1. Derivative instruments and unhedged foreign currency exposure Forward Contract
For minimizing the risk of currency exposure, the Forward Cover Contracts are of Nil (USD Nil) for trade receivables.
33. Related Party Disclosures
a) Name of related parties and related party relationship
Key Management Personnel Mr. Jugal Kishore Agarwal (Managing Director)
Mr. Mohan Lal Agarwal (Director)
Mr. Chandra Shekhar Agarwal (Independent Director) Mr. Mahesh Kumar Agarwal (Director)
Mr. Asit Baran Dasgupta (Independent Director)
Ms. Archana Gupta Sha (Independent Director)
Mrs. Sonam Agarwal (Independent Director)
Mr. Bikash Roy Chowdhury (Chief Financial Officer) Mr. Bharat Agarwal (Company Secretary)
Relatives of Key Management personnel Mr. Ghanshyam Das Agarwal (Brother of Director)
Mr. Manoj Kumar Agarwal (Brother of Director)
Mr. Nirmal Kumar Agarwal (Brother of Director )
Mr. Sachin Agarwal ( Son of Director )
Mr. Naveen Agarwal ( Son of Director )
Enterprises over which Key Management Personnel / Adhunik Corporation Ltd.
Share Holders / Relatives have significant influence Adhunik Infotech Ltd.
Adhunik Power & Natural Resource Ltd.
Adhunik Alloys & Power Ltd.
Sungrowth Share & Stocks Ltd.
Mahananda Suppliers Ltd.
Adhunik Meghalaya Steels Private Ltd.
Adhunik Metaliks Ltd. and its subsidiary
2. Capital Management
The Company’s capital management is intended to create value for shareholders by facilitating the meeting of long-term and short-term goals of the Company.
The Company determines the amount of capital required on the basis of annual operating plans and long-term product and other strategic investment plans. The funding requirements are met through equity and other long-term/short-term borrowings. The Company’s policy is aimed at combination of short-term and long-term borrowings.
The Company monitors the capital structure on the basis of total debt to equity ratio and maturity profile of the overall debt portfolio of the Company.
3. Financial risk management objectives and policies
The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, security deposits, employee liabilities. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include trade and other receivables, and cash and short-term deposits that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management is supported by the Board that advises on financial risks and the appropriate financial risk governance framework for the Company. The Board provides assurance to the Company’s senior management that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist personnel’s that have the appropriate skills, experience and supervision. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.
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 three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at 31 March 2018 and 31 March 2017.
The sensitivity analysis have been prepared on the basis that the amount of debt and derivatives.
The following assumptions have 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 31 March 2018, 31 March 2017 and 1 April 2016.
The sensitivity of equity is calculated by considering the effect of any associated derivatives at 31 March 2018 and 31 March
2017 for the effects of the assumed changes of the underlying risk.
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 is subject to variable interest rates on some of its interest bearing liabilities. The Company’s interest rate exposure is mainly related to debt obligations. The Company also uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like short term loans.
The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of derivative instruments. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company, as per its risk management policy, uses foreign exchange and other derivative instruments primarily to hedge foreign exchange exposure. Any weakening of the functional currency may impact the Company’s cost of imports and cost of borrowings and consequently may increase the cost of financing the Company’s capital expenditures.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in accordance with its risk management policies.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities. The Company’s exposure to foreign currency changes for all currencies other than US Dollars is not material.
The movement in the post-tax effect is a result of a change in the fair value of derivative financial instruments not designated in a hedge relationship and monetary assets and liabilities denominated in ', where the functional currency of the entity is a currency other than. Although the derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur.
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 Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Customer credit risk is managed by each divisions subject to the Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit or other forms of credit insurance.
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 has obtained fund and non-fund based working capital lines from various banks. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, buyer’s credit and other means of borrowings. The company invests its surplus funds in liquid schemes of mutual funds, which carry no/low mark to market risk.
The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.
Level 3 inputs are unobservable inputs for the asset or liability.
The investments included in Level 2 of fair value hierarchy have been valued using quotes available for similar assets and liabilities in the active market. The investments included in Level 3 of fair value hierarchy have been valued using the cost approach to arrive at their fair value. The cost of unquoted investments approximate the fair value because there is a range of possible fair value measurements and the cost represents estimate of fair value within that range
The following table summarizes financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
Notes:
i) The short-term financial assets and liabilities are stated at amortized cost which is approximately equal to their fair value.
ii) Derivatives are fair valued using market observable rates and published prices together with forecast cash flow information where applicable.
iii) Investments are stated at amortized cost which is approximately equal to their fair value.
iv) There have been no transfers between level 1 and level 2 for the years ended March 31, 2018 and 2017.
Notes:
1. To comply with the Companies (Accounting Standard) Rules, 2006, certain account balances have been regrouped as per the format prescribed under Division II of Schedule III to the Companies Act, 2013.
2. Financial liabilities and related transaction costs:
Borrowings and other financial liabilities which were recognized at historical cost under previous GAAP have been recognized at amortized cost under IND AS with the difference been adjusted to opening retained earnings. Under previous GAAP, transaction costs incurred in connection with borrowings were amortized equally over the tenure of the borrowings. Under IND AS, transaction costs are deducted from the initial recognition amount of the financial liability and charged over the tenure of borrowing using the effective interest method.
3. Financial assets at amortized cost:
Certain financial assets held on with an objective to collect contractual cash flows in the nature of principal and interest have been recognized at amortized cost on transition date as against historical cost under the previous GAAP with the difference been adjusted to the opening retained earnings.
4. Deferred tax as per balance sheet approach:
Under previous GAAP, deferred tax was accounted using the income statement approach, on the timing differences between the taxable profit and accounting profits for the period. Under IND AS, deferred tax is recognized following balance sheet approach on the temporary differences between the carrying amount of asset or liability in the balance sheet and its tax base. In addition, various transitional adjustments has also lead to recognition of deferred taxes on new temporary differences.
5. Excise duty:
Under previous GAAP, revenue from sale of goods was presented net of excise duty whereas under IND AS the revenue from sale of goods is presented inclusive of excise duty. The excise duty is presented on the face of the Statement of Profit and Loss as part of expenses.
6. Defined benefit liabilities:
Under IND AS, Remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined liability, are recognized in other comprehensive income instead of profit or loss in previous GAAP.
7. Other comprehensive income:
Under IND AS, all items of income and expense recognized in the period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss and “other comprehensive income” includes remeasurements of defined benefit plans, foreign currency monetary item translation difference account, effective portion of gains and losses on cash flow hedging instruments and fair value gain or losses on FVTOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP.
4. In the opinion of the management, current assets, loans and advances have the value at which these are stated in the balance sheet, if realized in the ordinary course of business, unless otherwise stated and adequate provisions for all known liabilities have been made and are not in excess of the amount reasonably required.
5. The outstanding balances of Sundry debtors / creditors are subject to confirmation as letters of confirmation of balances from several parties have not been received and hence the balances are subject to adjustments, if any, on reconciliation / settlement of account.
6. In the opinion of the management, leave is meant to be availed of and the employees has been advised to plan their leave in advance while in service and also immediately before superannuation. Accordingly, leave encashment liability for the year has been recognized and provided for only when such encashment was allowed.
7. Unclaimed dividend of earlier years aggregating to ' 1,36,000/- deposited in separated bank account, an amount of ' 68,000/which is liable to transferred to Investor Education Protection Fund (IEPF) has been duly transferred during the year. Inclusion of the said amount does not have any impact on the profitability of the company.
8. Raw materials consumed are accounted after adjustment of normal shortage/surplus of raw materials and rejected raw materials.
9. Previous year figures including those given in brackets have been rearranged where ever necessary to confirm with the current year classification.
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