1. CORPORATE INFORMATION :

Walchandnagar Industries Limited “(the Company)” is a limited company incorporated and domiciled in India whose shares are publicly traded. The registered office is located at 3, Walchand Terraces, Tardeo Road, Mumbai - 400 034, Maharashtra, India.

The Company is an ISO 9001:2008 certified Heavy Engineering and Project execution company. The Company has diversified business offerings across core sectors with focus on EPC / Turnkey Projects, Hi Tech Manufacturing, Engineering Products and Engineering Services.

The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorises for issue on May 28, 2018.

Terms/Rights attached to equity shares

The Company has only one class of equity shares having a par value of ‘2 per share. Each holder of equity shares 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 in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts.

The distribution will be in proportion to the number of shares held by the shareholders.

As per the records of the company, including its register of shareholders/members and other declaration received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

ii) They are secured by:

1) First charge on specified land and buildings at Walchandnagar, Mumbai and Dharwad.

2) First charge by way of pledge of shareholdings of promoters/affiliates amounting to 53.99% of paid-up capital of the company.

3) First charge on the designated bank account held with State Bank of India.

(B) Corporate loans from State Bank of India and Bank of India outstanding on March 31, 2017 and April 1, 2016 have been repaid in full. The securities charged for the corporate loans have now been transferred to the working capital loans.

(C) Vehicle Loan from Axis Bank - Secured by vehicle bought under loan and repayable in 48 Equated monthly installments of Rs. 0.26 Lakhs and interest @ 11% p.a. Balance instalments payable on balance sheet date are 23.

(D) Other borrowing pertains to Acceptances. In case of HED division they are secured by mortgage of residential flat in Mumbai, specified land and building situated at Walchandnagar and by way of charge on all movable plant and machinery, fixtures, implements, fittings, furniture, current assets (both present & future) including stock-in-trade, raw material, semi-finished and finished products, stores and spares, book debts, tools and accessories and other movables of and pertaining to Heavy Engineering Division at Walchandnagar. Further secured by second charge on all the assets given to KKR India and charge on Residual from sales of Shares pledged to KKR India.

Acceptances for Foundry, Satara are secured by hypothecation of all those tangible movable properties and assets, including all stocks of Raw Material, Components, Tools, Stores Materials, Work-in-Progress, Finished Goods and Book Debts and equitable mortgage on fixed assets of Foundry Division at Satara Road.

The above are at an interest rate of 15.05% from Bank of India and 15.85% from State Bank of India.

The facilities mentioned at a(i) & a(ii) above peratining to HED division are secured by mortgage of residential flat in Mumbai, specified land and building situated at Walchandnagar and by way of charge on all movable plant and machinery, fixtures, implements, fittings, furniture, current assets (both present & future) including stock-in-trade, raw material, semi-finished and finished products, stores and spares, book debts, tools and accessories and other movables of and pertaining to Heavy Engineering Division at Walchandnagar. Further secured by second charge on all the assets given to KKR India and charge on Residual from sales of Shares pledged to KKR India.

The facilities mentioned at a(i) & a(ii) above peratining to Foundry division,Satara are secured by hypothecation of all those tangible movable properties and assets, including all stocks of Raw Material, Components, Tools, Stores Materials, Work-in-Progress, Finished Goods and Book Debts and equitable mortgage on fixed assets of Foundry Division at Satara Road.

The secured working capital loan from IndusInd bank secured by mortgage of Mahim property has been repaid on September 16, 2017.

Unsecured loans from Citibank, Walchand Great Achievers Pvt. Ltd. and Walchand Kamdhenu Commercials Pvt. Ltd. have been fully repaid on September 16, 2017.

2 FIRST TIME ADOPTION OF IND AS:

The Company has prepared its first Indian Accounting Standards (Ind AS) compliant Financial Statements for the periods commencing April 1, 2017 with restated comparative figures for the year ended March 31, 2017 in compliance with Ind AS. The company has prepared these financial statements in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013. Accordingly, the Opening Balance Sheet, in line with Ind AS transitional provisions, has been prepared as at April 1, 2016, the date of company’s transition to Ind AS. In accordance with Ind AS 101 First-time Adoption of Indian Accounting Standard, the Company has presented a reconciliation from the presentation of financial statements under Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (“Previous GAAP”) to equity under Ind AS at March 31, 2017 and April 1, 2016 and to the total comprehensive income for the year ended March 31, 2017. The principal adjustments made by the Company in restating its previous GAAP financial statements as at and for year ended March 31, 2017and the balance sheet as at April 1, 2016 are as mentioned below:

Exemptions availed:

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 material exemptions:

1. The estimates as at April 1, 2016 and as at March 31, 2017 are consistent with those made for the same dates in accordance with previous GAAP after adjustments to reflect any differences in accounting policies.

2. Appendix C to IND AS 17 requires the Company to assess whether a contract or arrangement contains a lease. In accordance with IND AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all relevant arrangements for leases based on conditions in place as at the date of transition.

3. In accordance with the exemption given in IND AS 101, the Company has recorded investment in associate at deemed cost i.e. Previous GAAP carrying amount, as on date of transition.

4. The Company has elected to avail exemption under Ind AS 101 to use previous GAAP carrying value as deemed cost at the date of transition for all items of Property, plant and equipment, Intangible Assets and Capital work in progress as per the balance sheet prepared in accordance with previous GAAP.

Notes to reconciliation between previous GAAP and Ind AS:

i. Under Indian GAAP, the Creditors for Capital Goods were not fair valued. Under Ind AS, such loans are subject to fair valued on transition date and every subsequent payments. Effect of fair valuation measurements are recognised to statement of profit and loss.

ii. The Company recognises costs related to its post-employment defined benefit plan on an actuarial basis both under Indian GAAP and Ind AS. Under Indian GAAP, the entire cost including actuarial gains and losses are charged to profit or loss. Under Ind AS, remeasurements are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI.

iii. In accordance with Ind AS 12, ‘Income Taxes’, the Company on transition to Ind AS has recognised deferred tax on temporary differences, i.e. based on balance sheet approach as compared to the earlier approach of recognising deferred taxes on timing differences , i.e. profit and loss approach. The tax impacts as above primarily represent deferred tax consequences arising out of Ind AS re measurement changes.

iv. Under Ind AS, all items ofincome and expense recognised during the year are included in the profit or loss for the year, unless Ind AS requires orpermits otherwise. Items that arenotrecognised in profit orlossbut are showninthestandalone statement of profit and loss and other comprehensive income include re-measurements gains or losses on defined benefit plans. The concept of other comprehensive income did not exist under the previous GAAP.

3. DETAILS OF THE INVESTMENT PROPERTY AND ITS FAIR VALUE :

The fair value of the Company’s investment properties as at March 31, 2018, March 31, 2017, and April 1, 2016 have been arrived at on the basis of a valuation carried out as of the respective dates by an independent valuer. In estimating the fair value of the properties, the highest and best use of the properties is their current use.

The fair value was derived using:

* market comparable approach based on recent market prices without any significant adjustments being made to the market observable data.

* capitalization of net income method, where the market rentals of all lettable units of the properties are assessed by reference to the rentals achieved in the lettable units as well as other lettings of similar properties in the neighborhood. The capitalisation rate adopted is made by reference to the yield rates observed by the valuers for similar properties in the locality and adjusted based on the valuers’ knowledge of the factors specific to the respective properties.

4. FINANCIAL INSTRUMENTS AND RISK REVIEW

Financial Risk Management Framework

The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit, liquidity, which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

Credit Risk

Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.

Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, unbilled revenue, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ‘47,124.86 lakhs, Rs. 45,945.41 Lakhs and Rs. 47,222.59 Lakhs as of March 31, 2018, March 31, 2017 and April 1, 2016 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, unbilled revenue and other financial assets. In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company’s maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.

Trade receivables

IND AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. Company’s exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2018, March 31, 2017 and April 1, 2016. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated.

The expected credit loss allowance is based on the receivables bifurcated based on the division to which they pertain and the rates as given in the provision matrix. The provision matrix at the end of the reporting period is as follows.

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. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company’s exposure to market risk is primarily on account of foreign currency exchange rate risk.

a) Foreign Currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar, ZAR against the respective functional currencies of Walchandnagar Industries Limited.

The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. Based on materiality the Company does not hedge any assets.

The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 10% against the respective functional currencies of Walchandnagar Industries Limited.

The carrying amounts of the Company’s foreign currency denominated financial assets and financial liabilities at the end of the reporting period are as follows:

Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per 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 by matching the maturity profiles of financial assets and liabilities.

The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.

The tax rate used for the above reconciliations are the rates as applicable for the respective periods payable by corporate entities in India on taxable profits under the India tax laws.

5. RELATED PARTY DISCLOSURES

Related party disclosures as required under Ind AS 24 (Related Party Disclosures), specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 are given below:

@ employment benefits comprising gratuity, and compensated absences are not disclosed as these are determined for the Company as a whole.

6. FAIR VALUE MEASUREMENTS

Details of transactions relating to the individuals / enterprises referred to in item (i), (ii) and (iii) above are as follows. The same are in the ordinary course of business.

(i) Fair value hierarchy:

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are

(a) recognised and measured at fair value, and

(b) measured at amortised cost and for which fair values 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 three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchange is valued using the closing price as at the reporting period.

Level 2: Fair value of financial instruments that are not traded in an active market (for example, traded bonds, over the counter derivatives) but is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument as observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification assets.

7. DISCLOSURE PURSUANT TO IND AS 19 “EMPLOYEE BENEFITS”

(i) Defined Contribution Plan

The Company makes contributions to Provident Fund and Superannuation Fund which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds. The Company recognized expense in the Statement of Profit and Loss amounting to:

- Rs. 409.14 Lakhs (March 31, 2017: Rs. 453.25 Lakhs) for Provident Fund contributions,

- Rs. (4.50) Lakhs (March 31, 2017: Rs. 51.06 Lakhs) for Superannuation Fund contributions.

The contributions to these plans are made at specified percentage/applicable amounts.

Contributions to defined contribution plans for key management personnel have been disclosed as per Note No-46

(ii) Defined Benefit Plan

The defined benefit plan comprises of gratuity. The gratuity plan is funded. Changes in the present value of Defined Benefit Obligation (DBO) are representing reconciliation of opening and closing balances thereof and fair value of Trust Fund Receivable recognized in the Balance Sheet is as under:

The sensitivity results above determine their individual impact on Plan’s end of year Defined Benefit Obligation. In reality, the plan is subject to multiple external experience items which may move the defined Benefit Obligation in similar or opposite directions, while the Plan’s sensitivity to such changes can vary over time.

8. CONTINGENT LIABILITIES AND COMMITMENTS

(a) Claims against the company not acknowledged as debt

(a) Demand of Non Agricultural (NA) Tax of Rs. 161.37 lakhs is raised by Tahshildar, Indapur (Previous year Rs. 161.37 lakhs) out of which Rs. 20 lakhs is paid under protest by the company. No provision has been made in the accounts as the company has not accepted the liability and the matter is sub-judice.

(b) Demand on account of fixation of Annual Rateable Value of Property at Pune, amounting to Rs. 89.32 lakhs (for the period April 1, 2008 to March 31, 2017) was raised by the local authorities (Previous year Rs. 89.32 lakhs). No provision has been made in the books of accounts. The Company has not accepted the liability and the same is sub-judice.

(c) The Sales Tax Authority, Maharashtra has raised demand of Rs. 159.83 lakhs (Previous Year Rs. 159.83 lakhs) as per section 6(2) of the Central Sales Tax Act,1956. The Company has disputed the demand and has preferred an appeal before The Sales Tax Appellate Commissioner. Company has paid Rs. 30.00 lakhs under protests (included under the head loans and advances). There is another demand received post March 31, 2018 of Rs. 1,080.53 lakhs, for which the company will be filing an appeal. On the basis of legal opinion the Company does not expect any liability.

(d) The Customs Authorities, Chennai have raised demand of Rs. 64.50 lakhs (Previous Year Rs. 64.50 lakhs). Company has disputed the demand and has preferred an appeal before Madras High Court. On the basis of legal opinion the Company does not expect any liability.

(e) The Service Tax Authorities, Shillong have raised demand of Rs. 362.65 lakhs on sale of bought out items. The company has discharged liability of Rs. 28.76 lakhs by way of CENVAT reversal under protest and has preferred an appeal which is pending before the CESTAT.

(f) The Central Excise Authorities have raised a demand of Rs. 377.84 lakhs (Previous Year Rs. 377.84 lakhs) denying the exemption from the excise duty on non-conventional energy devices/ systems supplied by the Company. The company has paid Rs. 111.64 lakhs under protest and has preferred an appeal which is pending before CESTAT, Mumbai and before Supreme Court. On the basis of legal opinion, the Company does not accept any liability.

(g) The Central Excise Authorities have raised various demands pertaining to various years of Rs. 188.95 lakhs (Previous Year Rs. 188.95 lakhs) on bought out items supplied for Centrifugals, which has already suffered duty at manufacturers’ end. The Company has disputed the demands and has preferred appeals which ares pending before the CESTAT Tribunal / Supreme court. Company has discharged a liability of Rs. 29.53 lakhs by reversal of CENVAT availed and paid Rs. 10 lakhs under protest (included under the head loans and advances). On the basis of legal opinion, the Company does not expect any liability.

(h) The Central Excise Authorities have raised demand of Rs. 2.47 lakhs (Previous Year ‘2.47 lakhs) on bought out items supplier for centrifugals, which has already suffered duty at manufacturers end. The company had disputed demand of Rs. 2.47 lakhs before CESTAT against order passed by Commissioner (Appeals). The Stay order has been granted and Rs. 0.50 lakhs paid as ordered by CESTAT.

(i) The Company has received a demand of Rs. 50.68 lakhs from Employee’s Provident Fund office (Previous year Rs. 50.68 lakhs). The company has contested the demand raised, and filed a writ petition with Mumbai High Court. No provision is being made against the same based on the legal advice.

(j) Certain cases filed against the company by the Ex-employees of Heavy Engineering Division and Foundry Division for compensation are pending before the labour courts - Amounts unascertained.

The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable. The Company does not expect the outcome of these proceedings to have materially adverse effect.

9. Balance under the head ‘Trade Receivables’, ‘Trade Payables’, ‘Loan and Advances Receivable and Payable’ are shown as per books of accounts subject to confirmation by concerned parties and adjustment if any, on reconciliation thereof.

10. Inventory of Work in Progress includes Rs. 2585 lakhs of non-moving inventory relating to orders which have been cancelled or kept on hold. The Company contends that this stock will either be liquidated or diverted to other projects without any loss arising there from. Hence no provisions has been made in the books of accounts.

11. Previous year’s figures have been regrouped/ reclassified / rearranged wherever necessary, to conform to current year’s presentation.