NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH 2015 1. SIGNIFICANT ACCOUNTING POLICIES A) BASIS OF brSENTATION The financial statements are brpared to comply with the mandatory Accounting Standards brscribed in the Companies (Accounting Standards) Rules 2006,(as amended) issued by the National Advisory Committee on Accounting Standards and the relevant provisions of the Companies Act, 2013. The financial statements have been brpared under the historical cost convention, on the basis of a going concern and on accrual basis. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 (twelve) months for the purpose of current and non current classification of assets and liabilities B) USE OF ESTIMATES The brparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses of that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognised prospectively. C) FIXED ASSETS (i) Tangible Assets/Intangible Assets are stated at cost net of accumulated debrciation/amortisation and impairment,if any. The Cost Comprises its purchase price and any cost directly attributable to bringing the asset to its working condition for its intended use. Fixed assets are eliminated from financial statements ,either on disposal or when retired from active use. Also refer Policy G and H below. Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets are recognised in the Statement of Profit and Loss. (ii) Impairment of Assets : The company assesses at each Balance Sheet date whether there is any indication that any asset (both tangible and intangible) may be impaired, if any such indication exists, the carrying value of such assets is reduced to recoverable amount and the impairment loss is charged to Statement of Profit and Loss. If at the Balance sheet date there is any indication that a brviously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to that extent. D) INVESTMENTS Long term investments are stated at cost less provision, if any, for other than temporary diminution in the value of investments. E) INVENTORIES Inventories are stated at lower of cost and net realisable value. The cost includes cost of purchase, cost of conversion and other cost incurred in bringing the inventories to their brsent location and condition. Cost formula used are "Weighted Average Method" or "Specific Identification method" as applicable. F) REVENUE RECOGNITION Sales are recognised as and when risks and rewards of ownership are passed on to the buyer and ultimate realisation of price is reasonably certain. Export Sales are inclusive of deemed exports while domestic sales are net of Value Added Tax. G) BORROWING COST Borrowing costs attributable to acquisition and construction of qualifying assets are capitalised as a part of the cost of such asset upto the date when such asset is ready for its intended use. All other Borrowing costs are charged to Statement of Profit and Loss. H) DEbrCIATION /AMORTISATION Debrciation has been provided on straight line method based on useful life of Assets as brscribed in Schedule II to the Companies Act, 2013. Plant and Equipment have been, on technical assessment, considered as continuous process plants and debrciation has been provided under straight line method as specified in the said Schedule. Debrciation on Wind Turbine Machinery has been provided on Straight Line Method based on useful life as specified in the said Schedule. Intangible Assets are amortised on their estimated useful lives. EMPLOYEE BENEFITS Short Term employee benefits including accrued liability for Leave Entitlement (other than termination benefits) which are payable within 12 (twelve) months after the end of the period in which the employees render service are paid/provided during the year, as per the Rules of the Company. Defined Contribution Plans: Retirement benefits in the form of Provident fund, Family Pension Funds, Superannuation Fund (wherever opted) and ESIC are defined contribution scheme and the contributions are charged to the statement of profit and loss of the period when the contributions to the respective funds are due. There are no other obligations other than the contributions payable to the respective trusts. Defined Benefit plans: The Company provides for Gratuity ,a defined benefit retirement plan, covering eligible employees .The scheme is funded with Life Insurance Corporation of India. Liabilities under gratuity plan is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial period. Termination Benefits: Payments under Voluntary Retirement Scheme, if any are recognized in the Statement of Profit and Loss in the year in which such payments are due. J) FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currency are recorded at the rate of exchange in force on the date of transaction. Foreign currency assets and liabilities both monetary and non monetary are stated at the rate of exchange brvailing at the year-end and resultant gains /losses are recognised in the Statement of profit and loss .Premium /Discount in respect of forward foreign exchange contracts are recognised over the life of the contracts. K) TAXATION Income Tax expenses comprises Current Tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year, unabsorbed debrciation or carry forward loss under taxation laws). Deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted on the Balance Sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed debrciation or carry forward losses, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. At each balance sheet date the company reassesses the deferred tax assets. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws Minimum Alternative Tax 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 and is reviewed at each balance sheet date. L) PROVISIONS AND CONTINGENT LIABILITIES Provisions: Provisions are recognised when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance sheet date and are not discounted to its brsent value. Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, 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 or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability M) CASH AND CASH EQUIVALENTS In the cash flow statement, cash and cash equivalents includes Cash in Hand, Demand Deposits with banks, other short-term highly liquid investments with original maturities of three months or less. N) EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Earnings considered in ascertaining the Company's earnings per share is the net profit /loss for the year. 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 is adjusted for the effects of all dilutive potential equity shares. 30 CONTINGENT LIABILITY AND COMMITMENTS: A COMMITMENTS 1. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Nil (Previous year Rs.Nil). 2. Outstanding Export Forward Contracts (not in the nature of derivatives ) as on 31 st March '15 which were entered into for hedging exchange risk arising from foreign currency fluctuations related to highly probable future transactions amount to US$ 41.81 lacs and Euro 3.00 lacs ( Previous Year US$ 19.89 lacs and Euro 5.89 lacs ) at average Exchange Rate of Rs 63.70 /US$ and Rs 70.22/Euro (Previous year Rs 62.54/US$ and Rs 88.78/Euro). The period covered under these contracts sbrads over April 2015 to February 2016 (Previous Year April 2014 to September 2014). The average Exchange Rate applicable for the above period based on exchange rate on 31.03.2014 works out to Rs 63.84 /US$ and Rs 69.09/Euro (Previous year Rs 55.32/US$ and Rs 70.62/Euro ), resulting in notional loss of Rs 2.28 lacs (Previous year notional gain of Rs 46.75 lacs) 3. Outstanding Import Forward Contracts ( not in the nature of derivatives) as on 31st March 2015 which were entered into for hedging exchange risk arising from foreign currency fluctuations related to highly probable future transactions amounting to US$ 4.61 Lacs (Previous year US$ 9.76 Lacs) at average exchange rate of Rs.62.54/US$ (Previous year Rs.63.34/US$) . The period covered under these contracts sbrads over April 2015 to October 2015 (Previous year April 2014 to June 2014). The average exchange rate applicable for above period based on exchange rate on 31.03.2014 works out to Rs.62.96/US$ (Previous year Rs.54.88/ US$), resulting a notional gain of Rs.1.95 lacs (Previous year notional loss of Rs.23.39 Lacs) B CONTINGENT LIABILITIES 1. Disputed amounts of Taxes and duties and other claims not acknowledged as debts : a) Excise duty : Rs. Nil lacs (Previous year Rs. 254.14 lacs) b) Sales Tax (VAT) : Rs 147.56 lacs (Previous year Rs.150.22 lacs) c) Market Committee Cess: Rs. 49.23 lacs (Previous year Rs.41.90 lacs) d) Disputed Income Tax demands Rs 353.78 lacs (Previous year 353.78 lacs ) and interest there on Rs 308.65 lacs (Previous year Rs 308.65 lacs ), matter having been decided by the Hon'ble High Court of Kerala against the Company. The Company has gone for appeal before the Subrme Court of India and is hopeful of outcome in its favour.Payment there against Rs 546.58 lacs (Previous year 408.58 lacs ) is included in the loans and advances,with further commitment to pay Rs 34.40 lacs in three monthly equal instalments effective from 01.04.2015 (Previous Year Rs 174.40 lacs in fifteen equal instalments effective from 01.04.2014) e) Disputed amount of fiscal penalty imposed by Joint Director General of Foreign Trade Charging for violation of condition of EPCG authorization Rs 288.89 lacs (Previous Year-Nil) .The Company has appealed to the Appellate Authority. Meanwhile, Hon'ble High Court of Kerala has ordered to maintain status quo till the matter is decided by the appellate authority. The company is hopeful of outcome in its favour. The Company's pending litigation comprise mainly of above taxes and duties.The Company has reviewed all its pending litigations and proceedings and has made adequate provision,whereever required and disclosed the contingent liabilities, whereever applicable in its financial statements. The Company doesn't reasonably expect these proceedings to have material impact on its financial statements. 2. Corporate Guarantee : 2.1 The company has given Corporate Guarantee amounting to Rs.2113 lacs ( Previous year Rs.2113 lacs) to a Financial Institution in respect of financial assistance provided by them to GTN Enterprises Ltd and the outstanding amount thereof is Rs.1226 lacs as on 31st March 2015 ( Previous Year - Rs. 1538 lacs ). 2.2 The company has given Corporate Guarantee amounting to Rs.175 lacs ( Previous year Rs.175 lacs) to a Financial Institution in respect of financial assistance provided by them to GTN Textiles Ltd and the outstanding amount thereof is Rs.263 lacs as on 31st March 2015 ( Previous Year - Rs. 295 lacs ). All the investments made, loans and advances given and gurantees provided are for business purposes. 32. Net loss / Gain on Foreign currency transaction and translation The amount of net gain on foreign currency transaction and translation included in the other expenses amounts to Rs 314.73 lacs (Previous year Rs 365.77 lacs loss ).This includes gain on account of export Rs 528.96 lacs (Previous Year Rs 129.90 lacs gain), Loss on account of Import Rs.220.16 lacs (Previous year Rs 457.86 lacs loss) and GAIN on account of cancellation of forward contracts Rs.5.93 lacs (Previous Year Rs 37.81 lacs loss). 33. a) In the opinion of the management, assets other than fixed assets and non current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated. b) The accounts of certain Trade Receivables ,Trade payables, Loans and advances and Banks are however,are subject to formal confirmations /reconciliations and consequent adjustments, if any. The management does not expect any material difference affecting the current period's financial statements on such reconciliation/ adjustments. 34. In term of Accounting Standard -17, the company operates materially only in one business segment viz., Textile industry and have its production facilities and all other assets located within India. Sales to external customers comprise outside India sales of Rs.31590.11 Lacs ( Previous year Rs.36459.37 lacs) and within India sale of Rs. 22540.56 lacs ( Previous year Rs. 23270.98 Lacs) 35. The Company was sanctioned a Debt Restructuring Package under Corporate Debt Restructuring (CDR) Scheme on 12.10.2012 effective from 01.04.2012 for the loans availed from Banks/Financial Institutions,which was approved by CDR-EG and all the lenders. The restructuring inter-alia envisages: • Deferment / Rescheduling in payment of principal • Refixation of interest rates on term loans • Sanction of additional long term working capital term loan of Rs.22.16 crores • In lieu of sacrifice by the lenders, Preference Shares of Rs.10.81 crores were allotted on 29.01.2013 to the banks/ financial institutions. The amount rebrsents difference between the net brsent value (NPV) of the future cash flows towards repayment of principal and interest thereon as per the revised term and those payable as per the original terms. The said sacrifice will be amortized equally over a period of 9 years beginning from the FY 2013-14 and ending in the financial year 2021-22 being the last year of repayment of entire loans. • The Promoters to bring in contribution of Rs.2.70 crores by way of Preference Shares.The said amount was brought into two phases of Rs 1.35 Crores each on 7th November,2012 and 28th November ,2013 respectively in line with CDR Scheme. • GTN Textiles Limited (GTN), the main Promoter to pledge 72,86,405 Equity Shares of Rs.10 each (51% of the shareholding in Patspin India Limited) in favour of Central Bank of India, the Monitoring Institution. GTN has since pledged the shares on 14.05.2013. • The CDR lenders, with the approval of CDR EG, shall have the right to recompense the reliefs/ sacrifices/waivers extended by respective CDR lenders as per CDR guidelines 41 brVIOUS YEAR'S FIGURES Previous year's figures have been regrouped /reclassified wherever necessary to conform to the current year's brsentation. As per our report of even date attached For M.S. JAGANNATHAN & VISVANATHAN Chartered Accountants (ICAI FRN 001209S) R. MUGUNTHAN Partner (M. No. 21397) For and on behalf of the Board B. K. PATODIA Chairman DIN No.00003516 N. K. BAFNA Director DIN No.00019372 UMANG PATODIA Managing Director DIN No. 00003588 N.N. VENKITASUBRAMANIAN General Manager (Finance) & Chief Financial Officer DIPU GEORGE Assistant Company Secretary Place : Kochi Date : 27th May, 2015 |