CORPORATE INFORMATION_ Titagarh Wagons Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 and existing under Companies Act 2013. Its shares are listed on Bombay Stock Exchange and National Stock Exchange. The Company is engaged in the manufacturing and selling of Railway Wagons, Steel Castings, Heavy Earthmoving and mining equipments, Bailey Bridges, EMU etc. The Company primarily caters to the domestic market. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES_ a) Basis of brparation 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 accounting standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention except in case of assets for which revaluation is carried out. The accounting policies adopted in the brparation of financial statements are consistent with those used in the brvious year, except for the changes in accounting policy explained below. b) Changes in accounting policy Debrciation on fixed assets Till the year ended 31 March 2014, Schedule XIV to the Companies Act, 1956, brscribed requirements concerning debrciation of fixed assets. From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013. The applicability of Schedule II has resulted in the following changes related to debrciation of fixed assets. Unless stated otherwise, the impact mentioned for the current year is likely to hold good for future years also. (i) Useful lives/ debrciation rates Till the year ended 31 March 2014, debrciation rates brscribed under Schedule XIV were treated as minimum rates and the Company was not allowed to charge debrciationat lower rate seven if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act 2013 brscribes useful lives for fixed assets which, in many cases, are different from lives brscribed under the erstwhile Schedule XIV. However, Schedule II allows companies to use higher/ lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements. Considering the applicability of Schedule II to the Companies Act 2013, the management has re-estimated useful lives and residual values of all its fixed assets and accordingly the debrciation charge for the current year is higher by Rs 202.34 lacs as compared to the brvious year. Further, based on transitional provision provided in Note 7(b) of Schedule II, an amount of Rs 271.22 lacs (net of deferred tax of Rs. 139.66 lacs) has been adjusted with general reserve. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets. (ii) Accounting for additional debrciation on account of revaluation of fixed assets On31st March 2009,theCompany had revalued all its land, buildings, plant and machineries at Titagarh Steels Unit existing as on that date. Till year ended 31 March 2014, the Guidance Note on Treatment of Reserve Created on Revaluation of Fixed Assets issued by the ICAI allowed companies to transfer an amount equivalent to the additional debrciation arising due to upward revaluation of fixed assets from revaluation reserve to the statement of profit and loss. Accordingly, the Company was transferring an amount equivalent to additional debrciation arising due to upward revaluation of fixed assets from revaluation reserve to the statement of profit and loss. In contrast, Schedule II to the Companies Act, 2013 applicable from the current year, states that debrciable amount of an asset is the cost of an asset or other amount substituted for cost. Hence, in case of revalued assets, debrciation computed on the revalued amount needs to be charged to the statement of profit and loss, without any recoupment from revaluation reserve. Consequently, to comply with the Schedule II requirement, the Company has discontinued the practice of recouping the impact of additional debrciation from revaluation reserve. The management has decided to apply the revised accounting policy prospectively from accounting periods commencing on or after 1 April 2014. On disposal of a brviously revalued item of fixed asset, the difference between net disposal proceeds and the net book value is charged or credited to the profit and loss statement except that, to the extent such a loss is related to an increase which was brviously recorded as a credit to revaluation reserve and which has not been subsequently reversed or utilised, it is charged directly to that account .The amount standing in revaluation reserve following the retirement or disposal of an asset which relates to that asset is transferred to general reserve. Had the Company continued its earlier policy of recouping the additional debrciation arising due to upward revaluation of fixed assets from reserve created from revaluation of fixed assets, profits for the current year would have been higher by Rs 37.34 Lacs. However, the change in accounting policy does not have any impact on the reserves and surplus balance as at 31 March 2015. c) Use of estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. d) Tangible Fixed Assets Tangible Fixed Assets are stated at cost (or revalued amounts, as the case may be), less accumulated debrciation and impairment, if any. The cost of acquisition comprises of purchase price inclusive of duties (net of Cenvat/VAT), taxes, incidental expenses, erection/commissioning/trial run expenses and borrowing cost etc, up to the date the assets are ready for intended use. In case of revaluation of tangible fixed assets, the original cost as written up by the approved valuers is considered in the accounts and the differential amount is credited to revaluation reserve. Machinery spares which can be used only in connection with an item of fixed assets and whose use, as per technical assessment, is expected to be irregular, are capitalized and debrciated over the residual life of the respective assets. Capital work-in-progress includes machinery to be installed and construction & erection materials lying in stock. e) Intangibles Research costs are expensed as and when incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following: ¦ The technical feasibility of completing the intangible asset so that it will beavailable for use or sale ¦ It sintention to complete the asset ¦ Its ability to use or sell the asset ¦ How the asset will generate future economic benefits ¦ The availability of adequate resources to complete the development and to use or sell the asset ¦ The ability to measure reliably the expenditure attributable to the intangible asset during development. Development expenditure recognized as an intangible asset is amortized on a straight line basis over the period of expected future sales from the related project, not exceeding ten years. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable. Computer soft wares not being part of the hardware operating system, are assessed to have a useful life of 3 years and are capitalised as intangible fixed assets. f) Debrciation & Amortisation on tangible & intangible fixed assets Tangible Assets Leasehold land is amortized on a straight line basis over the period of lease, i.e., 99 years. Debrciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management which is line with the useful lives as mentioned in Schedule II to the Companies Act 2013.The Company has used the following rates to provide debrciation on its fixed assets. g) Leases Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased items, are capitalized at the lower of the fair value and brsent value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs are capitalized. Leases where the less or effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. h) Borrowing costs Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest 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. i) Impairment of tangible and intangible fixed assets The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on the internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which is the greater of the assets'net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. Impairment losses are recognized in the statement of profit and loss, except for brviously revalued tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any brvious revaluation. After impairment, debrciation is provided on the revised carrying amount of the assets over its remaining useful life. A brviously recognized impairment loss is increased or reversed depending on the changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation ifthere was no impairment. j) Investments Investments that are readily realizable and intended to be held for not more than a 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 determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognizea decline other than temporary in the value of the investments. k) Inventories Raw materials& Components and Stores &Spares Parts are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of finished goods are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost include expenses incidental to procurement thereof and determined on a weighted average basis. Goods under process and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials, labour cost and a proportion of manufacturing overheads based on the normal operating capacity. The cost of Finished goods and goods under process is determined on a weighted average basis. Cost of finished goods also includes excise duty. Obsolete/damaged stores and saleable scraps are valued at estimated net realizable value. 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. l) Revenue Recognition 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. Sale of Goods In case of sale of goods, revenue is recognized when the significant risks and rewards of ownership of goods have passed to the buyer. Sales are net of returns, claims, trade discounts etc. Sales exclude sales tax and value added tax (VAT) which are collected by the Company on behalf of the State Governments and deposited to the credit of the respective State Governments. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year. Interest Income Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. m) Foreign Currency Transactions Initial Recognition Foreign currency transactions are initially 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. 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 theex change rate at the date of the transaction; and non-monetary items which are carried at fairvalue or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. Exchange differences Exchange differences arising on the settlement of monetary items or on restatement of monetary items 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. Forward Exchange Contracts not intended for trading or speculation purposes The brmium or discount arising at the inception of the forward exchange contract 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 for ward exchange contract is recognized as income or expense for the year. n) Retirement and other Employee Benefits Retirement benefits in the form of Provident and Superannuation funds are defined contribution schemes and the contributions are charged to the Statement of Profit and Loss of the year when an employee renders the related service. There are no obligations other than the contribution payable to the respective funds. Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method made at the end of each financial period. Long term compensated absences are provided for based on actuarial valuation, as per projected unit credit method, made at the end of each financial period. Accumulated leave, which is expected to be utilized within the next twelve months is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. Actuarial gains/losses are taken to Statement of Profit and Loss and are not deferred. o) Taxes on Income Tax expense comprises of current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the company has carry forward unabsorbed debrciation and carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty backed by convincing evidence that such deferred tax assets can be realized against future taxable profits. At each balance sheet date, the Company re-assesses unrecognized deferred tax assets. It recognizes deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets is reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. p) Segment Reporting Identification of segments The Company's operating businesses are organized and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Inter Segment transfers The Company accounts for inter segment transfers at brvailing market prices. Allocation of common costs: Common allocable costs are allocated to each segment on case to case basis by applying the ratio, appropriate to each relevant case. Unallocated items Revenue and expenses which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, are included under the head "Unallocated - Common" Segment accounting policies The Company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the Company as a whole. q) Earning per share Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the 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) Provisions A provision is recognized when the Company has a brsent obligation as a result of past event, 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 the obligation. Provisions are not discounted to their brsent value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Provision for product related warranties cost is based on the claims received up to the year end as well as the management's estimates of further liability to be incurred in this regard during the warranty period. Liquidated damages on supply of materials are provided based on the contractual obligations or deduction made by the customers, as the case may be. Provision is recognized for the contract, where unavoidable cost of meeting the obligation under the contract exceeds the economic benefits expected to be received. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it. s) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. t) Cash and Cash equivalents Cash and cash equivalents for the purposes of cash flow statement comprise of cash on hand, cash at bank and fixed deposits with an original maturity of three months or less. u) Excise duty & Custom duty Excise duty is accounted for at the point of manufacture of goods and accordingly is considered for valuation of finished goods stock lying in the factories as on the balance sheet date. Similarly, customs duty on imported materials in transit / lying in bonded warehouse is accounted for at the time of import / bonding of materials. v) Measurement of EBITDA As permitted by the Guidance Note on the Revised Schedule VI to the Companies Act, 1956, the Company has elected to brsent earnings before interest, tax, debrciation and amortization (EBITDA) asa separate line item on the face of the statement of profitand loss. The Company measures EBITDA on the basis of profit/ (loss) for the year excluding debrciation & amortization expenses, interest income, finance costs and tax expenses. 1. The Board of Directors at their meeting dated September 11,2014 has given in-principle approval for the merger off our wholly owned subsidiaries (including step down subsidiaries) namely Titagarh Marine Limited ,Cimco Equity Holdings Private Limited, Corporated Shipyard Private Limited and Times Marine Enterprise Private Limited, subject to necessary approvals. The scheme of merger is under brparation. 2. The Shareholders of the Company have approved through postal ballot on April 13, 2015, raising of funds by way of equity shares and / or other securities in accordance with applicable provisions of Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 for an aggregate amount not exceeding Rs 25,000.00 lacs or equivalent thereof in foreign currency in such manner and on such terms and conditions as may be deemed appropriate by the Board. 3. Excise Duty & Cess on stocks rebrsents differential excise duty and cess on opening and closing stock of finished goods, work in progress and saleable scrap. 4. Previous year's figures including those given in brackets have been regrouped/reclassified, where necessary, to conform to the current year's classification. As per our Report of even date For S. R. Batliboi& Co. LLP Chartered Accountants ICAI Firm Registration No.:301003E per Kamal Agarwal Partner Membership No. 58652 For and on behalf of the Board of Directors J P Chowdhary Executive Chairman D N Davar Director Anil Kumar Agarwal ChiefFinancial Officer Umesh Chowdhary Vice Chairman & Managing Director Sunirmal Talukdar Director Dinesh Arya Company Secretary Place: Kolkata Dated: April 18, 2015 |