Notes to financials statements for the Year Ended March 31, 2016 1. Company Overview Redington (India) Limited ("the Company"), is a public limited Company domiciled in India and incorporated under the provisions of the Companies Act,1956. The Company's equity shares are listed on the bourses of BSE Limited and National Stock Exchange of India Limited. The Company operates in the Information Technology product distribution business supply chain solutions and after sales services of Information Technology products. The Company has a branch in Singapore which has become operational since financial year 2014-15. The Company and its subsidiaries operate in India, Middle East, Turkey, Africa, and South Asia countries. 2. Basis of brparation of financial statements 2.1 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 specified under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") as applicable. The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year. 2.2 Summary of Significant Accounting Policies a. 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 due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise. b. Fixed assets Tangible assets Tangible Assets are recorded at cost less accumulated debrciation. Cost comprises of purchase price and other directly attributable cost of bringing the assets to its working condition for the intended use. Gains or losses arising from derecognition of tangible fixed assets are measured as the difference between the net proceeds from disposal/net realisable value and carrying amount of the asset and are recognised in the Statement of Profit and Loss. Debrciation on Tangible assets 1. Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. 2. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in which case the life of the assets have been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturer's warranties and maintenance support, etc. Intangible assets 1. Intangible assets are recorded at cost less amortization. 2. Intangible assets are amortized on straight line basis over a period of three years. 3. The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any. c. Impairment of tangible and intangible assets At each Balance Sheet date, the Company assesses whether there is any indication that the fixed assets with finite lives may be impaired. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. If there is any indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment if any. Where it is not possible to estimate the recoverable amount of individual asset, the Company estimates the recoverable amount of cash-generating unit to which the asset belongs. d. Leases Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Lease Rentals under operating leases are recognised in the Statement of Profit and Loss. e. Investments Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, 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 which are strategic in nature are generally carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such diminution being determined and provision made for each investment individually. f. Inventories Inventories are stated at lower of cost and the net realizable value. Costs includes cost of purchase and other costs incurred in bringing the inventories to the warehouse, net of discounts and rebates and is determined on weighted average basis. g. Foreign Currency Transactions On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of the transaction. All monetary assets and liabilities in foreign currency are restated at the end of the accounting period at the brvailing exchange rates as on the Balance Sheet date and exchange gain/loss is considered in the Statement of Profit and Loss. For Branch operations: Transactions of non-integral foreign operations are translated at the exchange rates brvailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. All assets and liabilities of non-integral foreign operations are translated at the year-end rates. The resulting exchange differences is accumulated in a foreign currency translation reserve until the disposal of the net investment. The brmium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/liability, is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or as expense in the period in which such cancellation or renewal is made. h. Warranties The Original Equipment Manufacturer generally warrants the products distributed by the Company. In a few cases, as per the terms of the contracts, the Company provides post-contract services / warranty support to its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past technical estimates. i. Revenue Recognition 1. Revenue from Sales is recognized when the ownership and title is transferred which generally coincides with delivery. Revenue is stated net of discounts, rebates and sales tax. 2. Service Income is recognized when services are rendered. Income from Warranty and Maintenance Contracts is recognized as per the terms of contract. 3. Income from supplier schemes is accrued, on fulfillment of terms of such programs. j. Other Income 1. Dividend from investments is recognized when the right to receive the payment is established and when no significant uncertainty as to measurability or collectability exists. 2. Interest income is recognised on the time proportion basis determined by the amount outstanding and the rate applicable and where no significant uncertainty as to measurability or collectability exists. Interest income on overdue receivables is recognized only when there is a certainty of receipt. k. Employee Benefits 1. Short-term Employee Benefits Short-term employee benefits including accumulated short-term compensated absences determined as per Company's policy/ scheme are recognized at the Balance Sheet date as expense based on the expected obligation on an undiscounted basis. 2. Long-term Employee Benefits Defined Benefit Plan Compensated Absences & Gratuity The liability for Gratuity and long term compensated absences, both unfunded, is provided based on actuarial valuation as at the Balance Sheet date, using the Projected Unit Credit Method. Actuarial gains and losses are recognized in the Statement of Profit and Loss for the period in which they occur. The retirement benefit obligation recognized in the Balance Sheet rebrsents the brsent value of the defined benefit obligation as adjusted for unrecognized past service cost. Defined Contribution Plan Contribution under statutory laws relating to employee benefits, including Provident Fund and Employee State Insurance, is made in accordance with the respective rules and is charged to the Statement of Profit and Loss as and when services are rendered by the employees. l. Employee share based payments Stock options granted to the employees under the Employee Stock Option Scheme are evaluated in accordance with the accounting treatment brscribed by "Securities and Exchange Board of India (Shares Based Employee Benefits) Regulations, 2014 and the Guidance Note on Employee share based payments issued by the Institute of Chartered Accountants of India. The Company follows the intrinsic value method of accounting for the options and accordingly the excess of market value of the stock options as on the date of grant over the exercise price of the options, if any, is recognized as deferred employee compensation and is charged to the Statement of Profit and Loss on graded vesting basis over vesting period of the options. m. Current and deferred tax i. Tax expense for the year, comprising current tax and deferred tax, are included in the determination of the net profit for the year. ii. Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates under the provisions of the Income Tax Act, 1961. iii. 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 substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed debrciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there is unabsorbed debrciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. 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. iv. Tax on proposed distribution of dividend is based on the provisions of Income Tax Act, 1961 and disclosed as appropriation in the Reserves and Surplus in the Balance Sheet. n. Provisions, Contingent Liabilities and Contingent Assets Provisions are recognized only when there is a brsent obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for i. Possible obligation which will be confirmed only by future events not wholly within the control of the Company or ii. Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognized in the financial statements o. Cash and cash equivalents Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash. p. 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. q. 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. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period brsented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate. r. Derivative Instruments and Hedge Accounting The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions. The Company does not hold derivative financial instruments for speculative purposes. The Company has applied to all such contracts outstanding as on March 31, 2016 the hedge accounting principles set out in Accounting Standard 30 "Financial Instruments : Recognition and Measurement" (AS 30) by marking them to market. Changes in the fair value of the contracts that are designated and effective hedges of future cash flows are recognised directly in the Hedge Accounting Reserve 2. Operating Leases a) The Company has taken a cancelable operating lease for its office brmises, which is for a period ranging from 11 months to 9 years. b) The Company's ADCs are mainly used for storing its own inventories. Also certain portion of the building has been provided on operating lease to its wholly owned subsidiary Pro Connect Supply Chain Solutions Limited and rental income earned on such lease arrangement is included as Other Income under Note No.19 3. Accounting for Financial Instruments Pursuant to the announcement of the Institute of Chartered Accountants of India (ICAI) in respect of "Accounting for Derivatives", the Company had opted to follow the recognition and measurement principles relating to derivatives as specified in AS 30 "Financial Instruments, Recognition and Measurement", issued by the ICAI, from the year ended March 31, 2008. Consequently, as of March 31, 2016, the Company has recognised Mark to Market (MTM) loss of Rs. 20.80 Lakhs. (Previous Year loss of Rs. 3.14 Lakhs) relating to forward contracts and other derivatives entered into to hedge the foreign currency risk of highly probable forecast transactions that are designated as effective cash flow hedges, in the Hedge Accounting Reserve as part of the Shareholders Funds. The Mark to Market (MTM) net loss on undesignated / ineffective forward contracts amounting to Rs. 72.11 Lakhs (Previous Year Rs. 17.68 Lakhs) has been recognised in the Statement of Profit and Loss. 4. Redington Employees Share Purchase Trust administers the Employee Share Purchase Scheme (ESPS), which is in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The deficit of the trust for the year ended March 31, 2016 amounting to Rs. 0.07 Lakhs (Previous Year Nil) has been absorbed in the Profit and Loss Account. 5. As per the Companies Act, 2013, the Company is required to spend Rs. 516.78 Lakhs on "Corporate Social Responsibility (CSR)" during the financial year 2015-16. The Company has spent during the year Rs. 495 Lakhs towards CSR Expenditure for the brvious financial year 6. The figures of the brvious year have been regrouped wherever necessary to conform to the classification of the current year. Comparative figures do not include the figures of erstwhile Nook Micro Distribution Limited which is amalgamated with the Company effective April 1, 2015. Consequently, the comparative figures are not comparable with the figures for the year ended March 31, 2016. For and on behalf of the Board of Directors Raj Shankar Managing Director (DIN-00238790) M Raghunandan Whole Time Director ' (DIN-00082171) S V Krishnan M Muthukumarasamy Chief Financial Officer Company Secretary Place: Chennai Date: May 24, 2016 |