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Huhtamaki PPL Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 1579.16 Cr. P/BV 2.26 Book Value (₹) 92.34
52 Week High/Low (₹) 305/162 FV/ML 2/1 P/E(X) 9.29
Bookclosure 23/06/2020 EPS (₹) 22.52 Div Yield (%) 1.43
Year End :2018-12 

1. Corporate information:

Huhtamaki PPL Limited (‘the Company') is a public limited Company domiciled in India with its registered office located at 12A-06 B-Wing,13th Floor, Parinee Crescenzo, C-38/39, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 and having manufacturing locations spread across the country. The Company is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The principal activity of the Company is manufacture and sale of packaging material.

2. Basis of Preparation, Measurement and Significant Accounting Policies:

A. Basis of Preparation

These financial statements have been prepared in accordance with the Indian Accounting Standards (‘Ind AS') as notified by Ministry of Corporate Affairs pursuant to Section 133 of Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2016.

The financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.

The financial statements for the year ended December 31, 2018 were approved by the Board of Directors and authorised for issue on February 18, 2019.

B. Basis of Measurement

The financial statements have been prepared under the historical cost convention, unless otherwise indicated.

The financial statements are presented in Indian Rupees (“INR”) and all values are rounded to the nearest Lakh, except otherwise indicated.

C. Key Accounting Estimates and Judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Continuous evaluation is done on the estimation and judgements based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Revisions to accounting estimates are recognised prospectively.

Information about critical judgements in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:

- Measurement of defined benefit obligations - Refer Note 46

- Measurement and likelihood of occurrence of provisions and contingencies - Refer Note 45

- Recognition of deferred tax assets - Refer Note 9

- Impairment of Intangibles - Refer Note 5

- Measurement of useful lives for property, plant and equipment and intangible assets - Refer Accounting Policy on Depreciation below

- Measurement of Share Based Payments - Refer Note 47

- Measurement of Fair values - Refer Note 50

D. Recent Accounting Developments

The Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 (the ‘Rules') on March 28, 2018. The rules shall be effective from reporting periods beginning on or after April 1, 2018. Amendments to Ind AS as per these rules are mentioned below:

Ind AS 115 - Revenue from contracts with customers:

Ind AS 115, Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a promised good or service and thus has the ability to direct the use and obtain the benefits from the good or service in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The standard replaces Ind AS 18 Revenue and Ind AS 11 Construction contracts and related appendices.

The Company is in the process of assessing the detailed impact of Ind AS 115, though it is expected that application of Ind AS 115 will not significantly change the timing of the Company's revenue recognition.

Appendix B to Ind AS 21 - Foreign currency transactions and advance consideration:

The appendix clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency-denominated contracts. For a single payment or receipt, the date of the transaction should be the date on which the entity initially recognises the non-monetary asset or liability arising from the advance consideration (the prepayment or deferred income/contract liability).

If there are multiple payments or receipts for one item, date of transaction should be determined as above for each payment or receipt.

The management is in process of assessing the impact of above amendment, though it is expected that impact from the amendment would not be significant. The Company intends to adopt the amendments prospectively from January 1, 2019.

Ind AS 12 - Income taxes regarding recognition of deferred tax assets on unrealised losses:

The amendments clarify the accounting for deferred taxes where an asset is measured at fair value and that fair value is below the asset's tax base.

The management is in process of assessing the impact of above amendment, though it is expected that impact from the amendment would not be significant. The Company will adopt the amendments from January 1, 2019.

Immovable Properties (Leasehold & Freehold Land) with a Gross Block value of Rs. 1,736.86 Lakh (Net block Rs. 1,632.24 Lakh) as at December 31, 2018 are held in the name of erstwhile Positive Packaging Industries Limited on account of amalgamation for which Company is in the process of registering the title deeds in its name.

Immovable Properties (Freehold Land) with a value of Rs.140 Lakh as at December 31, 2018 are held in the name of Ajanta Packaging on account of acquisition of Business by the Company (Refer Note 53) for which Company is in the process of registering the title deeds in its name.

B. Capital Work-in-Progress

Capital Work-in-Progress as at December 31, 2018 is Rs.445.20 Lakh (December 31, 2017: Rs.206.83 Lakh).

For contractual commitment with respect to property, plant and equipment refer note 45.

Impairment Charges

Goodwill has been tested for impairment and accordingly no impairment charges were identified for the year 2018 and 2017.

Goodwill of Rs.968.80 Lakh pertains to Webtech Lables Private Limited (merged with Huhtamaki PPL Limited w.e.f. April 1, 2015) and Goodwill of Rs.4,671.23 Lakh pertains to business of Ajanta Packaging acquired by Huhtamaki PPL Limited (Refer Note 53).

Following Key assumptions were considered while performing Impairment Testing

a) Long-Term sustainable growth rates - 5%

b) Weighted Average Cost of Capital % before Tax (Discount Rate) - 10%

The Projections cover a period of five years, as we believe this to be the most appropriate timescale over which to review and consider annual performances before applying a fixed terminal value multiple to the final year cashflows. The growth rates used to estimate future performance are based on the conservative estimates from past performance.

We have performed sensitivity analysis around the base assumptions and have concluded that no reasonable changes in key assumptions would cause the recoverable amount to be less than carrying value.

c) Terms/rights attached to equity shares

The Company has only one class of Issued, Subscribed and Paid-up Equity Capital having a par value of Rs.2 per share.

Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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.

b) Nature and Purpose of reserves:

i. Share Options Outstanding Account

The above reserve relates to shares of Ultimate Parent Company, granted by the Ultimate Parent Company to specific employees of the Company under its Employee Share arrangement.

Further information about Share based payments to employees is given at Note 47.

ii. Debenture Redemption Reserve (DRR)

The Company has issued redeemable non-convertible debentures. Accordingly, the Companies (Share Capital and Debentures) Rules, 2014 (as amended), require the Company to create DRR out of profits of the Company available for payment of dividend. DRR is required to be created for an amount which is equal to 25% of the value of debentures issued. The DRR is required to be created over the life of debentures viz. 5 years.

iii. General reserve

The Company has transferred a portion of the net profit of the Company before declaring dividend to general reserve. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to the Statement of Profit and Loss.

iv. Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.

a) Loan of Rs.6,408 Lakh (USD 100 Lakh) has been repaid in full in the current year as per the instalments due.

b) Unsecured Debentures carry interest rate of 7% p.a. The debentures are listed and are due for redemption on January 27, 2020.

c) The Company has availed unsecured interest free Sales tax deferral loan from the Government of Telangana for its Hyderabad (Bollarum) factory, in accordance with their sales tax deferral scheme. The above amount is repayable after 14 years from the date of availment of the loan. The loan is repayable annually on April 1 with 1st instalment was due on April 1, 2011 and last one being due on April 1, 2021.

d) The Company had availed interest free sales tax deferral loan from Government of Maharashtra for one of its factories in Maharashtra. The Loan has been repaid in full in the current year.

e) Outstanding balances shown in the foot notes above, are grossed up to the extent of unamortised transaction cost.

a) Retention Money represents:

- Rs.668.40 Lakh, being money payable to erstwhile shareholders of Positive Packaging Industries Limited for purchase of shares.

- Rs.247.13 Lakh, being money payable to Ajanta Packaging for purchase of business.

* There is no amount due and outstanding to be credited to Investor Education & Protection Fund.

Provision for Litigation represents provision made by the Company in respect of disputed Indirect Tax matters that arise in the ordinary course of business. These provisions have not been discounted as it is not practicable for the Company to estimate the timing of the provision utilisation and cash outflows, if any, pending resolution.

a) The Company has recognised a government grant of Rs.297.89 Lakh (December 31, 2017: Rs.342.51 Lakh) relating to benefit received from EPCG Scheme.

b) Goods and Services Tax ("GST") has been implemented with effect from July 1, 2017 which replaces Excise Duty and other input taxes. According to the requirements of Ind AS, revenue for the year ended December 31, 2017 are reported inclusive of excise duty. As per Ind AS 18, the revenue for the year ended December 31, 2018 are reported net of GST. In view of the aforesaid restructuring of indirect taxes, Revenue from Sale of Products and Services for the year ended December 31, 2018 are not comparable with the previous period. Following additional information is being provided to facilitate such comparison:

Note 3: Details of CSR expenditure:

The Company has incurred Rs.238.26 Lakh (Previous Year: Rs.156.85 Lakh) towards Corporate Social Responsibility activities. Further, no amount has been spent on construction/acquisition of an asset of the Company. The amount paid out of the above is Rs.224.95 Lakh (Previous Year: Rs.149.37 Lakh).

The amount required to be spent under Section 135 of the Companies Act, 2013 for the year 2018 is Rs.213.49 Lakh (Previous Year: Rs.195.04 Lakh) i.e. 2% of average net profits for last three financial years, calculated as per Section 198 of the Companies Act, 2013.

Note 4: Taxes relating to earlier periods

In respect of a disputed Income tax matter of earlier years, the Company was pursuing appeals on the basis of expert advice and favourable judicial precedent. The Supreme Court has given in August 2018, a ruling in favour of the revenue authorities on a similar issue concerning other assesses. Consequent to this development, the Company has recognised a provision for income tax of Rs.2,107.49 Lakh and interest thereon of Rs.1,000.41 Lakh during the current year. The Company is evaluating further legal options on the matter.

* Revenue Expenditure of Rs.112.45 Lakh has been grouped under various expense heads of the Financial Statements.

** Additions to Fixed Assets in Note No. 4 includes Rs.Nil towards Capital Expenditure incurred for Company's in house R & D facilities.


i. It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above, pending resolution of the respective proceedings as it is determinable only on receipt of judgements/decisions pending with various forums/authorities.

ii. The Company does not expect any reimbursements in respect of the above contingent liabilities.

iii. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.

B. Commitments-

i. Operating Lease Commitments:

The Company has taken certain Office Premises, Factory Premises and residential facilities under Operating Lease arrangements. The aggregate lease rentals payable are charged as rent in the Statement of Profit and Loss. There are no restrictions imposed by lease arrangements. There are no subleases.

iii. Export Obligation:

The Company has undertaken an export obligation of 6 to 8 times of the duty saved on Machinery imported by the Company to be fulfilled over a period of 6 to 8 years. The Obligation outstanding as on the date of Balance sheet is Rs.2,640.28 Lakh (December 31, 2017 Rs.987.79 Lakh).

Note 5: Defined Benefit Plan - Gratuity

Description of the Plan

The Company has a defined benefit gratuity plan (funded). Gratuity is payable to all eligible employees of the Company on Superannuation, death and resignation, in terms of the provisions of the Payment of Gratuity Act or as per the Company's Scheme whichever is more beneficial.


The Fund is in form of Company managed Trust. The Trustees of the Trust are responsible for the overall governance of the plan and to act in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term investment, risk management and funding strategy.

Investment Strategy

The Company's investment strategy in respect of its funded plans is implemented within the framework of the applicable statutory requirements. The plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has allocated assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Company of the benefits provided.

The Plan does not invest directly in any property occupied by the Company or any financial securities issued by the Company E. Assumptions:

With the objective of presenting the plan assets and plan obligations of the defined benefits plans at their fair value on the Balance Sheet, assumptions under Ind AS 19 are set by reference to market conditions at the valuation date.

The estimates of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

G. Expected Employer Contribution for the next year is Rs.182.40 Lakh (Year 2017:264.09 Lakh).

H. The Average Duration of the defined benefit obligation at the end of reporting period is 13 years.

Note 6: Share-based payments

a) Performance Share Plans

On March 12, 2010 the Board of Directors of the Parent Company decided on establishing a Performance Share Arrangement to form a part of the long-term incentive and retention programme for the key personnel of the Parent Company and its subsidiaries. The Performance Share Arrangement offers a possibility to earn the Parent Company shares as remuneration for achieving established targets. The arrangement includes annually commencing three-year performance share plans. A possible reward shall be paid during the calendar year following each three-year plan. Commencement of each three-year plan will be separately decided by the Board of Directors of Parent Company.

Participants to the plan shall hold at least 50% of the shares received until he/she holds shares received from the Performance Share Plans corresponding in aggregate to the value of his/her 6 months base salary. The aforementioned ownership requirements apply until termination of employment or service.

Performance Share Plan 2018-2020:

The Performance Share Plan 2018-2020 commenced in year 2018 and the possible reward will be based on the Group's earnings per share (EPS) in 2020. The reward, if any, will be paid during 2021.

Performance Share Plan 2017-2019:

The Performance Share Plan 2017-2019 commenced in year 2017 and the possible reward will be based on the Group's earnings per share (EPS) in 2019. The reward, if any, will be paid during 2020.

Performance Share Plan 2016-2018:

The Performance Share Plan 2016-2018 commenced in 2016 and the possible reward will be based on the Group's earnings per share (EPS) in 2018. The reward, if any, will be paid during 2019.

Performance Share Plan 2015-2017:

The Performance Share Plan 2015-2017 commenced in 2015. The reward was based on the Group's earnings per share (EPS) in 2017 and was paid in 2018.

In terms of the aforesaid plan, the eligible employees of the Company receive certain number of shares of the Parent Company as per the terms and conditions of the Plan.

The aforesaid plan is an equity settled plan.

The Company has recognised these share based payment transactions as equity settled share based payment transaction in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments, since the Company receives the services of the employees to whom the shares have been granted by the Parent Company and the Company has no obligation to settle the same.

b) Share Appreciation Rights

During the year 2016, at the General Meeting, the shareholders of the Company had unanimously passed Special Resolution on May 10, 2016 to grant stock appreciation rights (SARs) to the eligible employees of the Company. Pursuant to this resolution, Huhtamaki PPL Limited Employee Phantom Stock Scheme 2015 has been formulated and adopted. Fair value of the SARs is measured at each reporting date taking into account the terms and conditions upon which the SARs were granted.

The SARs will be settled in cash and vest after 2 years from the date of allotment as per the terms and conditions of the grant.

* Key managerial personnel are eligible for share based payments of the Ultimate Holding Company for which there is no cash outflow from the Company. ** As the future liabilities for gratuity and leave encashment are provided on an actuarial valuation basis for the Company as a whole, the amount pertaining to individual is not ascertainable and therefore not included above.

7. Terms and Conditions

i) All outstanding balances are unsecured and are repayable as per terms of credit and settlement occurs in cash.

ii) All related party transactions entered during the year were in ordinary course of business and on arms length basis.

iii) The Company has not recorded any impairment of receivables related to amounts owed by related parties.

Note 8: Segment information

For Management purpose, the Company comprise of only one reportable segment - Consumer Packaging.

The Executive Management monitors the operating results of this segment for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.

ii. Entire Non-Current Assets of the Company are situated in India

iii. Major customer

Revenue from one customer of the Company is Rs.24,483.06 Lakh (2017: Rs.22,836.89 Lakh) which is 10.50% (2017: 10.38%) of the Company's total revenue.

The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, Trade receivables, Loans, Other Financial Assets, Trade Payables, Other Financial Liabilities at carrying value, because, their carrying amounts are a reasonable approximation of the fair values due to their short-term nature.

B. Calculation of Fair Values-

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. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended December 31, 2017.

Financial assets and liabilities measured at fair value as at Balance Sheet date:

1. 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.

2. The fair values of the forward contracts used for expected future sale have been determined using forward pricing, based on present value calculations.

3. The fair value of the Company's Sales Tax Deferral Loans are determined by using DCF method using discount rate that reflects the issuer's borrowing rate at the end of the reporting period.

4. Cash and cash equivalents, trade receivables, investments in term deposits, other financial assets (except derivative financial instruments), trade payables, and other financial liabilities have fair values that approximate to their carrying amounts due to their short-term nature.

5. Loans have fair values that approximate their carrying amounts as it is based on the net present value of the anticipated future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

C. Fair Value Hierarchy-

The fair value of financial instruments as referred to in note (A) above 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: 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

For assets and liabilities which are measured and disclosed at fair value as at Balance Sheet date, the classification of fair value calculations by category is summarised below:

Note 9: Financial Risk Management Objectives and Policies

The Company's principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include loans, current investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.

The Company's business activities are exposed to a variety of financial risks, namely liquidity risk, market risk and credit risk. The Company's senior management has the overall responsibility for establishing and governing the Company's risk management framework. The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor controls, periodically review changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board of Directors and Audit Committee of the Company.

A. Management of Liquidity Risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company's approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.

The Company maintained a cautious liquidity strategy, with a positive cash balance throughout most of the year ended December 31, 2018 and December 31, 2017. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis.

The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in other highly marketable debt investments to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

B. Management of Market Risk

The Company's size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:

1. Currency Risk

2. Price Risk

3. Interest Rate Risk

The above 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. Currency Risk:

The Company is subject to the risk that changes in foreign currency values impact the Company's exports revenue and imports of raw material and property, plant and equipment. The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollar and Euro.

The Company manages currency exposures within prescribed limits, through use of forward exchange contracts. The aim of the Company's approach to management of currency risk is to leave the Company with no material residual risk.

The Company's exposure to foreign currency changes for all other currencies is not material.

ii) Price Risk:

The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments

The Company has laid policies and guidelines which it adheres to in order to minimise price risk arising from investments in debt mutual funds.

At December 31, 2018, the investments in debt mutual funds amounts to Rs.2,112.18 Lakh (December 31, 2017: Rs.13,749.79 Lakh). These are exposed to price risk.

A 1% increase in prices would have led to approximately an additional Rs.21 Lakh gain in the Statement of Profit and Loss (2017: Rs.137 Lakh gain). A 1% decrease in prices would have led to an equal but opposite effect

iii) Interest Rate Risk:

Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. To hedge interest rate risk mix of variable and fixed instruments is judiciously applied for financing company's requirement.

C) Management of Credit Risk Trade Receivables:

Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations.

Concentration of credit risk with respect to trade receivables are limited, due to the Company's customer base being large and diverse. Further majority of the Company's customers are Companies with strong financial stability. All trade receivables are reviewed and assessed for default on a quarterly basis, through detailed review with the business teams.

Credit to be given to a customer is assessed based on credit quality of the customer and individual credit limits are defined in accordance with this assessment.

Our historical experience of collecting receivables is that credit risk is low. Hence, trade receivables are considered to be a single class of financial assets.

Other Financial Assets:

The Company maintains exposure in cash and cash equivalents, term deposits with banks, liquid mutual funds and derivative instrument. The Company has set counter-parties limits based on multiple factors including financial position, credit rating, etc. The Company's maximum exposure to credit risk as at December 31, 2018 and December 31, 2017 is the carrying value of each class of financial assets.

There is no major change as compared to previous year w.r.t to risk management and policies

Note 10: Capital management

For the purpose of Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to maximise 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. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using the debt-equity ratio, which is net debt divided by total equity. The Company includes within net debt, entire loans and borrowings less cash and cash equivalents, bank balance other than cash and cash equivalents and investment in liquid mutual funds.

In order to achieve this overall objective, the Company's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2018 and December 31, 2017.

Note 11: Acquisition of Business of Ajanta Packaging

On June 1, 2018, the Company acquired Business of Ajanta Packaging, a partnership firm in India on Slump Purchase basis by way of cash payment to Ajanta Packaging. Ajanta Packaging is a partnership firm specialising in manufacture of Pressure Sensitive Labels.

The Company acquired business of Ajanta Packaging as it enhances its Pressure Sensitive Labels manufacturing capacity and also provides the Company with new customers and synergies in Purchasing.

The Company has measured the acquired business of Ajanta Packaging at fair value.

The Goodwill of Rs.4,671.23 Lakh comprises the value of expected synergies arising from acquisition, trained manpower and established earning capacity of the business, which has not been seperately recognised. Goodwill of Rs.4,077.58 Lakh is tax deductible.

From the date of acquisition, business of Ajanta Packaging has contributed Rs.5,509.21 Lakh to revenue and Rs.683.37 Lakh to the profit before tax.

Note 12

In view of the acquisition of business of Ajanta Packaging referred to in Note 53, the figures for the current year are not comparable with corresponding figures of previous year.

Note 13

The Company, in relation to its Thane manufacturing facility, received a closure notice on November 20, 2018 from Maharashtra Pollution Control Board (‘MPCB'), pursuant to the provisions of Water & Air Pollution Act, against which the Company filed an appeal with the National Green Tribunal (‘NGT'). The Company submitted documentary evidence of its compliance under the Plastic Waste Management Rules, 2016, (PWM Rules) to MPCB and on December 14, 2018 withdrew its appeal before the NGT, with liberty to file a fresh appeal, which has been accepted by NGT. On January 3, 2019, the Central Pollution Control Board (‘CPCB') certified the Company as ‘Producer' as per the PWM Rules, notified under the Environmental (Protection) Act, 1986 covering all its manufacturing sites. In view of the actions taken, the Company expects withdrawal of the closure notice by MPCB.

Note 14

Since the Chief Financial Officer has resigned w.e.f. January 18, 2019 and the Company is still in the process of appointing a new Chief Financial Officer as required under Section 203 of the Companies Act, 2013, the financial statements have not been signed by a Chief Financial Officer as required by Section 134 of the Companies Act, 2013.

Note 15: Events after the reporting period

The Board has recommended dividend of Rs.3 per share (December 31, 2017 - Rs.3 per share) for the year 2018.

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