1. Corporate information
Indag Rubber Limited (hereinafter referred to as “the Company”) is a Public Limited Company incorporated and domiciled in India. The registered office of the Company is located at 11 Community Center, Saket, New Delhi-110017, India. The Company’s CIN is - L74899DL1978PLC009038.
The Company’s shares are listed on Bombay Stock Exchange (‘BSE’). The Company is engaged in the manufacturing and selling of Precured Tread Rubber and allied products.
These financial statements were approved by the Board of Directors and authorised for issue on April 20, 2019.
a. Terms/rights attached to equity shares
The Company has only one class of equity shares having par value of Rs. 2 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees.
Notes
(i) Capital reserve
Capital reserve represents the amount on account of forfeiture of equity shares of the Company.
(ii) Securities premium
Securities Premium represents amount received on issue of shares in excess of the par value.
(iii) General reserve
This represents appropriation of profit by the Company. General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income. Central cash subsidy amounting to Rs. 30 lakh received for the installation of plant at Nalagarh in 2006 is included in general reserve.
(iv) Retained earnings
Retained earnings comprises of prior years undistributed earnings after taxes.
For the year ended 31 March 2019, the amount of per share dividend recognised as distribution to equity shareholders was Rs. 2.40 (Previous Year Rs 2.40)
The board of directors in its meeting held on April 20, 2019, has proposed final dividend @75% of paid up capital (i.e. Rs 1.50 per equity share of Rs 2 each)
(v) Other comprehensive income
It comprises amounts that will not be re-classifed to profit & loss and are eligible to be re-classified in retained earning.
2 Segment Information
The Operating Segment have been reported in a manner consistent with the internal reporting provided to the Chief Financial Officer and the Chief Executive Officer who are the Chief Operating Decision Maker (CODM).The Company is engaged in the manufacturing of the Precured Tread Rubber, Bonding Repair and Extrusion Gum and Rubber Cement, which are used for retreading of tyres and providing tyre retreading service. These products do not have any different risk and returns and thus the CODM performs review based on one operating segment.
There are no single customer whose sales are exceeding 10% of the turnover.
3 Obligations under leases
The Company has taken offices, guest house, residence and warehouse premises under operating lease agreements. There are no purchase options in the lease agreements. There is an escalation clause in some lease agreements. There are no restrictions imposed by lease arrangements. There are no subleases. The agreements are generally cancelable at the mutual consent of both the lessor and the lessee.
# The Company had obtained a stay of the Himachal Pradesh Government order levying entry tax on all goods entering the state with effect from 24th January, 2011. The Hon’ble High Court, Himachal Pradesh while staying the levy in an interim order, directed the Company to deposit 1/3rd of the assessed amount as ‘‘deposit’’ with the state government and furnish a bank guarantee for the balance 2/3rd amount to them. The company has deposited Rs. 451.33 lakh and furnished bank guarantees of Rs. 793.35 lakh till 30.06.2017. Since the cash payment as per court order is in the nature of deposits, no amount has been expensed off in the financial statements as entry tax.
While Hon’ble Supreme Court has upheld the constitutional validity of Entry Tax in their judgement dated 11th November, 2016, the issue of discrimination under Article 304(a) and scope of local area is left to be determined by respective High Courts. Hon’ble High Court, Shimla has issued notice on the writ petition filed by the Company and ordered that bank guarantee will not be encashed and department will maintain status quo.
* Based on the discussions with the solicitor/ expert opinions taken/status of the case, the management believes that the Company has strong chances of success in above mentioned cases and hence no provision there against is considered necessary at this point in time.
* Excluding dividend of Rs. 270.84 lakh (Rs. 270.84 Lakh for year ended 31 March, 2018) credited to FCNR/NRE account of NRI’s / paid to Overseas Corporate Bodies on repatriation basis.
4 Employee benefit plans
a. Defined contribution plans
The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
b. Defined benefit plan Gratuity
The Company has a defined benefit gratuity plan. Employee who have completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.
The most recent valuation of the present value of defined benefit obligation was carried as at 31 March, 2019 in which the present value of the defined benefit obligation, and the related current service cost and past service cost were measured using the project unit credit method.
i. The current service cost and the net interest expenses for the year are included in the ‘Employee benefits expense’ line item in the Statement of profit and loss.
ii. The remeasurement of the net defined liability is included in other comprehensive income.
The fund invested in LIC of India (“insurer”). The future information of fund investments are not available with the Company.
Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
Notes
i. Sensitivities due to mortality and withdrawals are not material and hence impact of change not calculated.
ii. Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by 0.50 percentage, keeping all other actuarial assumptions constant.
5 Financial instruments
A. Capital Management
The Company’s objective for capital management is to maximise shareholders value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through equity and operating cash flows generated.
C. Financial risk
In the course of its business, the Company is exposed primarily to fluctuations in Interest rates, security price risk, credit risk and liquidity risk which may adversely impact the fair value of its financial instruments, the operation of the Company did not have an exposure for foreign currency exchange rates as the majority of the operations are in India only. The Company has a risk management policy covering risks associated with the financial assets and liabilities such as interest rate risk, security price risk and credit risk. The risk management policy has been approved by the board of directors. The risk management framework aims to:
- Create a stable business planning environment by reducing the impact of interest rate fluctuations on the Company’s business plan.
- Achieve greater predictability to earnings by determining the financial value of the expected earnings in advance.
The Company did not use the derivative financial instruments for risk mitigation.
a. Market risk
Market risk is the risk of any loss in future earnings, in realisable fair values or in future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the foreign currency exchange rates, interest rates, liquidity and other market changes. Future specific market movements cannot be normally predicted with reasonable accuracy.
i. Foreign currency exchange rate risk
The Company operates majorly in India but is exposed to foreign exchange risk arising through its sale and purchase of goods and services with overseas suppliers and investment in foreign currency transactions primarily with respect to US Dollar (‘USD’). The Company does not use the derivative financial instruments to manage their risk.
iii. Interest rate risk Financial liabilities
The Company has not regularly utilised the borrowed fund, hence the Company is not significantly exposed to interest rate risk.
Financial assets
The Company’s investments are primarily in fixed rate interest bearing investments. Hence the Company is not significantly exposed to interest rate risk.
b. Security price risk
The Company is exposed to equity price risks arising from equity investments held by the Company and classified in the balance sheet as fair value through OCI.
i. Equity price sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to equity price risks at the end of the year.
If the equity instruments (equity shares and equity linked mutual fund) prices had been 5% higher / lower:
Other comprehensive income for the year ended 31 March 2019 would increase / decrease by Rs. 224.43 Lakh (for the year ended 31 March 2018: increase / decrease by Rs. 277.23 lakh) as a result of the change in fair value of equity investment measured at FVTOCI.
ii. Exposure in mutual funds (Other than equity linked mutual fund)
The Company manages the surplus funds majorly through investments in debt based mutual fund schemes. The price of investment in these mutual fund schemes is reflected though Net Asset Value (NAV) declared by the Asset Management Company on daily basis as reflected by the movement in the NAV of invested schemes. The Company is exposed to price risk on such Investments.
Mutual fund price sensitivity analysis The sensitivity analysis below have been determined based on Mutual Fund Investment at the end of the year.
If NAV has been 1% higher / lower: Profit for the year ended 31 March 2019 would increase / decrease by Rs. 29.43 lakh (for the year ended 31.03.2018 by Rs. 39.98 Lakh as a result of the changes in fair value of mutual fund investments.
iii. If the tax free bonds and investment in preference shares prices had been 1% higher / lower:
Profit for the year ended 31 March 2019 would increase / decrease by Rs. 8.33 Lakh (for the year ended 31 March 2018: increase / decrease by Rs. 8.54 lakh) as a result of the change if there is no change in the market risk and other assumptions.
c. Credit risk
Credit risk arises from the possibility that the counter party may not be able to settle their obligations. To manage trade receivable, the Company periodically assesses the financial reliability of customers, taking into account the financial conditions, economic trends, analysis of historical bad debts and ageing of such receivables.
Financial instruments that are subject to such risk, principally consist of investments, trade receivables and loans and advances. None of the financial instruments of the Company results in material concentration of credit risks. Financial assets for which loss allowance is measured:
Other than financial assets mentioned above, none of the Company’s financial assets are either impaired or past due, and there were no indications that defaults in payment obligations would occur and exposure to Trade Receivable is diversified and no single customer contributes to more than 10% of outstanding trade receivable as at 31 March, 2019 and 31 March, 2018.
d. Liquidity risk
Liquidity risk refers to the risk that the Company can not 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 the requirements.
During the year, the Company generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
Valuation technique
Level 1: Quoted prices in the active market. This level of hierarchy includes financial assets that are measured by reference to quoted prices in the active market. This category consists of quoted equity shares and debt based open ended mutual funds.
Level 2: Valuation techniques with observable inputs. This level of hierarchy includes items measured using inputs other than quoted prices included within Level 1 that are observable for such items, either directly or indirectly. This level of hierarchy consists of debt based close ended mutual fund investments and over the counter (OTC) derivative contracts.
Level 3: Valuation techniques with unobservable inputs. This level of hierarchy includes items measured using inputs that are not based on observable market data (unobservable inputs). Fair value determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instruments nor based on available market data. The main item in this category are unquoted equity instruments.
The fair value of the financial assets are determined at the amount that would be received to sell an asset in an orderly transaction between market participants. The following methods and assumptions were used to estimate the fair values:
a. Investments in debt mutual funds: Fair value is determined by reference to quotes from the financial institutions, i.e. net asset value (NAV) for investments in mutual funds declared by mutual fund house.
b. Quoted equity investments: Fair value is derived from quoted market prices in active markets.
c. Unquoted equity investments: Fair value is derived on the basis of income approach, in this approach the discounted cash flow method is used to capture the present value of the expected future economic benefits to be derived from the ownership of these investments.
Derivative contracts: The Company has not entered into any forward contracts and swaps to manage its exposure as the Company management expect that there are nominal exposure of the Company for foreign exchange and they are capable to manage these risks.
6 Events after the reporting period
The board of directors in its meeting held on April 20, 2019, has proposed final dividend @75% of paid up capital (i.e. Rs 1.50 per equity share of Rs 2 each) subject to approval of shareholders at the Annual General Meeting.
7 Previous year figures
Previous year figures have been regrouped/reclassified, wherever necessary to conform to this year’s classification.
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