A. General Information
Nettlinx Limited (‘the Company’) is a Public Limited Company incorporated in India, registered under Companies Act 1956 having registered office at 5-9-22 Flat No.303 , 3rd Floor My Home Sarovar Plaza, Secretariat, Hyderabad, Telangana-500063, India and its securities listed on the BSE Limited and MSEI Limited.
Nettlinx Limited provides a portfolio of high quality Internet solutions for data voice and security to cater to the corporate customer needs.
B. Basis of preparation of financial statements
B.1. Statement of Compliance
These financial statements are prepared in accordance with the generally accepted accounting principles (GAAP) in India and in compliance with the Indian Accounting Standards (Ind AS) Specified under section 133 of the Companies Act 2013(“the Act”) read with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 , the Companies (Indian Accounting Standards) (Amendment) Rules, 2017 and other provisions to the Act, to the extent notified and applicable as well as applicable guidance notes and pronouncements of the Institute of Chartered Accountants of India (the ICAI)
The financial statements were authorized for issue by the Company’s Board of Directors on 29 May, 2018.
Details of the accounting policies are included in Note 1.
B.2 Basis of preparation and presentation
These financial statements for the year ended March 31, 2018 are the first financial statement that the Company has prepared under Ind AS. For all periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with the accounting standards notified under Section 133 of the Act, read together with Rule 7 of the Companies (Accounts) Rules, 2014 (hereinafter referred to as ‘the Previous GAAP’) used for its statutory reporting requirements in India immediately before adopting Ind AS.
These financial statements have been prepared on the historical cost convention and on an accrual basis, except for the following material items in the statement of financial position:
- Certain financial assets and liabilities are measured at fair value;
- Employee defined benefit assets/(liability) are recognized as the net total of the fair value of plan assets, plus actuarial losses, less actuarial gains and the present value of the defined benefit obligation;
- Long term borrowings are measured at amortized cost using the effective interest rate method.
B.3 Functional and presentation currency
The financial statements are presented in Indian rupees, which is the functional currency of the Company.
All amounts are in Indian Rupees except share data, unless otherwise stated.
B.4 Operating Cycle
All the assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out under Ind As and in the Schedule III to the Companies Act, 2013. Based on the nature of services and their realization in cash and cash equivalents, the company has ascertained its operating cycle as twelve months for the purpose of current or non-current classification of assets and liabilities.
B.5 Critical accounting judgements and key sources of estimation uncertainty.
In the application of the Company’s accounting policies, which are described in Note 1, the management of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the areas of estimation uncertainty and critical judgements that the management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements:
Provision and contingent liability
On an ongoing basis, Company reviews pending cases, claims by third parties and other contingencies. For contingent losses that are considered probable, an estimated loss is recorded as an accrual in financial statements. Loss Contingencies that are considered possible are not provided for but disclosed as Contingent liabilities in the financial statements. Contingencies the likelihood of which is remote are not disclosed in the financial statements. Gain contingencies are not recognized until the contingency has been resolved and amounts are received or receivable.
Useful lives of depreciable assets
Useful life of Property, Plant and Equipment including intangible asset: Residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Investment in equity instruments of subsidiary and associate companies
During the year, the Company assessed the investment in equity instrument of subsidiary and associate companies carried at cost for impairment testing. These companies are expected to generate positive cash flows in the future years. Detailed analysis has been carried out on the future projections and the Company is confident that the investments do not require any impairment.
B.6 Fair value measurement and valuation process:
The company measured financial assets and liabilities, if any, at fair value for financial reporting purposes.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
*Company has received revised provisional license fee assessment notice from Department of Tele-communications-AP circle for the years 2005-06, 2006 07, 2007-08 and 2008-09 w.r.t ISP(IT) License for Rs. 43,30,195/-
B. Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006.
Under the Micro, Small and Medium Enterprises Development act, 2006(MSMED) which came into force from Oct 2, 2006, certain disclosures are required to be made relating to MSMED. On the basis of information and records available with the company, the following disclosures are made for the amounts due to the micro and small enterprises.
Based on the recommendation of the Nomination, Remuneration and Compensation Committee, all decisions relating to the remuneration of the Directories of the Company, in accordance with shareholder’s approval, wherever necessary
Terms and Conditions of transactions with Related Parties:
The sale to related parties are made in the normal course of business and on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free.
For the year ended March 31,2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
A. The Company provides its employees with benefits under a defined benefit plan, referred to as the “Gratuity Plan”. The Gratuity Plan entitles an employee, who has rendered at least five years of continuous service, to receive 15 days salary for each year of completed service (service of six months and above is rounded off as one year) at the time of retirement / exit.
The following tables summarize the components of net benefit expense recognised in the statement of profit or loss and the amounts recognised in the balance sheet for the plan:
B) As stipulated in IndAS-36, the Company has assessed its potential of economic benefits of its business units and is of the view of that the assets employed in continuing business are capable of generating adequate returns over their useful life in the usual course of its business. There is no indication to the contrary and accordingly the management is of the view that no impairment provision is called for in these accounts.
C) Operating Lease (Ind AS 17)
The Company has not taken any office premises under operating leases.
D) Financial risk management objectives and policies
The Company’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance and support Company’s operations. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents and refundable deposits that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management overseas the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.
i) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk, interest rate risk and other price risk, such as equity price risk and commodity/ real estate risk. Financial instruments affected by market risk include loans and borrowings and refundable deposits. The sensitivity analysis in the following sections relate to the position as at March 31, 2018 and March 31, 2017. The sensitivity analyses have been prepared on the basis that the amount of net debt and the ratio of fixed to floating interest rates of the debt.
The analysis excludes the impact of movements in market variables on: the carrying values of gratuity and other post retirement obligations; provisions.
The below assumption has been made in calculating the sensitivity analysis:
The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2018 and March 31, 2017.
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’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.
The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Company does not enter into any interest rate swaps.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:
ii) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The credit risk arises principally from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks and financial institutions and other financial instruments.
Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom credit has been granted after obtaining necessary approvals for credit. The collection from the trade receivables are monitored on a continuous basis by the receivables team.
The Company establishes an allowance for credit loss that represents its estimate of expected losses in respect of trade and other receivables based on the past and the recent collection trend. The trade receivables as on March 31, 2018 is Rs.459.35 Lakhs (March 31, 2017: Rs.445.54 Lakhs). The movement in allowance for credit loss in respect of trade and other receivables during the year was as follows:
No single customer accounted for more than 5% of the revenue as of March 31, 2018 and March 31, 2017 and there is no significant concentration of credit risk.
Credit risk on cash and cash equivalent is limited as the Company generally transacts with banks and financial institutions.
iii) Liquidity risk
The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans.
The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:
E) Capital management
The Company’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio.
For the purpose of debt to total equity ratio, debt considered is long-term and short-term borrowings. Total equity comprises of issued share capital and all other equity reserves excluding Debenture Redemption Reserve.
F) Corporate Social Responsibility:
The Company is not required to spend towards Corporate Social Responsibility (CSR) as per Section 135 of the Companies Act, 2013, since the company is within the threshold limit given as per the provisions of the Act.
G) Standards issued but not effective
Ind AS 115, Revenue from contracts with customers
In March 2018, the Ministry of Corporate Affairs has notified Ind AS 115, ‘Revenue from Contracts with Customers’, which is effective for accounting periods beginning on or after 1 April 2018. This comprehensive new standard will supersede existing revenue recognition guidance, and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.
Ind AS 115 is effective for annual reporting periods beginning on or after April 1, 2018.
The Company intends to adopt Ind AS 115 effective April 1, 2018, using the modified retrospective method. The adoption of Ind AS 115 is not expected to have a significant impact on the Company’s recognition of revenues.
Other amendments to Indian Accounting Standards
The Ministry of Corporate Affairs (MCA), on 28 March 2018, issued certain bamendments to Ind AS. The amendments relate to the following standards:
Ind AS 21, The Effects of Changes in Foreign Exchange Rates - The amendment lays down the principle regarding advance payment or receipt of consideration denominated or priced in foreign currency and recognition of non-monetary prepayment asset or deferred income liability.
Ind AS 12, Income Taxes - The amendment explains that determining temporary differences and estimating probable future taxable profit against which deductible temporary differences are assessed for utilization are two separate steps and the carrying amount of an asset is relevant only to determining temporary differences.
Ind AS 28, Investments in Associates and Joint Ventures - The amendment clarifies when a venture capital, mutual fund, unit trust or similar entities elect to initially recognize the investments in associates and joint ventures.
Ind AS 112, Disclosure of Interests in Other Entities - The amendment clarifies that disclosure requirements for interests in other entities also apply to interests that are classified as Held for sale or discontinued operations in accordance with Ind AS 105.
Ind AS 40, Investment Property - The amendment clarifies when a property should be transferred to / from investment property.
The amendments are effective 1 April 2018. The Company believes that the aforementioned amendments will not materially impact the financial position, performance or the cash flows of the Company.
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