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NOTES TO ACCOUNTS

Tata Global Beverages Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 16784.90 Cr. P/BV 2.29 Book Value (₹) 116.17
52 Week High/Low (₹) 277/177 FV/ML 1/1 P/E(X) 41.12
Bookclosure 04/06/2019 EPS (₹) 6.47 Div Yield (%) 0.94
Year End :2019-03 

1. General Information

Tata Global Beverages Limited (“The Holding Company”) and its subsidiaries (together referred to as ‘The Group’) and the Group’s associates and joint ventures are engaged in the trading, production and distribution of Tea, Coffee and Water. The Group has branded beverage business operations mainly in India, Europe, US, Canada and Australia, plantation business in India and extraction business mainly in India and US.

The Holding Company is a public limited company incorporated and domiciled in India and has its registered office at Kolkata, West Bengal, India. The Holding Company has its primary listings on the Bombay Stock Exchange and National Stock Exchange in India.

The financial statements for the year ended March 31, 2019 were approved for issue by Company’s board of directors on April 23, 2019.

1) Certain plantation land meant for usage as tea plantations and for ancillary activities has been leased by the Company to its associate company Kanan Devan Hills Plantations Company Private Limited for a period of 30 years as part of the restructure in 2005, of its South India Plantation Operation.

2) Cost of Buildings include Rs. 5.90 Crores (Rs 5.90 Crores) represented by shares in Co-operative Housing Societies / a Company.

3) (@) Includes amounts of Rs. 1.26 Crores (1.26 Crores), Rs.0.62 Crores (Rs. 0.62 Crores), Rs. 0.08 Crores (Rs.0.08 Crores) under land, buildings and plant and equipment respectively, jointly owned /held with a subsidiary company.

4) Land includes leasehold land amounting to Rs. 0.17 Crores (Rs. 0.17 Crores).

a) Inclusive of Rs. 21.86 Crores (Rs. 21.86 Crores) kept in Revaluation Reserve.

b) Costs of these unquoted equity instruments have been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represent the best estimate of fair value within that range.

c) During the financial year 2018-19, the Company has invested an amount of Rs. 35.80 Crores towards equity capital in Tata Starbucks Private Ltd. which is a 50:50 joint venture.

d) Investment in preference shares of Amalgamated Plantations Pvt. Ltd., are now redeemable with a special redemption premium, on fulfilment of certain conditions, within 13 - 15 years from the date of the issue and are designated as fair value through profit and loss. During the year, fair value difference of Rs 10.08 Crores arising on extension of redemption period has been accounted as part of equity investment.

e) Preference shares of TRIL Constructions Ltd. are non-cumulative and mandatorily fully convertible within six years from the issue date, the same is carried at cost.

f) Investment carrying values are below Rs. 0.01 crores.

Raw material includes in transit tea inventory of Rs. 2.69 Crores (Rs. 1.57 Crores).

Finished Goods include in transit inventory of Rs. NIL (Rs. 0.87 Crores).

During the year ended March 31, 2019 - Rs. 5.86 Crores (Rs. 2.76 Crores) was charged to statement of profit and loss for slow moving and obsolete inventories.

Secured receivables are backed by security deposit.

Includes due from Related Parties - Rs. 43.12 crores (Rs. 64.96 Crores).

Inventories and trade receivables have been hypothecated to banks for the working capital facilities availed.

b) Rights, preferences and restrictions attached to shares

The Company has one class of equity shares having a par value of Re 1 each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

c) Equity shares allotted as fully paid-up (during 5 years preceding March 31, 2019) pursuant to contracts without payment being received in cash 1,27,31,159 equity shares were issued during the financial year 2015-16, consequent to and as part of the amalgamation of the erstwhile Mount Everest Mineral Water Limited with the Company.

The Board of Directors in its meeting held on April 23, 2019 have recommended a final dividend payment of Rs. 2.50 per share for the financial year ended March 31, 2019.

f) Nature and Purpose of Reserve

i) Capital Reserve

Capital Reserve was created on acquisition of certain plantation business.

ii) Securities Premium Account

Security Premium Account was created on issue of shares at premium. These reserves can be utilised in accordance with Section 52 of Companies Act 2013.

iii) Contingency Reserves

Contingency Reserves are in the nature of free reserves.

iv) Revaluation Reserve

Revaluation Reserve was created on acquisition of shares of Tata Coffee Limited (Refer note 6).

2. Capital Commitment

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for as at March 31, 2019 aggregated Rs. 10.49 Crores (Rs. 10.97 Crores).

(b) Commitment towards Share Capital contributions in Joint Ventures - Rs. 25.40 Crores (Rs. 40.00 Crores).

3. Micro enterprises and small enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 have been determined based on the confirmations received in response to intimation in this regard sent by the Company to the suppliers. No interest in terms of Section 16 of Micro, Small and Medium Enterprises Development Act, 2006 or otherwise has either been paid or payable or accrued and remaining unpaid as at March 31, 2019.

4. Corporate Social Responsibility (CSR)

As per Section 135 of the Companies Act 2013, a CSR Committee has been formed by the Company.

(a) Gross Amount required to be spent by the Company during the year Rs. 7.66 Crores (Rs. 6.14 Crores).

(b) Amount spent during the year:

5. Leases

The Company’s leasing arrangements are in respect of operating leases for premises (residential, office,factory, godown, etc.) and motor car. These range between 5 months - 15 years and usually renewable on mutually agreed terms.

6. a) Related Party Disclosure Related Parties Promoter

Tata Sons Private Limited Subsidiaries

Tata Global Beverages Group Limited Tata Global Beverages Holdings Tata Global Beverages Services Limited Tata Global Beverages GB Limited Tata Global Beverages Overseas Holdings Limited Tata Global Beverages Overseas Limited Lyons Tetley Limited

Tata Global Beverages U.S. Holdings, Inc.

Tata Water LLC Tetley USA Inc

Empirical Group LLC Tata Global Beverages Canada Inc Tata Global Beverages Australia Pty Limited Earth Rules Pty Ltd.

Stansand Limited Stansand(Brokers) Limited Stansand(Africa) Limited Stansand(Central Africa) Limited Tata Global Beverages Polska Sp.z.o.o Drassington Limited, UK Good Earth Corporation Good Earth Teas Inc.

Teapigs Limited.

Teapigs US LLC.

Tata Global Beverages Czech Republic a.s,

Joekels Tea Packers (Proprietary) Limited. (South Africa) Tata Global Beverages Investments Limited Campestres Holdings Limited Kahutara Holdings Limited Suntyco Holding Limited Onomento Co Limited Coffee Trade LLC (w.e.f 18.09.2017)

Tea Trade LLC (ceased w.e.f 03.11.2017)

Sunty LLC (ceased w.e.f 03.11.2017)

Tata Coffee Limited

Tata Coffee Vietnam Company Limited Consolidated Coffee Inc.

Eight ‘O Clock Coffee Company Eight ‘O Clock Holdings Inc Tata Tea Extractions Inc Tata Global Beverages Capital Limited Tata Tea Holdings Private Limited

Associates

Amalgamated Plantations Private Limited

Kanan Devan Hills Plantations Company Private Limited

TRIL Constructions Limited

Estate Management Services Pvt Limited, Sri Lanka (ceased w.e.f 28.12.2017)

Watawalla Plantations Plc (ceased w.e.f 28.12.2017)

Joint Ventures

NourishCo Beverages Limited Tata Starbucks Private Limited

Joint Venture of Subsidiaries

Tetley ACI (Bangladesh) Limited

Southern Tea LLC

Tetley Clover (Private) Limited

Key Management Personnel

Mr. Ajoy Misra - CEO & Managing Director

Mr L Krishna Kumar - Executive Director & Group CFO

Subsidiary and Joint Venture of Promoter Company

Tata Investment Corporation Limited Ewart Investments Limited Taj Air Limited

Tata AIG General Insurance Limited

Tata AIA Life Insurance Co Limited

Tata Consultancy Services Limited

Tata International Singapore PTE Limited

Tata Housing Development Company Limited

Tata Elxsi Limited

Tata Industries Limited

Tata Communications Limited

Tata Teleservices Limited

Tata Capital Forex Limited (ceased w.e.f 30.10.2017)

Infiniti Retail Limited

Tata Business Support Services Limited (ceased to be a subsidiary and is an associate w.e.f 27.11.2017)

Employee Benefit Plans

Tata Tea Limited Management Staff Gratuity Fund

Tata Tea Limited Management Staff Superannuation Fund

Tata Tea Limited Staff Pension Fund

Tata Tea Limited Gratuity Fund

Tata Tea Limited Calcutta Provident Fund

# The deposit was placed as a part of cash management and is a general purpose deposit with short-term maturity.

* Provision for employee benefits, which are based on actuarial valuation done on an overall company basis, is excluded.

7. a) Disclosure under Regulation 34(3) of the SEBI (Listing Obligations and disclosure requirements) Regulations, 2015.

8. Financial instruments - Fair values and risk management

A. Accounting classification and fair values

* For certain investments categorized under level 3, cost has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.

B. Measurement of fair values

The basis of measurement in respect to each class of financial asset, financial liability is disclosed in note 2(j) of the financial statement.

The fair value of liquid mutual funds and long term equity investment is based on active market price. Fair values of certain non current investment are valued based on Discounted cashflow/book value/EBITDA multiple approach. Derivative financial instruments are valued based on Black-Scholes-Merton approach/Dollar offset principles.

C. Financial risk management

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

- Credit risk ;

- Liquidity risk ; and

- Market risk

i. Risk management framework

The Risk Management Committee of the Board is entrusted with the responsibility to assist the Board in overseeing and approving the Company’s risk management framework. The Company has a comprehensive risk policy relating to the risks that the Company faces under various categories like strategic, operational, reputational and other risks and these have been identified and suitable mitigation measures have also been formulated. The Risk Management Committee reviews the key risks and the mitigation measures periodically. The Audit Committee has additional oversight in the area of financial risks and control.

ii. Credit risk

Credit risk is the risk that counterparty will not meet its obligations leading to a financial loss. The Company is exposed to credit risk arising from its operating (primarily trade receivables) and investing activities including deposits placed with banks, financial institutions and other corporate deposits. The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of financial assets. Financial assets are classified into performing, under-performing and non-performing. All financial assets are initially considered performing and evaluated periodically for expected credit loss. A default on a financial asset is when there is a significant increase in the credit risk which is evaluated based on the business environment. The assets are written off when the Company is certain about the non-recovery.

a. Trade receivables

The Company has an established credit policy and a credit review mechanism. The Company also covers certain category of its debtors through a credit insurance policy. In such case the insurance provider sets an individual credit limit and also monitors the credit risk. The concentration of credit risk arising from trade receivables is limited due to large customer base.

Management believes that the unimpaired amounts that are past due are collectible in full, based on historical payment behaviour and analysis of customer credit risk.

b. Financial instruments and cash deposits

The credit risk from balances / deposits with banks, other financial assets and current investments are managed in accordance with the Company’s approved policy. Investments of surplus funds are made only with approved counterparties and within the limits assigned to each counterparties. The limits are assigned to mitigate the concentration risks. These limits are actively monitored by the Company.

iii. Liquidity risk

Liquidity risk is the risk that the Company may encounter difficulty in meeting its obligations. The company monitors rolling forecast of its liquidity position on the basis of expected cash flows. The Company’s approach is to ensure that it has sufficient liquidity or borrowing headroom to meet its obligations at all point in time. The company has sufficient short term fund based lines, which provides healthy liquidity and these carry highest credit quality rating from reputed credit rating agency.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.

iv. Market risk

Market risk is the risk that the fair value of the future cash flows will fluctuate because of changes in the market prices such as currency risk, interest rates risk and commodity price risk.

a) Currency risk

The company’s operates in various geographies and is exposed to foreign exchange risk on its various currency exposures. The risk of changes in foreign exchange rates relates primarily to the Company’s operating activities and translation risk, which arises from recognition of foreign currency assets and liabilities.

The Company uses various derivative financial instruments governed by its board approved policy, such as foreign exchange forward and option contracts to mitigate the said risk. The counterparty for these contracts is generally a reputed scheduled bank. The company reports quarterly to a committee of the board, which monitors foreign exchange risks and policies implemented to manage its foreign exchange exposures.

During the year ended March 31, 2019, the company has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign currency exposure on highly probable forecasted transactions. Hedge effectiveness is determined at inception and periodic prospective effectiveness testing is done to ensure the relationship exist between the hedged items and hedging instruments, including whether the hedging instruments is expected to offset changes in cash flows of hedge items.

b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The interest rate risk can also impact the provision for retiral benefits. The Company generally utilises fixed rate borrowings and therefore not subject to interest rate risk, since neither the carrying amount nor the future cash flows will fluctuate because of change in the market interest rates.

The Company is not exposed to significant interest rate risk as at the respective reporting dates.

c) Price risk

The price risk is the risk arising from investments held by the Company and classified in the balance sheet either as fair value through other comprehensive income or at fair value through profit or loss.

The Company’s equity investments are mainly strategic in nature and are generally held on a long term basis. Further, the current investments are in units of liquid mutual fund and these are not exposed to significant price risk.

d) Commodity risk

The Company is exposed to the fluctuations in commodity prices mainly for tea. Mismatch in demand and supply, adverse weather conditions, market expectations etc., can lead to price fluctuations. The Company manages these price fluctuations by actively managing the sourcing of tea, private purchases and alternate blending strategies without impacting the quality of the blend.

Capital Management

The Company’s objective for capital management is to maximize shareholder wealth, safeguard business continuity and support the growth of the Company. The Company determines the capital management requirement based on annual operating plans and long term and other strategic investment plans. The funding requirements are met through optimum mix of borrowed and own funds.

9. Post Retirement Employee Benefits

i) Defined Contributions

Amount of Rs. 11.51 Crores (Rs. 10.45 Crores) is recognised as an expense and included in employee benefit expense to the following defined contribution plans:

ii) Defined Benefits

Gratuity, Pension and Post Retiral Medical Benefits :

The Company operates defined benefit schemes like retirement gratuity, defined pension benefits and post retirement medical benefits. There are other superannuation benefits and medical benefits restricted to certain categories of employees/directors in the form of pension, medical and other benefits in terms of a specific policy related to the same. The defined benefit schemes offer specified benefits to the employees on retirement. The gratuity benefit provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 to 30 days’ last drawn salary payable for each completed year of service. Vesting occurs upon completion of five continuous years of service.

Sensitivities have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the accounting date. In presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calcualted using the Projected Unit Credit method at the end of the reporting period , which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

The Company contributes all its ascertained liabilities towards gratuity to the trust set up for the same. Trustees administer the contributions made to the trust. As at March 31, 2019 and March 31, 2018, the plan assets have been primarily invested in insurer managed funds.

Expected Contribution over the next financial year:

The Company is expected to contribute Rs. 4.76 Crores to defined benefit obligation funds for the year ending March 31, 2020.

iii) Provident Fund

The Company operates Provident Fund Schemes and the contribution are made to recognized funds maintained by the Company and for certain categories contributions are made to State Plans. The Company has an obligation to fund any shortfall on the yield of the trust’s investments over the administered rates on an annual basis. The Actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumption there is no shortfall as on March 31, 2019 and March 31, 2018.

10. Unless otherwise stated, figures in brackets relate to the previous year. All the numbers have been rounded off to nearest crore.

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