SIGNIFICANT ACCOUNTING POLICIES NOTE 1 : BASIS OF brPARATION The financial statements have been brpared to comply with the accounting principles generally accepted in India, including the Accounting Standards specified under Section I33 of the Companies Act, 20I3 (the 'Act'), read with Rule 7 of the Companies (Accounts) Rules, 20I4 (as amended). The financial statements have been brpared on a going concern basis under the historical cost convention on accrual basis, as supplemented by revaluation of certain fixed assets. The accounting policies have been consistently applied by HSIL Limited (the 'Company'). NOTE 2 : USE OF ESTIMATES The brparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported balances of assets and liabilities and the disclosure relating to contingent liabilities as at the date of financial statements and reported amounts of income and expenses during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from those estimates. Any revision to accounting estimates is recognised in the current and future periods. NOTE 3 : SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES i Fixed assets Tangible Tangible assets (other than those which have been revalued) are stated at cost of acquisition less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price (net of cenvat credit availed) and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure on account of restoration/modification/alteration in plant and machinery/ building, which increases the future benefit from the existing asset beyond its brviously assessed standard of performance/estimated useful life, is capitalised. Capital expenditure incurred on rented properties is classified as 'Leasehold improvements' under fixed assets. Pre-operative expenditure including borrowing cost (net of revenue, where applicable) and foreign exchange differences on specific project loans incurred during the construction/ trial run of the project is allocated on an appropriate basis to fixed assets upon commissioning. Intangible I ntangible assets are recognised if and only if it is probable that the future economic benefits that are attributable to the assets will flow to the Company and the cost of the asset can be measured reliably in accordance with the notified Accounting Standard-26. Capital work-in-progress Capital work-in-progress includes assets under construction/installation comprising of direct cost and related incidental expenses. Capital work-in-progress is stated at cost and not debrciated. Debrciation on capital work-in-progress commences when the assets are ready for their intended use. ii Debrciation and amortisation A Tangible a) Debrciation on fixed assets has been provided as per guidance set out in Schedule II of the Act on straight line method using the undermentioned indicative lives- b) Leasehold improvements are being amortised over the lease period or estimated useful life of the leasehold improvements, whichever is lower. c) Vehicles are being debrciated using written down value method as per life of 8 years mentioned in Schedule II of the Act. B Intangible a) Technical knowhow is being amortised over a period of ten years. b) Goodwill arising on merger is amortized over a period of seven years. iii Impairment of assets The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If at the balance sheet date there is an indication that if a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of debrciated historical cost. iv Investments Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are valued at the lower of cost and fair value. Long-term investments are stated at cost. Provision is made for diminution in the value of long-term investments to recognise a decline, if any, other than temporary in nature. Profit/loss on sale of investments are computed with reference to their cost determined on first in first out basis. v Inventories a) Inventories are valued as follows: Raw materials including components,packing materials, stores and spares and goods-in-transit - At lower of cost and net realisable 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. Work-in-progress - At cost up to estimated stage of completion. Finished goods and traded goods - At lower of cost and net realisable value. b) Cost of inventories is ascertained on the following basis: Raw materials, stores and spare parts and packing materials - On weighted average basis. Finished goods - traded - On weighted average basis. Cost of manufactured finished goods and stock in process determined on weighted average basis and comprises of material, labour, other related production overheads and non-recoverable duties. Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion to make the sale. vi Cash and cash equivalent Cash and cash equivalent comprise of balance at bank, cash in hand and short-term deposits with maturity of three months or less. vii Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company, the revenue can be reliably measured and there is certainty of ultimate collection. Sale of goods Revenue from sale of goods is recognised when all the significant risks and rewards in respect of ownership of the goods are transferred to the customer and the Company retains no effective control of the goods transferred to the buyer and is stated inclusive of excise duty and net of trade discounts, sales return and sales tax wherever applicable. Other income 1. I nterest income is recognised on a time proportion basis at the applicable rates. 2. I nsurance claims are recognised on actual realization basis. viii Export benefit/incentives Benefit under the advance license scheme and duty free replenishment certificate are accounted for at the time of purchase of imported raw material or sale of the license ix Employee benefits Expenses and liabilities in respect of employee benefits are recorded in accordance with the notified Accounting Standard I5, 'Employee Benefits (Revised 2005) ('Revised AS I5'). a) Provident fund The Company makes contributions to independently constituted trusts recognized by income tax authorities and regional provident fund. In terms of the Guidance note on implementing the Revised AS I5, issued by the Accounting Standard Board of the Institute of Chartered Accountants of India (the 'ICAI'), the provident fund set up by the Company is treated as a defined benefit plan since the Company has to meet the interest shortfall, if any.Accordingly, the contribution paid or payable and the interest shortfall, if any is recognized as an expense in the period in which services are rendered by the employee. b) Gratuity Gratuity is a post employment defined benefit plan. The liability recognised in respect of gratuity is the brsent value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method. Actuarial gains and losses arising from experience, adjustments and changes in actuarial assumptions are recorded as expense or income in the statement of profit and loss in the year in which such gains or losses arise. c) Compensated absences The liability in respect of compensated absences is determined on the basis of actuarial valuation performed by an independent actuary using the projected unit credit method. Actuarial gains or losses are recognised in the statement of profit and loss in the year they arise. d) Other short term benefits Expenses relating to other short term benefits is recognised on the basis of amount paid or payable for the period during which services are rendered by the employee. x Leases Operating lease Lease rentals in respect of assets taken on operating lease are charged to the statement of profit and loss on straight line basis over the term of the lease. xi Foreign currency transactions Foreign currency transactions are recorded at the exchange rates brvailing on the date of transaction. Differences arising out of foreign currency transactions settled during the year are recognised in the statement of profit and loss. Monetary items outstanding at the balance sheet date and denominated in foreign currencies are restated at the exchange rates brvailing at the balance sheet date. Differences arising on such restatement are recognised in the statement of profit and loss except to the extent permitted by the transitional provisions contained in the Companies (Accounting Standards) Amendment Rules, 2009 in respect of long term foreign currency monetary items, in which case the cost of fixed assets are adjusted by the translation differences and amortised over the remaining useful life of the related asset. The brmium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year. Forward exchange contracts and other currency derivative contacts that are not in principle forward contracts in accordance with the notified Accounting Standard II 'Effect of change in Foreign Exchange Rates' that are entered to hedge the foreign currency risk of highly probable forecast transactions and firm commitments are marked to market at the balance sheet date and exchange loss is recognised in the statement of profit and loss immediately. Any gain is ignored and not recognised in the financial statements, in accordance with the principles of prudence enunciated in the notified Accounting Standard I- Disclosure of Accounting Policies. xii Research and development Research and development expenditure is charged to statement of profit and loss except capital expenditure, which is added to the cost of respective fixed assets in the year in which it is incurred. xiii Borrowing cost Borrowing costs that are attributable to the acquisition and/ or construction of qualifying assets are capitalised as part of the cost of such assets, in accordance with the notified Accounting Standard I6 'Borrowing Costs'. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. Capitalisation of borrowing costs is suspended in the period during which the active development is delayed due to, other than temporary interruption. All other borrowing costs are charged to the statement of profit and loss as incurred. xiv Taxes on income Tax expense comprises current income-tax and deferred income-tax. Current tax is determined as higher of the amount of tax payable in respect of taxable income for the period or tax payable on book profit computed in accordance with the provisions of section II5JB of the Income-tax Act, I96I. Deferred income-tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable/virtual certainty, depending on the nature of the timing differences, that sufficient future taxable income will be available against which such deferred tax assets can be realised. Minimum Alternate Tax ('MAT') credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss and shown as MAT credit entitlement.The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent it is not reasonably certain that the Company will pay normal income-tax during the specified period. xv Share issue expenses The share issue expenses are adjusted against the balance in Securities Premium Account as permitted under Section 52 of the Act. xvi Earnings per share Basic earnings per share is calculated by dividing net profit or loss for the year attributable to equity shareholders by weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue, share split and any new equity issue. 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 year are adjusted for the effects of all dilutive potential equity shares. xvii Contingent liabilities and provisions The Company makes a provision when there is a brsent obligation as a result of a past event, where the outflow of economic resources is probable and a reliable estimate of the amount of the obligation can be made. A disclosure is made for a contingent liability when there is a: - possible obligation, the existence of which will be confirmed by the occurrence/non-occurrence of one or more uncertain events, not fully within the control of the Company; - brsent obligation, where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - brsent obligation, where a reliable estimate cannot be made. When there is a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. xviii Measurement of EBITDA As permitted by the Guidance Note on the Revised Schedule VI to the Companies Act, I956 (now Schedule III of Companies Act, 20I3), the Company has elected to brsent earnings before interest, tax, debrciation and amortisation (EBITDA) as a separate line item on the face of the statement of profit and loss. In its measurement, the Company does not include debrciation and amortisation expense, finance costs and tax expense Notes: 1. Foreign currency loans (including current maturities) comprises of: a) The External commercial borrowings ('ECB') of USD I6 million from Standard Chartered Bank, London, United Kingdom ('UK') carries an interest @ 6 months LIBOR plus I77 basis points ('bps'), is repayable in 6 yearly installments ranging from USD 0.962 million to USD 4.322 million commencing from September 20I0. This ECB is secured by way of hypothecation of first pari passu charge on movable fixed assets (both brsent and future) pertaining to the glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. Further, this is secured by first pari-passu charge by way of mortgage of deposit of title deeds of immovable properties (both brsent and future) of glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. b) The ECB of USD I7 million from the Hongkong and Shanghai Banking Corporation Bank Plc, London, UK, carries interest @ 6 months LIBOR plus 200 bps is repayable in 30 installments ranging from USD 0.40 million to USD I.00 million commencing 120 from September 20II. This ECB is secured by way of hypothecation of first pari passu charge over the Company's movable fixed assets, plant and machinery, machine spares, tools and accessories (both brsent and future) pertaining to the glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. Further, this is secured by first pari-passu charge by way of mortgage of deposit of title deeds of immovable properties (both brsent and future) of glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. This ECB will be repayable by March 20I6. c) The ECB of USD I6.75 million from Citibank N.A., London, UK carries an interest @ 6 months LIBOR plus I8I bps, is repayable in 9 half yearly installments ranging from USD I.250 million to USD I.938 million commencing from September 20II. This ECB is secured by way of hypothecation of first pari passu charge on moveable fixed assets (both brsent and future) pertaining to the glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. Further, this is secured by first pari-passu charge by way of mortgage of deposit of title deeds of immovable properties (both brsent and future) of glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. d) The ECB of USD 8 million from Standard Chartered Bank (Mauritius) Limited carries an interest @ 6 months LIBOR plus 225 bps, is repayable in 32 equal installments of USD 0.25 million commencing from September 20I2. This ECB is secured by way of hypothecation of first pari passu charge on movable fixed assets including plant and machinery, furniture and fittings, equipments, computer hardware, computer software, machinery spares, tools and accessories (both brsent and future) pertaining to the glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. Further, this is secured by first pari-passu charge by way of mortgage of deposit of title deeds of immovable properties (both brsent and future) of glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. This ECB will be repayable by July 20I6. e) The ECB of USD 8.955 million from DBS Bank Limited, Singapore carries an interest @ 3 months LIBOR plus 200 bps, is repayable in 32 installments ranging from USD 0.278 million to USD 0.28I million commencing from October 20I2. This is secured by first pari passu charge by way of mortgage of deposit of title deeds of immovable property situated at Sitarampur, Isnapur, PO Medak District, Hyderabad, Telangana. This ECB will be repayable by August 20I6. f) The ECB of USD 20 million from Standard Chartered Bank, London, UK carries an interest @ LIBOR plus 250 bps, is repayable in 50 installments ranging from USD 0.225 million to USD 0.90 million commencing from March 20I4. This ECB is secured by way of hypothecation of first pari passu charge on movable fixed assets including plant and machinery, furniture and fittings, equipments, computer hardware, computer software, machinery spares, tools and accessories (both brsent and future) pertaining to the glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. Further, this is secured by first pari-passu charge by way of mortgage of deposit of title deeds of immovable properties (both brsent and future) of glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. This ECB will be repayable by March 20I9. g) The ECB of USD 25 million from DBS Bank Limited, Singapore carries an interest @ 6 months LIBOR plus 260 bps, is repayable in 50 installments ranging from USD 0.32 million to USD 0.72 million commencing from March 20I4. This ECB is secured by way of first pari passu hypothecation and floating charge on movable fixed assets including plant and machinery, furniture and fittings, equipments, computer hardware, computer software, machinery spares, tools and accessories (both brsent and future) pertaining to the glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. Further, this is secured by first pari-passu charge by way of mortgage of deposit of title deeds of immovable properties of glass plants of the Company situated at Sanathnagar and Bhongir in Telangana. This ECB will be repayable by January 20I9. h) The ECB of USD 20 million from the HSBC Bank (Mauritius) Limited carries an interest @ 6 months LIBOR plus 300 bps, is repayable in 35 installments ranging from USD 0.09 million to USD I.I4 million starting from November 20I4. This ECB is secured by first pari-passu charge over all brsent and future movable and immovable fixed assets of Sanitaryware plant situated at Bibinagar, Telangana and faucet plant situated at Kehrani, Rajasthan. This ECB will be repayable by April 20I8. NOTE 1 : SCHEME OF AMALGAMATION a) The Board of Directors of the Company on 25 September 2012 approved the Scheme of Amalgamation (the 'Scheme') between Garden Polymer Private Limited ('transferor Company') and HSIL Limited ('transferee Company'). The Scheme has been approved by the Hon'ble High Court of Calcutta on 13 March 2014 and made effective upon filing of the approved scheme with the Registrar of Companies, West Bengal with an appointed date of 1 April 2012. b) Accordingly, all the properties, assets, rights, powers, liabilities and duties of the Transferor Company vested in the Transferee Company as a going concern from the appointed date and the Transferor Company stands dissolved without being wound up. c) Pursuant to the scheme coming into effect, the authorised share capital of the Transferor Company has been combined with the Company and resultantly there is an increase in authorised share capital by f 225.00 lacs. d) As per the scheme of amalgamation: © the amalgamation of the Transferor Company were accounted for in the books of the Transferee Company by adoption of 'Purchase Method' method in accordance with the notified Accounting Standard 14 : Accounting for amalgamations. © with effect from the appointed date, the Transferee Company have recorded all the identifiable assets and liabilities of the Transferor Company at their respective fair values. © i n case of any differences arising in accounting polices between the Transferor Company and Transferee Company, the impact of the same has been adjusted in the Statement of Profit and Loss of the Transferee Company. © the difference between the investment made by the Transferee Company in the Transferor Company and the net assets acquired of the Transferor Company has been shown under Goodwill. NOTE 2 : In view of long term business relations, trade deposits from dealers are considered as long term liabilities. NOTE 3 : Segment information, as required under AS-17 "Segment Reporting", has been provided in the consolidated financial statements of the Company and therefore, no separate disclosure on segment information is given in these standalone financial statements. NOTE 4 : Lease payments under cancelable operating leases amounting to Rs. 737.97 lacs (brvious year Rs. 711.61 lacs) for the year has been charged to the statement of profit and loss as rentals. NOTE 5 : In accordance with the provisions of section I35 of the Act, the Board of Directors of the Company had constituted a Corporate Social Responsibility (CSR) Committee. In terms, with the provisions of the said Act, the Company was to spend a sum of Rs. 175 lacs towards CSR activities during the year ended 31 March 2015. The CSR Committee has been examining and evaluating suitable proposals for deployment of funds towards CSR initiatives, however, the committee expects finalization of such proposals in due course. During the period ended 31 March 2015, Company has contributed the following sums towards CSR initiatives. NOTE 6: Previous year figures have been regrouped/recast wherever considered necessary to make them comparable with those of the current year. For and on behalf of the Board of Directors For Walker Chandiok & Co LLP (formerly Walker, Chandiok & Co) Chartered Accountants Sandip Somany Joint Managing Director DIN: 00053597 Rajendra K Somany Chairman and Managing Director DIN: 00053557 Per Lalit Kumar Partner Payal M. Puri Company Secretary Sandeep Sikka Chief Financial Officer Place : Gurgaon Date : 18 May 2015 |