this purpose in the earlier years.

10. 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.

11. Employee Stock Option Plan 2008

The Company follows intrinsic value method as per previous GAAP for accounting of employee stock options and decided to avail exemption under Ind AS 101 from retrospective application of accounting requirements prescribed under Ind AS 102 for outstanding options as on the transition date. Hence no compensation costs have been recognized in these accounts as the options have been granted at the prevailing market prices.

* Out of the total options granted in 2008, 1,959,830 options were reprised at Rs, 130/- on January 28, 2009 and 75,000 options were reprised at Rs, 165/- on May 22, 2009

The variables used for calculating the Fair Values of Grant V and their rationale are as follows:

A. Stock price

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

B. Volatility

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

The period to be considered for volatility has to be adequate to represent a consistent trend in the price movements. It is also important that movements due to abnormal events get evened out.

There is no research that demonstrates conclusively how long the historical period used to estimate expected long term future volatility should be. However, Guidance note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India recommends including the historical volatility of the stock over the most recent period that is generally commensurate with the expected life of the option being valued.

The entity's stocks have been publicly traded on NSE and BSE. For calculating Volatility, we have 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.

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, for the probability of gaining is lesser in the latter case.

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. Time to Maturity / Expected Life of options

Time to Maturity / Expected Life of options is the period for which the Company expects the options to be live. 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.

According to SEBI Guidelines, the expected life of an award of stock options shall take into account the following factors -

i. The expected life must at least include the vesting period.

ii. The average lengths of time of similar grants have remained outstanding in the past. If the Company does not have a sufficiently long history of stock option grants, the experience of an appropriately comparable peer group may be taken into consideration.

iii. The expected life of stock options should not be less than half of the exercise period of the stock options issued until and unless the same is supported by historical evidences with respect to stock options issued by the Company earlier.

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 time to maturity has been estimated as illustrated by the following example. In case of the grant made on December 5, 2011, the earliest date of exercise is December 5, 2012 i.e. one year from the date of grant. The exercise period is five years from the date of vest.

Hence, the time to maturity for the first vest is equal to the average of the minimum period plus the maximum period i.e. 1 year 6 Years = 3.5 years. Time to Maturity has been estimated on a similar basis for the remaining vests.

Expected Dividend yield: Expected dividend yield has been calculated as an average of dividend yields for the preceding 2 years to the year of grant.

12. Transition to Ind AS:

13 First-time adoption of Ind AS:

The financial statements for the year ended March 31, 2017 are the first financial statements prepared by the Company in accordance with Ind AS. For the periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with the Generally Accepted Accounting Principles in India (previous GAAP). Reconciliation and description of the effect of transition from previous IGAAP to Ind AS are provided in Note 48.

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for the year ended March 31, 2017, together with the comparative year data as at and for the year ended March 31, 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company prepared the opening balance sheet as at April 1, 2015, being the transition date. Note 48 explains the principal adjustments made by the Company in restating its previous GAAP financial statements, including the balance sheet as at April 1, 2015 and the financial statements as at and for the year ended March 31, 2016.

14 Exceptions to retrospective application of Ind AS:

Ind AS 101 allows certain exemptions to first-time adopters from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

Mandatory Exceptions: a. Estimates:

When the Company needs to make estimates under Ind AS that were not required under previous GAAP or vice-versa, the estimates must reflect conditions at the date of transition to Ind AS. On an assessment of the estimates made under previous GAAP, the Company has concluded that there is no necessity to revise the estimates under IND AS.

b. Hedge Accounting:

Hedge accounting is to be applied only to hedge relationships that meet the requirements of hedge accounting in accordance with Ind AS 109. An entity shall not reflect in its Ind AS balance sheet a hedge relationship that does not qualify under Ind AS 109. The Company has retrospectively applied these principles and elected not to disclose in its balance sheet, the relationships that do not qualify for hedge accounting under Ind AS 109.

Optional Exemptions: a. Deemed Cost:

The Company being a first time adopter has elected to carry the value of Property, Plant and Equipment and Intangible assets as per Balance sheet prepared under previous GAAP under deemed cost model. The Company has elected to regard those values of property as its deemed cost as at the date of transition and elected not to revalue those assets.

Notes to reconciliations:: a. Discounting of Long Term Security Deposits:

Lease deposits held as on the transition date has been measured at fair value of which is estimated at the present value of the deposit, discounted using the prevailing market rate of Government securities.

i. The difference between the carrying value and the fair value amounting to Rs, 90.40 Lakhs is increased to the Retained earnings as on 1st April 2015. The said difference between the present value of the deposit and the recoverable value is amortized over the lease period as prepaid expenses. The value of prepaid expense for the lease deposit held as on transition date is Rs, 78.34 Lakhs which is decreased to the Retained earnings as on 1st April 2015.

ii. Rental expenses & Interest Income for the above amortization value for the year ended March 31, 2016 has been charged to Statement of Profit and loss to the extent of Rs, 16.33 Lakhs and Rs, 15.67 Lakhs respectively.

b. Tax adjustments:

Tax expense has been recomputed based on the Ind AS adjustment and the differential amount is charged to Provision for Taxation which has been charged to Statement of Profit and loss to the extent of Rs, 0.07 Lakhs. The difference effect on Transition date has been adjusted against Deferred Tax and the Retained earnings as on 1st April 2015, to the extent of Rs, 20.05 Lakhs.

c. Dividend:

Under previous GAAP, equity dividend recommended by the board of directors after the end of the reporting period but before the financial statements were approved was recognized in the financial statements as a liability. Under Ind AS 10, such dividends are to be recognized when approved by the members in a general meeting. Accordingly an amount of Rs, 9,963.17 Lakhs recognized as liability in the financial year 2015-16 is reversed and the same is adjusted in Equity in the year 2016-17 and similarly an amount ofRs, 9,028.03 Lakhs recognized as liability in the financial year 2014-15 was reversed and adjusted in Equity in the year 2015-16 as paid.

d. Effect of changes in Foreign Exchange:

Net movement in Hedge accounting reserves has been reclassified as Exchange gain/(loss) which has been charged to Statement of Profit and loss, amounting to Rs, 17.66 Lakhs

e. Foreign Currency Translation Reserve:

Movement Foreign Currency Translation reserve (FCTR) for the year ended March 31, 2016 amounting to Rs, 7.10 Lakhs has been reclassified under Other Comprehensive Income, which was shown as a part of Reserves in the Balance Sheet. Refer Note 2.3(h) for accounting of FCTR

h. There were no significant reconciliation items between cash flows prepared under previous GAAP and those prepared under Ind AS

15. Events after the Reporting period (Non-adjusting)

The Board of Directors at its meeting held on May 25, 2017 has recommended a dividend ofRs, 2.30 per Equity share ofRs, 2/- each (i.e., 115% of face value) for the Financial Year Ended March 31, 2017 (Previous Year Rs, 2.10 per Equity Share ofRs, 2/- each - i.e., 105% of face value) subject to the approval of shareholders in the ensuing Annual General Meeting.

16. Disclosure on Specified Bank Notes (SBNs)

During the year, the Company had specified bank notes and other denomination notes. As defined in the MCA notification G.S.R. 308 (E) dated March 30, 2017 on the details of Specified Bank Notes (SBN) held and transacted during the period from November 8, 2016 to December 30, 2016, the denomination wise SBNs and other notes as per the notification is given below:

*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

17. The Board of Directors at its meeting held on February 3, 2017 declared a special (Interim) dividend of Rs, 2/- per Equity share of Rs, 2/- each -i.e., 100% of face value.

18. The financial statements were approved for issue by the board of directors on May 25, 2017.