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NOTES TO ACCOUNTS

Global Vectra Helicorp Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 83.79 Cr. P/BV 1.26 Book Value (₹) 47.36
52 Week High/Low (₹) 127/41 FV/ML 10/1 P/E(X) 11.94
Bookclosure 28/09/2018 EPS (₹) 5.01 Div Yield (%) 0.00
Year End :2018-03 

A. General Information

Global Vectra Helicorp Limited ('the Company') was incorporated in 1998 as a private limited company and was subsequently listed on 27 October 2006 the Bombay Stock Exchange and the National Stock Exchange.

The Company is mainly engaged in helicopter charter services for offshore transportation, servicing the oil and gas exploration and production sector in India. The Company is also engaged in helicopter charter services for onshore transportation.

B. Basis of preparation of financial statements

a) Statement of compliance with Ind AS

The financial statements of the Company comply with all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.

The financial statements up to and including the year ended 31 March 2017 were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act. Accordingly, the transition to Ind AS has been carried out from the accounting principles generally accepted in India (“Indian GAAP”) which is considered as the “Previous GAAP” for purposes of Ind AS 101. An explanation of how the transition to Ind AS has affected the Company's equity and its net profit or loss is provided in Note 50 . These financial statements are the first financial statements of the Company under Ind AS.

All assets and liabilities are classified as current or non-current as per the company's normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the 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/non-current classification of assets and liabilities.

b) Standards issued but not yet effective

The Ministry of Corporate Affairs (MCA), on 28 March 2018, notified Ind AS 115, Revenue from Contracts with Customers (which is based on IFRS 15, Revenue from Contracts with Customers) as part of the Companies (Indian Accounting Standards) Amendment Rules, 2018. The new standard is effective for accounting periods beginning on or after 1 April 2018, thus aligning the Ind AS 115 applicability date with the IFRS applicability date i.e. 1 January 2018.

Ind AS 115 replaces existing revenue recognition standards Ind AS 11, Construction Contracts and Ind AS 18, Revenue and revised guidance note of the Institute of Chartered Accountants of India (ICAI) on Accounting for Real Estate Transactions for Ind AS entities issued in 2016.

The company expects no significant impact of Ind AS 115 and plans to adopt the new standard on the required effective date.

On 18 July 2017, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) issued an Exposure Draft (ED) of Ind AS 116, Leases. Ind AS 116 is largely converged with IFRS 16. IFRS 16 is effective from 1 January 2019, with early adoption being permitted (as long as IFRS 15, Revenue from Contracts with Customers is also applied).

Ind AS 116 is expected to replace Ind AS 17 from its proposed effective date, being annual period's beginning on or after 1 April 2019.

The assessment of impact of Ind AS 116 as per the Exposure Draft on the Company is to be carried out.

c) Historical cost convention

The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities including defined benefit plans - plan assets measured at fair value.

d) Use of estimates and judgements

The preparation of the financial statements in conformity with Ind AS requires management to make judgements, 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 these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The areas involving critical estimates and judgements are:

i. estimation of useful lives and residual value of Property, Plant and Equipment

ii. estimation of defined benefit obligation

iii. impairment of financial assets

iv. recognition of deferred tax assets and deferred tax liabilities

v. recognition and measurement of provisions and contingencies

vi. recognition and measurement of Non-current assets held for sale

# Deductions / Adjustments include assets re-classified from leased to owned for three Cessna aircrafts.

Exchange gain / (loss) on restatement of long term monetary liabilities as at 31 March 2018 aggregating Rs. 30.52 Lakhs (previous year: Rs (429.78 Lakhs)) (net of tax) has been capitalised by adjusting the historical cost of the specifically identifiable asset. The exchange fluctuation during the year is presumed to occur evenly throuqhout the reportinq period.

On the date of transition to Ind AS, the Company has elected to measure certain Helicopters at its fair value and use that fair value as its deemed cost at the date of transition to Ind AS. Accordingly, the Company has recognized fair value changes of INR 4,907 lakhs as on April 01, 2016. On account of aforesaid adjustments, the Company has charged additional depreciation of INR 408 lakhs during the year 2016-17.

Exchange gain / (loss) on restatement of long term monetary liabilities as at 31 March 2017 aggregating Rs 429.78 Lakhs (previous year: Rs (595.15)) (net of tax) has been capitalised by adjusting the historical cost of the specifically identifiable asset. The exchange fluctuation during the year is presumed to occur evenly throughout the reporting period.

Note

Amounts with banks in deposit accounts have been pledged with banks as security for credit facilities and guarantees obtained.

Note:

In March 2018, management entered into a contract for sale of one of its Aircraft including all communications equipment per Avionics Equipment, accessories, instruments and other items of equipment installed in such Aircraft. The Aircraft shall be delivered to the purchaser at the delivery location by 20th April 2018 or such as other date as mutually agreed between purchaser and the company.

Helicopter classified as held for sale during the reporting period was measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification, resulting in the recognition of a write down of Rs. 266.21 lakhs as other expenses in the statement of profit or loss.

c) Terms / rights attached to shares

i) Rights, preferences and restrictions attached to shares

The Company has only one class of equity shares having a par value of Rs 10/- per share. Each holder of equity shares is entitled to one vote per share.

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.

d) There are no shares reserved for issue under options and contracts or commitments for the sale of shares.

e) For the period of five years immediately preceding the date of the Balance Sheet, the Company has not

i) Allotted any shares as fully paid up pursuant to contracts without payment being received in cash; or

ii) Allotted any shares as fully paid up bonus shares; or

iii) Bought back any of its Equity Shares.

f). There are no securities convertible into equity / preference shares, there are no calls unpaid, no shares have been forfeited.

Company has proposed to alter the term of their existing preference shares to 659,34,900 Optionally Convertible Cumulative Redeemable Preference Shares of Rs. 10/- with an option to convert the same into 73,26,100 Equity Shares of Rs. 10/- each issued at a premium of Rs. 80/- per shares.

Accordingly, on 26 December 2017 Company has filed an application with National Company Law Tribunal (NCLT) to change the terms and conditions of their existing redeemable preference shares. On 07 May 2018, NCLT has issued a notice to relevant authorities whether they have any objection to the petition filed by the Company. As on 31 March 2018, pending final approval from NCLT the entire instrument has been classified as equity in nature.

Nature and purpose of reserves

1. Capital reserve

Capital reserve is created on waiver of Preference dividend to 5.46% Non convertible cumulative redeemable preference shareholders. No distributions are permitted.

2. Securities Premium reserve

The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. The reserve is utilised in accordance with the provisions of the Companies Act.

3. General reserve

The Company has transferred a portion of the net profit of the Company before declaring dividend to general reserve pursuant to the earlier provisions of Companies Act 1956. Mandatory transfer to general reserve is not required under the Companies Act 2013.

4. Retained earnings

The balance held in this reserve is the accumulated retained profits and includes impact of fair valuation of helicopter on transition to Ind AS (net of related tax impact): Rs. 3,737.10 lacs (March 31 2017: Rs. 4,125.20 lakhs and April 1 2016: Rs. 4,513.31 lakhs).

Excluding the amount of fair valuation balance is permitted to be distributed to shareholders as part of dividend.

5. Effective portion of cah flow hedges

The cash flow hedging reserve represents the cumulative portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of cash flow reserve will be reclassified to Statement of Profit and Loss only when the hedged transaction affects the profit or loss or included as a basis adjustment to the non financial hedged item.

6. Remeasurement of defined benfit obligation

Remeasurements of defined benefit (liability)/ asset comprises actuarial gains and losses and return on plan assets (excluding interest income)

**Vehicle loans carry interest charge in the range of 8.25% to 10.57%, payable in 60 equal monthly instalments. The loans have been secured against Seven (31 March 2017 : five, 01 April 2016 : four) vehicles.

***External Commercial Borrowing ('ECB') of USD 15,298,300 is repayable in forty quarterly instalments commencing from 16 January 2009. The ECB is secured by exclusive charge over two Bell 412 helicopters. ECB of USD 9,100,000 is repayable in forty quarterly instalments commencing from 31 Jan 2012. The ECB is secured by exclusive charge over one Bell 412 helicopter. The interest terms are 3 months USD LIBOR plus 1.08% for two helicopters and 3 months USD LIBOR plus 1.16% for the third helicopter.

****External Commercial Borrowing ('ECB') of USD 2,955,556 (31 March 2017: USD 2,955,556, 01 April 2016 :USD NIL) and USD 2,705,217 (31 March 2017: USD 2,705,217, 01 April 2016 : NIL) is repayable fifteen quarterly instalments commencing from 20 January 2019. The ECB is secured by charge over one (previous year: Nil) AgustaWestland helicopter and one (previous year: Nil) Bell 412 helicopter. The interest terms are 6 months USD LIBOR plus 2.85%.

***** The Loan consists of Rs 2,500 lakhs (31 March 2017: Rs 2500 lakhs, 01 April 2016 : NIL) repayable in twenty five equal instalments commencing from 22 October 2016 The loan is secured by exclusive charge over one (31 March 2017: one, 01 April 2016 : NIL) Bell 412 helicopter, one (31 March 2017: one, 01 April 2016 : NIL) AS350 B3 helicopter and one (31 March 2017: one, 01 April 2016 : NIL) EC 135 P2 helicopter. The interest terms are 14%.

****** The Loan consists of Rs 850 lakhs (31 March 2017: Rs 850 lakhs, 01 April 2016 : Rs 850 lakhs) repayable in seventeen equal instalments commencing from 22 April 2015 The loan is secured by exclusive charge over one (31 March 2017: one, 01 April 2016 : one) EC 135 helicopter. The interest terms are 14%.

*******Finance lease obligation is secured by hypothecation of helicopters taken on lease.

Two (previous year: five) helicopters have been obtained on finance lease basis. The legal title to these items vests with their lessors. The lease term for two helicopters is 10 years with equal quarterly instalments commencing on 15 December 2015 and 20 March 2016 for each lease respectively.

********The Company has only one class of preference shares having a par value of Rs 100/- per share. All the preference shares are non convertible and redeemable at par on 27 December, 2017. Each preference share is entitled to cumulative coupon rate of 5.46% per annum on par value.

# Secured by a pari-passu charge of the following:

a) Exclusive charge over Nil (previous year: one) bell helicopter and Nil (previous year: one) airbus helicopter.

b) Specific assignment of book debts relating to Nil (previous year: two) helicopters.

c) Hypothecation of stock / inventory and book debts.

Interest terms are base rate 8.50%

## Secured by a pari-passu charge of the following:

a) Specific assignment of immoveable property of a company

b) Hypothecation of stock / inventory and book debts.

Interest terms are MCLR 3.25%

### The loan is repayable on demand, the interest terms are 9%

#### The loan is repayable on demand, the interest terms are 7%

On the basis of the information and records available with the management, there are no outstanding dues to the micro and small enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006.

*The charges for licence fees on land levied by the Airports Authority of India (AAI) have been revised with effect from October 2014. The total amount claimed by AAI up to 31 March, 2018, aggregates to Rs 2,349.83 lakhs (Rs. 311.79 lakhs and Rs 779,97 lakhs for the quarter and year ended 31 March, 2018 respectively, Rs.840.42 for the period up to 01 April, 2016) against which the Company has paid under protest an amount aggregating to Rs 1,174.10 lakhs up to March 31, 2018. The Company believes that these demands are not reasonable and has consequently requested for arbitration and conciliation and has provided for differential revised charges to the extent of Rs 1,175.73 lakhs based on Management's estimate subject to outcome of arbitration proceedings. During the quarter ended December 31, 2017, the Company received an interim order whereby, amongst other matters, the Company has been directed to deposit with AAI 50% of the amount claimed pending final settlement of the dispute.

Note - 1

Segment reporting

Operating Segment are reported in a manner consistent with the internal reporting provided to chief operating decision maker (CODM).Chief Financial Officer has been identified as the Chief Operating Decision Maker of the Company. The Company is engaged in providing helicopter services in India, which is considered as one business segment.

The Company's revenue attributable from overseas business is less than 10% of the total business and all the non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets are located in India.

Information about major customers

Approximately 64% of the revenues derived for the year ended March 31, 2018, 65% for the year ended March 31, 2017 and 60% for April 1, 2016 is from a single external customer.

Note: In F.Y 2017-18, company has converted its 5.46% Non-Convertible Cumulative Redeemable Preference Shares (65,93,490 Rs 100/- each) to optionally convertible Cumulative Preference Shares of Rs 10/- each with an option to convert the same into 73,26,100 equity shares of Rs 10/- each issued at a premium of Rs 80/- per shares)

Pursuant to the mutual consent of the Board of Directors and the preference shareholder, cumulative preference share dividend aggregating to Rs 370.13 lakhs (31 March 2017: Rs 360.00 lakhs 01 April 2016 : Rs.1,893.72 lakhs) was waived by the preference share holder up to 31 March 2018. Accordingly, dividend distribution tax is not applicable.

Note

#Duty paid under protest aggregating Rs 538.26 Lakhs(31 March 2017 : Rs 538.26 Lakhs, 01 April 2016 : Rs 538.26 Lakhs) (Refer Note 39)

Note - 2

Micro, Small and Medium Enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the Management, there are no outstanding dues to the Micro, Small and Medium enterprises as defined in the MSMED as set out in following disclosure:

Note - 3

Demand notice issued by the Customs authorities

During the year ended 31 March 2009, the Office of the Commissioner of Customs (Preventive) had seized three helicopters for alleged non-compliance of the duty waivers given to non-scheduled operators (passenger). The Company had received a Show Cause Cum Demand Notice (SCN) citing an amount of Rs 2,379.24 Lakhs (previous year: Rs 2,379.24 Lakhs) towards custom duty under Section 28 of the Customs Act, 1962 and applicable interest and penalty thereon. Pursuant to the receipt of the said SCN, the Commissioner of Customs (Preventive) had confirmed a demand of Rs 2,621.95 Lakhs (previous year: Rs 2,621.95 Lakhs) towards differential duty of customs and penalty thereon for two helicopters. The management believes that the Company is in compliance with the relevant customs and other regulatory guidelines in this respect, based on decision in the previous year from Custom Excise and Service Tax Appellate Tribunal (CESTAT) West Zonal Bench, in favour of the Company on a similar matter and on an opinion from an external legal expert and the demand being contested by the Company will be set aside by the higher appellate tribunal. An amount aggregating Rs 538.26 Lakhs (previous year: Rs 538.26 Lakhs) has been paid as duty under protest during the year ended 31 March 2010.

Note - 4 Transfer Pricing

The Company's international transactions with related parties are at arms length as per the independent accountants report for the year ended 31 March 2018. Management believes that the Company's international transactions with related parties post 31 March 2017 continue to be at arm's length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation. Management is in the process of obtaining the transfer pricing study / report for the year ended 31 March 2018.

Note - 5

Recoverable from customers

A customer of the Company has been retaining amounts aggregating Rs 252.37 Lakhs (Service Tax liability Rs.238.52/- Lakhs upto June 30, 2017 and GST liability Rs. 13.85 Lakhs from July 2017 onwards) in respect of service tax/ GST levied by the Company on reimbursement of expenses. The Company is currently in discussion with this customer for recovering the retained amounts and management believes that they have a strong case to collect the outstanding amounts, and accordingly no provision has been made thereon.

Note - 6

Corporate Social Responsibility

The Company has constituted a Corporate Social Responsibility (CSR) Committee as per Section 135 and Schedule VII of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014.

The CSR activities of the Company will be undertaken either through a Registered Trust or in collaboration with other Group Companies.

The Company is in the process of identifying the Projects for CSR spending. The efforts are being undertaken to implement the same in financial year 2017-18

Note - 7

Employee benefit

The Company contributes to the following post-employment defined benefit plans in India.

(i) Contribution to provident fund and ESIC:

The Company recognised Rs.86.80 Lakhs (previous year: Rs 84.91 Lakhs) for retirement benefit contributions in the Statement of Profit and Loss.

(ii) Leave Wages

Amount of Rs 36.13 Lakhs (previous year: Rs 41.98 Lakhs) is recognised as an expense and included in “Employee benefits expense”.

(iii) Defined benefit plan and long term employment benefit

A. General description

Gratuity (Defined benefit plan)

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of services gets gratuity on death or resignation or retirement at 15 days salary (last drawn salary) for each completed year of service.

Leave wages (Long term employment benefit)

Eligible employees can carry forward leave with a maximum accumulation of thirty (30) days. All leave balances in excess of thirty (30) days at the end of the calendar year are compulsorily encashed on the basis of basic salary last drawn. Leave wages are also payable to all eligible employees at the rate of daily basic salary on accumulated leave at the time of death / resignation / retirement or on attaining superannuation age.

Sick leave (Long term employment benefit)

The sick leave is not encashable and can be accumulated till 90 days for employees other than pilots, whose leave balance will lapse at the end of the year.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company's financial statements as at balance sheet date:

B. Movement in net defined benefit (asset) liability

The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset) liability and its components

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

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

Weighted average duration of the Projected Benefit Obligation is 7 years.

E. Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

Other long term employee benefits.

Compensated absences are payable to employees. The charge towards compensated absences for the year ended 31 March 2018 based on actuarial valuation using the projected accrued benefit method is Rs.90.68 Lakhs ( 31st March 2017 : Rs.83.04 Lakhs, 01st April 2016 : Rs. 68.51Lakhs).

Note - 8

Financial instruments - Fair values and risk management

A. Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities if the carrying amount is a reasonable approximation of fair value.

A substantial portion of the Company's long-term debt has been contracted at floating rates of interest, which are reset at short intervals. Accordingly, the carrying value of such long-term debt approximates fair value.

B. Measurement of fair values

The three levels of the fair-value-hierarchy under Ind AS 107 are described below:

Level 1: Level 1 heirarchy includes financial instruments measured using quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

C. Fair value of Financial assets and liabilities measured at amortised cost

The carrying amounts of cash and cash equivalents, other bank balances, current loans, trade receivables, short-term borrowing, trade payables, other short term financial assets and financial liabilities are considered to be the same as their fair values due to their short-term nature.

i) . The carrying amounts of cash and cash equivalents, other bank balances, current loans, trade receivables, short-term borrowing, trade payables, other short term financial assets and financial liabilities are considered to be the same as their fair values due to their short-term nature.

ii). The Company's borrowing have been contratced at floating rate of interest, which gets reset periodically based on the market movements. Accordingly, the carring value of such borrowings approximates fair value.

iii). The other non- current financials assets include bank deposits (due for maturity beyond twelve months from the reporting date), interest accurred but not due on bank deposits. The carring value of such borrowings approximates fair value at reposting date.

Note - 9

Financial instruments - Fair values and risk management

B. Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk ;

- Liquidity risk ; and

- Market risk

i. Risk management framework

The Company's activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company's primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company's risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company's activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company's risk assessment and management policies and processes.

ii. Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Trade and other receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Cash and cash equivalents

The Company held cash and cash equivalents with credit worthy banks and financial institustions of INR 684.11 Lakhs as at 31st March 2018 & INR 304.39 Lakhs as at 31st March 2017 and INR 170.29 Lakhs as at 1st April 2016. The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.

Impairment

The management has written off the following amounts of trade receivables during the years:

Management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying customers' credit quality and prevailing market conditions.

Note - 10

Financial instruments - Fair values and risk management

iii. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company's reputation. The Company has obtained fund and non-fund based working capital lines from various banks. The Company also constantly monitors, as and when required, funding options available in the debt and capital markets with a view to maintain financial flexibility.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments.

Note - 11

Financial instruments - Fair values and risk management

iv. Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates and foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk and interest rate risk.

Currency risk

The fluctuation in foreign currency exchange rates may have potential impact on the Statement of Profit and Loss and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the entity.

The Company, as per its risk management policy, uses foreign exchange and other derivative instruments primarily to hedge foreign exchange exposure. The Company does not use derivative financial instruments for trading or speculative purposes.

Sensitivity analysis

The Company is mainly exposed to changes in USD and EUR. The below table demonstrates the sensitivity to a 1% increase or decrease in the USD and EUR against INR, with all other variables held constant. The sensitivity analysis is prepared on the net unhedged exposure of the Company as at the reporting date. 1% represents management's assessment of reasonably possible change in foreign exchange rate.

Note - 12

Financial Risk Management

(ii) Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates. The Company’s main interest rate risk arised from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk.

Interest rate sensitivity - fixed rate instruments

The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of change in market interest rates.

Interest rate sensitivity - variable rate instruments

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased / decreased equity and profit or loss by amounts shown below. This analyses assumes that all other variables, in particular, foreign currency exchange rates, remain constant. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Note - 13

Hedge accounting

The Company's risk management policy is to hedge its USD lease payments, thereby the company's sales contracts are entered in USD. In these type of contracts, there is an embedded derivative element which helps the company in hedging the currency risk. Such contracts are generally designated as cash flow hedges.

The embedded derivative contracts are denominated in the same currency as the underlying hedged item, therefore the hedge ratio is 1:1. Most of these contracts have a maturity of more than 12 months from the reporting date.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in the cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships, changes in timing of the hedged transactions is the main source of hedge ineffectiveness.

Note - 14

Capital Management

The primary objective of the Company's capital management is to ensure that it maintains an efficient capital structure and healthy capital ratios to support its business and maximize shareholder value. The Company makes adjustments to its capital structure based on economic conditions or its business requirements. The funding requirements are met through a mixture of equity and other borrowings. The Company's policy is to use short-term and long-term borrowings to meet anticipated funding requirements.

The Company monitors capital using the metric of Net Debt to Equity. Net Debt is defined as borrowings less cash and cash equivalents and fixed Deposits.

Notes - 15

Transition to Ind AS:

For the purposes of reporting as set out in Note 1, we have transitioned our basis of accounting from Indian generally accepted accounting principles (“IGAAP”) to Ind AS. The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (the “transition date”).

In preparing our opening Ind AS balance sheet, we have adjusted amounts reported in financial statements prepared in accordance with IGAAP. An explanation of how the transition from IGAAP to Ind AS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables. On transition, we did not revise estimates previously made under IGAAP except where required by Ind AS.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from Indian GAAP to Ind AS :

1) Fair valuation as deemed cost for certain items of Property, Plant and Equipment

The Company has elected to measure certain Helicopters at its fair value and use that fair value as its deemed cost at the date of transition to Ind AS and for other Helicopters previous GAAP revaluation that was broadly comparable to fair value under Ind AS has been considered as its deemed cost at the date of transition to Ind AS.

Other items of Property, Plant and Equipment have been measured as per Ind AS 16.

2) Arrangement containing a lease

IND AS 101 provides the option to determine whether an arrangement existing at date of transition is, or contains, a lease based on the facts and circumstances at that date and not at lease start date.

Accordingly, the company has elected to determine arrangement existing at the date of transition and not at lease start date.

3) Estimates

An entity's estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consitent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at 1 April 2016 are consitent with the estimates as at the same date made in conformity with previous GAAP.

4) 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 circumstances that exist on the date of transition to Ind AS.

5) Derecognition of financial assets and financial liabilities

The Company has opted to apply the exemption available under Ind AS 101 to apply the derecognition criteria of Ind AS 109 prospectively for the transactions occurring on or after the date of transition to Ind AS.

B. Reconciliations between previous GAAP and Ind AS

Ind AS 101 requires an enity to reconcile equity and total comprehensive income for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS.

Reconciliation of Statement of Cash Flows for the year ended 31st March, 2017

There were no material differences between the Statement of Cash Flows presented under Ind AS and under IGAAP.

Notes to the reconciliation:

1 Under the previous GAAP, preference shares are accounted under Equity share capital. Under Ind AS, the portion of reedemable non convertible preference share is accounted as liablity component of compound financial instrument and remaining portion is accounted in “Other Equity” as equity portion of the compound financial instrument. Under Ind AS, interest part of the liability component of the compound financial instrument is accounted as interest expense under finance cost.

2 Under the previous GAAP, interest free lease security deposit are recorded at their transaction value. Under Ind AS, all financial asset are required to be recognised at fair value. Accordingly the company has fair valued these security deposit under Ind AS. Difference between transaction value and fair value of the security deposit has been recognised as prepaid expenses.

3 On the date of transition to Ind AS, the Company has elected to measure certain Helicopters at its fair value and use that fair value as its deemed cost at the date of transition to Ind AS. Accordingly, the Company has recognized fair value changes of INR 4,907 lakhs as on April 01, 2016 and also recognised deferred tax liability of INR 1,698 lakhs. On account of aforesaid adjustments, the Company has charged additional depreciation of INR 408 lakhs and has reversed deferred tax liability of INR 141 lakhs, during the year 2016-17.

4 The Company has adopted hedge accounting prospectively from transition date as per Ind AS 109. Consequently, the Company has fair valued embedded derivatives on transition date and difference between the fair value of such contracts and previous GAAP carrying amount have been recognised in the retained earnings in the opening Ind AS balance sheet.

5 Under previous GAAP, the Company recognise lease rent as per the amounts specified in the contract. Under Ind AS, the Company is recognising lease rents on a straight line basis, provided the escalation is not in line with general inflation in India.

6 Under previous GAAP, the transaction cost on the borrowing is expensed off as and when incurred. Under Ind AS, transaction cost incurred towards origination of borrowing to be deducted from the carrying amount of borrowing on initial recognition. The costs are recognised in the Statement of Profit and Loss over the tenure of the borrowing as part of the interest expense as result of the adjustment.

7 Under the previous GAAP, the Company has recognised certain expenses in the financial year subsequent to the year to which the expenses pertain as exceptional item. Under Ind AS, those expenses have been recognised in the year to which it pertains with a corresponding adjustment to relevant head in Statement of Profit and Loss and retained earnings respectively.

8 In the financial statements prepared under Previous GAAP, deferred tax was accounted as per the income statement approach which required creation of deferred tax asset/liability on temporary differences between taxable profit and accounting profit. Under Ind AS, deferred tax is accounted as per the Balance Sheet approach which requires creation of deferred tax asset/ liability on temporary differences between the carrying amount of an asset/liability in the Balance Sheet and its corresponding tax base.

The application of Ind AS has resulted in recognition of deferred tax on new temporary differences which were not required to be recognised under Previous GAAP. In addition, the above mentioned transitional adjustments have also led to temporary differences and creation of deferred tax thereon.

Notes - 16

Previous year's figures have been audited by a firm of Chartered Accountants other than Kalyaniwalla & Mistry LLP, Chartered Accountants, the current auditors.

Notes - 17

Previous year's figures have been regrouped and rearranged to conform to current year's presentation, wherever necessary.

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