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NOTES TO ACCOUNTS

R&B Denims Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 33.94 Cr. P/BV 0.86 Book Value (₹) 28.10
52 Week High/Low (₹) 46/19 FV/ML 10/1 P/E(X) 8.73
Bookclosure 02/08/2019 EPS (₹) 2.78 Div Yield (%) 0.00
Year End :2018-03 

1) THE COMPANY OVERVIEW:

R & B Denims Ltd. is a Public Limited Listed Company incorporated and domiciled in India. The address of its registered office is R & B Denims Limited, Block No. 467, Palsana-Sachin Highway, Gujarat, India. The Company is engaged in the business of manufacturing and sale of quality Denim Textile products. The company caters both domestic and international markets.

2) BASIS OF PREPARATION OF FINANCIAL STATEMENTS:

Statement of compliance and basis of preparation

These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS)prescribed under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules as amended from time to time, the provisions of the Companies Act, 2013 (“the Companies Act”) as applicable and guidelines issued by the Securities and Exchange Board of India (“SEBI”).

Up to the year ended March 31, 2017, the company prepared its financial statements in accordance with the requirements of the Indian GAAP (“Previous GAAP”), which included Standards notified under the Companies (Accounting Standards) Rules, 2006. The date of transition to Ind AS is April 01, 2016.

Accounting policies have been applied consistently to all periods presented in these financial statements.

The financial statements correspond to the classification provisions contained in Ind AS 1 “Presentation of Financial Statements”. For clarity, various items are aggregated in the statements of profit and loss and balance sheet. These items are disaggregated separately in the notes to the financial statements, where applicable.

All amounts included in the financial statements are reported in lakhs of Indian rupees except share and per share data, unless otherwise stated. Due to rounding off, the numbers presented throughout the document may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.

Basis of measurement

These financial statements have been prepared on a historical cost convention and on an accrual basis, except for the following material items which have been measured at fair value as required by relevant Ind AS;

- The defined benefit asset(liability) is as the present value of defined benefit obligation less fair value of plan assets and

- Financial instruments classified as fair value through profit or loss.

Use of estimates and judgment

The preparation of the financial statements in accordance with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amounts recognized in financial statements are included in the following notes:

- Useful lives of Property, plant and equipment [Note M]

- Measurement of defined benefit obligations [Note D]

- Provision for inventories [Note J]

- Measurement and likelihood of occurrence of provisions and contingencies [Note Q]

- Deferred taxes [Note E]

3) RECENT ACCOUNTING DEVELOPMENTS

Standards issued but not yet effective:

In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2018, issuing Ind AS 115, Revenue from Contracts with Customers. The standard is applicable from April 01, 2018. The Corresponding Ind AS 18, ‘Revenue’ and Ind AS 11, ‘Construction Contract’ have been omitted. Relevant amendments have been made to Ind AS 101, 103, 104, 107, 109, 112, 1, 2, 8, 12, 16, 17, 21, 23, 28, 32, 34, 36, 37, 38 and 40.

The Company has not applied these amendments since they are effective for periods beginning on or after April 01, 2018.

4) FIRST TIME ADOPTION OF IND AS

These are the Company’s first financial statements prepared in accordance with Ind AS.

The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from April 01, 2017 with a transition date of April 1, 2016. These financial statements for the year ended March 31, 2018 are the first the Company has prepared under Ind AS. For all period’s upto and including the year ended 31st March, 2017, the Company prepared its financial statements in accordance with the previously applicable Indian GAAP (previous GAAP).

The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared financial statements which comply with Ind AS for year ended 31st March 2018, together with the comparative information as at and for the year ended 31st March 2017. The Company’s opening Ind AS Balance Sheet has been prepared as at 1st April, 2016, the date of transition to Ind AS.

In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act.

An explanation of how the transition from previous GAAP to Ind AS has affected the Company financial position, financial performance and cash flows is set out in the following tables and notes

I. Optional Exemptions from retrospective application

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions.

(a). Deemed cost of property, plant and equipment.

Ind AS 101 permits a first time adopter to elect to continue with the carrying values for all of its Property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for decommissioning liabilities. Accordingly, the Company has opted to consider the carrying value for all of its Property, plant and equipments as recognised in its previous GAAP financials as its deemed cost at the transition date.

(b) Fair value of financial assets and financial liabilities

Ind AS 101 permits a first time adopter to apply requirement of Ind AS 109 prospectively to transactions entered into on or after the date of transition. Accordingly the company has opted to consider the measurement of financial assets and liabilities arisen before the date of transition of Ind AS as per previous GAAP.

II. Mandatory Exceptions to retrospective application

(a). Estimates

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 01, 2016, the date of transition to Ind AS and as of March 31, 2017.

(b). Classification and measurement of financial assets

The classification of financial assets to be measured at cost or fair value made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.

III. Transition to Ind AS - Reconciliations

The following reconciliations provide the explanations and quantification of the differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:

i. Reconciliation of Statement of Profit and Loss for the year ended 31st March, 2017.

ii. Adjustments to Statement of Cash Flows for the year ended 31st March, 2017.

Previous GAAP figures have been reclassified/regrouped wherever necessary to conform to Standalone financial statements prepared under Ind AS.

Notes to reconciliation

1) Re-measurement of defined benefit obligations :

Under the Previous GAAP, actuarial gains and losses on defined benefit obligations were recognized in the statement of profit and loss. Under Ind AS, these are recognized in other comprehensive income. This difference has resulted in an increase in net income for the year ended March 31, 2016. However, the same does not result in difference in equity or total comprehensive income.

2) Difference in current tax expense :

Tax adjustments include deferred tax impact on account of differences between Previous GAAP and Ind AS.

Trade receivables are due neither from directors or other officers of the company either severally or jointly neither with any other person nor from firms or private companies respectively in whom any director is a partner, a director or a member.

*These deposits can be withdrawn by the Company at any time without prior notice and without any penalty on the principal.

*Term loan(s) from Cosmos Co-Op Bank Limited are secured by way of:

a) Hypothecation of existing plant and machineries.

b) Factory Land (lease hold), along with construction thereon made by the company, situated at Revenue Survey 446, Block No. 467, at Sachin-Palsana Highway Road, at Village Palsana, Dist. Surat, given as collateral security.

c) Personal guarantee by the Directors - Mr. Amitkumar Dalmia, Mr. Deepakkumar Dalmia, Mr. Rajkumar Borana and Mr. Ankur Borana.

Current maturities of term loans amounting to Rs. 824.92 (March 31, 2017 and April 01, 2016: Rs 824.92 and Rs 521.67 respectively are classified under “Other Current Financial Liabilities”.

Provision for employee benefits includes gratuity liability. Provision for other taxes includes liability related to Income tax and Indirect Taxes. The timing of cash outflows in respect of other provisions cannot be reasonably determined.

(c) Defined benefit plans - Gratuity:

The Company has a defined benefit gratuity plan in India (unfunded). The company’s defined benefit gratuity plan is a final salary plan for employees.

Gratuity is paid from company as and when it becomes due and is paid as per company scheme for Gratuity.

During the year, the company has changed the benefit scheme in line with Payment of Gratuity Act, 1972 by increasing monetary ceiling from 10 lakhs to 20 lakhs. Change in liability (if any) due to this scheme change is recognised as past service cost.

The Company’s obligation in respect of the gratuity plan is provided for based on actuarial valuation using the projected unit credit method. The Company recognizes actuarial gains and losses immediately in other comprehensive income, net of taxes. Amount recognized in the statement of profit and loss in respect of gratuity cost (defined benefit plan) is as follows:

Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other foreign defined benefit gratuity plans.

The principal assumptions used for the purpose of actuarial valuation are as follows:

The discount rate is based on the prevailing market yields of Indian government securities for the estimated term of the obligations. The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors. Salary escalation and attrition rate are considered as advised by the the company; they appear to be line with the industry practice considering promotion and demand & supply of the employees.

The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

Risks associated with defined benefit plan

Gratuity is a defined benefit plan and company is exposed to the Following Risks:

Salary Risk:

The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan’s liability.

Interest rate risk:

A fall in the discount rate which is linked to the G.Sec. Rate will increase the present value of the liability requiring higher provision.

Asset Liability Matching Risk:

The plan faces the ALM risk as to the matching cash flow. Company has to manage pay- out based on pay as you go basis from own funds.

Mortality risk:

Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

Note 5 Fair Value

The fair value of cash and cash equivalents, trade receivables, borrowings, trade payables, other current financial assets and liabilities approximate their carrying amount largely due to the short-term nature of these instruments. The Company’s long term debt and investment in fixed deposit have been contracted at market rates of interest. Accordingly, the carrying value of such instruments approximates their fair value.

The fair value of investment in shares of The Cosmos Co-operative Bank Ltd. has been valued using cost approach.

The case of the Company stands pending before Customs Excise & Service Tax Appellate Tribunal (CESTAT) for payment of custom duty. The amount of custom duty involved is Rs. 193,179/- which is contingent in nature.

The case of the Company stands pending before Appellate Tribunal for the Sales Tax Penalty levied for F.Y. 2012-13. The amount of Penalty is Rs. 57,074/- which is contingent in nature.

The Appeal of the Company stands pending before Commissioner of Appeals (Income Tax) for F.Y. 201213 and F.Y. 2013-14. The amount of tax liability involved are Rs. 7,335,180/- and Rs. 18,825,700/respectively which are contingent in nature.

Note 6 Operating Lease

Future lease commitments in respect of non-cancellable leases:

Note 7 Operating Segment

The operations of the company are limited to one segment viz. Denims manufacturing.

Operating segments are defined as components of a company for which discrete financial information is available that is evaluated regularly by Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assessing performance.

Geographical revenues are allocated based on the location of the customer. Information regarding geographical revenue is as follows:

The following customers represent 10% or more of the company’s total revenue during the year ended March 31, 2018 and March 31, 2017

Note 8 Other Additional Information

There was no employee in receipt of remuneration aggregating to Rs. 10,200,000/- or more per year or Rs. 850,000/- or more per month for the part or whole of the year. Previous year also there was no such employee.

Balances of loans, advances, Cash & Bank and Creditors & Debtors are subject to confirmation and have been taken as appeared in the books of account of the company.

The quantity and value of closing stock is certified by the management as true and correct.

In the absence of information regarding outstanding dues of MICRO or Small Scale Industrial Enterprise(s) as per The Micro, Small & Medium Enterprise Development Act, the Company has not disclosed the same as required by Schedule III to the Companies Act, 2013.

The provision of Service Tax Expense has been made in current Year is Nil. (Pre Year Rs. 279,736)

The Company is eligible for VAT subsidy under the Gujarat Textile Policy 2012 amounting to Rs. 2.3 Cr, out of which subsidy of Rs. 1.05 Cr has been received and Rs. 1.25 Cr is receivable and the same have been accounted as income during the year.

The Company is eligible for Power Tariff Subsidy under the Gujarat Textile Policy 2012 amounting to Rs. 35.62 Lacs. The same have been accounted as income during the year.

The Company is eligible for Interest Subsidy under the Technology Up-gradation Fund (TUF Scheme) amounting to Rs. 56.02 Lacs. The same have been accounted as income during the year.

Managerial remuneration paid/ payable to the Managing Director/ Directors for the period from 1st April 2017 to 31st March 2018 Rs. 30 Lacs (Previous Year Rs. 30 Lacs)

(ii) Terms and rights attached to equity shares:

The company has only one class of equity shares having face value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The final 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. The distribution will be in proportion to the number of equity shares held by the shareholder.

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