Note 1 - Summary of Significant Accounting Policies (a) Basis of brparation These financial statements 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) Rule 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 Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with accounting standards notified under Section 211(3C) of the Companies Act, 1956 [Companies (Accounting Standards) Rules 2006, as amended] and other relevant provisions of the Companies Act, 2013. 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. (b) Fixed Assets (i) Tangible Assets Tangible assets are stated at cost net of accumulated debrciation/amortisation, impairment loss, if any. Cost comprises cost of acquisition/construction and subsequent improvement thereto including taxes and duties (net of credits and drawbacks),freight and other incidental expenses related to acquisition and installation. Preoperative expenses where appropriate are capitalised till commercial use of the assets. (ii) Intangible Assets Intangible assets are stated at cost net of accumulated amortisation and net of accumulated impairment losses if any. Intangible asset is recognised if it is probable that future economic benefits will flow to the Company. Such asset is initially recognised at cost. Subsequent expenditure on such asset is recognised as expense when incurred unless it is probable that the expenditure will enhance its future economic benefits. (c) Debrciation and Amortisation Debrciation is provided on prorata basis on straight line method at the rates determined based on estimated useful lives of assets, where applicable, brscribed under Schedule II to the Act with the exception of the following categories of the assets where estimated useful lives have been determined to be shorter than the lives specified in Schedule II based on usage experience of the Company: Motor Vehicles (included in Vehicles) - 5 years Mobile Phones (included in Office Equipment) - 2 years Further Leasehold Land is amortised under the straight line method over the period of lease. Intangible assets are amortised on prorata basis under the straight line method over the best estimate of its useful life as given below: - Computer software is amortised over 5 years. - Other Intangible assets are amortised over 10 years. Also refer Note-38 (d) Impairment An impairment loss is recognised, where applicable, when the recoverable amount of an asset(i.e. higher of the asset's net selling price and value in use) is less than its carrying amount. (e) Investments Current investments are carried at the lower of cost and fair value. Long-term investments are carried at cost and provision is recorded to recognise, any decline, other than temporary, in the carrying value of such investment. Investment acquired in exchange of another is carried at a cost determined with reference to the fair value of investment given up. (f) Inventories Inventories are valued at the lower of cost, computed on a weighted average basis, and estimated net realisable value. Provision is made for obsolescence wherever considered necessary. Cost comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their brsent location and condition. (g) Employee Benefits (i) Short term Employee Benefits: The undiscounted amount of Short-term Employee Benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. (ii) Post Employment Benefits Plans: Contributions under Defined Contribution Plans payable in keeping with the related schemes are recognised as expenses for the year. For Defined Benefit Plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on straight line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet rebrsents the brsent value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the brsent value of any economic benefit available in the form of refunds from the plan or reductions in future contributions to the plan. (iii) Other Long-Term Employee Benefits (unfunded): The cost of providing long term employee benefits is determined using Projected Unit Credit Method with actuarial valuation being carried out at each Balance Sheet date. Actuarial gains and losses and past service cost are recognised immediately in the Statement of Profit and Loss for the period in which they occur. Other long term employee benefit obligation recognised in the Balance Sheet rebrsents the brsent value of related obligation. (h) Foreign Currency Transactions Transactions in foreign currency are recorded at daily exchange rates brvailing on the date of the transaction. Monetary items denominated in foreign currency are reinstated at the year-end at the exchange rate brvailing on the Balance Sheet date. Foreign currency non monetary items carried in terms of historical cost are reported using the exchange rate on the date of transactions. Exchange differences arising on reinstatement or settlement are recognised in the Statement of Profit and Loss except for exchange difference arising on reinstatement/settlement of long term foreign currency monetary items relating to acquisition of debrciable assets which are adjusted to the cost of the debrciable assets to be debrciated over the balance life of the assets and in other cases such differences are accumulated in a Foreign Currency Monetary Item Translation Difference Account, and amortised over the balance period of such long term asset/liability with effect from 1st April, 2011. (i) Revenue Recognition Sales are recognised upon transfer of substantial risk and rewards of ownership in the goods to the buyers as per the terms of the contract and net of trade discounts, sales tax and excise duties, where applicable. Interest income is recognised on time proportion basis taking into account the amount outstanding and the rate applicable. Dividend income is recognised when the right to receive dividend is established. Other items are accounted for on accrual basis. (j) Borrowing Costs Borrowing costs attributable to the acquisition, construction or production of qualifying assets (i.e. assets that necessarily take substantial period of time to get ready for their intended use or sale) are added to the cost of those assets. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred. (k) Taxes on Income Current tax in respect of taxable income for the year is recognised based on applicable tax rates and laws. Note 1 - Summary of Significant Accounting Policies (contd.) Deferred tax is recognised, subject to the consideration of prudence, on timing differences, 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 is measured using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets in respect of carried forward losses and/or unabsorbed debrciation are recognised only when it is virtually certain and in other cases where there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are reviewed at each Balance Sheet date to re-assess realisation. Current tax assets and current tax liabilities are offset when there is 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 legally enforceable right to set off assets and 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. (l) Leases Lease payments under operating lease are recognised as an expense in the Statement of Profit and Loss . (m) Government Grants (i) Government grants of the nature of promoters' contribution are credited to Capital Reserve. (ii) Government grants related to specific fixed assets are deducted from gross values of related assets in arriving at their book values. (iii) Government grants related to revenue are recognized on a systematic basis in the Statement of Profit and Loss over the periods necessary to match them with their related costs. (n) Provisions and Contingent Liabilities Provisions are recognised when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. 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 the obligation or reliable estimate of the amount cannot be made. (o) Derivative Instruments The Company uses derivative financial instruments such as forward exchange contracts, interest rate swaps, etc. to hedge its risks associated with foreign currency fluctuations relating to the underlying transactions, highly probable forecast transactions and firm commitments. In respect of forward exchange contracts entered into to hedge an existing asset/liability, the brmium or discount arising at the inception of such contracts is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Derivative contracts (other than forward exchange contracts covered under Accounting Standard 11 on ' The Effects of Changes in Foreign Exchange Rates'), outstanding as at the Balance Sheet date are marked to market and losses, if any, are recognised in the Statement of Profit and Loss and gains are ignored in accordance with the announcement of the Institute of Chartered Accountants of India on " Accounting of Derivatives" issued in March, 2008. Any profit or loss arising on cancellation or renewal of derivative instruments are recognised as income or as expense in the Statement of Profit and Loss for the period. (p) Use of Estimates The brparation of financial statements requires use of estimates and assumptions to be made that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Difference between actual amount and estimates are recognised in the period in which the results are known / materialized. Note 1 - Discontinuing Operations The Board of Directors at its meeting held on 29th February, 2016 approved a Scheme of Arrangement (the Scheme) for reconstruction by transfer of'Polyethylene Terephthalate ("PET Resin") business of the Company in India" ("Transferred Business") to Dhunseri Petglobal Limited "DPGL", a Subsidiary Company with effect from the Appointed Date i.e. 1st April, 2016 in consideration for 28,475,000 Optionally Convertible Debentures for Rs.100/each credited as fully paid up in DPGL. The Company has also intimated to the Stock Exchanges about the Scheme on March 21, 2016.The PET Resin is a separate business segment as per AS-17 "Segment Reporting" . The Scheme is subject to and conditional upon the requisite approvals, including sanction of the Hon'ble High Court at Calcutta which is pending and accordingly, although operative from the Appointed Date it would become effective on the Effective Date on which certified copies of the order of the Hon'ble High Court at Calcutta sanctioning the Scheme are filed with the Registrar of Companies. Accordingly, aforesaid PET Resin business has been considered as discontinuing operations Note 2 - Scheme of Arrangement Pursuant to the Scheme of Arrangement (the Scheme), duly sanctioned by the Hon'ble High Court at Calcutta at the hearing held on 7th August, 2014, with effect from the appointed date i.e. 1st April, 2014, the "Tea Division" of the Company engaged in the business of cultivation, production and marketing of tea, together with all its assets ,liabilities etc . stood transferred as a going concern by way of demerger to Dhunseri Tea & Industries Limited (DTIL) and the "IT SEZ Division" engaged in the business of providing infrastructure facilities in the Information Technology/ Information Technology Enabled Services units with Special Economic Zone status together with all its assets, liabilities etc. stood reorganized and transferred as a going concern to Dhunseri Infrastructure Limited (DIL). Upon filing of the certified copy of the Court Order with the Registrar of Companies on 1st September, 2014, the Scheme had become operative on and from the said date .And accordingly the effect of the same had been given at the time of brvious year's financial statements. In terms of the Scheme upon transfer to DTIL, the difference Rs. Nil crore (Previous Year Rs.275.02 crores )between the total assets of Rs. Nil crore (Previous Year Rs.341.62 crores ) and total liabilities of Rs. Nil crore (Previous Year H66.60 crores ) of the Tea Division as on the appointed date had been adjusted against General Reserve (Note 3 -Reserves and surplus) in the books of the Company. Further, in terms of the Scheme, the consideration for transfer of IT SEZ Division amounting to Rs. Nil crore (Previous Year Rs.46.18 crores) being the book value of the net assets of the said Division as on the appointed date had been settled by DIL by issue of 50,00,000 Equity Shares of Rs.10/- each fully paid up in the brvious year and the balance amount of Rs.41.18 crores has been settled by cash in the current year. Note 3 - Exceptional Item Exceptional item amounting to Rs.17.78 crores (Previous Year Rs. Nil crore)rebrsents refunds of duty paid by the Company on Polyester Chips exported to and landed in the United States of Americas (USA) during the period from 1st August, 2013 to 31st March, 2015 which has arisen to the Company and accounted for during the year upon renewal of the Generalised System of Preference program with retroactive effect between 1st August, 2013 to 28th July, 2015 by a provision in the Trade Preference Extension Act of 2015 of the USA. The aforesaid item being attributable to discontinuing operations, referred to in Note- 35, has been classified accordingly. Note 4 - Revision in useful lives of Fixed Asset Effective 1st April, 2014, the Company has started charging debrciation in keeping with the requirements of Schedule II to the Companies Act, 2013 and as a result of which the estimated useful lives of certain fixed assets had been revised in earlier year. Pursuant to the transitional provision set out in the said Schedule II, the carrying amount ( after retaining the residual values) aggregating H Nil crore (Previous Year Rs.17.98 crores) relating to Fixed assets, where the revised useful lives were Nil as on 1st April, 2014, had been debited to General Reserve (Note 3). Further, related tax impact on such adjustment amounting to H Nil crore (Previous Year Rs.6.11 crores)had also been credited to General Reserve . Note 5 (a) Loans and advances to related parties under "Short term loans and advances" (Note 22) includes amount due from- (i) From a Company in which Key Management Personnel is able to exercise Significant Influence- Rs. Nil crore (Previous Year - Rs.0.10 crore) (ii) Subsidiary Companies amounting to Rs.3.83 crores ( Previous Year- Rs.3.62 crores ). (b) Receivable from Subsidiary under "-Other non-current assets" (Note 17) includes amount due from-(i) Subsidiary Company amounting to Rs. Nil crore ( Previous Year- Rs.41.18 crores ). Note5 - Employee Benefit Obligation I. Gratuity The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. As per the scheme, the Gratuity Trust Fund make payment to vested employees at retirement, death/disability, withdrawal of an amount based on the respective employee's eligible salary for specified number of days depending upon the tenure of service . Vesting occurs upon completion of five years of service. Liability with regard to the aforesaid gratuity plan is determined by actuarial valuation as set out in Note 1(g)(ii) above, based upon which the Company makes annual contributions for Gratuity to the Trust Fund. Note6 - Undertaking given to Lenders of Subsidiary Company The Company had invested an amount of Rs.196.26 crores (Previous Year- Rs.196.26 crores) by way of equity contribution up to 31st March, 2016, towards PET Resin manufacturing project in its subsidiary company, Egyptian Indian Polyester Company S.A.E. (EIPET). EIPET has also taken loans from various lenders to fund the project. As the sponsor shareholder having majority stake in EIPET, the Company has given an undertaking to the lenders that in the event of the failure of EIPET to make any term loan repayment on due date and triggering of Market Redirection Event as specified in the agreement, which according to the Company are within its control, the Company will be required to pay to the lenders the amounts due by EIPET subject to a specified limit. Based on the information available with the Company, the loan amount outstanding in EIPET books as on 31st March, 2016 amounts to US$ 16.18 crores, equivalent Rs.1073.48 crores (Previous Year - US$ 17.06 crores, equivalent Rs.1058.57 crores). Note 7 In view of unfavourable financial performance of Egyptian Indian Polyester Company S.A.E (EIPET) for the year ended 31st December, 2014 the Company had waived the Royalty fee due from EIPET for the period up to 31st March, 2015.Subsequent thereto the Company has agreed to extend such waiver till EIPET is able to service its debt obligation upon improvement of its financial performance. Such fee for the year ended 31st December, 2014 worked out to USD 0.15 crore ( Equivalent Rs.9.13 crores) . Note 8 The Company holds long term strategic investment in Egyptian Indian Polyester Company S.A.E ( EIPET), a subsidiary company in Egypt amounting to Rs.196.26 crores (Refer Note 15). EIPET commenced its operation in 2014. On account of loss in the initial period of operation, 100% net worth of EIPET has been eroded as at 31st December, 2015 and operation of the plant has temporarily ceased mainly due to shortage of working capital. The losses were primarily due to certain unbrcedented business conditions. However, the management of the Company is confident that after the initial years of operations in which EIPET suffered loss, the subsidiary will recover as the plant is in proximity to developed markets with quality of product well accepted with the customers. Besides, the plant operations were also smooth in the production phase. To mitigate the temporary financial crisis a restructuring plan is under process with the lenders. Thus taking into account the actions being taken by the management and other factors as set out above, diminution in the value of the long term and strategic investment in EIPET is considered to be temporary in nature at this stage and no provisioning for diminution is considered necessary by management at this stage as per applicable accounting standards. Note 9 Previous Year's figures have been rearranged/regrouped wherever necessary. Signatures to Notes 1 to 58 For Lovelock & Lewes Firm Registration Number: 301056E Chartered Accountants For and on behalf of the Board C. K. Dhanuka P. K. Khaitan Executive Chairman Director J. P. Kundra Director Pradip Law Partner Membership Number 51790 B. Chattopadhyay Managing Director & CEO R. K. Sharma Executive Director (Finance) & CFO K. V. Balan Company Secretary & Compliance Officer Place: Kolkata Date: May 24, 2016 |