Notes forming part of the financial statements For the year ended 31st March 2015 1. Corporate information Sanghvi Movers Limited ("SML" or "the Company") was incorporated in 1989. SML is engaged in the business of providing hydraulic and crawler cranes to various industries in the infrastructure sector and has a fleet of 375 medium-to large-size hydraulic trucks mounted telescopic and lattice boom cranes and crawler cranes with lifting capacity ranging from 20 tons to 800 tons. The Company has its corporate office at Pune. The equity shares of the Company are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). 2 Summary of significant accounting policies I Basis of 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). The Company has brpared these financial statements to comply in all material respects with the applicable accounting standards notified pursuant to Companies (Accounting Standards) Rules, 2006 which continue to apply under section 133 of the Companies Act 2013, read together with Rule 7 of the Companies (Accounts) Rules 2014. The financial statements have been brpared and brsented on an accrual basis and under the historical cost convention. The financial statements are brsented in Indian rupees rounded off to nearest lakh. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year. II Use of estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting principles and reported amount of assets, liabilities and the disclosure of contingent liabilities on the date of the financial statements. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognised prospectively in the current and future periods. III Current-non-current classification All assets and liabilities are classified into current and non-current. Assets An asset is classified as current when it satisfies any of the following criteria: a) it is expected to be realised in, or is intended for sale or consumption in, the Company's normal operating cycle b) it is held primarily for the purpose of being traded; c) it is expected to be realised within 12 months after the reporting date; or d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date. Current assets include current portion of non-current financial assets. All other assets are classified as non-current. Liabilities A liability is classified as current when it satisfies any of the following criteria: a) it is expected to be settled in the Company's normal operating cycle; b) it is held primarily for the purpose of being traded; c) it is expected to be settled within 12 months after the reporting date; or d) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Operating cycle Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. The operating cycle of the Company is less than 12 months. IV Revenue recognition a) Revenue from hiring of equipments (cranes and trailers along with relevant manpower) is recognised when the service is performed, usually on a time proportionate basis as per the terms of contract, and the performance of service is regarded as achieved when no significant uncertainty exists regarding the amount of consideration that will be derived from rendering the service. b) Revenue from power is recognised on the accrual basis in accordance with the provisions of Power Purchase Agreement entered with the regulatory commission of the respective state. Claims for delayed payment charges and any other claims, which the Company is entitled to under the Power Purchase Agreement, are accounted for in the year of acceptance. c) Interest income is recognised using the time proportion method based on the underlying interest rates. d) Other items of income are accounted as and when the right to receive arises. V Fixed assets and debrciation Tangible fixed assets Tangible fixed assets are carried at acquisition cost less accumulated debrciation and/or impairment loss if any. The cost of an item of tangible fixed asset comprises its purchase price including inward freight, duties, taxes, relevant foreign exchange fluctuation differences and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. Subsequent expenditure related to tangible fixed assets are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard or performance. Borrowing costs directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalised. Other borrowing costs are recognised as expense in the period in which they are incurred. Exchange differences (favorable as well as unfavorable) arising in respect of translation/settlement of long term foreign currency borrowings attributable to the acquisition of debrciable fixed assets are also included in the cost of the assets. Tangible fixed assets under construction are disclosed as capital work-in-progress. Till the year ended 31 March 2014, debrciation on fixed assets was provided on straight line method, at the rates, and in the manner brscribed under Schedule XIV to the Companies Act, 1956 except for cranes and windmills which are debrciated over useful life of 13 years. Schedule II to the Companies Act, 2013 became applicable to the Company from the current financial year which brscribes useful lives for fixed assets which, as follows- Useful lives (years) Factory buildings 30 Cranes 15, 20* Plant and equipments 8-20 Other plant equipment 8-15 Furniture and fixtures 10 Office equipment 5 Vehicles 8 Windmills 22 *Based on single shift. Cranes owned by the company usually work for more than a single shift and hence double shift rates are considered. Considering the applicability of Schedule II, the management has adopted useful lives brscribed under Schedule II. Debrciation computed based on Schedule II is not materially different had debrciation been computed using earlier estimated useful lives. Freehold land is not debrciated. Acquired assets consisting of leasehold land are recorded at acquisition cost and amortised on straight-line basis based over the lease term. A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Losses arising from retirement or gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss. VI Investments Investments that are readily realizable and intended to be held for not more than a year from the date of the acquisition are classified as current investments. All other investments are classified as long-term investments. However, that portion of long term investments which is expected to be realised within 12 months after the reporting date is also brsented under 'current assets' as current portion of long term investments. Long-term investments are valued at cost less any other-than-temporary diminution in value, determined separately for each individual investment. Current investments are valued at lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments. Any reductions in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss. VII Inventories Inventories comprise of stores and spare parts and are valued at cost on first in first out (FIFO) basis, net of Cenvat credit. VIII Employee benefits a) Short term employee benefits Employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. These benefits include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee services is recognised as an expense as the related service is rendered by employees. b) Post employment benefits (defined benefit plans) The employees' gratuity scheme is a defined benefit plan. The brsent value of the obligation under such defined benefit plan is determined at each Balance Sheet date based on an actuarial valuation carried out by an independent actuary using the projected unit credit method. Gratuity Liability is funded through a Group Gratuity Scheme with Life Insurance Corporation of India wherein contributions are made and charged to revenue on annual basis. Actuarial gains and losses and past service costs are recognised immediately in the Statement of Profit and Loss. c) Post employment benefits (defined contribution plans) Contributions to the provident fund and superannuation fund which are defined contribution schemes are recognised as an expense in the Statement of Profit and Loss in the period in which the contribution is due. d) Long term employee benefits Long term employee benefits comprise of compensated absences. These are measured based on an actuarial valuation carried out by an independent actuary at each Balance Sheet date. Actuarial gains and losses and past service costs are recognised immediately in the Statement of Profit and Loss. Compensated absences are funded through a Scheme with Life Insurance Corporation of India wherein contributions are made and charged to revenue on annual basis. Actuarial gains and losses and past service costs are recognised immediately in the Statement of Profit and Loss. IX Taxation Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law), and deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the year). The 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 by the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future; however, where there is unabsorbed debrciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of these assets. Deferred tax assets are reviewed as at each Balance Sheet date and written down or written-up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised. X Foreign exchange transactions a) 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. b) 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. c) Exchange differences From accounting period commencing on or after 7 December 2006, the Company accounts for exchange differences arising on translation/settlement of foreign currency monetary items as below: i . Exchange differences arising on long-term foreign currency monetary items related to acquisition of fixed assets are capitalised in accordance with an amendment issued by the Ministry of Corporate Affairs ('MCA') on 29 December 2011 to Accounting Standard 11- The Effects of changes in Foreign Exchange Rates and clarification provided vide circular 25/2012 dated 09 August 2012 and debrciated over the remaining useful life of the asset. For this purpose, the Company treats a foreign currency monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its origination. ii. All other exchange differences are recognised as income or expenses in the period in which they arise. d) Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability The Company is exposed to foreign currency fluctuations on foreign currency liabilities and forecasted cash flows denominated in foreign currency. The Company enters into forward exchange contracts, where the counterparty is a bank. The forward contracts are not used for trading or speculation purposes. The brmium or discount arising at the inception of the forward exchange contract is amortised and recognised as an expense/income over the life of the contract. Exchange differences on such contracts, except the contracts which are long-term foreign currency monetary items, are recognised in the Statement of Profit and Loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognised as income or as expense for the period. Any gain/loss arising on forward exchange contracts which are long-term foreign currency monetary items is recognised in accordance with paragraph 'c' above. XI Government grants and subsidies Grants and subsidies from the government are recognised 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 recognised 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 in arriving at the carrying amount of the related asset. In case the asset cannot be distinguished, the grant/subsidy is accounted for as Capital Reserve. Government grants of the nature of promoters' contribution are credited to Capital Reserve and treated as a part of the shareholders' funds. XII Provisions A provision is recognised if, as a result of a past event, the Company has an brsent obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at the best estimate of the expenditure required to settle the obligation at the Balance Sheet date. The provisions are measured on an undiscounted basis. Onerous contracts A contract is considered as onerous when the expected economic benefits to be derived by the Company from the contract are lower than the unavoidable costs of meeting its obligations under the contract. The provision for onerous contracts is measured at lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract. Before a provision is established, the Company recognises any impairment loss on the assets associated with that contract. Contingencies Provision in respect of loss contingencies relating to claims, litigations assessment, fines, penalties etc are recognised when it is probable that a liability has been incurred, and the amount can be estimated reliably. XIII Contingent liabilities and contingent assets A contingent liability exists when there is a possible but no obligation, or a brsent obligation that may, but probably will not, require an outflow of resources, or a brsent obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it virtually certain that an inflow of economic benefit will arise, the asset and related income are recognised in the period in which the change occurs. XIV Impairment of assets The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the Balance Sheet date there is an indication that a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of debrciable historical cost. XV Operating leases Leases, where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating lease. Operating lease rentals are recognised over the period of the lease in the Statement of Profit and Loss on a straight line basis. XVI Earnings per share The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the year. The diluted earnings per share is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and equivalent potential dilutive equity shares outstanding during the year, except where the result would be anti dilutive. XVII Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. 3. Deferral/capitalisation of exchange differences On 29 December 2011, the Ministry of Corporate Affairs ('MCA') has issued an amendment to Accounting Standard 11- The Effects of changes in Foreign Exchange Rates and clarification provided vide circular 25/2012 dated 09 August 2012. The amendment permits Companies to defer/capitalise the exchange differences arising on Long Term Foreign Currency Monetary Items. In accordance with the amendment, the Company has capitalised exchange gain arising on long term foreign currency loans, amounting to Rs. 544.18 (2014: Exchange loss of Rs. 3,229.02) to the cost of plant and equipments. There is no exchange loss deferred in 'Foreign Currency Monetary Translation Difference Account', as there are no other long term foreign currency monetary items. 4. Segment reporting The Company is primarily engaged in the business of providing cranes on rental basis. Further all the commercial operations of the Company are based in India. Accordingly, there is no separate reportable segment in accordance with AS 17- Segment Reporting brscribed under the Companies (Accounting Standards) Rules, 2006 which continue to apply under section 133 of the Companies Act, 2013 read together with rule 7 of the Companies (Accounts) Rules 2014. 5. Corporate social responsibility As per provisions of section 135 of Companies Act, 2013, the Company was required to spend Rs. 123.76 (2014: Rs. Nil) being 2% of average net profits made during the three immediately brceding financial years, in pursuance of its Corporate Social Responsibility Policy on the activities specified in Schedule VII of the Act. However, till date the Company has spend Rs. Nil on the Corporate Social Responsibility. The Company has formulated CSR Committee and the committee is in process of exploring various options in health, education and environment section specified in Schedule VII on which it could do its spending of CSR for the benefit of society. As per our report of even date attached. For B S R & Co. LLP Chartered Accountants Firm Registration No.101248W/W100022 Vijay Mathur Partner Membership No.046476 For and on behalf of the Board of Directors of Sanghvi Movers Ltd. Chandrakant Sanghvi - Chairman & Managing Director (DIN:00116569) Sham Kajale - Executive Director & Chief Financial Officer (DIN: 00786499) Vijay Mainkar - Director (DIN: 00170719) Rajesh Likhite - Company Secretary & Chief Compliance Officer Place : Mumbai Place : Pune Date : 22nd May 2015 |