1. Company overview and basis of preparation and presentation

1.1. Company overview

DCM Limited (the ‘Company’) is a public limited company incorporated in India in the name and style of Delhi Cloth & General Mills Co. Limited with registered office at Vikrant Tower, 4, Rajendra Place, New Delhi, India (CIN number L74899DL1889PLC000004). The Company is listed on two stock exchanges in India namely National Stock Exchange and Bombay Stock Exchange. The Company is engaged in the business of Textiles, Grey iron casting, IT Infrastructure Services and Real Estate.

1.2. Basis of preparation and presentation

These standalone financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of Companies Act, 2013, (the ‘Act’) and other relevant provisions of the Act.

The Company’s standalone financial statements up to and for the year ended March 31, 2017 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act.

As these are the Company’s first standalone financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, Firsttime Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flows of the Company is provided in Note 55.

The standalone financial statements were authorised for issue by the Company’s Board of Directors on May 30, 2018.

Details of the Company’s accounting policies are included in Note 2.

a. Functional and presentation currency

These standalone financial statements are presented in Indian Rupees (INR), which is also the Company’s functional currency. All amounts have been rounded-off to the nearest lakhs, unless otherwise indicated.

b. Basis of measurement

The standalone financial statements have been prepared on the historical cost basis except for the following items:

c. Use of estimates and judgements

In preparing these standalone financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual result may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

Note 2 (l) - leases: whether an arrangement contains a lease

Note 2 (l) - lease classification

Note 2 (f) - classification of financial assets: assessment of business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending March 31, 2019 is included in the following notes:

Note 2 (i) - measurement of defined benefit obligations: key actuarial assumptions

Note 2 (c) - measurement of useful lives and residual values to property, plant and equipment

Note 2 (d) - measurement of useful lives of intangible assets

Note 2 (f) - fair value measurement of financial instruments

Note 2 (j) - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of outflow of resources

Note 2 (m) - recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used

From banks:

(a) Term loans aggregating Rs. 7,291.75 lacs (March 31, 2017: Rs. 8,401.00 lacs, April 1, 2016: Rs. 9,810.23 lacs) are secured by first charge alongwith the charge created for availing cash credit, overdraft and working capital demand loan facilities described in note 22, on existing as well as future block of movable assets and an equitable mortgage by deposit of title deeds of land admeasuring 129.47 acres and all the immovable assets, both present and future, pertaining to the Textile Division at Hisar. The term loan carries a floating interest rate ranging between 8.35%-10.65% per annum. Rs. 173.75 lacs repayable in 3 quarterly installments, Rs. 138.00 lacs repayable in 4 quarterly installments, Rs. 6,655.00 lacs repayable in 20 quarterly installments and Rs. 325.00 lacs repayable in 32 quarterly installments.

(b) Rs. 847.00 lacs (March 31, 2017: Rs. 1,706.90 lacs, April 1, 2016: Rs. 2,829.20 lacs) secured by way of first pari passu charge on the fixed assets of the Company’s Engineering division, both present and future, including equitable mortgage of Engineering division’s factory land and building measuring 71 Acre- 07K-18M and second pari passu charge on the entire current assets of the Company, both present and future. The term loan carries a floating interest rate ranging between 11.85%- 12.65% per annum. Rs. 847.00 lacs is repayable in 22 monthly installments.

(c) Rs. 1300.00 lacs (March 31, 2017: Rs. 1500.00 lacs, April 1, 2016: Rs. Nil) secured by way of first pari passu charge on the fixed assets of the Company’s Engineering division, both present and future, including equitable mortgage of Engineering division’s factory land and building measuring 71 Acre-07K-18M and second pari passu charge on the entire current assets of the Company, both present and future. The term loan carries a floating interest rate 11.75% per annum and is repayable in 8 quarterly installments.

(d) Rs. 402.66 lacs (March 31, 2017: Rs. Nil, April 1, 2016: Rs. Nil) secured by way of first pari passu charge on the fixed assets (including immovable assets) of the Company’s Engineering Division and second pari passu charge on the entire stock of raw material, work-in-progress, semi-finished and finished goods, consumable stores & spares and such other movables including book debts, bills, whether documentary or clean, both present & future. The term loan carries a floating interest rate @ 11.80% per annum and is repayable in 41 monthly instalments.

(e) Rs. 148.64 lacs (March 31, 2017: Rs. 186.76 lacs, April 1, 2016: Rs. 86.55 lacs) relate to assets purchased under hire purchase/financing arrangements with banks and are secured by way of hypothecation of the specified assets. Repayable in equal monthly installments. The loans carry an interest rate ranging between 9.50%-13.50% per annum.

From others:

Secured :

(a) Rs. 6.13 lacs (March 31, 2017: Rs. 15.67 lacs, April 1, 2016: Rs. 35.00 lacs) relate to assets purchased under hire purchase/financing arrangements and are secured by way of hypothecation of the specified assets. Repayable in equal monthly installments. The loans carry an interest rate ranging between 9.50%-13.50% per annum.

From others:

Unsecured :

(a) Rs. Nil (March 31, 2017: Rs. Nil , April 1, 2016: Rs. 2,000.00 lacs) secured by way of extensions of pledge of 100% equity shares of Teak Farms Private Limited (TFPL) and 100% equity shares of Juhi Developers Private Limited (enterprises over which Key Managerial Personnel have significant influence). The term loan carries a floating interest rate ranging between 13.20%-13.50% per annum.

(b) Rs. 2,000.00 lacs (March 31, 2017: Rs. 2,000.00 lacs, April 1, 2016: Rs. Nil) secured by way of extensions of pledge of 100% equity shares of Teak Farms Private Limited (TFPL) and 100% equity shares of Juhi Developers Private Limited and pledge of 14.30 lacs equity shares of DCM Limited held by Crescita Enterprises Private Limited (enterprises over which Key Managerial Personnel have significant influence). The Loan is further secured by personal guarantee of Mr. Sumant Bharat Ram (Chief executive and financial officer). The term loan carries a floating interest rate of 12.50% per annum and is repayable in 8 equal quarteraly installments of Rs. 250.00 lacs each, commencing from June 2019.

There is no continuing default as on the balance sheet date in repayment of loans and interest thereon.

Security against loans repayable on demand

i) Cash credit/overdraft and working capital demand loan facilities aggregating to Rs. 12,876.00 lacs (March 31, 2017: Rs. 16,257.76 lacs, April 1, 2016: Rs. 12,495.13 lacs) relating to Textile Division at Hisar are secured by way of:

- hypothecation of stocks / stores and book debts, both present and future.

- further secured by equitable mortgage of land admeasuring 129.47 acres and all immovable assets, both present and future, and first charge, ranking pari-passu with the charge created for availing term loans as described in note 19, by way of hypothecation of existing as well as future block of movable assets pertaining to the Division.

ii) Cash credit facilities aggregating to Rs. 12.86 lacs (March 31, 2017: Rs. 199.60 lacs, April 1, 2016: Rs. 183.58 lacs) relating to IT Division from a bank are secured by way of:

- first charge/hypothecation of inventories, book debts and other assets of the Division (both present and future), and by way of first charge on office property at Hyderabad.

iii) Cash credit and working capital demand loans facilities aggregating to Rs. 3,191.82 lacs (March 31, 2017: Rs. 4,944.27 lacs, April 1, 2016: Rs. 6,483.93 lacs) relating to the Company’s Engineering division from banks are secured by way of:

- hypothecation of entire stocks of raw material, work in process, semi-finished goods and finished goods, consumable stores and spares and such other movables including book debts, bills, whether documentary or clean, both present and future

- charge on all fixed assets, both present and future, including mortgage of factory’s land and building located at village Asron, Hadbast No. 418, Tehsil Balachaur District Hoshiarpur, Punjab, measuring 71 Acre- 07K-18M together with all buildings, plant and machinery, erections, godowns and constructions of every description which are standing, erected or attached or shall at any time hereafter during the continuance of the security hereby constituted be erected or attached and standing or attached thereto.

iv) Overdraft facility of Rs. 898.13 lacs (March 31, 2017: Rs. 896.90 lacs, April 1, 2016: Rs. 991.21 lacs) relating to the Company’s Engineering division from a bank are secured by way of:

- land and building located in Kodukanthangal Village and Serkadu Village, Katpadi Sub-Registration District, Vellore Registration District, Vellore District,

Tamil Nadu measuring 39.02 acres and land and building located in Rail Mazra Village, Tehsil Balachaur, District Shaheed Bhagat Singh Nagar, Punjab measuring 4.02 acres.

The Company’s exposure to currency and liquidity risks related to trade payables is disclosed in Note 53.

* The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated August 26, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Based on the information presently available with the management, the disclosures required under Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”) are given below:

(c) As at March 31, 2018, the Group has unabsorbed depreciation and business losses under the provisions of the Income-tax Act, 1961. Consequent to the provisions of Ind AS 12 - “Income Taxes”, in the absence of reasonable certainty of taxable profits in future years, deferred tax assets have been recognised only to the extent of deferred tax liability. The Company reassess the unrecognised deferred tax assets at each reporting period and recognise the deferred tax assets over its deferred tax liability when it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

3. Leases

Operating leases

The Company’s significant operating lease arrangements are in respect of premises for residential use of employees, office, stores, godown, etc. for a period of ranging from 1-5 years. These leasing arrangements, which are cancellable, are renewable at mutually agreeable terms. The lease rentals charged as employee benefits expense aggregate Rs. 113.47 lacs (March 31, 2017: Rs. 111.25 lacs) under note 32 and lease rentals charged as rent aggregate Rs. 120.22 lacs (March 31, 2017: Rs. 114.02 lacs) under note 35.

Finance leases A. Leases as a lessor

The company has classified the arrangement with the customers wherein the patterns/tooling/moulds are lease out in the nature of lease based on the principles enunciated in Appendix C of Ind AS 17 ‘Leases’ and accounted for as finance lease in accordance with those principles.

The agreement with the customers is for a period of 15 years.

4. Restructuring

In terms of the Scheme of Restructuring and Arrangement approved by the Delhi High Court vide its order dated October 29, 2003 under section 391-394 of the Companies Act, 1956 (Act) and subsequent modification thereto vide Delhi High Court order dated April 28, 2011 (hereinafter referred to as SORA), the Company as envisaged thereunder has:

a) entered into definitive agreement on February 16, 2004 with Purearth Infrastructure Limited (PIL), a co-promoted company, for sale of development rights in freehold and leasehold land at Bara Hindu Rao/Kishanganj for a total consideration of Rs. 28,820 lacs (includes Rs. 3,400 lacs on account of leasehold land out of which Rs. 2,400 lacs is subject to certain minimum profits being earned by PIL from the leasehold land). The status of these agreements is as under:

- In terms of the Freehold Definitive Agreement dated February 16, 2004, the Company had, during the year 2003-04, recognised the sale of development rights to PIL in freehold land at Bara Hindu Rao for a consideration of Rs.14,449.92 lacs (excluding the outstanding of Rs.10,962.08 lacs against the sale of rights aggregating Rs. 39,567 lacs in the Previous years).

- In terms of the “Leasehold Definitive Agreement” (“LDA”) dated February 16, 2004, pursuant to completion of its obligation to get the leases restored/converted from leasehold to freehold , the Company had recognized the entire revenue of Rs. 3,400 lacs from sale of development rights in leasehold land in the year 2014-15 and 2015-16.

- The outstanding receivable from for the said sale of development rights in freehold and leasehold land is amounting to Rs. Nil (March 31, 2017: Rs. Nil, April 1, 2016: Rs 1,850.00 lacs) as at year end.

b) After considering the effect of Delhi High Court order dated April 28, 2011, the Company had complied with the debt repayment obligations including in respect of debentures, deposits, loans and related interest and where such amount has not been claimed by the concerned party, deposited an equivalent amount into a ‘No Lien /Designated Account’ with scheduled banks. Aggregate of amount so deposited as at the year-end is Rs. 10.84 lacs (March 31, 2017: Rs. 19.52 lacs, April 1, 2016: 91.83 lacs).

5. Amalgamation and demerger

i. The Board of Directors of the Company, in its meeting held on October 15, 2016, approved a Scheme of Arrangement (‘the Scheme’) between DCM Ltd and DCM Nouvelle Limited, a wholly owned subsidiary of DCM Limited for the demerger of the Textile business of DCM Limited as per the scheme and vesting of the same with DCM Nouvelle Limited, on a going concern basis with effect from January 1, 2017, i.e the appointed date.

Further the Board of Directors of the Company, in its meeting held on October 15, 2016, approved a Composite scheme of arrangement (‘the Composite Scheme’) which was further amended in its subsequent meeting held on February 13, 2017 for the:-

(a) Amalgamation of Tiara Investment Holdings Limited into Purearth Infrastructure Limited, a jointly controlled entity (‘the Amalgamated Company’), with effect from December 31, 2016;

(b) Demerger of the Real Estate business of DCM Limited, as defined in the Composite Scheme, into DCM Realty and Infrastructure Limited (‘the Resulting Company’), on a going concern basis with effect from January 1, 2017; and

(c) Following the amalgamation as referred to in (a) and demerger as referred to in (b) above, amalgamation of the Amalgamated Company, i.e. Purearth Infrastructure Limited with the Resulting Company, i.e. DCM Realty and Infrastructure Limited, with effect from January 1, 2017.

The aforesaid schemes are subject to approval from the concerned regulatory authorities which is not perfunctory and considered to be substantive. Accordingly, the aforesaid schemes of arrangement cannot be considered as highly probable unless the regulatory approvals are obtained and hence do not meet the criteria for held for sale/ discontinued operations. Accordingly, the proposed demerger of Textile business and Real Estate business has not been considered as Discontinued Operations in these financial statements.

ii. The Board of Directors of the Company, in its meeting held on 31 March 2017, approved a scheme ofAmalgamation of Crescita Enterprises Private Limited (‘the Transferor Company’) into & with the Company with effect from 31 March 2017 (i.e. the appointed date). After the above said amalgamation, 48.35% shares of the Company which are presently held by the Transferor Company would be cancelled and the Company would issue same number of equity share to the shareholder of the Transferor Company in proportion to the shares held by them in Transferor Company at record date. The aforesaid scheme is subject to approval from the concerned regulatory authorities.

6. The Company has set up a solar power plant at its textile division at Hisar with a cost of Rs. 471.60 lacs during the year ended March 31, 2017. A term loan of Rs. 325 lacs (out of sanctioned term loan of Rs. 330 lacs) is taken for this purpose. Total power units generated during the year are 15.31 lacs KWH (March 2017 : 1.47 lacs KWH). The company is eligible for tax holiday under section 80IA up to 2030-31 (to claim deduction in any 10 consecutive assessment year out of 15 year starting from the year in which operation begins).

7. Capital advances includes Rs. 870.00 lacs (March 31, 2017: Rs. 870.00 lacs, April 1, 2016: 870.00 lacs) to acquire certain property under construction at New Delhi. The construction was a matter of litigation between the builder and the local authorities. The High Court of Delhi has allowed the builder to construct the property subject to certain conditions. The management is confident that the advance paid to acquire the property is good and fully recoverable.

8. In the previous years, the Company’s claim for the refund of an Inter Corporate Deposit amounting to Rs. 100 lacs against a body corporate was settled by the body corporate by issuing, in terms of an arbitration award, 0% non-cumulative, non-voting, redeemable preference shares of Rs. 100 each to the Company, redeemable within 20 years. The management is confident that the investment of Rs. 100.00 lacs (fare value Rs.76.32 lacs, March 31, 2017 : Rs. 68.03 lacs, April 1, 2016 : Rs. 61.00 lacs) acquired by the Company in preference shares of the body corporate is good and fully recoverable.

9. Disclosure of Specified Bank Notes (SBNs) (as defined in the notification of Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407 (E) dated 08 November 2016) during the period November 08, 2016 to December 30, 2016, as required by Notification No. G.S.R 308(E) dated March 30, 2017 issued by the Ministry of Company Affairs:

10. Operating segments

A. Basis for segmentation

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components, and for which discrete financial information is available. All operating segments’ operating results are reviewed regularly by the Chief operating decision maker (CODM) to make decisions about resources to be allocated to the segments and assess their performance.

In accordance with Ind AS 108 ‘Segment Reporting’ as specified in section 133 of the Companies act, 2013 read with Rule 7 of the Companies (Accounts) Rule, 2014, the Company has identified four reportable segments, as described below, which are the Company’s strategic business units. These business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the business units, the Chief operating decision maker (CODM) reviews internal management reports on a periodic basis.

The following summary describes the operations in each of the Company’s reportable segments:

B. Information about reportable segments

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit (before tax), as included in the internal management reports that are reviewed by the Company’s Board of Directors. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

C. Geographical information

The geographical information analyses the Company’s revenues and non-current assets by the Company’s country of domicile (i.e. India) and other countries. In presenting the geographical information, segment revenue has been based on the geographic location of customers and segment assets which have been based on the geographical location of the assets.

*Non current assets exclude financial instrument, deferred tax assets and post employment benefit assets.

D. Major customers

There is no single customer who contributed 10% or more of the Companies revenue during the year ended March 31, 2018 and March 31, 2017.

11. Employee benefits

A Defined contribution plans

Contributions to defined contribution plans charged off for the year are as under:

B Defined benefit plans

The Company operates the following post-employment defined benefit plans:-

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to 15 days of total basic salary last drawn for each completed year of service. Gratuity is payable to all eligible employees of the Company on retirement, separation, death or permanent disablement, in terms of the provisions of the Payment of Gratuity Act.

Liability with regards to Gratuity is accrued based on actuarial valuation at the balance sheet date, carried out by independent actuary. For details about the related employee benefits plan, refer accounting policies on employee benefits.

12. Related party disclosures:

In accordance with the requirements of Ind AS 24 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management are:

A. Name and description of relationship of the related party Entity having significant control over the Company Crescita Enterprises Private Limited (w.e.f. March 09, 2017)

Related parties where control exists Subsidiaries

DCM Finance & Leasing Limited

DCM Textiles Limited

DCM Realty and Infrastructure Limited

DCM Tools & Dies Limited

DCM Realty Investment & Consulting Limited

DCM Data Systems Limited

DCM Nouvelle Limited

Other related parties with whom transaction have taken place during the year Joint venture

Purearth Infrastructure Limited

Key management personnel and/or individuals having direct or indirect control or significant influence, and their relatives:

Dr. Vinay Bharat Ram — Chairman and Managing Director Mr. Hemant Bharat Ram — President (Textiles division)

Mr. Sumant Bharat Ram — Chief Executive and Financial Officer

Mr. Sushil Kapoor Executive Director (Business) - Engineering Division (with effect from January 15, 2018)

Mr. Dinesh Dhiman - Executive Director (Operations)- Engineering Division (with effect from December 13, 2017)

Mr. Varun Sarin - Chief of Operation and Finance (IT Division)

Mr. Rakesh Kumar Goel - CEO (Textile Division)

Mr. Yadvinder Goyal - Company Secretary

Mr. Rahil Bharat Ram — Son of Mr. Sumant Bharat Ram

Mr. Yuv Bharat Ram — Son of Mr. Sumant Bharat Ram

Entities where key management personnel have significant influence

Juhi Developers Private Limited Teak Farms Private Limited Crescita Enterprises Private Limited

Society

DCM Engineering Products Educational Society

13. Research and development expenditure

Company has claimed weighted tax deductions on eligible research and development expenditure u/s 35(2AB) of the Income Tax Act, 1961 equivalent to 200% of such expenditure based on the approval received from Department of Scientific and Industrial Research (DSIR) w.e.f. May 28, 2015. The details of such expenditure are as follows:

14. Assets held for sale

The Board of Directors of the Company, in its meeting held on February 8, 2018, approved the sale of land and building held at Tamil Nadu and Punjab for such consideration and on such terms and conditions as may be deemed fit in the best interest of the Company.

- The Company’s borrowings have been contracted at floating rates of interest. Accordingly, the carrying value of such borrowings (including interest accrued but not due) approximates fair value.

- The carrying amounts of trade receivables, trade payables, cash and cash equivalents, bank balances other than cash and cash equivalents and other financial assets and liabilities, approximates the fair values, due to their short-term nature. The loans, investments and other non-current financial assets represents finance lease receivable and bank deposits (due for maturity after twelve months from the reporting date), and other non-current financial liabilities, the carrying value of which approximates the fair values as on the reporting date.

There have been no transfers between Level 1, Level 2 and Level 3 for the years ended March 31, 2018, March 31, 2017 and April 1, 2016. Valuation technique used to determine fair value

Specific valuation techniques used to value non-current financial assets and liabilities for whom the fair values have been determined based on present values and the appropriate discount rates of the Company at each balance sheet date. The discount rate is based on the weighted average cost of borrowings of the Company at each balance sheet date.

b. Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk ;

- Liquidity risk ; and

- Market risk

Risk management framework

There is a continuous process of identifying/ managing risk through a Risk Management Process. The measures used in managing the risk are also reviewed. Financial Risk identified by the Company broadly fall in the category of Credit risk, Liquidity risk and Market risk.

The Company’s risk management process consists of risk identification, risk assessment, risk monitoring and risk mitigation. Risk management process are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.

The maximum exposure to the credit risk at the reporting date is primarily from trade receivables. Trade receivables are generally unsecured and are derived from revenue earned from customers primarily located in India and China. The Company continuously monitors the economic environment in which it operates. The Company manages its Credit risk through credit approvals, establishing credit limits and continuously monitoring credit worthiness of customers to which the Company grants credit terms in the normal course of business.

The average credit period on sales of goods and services (other than moulds) within India is 30 to 60 days, sale of moulds is 180 days and sales of goods and services outside India is 30 to 90 days.

Majority of trade receivables are from customers, which are fragmented and are not concentrated to individual customers. Trade receivables are generally realised within the credit period.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are fallen due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company believes that its liquidity position, including total cash and cash equivalent and bank balances other than cash and cash equivalent of Rs. 1,213.21 lacs as at March 31, 2018 (March 31, 2017 Rs. 1624.51 lacs, April 1, 2016 Rs. 2476.84 lacs), anticipated future internally generated funds from operations, and its fully available, revolving undrawn credit facility will enable it to meet its future known obligations in the ordinary course of business. However, if a liquidity needs were to arise, the Company believes it has access to financing arrangements, value of unencumbered assets, which should enable it to meet its ongoing capital, operating, and other liquidity requirements. The Company will continue to consider various borrowing or leasing options to maximize liquidity and supplement cash requirements as necessary.

The Company’s liquidity management process as monitored by management, includes the following:

- Day to day funding, managed by monitoring future cash flows to ensure that requirements can be met.

- Maintaining rolling forecasts of the Company’s liquidity position on the basis of expected cash flows.

- Maintaining diversified credit lines.

iii. Market risk

Market risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: currency risk and interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

Currency risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed to the effects of fluctuation in the prevailing foreign currency exchange rates on its financial position and cash flows. Exposure arises primarily due to exchange rate fluctuations between the functional currency and other currencies from the Company’s operating, investing and financing activities.

Exposure to currency risk

The summary of quantitative data about the Company’s exposure to currency risk, as expressed in Indian Rupees, as at March 31, 2018, March 31, 2017 and April 1, 2016 are as below:

Sensitivity analysis

A reasonably possible strengthening (weakening) of the Indian Rupee against below currencies at March 31, 2018 (previous year ended as on March 31, 2017) would have affected the measurement of financial instruments denominated in functional currency and affected equity and profit or loss by the amounts shown below. This analysis is performed on foreign currency denominated monetary financial assets and financial liabilities outstanding as at the year end. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk.

Exposure to interest rate risk

The Company’s interest rate risk arises majorly from the term loans from banks carrying floating rate of interest. These obligations exposes the Company to cash flow interest rate risk. The exposure of the Company’s borrowing to interest rate changes as reported to the management at the end of the reporting period are as follows

15 Capital management

For the purpose of the Company’s capital management, capital includes issued equity share capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the management of the Company’s capital structure is to maintain an efficient mix of debt and equity in order to achieve a low cost of capital, while taking into account the desirability of retaining financial flexibility to pursue business opportunities and adequate access to liquidity to mitigate the effect of unforeseen events on cash flows.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may return capital to shareholders, raise new debt or issue new shares.

16. Transition to Ind AS

As mentioned in note 1.2 (A), these financial statements for the year ended March 31, 2018, are the first financial statements of the Company prepared in accordance with the Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015. For periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with “previous GAAP”, including accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended).

Accordingly, the Company has prepared financial statements which comply with Ind-AS applicable for periods ended on or after March 31, 2018, together with the comparative period data as at and for the year ended March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1, 2016, the Company’s date of transition to Ind-AS. This note explains the principal adjustments made by the Company in restating its Previous GAAP financial statements, including the balance sheet as at April 1, 2016 and the financial statements as at and for the year ended March 31, 2017.

In preparing its Ind AS financial statements as at April 1, 2016 and in presenting the comparative information for the year ended March 31, 2016, the company has adjusted amounts reported previously in the financial statements prepared in accordance with previous GAAP. This note explains the principal adjustments made by the company in restating its financial statements prepared in accordance with previous GAAP, and how the transition from previous GAAP to Ind AS has affected the company’s financial position, financial performance and cash flows.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

Transition elections

Explanation of the Ind AS 101 exceptions and exemptions to the full retrospective application of Ind AS applied by the Company.

In the Ind AS opening Balance Sheet as at April 1, 2016, the carrying amounts of assets and liabilities from the Previous GAAP as at March 31, 2016 are generally recognized and measured according to Ind AS in effect for the financial year ended as on March 31, 2018. For certain individual cases, however, Ind AS 101 provides for optional exemptions to the general principles of retrospective application of Ind AS. The Company has made use of the following exemptions in preparing its Ind AS opening Balance Sheet.

A.1 Ind AS optional exemptions

(i) Property, plant and equipment and intangible assets

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment and intangible assets as 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 after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.

(ii) Business combination

Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.

(iii) Determining whether an arrangement contains a lease

Ind AS 101 includes an optional exemption that permits an entity to apply the relevant requirement in Appendix C of Ind AS 17 for determining whether an arrangement existing at the date of transition contains a lease by considering the facts and circumstances existing at the date of transition ( rather than at the inception of the arrangement). The Company has elected to avail of the above exemption.

A.2 Ind AS mandatory exceptions Estimates

An entity’s estimates in accordance with Ind ASs 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), unless there is objective evidence that those estimates were in error. Ind AS estimates as at April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under previous GAAP.

Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

B. Reconciliations between previous GAAP and Ind AS:

Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from Previous GAAP to Ind AS.

Impact of Ind AS adoption on the statements of cash flows for the year ended March 31, 2017

There were no material differences between the statement of cash flows presented under Ind AS and the Previous GAAP except due to various reclassification adjustments recorded under Ind AS and difference in the definition of cash and cash equivalents under these two GAAPs.

Notes to the reconciliation:

a. Fair valuation of investments

Under previous GAAP, investments in preference shares were carried at cost. Under Ind AS, these investments are required to be measured at fair value. The investment in preference shares of subsidiary are measured at amortised cost and there is no impact of fair value change on total equity. The investment in preference shares of Combine Overseas Limited are measured at fair value through profit and loss, resulting fair value changes of these investments amounting to Rs. 39.00 lacs have been recognised in total equity as at the date of transition (i.e. April 1, 2016). The loss for the year ended March 31, 2017 has decreased and total equity has increased by Rs. 7.03 lacs due to the fair value changes.

b. Measurement of borrowings as per effective interest rate method

Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in the statement of profit and loss over the tenure of the borrowings as part of the interest expense by applying the effective interest rate method. However, under previous GAAP, these transaction costs were capitalising/charging to the statement of profit and loss. Accordingly, under Ind AS borrowings as at March 31, 2017 have been reduced by Rs. 48.51 lacs (April 1, 2016 Rs. 27.27 lacs) and property, plant and equipment have been reduced by Rs. 30.84 lacs as on March 31, 2017 (April 1, 2016 Rs. 36.64 lacs), net adjustment to retained earnings is Rs. 9.37 lacs. The loss for the year ended March 31, 2017 has been decreased by Rs. 31.85 lacs as a result of reversal of interest expense and by Rs. 5.80 lacs as a result of reversal of depreciation.

c. Recognition of security deposits at amortised cost

Under Previous Indian GAAP, interest free security deposits (that are refundable in cash on completion of the term) are recorded at their transaction value. Under Ind AS, such financial assets are required to be recognised initially at their fair value and subsequently at amortised cost. Difference between the fair value and transaction value of the security deposit has been recognised as deferred rent. Consequent to this change the amount of security deposit as on March 31, 2017 has decreased by Rs. 8.08 lacs (April 1, 2016 : Rs. 12.17 lacs) with a creation of deferred rent (included in other non-current and current assets) of Rs. 6.89 lacs (April 1, 2016 : Rs. 10.65 lacs). The total equity decreased by Rs. 1.52 lacs as at April 1, 2016. The unwinding of security deposit happens by recognition of a notional interest income in Statement of Profit and Loss at effective interest rate. The deferred rent gets amortised on a straight line basis over the term of the security deposits. The loss for the year ended March 31, 2017 increased and total equity for the year ended March 31, 2017 decreased by Rs. 5.27 lacs due to amortisation of deferred rent and increase in notional interest income of Rs. 5.61 lacs recognised on security deposits (included in other income).

d. Employee benefits: Remeasurement of post employment benefit plans

Under Ind AS, remeasurements i.e. actuarial gains and losses on the defined benefit liability are recognised in other comprehensive income instead of statement of profit and loss. Under previous GAAP, these were forming part of the statement of profit and loss for the year. As a result, loss for the year ended March 31, 2017 is decreased by Rs. 149.27 lacs and is reclassified to other comprehensive income. There is no impact on the total equity as at March 31, 2017.

e. Loss allowance for trade receivable

On transition to Ind AS, the company has recognised impairment loss on trade receivables based on the expected credit loss models required by Ind AS 109. Consequently, trade receivable have been reduced by Rs. 22.87 lacs (April 1, 2016: Rs. 56.25 lacs) with a corresponding decrease in retained earnings on the date of transition and there has been an incremental provision for the year ended March 31, 2017.

f. Capitalisation of tooling income and lease of

Under previous GAAP, arrangements that did not take the legal form of lease were accounted for based on the legal form of such arrangements. Under Ind AS, any arrangement (even if not legally structured as lease) which conveys a right to use an asset in return for a payment or series of payments are identified to be as leases provided certain conditions are met. In case such arrangements are determined to be in the nature of leases, such arrangements are required to be classified into finance or operating leases as per requirement of Ind AS 17, Leases. On the date of transition (i.e. April 1, 2016), the carrying value of property, plant and equipment has been reduced by Rs. 562.34 lacs (March 31, 2017: Rs. 437.25 lacs), with corresponding increase in other non-current financial assets (finance lease receivable) by Rs. 482.44 lacs (March 31, 2017: Rs. 345.85 lacs) and other current asset by Rs. 131.11 lacs (March 31, 2017: Rs. 136.60 lacs). Further an amount of Rs. 51.21 lacs (March 31, 2017: Rs. 45.21 lacs) has been transferred from deferred revenue to retained earnings.

g. Other comprehensive income

Under previous GAAP, there was no requirement to disclose any item of statement of profit and loss in other comprehensive income. However as per requirement of Ind AS certain items of statement of profit and loss are to be reclassified to other comprehensive income. Consequent to this, the Company has reclassified remeasurement of defined benefit plans and translation difference on foreign operation from the statement of profit and loss to other comprehensive income.

h. Reversal of dereffer tax assets

Under Previous GAAP, the Company has recorded the amount of deferred tax. However, on transition to Ind AS, the Company has reversed the deferred tax assets amounting to Rs. 548.48 lacs as at 1 April 2016 pursuant to rectification of error in the estimate of recoverability.

i. Fair valuation of forward contracts

Under previous GAAP, forward contracts were revalued at each reporting date and the amount being recognised in the statement of profit and loss, but recognition was restricted only to the extent it represents any losses. Under Ind AS, such instruments needs to be fair valued on the balance sheet date /every reporting date and both fair value gains and losses needs to be recognised in statement of profit and loss, unless hedge accounting is followed in which the same needs to be recorded through OCI. As a result, loss for the year ended March 31, 2017 has decreased by Rs. 111.15 lacs. j. Translation difference on foreign operation

Under Ind AS, translation difference on arising on foreign operation are recognised in other comprehensive income instead of statement of profit and loss. Under previous GAAP, these were forming part of the statement of profit and loss for the year. As a result, loss for the year ended March 31, 2017 is decreased by Rs. 22.82 lacs and is reclassified to other comprehensive income. There is no impact on the total equity as at March 31, 2017. k. Excise Duty on sales

Under the previous GAAP, excise duty on sale of goods was reduced from sales to present the revenue from operations. Whereas, under Ind AS, this excise duty is included in the revenue from operations and the corresponding expense is included is part of total expenses. The change does not affect total equity as at April 1, 2016 and March 31, 2017, loss before tax or total loss for the year ended March 31, 2017.

l. Cash discounts on sales

Under the previous GAAP, only trade discount and volume rebates were netted off from the revenue. Whereas, under Ind AS, cash discounts and other sales incentives are also required to be factored in calculation of transaction price. The change does not affect total equity as at April 1, 2016 and March 31, 2017, loss before tax or total loss for the year ended March 31, 2017. m. Revenue grants

Under the previous GAAP, revenue grants from government were recognised as a deduction from the expenses to which they were intended to compensate. Whereas, under Ind AS, the Company has elected to present such grants within other income. The change does not affect total equity as at April 1, 2016 and March 31, 2017, loss before tax or total loss for the year ended March 31, 2017. n. Exceptional items

Under the previous GAAP, recovery of an amount of Rs. 775.00 lacs during the year ended March 31, 2017 from a jointly controlled entity pursuant to the settlement reached by the Company is shown as exceptional items. Whereas, under Ind AS, the Company has elected to present such items as normal revenue/ expenses. The change does not affect total equity as at March 31, 2017, loss before tax or total loss for the year ended March 31, 2017. The accompanying notes are an integral part of these standalone financial statements