1. CORPORATE AND GENERAL INFORMATION
Phoenix International Limited (“the Company'') is a Public Company domiciled and incorporated in India and its shares are publicly traded on the National Stock Exchange (‘NSE') and Bombay Stock Exchange (BSE) in India. The registered office of Company is situated at 3rd Floor, Gopala Tower,25 Rajendra Place, New Delhi110008, India.
The Company is in the business of leasing out buildings and is a leading manufacturer and supplier of Shoes and Shoe Uppers in Chennai, India.
These financial statements were approved and adopted by board of directors of the Company in their meeting dated May 30, 2018.
(b) Terms/ rights attached to equity shares
The company has 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.
In the event of liquidation of the Company, the holders of equity shares will be entiled to receive any of the remaining assets of the company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.
As per records of the company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
Based on information available with the company there are no overdue amount payable to Micro, Small and Medium Enterprises, as defined in The Micro, Small and Medium Enterprises Development Act, 2006. This has been determined to the extent such parties have been identified on the basis of information available with the Company which has been relied upon by the Auditors.
2. First time adoption of Ind AS
These financial statements, for the year ended 31stMarch 2018, are the first the company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for period ending on 31stMarch 2018, together with the comparative period data as at and for the year ended 31stMarch 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 1stApril 2016, the Company's date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1stApril 2016 and the financial statements as at and for the year ended 31stMarch 2017.
Exemptions applied
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has, accordingly, applied following exemptions:
a) The Company has elected to consider carrying amount of all items of Property, Plant and Equipment's (PPE) except for Land and Building (which has been revalued) as per Indian GAAP, as deemed cost at the date of transition.
b) The Company has availed the exemption of fair value measurement of financial assets or liabilities at initial recognition and accordingly will apply fair value measurement of financial assets or liabilities at initial recognition prospectively to transactions entered into on or after 01st April 2016.
c) The estimates at 1st April 2016 and at 31st March, 2017 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items under Indian GAAP did not require estimation:
- Fair value of investments in unquoted equity instruments.
- Impairment of financial assets based on expected credit loss model
- Discount rates
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions that existed as at 1st April, 2016 and 31st March, 2017.
d) The Securities Deposit have been reclassified on the bases of their maturities from Current to Non-Current.
e) The Bank Deposit have been reclassified as Non-Current Assets which have maturity more than 12 months.
f) The Preference share capital has been reclassified as other financial non-current liabilities from Equity as per Ind As.
g) The Term Loan from Oriental Bank Of Commerce has been revalued as per Ind AS.(Loan Processing fees)
Notes to the reconciliation of equity as at 1st April 2016 and 31st March 2017 and Total Comprehensive Income for the year ended 31st March 2017
1. Fair Valuation of Investments
Under Indian GAAP, investments in equity instruments were classified as long term investments or current investments based on the intended holding period and realisability. Long term investments were carried at cost less provision for other than temporary diminution in the value of investments. Current investments were carried at lower of cost and fair value. Ind AS requires such investments to be measured at fair value except investments in subsidiaries, associates and joint venture for which exemption has been availed.
Accordingly, the Company has designated investments in equity instruments as FVTPL investments. The difference between the instrument's fair value and Indian GAAP carrying amounthas been recognized in retained earnings.
2. Financial instruments measured at amortized cost
Under Indian GAAP, interest free loan to employees are recorded at their transaction value. Under Ind AS, these loans are to be measured at amortized cost on the basis of effective interest rate method.
3. Defined benefit obligation
Both under Indian GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gain and loss, are charged to profit and loss. Under Ind AS, such actuarial gain and loss is to be recognized separately through Other Comprehensive Income. Thus, employee cost has been reduced and actuarial gain/loss has been recognized in OCI net of taxes.
4. Sale of Goods
Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Thus, sale of goods under Ind AS has increased by the excise duty with a corresponding increase in other expenses.
5. Sale of Service
Under Indian GAAP and IND AS, sale of service presents as net of taxes.
6. Deferred Tax
Indian 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 requires entities to account for deferred taxes using the 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. The application of Ind AS has resulted in recognition of deferred tax on temporary differences which was not required under Indian GAAP. In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity.
7. Statement of cash flows
The transition from Indian GAAP to IND AS has not had a material impact on statement of cash flows.
Notes:-
a) The company does not expect any reimbursement in respect of the above contingent liabilities.
b) It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at A above, pending resolution of the appellate proceedings.
3. Disclosures as required by Indian Accounting Standard (Ind AS) 19 Employee Benefits:
Gratuity plan: The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount equivalent to 15 days salary for each completed year of service subject to a maximum Rs.10 lacs, vesting occurs upon completion of five continuous years of service in accordance with Indian law.
The following tables set out the disclosures in respect of the gratuity plan as required under Ind AS 19.
The assumption of future salary increase takes into account the inflation, seniority, promotion and other relevant factors such as supply and demand in employment market. Same assumptions were considered for comparative period i.e. 2016-17 as considered in previous GAAP on transition to IND AS.
4. The Company operates in two business segment viz. “Shoe Manufacturing” & “Rental Services of Immovable Properties”, both segments are reportable in accordance with the requirements of Ind AS -108 on “Operating Segments”, prescribed by Companies (Indian Accounting Standards) Rules 2015. The Company's business activities primarily fall within single geographical segments.
5. Related Party Disclosure:
In accordance with the requirements of IND AS 24, on related party disclosures, name of the related party, related party relationship, transactions and outstanding balances including commitments where control exits and with whom transactions have taken place during reported periods, are:
Disclosure of Related parties and relationship between parties:-
a) Key Management Personnel :
Mr. P M Alexander (Director)
: Mr. Narendra Aggarwal (Director)
: Mr. Narender Makkar (Company Secretary)
6. Disclosures as required by Indian Accounting Standard (Ind AS) 17 Lease:-
Operating lease commitments:
(i) Company as lessor:-
The Company's significant leasing arrangements are in respect of operating leases for premises (residential, godown etc.). These leasing arrangements, which are non-cancellable with range from 11 months to 99 years and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals receivable are charged as Rent under ‘Rental Income'.
7. Earnings per Share
The calculation of Earnings per Share (EPS) as disclosed in the Statement of Profit and Loss has been made in accordance with Ind AS- 33 on “Earnings per Share”.
The number of shares used in computing basic EPS is the weighted average number of shares outstanding during the year.
The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effects of potential dilutive equity, if any.
8. Income Tax:
a) Any change in the amount of deferred tax liability on account of change in the enacted tax rates and change in the quantum of depreciation allowable under the tax laws, is disclosed in the statement of profit and loss account as ‘Deferred tax adjustment'.
b) Reconciliation of Deferred tax liabilities (Net)
9. Financial Risk Management
The financial assets of the company include investments, loans, trade and other receivables, and cash and bank balances that derive directly from its operations.
The financial liabilities of the company, other than derivatives, include loans and borrowings, trade and other payables and the main purpose of these financial liabilities is to finance the day to day operations of the company.
The company is mainly exposed to the following risks that arise from financial instruments:
(i) Market risk
(ii) Liquidity risk
(iii) Credit risk
The Company's senior management oversees the management of these risks and that advises on financial risks and the appropriate financial risk governance framework for the Company.
(i) Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise two types of risk: interest rate risk, foreign currency risk.
(a) Foreign currency risk
The company imports certain assets and material from outside India. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently the company is exposed to foreign currency risk and the results of the company may be affected as the rupee appreciates/ depreciates against foreign currencies. Foreign exchange risk arises from the future probable transactions and recognized assets and liabilities denominated in a currency other than company's functional currency.
The company measures the risk through a forecast of highly probable foreign currency cash flows and manages its foreign currency risk by hedging appropriately. The Company uses foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The Company's exposure to foreign currency risk was based on the following amounts as at the reporting dates: (FC in Lacs)
Foreign currency sensitivity analysis
Any changes in the exchange rate of EURO and USD against INR is not expected to have significant impact on the Company's profit due to the less exposure of these currencies. Accordingly, a 10% appreciation/depreciation of the INR as indicated below, against the EURO and USD would have increased/reduced profit by the amounts shown below. This analysis is based on the foreign currency exchange rate variances that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variable remains constant:
(b) Interest Rate Risk
The company is exposed to interest rate risk because company borrows funds at fixed interest rate.
(ii) Liquidity Risk
The financial liabilities of the company, other than derivatives, include loans and borrowings, trade and other payables. The company's principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. Ultimate responsibility of liquidity risk management rests with board of directors.
The company monitors its risk of shortage of funds to meet the financial liabilities using a liquidity planning tool. The company plans to maintain sufficient cash and marketable securities to meet the obligations as and when falls due.
The below is the detail of contractual maturities of the financial liabilities of the company at the end of each reporting period:
(iii) Credit Risk
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the company. The company takes due care while extending any credit as per the approval matrix approved by ECRM.
Write off policy
The financials assets are written off in case there is no reasonable expectation of recovering from the financial asset.
10. Capital Management
The capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the company. The primary objective of the company's capital management is to maintain optimum capital structure to reduce cost of capital and to maximize the shareholder value.
The company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants which otherwise would permit the banks to immediately call loans and borrowings. In order to maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
Further, there have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period. There were no changes in the objectives, policies or processes for managing capital during the year ended 31 March 2018 and 31 March 2017.
11. In accordance with the Ind AS-36 on Impairment of Assets, the Company has assessed as on the balance sheet date, whether there are any indications with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account.
12. The Company owes dues of Rs Nil (previous year Rs. Nil) towards Micro and Small Enterprises, which are outstanding for more than 45 days as at 31st March, 2018. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the company.
13. Previous Year figures have been regrouped/ reclassified wherever considered necessary.
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