Notes to the Financial Statements for the year ended 31st March, 2015 1. LEGAL STATUS & ACTIVITIES a) Vardhman Polytex Limited (the Company) is a public limited listed company registered under the erstwhile Companies Act 1956. The Company's principal activity is manufacturing of yarn, garments and to develop residential & commercial colony or project. b) The company's principal place of business is located at 'Vardhman Park, Chandigarh Road, Ludhiana-141123' & factories/units are located at the following brmises: - Badal Road, Bathinda, Punjab - 151005. - D295/1, Phase VIII, focal point, Ludhiana, Punjab - 141010 (Unit - Vinayak Textiles Mills -Spinning & Dye house, Amkryon International). - Village Nangal Nihla/Upperla, Swarghat Road, Nalagarh, Himachal Pradesh - 174101. c) The company is developing residential and commercial colony/project named as 'Vardhman Park' situated at Chandigarh Road, Ludhiana-141123' during the current year. d) These financial statements are brsented in Indian Rupees (Rs.). 2. SIGNIFICANT ACCOUNTING POLICIES a) BASIS OF brPARATION These financial statements of the Company have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the erstwhile Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211(3C) {Companies (Accounting Standards) Rules, 2006 as amended} and other relevant provisions of the Companies Act, 2013. b) 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 amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Difference between the actual results and estimates are recognized in the period in which the results are known / materialized. c) REVENUE RECOGNITION SALE OF GOODS Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. i. Revenue is recognized in respect of export sales on the basis of bill of lading. ii. Inter unit sales comprising of sale of yarn from spinning unit to dyeing unit is reduced from gross turnover in deriving net turnover. iii. Income and export incentives / benefits are accounted for on accrual basis and as per principles given under AS-9 - Revenue recognition. REVENUE FROM REAL ESTATE ACTIVITY Revenue from real estate activity ("the project") is recognised on the transfer of all significant risks and rewards of ownership to the customers and it is not unreasonable to expect ultimate collection and no significant uncertainty exists regarding the amount of consideration. The freehold land under real estate development planned for sale, is converted from fixed assets into stock-in-trade at rate as assessed by the management of the Company. The difference between the as assessed rate and cost of that part of freehold land is credited to capital reserve and is released to the Statement of Profit and Loss in the proportion of revenue recognized under the percentage of completion method on entering into an agreement/ contract for sale. Revenue from real estate development activity where the Company still has obligations to perform substantial acts even after the transfer of all significant risks and rewards, is recognised on the ''Percentage of Completion Method''. Revenue is recognised in relation to the sold areas, on the basis of percentage of actual cost incurred, including land, development and construction costs as against the total estimated cost of project. Revenue is recognised, if the cost incurred is in excess of 25% of the total estimated cost and the outcome of the project can be reliably ascertained. The Company recognize revenue in accordance with the Revised Guidance Note issued by the Institute of Chartered Accountants of India on "Accounting for Real Estate transactions (Revised 2012)" Cost of construction/development (including cost of land) incurred is charged to the statement of profit and loss proportionate to area sold and the balance cost is carried over under Inventory as part of development work-in- progress. Cost of construction/ development includes all costs directly related to the Project and other expenditure as identified by the management which are reasonably allocable to the project. Unbilled revenue, if any , disclosed under other non-current assets rebrsents revenue recognized over and above amount due as per payment plans agreed with the customers. Progress billings which exceed the costs and recognized profits to date on projects under construction are disclosed as advance received from customers under other current liabilities. Any billed amount that has not been collected is disclosed under trade receivables. Interest free maintenance security (IFMS) and Community Club fees received by the company from real estate customers will be treated as part of liabilities till such time the relavant facilities are not provided by the Company. The estimates of saleable area and cost of construction are revised periodically by the management. The effect of such changes to estimates is recognised in the period such changes are determined. The estimated cost of construction as determined is based on management's estimate of the cost expected to be incurred till the final completion and includes cost of materials, service and other related overheads. Unbilled costs are carried as real estate development work in progress. Determination of revenues under the percentage of completion method necessarily involves making estimates by the Company, some of which are of a technical nature, concerning, where relevant, the percentages of completion, costs to completion, the expected revenues from the project/ activity and the foreseeable losses to completion. DIVIDENDS Revenue in respect of dividends is recognized when the shareholders' right to receive payment is established by the balance sheet date. INTEREST Interest in come 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 statement of profit and loss. INSURANCE CLAIM Claims with insurance companies are accounted on accrual basis to the extent, these are measurable and ultimate collection is reasonably certain. d) INVENTORIES i. Finished goods and work in progress are valued at lower of historical cost or net realizable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing them to their respective brsent location and condition. By products are valued at net realizable value. ii. Stores, spares and raw materials are valued at lower of historical cost or net realizable value. However materials & other items held for use in the production of inventories are not written below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. iii. Cost is determined on the basis of weighted average method. iv. 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. e) INVESTMENTS Investments that are readily realizable 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 carried at lower of cost and fair value. Long-term investments are carried at cost individually. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments in case of long term investments. f) FIXED ASSETS Tangible assets Fixed assets are stated at historical cost less accumulated debrciation and impairment loss if any. Historical cost comprises the purchase price (net of cenvat / duty credits wherever applicable) and all direct costs attributable to bringing the asset to its working condition for intended use. Intangible assets Capital expenditure on purchase and development of identifiable non-monetary assets without physical substance is recognized as intangible assets in accordance with principles given under AS-26 - Intangible assets. These are grouped and separately shown under the schedule of fixed assets. These are amortized over their respective expected useful lives. g) DEbrCIATION & AMORTIZATION Debrciation on fixed assets is provided on the basis of useful life of assets brscribed in Schedule II to the Companies Act, 2013. All assets costing Rs. 5,000 or below are fully debrciated in the year of addition. Asset description Useful Life (Years) Plant & machinery - continous process 25 - others 7.50 -15 Other equipment 5 - 10 Computers and Equipements 3 - 6 Vehicle 8 Factory building 3 - 30 Other than factory building 60 Furniture & fixtures 10 However in some of the assets the company has reassessed the estimated useful life of its fixed assets through an independent Chartered Engineers. In such cases the company has not opted for the rates as given by the schedule II of the Companies Act, 2013. Intangible assets are amortized over a period not exceeding ten years on a straight-line basis. Land on lease is amortized over the period of the lease. h) IMPAIRMENT OF ASSETS The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/ external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value at the weighted average cost of capital. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. Previously recognised impairment losses are reversed to the extent the recoverable amount exceeds the carrying amount. i) FOREIGN EXCHANGE TRANSACTIONS/TRANSLATION i. 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. ii. Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. iii. Exchange Differences Exchange differences arising on a monetary item that, in substance, form part of the company's net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as an expense. Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognized as income or as expenses in the year in which they arise. iv. Forward exchange contracts not intended for trading or speculation purposes The brmium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized 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 recognized as income or as expense for the year. j) RESEARCH AND DEVELOPMENT Revenue expenditure on research and development including salaries, consumables and power & fuel is charged to statement of profit and loss under respective heads of expenditure. Capital expenditure is shown as addition to fixed assets. k) EMPLOYEE BENEFITS Expenses and liabilities in respect of employee benefits are recorded in accordance with Accounting Standard 15 - Employee benefits. i. Provident Fund & ESI The Company makes contribution to Statutory Provident Fund and Employee State Insurance in accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952 and Employee State Insurance Act, 1948 which is a defined contribution plan and contribution paid or payable is recognized as an expense in the period in which services are rendered by the employee. ii. Gratuity Gratuity is a post employment benefit and is in the nature of a defined benefit plan. The liability recognised in the balance sheet 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 adjustment for unrecognized actuarial gains or losses and past service costs. The defined benefit/ obligation is calculated at or near the balance sheet date by an independent actuary using the projected unit credit method. Actuarial gains and losses arising form past experience and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the year to which such gains or losses relate. iii. Leave encashment Liability in respect of leave encashment becoming due or expected after the balance sheet date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method. iv. Superannuation benefit The Company makes contribution to superannuation fund which is a post employment benefit in the nature of a defined contribution plan & contribution paid or payable is recognized as an expense in the period in which services are rendered by the employee. v. Other short term benefits Expense in respect of other short term benefits is recognized on the basis of the amount paid or payable for the period during which services are rendered by the employee. l) LEASES Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the brsent value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. m) TAXES ON INCOME Tax expense comprises of current and deferred. Tax provision for current tax is made in accordance with the provisions of Income Tax Act, 1961. In accordance with Accounting Standard AS-22 'Accounting for Taxes on Income' as notified by Companies (Accounting Standards) Rules, 2006 deferred tax liability/ asset arising from timing differences between book and income tax profits is accounted for at the current rate of tax to the extent these differences are expected to crystallize in later years. However, deferred tax assets are recognized only if there is a reasonable/ virtual certainty of realization thereof. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date n) GOVERNMENT GRANTS AND SUBSIDIES Grants and subsidies from the Government are recognized when there is reasonable assurance that the grant/subsidy will be received and all attaching conditions will be complied with. When the grant or subsidy relates to an expense item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. Where the grant or subsidy relates to an asset, its value is deducted from the gross value of the asset concerned in arriving at the carrying amount of the related asset. o) BORROWING COST Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds p) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS A provision is recognized when there is a brsent obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. A contingent liability is recognized for: i. a brsent obligation that arises from past events but is not recognized as a provision because either the possibility that an outflow of resources embodying economic benefits will be required to settle the obligation is remote or a reliable estimate of the amount of the obligation cannot be made; and ii. a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. Contingent assets are neither accounted for nor disclosed in the financial statements. q) EARNING PER SHARE Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares). For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. r) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less. 3. Inventories, loans & advances, trade receivables and other current / non-current assets are reviewed annually and in the opinion of the Management do not have a value on realization in the ordinary course of business, less than the amount at which they are stated in the Balance Sheet. 4. CORPORATE DEBT RESTRUCTURING i) The Debt Restructuring Scheme (the 'Scheme') under CDR Mechanism had been approved and Letter of Approval issued on 28th Dec'2012. The Scheme inter-alia included restructuring of repayment schedule, interest funding, reduction in interest rates and additional security in favour of CDR lenders by pledge of shares of promoters stipulated. Master Restructuring Agreement ("MRA") had been executed on March 15, 2013 with the lenders. The impact in terms of the approved Scheme has been given effect in financial statements with effect from the cut-off date being January 1, 2012. ii) Interest has been accounted for based upon terms of package/confirmations received from the banks. iii) The Funded Interest Term Loan (FITL) has been created on certain credit facilities. iv) The credit facilities/loans under CDR are further secured by unconditional & irrevocable personal guarantee of promoter director & Mrs. Manju Oswal (related party) and corporate guarantee of M/s FM Hammerle Textiles Ltd., subsidiary company. v) Other conditions as stipulated under the scheme are being complied with. 5. During the earlier years, the Company had Issued 2% Unsecured Foreign Currency Convertible Bonds (FCCBs) in the aggregate principal amount of United State Dollars 12 (Twelve) Millions in the course of International Offerings. The expenses incurred & brmium payable on the redemption of such bonds has been adjusted with share brmium reserves in accordance with the provisions of Section 78 of the erstwhile Companies Act, 1956. 6. The company had received a letter from F.M Hammerle Textile Limited, Subsidiary Company, dated 26.03.2013 for considering option for conversion of advance given of Rs. 2,236 lac in different trenches into Preference Shares. The Board of the directors had approved subject to bankers and shareholders for the same. 7. The Central Government vide its letter dated: 30/08/2013 under section 198,309 (3), 310 r/w Section 637A & 637AA of the erstwhile Companies Act,1956 has approved the increase in remuneration of Mr. Ashok Oswal,Managing Director and Mr. Adish Oswal, Executive Director w.e.f 01/04/2012 till 31st March 2015. The remuneration during the current year has been paid considering this approval. 8. The Company is paying rentals for office brmises taken on rent which are not in the nature of lease agreements. Therefore, disclosure requirements of Accounting Standard AS-19 are not applicable. 9. In accordance with the provisions of Accounting Standard on impairment of Assets, ( AS-28), the management has made assessment of assets in use & considering the business prospects related thereto, no provision is considered necessary in these accounts on account of impairment of assets. 10. Previous year figures have been regrouped /reclassified wherever necessary to conform to current year classification. As per our report of even date For S.S. Kothari Mehta & Co. Chartered Accountants Firm Reg. No:- 000756N Sd/-Sunil Wahal Partner M. No. 087294 FOR AND ON BEHALF OF THE BOARD OF VARDHMAN POLYTEX LIMITED Sd/-Parvinder Singh Chief Financial Officer Sd/-Sushil Sharma Company Secretary (FCS-6535) Sd/- Ajay Chaudhry Director (DIN-00055733) Sd/-Ashok Kumar Oswal Chairman & Managing Director (DIN-00009403) Place : Ludhiana Date : 25th May, 2015 |