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Tata Global Beverages Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 15592.06 Cr. P/BV 2.13 Book Value (₹) 116.17
52 Week High/Low (₹) 285/177 FV/ML 1/1 P/E(X) 38.20
Bookclosure 04/06/2019 EPS (₹) 6.47 Div Yield (%) 1.01
Year End :2018-03 

The areas involving critical estimates or judgments’ are:

1. Depreciation and amortization

Depreciation and amortization is based on management estimates of the future useful lives of the property, plant and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions and other factors and may result in changes in the estimated useful life and in the depreciation and amortization charges.

2. Employee Benefits

The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using various assumptions. One of the critical assumptions used in determining the net cost (income) for these obligations include the discount rate. Any changes in these assumptions will impact the carrying amount of retirement benefit obligations.

3. Fair Value of derivatives and other financial instruments

Financial instruments are required to be fair valued as at the balance sheet date, as provided in Ind AS 109 and 113. Being a critical estimate, judgment is exercised to determine the carrying values. The fair value of financial instruments that are unlisted and not traded in an active market is determined at fair values assessed based on recent transactions entered into with third parties or based on valuation done by external appraisers, as applicable.

(z) Recent accounting pronouncements

In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying Ind AS 115, 'Revenue from Contracts with Customers'. The new revenue standard combines, enhances and replaces guidance’s on recognizing revenue with a single standard. It defines a new five-step model to recognize revenue from customer contracts. This standard is mandatory for the accounting period beginning on April 1, 2018. The Company is in the process of evaluating the impact on the financial statements.

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 Plantation Company Private Limited for a period of 30 years as part of restructure of its South India Plantation Operation in 2005.

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 amount of Rs. 1.26 Crores (Rs. 1.26 Crores), Rs. 0.62 Crores (Rs. 0.62 Crores), Rs. 0.08 Crores (Rs. 0.08 Crores), respectively, jointly owned /held with a subsidiary company.

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

Fair valuation of the investment property as at March 31, 2018 is Rs. 4.92 Crores (Rs. 4.80 Crores) based on valuation (Sales Comparable Approach-Level 2) by a recognized independent valuer.

a) During the year, the Company has sold a significant portion of its holding in Tata Chemicals Limited. Realized gain arising on the transaction amounting to Rs. 625.46 Crores has been accounted under retained earnings.

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

c) 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.

d) During the financial year 2017-18, the Company has divested its stake in Zhejiang Tata Tea Extractions Limited. Resultant profit on disposal net of reversal of impairment provisions of Rs. 18.77 Crores has been recorded under exceptional item.

e) During the financial year 2017-18, the Company has divested its holding in Estate Management Services Private Limited. Resultant profit on disposal of Rs. 105.08 Crores has been recorded under exceptional item.

f) During the financial year 2017-18, the Company has invested an amount of Rs. 10 Crores towards equity capital in Tata Starbucks Private Limited which is a 50:50 joint venture.

g) Investment in preference shares of Amalgamated Plantations Pvt. Ltd., are redeemable with a special redemption premium, on fulfilment of certain conditions, within 10-12 years from the date of the issue and are designated as fair value through profit and loss.

h) 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.

i) Investment carrying values are below Rs. 0.01 Crores.

* Includes deposit of Rs. 4.25 Crores (Rs. 4.25 Crores) secured by mortgage of land and deposits to related parties Rs. Nil (Rs. 6.50 Crores). $ secured by mortgage of rights on immovable assets.

# Property Rights Pending Development represents constructed office space to be delivered to the Company by TRIL Constructions Limited, consequent to a development agreement entered in 2013-14.

Raw material includes in transit tea inventory of Rs. 1.57 Crores (Rs. 5.81 Crores).

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

During the year ended March 31, 2018 - Rs. 2.76 Crores (Rs. 2.16 Crores) was charged to statement of profit and loss for slow moving and obsolete inventories.

* Includes due from Related Parties - Rs. 64.96 Crores (Rs. 58.56 Crores).

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

b) Rights, preferences and restrictions of equity 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, 2018) pursuant to contracts without payment being received in cash

12731159 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 May 11, 2018 have recommended a final dividend payment of Rs. 2.50 per share for the financial year ended March 31, 2018.

e) Nature and Purpose of Reserve

i) Capital Reserve

Capital Reserve had been 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 utilized in accordance with Section 52 of Companies Act 2013.

iii) Contingency Reserves

Contingency Reserve 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).

* There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund.

4. Capital Commitment

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for as at March 31, 2018 aggregated Rs. 10.97 Crores (Rs. 11.58 Crores).

(b) Commitment towards Share Capital contributions in Joint Ventures Rs. 40.00 Crores (Rs. 13.00 Crores)

(b) Labour disputes under adjudication relating to some staff - amount not ascertainable.

5. Contingent Assets:

Certain insurance/commercial claims are in the final stage of recovery for which amounts are not quantifiable and hence not reported.

6 . 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, 2018.

7.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. 6.14 Crores (Rs. 5.31 Crores).

8. Lease

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

9.a) Related Party Disclosure

Related Parties

Promoter Associates

Tata Sons Limited Estate Management Services Pvt Limited, Sri Lanka (till 28th December, 2017)

Watawalla Plantations Plc (till 28th December, 2017)

Amalgamated Plantations Pvt Limited

Subsidiaries Kanan Devan Hills Plantation Company Private Limited

TRIL Constructions Limited

Tata Global Beverages Group Limited

Tata Global Beverages Holdings Joint Ventures

Tata Global Beverages Services Limited NourishCo Beverages Limited

Tata Global Beverages GB Limited Tata Starbucks Private Limited Tata Global Beverages Overseas Holdings Limited

Tata Global Beverages Overseas Limited Joint Venture of Subsidiaries

Lyons Tetley Limited Tetley ACI (Bangladesh) Limited

Tata Global Beverages U.S. Holdings, Inc. Southern Tea LLC

Tata Water LLC Tetley Clover (Private) Limited Tetley USA Inc

Empirical Group LLC Key Management Personnel

Tata Global Beverages Canada Inc Mr. Ajoy Misra - CEO & Managing Director

Tata Global Beverages Australia Pty Limited Mr L Krishna Kumar - Executive Director & Group CFO

Earth Rules Pty Ltd.

Stansand Limited Subsidiary and Joint Venture of Promoter Company

Stansand(Brokers) Limited Tata Investment Corporation Limited

Stansand(Africa) Limited Ewart Investments Limited

Stansand(Central Africa) Limited Taj Air Limited

Tata Global Beverages Polska Sp.z.o.o Tata Capital Forex Limited (till October 30, 2017)

Drassington Limited Tata AIG General Insurance Limited

Good Earth Corporation Tata AIA Life Insurance Co Limited

Good Earth Teas Inc. Tata Consultancy Services Limited

Teapigs Limited TC Travel and Services Limited (till October 30, 2017)

Teapigs US LLC. Infiniti Retail Limited

Tata Global Beverages Czech Republic a.s Tata Interactive System Limited

Joekels Tea Packers (Proprietary) Limited Tata Business Support Services Limited (till November 27, 2017)

Tata Global Beverages Investments Limited Tata International Singapore PTE Limited

Campestres Holdings Limited Tata Housing Development Company Limited

Kahutara Holdings Limited Tata Elxsi Limited

Suntyco Holding Limited Tata Industries Limited Onomento Co Limited Coffee Trade LLC (w.e.f September 18, 2017)

Tea Trade LLC (till November 3, 2017) Employee Benefit Plans

Sunty LLC (till November 3, 2017) Tata Tea Limited Management Staff Gratuity Fund

Tata Coffee Limited Tata Tea Limited Management Staff Superannuation Fund

Tata Coffee Vietnam Company Limited Tata Tea Limited Staff Pension Fund

Consolidated Coffee Inc. Tata Tea Limited Gratuity Fund

Eight 'O Clock Coffee Company Tata Tea Limited Calcutta Provident Fund Eight 'O Clock Holdings Inc Tata Tea Extractions Inc Tata Global Beverages Capital Limited

Zhejiang Tata Tea Extraction Company Limited (till 24th July, 2017)

Tata Tea Holdings Private Limited

* For certain investments categorized under level 3, cost 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.

B. Measurement of fair values

The basis of measurement with 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. Fair values of certain non-current investment are valued based on discounted cash flow/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 by more than 90 days are still collectible in full, based on historical payment behavior 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, 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 rate risk and commodity price risk.

a) Currency risk

The Company 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, 2018, 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 instrument is expected to offset changes in cash flows of hedged 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 retrial benefits. The Company generally utilizes 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 owned funds.

(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.

(iii) Provident Fund

The Company operates Provident Fund Schemes and the contributions 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, 2018 and March 31, 2017.

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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