1 Corporate Information:
Patspin India Limited (‘the company') is a Public Limited company incorporated and domiciled in India, and has its registered office at 3rd Floor,Palal Towers, Ravipuram, MG Road, Kochi -682016 Kerala State, India .The company has been incorporated under the provisions of Indian Companies Act and its equity shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange(BSE) in India. The company is engaged mainly in the business of manufacture and Export of Fine and super fine combed cotton yarn.
ii Rights, preferences and restrictions attached to Equity shares
The company has only one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferential amounts, in proportion of their shareholding.
Preference shares being Non-Cumulative and redeemable, i.e. there is contractual obligation to deliver cash at the time of redemption, accordingly these have been classified as financial liability as per Ind AS 32 “Financial Instrument Presentation”. Fair value of the liability component is the Present value of redeemable principal amount using the borrowing cost applicable to the Company. Subsequently, the financial liability is carried at amortised cost and Interest expenses has been recognised using the effective interest method on the amortised cost.
i Term Loan are secured by :
(i) Term loans from banks and financial institution, excluding corporate term loan from a bank of Rs. 1500 lacs (Outstanding as on 31.03.2018 Rs. 746.63 lacs,Previous year Rs. 937.45 lacs)(security for which is explained in Para 1(ii) below) and Term Loan from a financial institution of Rs. 2000 lacs (Outstanding as on 31.03.2018 Rs. 1054.50 lacs, Previous Year 1317.82 lacs) (security for which is explained in Para 1(iii) below), are secured by first charge by way of equitable mortgage on all the immovable assets of the company, both present and future, and by way of hypothecation on all movable assets (excluding vehicle purchased on Finance lease basis) of the company, and further secured by second charge on current assets of the company, subject to prior charges in favour of banks for working capital ranking pari passu, inter se (as mentioned in Note No 5, Para (i) and (ii)), and further secured by personal guarantee of two Directors of the Company.
(ii) Corporate term loan from a bank of Rs. 1500 lacs mentioned in para 1 (i) above is secured by way of hypothecation of moveable assets (excluding vehicle purchased on Finance lease basis) of the company, both present and future, has been secured by second charge by way of equitable mortgage on the immovable assets of the company, both present and future,and further secured by personal guarantee of two directors of the Company.
(iii) Term Loan from a financial institution of Rs. 2000 lacs is secured by first charge by way of equitable mortgage on all the immovable assets of the company, both present and future, and by way of hypothecation on all moveable assets (excluding vehicle purchased on Finance lease basis) of the company, and further secured by second charge on current assets of the company,subject to prior charges in favour of banks for working capital ranking pari passu, inter se (as mentioned in Note No 5,Para (i) and (ii) below), and further secured by Corporate Guarantee from GTN Textiles Limited (Rs. 300 lacs) and GTN Enterprises Limited (Rs. 1700 lacs).
(iv) Finance lease obligations are relating to vehicles and are secured by hypothecation of respective vehicles.
i) Working Capital loans from banks are secured by first charge by way of hypothecation on current assets of the company and further secured by way of second charge over the immovable assets of the company both present and future and further secured by personal guarantee of two directors of the Company.
ii) Non-fund based limits sanctioned by the bankers are secured by extension of first charge on the current assets of the Company and further secured by second charge on the immovable properties of the company and personal guarantee of two directors of the company; Total amount outstanding at the end of the year is Rs. 5778.00 lacs (Previous year Rs. 4837.00 lacs).
* The ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allotted after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprise as at reporting date has been made in the financial statements on information received and available with the Company and it has been relied upon by the auditors. Further, in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Micro,Small and Medium Enterprises Development Act,2006(“the MSMED Act) is not expected to be material. The company has not received any claim for interest from any supplier under the said Act.
The company had four wind mill undertakings and out of which one of the Wind Mill undertaking was sold during the previous year on slump sale basis and realised a profit of Rs. 491.97 lacs.During the current financial year the remaining three wind mill undertakings were also sold on slump sale basis and realised a profit of Rs. 1231.14 lacs as mentioned above
2. Employee Benefits Plan Gratuity:
In accordance with the applicable laws, the Company provides for Grauity, a defined benefit retirement plan (“The Gratuity Plan”) covering eligible employees. The Gratuity plan provides for a lump sum payment to vested employees on retirement (subject to the completion of 5 years of continues employment), death, inacpacitisation or termination of the employment are based on last drawn salary and tenure of employment.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation on the reporting date and the Company makes annual contribution to the Gratuity Fund administered by Life Insurance Corporation of India, which is basically a year-on-year cash accumulation plan. Though company has not fully funded to LIC, adequate provision has been made in the Books of accounts. As part of the scheme the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance company, as part of the policy rules, makes payment of all gratuity settlements during the year subject to sufficiency of funds under the policy.
3. The accounts of certain Trade Receivables ,Trade payables, Loans and advances and Banks are subject to formal confirmations /reconciliations and consequent adjustments ,if any. The management does not expect any material difference affecting the current year's financial statements on such reconciliation/adjustments.
4. In term of Ind AS-108 Operating Segments, the company operates materially only in one business segment viz., Textile industry and have its production facilities and all other assets located within India.
5. RELATED PARTY DISCLOSURES
Related Party Disclosures pursuant to Ind AS 24
(a) Names of Related parties and nature of relationship
i Associates:
1 GTN Textiles Limited
ii Companies under joint control as per para9(b)vi of IndAS
GTN Enterprises Limited
iii Key Management Personnel:
Shri Umang Patodia -Managing Director
Shri TRavindran -CFO
Shri Dipu George -Dy. Company secretary
iv Enterprises/Entities having “Common Key Management Personnel”:
1 Perfect Cotton Co.
2 Patcot & Co
3 Standard Cotton Corporation
v Relatives of Key Management Personnel:
Shri Binod Kumar Patodia - Father of Shri. Umang Patodia
6 CONTINGENT LIABILITY AND COMMITMENTS:
A COMMITMENTS
1 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Nil (Previous year Rs.Nil).
B CONTINGENT LIABILITY
1 Disputed amounts of Taxes and duties and other claims not acknowledged as debts :
a) Excise duty : Rs. 72.99 lacs (Previous year Rs. 36.36 lacs)
b) Sales Tax (VAT) : Rs. 146.45 lacs (Previous year '146.45 lacs)
c) TANGEDCO has been charging electricity tax @ 5% on Demand Charges through their bills. This was challenged by a consumer in Hon'ble Supreme Court and Hon'ble Supreme Court has accepted the appeal on records. Liability towards the same Rs. 27.25 lacs (Previous year Rs. 15.17 lacs)
d) TANGEDCO has denied deemed demand benefit available for use of self generated thermal power received through group captive arrangement. This was challenged in Hon'ble Chennai High Court and the Hon'ble Hight court has given injunction with a condition to TANGEDCO to Charge only 50% till the matter is decided. Liability towards the same was Rs. 55.84 lacs .(Previous year Nil).
e) Disputed Income Tax demands Rs. 353.78 lacs (Previous year 353.78 lacs ) and interest there on Rs. 308.65 lacs (Previous year Rs. 308.65 lacs ),for the assessement year 2001-02 to 2005-06, matter was decided by the Hon'ble High Court of Kerala against the Company. The Company had gone on appeal before the Hon'ble Supreme Court of India and the appeals for the AY 2001-02 to 2004-05 were decided by SC in favour of the Company . The appeal for Assessement Year 2005-06 is still pending with Hon'ble Supreme court of India.The total Payments of Rs. 580.98 lacs (Previous year 580.98 lacs ) was made aganist the aforesaid demand is included in the loans and advances.
7. Corporate Guarantee :
7.1 The company has given Corporate Guarantee amounting to Rs. 389 lacs (Previous year Rs. 389 lacs) to a Financial Institution in respect of financial assistance provided by them to GTN Enterprises Ltd and the outstanding amount thereof is Rs. 116.55 lacs as on 31st March 2018 (Previous Year - Rs. 271.95 lacs).
7.2 The company has given Corporate Guarantee amounting to Rs. 175 lacs (Previous year Rs. 175 lacs) to a Financial Institution in respect of financial assistance provided by them to GTN Textiles Ltd and the outstanding amount thereof is Rs. 70 lacs as on 31st March 2018 (Previous Year - Rs. 140 lacs).
8. The Company was sanctioned a Debt Restructuring Package under Corporate Debt Restructuring (CDR) Scheme on 12.10.2012 effective from 01.04.2012 for the loans availed from Banks/Financial Institutions,which was approved by CDR-EG and all the lenders.
The restructuring inter-alia envisages:
- Deferment / Rescheduling in payment of principle
- Refixation of interest rates on term loans
- Sanction of additional long term working capital term loan of Rs. 22.16 crores
- In lieu of sacrifice by the lenders, Preference Shares of Rs. 10.81 crores were allotted on 29.01.2013 to the banks/ financial institutions. The amount represents difference between the net present value (NPV) of the future cash flows towards repayment of principal and interest thereon as per the revised term and those payable as per the original terms.
- The Promoters to bring in contribution of Rs. 2.70 crores by way of Preference Shares. The said amount was brought into two phases of Rs. 1.35 Crores each on 7th November, 2012 and 28th November, 2013 respectively in line with CDR Scheme.
- GTN Textiles Limited (GTN), the main Promoter to pledge 72,86,405 Equity Shares of Rs. 10 each (51% of the shareholding in Patspin India Limited) in favour of Central Bank of India, the Monitoring Institution. GTN has since pledged the shares on 14.05.2013.
- The CDR lenders, with the approval of CDR EG, shall have the right to recompense the reliefs/ sacrifices/waivers extended by respective CDR lenders as per CDR guidelines
9. FINANCIAL RISKS MANAGEMENT
In the course of business, amongst others, the Company is exposed to several financial risks such as Credit Risk, Liquidity Risk, Interest Rate Risk, and Exchange Risk . These risks may be caused by the internal and external factors resulting into impairment of the assets of the Company causing adverse influence on the achievement of Company's strategies, operational and financial objectives, earning capacity and financial position.
The Company has formulated an appropriate policy and established a risk management framework which encompass the following process.
- identify the major financial risks which may cause financial losses to the company
- assess the probability of occurrence and severity of financial losses
- mitigate and control them by formulation of appropriate policies, strategies, structures, systems and procedures
- Monitor and review periodically the adherence, adequacy and efficacy of the financial risk management system.
The Company enterprise risk management system is monitored and reviewed at all levels of management, Internal Auditors, Audit Committee and the Board of Directors from time to time.
Credit Risk
Credit Risk refers to the risks that arise on default by the counterparty on its contractual obligation resulting into financial loss to the company. The company may carry this Risk on Trade and other receivables, liquid assets and some of the non current financial assets.
In case of Trade receivables, the company has framed appropriate policy for extending credits period & limit to each customer based on their profile, financial position etc. The collections of trade dues are strictly monitored. In case of Export customers, even credit guarantee insurance is also obtained wherever required.
Company's exposure to Credit Risk is also influenced by the concentration of risk from top five customers. The details in respect of the % of sales generated from the top customer and top five customers are given hereunder.
The credit risk on cash & cash equivalent, investment in fixed deposits, liquid funds and deposits are insignificant as counterparties are banks with high credit ratings assigned by the rating agencies of international repute.
Liquidity Risk
Liquidity Risk arises when the company is unable to meet its short term financial obligations.
The company maintains liquidity in the system so as to meet its financial liabilities .
Contractual maturities of financial liabilities are given as under:
Interest Rate Risk
Generally market linked financial instruments are subject to interest rate risk. The company does not have any market linked financial instruments both on the asset side as well liability side. Hence there no interest rate risk linked to market rates.
However the interest rate in respect of major portion of borrowings by the Company from the banks and financial institutions are linked with the MCLR / Base Prime lending rate of the respective lender. Any fluctuation in the same either on higher side or lower side will result into financial loss or gain to the company.
The amount which is subjected to the change in the interest rate is of Rs. 8372.47 lacs out of the total debt of Rs. 20689.97 Lacs
Based on the Structure of the debt as at year end, a half percentage point increase in the interest rate would cause an additional expense in the net financing cost of Rs. 41.86 Lacs on annual basis.
Foreign Currency Risk
The company is exposed to the foreign currency risk from transactions & translation. Transactional exposures are arising from the transactions entered in foreign currency. Management keeps a close watch of the maturity of the financial assets in foreign currency and payment obligations of the financial liabilities.
Based on one percentage point variations in the exchange rate, the profit before tax for the year based on the un hedged foreign currency transaction entered during the period will be effected by Rs. 33.15 Lacs
10. Capital risk management
The Company's objectives when managing capital are to :
- create value for its shareholders and other stake holders, and
- maintain an optimal capital structure to reduce the cost of capital through a fair mix of equity with combination of short term/long term debt as may be appropriate.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which includes capital and other strategic investments. The Company's intention is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business.
11. First time adoption of Ind AS
The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from 1st April, 2017, with a transition date of 1st April, 2016. The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements for the year ended 31st March, 2018, be applied retrospectively and consistently for all financial years presented. However, in preparing these Ind AS financial statements, the Company has availed of certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under Ind AS and Previous GAAP have been recognised directly in equity (retained earnings or another appropriate category of equity).
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A. Optional Exemptions
(i) Deemed Cost
The Company has elected to continue with the carrying value of all of its plant and equipment and intangible assets recognised as of 1st April, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date, except Freehold land for which the Company had adopted the revaluation model pursuant to the para 29 to 31 of Ind AS 16 and recognised revalued cost as its deemed cost as at 1st April 2016.
(ii) Designation of previously recognised financial instruments
The Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.
(iii) De-recognition of financial assets and financial liabilities
The Company has applied the de-recognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after 1 April, 2016 (the transition date).
B. Mandatory Exceptions
(a) Estimates
An entity's estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).
Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company make estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Investment in equity instruments carried at cost;
- Impairment of financial assets based on expected credit loss model.
(b) Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
C. Transition to Ind AS - Reconciliations
The following reconciliations provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS 101:
(i) Reconciliation of Balance sheet as at April 1, 2016 (Transition Date)
(ii) A. Reconciliation of Balance sheet as at March 31, 2017
B. Reconciliation of Statement of total Comprehensive Income for the year ended March 31, 2017
(iii) A. Reconciliation of Equity as at April 1, 2016 and March 31, 2017
B. Reconciliation of Income Statement March 31, 2017
Notes to first time adoption:
a Property, plant and Equipment
In accordance with the option available under Ind AS 101-First time adoption of Indian Accounting Standards. the company has opted to continue with net carrying values of all Property, plant and Equipment as at 1st April 2016(transition date ) as per the previous GAAP and use that as the Deemed cost excepting Freehold Land. The Company has adopted cost model as their accounting policy for subsequent measurement and recognition of Property, plant and equipment.
For Freehold Land, as per the provisions of Para 29 to 31 of the Ind AS 16, the company has adopted Revaluation model and has determined its fair value on the transition date of 1st April 2016 on the basis of valuation report of external valuer and considered the same as its Deemed cost. The fair value of the land amounted to Rs. 5543.44 Lakhs (Cost Rs. 282.16 Lakhs) as at 1 April 2016. Impact of the fair value changes as on the date of transition, is recognised in opening reserves/separate component of other equity, as the case may be
b Deferred Tax
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 year. Under Ind AS, deferred tax is recognised following balance sheet approach on the temporary differences between the carrying amount of asset or liability in the balance sheet and its tax base.
c Defined benefits Liabilities:
Under Ind AS Re-measurements i.e. Actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in Other comprehensive income instead of profit and loss in previous GAAP
d In the previous GAAP outstanding forward exchange contracts covering the exchange risk on Export and Import transactions were not marked to market at the year-end. Under Ind As, the outstanding forward exchange contracts were re -measured based on the spot rates prevailing at the year-end and impact is recognised in the financial statements of the year.
e 5% and 0.01% Non-Cumulative Redeemable Preference Shares:
7,00,000 shares of Rs. 100 each of 5% Non-cumulative Redeemable Preference and 13,51,000 shares of Rs. 100 each of 0.01% Non-Cumulative Redeemable Preference Shares being Non-Cumulative and redeemable, i.e. there is contractual obligation to deliver cash at the time of redemption, accordingly the preference shares have been classified as financial liability as per Ind AS 32 “Financial Instruments: Presentation”. Fair value of the liability component is the Present value of redeemable principal amount using the borrowing cost applicable to the Company. Subsequently, the financial liability is carried at amortized cost and Interest expenses has been recognised using the effective interest method on the amortized cost.
The presentation requirements under Previous GAAP differs from Ind AS and hence Previous GAAP information has been regrouped for ease of reconciliation with Ind AS. The Regrouped Previous GAAP information is derived from the Financial Statements of the Company prepared in accordance with Previous GAAP.
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