1. General information
The Standard Mills Company Limited was incorporated in India in the year 1892 under the Indian Companies Act, 1882. In line with the diverse nature of its business, it had changed its name from Standard Mills Company Limited to Standard Industries Limited, (the ‘Company') in october 1989. The Company is engaged in the business of trading in Textiles and Chemicals. real Estate division comprises of assets which are in excess of business needs, which the Company would liquidate based on market conditions.
2.1 Impairment losses recognised in the year
There are no impairment losses recognised during the year.
2.2 Assets pledged as security
Buildings with a carrying amount of Rs. 6.87 Lakhs (as at March 31, 2017: Rs.7.09 Lakhs and as at April 1, 2016: Rs.7.30 Lakhs) included in the block of buildings have been pledged to secure borrowings of the Company (see note 20). The Company is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.
3.1 Fair value of the Company’s investment properties
The fair value of the Company's investment properties as at March 31, 2018, March 31, 2017, and april 1, 2016 have been arrived at on the basis of a valuation carried out as on the respective dates by K.C. Gandhi & Co., independent valuers not related to the Company. K.C. Gandhi & Co. are registered with the authority which governs the valuers in India, and they have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The fair value was derived using the market comparable approach based on recent market prices with few adjustments being made to the market observable data.
The fair value of the Company's investment properties situated at surat as at March 31, 2018, March 31, 2017, and april 1, 2016 have been arrived at on the basis of a valuation carried out as on the respective dates by sai Consultants, independent valuers not related to the Company. sai Consultants. are registered with the authority which governs the valuers in India, and they have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The fair value was derived using the market comparable approach based on recent market prices with few adjustments being made to the market observable data.
3.2 Assets pledged as security
Buildings with a carrying amount of Rs.68.71 Lakhs (as at March 31, 2017: Rs.70.85 Lakhs and as at April 1, 2016: Rs.72.99 Lakhs) included in the investment property have been pledged to secure borrowings of the Company (see note 20). The Company is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.
4.1 The Company has provided loan to its subsidiary, Standard Salt Works Limited. This loan is initially measured at fair value and subsequently at amortised cost. The difference between the market rate of interest and the rate of interest of the loan is the benefit provided by the Company to its subsidiary. This benefit is recognised as deemed investment in the books of the Company.
The cost of inventories recognised as an expense during the year was Rs.984.36 Lakhs (for the year ended March 31, 2017: Rs.686.21 Lakhs).
The cost of inventories recognised as an expense includes Rs.25.68 Lakhs (during 2016-2017: Rs. Nil) in respect of write-downs of inventory to net realisable value.
The mode of valuation of inventories has been stated in note 3.14.
The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. as the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to profit or loss.
Retained earnings represents the amount that can be distributed by the Company as dividends considering the requirements of the Companies Act, 2013.
On September, 2017, a dividend of Rs.0.75 per share (total dividend Rs.482.47 Lakhs and tax on dividend paid Rs.98.24 Lakhs) was paid to holders of fully paid equity shares. In July 2016, the dividend paid was ' 0.75 per share (total dividend Rs.482.47 Lakhs and tax on dividend paid Rs.98.24 Lakhs).
In respect of the year ended March 31, 2018, The Board of directors of the Company has declared an Interim dividend of Rs.0.75 per equity share of Rs.5/- each for the year ended March 31, 2018.
Further the Board of director has proposed a Final dividend of Rs.0.25 per equity share of Rs.5/- each for the year ended March 31, 2018 which is subject to the shareholders' approval and declaration at the ensuing Annual General Meeting. Both aggregate to Rs.1.00 for the year ended March 31, 2018 (Previous Year Rs.0.75 per equity share of Rs.5/- each)
4.2 There are no breach of contractual terms of the borrowing during the year ended March 31, 2018, March 31, 2017 and April 1, 2016.
4.3 Reconciliation of liabilities arising from financing activities
The table below details changes in the Company's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Company's consolidated of cash flows as cash flows from financing activities.
5 Segment information
5.1 Products and services from which reportable segments derive their revenues Information reported to the chief operating decision maker (CoDM) for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided, and in respect of the ‘real estate' and ‘trading' operations. The directors of the Company have chosen to organise the Company around differences in products and services. No operating segments have been aggregated in arriving at the reportable segments of the Company.
specifically, the Company's reportable segments under lnd as 108 are as follows:
- Real estate
- Trading
The accounting policies of the reportable segments are the same as the Company's accounting policies described in note 3. Segment profit represents the profit before tax earned by each segment without allocation of unallocated expenses and income. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.
5.2 Information about geographical areas
The Company presently caters to only domestic market i.e. India and hence there is no revenue from external customers outside India nor any of its non-current asset is located outside India.
5.3 Information about major customers
Included in revenue arising from direct sales of trading goods of Rs.668.05 Lakhs (year ended 31 March, 2017: Rs.326.05 Lakhs) which arose from sales to its five (two) major customers which accounts for 66.83 percent (year ended 31 March, 2017: 44.22 percent) of the total revenue from trading operation. The entire revenue of real estate operation is from a single customer. No other single trading customer contributed 10% or more to the Company's revenue for year ended 31 March, 2018 and year ended 31 March, 2017.
5.4 diluted Earnings Per Share
The diluted earnings per share has been computed by dividing the Net profit after tax available for equity shareholders by the weighted average number of equity shares, after giving the effect of the dilutive potential ordinary shares for the respective periods.
6. Employee benefits
i) defined Contribution Plan
The Company's contribution to Provident fund and other funds aggregating during the period ended 31 March, 2018 is Rs.16.52 Lakhs (and during the year ended 31 March 2017: 17.47 Lakhs) has been recognised in the statement of profit or loss under the head employee benefits expense.
ii) Defined Benefit Plans:
Gratuity
The Company has a defined benefit gratuity plan in India (funded). The Company's defined benefit gratuity plan is a final salary plan for employees, which requires contribution to be made to a separately administered fund.
The fund is managed by a trust which is governed by the board of trustees. The board of trustees are responsible for the administration of the plan assets and for the definition of the investment strategy.
During the year, the Company has changed the benefit scheme in line with Payment of Gratuity act, 1972 by increasing monetary ceiling from Rs.10 lakhs to Rs.20 lakhs, for those employees who are getting benefit as per Payment of Gratuity act, 1972. Change in liability ( if any) due to this scheme change is recognised as past service cost.
A separate trust fund is created to manage the Gratuity plan and the contributions towards the trust fund is done as guided by rule 103 of Income Tax Rules, 1962.
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
(1) Salary Risk:
The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. as such, an increase in the salary of the members more than assumed level will increase the plan's liability.
(2) Interest rate Risk:
A fall in the discount rate which is linked to the G.sec. Rate will increase the present value of the liability requiring higher provision. a fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.
(3) 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. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.
(4) Asset Liability Matching Risk:
The plan faces the ALM risk as to the matching cash flow. since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.
(5) Mortality Risk:
since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.
Sensitivity Analysis
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The following table summarizes the impact on the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 1%.
i) The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
ii) Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.
iii) There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
The Company expects to contribute Rs. Nil (as at 31st March, 2017: Rs. Nil and as at 1st April, 2016: Rs. Nil) to the gratuity trust during the next financial year.
7. Leases Operating Lease
i) The Company has entered into operating lease arrangements for commercial premises at various locations. Amount of lease rentals (excluding service tax and GST) in respect of cancellable operating leases recognised in the statement of profit and loss is Rs.97.20 Lakhs ( for the year ended March 31, 2017: 97.20 Lakhs)
8 Financial instruments
8.1 Capital management
The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt offset by cash and bank balances and total equity of the Company.
8.2 Financial risk management objectives
The Company monitors and manages the financial risks to the operations of the Company. These risks include market risk, credit risk, interest risk and liquidity risk.
A. Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk of financial loss from defaults. The Company uses its own trading records to rate its major customers. The Company's exposure to financial loss from defaults are continuously monitored.
Trade receivables consist of a large number of customers, spread across various geographical areas. ongoing credit evaluation is performed on the financial condition of accounts receivable.
B. Liquidity risk
Liquidity risk refers to insufficiency of funds to meet the financial obligations. Liquidity Risk Management implies maintenance of sufficient cash to meet obligations when due.
The Company continuously monitoring forecast and actual cash flows, and by assessing the maturity profiles of financial assets and liabilities.
The above table details the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The contractual maturity is based on the earliest date on which the Company may be required to pay.
C. Market risk
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of currency risk and interest rate risk. In the normal course of business and in accordance with our policies, we manage these risks through a variety of strategies.
i) Currency risk
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is domiciled in India and has its revenues and other transactions in its functional currency i.e. I NR. Accordingly the Company is not exposed to any currency risk.
ii) Interest rate risk
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has borrowed funds with both fixed and floating interest rate.
Notes:
(i) The above claims are pending before various Authorities/court. The Company is confident that the cases will be successfully contested.
(ii) These represent demands raised by Income-tax department on various matters for which disputes are pending before various Appellate authorities. The Company is confident that all these cases can be successfully contested.
(iii) There are no capital commitments
9. The Company has entered into a Memorandum of Understanding dated september 1, 2016 with Feat Properties Private Limited (FPPL) to transfer and assign all its leasehold rights in 62.25 acres of Company's leasehold property situated at Plot No.4, Trans-Thane Creek Industrial Area in the Villages of Ghansoli and savali, Taluka/Dist - Thane (“Property”) for a consideration of Rs.3,550,000,000 (Rupees Three hundred and fifty five crores only) receivable in installments. This transfer, assignment and consideration is subject to various conditions precedent getting satisfied (including approval of MIDC) and other terms and conditions specified in the aforesaid Memorandum of Understanding. Accordingly, FPPL has paid advance of Rs.6,500 lakhs till March 31, 2018.
10. During the year, in terms of the agreement/understanding entered with a buyer, the Company has assigned all its rights and interest concerning entitlement of Transferable Development Right (TDR) with respect to its land situated at Sewree, which the Company is entitled to in terms of Notification dated 16.11.2016 under the Development Control Regulations of Greater Mumbai 1991. Considering acknowledgement on the part of the buyer and views of expert , the management has concluded that, pending only certain formalities for entitlement and assignment, there is no uncertainty in respect of its entitlement of TDR and passing of significant risks and rewards in respect the same and its consequential assignment in favour of the buyer. Accordingly the Company has recognised assignment of TDR entitlement in the financial statements of the current year and profit arising therefrom, amounting to Rs.3503.13 lakhs, has been disclosed under schedule 26 as “other income”.
11. During the previous year, the unsecured loan of Rs.5370.00 Lakhs (including accrued interest of Rs.1,249.18 lakhs and business advance of Rs.159.45 Lakhs) given to Standard Salt Works Limited (SSWL) has been converted into equity shares. Consequently, the total investment in SSWL as at March 31, 2017 aggregates Rs.5,969.82 lakhs. The net worth of SSWL as at March 31, 2017 post aforesaid conversion has become positive. Further, in view of the long-term strategic nature of the investment in leasehold rights to salt pans and the growth prospects of the subsidiary which is engaged in the manufacture of salt from the significant leased salt pans that it is holding, no provision for diminution in the value of the investment is considered necessary at this stage.
Notes to reconciliation
a) Under previous GAAP long term investments were measured at cost less diminution in value which is other than temporary and current investments were measured at lower of cost or fair value. Under Ind AS, these financial assets have been classified as FVTPL on the date of transition. The fair value changes are recognised in profit or loss. The net effect of these changes is an increase in total equity as at March 31, 2017 of Rs.95.06 Lakhs (Rs. 37.32 Lakhs as at April 1, 2016), increase in total profit for the year ended March 31, 2017 of Rs.57.74 Lakhs.
b) Under Previous GAAP the Company accounted for loan given to subsidiary at transaction value. Under Ind AS, the Company has recognised this loan initially at fair value and subsequently at amortised cost using effective interest rate (EIR).
This has resulted to an impact on equity as on 31st March, 2017 of Rs.506.30 Lakhs and on 1st April, 2016 of Rs.293.97 Lakhs.
c) Under Previous GAAP the Company accounted for long term borrowings at transaction value. Under Ind AS, the Company has recognised these long term borrowings initial at fair value less transaction cost and subsequently measured at amortised cost using effective interest rate (EIR). This has resulted to an impact on equity as on 31st March, 2017 of Rs.7.09 Lakhs and on 1st April, 2016 of Rs.25.89 Lakhs.
d) Under previous GAAP dividends on equity shares recommended by the board of directors after the end of the reporting period but before the financial statements were approved by shareholders were recognised in the financial statements as a liability. Under Ind AS, such dividends are recognised when declared by the members in a general meeting.
The net effect of this change is an increase in total equity as at March 31, 2017 of Rs. Nil (Rs. 580.70 Lakhs as at April 1, 2016). As proposed dividend of F.Y 2015-16 has been paid in F.Y 2016-17 and proposed dividend of F.Y 2016-17 has been pushed to current year and therefore the net impact as at March 31, 2017 is Nil.
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