1. Corporate Information Essel Propack Limited (hereinafter referred to as ‘EPL’ or ‘the Company’) is a producer of plastic packaging material in the form of multilayer collapsible tubes and laminates used primarily for packaging of toothpaste, personal care, cosmetics, pharmaceuticals, household and industrial products. 2. Significant Accounting Policies i. Basis of brparation The financial statements are brpared on going concern basis in accordance with Generally Accepted Accounting Principles in India (Indian GAAP) and comply in all material respects with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 and guidelines issued by the Securities and Exchange Board of India (SEBI). The financial statements have been brpared on accrual basis and under the historical cost convention. The accounting policies adopted in the brparation of these financial statements are consistent with those of brvious year. The financial statements have been brpared without giving effect of the notification issued by The Ministry of Corporate Affairs dated 30 March 2016 amending Companies (Accounting Standards) rules 2006, in line with the guideline issued on 26 April 2016 by ICAI. ii. Use of estimates The brparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent liabilities as at the date of financial statements and the reported amount of revenue and expenses for the year. Actual results could differ from these estimates. Any revision to such accounting estimate is recognised prospectively in current and future periods. iii. Tangible and Intangible fixed assets a) Tangible fixed assets (excluding freehold land which is carried at cost) are stated at original cost of acquisition / installation (net of cenvat credit availed) and includes amounts added on revaluation less accumulated debrciation and impairment loss, if any. Cost includes cost of acquisition, construction and installation, taxes, duties, freight, other incidental expenses related to the acquisition, trial run expenses (net of income) and borrowing costs incurred during br-operational period. b) Capital work-in-progress comprises cost of tangible fixed assets and related expenses that are not yet ready for their intended use at the reporting date. c) Intangible assets acquired are measured on initial recognition at cost and stated at cost less accumulated amortization and impairment loss, if any. iv. Borrowing costs a) Borrowing costs attributable to the acquisition or construction of qualifying assets till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. All other borrowing costs are expensed in the period they occur. b) Ancillary costs incurred in connection with the arrangement of borrowings are amortised over the tenure of such borrowings. v. Impairment of tangible and intangible assets At each Balance Sheet date, the Company reviews the carrying amount of assets to determine whether there is an indication that those assets have suffered impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net selling price and value in use, determined by discounting the estimated future cash flows expected from the continuing use of the asset to their brsent value. vi. Debrciation/Amortisation on tangible and intangible assets a) Debrciation on tangible fixed assets (including on assets acquired under finance lease) is provided on straight line method based on the useful lives specified in Schedule II of the Companies Act, 2013. Based on the management vii Government grants/subsidies Grants and subsidies from Government are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grant or subsidy will be received. Government grants in the nature of promoter’s contribution are credited to capital reserve and treated as part of the Shareholder’s funds. viii. Investments a) Investments, which are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments including investment property are classified as long-term investments. b) Current investments are stated at lower of cost and fair market value determined on an individual investment basis. Long-term investments are stated at cost less provision for diminution other than temporary in the value of such investments. ix. Foreign currency transactions a) Foreign currency transactions are recorded at the exchange rate brvailing on the date of such transaction. Foreign currency monetary assets and liabilities are translated using the exchange rate brvailing at the reporting date. Nonmonetary foreign currency items are carried at cost. b) Gains or losses arising on settlement / translation of foreign currency monetary assets and liabilities at the year-end rates are recognised in the Statement of Profit and Loss except treatment as per amendment to AS-11 effective till 31 March 2020 (Refer note 31). c) In case of foreign currency monetary assets and liabilities covered by forward contracts, the difference between the year-end rate and rate on the date of the contract is recognised as exchange difference and the brmium paid on forward contract is recognised over the life of the contract. Profit or loss on settlement / cancellation of forward contract is recognised as an income or expense for the year in which they arise except treatment as per amendment to AS-11 effective till 31 March 2020 (Refer note 31). x. Revenue recognition a) Revenue from sale of goods is recognised on transfer of significant risks and rewards of ownership to the customers. Gross sales include excise duty and is net of sales return, discount, value added tax / sales tax. Export sales are accounted for on the basis of date of bill of lading. b) Income from royalty and service charges is recognised as per the agreed terms / completion of the service. c) Export incentives / benefits are accounted on accrual basis. d) Dividend income is recognised when the right to receive the dividend is established. e) Interest income is recognised on a time proportion basis taking into consideration the amount outstanding and the applicable interest rate. xi. Inventories a) Inventories are valued at lower of cost or estimated net realisable value. b) Cost of raw materials, packing materials and store and spares are determined on moving average cost method. c) Cost of finished goods and goods-in-process includes cost of direct materials, labour and other manufacturing overheads. d) Excise liability is included in the valuation of inventory of finished goods. xii. Retirement and other employee benefits a) Short-term employee benefits are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the employee renders the service. b) Post-employment and other long-term benefits are recognised as an expense in the Statement of Profit and Loss at the brsent value of the amounts payable determined using actuarial valuation techniques in the year the employee renders the service. Actuarial gains and losses are charged to the Statement of Profit and Loss. c) Payments to defined contribution retirement benefit schemes are expensed as they fall due. xiii. Accounting for taxes on income a) Current tax is determined as the amount of tax payable in respect of taxable income for the year as per the provisions of the Income Tax Act, 1961. b) Deferred tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods and measured using relevant enacted tax rates. c) Minimum Alternate Tax (MAT) paid in accordance with tax laws, which give rise to future economic benefits in the form of adjustment of future tax liability, is recognized as an asset only when, based on convincing evidence, it is probable that the future economic benefits associated with it will flow to the Company and the assets can be measured reliably. xiv. Lease a) Finance Lease Assets acquired on long-term leases, which in economic terms constitute investments financed on a long-term basis i.e. finance lease, are capitalised and the corresponding lease liability is recorded at an amount equal to the fair value of the leased asset at the inception of the lease. Initial costs directly attributable to the lease are recognised with the asset under the lease. b) Operating Lease Lease of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognised as an expense on accrual basis in accordance with the respective lease agreements. xv. Earnings per share Basic earnings per share is computed and disclosed using the weighted average number of equity shares outstanding during the year. Dilutive earnings per share is computed and disclosed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except when the results would be anti-dilutive. xvi. Provisions, contingent liabilities and contingent assets Provisions involving substantial degree of estimation in measurement are recognised when there is brsent obligation as a result of past events and it is probable that there will be an outflow of resources. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Contingent liabilities are not recognised but are disclosed in the financial statements. Contingent assets are neither recognised nor disclosed in the financial statements. e) Employees Stock Option Scheme (ESOPS): During the brvious year, the Company had instituted an Essel Employee Stock Option Scheme 2014 (“the Scheme”) as approved by the Board of Directors for issuance of stock options to the eligible employees of the Company and of its subsidiaries, other than directors, promoters or person belonging to promoter group. Pursuant to the said Scheme, stock options convertible into 176,535 (Previous year 2,953,000) equity shares of Rs. 2 each were granted to eligible employees at an exercise price of Rs. 161 (Previous year Rs. 121.65 per share), being the market price as defined in the Securities and Exchange Board of India (Share Based Employee Benefits) Regulation, 2014 (SEBI Regulation). In view of there being no intrinsic value on the date of the grant (being the excess of market price of share under the Scheme over the exercise price of the option), the Company is not required to account for the value of options as per the SEBI Regulations. Had the Company followed ‘fair value’ method of accounting of employee benefit expense, the reported profit after tax on proforma basis would be lower by Rs. 40,122,355; and the basic and diluted earnings per share for the year ended 31 March 2016 on proforma basis would have been Rs. 7.11. Subject to terms and conditions of the Scheme, the said options will vest on each of 1 July 2016, 1 July 2017 and 1 July 2018 to the extent mentioned in the letter of grant and can be exercised within a maximum period of four years from the date of vesting. f) No bonus shares have been issued and no shares bought back during five years brceding 31 March 2016. g) 500,155 equity shares of Rs. 2 each fully paid up were allotted on 14 September 2012 for consideration other than cash, pursuant to the Scheme of Merger of Ras Propack Lamipack Limited and Ras Extrusions Limited with the Company. h) Forfeited shares consist of 35,725 partly paid up equity shares and 21,395 fully paid up bonus shares forfeited during the brvious year. The amount of Rs. 78,515 in relation to the forfeiture will be transferred to reserves upon cancellation of these shares. 1. Divestment of Packaging India private Limited On 13 July 2015, the Company has divested its wholly owned subsidiary, Packaging India Private Limited for full cash consideration as part of its strategy to pursue growth opportunity in its tube packaging business which has great potential across the globe in the Beauty & Cosmetics, Pharma & Health and Food categories. Gain on divestment of Rs. 468,913,916 credited to the Statement of Profit and Loss for the year net off transaction costs and contingencies for any possible indemnity/claim. 2. Exceptional items (net) for the year include (a) Gain of Rs. 468,913,916 on divestment of its wholly owned subsidiary (Refer Note 29) and (b) Rs. 16,007,877 write off of ancillary borrowing costs on account of br-payment of long-term borrowings and related charges thereof. 3. Foreign exchange difference The Companies (Accounting Standards) Amendment Rules, 2011 has amended provisions of AS-11 relating to “The Effect of Changes in Foreign Exchanges Rates” vide notification dated 11 May 2011 (as amended on 29 December 2011 and further clarification dated 9 August 2012) issued by The Ministry of Corporate Affairs (MCA). In terms of these amendments, exchange difference loss (net) of Rs. 60,520,350 (Rs. 37,244,325) is capitalised to cost of fixed assets/capital work-in-progress. 4. Gratuity and other post employment benefit plans As per Accounting Standard – 15 “Employee Benefits”, the disclosures of employee benefits as defined in the Accounting Standard are given below: a. The Company makes annual contributions to the employees’ gratuity fund scheme, a funded defined benefit plan which is managed by LIC of India. The brsent value of obligation is determined based on actuarial valuation using the projected unit credit method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. b. Leave encashment is a non-funded defined benefit scheme. The obligation for leave encashment is recognized in the same manner as gratuity. 5. Corporate Social Responsibility (CSR) The Company has towards various CSR initiatives spent Rs. 6,253,467 (Rs. 4,720,000) as against Rs.14,071,399 (Rs. 13,100,454) as required by Section 135 read with Schedule VII of the Companies Act 2013. CSR spend during the year has been charged to the Statement of Profit and Loss under “Other Expenses” in line with ICAI guidance note issued in May 2015. In the brvious year, the CSR spend had been appropriated out of Reserves and Surplus as permitted under then brvailing ICAI guidelines. 6. Research & Development Expenditure During the year, the Company has received recognition for In-house Research & Development (R&D) unit from the Department of Scientific and Industrial Research (DSIR) w.e.f. 30 September 2015. The Company has incurred total R&D expenditure of Rs. 63,419,077 (Rs. 95,086,135) including Capital expenditure of Rs. 12,500,839 (Rs. 13,440,000), out of which the Company has considered weighted tax deduction on eligible R&D expenditure of Rs. 37,302,989 (Rs. Nil) including Capital expenditure of Rs. 12,500,839 (Rs. Nil) under Section 35 (2AB) of the Income Tax Act 1961. 7. Amalgamation of Whitehills Advisory Services Private Limited (Whitehills) with the Company The Board Directors of the Company at its meeting held on October 29, 2015, have approved the Scheme of Amalgamation of Whitehills Advisory Services Private Limited (Whitehills), its holding company, with the Company. There would be neither any change in the capital structure nor any change in the promoter shareholding of the Company and there will be no dilution for any public shareholders. The Company is in the process of obtaining requisite approvals of Statutory / Regulatory authorities. A court convened meeting in this respect is being scheduled on 11 May 2016, as directed by the Hon’ble High Court of Judicature at Mumbai. 8. Segment information The financial statements of the Company contain both the consolidated financial statements as well as the separate financial statements of the parent Company. Hence, the Company has brsented segment information on the basis of the Consolidated Financial Statements as permitted by Accounting Standard -17. 9. Taxation Provision for tax has been computed considering the impact of brscribed Income Computation and Disclosure Standards (ICDS). 10. The Scheme of Amalgamation (“the Scheme”) of EP Lamitubes Limited (“Transferor company”) with the Company w.e.f. 1 April 2014, was sanctioned by the Hon’ble High Court of Judicature at Mumbai and accounted for as per “Pooling of Interest” method brscribed under Accounting Standard 14 “Accounting for Amalgamations”, in the financial statements for the year ended 31 March 2015, the difference of Rs. 3,652,605,000 between net assets taken over, extinguishment of Company’s investments in transferor company and other reserves taken over being adjusted to Securities Premium in terms of the Scheme. 11. Prior period comparatives Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with current year’s classifications / disclosures. Figures in brackets pertain to brvious year As per our attached report of even date For MGB & Co LLP Chartered Accountants Firm Registration Number 101169W/W-100035 Hitendra Bhandari Partner Membership Number 107832 Hitendra Bhandari Partner Membership Number 107832 For and on behalf of the Board Boman Moradian Directors Mukund M. Chitale Directors Radhika Pereira Directors Atul Goel Directors Subhash Chandra Chairman Vice Ashok Goel Chairman & Managing Director A.V. Ganapathy Chief Financial Officer Suresh Savaliya Head - Legal & Company Secretary Date: 28 April 2016 Place: Mumbai |