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NOTES TO ACCOUNTS

Raymond Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 3434.26 Cr. P/BV 1.76 Book Value (₹) 318.31
52 Week High/Low (₹) 885/533 FV/ML 10/1 P/E(X) 20.44
Bookclosure 05/06/2019 EPS (₹) 27.37 Div Yield (%) 0.54
Year End :2018-03 

I. Background

Raymond Limited (‘RL’ or ‘the Company’) incorporated in India is a leading Indian Textile, Lifestyle and Branded Apparel Company. The Company has its wide network of operations in local as well foreign market. The Company sells its product through multiple channels including wholesale, franchisee, retail etc. During the year ended 31 March 2018, the Company has decided to develop part of its land for residential / commercial purposes.

Premises given on operating lease:

The Company has given certain investment properties on operating lease. These lease arrangements range for a period between 2 and 5 years and include both cancellable and non-cancellable leases. Most of the leases are renewable for further period on mutually agreeable terms.

Estimation of fair value

The fair valuation is based on current prices in the active market for similar properties. The main inputs used are quantum, area, location, demand, restrictive entry to the complex,age of building and trend of fair market rent in village Panchpakhadi area.

This fair value is based on valuations performed by an accredited independent valuer. Fair valuation is based on replacement cost method. The fair value measurement is categorised in level 2 fair value hierarchy.

Notes:

@ During the earlier years, the Company invested an amount of Rs.6168 lakhs as at 31st March 2016 by subscription to the rights issue of equity shares of Raymond Luxury Cottons Limited (RLCL) a Subsidiary of the Company, enhancing the Company’s shareholding from 62% to 75.69% in 2015-16 and from 55% to 62% in 2014-15. In the year 2012-13, Cottonificio Honegger S.p.A (‘CH’), Italy, the erstwhile JV partner with Raymond Limited through one of its joint venture Company in India, Raymond Luxury Cotton Limited (RLCL) (formerly known as Raymond Zambaiti Limited), had submitted request for voluntary winding up including composition of its creditors in the Court of Bergamo, Italy. Consequent to this, RLCL as at 31st March 2013, had provided for its entire accounts receivable from CH of USD 1,255,058 and Euro 612,831, equivalent Indian Rupee aggregating Rs.1,122.24 Lakh. In the year 2013 - 14, RLCL had put up its claim of receivable from CH of Rs.1,122. 24 Lakh before the Judicial Commissioner of the Composition (the Commissioner) appointed by the Court of Bergamo, Italy. In protraction of matter with Cottonificio Honegger S.p.A (‘CH’), Italy, the Judicial Commissioner of the Composition (“the Commissioner”) appointed by the Court of Bergamo, Italy, has declared RLCL as unsecured creditor for the amount outstanding from ‘CH’. Further ‘CH’ had also sought permission from the Court of Bergamo, Italy, for initiating proceeding against RLCL in India.

RLCL had received a notice dated 23rd November 2015 notifying that CH has filed a Petition against them before the Hon’ble Company Law Board (“CLB”), Mumbai Bench under Section 397 and 398 of Companies Act, 1956. RLCL responded to the petition filed by CH. The CLB in its order dated 26th November, 2015 has recorded the statement made by the counsel for RLCL that CH’s shareholding in RLCL shall not be reduced further and the fixed assets of RLCL also shall not be alienated till further order. Subsequently, the proceedings were transferred to the National Company Law Tribunal (“NCLT”), Mumbai bench and currently, the matter is pending before the said forum. The next date of hearing has been fixed as 15 May 2018.

* These securities issued by Subsidiaries Companies are equity nature investment for Raymond Limited.

Significant Estimates : The carrying value of exposure in Raymond Uco Denim Private Limited is determined by an Independent valuer. The Company uses judgment to select from variety of methods and make assumptions which are mainly based on market conditions existing at the end of each reporting period.

Inventory write downs are accounted, considering the nature of inventory, ageing,liquidation plan and net realisable value. Writedowns of inventories amounted to Rs.4,384.87.lakhs as at 31st March, 2018 ( as at 31st March, 2017 - Rs.3,587.58 lakhs) These writedowns were recognised as an expense and included in ‘changes in inventories of finished goods, stock-in-trade, work-in-progress and property under development’ in the Statement of Profit and Loss.

# The Company had invested in the Preference Shares of UPL Limited (face value of Rs.10 each). During the year UPL Limited converted optionally convertible Preference Shares into Equity shares and in lieu of the preference shares, the Company received Ten Equity Shares (face value of Rs.2 each) for every Four Hundred Seventy One Preference Share of UPL Limited. The number of Preference shares held by Company of UPL Limited as at March 31, 2017 were 438834.

Refer Note 44 for information about fair value measurement, credit risk and market risk of investments.

Trade receivables include Rs.1500 lakhs (Previous year Rs. Nil) for which credit risk is retained by the Group under a factoring arrangement and are net of Rs.11144.76 lakhs de-recognised (along with corresponding liability) on transfer ‘without recourse’. Company retains interest liability upto an agreed date on the entire amount, the costs for which are recognised as part of finance costs.

Refer Note 45 for information about credit risk and market risk of trade receivables.

Notes:

a) Reconciliation of number of shares

b) Rights, preferences and restrictions attached to shares

Equity shares: The Company has one class of equity shares having a par value of Rs.10 per share. 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) Details of equity shares held by shareholders holding more than 5% of the aggregate shares in the Company

Securities premium reserve

Securities premium reserve is created due to premium on issue of shares. These reserve is utilised in accordance with the provisions of the Act.

Capital reserve

Capital reserve is utilised in accordance with provision of the Act.

Capital Redemption Reserve

Represent reserve created during buy back of Equity Shares and it is a non-distributable reserve.

Debenture Redemption Reserve

The Company is required to create a debenture redemption reserve out of the profits which is available for purpose of redemption of debentures.

Installments falling due within a year in respect of all the above Loans aggregating Rs.47860.88 lakhs (March 31, 2017 : Rs.31894.40 lakhs) have been grouped under “Current maturities of long-term debt” (Refer Note 22)

Amount of Rs.88.30 lakhs (March 31, 2017: Rs.127.44 lakhs) related to deferred expense towards processing charges is netted of against loan.

* Rate of Interest is without considering interest subsidy under TUF scheme.

The carrying amounts of financial and non financial assets as security for secured borrowings are disclosed in Note 37.

Consequent to reconciliation items shown above, the effective tax rate is 30.68% (2016-17: 28.17%)

Significant Estimates : In calculation of tax expense for the current year and earlier years, the group has disallowed certain expenditure pertaining to exempt income based on earlier tax assessments, matter is pending before various tax authorities.

Significant Estimates : Based on the approved plans and budgets, the Company has estimated that the future taxable income will be sufficient to absorb carried forward unabsorbed depreciation, which management believes is probable, accordingly, the Company has recognized deferred tax asset on aforesaid losses.

Note :-2-Commitments

i) Capital Commitments

Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:

ii) EPCG Commitments

Future Export Obligations / Commitments under import of Capital Goods at Concessional rate of Customs duty. As at 31st March, 2018 Rs.1782.18 lakhs (Previous year Rs.1593.34 lakhs).

Note :- 3: Post retirement benefit plans

Defined Benefits Plan

(i) Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India.

(ii) Pension Benefits

The Company operates defined benefit pension plans which provide benefits to some of its employees in the form of a guaranteed level of pension payable for certain years after retirement. The level of benefits provided depends on members’ length of service and their salary in the final years leading up to retirement.

As per Actuarial Valuation as on 31st March, 2018 and 31st March, 2017 and recognised in the financial statements in respect of Employee Benefit Schemes:

The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the method (Projected Unit Credit Method) used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.

**In case of certain employees, the Provident Fund contribution is made to a trust administered by the Company. In terms of the guidance note issued by the institute of Actuaries of India, the actuary has provided a valuation of Provident Fund liability based on the assumptions listed above and determined that there is no shortfall as at 31st March, 2018.

# takes into account the inflation, seniority, promotions and other relevant factors.

Risk Exposure - Asset Volatility

The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in government securities. These are subject to interest rate risk and the fund manages interest rate risk derivatives to minimize risk to an acceptable level. A portion of the funds are invested in equity securities and in alternative investments % which have low correlation with equity securities. The equity securities are expected to earn a return in excess of the discount rate and contribute to the plan deficit.

(iii) Leave obligations

The leave obligations cover the Company’s liability for sick and earned leave.

The amount of the provision of Rs.2948.91 lakhs (31 March 2017 - Rs.2543.7 lakhs) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations

(iv) Defined contribution plans

The Company also has certain defined contribution plans. such as provident fund and super annuation plan for benefits of employees. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan is Rs.1198.13 lacs (31 March 2017 - Rs.1112.46 lacs).

Note :-4 In accordance with Accounting Standard Ind As 108 ‘Operating Segment ‘, segment information has been given in the consolidated financial statements of Raymond Limited, and therefore , no separate disclosure on segment information is given in these financial statements.

Notes :

1) The Company has agreed with the lenders (Banks) of some of the subsidiaries/Joint Ventures for not disposing off Company’s investments in such Subsidiries/Joint Ventures without their prior consent.

2) Loans to Subsidiaries:

Loans to the Subsidiaries have been given for acquisition of assets and augmenting working capital and have been utilised for the same.

Guarantees given:

Guarantees provided to the lenders of the subsidiaries are for availing term loans and working capital facilities from the lender banks.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to short term maturities of these instruments.

2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counter-party. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.

The fair values for loans, security deposits and investment in preference shares were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

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

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The Company’s financial risk management is an integral part of how to plan and execute its business strategies. The Company’s financial risk management policy is set by the Managing Board.

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits , foreign currency receivables, payables and loans and borrowings.

The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommend risk management objectives and policies, which are approved by Senior Management and the Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures like foreign exchange forward contracts, borrowing strategies and ensuring compliance with market risk limits and policies.

Market Risk- Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Company’s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

According to the Company’s interest rate risk exposure is only for floating rate borrowings. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

Market Risk- Foreign currency risk.

The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas and purchases from overseas suppliers in various foreign currencies. Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies.

Derivative instruments and unhedged foreign currency exposure

(a) Derivative contracts outstanding as at 31st March, 2018

Derivative financial instruments such as foreign exchange forward contracts are used for hedging purposes and not as trading or speculative instruments.

(b) Particulars of unhedged foreign currency exposures as at the reporting date

(a) (iii) Market Risk- Price Risk

(a) Exposure

The Company’s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet either at fair value through OCI or at fair value through profit and loss. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

(b) Sensitivity

The table below summarizes the impact of increases/(decreases) of the BSE index on the Company’s equity and Gain/ (Loss) for the period. The analysis is based on the assumption that the index has increased by 5 % or decreased by 5 % with all other variables held constant, and that all the Company’s equity instruments moved in line with the index.

Above referred sensitivity pertains to quoted equity investment (Refer note 10(a) ). Profit for the year would increase/ (decrease) as a result of gains/ (losses) on equity securities as at fair value through profit or loss.

(c) Foreign Currency Risk Sensitivity

A change of 5% in Foreign currency would have following Impact on profit before tax

Credit risk

Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information.

The Company considers the probability of default upon initial recognition of asset 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 default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:

i) Actual or expected significant adverse changes in business,

ii) Actual or expected significant changes in the operating results of the counter-party,

iii) Financial or economic conditions that are expected to cause a significant change to the counter-party’s ability to meet its obligations,

iv) Significant increase in credit risk on other financial instruments of the same counter-party,

v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.

Financial assets are written off when there is no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized as income in the statement of profit and loss.

The Company measures the expected credit loss of trade receivables and loan from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.

Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.

(i) Financing arrangements

The Company had access to the following undrawn borrowing facilities at the end of the reporting period:

The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR.

Note :- 5 Capital risk management

(a) Risk Management

The Company aim to manages its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to our shareholders.

The capital structure of the Company is based on management’s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. We consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.

(b) Dividend

Note :-6 A Raymond Apparel Limited, the wholly owned subsidiary of the Company, during the year has granted 31516 Stock Options to its eligible employees and employees of the Company in accordance with the Raymond Apparel Limited Employee Stock Options Plan 2018 (“RAL ESOP2018”) with the vesting period of 5 years from the date of grant and the exercise period being one year from the date on which the options are eligible for exercise. Holder of each option is eligible for one fully paid equity share of the subsidiary company of the face value of Rs.10 each on payment of Rs.10 per option. The fair value of option determined on the date of grant is Rs.1570 based on the comparable companies multiple method. The impact of above for the year is not significant as the options were granted on 29th March , 2018 , accordingly no provision and disclosure have been considered in the financial statements.

Note 6 B Export Promotion Capital Goods (EPCG)

Export Promotion Capital Goods (EPCG) scheme allows import of certain capital goods including spares at concessional duty subject to an export obligation for the duty saved on capital goods imported under EPCG scheme. The duty saved on capital goods imported under EPCG scheme being Government Grant, is accounted as stated in the Accounting policy on Government Grant.

Note :- 6 C The Scheme of Arrangement between Raymond Apparel Limited (‘RAL’), subsidiary of Raymond Limited and Color Plus Fashions Limited, a subsidiary of RAL, and their respective shareholders has been approved by National Company Law Tribunal, Mumbai Bench (NCLT) on 28th June, 2017. Certified copies of the order of NCLT sanctioning the scheme were received on 27th July, 2017.

Note :- 7 Event occurring after balance sheet date

The Board of Directors has recommended Equity dividend of Rs.3.00 per share (Previous year Rs.1.25) for the financial year 2017-18. (Refer Note 46).

Note :- 8 The Financial Statements were authorised for issue by the directors on 24th April,2018.

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