Background

Orbit Exports Limited, a Public Limited Company incorporated under Companies Act 1956, principally operates in two business segments: Manufacturing of Textile and Windmill Power Generation. The equity shares of the Company are listed on Bombay Stock Exchange and National Stock Exchange of India Limited.

Authorisation of standalone financial statements

The standalone financial statements were authorized for issue in accordance with a resolution of the directors on May 30, 2018.

Note : The Company has a process whereby periodically all long-term contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision, as required under any law / accounting standards for material forseeable losses on such long term contracts including derivative contracts, has been made in the books of account.

Note : The Fixed Deposits aggregating to Rs. 21 Lakhs (March 31, 2017: Rs. 461.34 Lakhs, April 01, 2016: Rs. 331.85 Lakhs) has been pledged with State Bank of India, Rs. 300 Lakhs (March 31, 2017: Nil; March 31, 2016: Nil) has been pledged with HDFC Bank and Rs. 125 Lakhs (March 31, 2017: Rs. 461.34 Lakhs; March 31, 2016: Rs. 302.23 Lakhs) has been pledged with DBS Bank as collateral security against the financial assistance extended by the respective banks and Rs. 0.34 Lakhs (March 31, 2017: Rs. 0.25 Lakhs; April 01, 2016: Rs. 0.25 Lakhs) with Central Bank of India.

In accordance with Sec 68, 69, 70 and other applicable provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 (as amended) (‘SEBI Buy Back Regulations’), the Company concluded during the quarter ended March 31, 2018, the buyback of 4,44,444 equity shares of Rs. 10/- each fully paid up, as approved by the Board of Directors on January 5, 2018 by way of tender offer through stock exchange mechanism for cash at price of Rs. 180/- per equity share. This has resulted in a total cash outflow of Rs. 799.99 lakhs.

Pursuant to the buyback the Company has adjusted premium on buyback of 170/- per share aggregating Rs. 755.55 Lakhs from General Reserve. Further, an amount of Rs. 44.44 Lakhs (equivalent to the face value of shares bought back) has been transferred to Capital Redemption Reserve from the Retained earnings.

b. Rights, preference and restrictions attached to equity shares:

Equity Shares

The Company has issued only one class of equity shares having par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees.

The dividend proposed is as recommended by the Board of Directors and subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive the realised value of the assets of the Company, remaining after payment of all preferential dues. The distribution will be in proportion to the number of equity shares held by the shareholders.

*Bonus shares were issued by capitalisation of balance in securities premium and general reserve amounting to Rs. 1,435.12 Lakhs in the ratio of one equity share for every one equity share held by member(s) having face value of Rs. 10 each held on the record date.

Basic and diluted earnings per share for the previous periods has been presented to reflect the adjustment for bonus share in accordance with Indian Accounting Standard 33 Earnings Per Share.

Additional Disclosure

Terms of Warrant

A. 10 Lakhs Optionally Fully Convertible Warrants were issued to Mr. Pankaj Seth and Mrs. Anisha Seth on September 10, 2013 at a price of Rs. 76.57 each, out of which 25% amount received at the time of allotment of warrants. Each warrant was to be converted into 1 equity share of Rs. 10/- each within 18 months from the date of allotment i.e. on or before March 9, 2015. The details of conversion are as mentioned below:-

B. 8 Lakhs Optionally Fully Convertible Warrants were issued to Mr. Pankaj Seth and Mrs. Anisha P. Seth on November 1, 2010 at a price of Rs. 38/- each out of which 25% amount received at the time of allotment. Each warrant was to be converted into 1 equity share of Rs. 10/- each within a period of 18 months from the date of allotment i.e. on or before April 30, 2012. The details of conversion are as mentioned below:-

Description of the nature and purpose of each reserve within Other Equity is as follows:

(a) General Reserve :

The Company had transferred a portion of the net profit of the Company before declaring dividend to the general reserve pursuant to the earlier provisions of the Companies Act, 1956. Mandatory transfer to general reserve before declaration of dividend is not required under the Companies Act, 2013.

(b) Retained Earnings :

Retained earnings are the profits that the Company has earned till date and is net of amount transferred to other reserves such as general reserves etc., amount distributed as dividend and adjustments on account of transition to Ind AS.

(c) Securities Premium :

Securities premium reserve is credited when shares are issued at premium. It is utilised in accordance with the provisions of the Act, to issue bonus shares, to provide for premium on redemption of shares or debentures, write-off equity related expenses like underwriting costs, etc.

(d) Capital Redemption Reserve :

The Company has recognised Capital Redemption Reserve on buyback of equity shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the equity shares bought back.

1.01 Leases

Operating Leases (As Lessee)

The Company’s significant leasing arrangements in terms of Ind AS 17 on lease are in respect of Operating Leases for Building and Vehicles. The period of these leasing arrangements, which are cancellable in nature range between eleven months to five years and are renewable by mutual consent.

Rental Expenses debited to the Statement of Profit and Loss Rs. 225.24 Lakhs (March 31, 2017: Rs. 213.30 Lakhs) Details of Cancellable Leases are as under:

Lease Expenses debited to the Statement of Profit and Loss Rs. 25.37 Lakhs (March 31, 2017: Rs. 23.60 Lakhs). Some of these lease agreements have price escalation clauses

Rental income of Rs. 8.70 Lakhs (March 31, 2017 : ‘ Nil) in respect of have been recognised in Statement of Profit and Loss

1.02 Contingent Liabilities

The Company’s pending litigations comprise of proceedings pending with Income Tax and other government authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its standalone financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial results. In respect of litigations, where the management assessment of a financial outflow is probable, the Company has made an adequate provision in the standalone financial statements and appropriate disclosure for contingent liabilities is given below :-

1.03 Capital and other Commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 720.13 Lakhs (March 31, 2017: Rs. 676.28 Lakhs & April 1, 2016: Rs. 47 Lakhs).

b) Export obligations under Export Promotion Capital Goods Scheme (EPCG) towards import of capital goods at concessional rate of custom duty (duty amount involved is March 31, 2018: Rs. 98.34 lakhs, March 31, 2017: ‘ Nil and April 1, 2016: Rs. 197.86 lakhs*)

*Export obligation for this year has already been fulfilled, however, precedural formalities for the closure of the EPCG Licenses are pending.

1.04 The Company has two segments Manufacturing of Textile and Windmill Power Generation. The gross operating income and profit from the Windmill Power Generation segment is below the norms prescribed in Ind AS 108, hence separate disclosure have not been made.

1.05 Corporate Social Responsibility

As required under section 135 of the Companies Act 2013, the Company has constituted Corporate Social Responsibility (CSR) committee.

The company is required to spend ‘71.28 Lakhs; (March 31, 2017: Rs. 69.46 Lakhs) on CSR activities Amount spend during the year is as follows:

1.06 Employee Benefit Plans

1. Defined contribution plans

The amounts of contribution to provident fund and ESIC recognized as expenses during the year is Rs. 94.13 Lakhs (March 31, 2017: Rs. 72.73 Lakhs) for the year ended March 31, 2018.

2. Defined Benefits Plans

The Company sponsors unfunded defined benefit plans for qualifying employee therefore, there are no plan assets which are maintained exclusively thereof. In computation of gratuity liability, Project Unit Credit Method is used.

These plans typically expose the Company to Actuarial risks such as : investment risk, longevity risk and salary risk. No other post-retirement benefit are provided to the employees.

Investment Risk The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.

Longevity Risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary Risk The present value of the defined plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

6. Sensitivity Analysis

Below is the sensitivity analysis determined for significant actuarial assumption for determination of defined benefit obligation and based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period.

Key assumptions for determination of Defined Benefit Obligation at Discount Rate (i.e. Interest Rate) and Salary Growth Rate.

1.07 Capital Management

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to maximise shareholder’s value. In order to maintain or achieve a capital structure that maximises the shareholder’s value, the Company allocates its capital for distribution as dividend or re-investment into business based on its long term financial plans. As at March 31, 2018, the Company has only one class of equity shares.

The Company’s capital requirement is mainly to fund its business expansion and repayment of borrowings. The principal source of funding of the Company has been, and is expected to continue to be, cash generated from its operations supplemented by funding from bank borrowings.

The Company has adhered to material externally imposed conditions relating to capital requirements and there has not been any delay or default during the period covered under these financial statements with respect to payment of principal and interest. No lender has raised any matter that may lead to breach of covenants stipulated in the underlying documents.

The Company monitors its capital using gearing ratio, which is net debt divided to total equity. Net debt includes, interest bearing loans and borrowings less cash and cash equivalents.

1.08 Financial Instruments

(i) Methods and assumptions used to estimate the fair values

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

a) The carrying amounts of receivables and payables which are short term in nature such as trade receivables, other bank balances, deposits, loans to employees, trade payables, payables for acquisition of noncurrent assets, demand loans from banks and cash and cash equivalents are considered to be the same as their fair values.

b) The fair values for long term loans, long term security deposits given and remaining non current financial assets were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs.

c) The fair values of long term security deposits taken, non-current borrowings and remaining non current financial liabilities are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs.

d) For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

(ii) Categories of financial instruments

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: directly or indirectly observable market inputs, other than Level 1 inputs; and Level 3: inputs which are not based on observable market data

1.09 Financial Risk Management

The Company’s financial risk management is an integral part of how to plan and execute its business strategies. The Company’s financial risk management policy is set by the Managing Board. The details of different types of risk and management policy to address these risks are listed below:

The Company’s activities are exposed to various risks viz. Credit risk, Liquidity risk and Market risk. In order to minimise any adverse effects on the financial performance of the Company, it uses various instruments and follows polices set up by the Board of Directors / Management.

a. Credit Risk :

Credit risk arises from the possibility that counter party will cause financial loss to the Company by failing to discharge its obligation as agreed.

Credit risks from balances with banks are managed in accordance with the Company policy. For derivative and financial instruments, the Company attempts to limit the credit risk by only dealing with reputable banks having high credit-ratings assigned by credit-rating agencies.

Based on the industry practices and business environment in which the Company operates, management considers that the trade receivables are in default if the payment are more than 2 years past due.

Trade receivables primarily consists of Outstanding against exports sales and sales to certain domestic customers with no significant concentration of credit risk. The outstanding trade receivables are regularly monitored and appropriate action is taken for collection of overdue receivables.

The Company is taking adequate steps for recovery of overdue debts and advances and wherever necessary, adequate provisions as per expected credit loss model have been made.

b. Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company’s liquidity risk management policies include to, at all times ensure sufficient liquidity to meet its liabilities when they are due, by maintaining adequate sources of financing from both domestic and international banks at an optimised cost. In addition, processes and policies related to such risks are overseen by senior management. The Company’s senior management monitors the Company’s net liquidity position through rolling forecasts on the basis of expected cash flows.

Maturity of Financial Liabilities

The table below provides details regarding the remaining contractual maturities of financial liabilities at the reporting date based on contractual undiscounted payments.

Financing arrangements

The Company has sufficient sanctioned line of credit from its bankers / financers; commensurate to its business requirements. The Company reviews its line of credit available with bankers and lenders from time to time to ensure that at all point of time there is sufficient availability of line of credit to handle peak business cycle.

The Company pays special attention to the net operating working capital invested in the business. In this regard, as in previous years, considerable work has been performed to control and reduce collection periods for trade and other receivables, as well as to optimise accounts payable with the support of banking arrangements to mobilise funds and minimise inventories.

c. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company is exposed in the ordinary course of business to risks related to changes in foreign currency exchange rate and interest rate.

(i) Market Risk - Foreign Exchange

Foreign exchange risk arises on all recognised monetary assets and liabilities which are denominated in a currency other than the functional currency of the Company. The Company has foreign currency trade payables and receivables. However, foreign exchange exposure mainly arises from trade receivable and trade payables denominated in foreign currencies.

Foreign currency risk is that risk in which 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 a portion of its business is transacted in several currencies and therefore the Company is exposed to foreign exchange risk through its overseas sales and purchases in various foreign currencies. The Company hedges the receivables as well as payables by forming view after discussion with Forex Consultant and as per polices set by Management.

The Company does not enter into or trade financial instrument including derivative for speculative purpose.

The carrying amount of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.

1.10 Related party disclosures

(a) Names of related parties and related party relationship-where control exists

Subsidiary - Orbit Inc Subsidiary - Excellere (UK) Limited

(b) Related parties with whom transactions have taken place during the year

Associate - Rainbow Line Trading (L.L.C)

(c) Key management personnel

Mr. Pankaj Seth - Managing director Mrs. Anisha Seth -Whole time director Mr. Bruce Kievel - Executive Director Mr. Mukesh Deopura - Chief Financial Officer Mrs. Neha Poddar - Company Secretary

(d) Relatives of key management personnel

Mrs. Vishakha Seth Mehra - Daughter of Mr. Pankaj Seth Mrs. Sangeeta Bhatia - Sister of Mr. Pankaj Seth Mr. Shyamsunder Seth - Father of Mr. Pankaj Seth Mr. Parth Seth - Son of Mr. Pankaj Seth Mr. Prachya Thongnak - Son of Mr. Bruce Kievel Mrs. Chanda Deopura - Wife of Mr. Mukesh Deopura

(e) Enterprises owned or significantly influenced by key management personnel or their relatives Golden Bo Tree Impex Co Ltd.

M/s Mediaman Multitrade Pvt Ltd.

Orbit Foundation

(f) Non-Executive Directors Mr. Gopikrishna Bubna

Mr. Balkrishna Patil Mr. Saumil Marfatia Mr. Pardeep Khosla Mr. Varun Daga

1.11 Employee Stock Option Plan

The shareholders of the Company have approved Employee Stock Option Plan i.e. OEL Employees Stock Option Plan - 2013 (“The Plan”) on July 3, 2013. The Plan provides for issue of options (underlying equity share of Rs. 10/- each) to the persons specified in the scheme. The plan was framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time.

The plan provide for the issuance of options at the recommendation of the Nomination & Remuneration Committee at 90% of the market price i.e. price on the working day immediately preceding the date when options are granted, the price being the closing price of the share on Bombay Stock Exchange Limited and National Stock Exchange of India Limited with the highest trading volume as of the working day preceding the date of grant.

The options granted under the Plan shall vest within not less than two years and not more than four years from the date of grant of options. Once the options vest as per the Plan, they would be exercisable by the Option Grantee at any time within a period of one and a half year from the date of vesting and the shares received on exercise of such options shall not be subject to any lock-in period.

The following table summarizes the Company’s Stock Options activity:

Shares Underlying Options Outstanding

1.12 Unclaimed Dividend

During the year, Unclaimed dividend for the F.Y. 2010-11 amounting to Rs. 1.95 Lakhs has been deposited by the Company to the credit of Investor Education and Protection fund (IEPF) in terms of section 124(5) of the Companies Act, 2013.

During the previous year, Unclaimed dividend for the F.Y. 2009-10 amounting to Rs. 1.29 Lakhs has been deposited by the Company to the credit of Investor Education and Protection fund (IEPF) in terms of section 124(5) of the Companies Act, 2013. However there was a delay of 2 days in depositing the same.

1.13 According to the information available with the management, on the basis of intimation received from its suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006, the Company has amounts due to micro and small enterprises under the said Act as at March 31, 2018 as follows:

1.14 Notes to First Time Adoption

a Property, Plant and Equipment

The Company has availed the exemption available under Ind AS 101 to continue the carrying value for all of its Property, Plant and Equipments and Intangibles recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.

(i) Finance Lease

Under the previous GAAP, leasehold land was accounted for at the premium paid at the time of commencement of the lease. The lease rentals paid were recognised in the Statement of Profit and Loss. Land was not covered under the scope of AS -19 Leases. Ind AS 17 Leases now includes land under the scope of the standard. As on the transition date to Ind AS, the Company recognises the lease as an asset as well as liability at fair value (present value of minimum lease payments). Any direct expense incurred by the Company is added to the cost of leased asset. The lease payments are apportioned between finance charge and finance lease obligation. The finance charge shall be allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

b Security Deposit

Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly the Company has fair valued these security deposits under Ind AS and the difference between the fair value and the transaction value of the security deposit has been recognised as prepaid rent.

c Deferred Tax

The previous GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using balance sheet approach which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Various transitional adjustments has resulted in recognition of temporary differences.

d Defined Benefit Obligations

Under previous GAAP, actuarial gains and losses were recognised in Statement of Profit and Loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability / asset which is recognised in other comprehensive income. Consequently, the tax effect of the same has also been recognised in other comprehensive income under Ind AS instead of statement of profit or loss.

e Government Grants

The government grant related to fixed assets was netted off with the cost of respective Property, Plant and Equipment under previous GAAP. Under Ind AS, Property, Plant and Equipment has been recognised at gross cost and government grant has been recognised as deferred income.

f Trade Receivables

Under the previous GAAP, the Company has created provision for impairment of receivables consisting specific amount for incurred losses. Under Ind AS, impairment allowance has been determined based on Expected Credit Loss Model which has led to an increase in the amount of provision as on the date of transition.

g Derivative Instruments - Forward contracts

Under previous GAAP, the loss on forward contract was recognised based on difference between spot rate and forward rate . Under Ind AS, forward contract is required to be accounted at fair value.

h Inclusion of Bank Overdraft for the purpose of Cashflow

Under Ind AS, bank overdrafts which are repayable on demand and form an integral part of the Company’s cash management system and are included in cash and cash equivalents for the purpose of presentation of Statement of Cash flows. Whereas under previous GAAP, there was no similar guidance and hence, bank overdrafts were considered similar to other borrowings and the movements therein were reflected in cash flows from financing activities.

i Other Comprehensive Income

Under previous GAAP, there was no concept of other comprehensive income. Under Ind AS, items of income or expense that are not recognised in statement of profit and loss are recognised as “other comprehensive income” which includes remeasurement of defined benefit plans.

1.15 Ind AS issued but not yet effective

Ministry of Corporate Affairs (“MCA”) through the Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new and amendments to Ind ASs :

Ind AS 115- Revenue from Contract with Customers

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should 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. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition :

- Retrospective approach-Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch-up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018

The Company has adopted the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly, comparatives for the year ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is expected to be insignificant.

Ind AS 21 : The Effects of Changes in Foreign Exchange Rates

Appendix B to Ind AS 21, Foreign Currency Transactions and Advance Consideration is inserted to clarify the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The Appendix explains that the date of the transaction, for the purpose of determining the exchange rate, to use on the initial recognition of the related asset, expense or income (or part of it) is the date on which the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.

If there are multiple payments or receipts in advance, the date of the transaction is determined for each payment or receipt of advance consideration.

The amendment will come into force from April 1, 2018. The Company has evaluated the effect of this on its financial statements and the impact is not material.