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NOTES TO ACCOUNTS

TAAL Enterprises Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 78.45 Cr. P/BV 1.73 Book Value (₹) 145.87
52 Week High/Low (₹) 335/200 FV/ML 10/1 P/E(X) 4.33
Bookclosure 09/10/2018 EPS (₹) 58.20 Div Yield (%) 3.97
Year End :2018-03 

1 General Information

TAAL Enterprises Limited (TEL) is a public limited company incorporated in India under the Companies Act, 2013. TEL was earlier a wholly owned subsidiary of Taneja Aerospace and Aviation Limited (TAAL). However, pursuant to approval of the Scheme of Arrangement under Section 391 to 394 of the Companies Act, 1956 between TAAL & TEL, the Air Charter business of TAAL including investment in First Airways Inc, USA and Engineering Design Services business conducted through TAAL Tech India P. Ltd. has been demerged into TEL w.e.f. October 1, 2014 and TEL has seized to be a subsidiary of TAAL. Its principal business activity is providing Aircraft Charter Services.

2 Significant Accounting Judgments, Estimates and Assumptions

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future years.

2.1 Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the year end date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(a) Defined benefits and other long term benefits

The cost of the defined benefit plans such as gratuity and leave encashment are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each year end.

The principal assumptions are the discount and salary growth rate. The discount rate is based upon the market yields available on government bonds at the accounting date with a term that matches that of liabilities. Salary increase rate takes into account of inflation, seniority, promotion and other relevant factors on long term basis.

3 Standards (including amendments) issued but not yet effective

The standards and interpretations that are issued, but not yet effective upto the date of issuance of the financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

(a) Appendix B to Ind AS 21, Foreign currency transactions and advance consideration

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company is currently evaluating the requirements of amendments.

(b) Ind AS 115- Revenue from contract with customers

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115 - Revenue from contract with customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition:

(i) Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8-Accounting Policies, Changes in Accounting Estimates and Errors.

(ii) Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch-up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

The Company is currently evaluating the requirements of amendments.

4 First-time Adoption of Ind-AS

These financial statements are the first set of Ind AS financial statements prepared by the Company. Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for year ending on 31 March 2018, together with the comparative year data as at and for the year ended 31 March 2017, as described in the significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1 April 2016, being the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

4.1 Exemptions availed on first time adoption of Ind AS

Ind AS 101 - First-time Adoption of Indian Accounting Standards, allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has accordingly applied the following exemptions:

(a) Deemed cost

Since there is no change in the functional currency, the Company has elected to continue with carrying value for all of its property, plant and equipment as recognized in its Indian GAAP financial statements as its deemed cost at the date of transition after making adjustments for decommissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 - Intangible Assets and Investment Properties. Accordingly the management has elected to measure all of its property, plant and equipment, investment properties and intangible assets at their Indian GAAP carrying value.

(b) Investment in subsidiaries

Option to measure Investments in subsidiaries, joint ventures and associate at cost as per Ind AS 27 or deemed cost is available. The deemed cost shall be its fair value on transition date or carrying amount as per previous GAAP. This exemption is availed by the Company.

(c) Business combination

Company has elected not to apply Ind AS 103 retrospectively to past business combinations (business combinations that occurred before the date of transition to Ind ASs).

4.2 Mandatory exemption on first-time adoption of Ind AS

(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 Indian 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 consistent with the estimates as at the same date made in conformity with Indian GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under Indian GAAP:

(i) Impairment of financial assets based on expected credit loss model.

(ii) Effective interest rate used in calculation of security deposit.

(b) Derecognition of financial assets and financial liabilities

A first-time adopter should apply the derecognition requirements in Ind AS 109 - Financial Instruments, prospectively to transactions occurring on or after the date of transition. Therefore, if a first-time adopter derecognized non-derivative financial assets or non-derivative financial liabilities under its Indian GAAP as a result of a transaction that occurred before the date of transition, it should not recognize those financial assets and liabilities under Ind AS (unless they qualify for recognition as a result of a later transaction or event). A first-time adopter that wants to apply the derecognition requirements in Ind AS 109 -Financial Instruments, retrospectively from a date of the entity’s choosing may only do so, provided that the information needed to apply Ind AS 109 - Financial Instruments, to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.

The Company has elected to apply the derecognize provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

(c) Classification and measurement of financial assets

Ind AS 101 - First-time Adoption of Indian Accounting Standards, requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

(b) Rights, preferences and restrictions attached to shares

The Company has only one class of equity shares of INR 10/- each. Each shareholder is entitled to one vote per share held. Dividend if any declared is payable in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

*As informed to us by the management, the Company owes no dues which are outstanding as at March 31, 2018, March 31, 2017 and April 1, 2016 to any ‘Micro, Small and Medium Enterprises’ as covered under ‘Micro, Small and Medium Enterprises Development Act, 2006’. Dues to Micro, Small and Medium Enterprises have been determined to the extent such parties have been identified on the basis of intimation received from the ‘suppliers’ regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006.

5 Earnings/ loss per share

Basic earnings /(loss) per share amounts are calculated by dividing the profit/ loss for the year attributable to equity holders by the weighted average number of equity shares outstanding during the year.

Diluted earnings /(loss) per share amounts are calculated by dividing the profit/ loss for the year attributable to equity holders by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.

Note: This being the first year of actuarial valuation report obtained as per the requirements of Ind - AS, the previous year disclosures are not given w.r.t. clauses (v) and (vi) above.

6 There are no Contingent Liabilities, Capital and other commitments as at March 31, 2018, March 31, 2017 and April 1, 2016.

7 Related party disclosures: 31 March 2018

(A) Names of related parties and description of relationship as identified and certified by the Company: Parent Company

Vishkul Leather Garments Private Limited (Effective from: August 14, 2017)

Subsidiary Companies

TAAL Tech India Private Limited First Airways Inc, USA

TAAL Technologies Inc, USA (Subsidiary of Taal Tech India Private Limited)

TAAL Tech GmbH, Switzerland (Subsidiary of Taal Tech India Private Limited)

TAAL Tech Innovations GmbH, Austria (Subsidia ry of Taal Tech India Private Limited)

Key Management Personnel (KMP)

Mr. C S Kameswaran - Whole Time Director (upto February 06, 2018)

Non-Whole Time Director

Mr. Ajay Joshi (upto December 24, 2016)

Mr. Prakash Saralaya (upto April 24, 2016)

Mr. Salil Taneja (upto April 23, 2016)

Mr. Nirmal Chandra Mr. R Poornalingam

Mrs. Rahael Shobhana Joseph (upto April 22, 2017 and Reappointed from November 16, 2017)

8 Disclosure as required by Regulation 34(3) of the Listing Agreement

Amount of Investment in/ Loans and Advances in the nature of loans to subsidiaries and associates for the year ended March 31, 2018:

9 Segment reporting

The Company’s operations predominantly relate to providing air charter services. The Chief Operating Decision Maker (CODM) reviews the operations of the Company as one operating segment. Hence no separate segment information has been furnished herewith.

There are 2 customers whose revenue is more than 10% of companies total revenue:

Customer 1 : INR 218.44 lacs (March 31, 2017 : INR 253.05 lacs)

Customer 2 : INR 72.75 lacs (March 31, 2017 : INR 64.91 lacs)

10 Fair values of financial assets and financial liabilities

The fair value of other current financial assets, cash and cash equivalents, trade receivables, trade payables, short-term borrowings and other financial liabilities approximate the carrying amounts because of the short term nature of these financial instruments.

Financial assets that are neither past due nor impaired include cash and cash equivalents, security deposits, term deposits and other financial assets.

11 Fair value hierarchy

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

- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

No financial assets/liabilities have been valued using level 1 fair value measurements.

12 Financial risk management objectives and policies

The Company is exposed to various financial risks. These risks are categorized into market risk, credit risk and liquidity risk. The Company’s risk management is coordinated by the Board of Directors and focuses on securing long term and short term cash flows. The Company does not engage in trading of financial assets for speculative purposes.

(A) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include borrowings and derivative financial instruments.

(i) Interest rate risk

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. The Company exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates. The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:

(ii) Foreign currency risk

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 exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a different currency from the Company’s functional currency).

Foreign currency sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate (Net balance - receivable) (or any other material currency), with all other variables held constant, of the Company’s profit before tax (due to changes in the fair value of monetary assets and liabilities). The Company’s exposure to foreign currency changes for all other currencies is not material.

(B) 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. Credit risk arises principally from the Company’s receivables from deposits, loans and advances and other statutory deposits with regulatory agencies and also arises from cash held with banks and financial institutions. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.

The Company limits its exposure to credit risk of cash held with banks by dealing with highly rated banks and institutions and retaining sufficient balances in bank accounts required to meet a month’s operational costs. The Management reviews the bank accounts on regular basis and fund drawdowns are planned to ensure that there is minimal surplus cash in bank accounts. The Company does a proper financial and credibility check on the entities to whom such loans and advances and security deposits are given. The Company does not foresee any credit risks on deposits with regulatory authorities.

(C) 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.

13 Capital management

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximize the shareholder value and to ensure the Company’s ability to continue as a going concern.

The Company has not distributed any dividend to its shareholders. The Company monitors gearing ratio i.e. total debt in proportion to its overall financing structure, i.e. equity and debt. Total debt comprises of current borrowing which represents loan from bank. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

14.1 In terms of the Scheme of Arrangement approved / sanctioned by the Hon’ble High Court of Madras, (“the Scheme”), under section 391 to 394 of the Companies Act, 1956 between Taneja Aerospace and Aviation Limited (TAAL) and TAAL Enterprises Limited (“the Company”), TAAL has demerged its Air Charter Business including investment in First Airways Inc., USA and Engineering Design Services Business conducted through TAAL Tech India Private Limited into the Company. Pursuant to the Scheme as sanctioned by the Hon’ble High Court of Madras vide order dated June 22, 2015, received on July 23, 2015, the Air Charter Business of TAAL including investment in First Airways Inc., USA and Engineering Design Services Business conducted through TAAL Tech India Private Limited has been demerged into the Company on a going concern basis with effect from October 1, 2014 being the appointed date. The certified copy of the said order of the Hon’ble High Court of Madras has been filed with the Registrar of Companies, Chennai on August 21, 2015 and as such the Scheme has become effective from that date.

14.2 As per Clause 9.2 of the above Scheme of Arrangement as approved /sanctioned by the Hon’ble High Court of Madras, Taneja Aerospace and Aviation Limited (TAAL) will carry on the business and activities relating to the demerged charter business for and on account of and in trust for TAAL Enterprises Limited (TEL) until the time TEL obtains the requisite statutory licences required for carrying on the demerged charter business.

The said licences are yet to be obtained and accordingly the demerged charter business has continued to be operated by TAAL in trust for and on behalf of TEL including banking transactions, statutory compliances and all other commercial activities.

15 During the financial year ended March 31, 2017, the Company had incurred expenditure of INR 1,72,60,993/- due to bird hit accident to the aircraft. An insurance claim was raised with the insurance company before March 31, 2017. The insurance company had accepted, approved and settled the claim amounting to INR 1,29,29,850/- and the same was realised by the Company on or before adoption of financial statements by the Board for the financial year ended March 31, 2017. INR 43,31,143/- net expenditure incurred has been classified and disclosed as an Exceptional Item for the financial year ended March 31, 2017.

16 Deferred tax calculation results into working of deferred tax assets as at March 31, 2018, March 31, 2017 as well as at April 1, 2016. However as a matter of prudence, the Company has not recognised deferred tax asset.

17 The Company considers its investment in and loans to subsidiaries as strategic and long term in nature and accordingly, in the view of the management, any decline in the value of such long term investments in subsidiaries is considered as temporary in nature and hence neither provision nor impairment for diminution in value is considered necessary.

18 The Company operates a chartered plane obtained under a lease agreement dated December 11, 2007 which is the sole aircraft being operated by the Company as a part of its business operations. As per the lease agreement with the lessor, the lease was for a period of 120 months which expired on December 11, 2017. During the year, the Company and Lessor agreed for an extension of the lease for a period of one year from December 12, 2017 to December 11, 2018. Further, as per the purchase option agreement entered between the Company, Lessor and First Airways Inc. (Wholly owned subsidiary), First Airways Inc. has an option to purchase the aircraft at the end of lease period. On this basis, the Company intends to either renew the lease term or exercise the purchase option at the end of lease period through its subsidiary. In view of above, the Company has prepared financial statements on going concern basis.

19 Upon expiry of the lease aggrement, the lessor has aggred to restructure the lease which interalia provide for one year extenction of the Aggrement, reduction in monthly lease rental and reduction in existing past liabilities. Accordingly, the total outstanding liability of the Company under the Aggrement has come down by USD 405,495 (INR 263.50 Lacs) which is considered as other income and disclosed as such.

20 Since year end, the directors of TAAL Tech India Private Limited (Subsidiary Company) have recommended the payment of a final dividend of INR 25 per fully paid equity share (Previous Year- INR Nil). This proposed dividend is subject to the approval of shareholders in the ensuing Annual General Meeting.

21 In the opinion of the Board, Current Assets and Loans and Advances are of the value stated if realised in the ordinary course of business. Further, provision for all the known liabilities is adequate and not in excess of amount considered reasonably necessary.

22 Effective from Tuesday, July 05, 2016 the equity shares of the Company got listed and admitted to dealings on the Bombay Stock Exchange.

23 Previous year figures have been regrouped/ reclassified to confirm presentation as per Ind AS as required by Schedule III of the Act.

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