NOTE 1 - EMPLOYEE BENEFIT OBLIGATIONS
a) Compensated absences
Accumulated compensated absences, which are expected to be availed or encased within 12 months from the end of the year are treated as current employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from 31stMarch 2018 are treated as non-current employee benefits. The Company’s liability is actuarially determined (using the Projected Unit Credit method) by an independent actuary at the end of each year. Actuarial losses / gains are recognized in the Statement of Profit and Loss in the year in which they arise.
(All amounts in ' Lakhs, unless otherwise stated)
b) Post employment obligations
i) Gratuity-Defined benefit plan
The Company provides for gratuity to employees as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement / termination is the employees last drawn basic salary per month computed proportionately for 15 days salary of staff and workers. The ceiling of 15 days for workers is only up to 1st July 2006 and 20 days thereafter for workers multiplied for the number of years of service subject to payment ceiling of ' 20 Lakhs. The gratuity plan is a funded plan and the Company makes contributions to Saint-Gobain Sekurit India Limited Employee Group Gratuity Trust. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
ii) Provident fund - Defined contribution plan
The Company also has certain defined contribution plans. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to the registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognized during the period towards defined contribution plan is Rs, 44.90 Lakhs (31st March 2017: Rs, 43.80 Lakhs).
The Company in 2011 had imported assets under the Export Promotion Capital Goods Scheme (Scheme) whereby it received a benefit of waiver of payment of custom duty amounting to Rs, 287.66 Lakhs. Out of the total duty, the duty which is not refundable/ non-convertible has been recognized as a government grant. According to the terms of the Scheme, the Company has to fulfill an export obligation of Rs, 1,753.94 Lakhs (USD 38.98 Lakhs) over the period of license in order to avail the benefits of the government grant. The period of license expired in June 2017 and the Company has sought an extension for fulfilling the export obligation, from the respective authority. The Company has fulfilled export obligation amounting to Rs, 1,666.23 Lakhs (USD 25.83 Lakhs), up to June 2017, against the required export obligation mentioned above. The order from the respective authority for the extension is awaited as at the date of Balance Sheet.
Financial assets and liabilities measured at Amortized cost:
The fair values of all financial instruments carried at amortized cost are not materially different from their carrying amounts since they are either short-term in nature or the interest rates applicable are equal to the current market rate of interest.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. The Company does not have any financial asset in this measurement category.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, mutual funds, over-the counter derivatives) is determined using this 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 are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. The Company does not have any financial asset in this measurement category.
Valuation techniques used to determine fair value
Specific valuation techniques used to value financial instruments include:
- the use of net asset value for mutual funds.
- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date. Note 33 - Financial Risk Management
The Company’s activities expose it to market risk, liquidity risk and credit risk. In order to minimize any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements.
A. Credit Risk
Credit risk is the risk of incurring a loss that may arise from a borrower or debtor failing to make required payments. Credit risk arises mainly from outstanding receivables from free market dealers, cash and cash equivalents, employee advances and security deposits. The Company manages and analyses the credit risk for each of its new clients before standard payment and delivery terms and conditions are offered.
The Company considers the probability of default upon recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:
- Internal credit rating for free market dealers.
- External credit rating (as far as available for OEMs)
- Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the customer’s ability to meet its obligations
- Actual or expected significant changes in the operating results of the customer
- Significant changes in the expected performance and behavior of the customer, including changes in the payment status of customers
Macroeconomic information (such as regulatory changes, market interest rate or growth rates) is incorporated as part of the internal rating model.
In general, it is presumed that credit risk has significantly increased since the initial recognition if the payments are more than 120 days past due.
Company has a history of limited write off for doubtful debts. Company on a monthly basis review aging of receivables and rigorous follow-up is performed by credit controller along with the help of key accounts manager. Quality/ breakage claims received from the customer are reviewed and approved by quality manager, accordingly credit memos are issued as per policy of the company. At the end of every month credit memos raised during that month is also reviewed by Chief Financial Officer. Appropriate provision is made for each receivable based on review of supporting documents with credit controller. Any exception is justified and documented.
Credit risk on cash and cash equivalents is limited as company generally invests in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units.
B. Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements.
Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company’s liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal requirements and maintaining debt financing plans.
a. Financing arrangements
The Company had access to bank overdraft facilities. These facilities may be drawn at any time and may be terminated by the bank without notice.
b. Maturities of financial liabilities
The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
C. Market risk
Foreign currency risk
1. Foreign currency exposure
Currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency sales and purchases, primarily with respect to EUR, USD, CHF and GBP. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the company’s functional currency (').
The risk is measured through a forecast of foreign currency sales and purchases for the Company’s operations. The Company uses foreign exchange forward contracts to manage its exposure in foreign currency risk.
As of 31st March 2018, the Company’s exposure to foreign currency risk, expressed in Rs,, is given in the table below. The amounts represent only the financial assets and liabilities that are denominated in currencies other than the functional currency of the Company.
(All amounts in Rs, Lakhs, unless otherwise stateuj
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. Since the Company does not have any non-current borrowings, it is not exposed to cash flow interest rate risk.
Investment in Mutual Funds:
The Company’s exposure to price risk arises from investments held by the Company and classified in the balance sheet as fair value through profit or loss. To manage its price risk arising from investments in mutual funds, the group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.
NOTE 2- CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to:
- Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
- Maintain an optimal capital structure to reduce the cost of capital.
Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:
Net debt (total borrowings net of cash and cash equivalents) divided by Total ‘equity’ (as shown in the Balance Sheet).
The Company’s revenue from external customer attributed to countries other than India are not material. The Company’s non-current assets (other than financial instruments, deferred tax assets, post-employment benefit assets) in countries other than India are not material. Revenue of approximately Rs, 4,381.82 Lakhs (31st March 2017: Rs, 3,744.81 Lakhs) are derived from a single external customer which represents 10% or more of the total revenue for the year ended 31st March 2018 and 31st March 2017.
NOTE 3 - SEGMENT INFORMATION
The Company’s Managing Director (MD) - Mr. A. Dinakar is identified as the Chief Operating Decision Maker, examines the Company’s performance on an entity level. The Company has only one reportable segment i.e. ‘Automotive Glass’.
NOTE 4 - OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following table presents the recognized financial instruments that are offset, or subject to enforceable master netting arrangements and other similar agreements but not offset, as at 31st March 2018 and 31st March 2017. The column ‘net amount’ shows the impact on the Company’s balance sheet if all set-off rights were exercised.
# Company has arrangement with the group company, whereas per agreed terms company set off its receivable against payable made to such group company. The relevant amounts have therefore been presented net in the Balance Sheet.
Note 5 - Subsequent Events
There are no subsequent events that would require adjustments or disclosure in the financial statements as on the balance sheet date.
Note 6 - General
i) Previous year’s figures have been regrouped / restated wherever necessary to conform to current year’s presentation.
ii) Previous year’s figures have been audited by a firm of Chartered Accountants other than Kalyaniwalla & Mistry LLP, Chartered Accountants.
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