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Rama Steel Tubes Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 45.43 Cr. P/BV 0.52 Book Value (₹) 51.81
52 Week High/Low (₹) 115/16 FV/ML 5/1 P/E(X) 5.43
Bookclosure 30/09/2019 EPS (₹) 4.98 Div Yield (%) 0.00
Year End :2018-03 

1. Corporate Information

Rama Steel Tubes Limited (" the Company') is limited Company domiciled in India and incorporated on Febuary 26, 1974 under the provisions of the CompanyAct, 1956 having its registered office at 7, Second Floor, Surya Niketan, New Delhi. The Company is a public company listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The Company is engaged in the business of manufacturing of Steel Pipes and related products.

2. Basis of preparation of financial statements & Use of estimates

2.1 Basis of Preparation of financial Statements

These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 ( 'the Act') ( to the extent notified) and guidelines issued by the Securities and Exchange Board of India ( SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. The Company has adopted as applicable Ind AS standards and the adoption was carried out in accordance with Ind AS 101, First-Time Adoption of Indian Accounting Standards. The transition to Ind AS is April 1, 2016 which was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies( Accounts)Rules, 2014 ( IGAAP), which was the previous GAAP. Recommendations and descriptions of the effect of the transition have been summarized in Note 45. Accounting policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

2.2 Statement of compliance

The financial statements have been prepared in accordance with Indian Accounting Standard (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.Upto the year ended 31st March, 2016, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. These are the Company's first Ind AS financial statements. The date of transition to Ind AS is 1st April, 2016.

2.3 Use of estimates

The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates, judgements and assumptions. These estimate, judgements and assumptions affect the application of accounting sheet date is classified as capital advances under other noncurrent assets and the cost of Property, Plant and Equipment not available for use before such date are disclosed under 'Capital work-in-progress'policies and the reported amounts of assets and liabilities,the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. The application of accounting policies that require critical accounting estimates involving complex and subjective judgements and the use of assumptions in these financial statements have been disclosed in Note 4. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of the changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, their effects are disclosed in the notes to the financial statements.

D. Right, preference and restrictions attached to shares Equity Shares

The Company has only one class of equity shares having a par value of Rs. 5/- per share. Each Shareholder is eligible for one vote per share. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amount , in proportion of their shareholding.

*Others includes Financial Institutions.

"# Secured by way of mortgage of plot No 131, sector-44, Gurgaon & hypothecation of fixed assets of the Company and extension of charge by way of hypothecation of current assets of the company.

First Term loan from banks amounting Rs.720.64 Lakhs as at 31.03.2018 are payable in 120 monthly installments commencing from August 2014 to October 2023, carrying a floating interest rate linked with MCLR of bank (1 year MCLR 8.20 % 1.60 % p.a.) with periodical interest reset).

Second topup term loan from banks amounting Rs.150.95 Lakhs as at 31.03.2018 are payable in 120 monthly installments commencing from April 2017 to March 2027, carrying a floating interest rate linked with MCLR of bank (1 year MCLR 8.20% 1.60 % p.a.) with periodical interest reset).

First vehicle loan term loan from bank amounting Rs.3.90 Lakhs are payable in 36 monthly installments commencing from May 2016 to April 2019 with rate of interest 9.75 % p.a. at year end.

Second Vehicle term loan from bank amounting Rs.59.70 Lakhs are payable in 60 monthly installments commencing from March 2017 to Feb 2022 with rate of interest 9.75% p.a. at year end. Note: Installments falling due in respect of all the above loans upto 31st March, 2018 have been grouped under ""Current Maturities of long term debt.""(Refer Note 19 (c))"

* Working Capital Facilities from Banks are secured by way of hypothecation of Company's current assets (present and future) including interalia stock of raw materials, stores, spares, stock in process, finished goods etc. lying in the factory, shop, godowns, elsewhere and including goods in transit , book debts, bills receivable and first charge by way of collateral in respect of fixed assets of the company and further guaranteed by Sh. Naresh Kumar Bansal, Director and Sh. Richi Bansal Director of the Company.

3. Financial Risk Management Financial Risk Factors

The Company's principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to manage finances for the Company 's operations. The Company has loan and other receivables, trade and other receivables, and cash and short terms deposits that arise directly from its operations. The Company's activities expose it to a variety of financial risks.

i) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risks: currency rate risk, interest rate risk and other price risks such as equity price risk and commodity risk. Financials instruments affected by market risk includes loans and borrowings, deposits, investments. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchanges rates. 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. This is based on the financial assets and financial liabilities held as of March 31, 2018 and March 31, 2017.

ii) Credit Risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

iii) Liquidity Risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses.

The Company 's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

Market Risk

The sensitivity analysis excludes the impact of movementsin market variables on the carrying value of post employeement benefit obligations provisions and on the non-financial assets and liabilities. The sensitivity of the relevant statement of Profit and Loss item is the effect of the assumed changes in the respective market risks. The Company's acitivies expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. However, such effect is not material.

(a) Foreign exchange risk and sensitivity

The company transacts business primarly in Indian Rupee. Therefore the company does not have trade receivables other than in Indian Currency on which foreign exchange currency risk and sensitivity does not arise.

(b) Interest rate risk and sensitivity

The Company does not have any borrowings on which the interest risk and Sensitivity arises.

(c) Commodity price risk and sensitivity

The company is exposed to the movement in price of key raw materials in domestic markets. The Company enters into contracts for procurement of material most of the transactions are short term fixed price conract.

Credit Risk

The Company is exposed to credit risk from its operating activities (primarily trade receivables). Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly. The Company considers the probability of default upon initial recognition of assets and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk, the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forward-looking information.

Cash and Cash Equivalents, Deposit in Banks and other Financial instruments

The Company considers factors such as track record, size of the institution, market reputation and service standards to select the banks with which balances and deposits are maintained. Generally, the balances are maintained with the institutions with which the Company has also availed borrowings. The Company does not maintain significant cash and deposit balances other than those required for its day to day operations. For other financial assets the company monitors ratings, credit spreads and financial strengths of its counterparties. Based on its ongoing assessment of the counter party's risk, the company adjust its exposures to various counter parties. Based on the assessment there is no impairment in other financial assets.

Liquidity Risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company's finance department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company's net liquidity position through rolling forecasts on the basis of expected cash flows.

Maturity profile of financial liabilities

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

Capital Risk Management

For the purposes of the Company's capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company's Capital Management is to maximize shareholder value. The company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants. 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 of the financial covenants of any interest bearing loans and borrowing for reported periods.

4. Fair value of financial assets and liabilities

Set out below is a comparison by class of the carrying amounts and fair value of the company's financial instruments that are recognised in the financial statements.

Fair Value Hierarchy

The company measures financial instuments at fair value in accordance with the accounting policies mentioned above. Fair value is 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. The fair value measurement is based on the presumption that the transaction to sell the assets or transfer the liability takes place either:

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valution techniques as follows:-

1. Level 1: Quoted prices/ NAV for Identical instruments in an active market.

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

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

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Fair Value Technique

1) The carrying amounts of trade receivables, trade payables and cash and cash equivalents are considered to be the same as their fair values due to their short term nature.

2) The fair value of security deposit given was calculated based on cash flows discounted using the current lending rate. They are classified as a level 2 fair values in the fair value hierarchy due to the inclusion of unobservable inputs inlcuding counterparty credit risk.

3) For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

During the year ended 31st March 2018 and 31st March 2017, there were no transfers between level 1 and Level 2 fair value measurements and no transfer into and out of Level 3 vair value measurements. There is no transaction/ balance under Level 3.

5. Segment Reporting

The Company is in the business of manufacturing in a single segment of manufacturing of Steel and related products. Therefore, segment reported as per IND AS 108 is our operating segment.

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant acturial assumptions the same method (projected unit credit method) has been applied as when calculating the defined benefit obligation recognised within the Balance Sheet.

OCI presentation of defined benefit plan

a) Gratuity is in the nature of defined benefit plan, re-measurement gains / (losses) on defined benefit plans is shown under OCI as Items that will not be reclassified to profit or loss and also the income tax effect on the same.

b) Leave encashment cost is in the nature of short term employee benefits.

Presentation in Statement of Profit and Loss and Balance Sheet

Expenses for Service cost , net interest on net defined benefit liability (asset) is charged to Statement of Profit & Loss.

IND AS 19 do not require seggregation of provision in current and non-current, however net defined liability (Assets) is shown as current and non-current provision in balance sheet as per IND AS 1.

Actuarial liability for short terms benefits (leave encashment cost) is shown as current and non-current provision in balance sheet.

When there is surplus in defined plan, the company is required to measure the net defined benefit at the lower of the surplus in the defined benefit plan and the assets ceiling, determined using the discount rate specified i.e. market yield at the end of the reporting period on government bonds, this is applicable for domestic companies, foreign company can use corporate bonds rate.

b) The company has not proposed any dividend to its shareholders during the year.

c) The Company has not given any loan or given any guarantee with respect to the parties covered under section 186 (4) of the Companies Act, 2013.

d) Certain balances of trade receivables, loan and advances, trade payable and other liabilities are subject to confirmation and / or reconciliation.

6. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs.NIL (Previous Year Rs.NIL).

7. Exceptional item consists of Loss (Net) of Rs.NIL (Previous year Loss (Net) of Rs..90 Lakhs on the provision of employees benefits pertaining to previous years.

*A. Short-term benefits comprises the expenses recorded under the head employee benefit expenses (eg. Salary and wages, contribution to provident and other funds and staff welfare expenses).

B. The liability for gratuity and compensated absences are provided on actuarial basis for the Company as a whole, amounts accrued pertaining to key managerial personnel are not included above.

C. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

The transactions with the related parties are made on terms equivalent to those that prevail in arm's length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured and settlement occurs in cash.

The Company does not have any potential equity shares and thus, weighted average number of equity shares for the computation of Basis EPS and Diluted EPS remains same.

8. Disclosures Required as per Indian Accounting Standard (IND AS) 101-First Time Adoption of Indian Accounting Standard Transition to IND AS 1. Basis of Preparation

The Company prepared financial statements for all periods up to 31st March,2016 in accordance with the Accounting Standards notified u/s 133 of the Companies Act, 2013 (as amended) read with Companies (Accounts) Rules 2015 ("Indian GAAP"). These are the Company's first annual financials statements prepared complying in all material respects with the Indian Accounting Standards notified under Section 133 of Companies Act,2013, read together with paragraph 3 of the Companies (Indian Accounting Standards) Rules 20115. Accordingly the Company prepared its opening IND AS Balance sheet at April 1, 2016 and comparative period presented for the financial year ended 31st March, 2017.

i. Exemptions availed

As permited by IND AS 101, the company has not availed any exemotions from the retrospective application of certain requirements under IND AS.

The Company has choosen to measure all items of PPE on transition date i.e. 1st April, 2016 at carrying value under previous IGAAP at their deemed cost.

ii. Exceptions applied

Estimates : Estimates at 1st April, 2016 and 31st March, 2017 are consistent with estimates made for the same date in accordance with IGAAP.

Classification and measurement of financial assets: The Company has classified the financial assets in accordance with IND AS 109 on the basis of facts and condition existed on IND AS transition date.

iii. Measurement and recognition difference for the year ended 31st March, 2017.

1. Property ,Plant and Equipment Assets carried at Deemed cost in IND AS

The Company has carried out the previous IGAAP Figures of Property, Plant and Equipment appearing as on the date of transition i.e. 1st April, 2016, as deemed cost of the Property, Plant and Equipment.

2. Financial Instruments

i. Fair valuation of financial assets and liabilities

Under Indian GAAP, receivables and payables were measured at transaction cost less allowances for impairment , if any. Under IND AS, these financial assets and liabilitiies are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less allowancec for Impairment, if any. The resulting finance charge or income is included in finance expenses or finance income in the Statement of Profit and Loss for financial liabilities and financial assets respectively.

ii. Investment in fellow subsidiary / associates

The Company has carried out the previous IGAAP Figures of investment in Fellow Subsidiary/ Associates appearing as on the date of transition i.e.1st April, 2016 as deemed cost of the Investment.

iii. Cost of borrowing

Borrowings designated and carried at amortised cost are accounted on effective interest rate method. The upfront fee or cost of borrowing incurred is deferred and accounted on effective interest rate. Borrowings are shown as net of unamortised amount of ufront fee incurred.

iv. Security Deposit

Under Previous GAAP, the security deposit for leases are accounted at an undiscounted value. Under Ind AS, the security deposits for leases have been recognised at discounted value and the difference undiscounted and discounted value has been recognised as Deferred lease rent which has been amortised over the respective lease term as rent expenses under 'other expenses'. The discounted value of the secuirty deposits is increased over the period of lease term by recognising the notional interest income under 'other income'.

3. Deferred Tax

The Company has accounted for deferred tax on the various adjustments between Indian GAAP and IND AS at the tax rate at which they are expected to be reversed.

4. Statement of Cash Flows

The impact of transition from Indian GAAP to IND AS on the Statement of Cash Flows is due to various reclassification adjustments recorded under IND AS in Balance sheet, Statement of Profit & Loss and difference in the definition of cash and cash equivalents and these two GAAPs'.

5. The impact of change in acturial assumption and experience adjustments for defined benefit obligation towards gratuity liability is accounted in the Statement of Other Comprehensive income and corresponding tax impact on the same.

9. The Company changed its method of charging depreciation from written down value method (WDV) to the straight-line method (SLM) for the Company's Long Term assets. The retrospective effect of change upto 31st March, 2017 has increased the net book value of long term assets by '666.76 Lakhs and corospondingly increased the other equity (retained earnings) by the same amount during the FY 2017-18. The company brought about the change because the straight-line method will more accurately reflect the pattern of usage and the expected benefits of such assets and provide greater consistency with the depreciation method used by other companies in the Company's industry. The net book value of assets with useful lives remaining will be depreciated using the straight-line method prospectively. As a result of the change to the straight-line method of depreciating Long term assets, depreciation expenses decreased by Rs.130.17 Lakhs and increased the Net Profit before Tax by Rs.130.17 Lakhs for the year ended March 31, 2018.

10. Previous year figures have been regrouped/ rearranged, wherever considered necessary to conform to current year's classification.

11. Notes 1 to 47 are annexed to and form an integral part of financial statements.

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