NOTE 1:
Borrowings:
(a) 12% Non-Convertible Debentures issued to LIC of India
The company had issued 12% Non-Convertible debentures in FY 2009-10 aggregating to Rs. 125 crores. The repayment term were revised in the FY 2014-15. Principal Payable for current and future year as per revised schedule is as under:
As at 31st March 2016, there is an overdue amount of Rs. 241.74 lacs which includes overdue interest of Rs. 7.74 lacs. The said debentures are secured by first pari passu charge over immovable properties in Hyderabad belonging to Hyderabad Gems Sez Limited, a wholly owned subsidiary.
In respect of debentures installments maturing during the following year, the company could not create liquid assets of Rs. 211 lacs as required under Rule 18 (7)(c) of the Company’s (Share capital and Debenture) Rule 2014 due to continued Cash flow constraints arising out of regulatory restrictions on import of gold and unfavorable INR Vs USD currency fluctuation since FY 2012-13.
(b) External Commercial Borrowings (ECB)
During the financial year 2011-12 the company raised ECBs aggregating USD 107.19 million from the following two banks
* In respect of ECB from IDBI, on 22nd January 2012 IDBI down sold ECB of USD 10 million to Bank of Baroda
Out of the above ECB proceeds, USD 57.19 million was utilized to redeem the outstanding Foreign Currency Convertible Bonds (FCCBs) and balance USD 50 million was utilized towards capital expenditure in SEZ unit in Hyderabad and investment in overseas subsidiaries.
The company’s request for restructuring of ECB has been approved by RBI vide its letter dated November 27, 2014 and by IDBI vide its letter dated January 6, 2015 IDBI/DIFC/LOI/37/2014-15. As per revised terms, principal is repayable in 10 structured half yearly installments beginning from 30th September 2015, last installment being due on 31st March 2020. Interest is set at 6 months LIBOR rate 490 BPS. The Company has entered into derivative contract for hedging interest rate related risk via interest rate swap agreement while availing ECB from IDBI , Dubai.
The said ECBs are secured by first pari passu charge over certain immovable properties belonging to the company’s subsidiaries and second charge on the company’s assets, namely, raw materials, stock in progress, finished goods, all book debts, movable plant and machinery, consumable stores and stores and spares, both present and future. During FY 2013-14, the company also provided additional security by way of properties of various subsidiaries in respect of the said ECBs.
During the year there have been delays in servicing the principal and interest in respect of these ECBs. Amount due in next 12 months is USD 26.17 million (Equivalent INR Rs. 17,339.09 lacs).
In respect of IDBI ECB as at 31st March, 2016 principal overdue is USD 2.79 million (Equivalent INR Rs. 1,850.21 lacs).
(c) Working Capital Borrowing - from consortium of bankers
The total outstanding balance of Working Capital Borrowing from consortium of bankers as at 31st March 2016 amounted to Rs. 4,24,386.98 Lacs (net). The above facilities carries interest ranging from 5% to 14.5% per annum. The working capital borrowings are secured against certain immovable properties of the company and its subsidiaries and hypothecation by way of first charge on all present and future goods, movable assets, vehicles, furniture, stock in trade, fixed deposits, book debts along with the personal guarantee of the Managing Director.
In the month of May/June 2013, there have been changes in RBI Policy relating to issuance of BG/LC for purchase of gold. Due to this restriction, there has been sudden and severe impact on cash flow which started in May 2013 and continued to affect cash flows during 2015 -16.
During the year there were delay in servicing the interest on working capital borrowing and repayment of principal amounts. As at 31st March 2016, the facilities are overdrawn by Rs. 5,295 Lacs mainly on account of non-servicing of interest.
(d) Borrowings from Promoters
The changes in RBI Policy in the year 2013-14 resulted in the liquidity crunch affecting the cash flows of the company. This resulted in the nonpayment of interest and over drawing’s in the working capital facilities. The JLF was formed to ensure availability of adequate working capital facilities. The JLF suggested the promoters to infuse funds to support the operations. Based on these suggestions the promoters infused interest free loan without any stipulations for repayment.
(e) Public deposits:
During FY 2013-14, the Company has accepted deposits of Rs. 227.29 Lacs from the public within the meaning of section 58A of the Companies Act, 1956. Fixed deposits are for the period from 1 year to 3 year and carries interest ranging from 11.50% to 12.50%. The company repaid deposits maturing during the year from time to time. The outstanding balance as on 31st March 2016 is Rs. 171.20 lacs including unclaimed matured deposit of Rs. 1.25 lacs. The entire balance amount is repayable in FY 2016-17. The company has created liquid reserve of Rs 26.60 lacs. The company did not accept any further public deposit within the meaning of Section 73 to 76 of the Companies Act 2013 and rules framed there under during the year.
Note 2 :
Proposed Merger of Wholly Owned Subsidiary
At the Meeting of Board of Directors of the Company held on April 21, 2015, the Board has approved the “Scheme of Amalgamation” [Scheme] under Section 391 to 394 of the Companies Act, 1956 and relevant Sections of the Companies Act 2013, to the extent applicable, for amalgamation of the Company’s wholly owned subsidiary viz. Gitanjali Exports Corporation Limited with it, subject to the approval of the Scheme by Shareholders, Creditors of the respective Companies, Hon. Mumbai High Court and any other statutory authorities as may be required. Once sanctioned, the Scheme will be effective from the appointed date i.e. April 1, 2014.
Note 3:
Investments
1. Gitanjali Ventures DMCC
During the year the company has received back USD 0.45 million (Equivalent amount in INR Rs. 292.58 lacs) towards refund of part of its additional paid-in capital in its overseas subsidiary namely Gitanjali Ventures DMCC. The balance investment as at 31st March 2016 stands at USD 24.10 million (Equivalent amount in INR Rs.11,553.61 lacs).
2. Gitanjali USA, Inc.
During the year the company has received back USD 5.11 million (Equivalent amount in INR Rs. 3,331.45 lacs) towards refund of part of its additional paid-in capital in its overseas subsidiary namely Gitanjali USA, Inc. The balance investment as at 31st March 2016 stands at USD 18.71 million (Equivalent amount in INR Rs.8,374.39 lacs).
3. The company, with a view to consolidate the business model , appointed reputed firm of consultants to advise on future business model and restructuring of domestic and overseas subsidiaries. Based on the recommendations, as part of restructuring of overseas subsidiaries, the company has plans of disinvestment in equity share of three of the foreign subsidiaries to it’s another overseas wholly owned subsidiary namely Aston Luxury Group Ltd, Hong Kong. However the above restructuring is subject to approval by lenders and from Reserve Bank of India under FEMA. On signing off unbinding term sheet, the company has received part payment in earlier years. Pending necessary approval, the amount received of USD 6.44 Million as part consideration has been kept under Long term borrowing-Unsecured Loans & Advances from Related Parties
NOTE 4: Purchase of Raw Material and Traded Goods:
The Company is engaged in business of trading and manufacturing of Plain Gold Jewellery, Diamond Studded Jewellery, Diamond Cutting and Polishing. For this purpose Company has its own manufacturing facility and also undertakes job work for others. The company also purchases jewellery produced by reputed manufacturers. Considering the nature of product and type of business, cost of material consumed includes value of traded goods purchased for trading.
NOTE 5 :
Inventory:
The inventory comprising of raw material & finished goods is physically verified by the management at regular intervals and as at the end of the year. In respect of stock lying with third parties as at the yearend written confirmations have been obtained by the management.
Undisputed Statutory dues outstanding for period over 180 days as at 31st March, 2016
As a result of change in RBI policy on gold imports, the company’s cash flow was severely affected from mid May 2013 onwards and it continued to affect the cash flows of the company during FY 2015-16. For the said reason, bank working capital facilities were overdrawn on account of non serving of interest. As a result, the company could not meet some of the statutory payments in time. Income Tax (Self-assessment) of Rs. 1,503.32 Lacs for Assessment year 2013-14 (financial year 2012-13) and Income Tax (Self-assessment) of Rs. 256.60 lacs for assessment year 2015-16 (financial year 2014-15) is outstanding for a period of more than six months as at 31st March, 2016.
Notes:
The remuneration does not include Provision for Leave, Gratuity and Post-Retirement Benefits as per revised Accounting standard-15 since the same were not ascertained for individual employees.
The computation of Net profit under section 198 of the Companies Act 2013 has not been given since no commission is paid or payable to any director during current year.
In view of the profit earned during the current year, the company has retained remuneration payable to Managing Director for financial year 2015-16 at Rs. 48 lacs p.a.
NOTE 7 :
Interest received during the year was Rs. 445.39 Lacs (Previous Year Rs. 785.29 Lacs ) and Tax Deducted at Source from interest income was Rs. 44.38 Lacs for the year ended 31st March 2016. (Previous Year Rs. 78.37 Lacs). Bank Interest Expense is net of Interest received.
NOTE 8 : Trade Receivable
a) Trade Receivable as on 31st March, 2016 includes Rs. 134,154.81 Lacs (Previous Year Rs. 147,083.22 Lacs) due from group subsidiaries- domestic and overseas. Management considers that all current assets have the value at least as shown in the books and are fully recoverable and good.
b) There are some cases where the export receivables are outstanding for more than permissible limits for which the company is in process of filing application to authorized dealer / Reserve Bank of India.
c) The receivable and payable from same party have been netted off for purpose of presentation in financial statement.
d) During the year the company has written off export receivable of Rs. 1,235.45 Lacs (Net) (Previous year '4,985.33 Lacs) as Bad debts. The company is in process of filing application to authorized dealer / Reserve Bank of India in this respect.
NOTE 9:
Loans and Advances
a) Advances to suppliers includes Rs. 1,953.54 (Previous Year Rs. NIL Lacs) given to group subsidiaries and concerns in which Directors are interested as Directors/Members/Partners.
b) Loans and advances to other than group parties amounting to Rs. 546.03 lacs (Previous year Rs.1,858.81 Lacs) were considered irrecoverable and has been written off during the year and shown net of advances received written back.
Segment Reporting (Accounting Standard -17)
The Management of the company identifies two major reportable segments viz. Diamond Business & Jewellery Business. Activity in diamond business includes manufacturing and export of cut & polished diamonds and sales in local market. Activity in jewellery business includes manufacturing and export of plain gold and diamond studded jewellery and manufacturing and sales in local market of branded and unbranded jewellery. (Refer to Annexure I)
NOTE 10 :
Related Party Transaction (Accounting Standard -18) - (Refer to Annexure - II)
NOTE 11:
Disclosure as per Accounting Standard (AS - 19) on “Leases” are given below:
i. The Company has taken various office premises and fixed assets under operating lease or leave and license agreements. These are generally non-cancelable and ranges between 11 months and 5 years under leave and license, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.
ii. Lease payments are recognized in the Statement of Profit and Loss under ‘Rent’ in Note 23 and are net of recoveries from group companies.
iii. The future minimum lease payments under non-cancellable operating lease :
a. not later than one year Rs. 374.27 lacs (Previous Year Rs. 661.63 Lacs)
b. later than one year and not later than five years Rs. 849.15 Lacs (Previous Year Rs. 991.42 Lacs)
c. More than five years Rs.8.23 lacs (Previous Year NIL)
NOTE 12:
Disclosure of Loans and Advances to Subsidiaries, Associates and Others
Pursuant to Para A of Schedule V of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015.
Considering that the subsidiaries overseas and domestic have been formed for promoting company’s business, the above Loans and advances to its various subsidiaries are interest free and carry no stipulation as to repayment.
The Company has not given loans & advances for a term exceeding 7 years. Accordingly, the terms and conditions of these advances are not prejudicial to the interest of the company and the management is of the opinion that these are compliant with the provisions of sec 185 of the Companies Act 2013. Some of these loans were given under the provisions of Section 372 of the Companies Act 1956.These Loans are not in conformity with the provision of Section 186 of the Companies Act 2013.
In respect of few of its subsidiaries efforts are being made to recover the advances, however due to financial weakness of those subsidiaries they are unable to repay and regularize the advance. Under the aforesaid circumstances, the holding company is looking at various options to regularize the advance. Auditors have relied on the Management’s representation.
Note 13:
As represented by the company, the company does not owe any sum to micro enterprises and small enterprises. Accordingly, the company has not made a separate disclosure under Trade Payables in Part I - Balance Sheet as required by the notification dated 04th September, 2015 pertaining to alterations in Schedule III issued by MCA.
NOTE 14 :
There has been no delay in transferring amounts required to be transferred to Investor Education and Protection Fund by the company.
NOTE 15 :
Long term Contracts and Financial Derivative Instruments :
The Company has entered into derivative contract for hedging interest rate related risk via interest rate swap agreement while availing ECB from IDBI, Dubai. The company has reviewed its long term contract including derivative contract. There are no material foreseeable losses on such contracts.
NOTE 16 :
Balances of certain debtors, creditors and advances given are subject to confirmation or reconciliation if any. The management does not expect any material difference affecting the financial statements on such reconciliation / adjustments.
NOTE 17 :
Current Tax is provided as per the prevailing Income Tax laws and is provided based on MAT. MAT Credit Entitlement could be adjusted against future profits.
NOTE 18:
There is no impairment loss on fixed assets on the basis of review carried out by the management in accordance with the accounting standard (AS) - 28 “Impairment of Assets”
NOTE 19 :
The company has reviewed all the pending litigation and is of the opinion that no further provision is required impacting the financial position of the company.
NOTE 20 :
Previous year’s figures have been regrouped/rearranged/reworked wherever necessary and possible so as to confirm to current year’s classification.
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