1. SIGNIFICANT ACCOUNTING POLICIES 1. Basis of accounting and brparation of financial statements The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 2013. The financial statements have been brpared under historical Costing Convention, with revenues recognized and expenses accounted on their accrual including provisions/adjustments for committed obligations and amounts determined as receivable or payable during the year as a going concern basis. 2. Use of estimates The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise. 3. Inventories Inventories are valued at lower of cost and net realisable value. a. The raw materials are valued using identifiable lot cost. b. Value of finished goods is inclusive of excise duty wherever applicable c. Cost of finished goods is determined as cost of raw materials and other manufacturing cost. In respect of semi - finished goods cost is taken as cost of the materials and estimated Conversion cost, up to completed stage. d. Stores, Spares and Components are valued at weighted average cost. e. By- Products and waste are valued at net realizable value. 4. Cash and cash equivalents (for the purposes of Cash Flow Statement) Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. 5. Cash flow statement Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. 6. Debrciation and amortisation Debrciation has been provided on the straight-line method based on estimated useful lives brscribed in Schedule II of the Companies Act, 2013: Intangible assets are amortised over their estimated useful life as follows: The computer software will be amortised over a period of 3 years The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern. 7. Revenue recognition a) Sale of goods Sales are recognized, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of goods to customers. Sales include excise duty but exclude sales tax and value added tax. b) Sale of Services 1. Commission: The commission receivable is recognized on completion of delivery of the machines to the customer directly by our principals and billing is done on a monthly basis. 2. Wind Energy: Income from sale of wind energy is recognized on a monthly basis on the strength of the statements received from Tamilnadu Generation and Distribution Company Ltd. 3. Erection Charges: Revenue from Erection charges and repair services are recognized on completion of erection / repairs of the machinery at customers mill as per the specifications given by the principals and billing is done to the customers immediately after completion. 8. Other income Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established. 9. Fixed Assets Tangible fixed assets Fixed assets are carried at cost less accumulated debrciation and impairment losses, if any. The cost of fixed assets includes interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses incurred up to that date. Exchange differences arising on restatement / settlement of long-term foreign currency borrowings relating to acquisition of debrciable fixed assets are adjusted to the cost of the respective assets and debrciated over the remaining useful life of such assets. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and debrciated over the useful life of the principal item of the relevant assets. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. Fixed assets acquired and put to use for project purpose are capitalised and debrciation thereon is included in the project cost till commissioning of the project. Capital work-in-progress: Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest. 10. Foreign currency transactions and translations Initial recognition : Foreign currency transactions are recorded at the brvailing exchange rates at the time of initial recognition. On Settlement : Exchange difference arising on final settlement are adjusted and recognised as income or expense in the statement of Profit and Loss. Outstanding balances of monetary items denominated in foreign currency are restated at closing exchange rates and the difference accounted in the statement of profit and loss. The company has exercised the option available under the amended AS 11 in respect of Foreign currency loans availed for acquisition of capital assets and capitalized the exchange rate fluctuation during the year. 11. Investments Investments being long term are stated at cost inclusive of all expenses incidental to acquisition. Provision for diminution in their market value is made only if such decline is other than temporary. 12. Employee benefits Short term employee benefits (other than termination benefits) which are payable with in twelve months after the end of the period in which the employees render the service are accounted on accrual basis. Defined contribution plans. Company's contribution paid/ payable during the year to provident fund is recognized in the statement of profit and loss. Defined benefit plan. The gratuity payable to the employees is covered by a Master policy taken out with Life Insurance Corporation of India under its Group Gratuity Scheme and the company has opted for the Cash Accumulation Method. Earned leave provision has been made as per AS 15.(Revised). 13. Borrowing costs Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset upto the date of capitalisation of such asset is added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. 14. Segment reporting The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance. The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities". 15. Earnings per share Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. 16. Taxes on income Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company. Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed debrciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their realisability. 17. Impairment of assets The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and impairment is recognised, if the carrying amount of these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their brsent value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, except in case of revalued assets. 18. Provisions and contingencies A provision is recognised when the Company has a brsent obligation as a result of past events 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 (excluding retirement benefits) are not discounted to their brsent value and are determined based on the 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. Contingent liabilities are disclosed in the Notes. 19. Insurance claims Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims. 20. Input credit The input credit on Central Excise, Service Tax and TNVAT are accounted for in the books in the period in which the underlying service/goods received are accounted and when there is no uncertainty in availing / utilising the credits. Out of the credits available on capital goods, 50 % of the amount is taken in the financial year in which capital goods are received and balance 50% in the subsequent year. 2. NOTES FORMING PART OF FINANCIAL STATEMENTS AS AT MARCH 31, 2016 1. Provision for all liabilities including debrciation is neither inadequate nor more than what is necessary. 2. The opinion of the Board is that the current assets, loans and advances will fetch the amounts stated if realised in the ordinary course of business. 3. Income tax assessment upto assessment year 2013-2014 (year ending 31.03.2013) has been completed. 4. The figure of Rs. 65.26 Lakhs shown under the exceptional item in the statement of Profit and loss rebrsents the write off of the carrying amount of investments in Pugoda Textiles Lanka Ltd, the management of which was vested with the Government of Sri Lanka, net of the compensation of Rs. 15.38 Lakhs awarded by the Compensation Tribunal of Sri Lanka. The compensation receivable is recognized as income receivable under the head Other Current Assets in the Balance Sheet. However the company appealed for a higher compensation which is pending for disposal. 5. Commitments pending on Capital Goods purchase as on 31st March, 2016 is Rs.811.99 Lakhs (Previous year Rs.349.65 Lakhs.) 6. Leave encashment benefits have been provided as per the rules of the Company based on actuarial valuation. No separate fund has been created. Amount charged to Profit and Loss account during the year is Rs. 22.71 lakhs (Previous year Rs.16.08 lakhs) 7. The borrowing cost Rs. Nil (Previous Year Rs.Nil ) is added to the cost of fixed assets purchased during the year as per AS-16. 8. The interest subsidy due on the TUFS loan amounting to Rs. 12.35 lakhs (Previous Year Rs.33.67 lakhs) has been reflected under the head Income receivable. 9. The Company has carried out an exercise to ascertain the impairment if any in the carrying value of fixed assets. This has not revealed any impairment during the year. 10. The Company has not entered into any derivative transactions during the year under report. 11. Figures have been rounded off to lakh of rupees & brvious year's figures have been regrouped wherever necessary See accompanying notes to financial statements As per our report annexed For S . KRISHNAMOORTHY & CO., (Registration No. 001496S) Chartered Accountants (Sd.) K.N.SREEDHARAN Partner Membership No. 12026 (Sd.) SANJAY JAYAVARTHANAVELU Chairman DIN 00004505 (Sd.) N.R. SELVARAJ Wholetime Director DIN 00013954 (Sd.) S. RAVINDRAN Chief Financial Officer (Sd.) S.K. RADHAKRISHNAN Company Secretary Coimbatore 25th May, 2016 |