NOTES FORMING PART OF THE FINANCIAL STATEMENTS 1. Corporate information Welspun Syntex Limited is a Company incorporated under the Companies Act, 1956. Welspun Syntex Limited was established in 1983. Since its inception, it has grown manifold and today is amongst the largest manufacturers and exporters of Polyester Texturised Filament Yarn, Nylon Filament Yarn and Bulk Continuous Filament Yarn from India. 2. Significant Accounting Policies i) Basis of brparation of financial statements The financial statements are brpared on going concern basis in accordance with Generally Accepted Accounting Principles in India (Indian GAAP) and comply with 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. Use of estimates The brparation of the financial statements requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amount of revenue and expenses of the year. The estimates and assumptions used in the accompanying financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results could differ from those estimates and in such case the difference is recognised when known or materialised. Tangible and intangible assets a) Tangible assets are stated at original cost of acquisition / installation (net of cenvat credit availed) net of accumulated debrciation, amortization and impairment losses except freehold land which is carried at cost. Cost includes cost of acquisition, construction and installation, taxes, duties, freight, other incidental expenses related to the acquisition, trial run expenses (net of revenue) and broperative expenses including borrowing costs incurred during br-operational period. b) Tangible assets which are not ready for their intended use on reporting date are carried as capital work-in-progress at cost, comprising direct cost and related incidental expenses. c) Intangible assets are carried at cost, net of accumulated amortization and impairment loss, if any. iv) Debrciation/amortization on tangible and intangible assets a) Debrciation on tangible assets is provided on straight line method based on the useful lives specified in Schedule II of the Companies Act, 2013. Debrciation on both Partially Oriented Yarn (POY) and Bulk Continuous Filament Yarn (BCF) plant and machinery is charged as continuous process plant based on technical opinion taken by the Company/Expert. b) Intangible assets are amortized on a straight-line basis over the economic useful life estimated by the management. v) Impairment of tangible and intangible assets At each balance sheet date, the Company reviews the carrying amount of tangible and intangible assets to determine whether there is any 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) Borrowing costs 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. vii) Revenue recognition a)Revenue from sale of goods is recognized on transfer of significant risks and rewards of ownership to the customers, which is generally on dispatch of goods. Export ales are accounted for on the basis of date of bill of lading. Gross sales include excise duty and adjustments for price variations and are net of sales tax / value added tax. Consignment sales are recognized on confirmation from consignee/consignment agent. b)Export benefits / incentives are accounted on accrual basis. c)Revenue from services is recognized when the services are completed. d)Dividend income is recognized when right to receive the dividend is established. e) Interest income is recognized on a time proportion basis taking into account outstanding amount and the applicable interest rate except interest income from customers which is accounted on receipt basis. viii) Operating lease Lease of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognized as an expense on accrual basis in accordance with the respective lease agreements. ix) Investments a) Investments, which are readily realisable and are 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 are classified as long-term investments. b) Long-term investments are valued at cost less provision for diminution other than temporary, in the value of such investments. Current investments are valued at lower of cost and fair market value. x) Inventories Inventories are valued at lower of cost and estimated net realizable value. The basis of determining cost for various categories of inventories is as follows: a) Raw materials, stores and spares, dyes and chemicals and packing materials: Moving weighted average basis. b) Goods-in-process - Cost of materials, labour and other production overheads. c) Finished goods - Cost of materials, labour, production overheads and excise duty. xi) Accounting for taxes on income a) Current tax is determined as the amount of tax payable in respect of taxable income for the year computed as per the provisions of the Income Tax Act, 1961. b) Deferred tax is recognized subject to consideration of prudence, on timing difference, 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. xii) Employee benefits a) Short- term employee benefits are recognized as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related services are rendered. b) Post employment and other long-term benefits are recognized as an expense in the statement of profit and loss of the year in which the employee has rendered services. The expense is recognized at the brsent value of the amounts payable determined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and other long-term benefits are recognized in the statement of profit and loss. c) Payments to defined contribution retirement benefit schemes are expensed as andwhen they fall due. xiii) Foreign currency transactions a) Transactions in foreign currency are accounted at the exchange rate brvailing on the dateof such transactions. Current monetary assets and liabilities are translated at the exchange rate brvailing at the reporting date. Non-monetary items are carried at cost. b) In respect of forward contracts assigned to the foreign currency monetary assets and liabilities as at balance sheet date, the brmium / discount for the period up to the date of balance sheet is recognized in the statement of profit and loss. The exchange difference measured by the change rate between the inception of forward contract and date of balance sheet is applied on foreign currency amount of the forward contract and is recognized in the statement of profit and loss. 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 36). c) Gains or losses arising on settlement / translations of foreign currency monetary assets and liabilities at the year-end rates are recognized in the statement of profit and loss except treatment as per amendment to AS-11 effective till 31 March 2020 (Refer note 36). xiv) 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. xv) Provisions, contingent liabilities and contingent assets a) Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events. A provision is made when it is probable that an outflow of resources embodying economic benefits will be required to settle an obligation and in respect of which a reliable estimate can be made. Provision is not discounted and is determined based on best estimate required to settle the obligation at the yearend date. b) Contingent assets are not recognized or disclosed in the financial statements. NOTES FORMING PART OF THE FINANCIAL STATEMENTS 1. During the year, impairment loss aggregating Rs.114.03 lacs (Rs.4.19 lacs) has been reversed consequent to the relevant fixed assets being sold. 2. Contingent liabilities not provided for a) Guarantees given by banks Rs.698.86 lacs (Rs.450.93 lacs) b) Disputed Indirect taxes Rs.1,343.72 lacs (Rs.1,318.72 lacs) c) Disputed direct taxes Rs.46.86 lacs (Rs.4.96 lacs) d) Unexpired letters of credit Rs.1,604.21 lacs (Rs.802.66 lacs). e) Custom duty on pending export obligation for import under advance license Rs.116.37 lacs (Rs.144.88 lacs) f) The accumulated dividend of Rs. Nil (Rs.340.45 lacs) payable on redeemable cumulative / optionally convertible cumulative brference shares g) Claims against the Company not acknowledged as debt Rs.139.85 lacs (Rs.139.85 lacs) h) Bills receivable discounted Rs.1,702.54 lacs (Rs.1,788.67 lacs) 3. Capital commitment not provided for Rs.1,764.62 lacs (Rs.153.33 lacs) net of advances. 4. Freehold Land includes Rs.7.73 lacs (Rs.7.73 lacs) and development expenses of Rs.14.98 lacs (Rs.14.98 lacs) incurred on such land capitalized in the year 2002-2003 for which the Company holds no title. The Company is in possession of the said land without any interference for more than twelve years and is in the process of executing the documents to transfer the said land in its name. 5. Taxation a) Provision for current tax for the year has been made under Minimum Alternate Tax (MAT) as per the provisions of Section 115JB of the Income-Tax Act, 1961. In accordance with the Guidance Note on Accounting for Credit Available in respect of MAT under the Income-Tax Act, 1961 issued by the Institute of Chartered Accountants of India (ICAI), the Company has recognized the MAT credit entitlement of Rs.906.49 lacs (Rs.430.27 lacs) as an asset under the Note "Loans and Advances" and has credited the same to the statement of profit and loss under "Provision for Taxation". b) In accordance with the Accounting Standard - 22 on "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred tax assets and liabilities should be recognized for all timing differences in accordance with the said standard. However, considering the brsent financial position of the Company and requirement of the Accounting Standard regarding certainty/virtual certainty, deferred tax asset has not been created. The same will be reassessed at a subsequent balance sheet date and will be accounted for in the year of certainty / virtual certainty in accordance with the aforesaid accounting standard. 6. Operating Leases The Company has taken on lease offices and residential facilities under operating lease agreements that are renewable on periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for six months to thirty six months. Minimum rental payments are required to be made under the operating leases that have initially or remaining non-cancelable lease term in excess of one year as at 31 March 2015 as per the contracts are as under: - Not later than one-year Rs.70.39 lacs (Rs.70.39 lacs) - Later than one year but not later than five years Rs.Nil (Rs.40.84 lacs) The aggregate rental expenses of all the leases for the year are Rs.278.64 lacs (Rs.158.59 lacs). 7 Balances of certain debtors, creditors and advance are subject to confirmation/reconciliation, if any. The management does not expect any material difference affecting the financial statements on such reconciliation / adjustments except otherwise stated. In the opinion of management, current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the balance sheet. The provision for expenses and all known liabilities is adequate and not in excess of the amount reasonably stated. 8. Corporate Social Responsibility (CSR) As per section 135 of the Companies Act, 2013, a CSR Committee has been formed by the Company. The Company is required to spend Rs.31.38 lacs and has spent Rs.33.91 lacs on activities specified in Schedule VII of the Companies Act, 2013. The entire amount has been paid during the year. 8. Information required under section 186(4) of the Companies Act, 2013 a) Loans, guarantees and securities given - The Company has not given any loans, guarantees or securities during the year. b) Investments made - There are no investments other than as disclosed in Note 11 Non-current investments and Note 13 Current investments. 9. Previous year's figures have been regrouped/reclassified/recasted wherever necessary to correspond with the current year's classifications/ disclosures. Figures in brackets pertain to the brvious year. For and on behalf of the Board For MGB & CO LLP Chartered Accountants Firm Registration Number 101169 W/W-100035 Rajesh Chamaria Partner Membership Number 046788 As per our attached report of even date R. R. MandawewalaDirector B. A. Kale Executive Director Kaushik Kapasi Company Secretary Bhaskar Sen Chief Finance Officer Mumbai, 14 May 2015 |