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NOTES TO ACCOUNTS

Foods & Inns Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 240.11 Cr. P/BV 3.82 Book Value (₹) 12.48
52 Week High/Low (₹) 89/40 FV/ML 1/1 P/E(X) 2.20
Bookclosure 02/05/2019 EPS (₹) 21.70 Div Yield (%) 0.42
Year End :2018-03 

1. Corporate Information

Foods and Inns Limited (hereinafter referred as ‘FNI' or ‘the Company') is domiciled and incorporated in India and its shares are publically traded on the BSE Limited in India. The Company is engaged in business of processing and marketing fruit pulps, concentrates and spray dried fruit and vegetable powders both into domestic and international markets.

Authorization of standalone financial statements

The authorization of standalone financial statements (hereinafter referred as “Financial Statements”) of the Company for the year ended March 31, 2018 were authorised for issue by the Board of Directors at their meeting held on May 24, 2018.

5.1 On March 31, 2017, as the Company sold 55,119 Equity Shares of Dravya Finance Limited, the latter ceased to be the Company's associate. The balance 6 Equity Shares are held by the Nominees of the Company. The above investments do not include the carrying amount of such investments since the same was written off in an earlier year with effect from that date.

5.2 On March 31, 2017, as the Company sold 24,794 Equity Shares of Asim Exports International Limited, the latter ceased to be the Company's associate with effect from the said date.

5.3 On January 6, 2017 as the Company acquired 12,000 Equity Shares of Pharmpak Private Limited and accordingly, with effect from the said date, the latter became 100% Subsidiary of the Company. Accordingly, investments therein are reflected hereinabove.

5.4 During the year, Company has further acquired 3,50,000 Equity Shares of Finns Frozen Foods (India) Limited as on March 16, 2018.

2. Rights, preferences and restrictions :

I. The Company has only one class of shares referred to as Equity Shares having par value of Rs.10 Each holder of Equity Shares is entitled to one vote per share.

ii. During the year ended on March 31, 2018, the Company has issued 36,000 Equity Shares of Rs. 10 each at a premium of Rs.710 on conversion of share warrants of a director.

During the previous year ended on March 31, 2017, the Company has issued Equity Shares on a preferential basis resulting in increase in paid up Equity Share Capital and Securities Premium Account by Rs.15.49 Lakhs and Rs.11.82 Lakhs, respectively, the details of which are as under:

a. 1,00,000 Equity Shares of Rs.10 each at a premium of Rs.710

b. 16,500 Equity Shares of Rs.10 each at a premium of Rs.860

c. 38,402 Equity Shares of Rs.10 each at a premium of Rs.860 on conversion of interest-free unsecured loan of a director.

iii. The Company declares and pays dividend in Indian rupees. With effect from April 1, 2016, final dividend, if any, proposed by the Board of Directors is recorded as a liability on the date of the approval of the shareholders in the coming Annual General Meeting; in case of interim dividend, it is recorded as a liability on the date of declaration by the Board of Directors of the Company. Board of Directors, in their meeting held on May 24, 2018, has recommended final dividend of Rs.0.30 per equity share of face value of Rs.1 each for the year ended March 31, 2018.

iv. During the year ended March 31, 2017, the amount of per share dividend recognised as distribution to equity shareholders was Rs.3 per Equity Share of Rs.10 each. The dividend appropriation for the year ended March, 31 2017 amounted to Rs.49.26 Lakhs, including corporate dividend tax of Rs.10.13 Lakhs.

v. As on March 31, 2018, the Company has reserved for issue and allotment - 36,000 (As on March 31, 2017, 72,000) Equity Shares of Rs.10 each for outstanding Convertible Warrants (Refer Note 18.1).

vi. In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity Shares held by the shareholders.

Description of the nature and purpose of Other Equity

Capital Reserve: Capital reserve represents capital surplus and not normally available for distribution as dividend. Capital Reserve amount represents amount transferred on forfeiture of equity shares during F.Y. 1987-1988

Securities Premium: Securities Premium is used to record the premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act,2013.

General Reserve : The General Reserve comprises of transfer of profits from retained earnings for appropriation purposes. The reserve can be distributed/utilised by the Company in accordance with the Companies Act, 2013.

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

Cash flow Hedging Reserve: The Company has designated its hedging instruments obtained after April 01, 2016 as cash flow hedges and any effective portion of cash flow hedge is maintained in the said reserve. In case the hedging becomes ineffective the amount is recognised to the Statement of Profit and Loss.

18.1 During the previous year ended on March 31, 2017, the Company has issued Convertible Warrants (“Warrants”) on a preferential basis as under:

36.000 Warrants to a promoter against which it received a sum of Rs.64.80 Lakhs , being 25% of the price fixed against such Warrants. Each Warrant carries a right to convert the same into one Equity Share of Rs.10 each at a premium of Rs.710 each (calculated as per the Pricing Regulation prescribed in accordance with Chapter VII of SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009) over a period of 18 months from the date of allotment. In the event, the warrants are not converted into shares with in the said period, the Company is eligible to forfeit the amounts received towards the warrants.

36.000 Warrants to an another promoter against which it received a sum of Rs.78.30 Lakhs, being 25% of the price fixed against such Warrants. Each Warrant carries a right to convert the same into one Equity Share of ' 10 each at a premium of ' 850 each (calculated as per the Pricing Regulation prescribed in accordance with Chapter VII of SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009) over a period of 18 months from the date of allotment.

18.2 Represents amounts for allotment on a preferential basis - 36,000 (As at March 31, 2017, 1,16,500) and Nil (As at March 31, 2017, 38,402) Equity Shares of the face value of ' 10 each for the amounts received and for conversion of a specified loan, respectively. [Refer Note 17.2 (ii)]

22.1 Secured by way of hypothecation of inventory and book debts and charge on all the Property, Plant and Equipments excluding the assets financed out of the Term Loan.

Personal Guarantee:

i. Mr. Utsav Dhupelia, Managing Director and Shareholder till August 25,2016

ii. Mrs. Pallavi Dhupelia, Shareholder

22.2 Secured by way of hypothecation of inventory and book debts, lodgement of confirmed contracts and irrevocable letters of credit and ECGC Packing Credit Guarantee cover, charge on Property, Plant and Equipments excluding the assets financed out of the Term Loan

Personal Guarantee:

i. Mr. Utsav Dhupelia, Managing Director and Shareholder till August 25,2016

ii. Mrs. Pallavi Dhupelia, Shareholder

22.3 For Supplies to customers Secured by way of hypothecation of stocks of Finished Goods for customers and its receivables.

22.4 Secured by way of collateral against pledge of Fixed Deposit of Rs.22.83 Lakhs (As at March 31, 2017, Rs.21.42 Lakhs) together with Interest Receivable of Rs.2.33 Lakhs (As at March 31, 2017, Rs.7.69 Lakhs and ast at April1, 2016, Rs.5.87 Lakhs) (Refer Note 12.1).

22.5 Details of short-term borrowings guaranteed by some of the directors or others:

32.1 Interest on Cash Credit Facilities / Buyers Credit is net of subsidy F.Y. 2017-2018 Rs.333.54 Lakhs (F.Y. 2016-2017 Rs.317.22 Lakhs) received under Interest Equalisation Scheme on pre-shipment and post-shipment credit.

32.2 Guarantee Commission F.Y. 2017-18 Rs.42.75 Lakhs (F.Y 2016-2017 Rs.53.44 Lakhs) paid/provided as due to a related party (Refer Note 39).

3. Disclosure as per Ind AS 17 on “Leases”:

As Lessee

The Company has entered into Operating Lease Agreements for office premises at Mumbai, Chennai and Ahmedabad,Guest house at Nashik and factory premise at Valsad, renewable on a periodic basis and cancellable at the Company's option. Rental Expenses for operating leases recognised in the Statement of Profit and Loss for year ended March 31, 2018 is Rs.149.74 Lakhs (For the year ended March 31, 2017 Rs.145.55 Lakhs).

4. Employee Benefits

The Company has classified various employee benefits as under:

A. Defined Contribution Plans

The Company contributes to following funds which are considered as defined contribution plans

Provident Fund

Superannuation Fund

State Defined Contribution Plans

Employers' Contribution to Employees' State Insurance

Employers' Contribution to Employees' Pension Scheme 1995

The Provident Fund and the State Defined Contribution Plans are operated by the Regional Provident Fund Commissioner and the Superannuation Fund is administered by the LIC of India as applicable for all eligible employees. Under the schemes, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits. These funds are recognised by the Income Tax Authorities.

B. Defined Benefit Plans

Gratuity

Compensated Absences

Valuations in respect of above have been carried out by independent actuary, as at the balance sheet date, based on the following assumptions:

vi. The expected rate of return on plan assets is determined after considering several applicable factors such as the composition of the plan assets, investment strategy, market scenario, etc. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.

vii. The discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of the obligations.

viii. The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

Note on other risks:

Investment risk - The funds are invested by SBI Life Insurance Company Limited and they provide returns basis the prevalent bond yields, SBI Life Insurance Company Limited on an annual basis requests for contributions to the fund, while the contribution requested may not be on the same interest rate as the bond yields provided, basis the past experience it is low risk.

Interest Risk - SBI Life Insurance Company Limited does not provide market value of assets, rather maintains a running statement with interest rates declared annually - The fall in interest rate is not therefore offset by increase in value of Bonds, hence may pose a risk.

Longevity Risk - Since the gratuity payment happens at the retirement age of 58, longevity impact is very low at this age, hence this is a non-risk.

Salary risk - The liability is calculated taking into account the salary increases, basis past experience of the Company's actual salary increases with the assumptions used, they are in line, hence this risk is low risk.

Note on 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 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.

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 same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.

The method used to calculate the liability in these scenarios is by keeping all the other parameters and the data same as in the base liability calculation except for the parameters to be stressed.

There was no change in the method and assumptions used in preparing the sensitivity analysis from prior years.

5. Capital Management and Financial Risk Management Policy

A. Capital Management

For the purpose of the Company's Capital Management, Capital includes issued Equity Capital and all Other Reserves attributable to the Equity shareholders of the Company. The Primary objective of the Company's Capital Management is to maximise the shareholders' value. The Company's Capital Management objectives are to maintain equity including all reserves to protect economic viability and to finance any growth opportunities that may be available in future so as to maximise shareholder's value.

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

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

The Company is monitoring Capital using debt equity ratio as its base, which is debt to equity. The Company monitors capital using debt-equity ratio, which is total debt less investments divided by total equity.

Net debt (total borrowing net of cash and cash equivalents) divided by “Total equity” (as shown in the balance sheet).

B. Financial Risk Management and Policies

Risk is events, situation or circumstances which may lead to negative consequences on the Company's business. Risk management is a structure approach to manage uncertainty. The Company's financial risk management is an integral part of how to plan and execute its business strategies. The risk management policy is approved by the Company's Board. The Company's principal financial liabilities comprise of loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations and to provide guarantees to support its operations in select instances. The Company's principal financial assets include trade and other receivables, and cash and cash equivalents that derive directly from its operations and investments. The company is exposed to market risk, credit risk, liquidity risk etc. The objective of the Company's financing policy are to secure solvency, limit financial risks and optimise the cost of capital. The Company's capital structure is managed using equity and debt ratios as part of the Company's financial planning.

a. 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 risk comprises three types of risk : interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, investments and derivative financial instruments. The Company has designed risk management frame work to control various risks effectively to achieve the business objectives. This includes identification of risk, its assessment, control and monitoring at timely intervals.

The above mentioned risks may affect the Company's income and expenses, or the value of its financial instruments. The Company's exposure to and management of these risks are explained below:

i. Foreign Currency Risk:

The company is subject to the risk that changes in foreign currency values impact the company export, import and other payables.

The company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollar, Euro Singapore Dollars and Great Britain Pound.

The company manages currency exposures within prescribed limits, through use of derivative instruments such as Options, futures and Forward contracts etc. Foreign currency transactions are covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time.

ii. Forward foreign exchange contracts

It is the policy of the Company to enter into forward foreign exchange contracts to cover foreign currency payments in USD and Euro. The Company enters in to contracts with terms up to 360 days. The Company's philosophy does not permit any speculative calls on the currency. It is driven by conservatism which guides that we follow conventional wisdom by use of Forward contracts in respect of Trade transactions.

Regulatory Requirements: The Company will alter its hedge strategy in relation to the prevailing regulatory framework and guidelines that may be issued by RBI, FEDAI or ISDA or other regulatory bodies from time to time. Forward cover is obtained from bank for each of the aggregated exposures and the Trade deal is booked. The forward cover deals are all backed by actual trade underlines and settlement of these contracts on maturity are by actual delivery of the hedged currency for settling the underline hedged trade transaction.

The following table details the forward foreign currency (FC) contracts outstanding at the end of the reporting period

C. Credit Risk

Credit risk refers to risk that a counterparty will default on its contractual obligations resulting in financial loss to the company by failing to discharge its contractual obligations as agreed. The Company's exposure to credit risk arises primarily from financial assets such as trade receivables, investment in mutual funds, derivative financial instruments, other balances with banks, loans and other receivables. The outstanding trade receivables are regularly monitored and appropriate action is taken for collection of overdue receivables. Credit risk arising from investment in mutual funds, derivative financial instruments and other balances with banks is limited and there is no collateral held against these because the counterparties are banks and recognised financial institutions with high credit ratings assigned by the international credit rating agencies. The companies exposure are continuously monitored.

In addition, the Company is exposes to credit risk in relation to financial guarantees given to banks for the facilities availed by subsidiary. The Company's maximum exposures in this respect is the maximum amount the Company would have to pay if the guarantee is called upon.

The Company uses a provision matrix to determine impairment loss on portfolio of its Trade Receivables. The provision matrix is based on its historically observed default rates over the expected life of the Trade Receivable and is adjusted for forward-looking estimates. At every reporting date, the historically observed default rates are updated and changes in forward-looking estimates are analysed. The Company follows a simplified approach (i.e. based on life time ECL) for recognition of impairment loss allowances on trade receivables. For the purpose of measuring the life time ECL allowance for trade receivables, the Company uses a provision matrix which comprises a customer spread across the geographical areas and the same are grouped into homogenous group and assessed for impairment collectively. The outstanding trade receivables are regularly monitored and appropriate action is taken for collection of overdue receivables.

D. Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value The company maintains a cautious liquidity strategy, with a positive cash balance throughout the year. Management monitors the Company's liquidity position through rolling forecasts on the basis of expected cash flows. Cash flow from operating activities provides the funds to service and finance the financial liabilities. The Company's approach for managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Company's reputation. In addition, processes and policies related to such risks are overseen by the senior management. The management monitors the Company's net liquidity position through rolling forecasts on the basis of expected cash flows.

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

Financing arrangement

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

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

6. Financial Instruments

The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation

i. The fair values of investment in government securities and quoted investment in equity shares is based on the current bid price of respective investment as at the Balance Sheet date.

ii. The fair values of investments in mutual fund units is based on the net asset value (‘NAV') as stated by the issuers of these mutual fund units in the published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund and the price at which issuers will redeem such units from the investors.

iii. The fair value of Forward Foreign Exchange contracts is determined using forward exchange rates at the balance sheet date

iv. The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

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

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

Fair Value measurement hierarchy

The fair value of financial instruments as referred below have been classified into three categories depending on the inputs used in the valuation technique.

The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

The categories used are as follows:

Level 1: Unadjusted quoted prices for identical instruments in an active market;

Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs; and

Level 3: Inputs which are not based on observable market data.

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm's length transactions. Outstanding balances on account of trade receivable, trade payable, other receivable, other payable and interest receivable on loan at the year end are unsecured and settlement occurs in cash.

7. Disclosure as per Ind As 108 on “Segment Reporting”:

In accordance with Ind AS 108 on Operating Segments information has been given in the Consolidated Financial Statement of the Company and therefore no separate disclosure on Segment information is given in the Standalone financial Statements.

8. The Company is entitled to Export Benefits, under Merchandise Exports from India Scheme (MEIS) vide Public Notice No.2/2015-20 dated April 1, 2015, in respect of export of Fruit Pulp, paste, slice, Canned Vegetables and others. The Company recognises such Export Benefits on the basis of export of goods. Accordingly, the Company has recognised Export benefits of Rs.1,074.94 Lakhs (For the year ended March 31, 2017 Rs.836.05 Lakhs) on export of goods.

a. Property, Plant and Equipment

As on March 31, 2016, the carrying amount of Land and Building at Deonar, Mumbai under Property, Plant and Equipment (PPE) included ' 917.42 lakhs On account of revaluation thereof. Under the previous GAAP, as specified by Accounting Standard 10, as revised, on “Property, Plant and Equipment”, in the financial year 2016-17, with effect from April 1, 2016, the said revaluation amount in the carrying amount of Land and Building at Deonar, Mumbai was adjusted against outstanding amount of Revaluation Reserve .Under Ind AS, in terms of Para D7AA of Ind AS 101 on “First-time Adoption of Indian Accounting Standards”, the Company has adopted the carrying value of its PPE as on the transition date as its deemed cost; in other words, the carrying value on the transition date, as on April 1, 2016, is nothing but the carrying value of PPE as on March 31, 2016, which would include the revaluation amount for Land and Building at Deonar, Mumbai. Therefore, to arrive at the deemed cost under Ind AS as on April 1, 2016, the adjustment of revaluation done under the previous GAAP {that is, under AS 10 (Revised)} is restored to its revalued amount and Revaluation Reserve is accordingly restored. Also, depreciation in respect of such revalued amounts under Ind AS for the year ended March 31, 2017 and thereafter is accordingly reflected. Further, the effect of Deferred Tax for such adjustment for revaluation is also given.

b. Trade Receivable

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

c. Provision for Sales return

Revenue is recognised net of such provision for Sales Return and consequently related costs of such goods are reflected in Inventories.

d. Current Investment

Under previous GAAP, current investments were measured at lower of cost or fair value. Under Ind AS, these financial assets are classified as Fair Value Through Profit and Loss and the changes in fair value are recognised in statement of profit and loss. Thus, On the transition date, these financial assets have been measured at their fair value.

e. Derivative Instruments - Forward contracts

Under previous GAAP, there is concept of deferred premium/discount which is recognised based on difference between spot rate and forward rate and amortised over the tenure of the forward contract. Under Ind AS, forward contract is required to accounted at fair value. Accordingly, the Company has reversed deferred premium outstanding in the books of accounts.

f. Proposed Dividend

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting.

g. Non-Current Investments/ Investments in Other Companies

Under previous GAAP, non current investment in equity instruments of other companies were measured at cost less provision for diminution. Under Ind AS, the Company has recognised such investments at FVTOCI through irrevocable option. On the date of transition to Ind AS, the difference between the fair value of Non Current Investments as per Ind AS and their corresponding carrying amount as per financial statements prepared under previous GAAP, has resulted in decrease in the carrying amount of these investments which has been recognised in retained earnings.

h. Transaction Cost/ Borrowing Cost

Transaction cost are defined as incremental costs that are directly attributable to the acquisition, issue or disposal of a financial assets and financial liability. As per Ind AS transaction costs in case of financial assets, measured at amortised cost and FVTOCI are shown net of such asset. Similarly in case of financial liabilities, measured through amortised cost transaction costs are deducted from it and shown net of such liabilities.

i. Loan to employees

The Company has given interest free loans to some of its employees. As per Ind AS employee loans should be measured at fair value on initial recognition with a subsequent decrease in the amount of employee loan. The fair value is determined using the present value method using discount rate which is the market borrowing rate. The Company will accrue interest income at the effective interest rate (discount rate) over the term of the loan. The difference between the loan amount and its fair value is charged to the Statement of Profit and Loss as “Employee Benefit Expenses”.

j. Subsidy Received

Under previous GAAP, Subsidy received were presented as a part of capital reserve under reserves and surplus. However as per Ind AS 20, every subsidy is to be treated as a Deferred Income and accordingly the same has been shown in the Statement of Profit and loss Account for the year ended March 31, 2017

k. Defined Benefit Plans

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

l. Amortisation of Security Deposit

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

m. Prior Period Errors.

As per Ind AS 8 prior period error shall be corrected by retrospective restatement except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the error. On the date of transition, Prior period error existing in the statement of profit and loss for the year ended March 31, 2017 is adjusted through Retained earnings as on April 1, 2016.

n. Deferred Tax

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

o. Sale of Goods

Under IGAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty.

9. Non Current assets held for sale

During the year Company has identified its Land & building situated at Deonar, Sion Trombay Road as a non-core asset and categorised it as asset held for sale. The factory operations of the said unit were closed down in calendar year 2015.

10. Impact of implementation of Goods and Services Tax (GST) on the financial statements

In accordance with Ind AS 18 on “Revenue” and Schedule III to the Companies Act, 2013, Sales for the previous year ended March 31, 2017 and for the period April 01, 2017 to June 30, 2017 were reported gross of Excise duty and net of Value Added tax (VAT). Excise duty was reported as a separate expense line item. Consequent to the introduction of Goods and Service Tax (GST) with effect from July 01, 2017, VAT, Excise duty etc have been subsumed into GST and accordingly the same is not recognised as part of sales as per requirements of Ind AS 18. This has resulted in lower reported sales in the current year in comparison to the sales reported under the pre-GST structure of indirect taxes. With the change in structure of indirect taxes, expenses are also being reported net of taxes. Accordingly, Financial statements for the year ended March 31, 2018 and in particular, sales, absolute expenses, elements of working capital (inventories, trade payable, other current assets/ current liabilities etc) and ratios in percentage of sales, are not comparable with the figures of the previous year.

11. Ind AS issued but not yet effective

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

Ind AS 115- Revenue from Contract with Customers

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts with customers.

The standard permits two possible methods of transition:

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

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

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

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

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

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

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

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