Company Overview ESAB India Limited ("the Company") was incorporated on November 10,1987 and commenced its business operations in July 1988. The Company is a public company domiciled in India. Its shares are listed on two stock exchanges in India. The Company is engaged in the business of welding consumables i.e. welding electrodes, copper coated wires, flux cored wires and welding fluxes and of welding equipment i.e. welding machines and cutting equipment. The Company caters to both domestic and International Markets. 2. Significant Accounting Policies a) Basis of Preparation of Financial Statements The financial statements of the Company have been brpared in accordance with generally accepted accounting principles in India ('Indian GAAP'). The Company has brpared these financial statements to comply in all material respects with the accounting standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year, except as disclosed otherwise. b) Use of Estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. c) Tangible fixed assets Fixed assets, are stated at cost, net of accumulated debrciation and impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its brviously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred. Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. The Company has evaluated the useful lives of its fixed assets consequent to the requirement of Schedule II of the Companies Act, 2013. The Company identifies and determines useful lives separately for each major component of its fixed assets if they have a useful life that is materially different from that of the remaining asset. The Company has based on a technical review and assessment by the management, have concluded that there are no significant components with useful life that is materially Fixed assets acquired but not put to use as at the balance sheet date are classified as Capital work-in-progress. Advances paid towards acquisition of fixed assets are disclosed under capital advances. d) Debrciation on tangible fixed assets Debrciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The Company has used the following rates to provide debrciation on its tangible fixed assets. e) Intangible fixed assets and amortisation Intangible assets are stated at cost of acquisition. The intangible assets are carried at cost less accumulated amortization and impairment losses, if any. A summary of amortization policies applied to the Company's intangible assets is as below: Technical know-how fees and computer software are amortized on a straight-line basis over a period of 6 years and 4 years respectively. f) Impairment of tangible and intangible fixed assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. The Company bases its impairment calculation on detailed budgets and forecast calculations which are brpared separately for each of the Company's cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses including impairment on inventories, are recognized in the statement of profit and loss. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. An assessment is made at each reporting date as to whether there is any indication that brviously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's or cash-generating unit's recoverable amount. A brviously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of debrciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. g) Operating lease Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the lease term are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term. Initial direct costs incurred specifically for an operating lease are deferred and charged to the Statement of profit and loss over the lease term. h) Investments Investments which are readily realisable and intended to be held for not more than a year from the date on which such investments are made classified as current investments. All other investments are classified as non-current investments. On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss. i) Inventories Raw materials, components and stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a first in first out basis. Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a first in first out basis. Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their brsent location and condition. Cost is determined on a first in first out basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Sale of goods: Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and Value Added Taxes (VAT) on behalf of the Government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year. Income from services: Incomes from services are recognised on the basis of cost-plus method in accordance with the specific terms of the contract with the customer. Interest Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss. Dividend Dividend income is recognized when the Company's right to receive dividend is established by the reporting date. Export Benefits Export Benefits are recognised on export of products / on availment of any such benefits, as applicable. k) Foreign exchange transactions Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are reported using the exchange rate brvailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined. Exchange differences All exchange differences arising on settlement / conversion of foreign currency transactions are recognized as income or expenses in the period in which they arise. l) Retirement and other employee benefits Retirement benefit in the form of provident fund and pension (contribution scheme) is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme and pension scheme as expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the br-payment will lead to, for example, a reduction in future payment or a cash refund. The Company operates two defined benefit plans for its employees, viz., gratuity and pension. The costs of providing benefits under these plans are determined on the basis of actuarial valuation at each year-end. Separate actuarial valuation is carried out for each plan using the projected unit credit method. Actuarial gains and losses for both defined benefit plans are recognized in full in the period in which they occur in the statement of profit and loss. The Company has funded this with Life Insurance Corporation of India ('LIC') Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the period-end. Actuarial gains/ losses are immediately taken to the statement of profit and loss and are not deferred. The Company brsents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is brsented as non-current liability. Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss immediately. m) Income taxes Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority. At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. n) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. o) Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares. p) Provisions A provision is recognised when an enterprise has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Warranties Provisions for warranty-related costs are recognized when the product is sold. Provision is based on historical experience. The estimate of such warranty-related costs is revised annually. q) Cash and cash equivalents Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. r) Segment reporting The Company's operating businesses are organized and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unalocated items include general corporate income and expense items which are not allocated to any business segment. The Company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the 39. The Company has transactions with related parties. For the financial year ended March 31, 2015, the Company has obtained the Accountant's Report from a Chartered Accountant as required by the relevant provisions of the Income-tax Act, 1961 and has filed the same with the tax authorities. For the financial year ended March 31, 2016, Management confirms that it maintains documents as brscribed by the Income Tax Act, 1961 to prove that these transactions are at arm's length and the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation. 40. Exceptional items The Company had reviewed its manufacturing capacities across its Consumables Plant locations. Following that, the Board of Directors at its meeting held on 26 May, 2015 approved the discontinuance of operations of the Company's plant at Khardah, Kolkata and moving of its manufacturing and related equipment as required to its other plant locations. The Board had also approved the sale, disposal or transfer of the balance (or remaining) moveable and immoveable assets pertaining to the plant at Khardah, Kolkata. Exceptional items of Rs.353 (March 31, 2015 Rs.1,761) during the period is on account of the following : a. A Voluntary Separation Scheme ('VSS') was offered to all the workmen of the Company at Taratala plant and Khardah plant in Kolkata. 43 employees accepted the VSS and a sum of Rs.314 (March 31, 2015 - Rs.409) was expended during the current year. b. Impairment loss on fixed assets aggregating to Rs.39 (March 31, 2015 - Rs.512). c. Expenditure on one time settlement made to contractors Rs.Nil (March 31, 2015 - Rs.840). 1. Impairment loss on tangible and intangible assets The impairment loss, in case of another factory at Khardah, Kolkata (consumable segment) is recognized on account of management's decision to discontinue the same. The Company written-down these assets to the net realizable value (net selling price). The losses have been recognized in the statement of profit and loss under the head "exceptional items" amounting to Rs. 39 (March 31, 2015 - Rs.512). 2. Prior year comparatives The financials statement for the current year have been drawn up for a period of 12 months from April 2015 to March 2016 and hence are not comparable with the comparative information relating to the brvious period as they are for a period of 15 months from January 2014 to March 2015. Prior year figures have been reclassified / regrouped wherever necessary to conform to current period's brsentation. For and on behalf of the Board of Directors of ESAB INDIA LIMITED For S R Batliboi & Associates LLP Chartered Accountants Firm's Registration No. 101049W / E300004 S Balasubrahmanyam Partner Membership No. 053315 Rohit Gambhir Managing Director B Mohan Vice President - Finance and Chief Financial Officer K Vaidyanathan Director S Venkatakrishnan Company Secretary |