Mar 31, 2023
Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.
Expected rate of return on plan assets: This is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.
Salary escalation rate: The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors.
Contributions: The Company expects to contribute Rs. 15.34 Millions to its gratuity fund during the year ending March 31, 2024. ( Previous year : Rs. 17.27 Millions)
b. Contributions to defined contribution plansi. Provident Fund
In accordance with Indian law, all employees receive benefits from a provident fund, which is defined contribution plan. Both the employee and employer make monthly contributions to the plan, each equal to a specified percentage of employeeâs basic salary. The Company has no further obligations under the plan beyond its monthly contributions. The company contributed Rs. 41.02 Millions and Rs. 33.47 Millions during the year ended March 31, 2023 and March 31, 2022 respectively.
ii. Employee State Insurance
In accordance with Indian law, all employees receive benefits from a employee state insurance, which is defined contribution plan. Both the employee and employer make monthly contributions to the plan, each equal to a specified percentage of employeeâs salary. The Company has no further obligations under the plan beyond its monthly contributions. The company contributed Rs. 41.14 Millions and Rs. 29.33 Millions during the year ended March 31, 2023 and March 31, 2022 respectively.
The Company publishes this financial statement along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the Consolidated Financial Statements.
3.8 Financial instrumentsa. Derivative financial instruments3.9 Financial risk management
The Company has exposure to the following risks from its use of financial instruments:
⢠Credit risk
⢠Liquidity risk
⢠Market risk
The Board of Directors has overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Board of Directors has established a risk management policy to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed periodically to reflect changes in market conditions and the Companyâs activities. The Audit Committee oversees how management monitors compliance with the Companyâs risk management policies and procedures, and reviews the risk management framework. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
Credit risk:Trade and other receivables
The Companyâs exposure to credit risk is influenced mainly by the individual characteristics of each customer. Management considers that the demographics of the Companyâs customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. The Company is not exposed to concentration of credit risk to any one single customer since the services are provided to and products are sold to customers who are spread over a vast spectrum and hence, the concentration of risk with respect to trade receivables is low. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of the customers to which the Company grants credit terms in the normal course of the business.
Cash and cash equivalents and other investments
In the area of treasury operations, the Company is presently exposed to counter-party risks relating to short term and medium term deposits placed with public-sector banks, and also to investments made in mutual funds.
The Chief Financial Officer is responsible for monitoring the counterparty credit risk, and has been vested with the authority to seek Boardâs approval to hedge such risks in case of need.
Other financial assets and Loans of Rs.2533.24 Millions as at March 31, 2023 (Rs.1538.28 Millions as at March 31, 2022) has not been impaired.
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Companyâs approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companyâs reputation. Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses, servicing of financial obligations. In addition, the Company has concluded arrangements with well reputed Banks, and has unused lines of credit that could be drawn upon should there be a need. The Company is also in the process of negotiating additional facilities with Banks for funding its requirements.
Market risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk (currency risk), interest rate risk and the market value of its investments. Thus the Companyâs exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.
The Companyâs exposure in USD, GBP, Euro and other foreign currency denominated transactions gives rise to Exchange rate fluctuation risk. Companyâs policy in this regard incorporates:
- Forecasting inflows and outflows denominated in USD, GBP and EUR for a twelve-month period
- Estimating the net-exposure in foreign currency, in terms of timing and amount.
- Determining the extent to which exposure should be protected through one or more risk-mitigating instruments to maintain the permissible limits of uncovered exposures.
- Carrying out a variance analysis between estimate and actual on an ongoing basis, subject to review by Audit Committee.
A 10% weakening of the rupee against the above currencies as at March 31, 2023 and 2022 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk is the risk that an upward movement in interest rates would adversely affect the borrowing costs of the Company.
At the reporting date the interest rate profile of the Companyâs interest - bearing financial instruments were as follows:
The Companies hedging policy only allows for effective hedge relationships to be established. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic retrospective effectiveness assessments to ensure that an economic relationship exits between the hedged item and hedging instrument.
The Company enters into hedge relationships where the critical terms of hedging instruments match exactly with the terms of the hedged item and so qualitative assessment of effectiveness is performed.
Ineffectiveness is recognised on cash flow hedges where the cumulative changes in the designated component value of the hedging instruments exceeds on an absolute basis the changes in value of the hedged item attributable to the hedged risk.
The ineffectiveness is recognised in statement of profit loss during March 2023 and March 2022 refer note 2.9
The Companyâs capital comprises equity share capital, share premium, retained earnings and other equity attributable to equity holders. The primary objective of Companyâs capital management is to maximise shareholders value. The Company manages its capital and makes adjustment to it in light of the changes in economic and market conditions. The Company does so by adjusting dividend paid to shareholders. The total equity as on March 31, 2023 is Rs. 6,750.67 Millions (Previous Year: Rs. 6301.25) Millions .
The Company monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. Net debt comprises of long term and short term borrowings less cash and bank balances. Equity includes equity share capital and reserves that are managed as capital. The gearing at the end of the reporting period was as follows:
3.11 Contingent liabilities and commitments (to the extent not provided for) |
As at March 31, 2023 |
As at March 31,2022 |
|
(i) Contingent liabilities |
|||
a. |
Outstanding export obligations for EPCG license |
328.12 |
272.04 |
b. |
The Code on Social Security 2020 has been notified in the Official Gazette on September 29, 2020, which could impact the contributions by the company towards Provident Fund, Gratuity and other social security. The effective date from which the changes are applicable is yet to be notified, and the rules are yet to be framed. Impact, if any, of the change will be assessed and accounted in period of notification of the relevant provisions. |
||
(ii) |
a. Capital Commitments |
||
Estimated amount of Contracts remaining to be executed on the Capital Accounts (Tangible) and not provided for (Net of Advances) as confirmed by the management. b. Other Commitments |
124.03 |
6.03 |
|
The Company has given corporate guarantees to Banks on behalf of S.P. Apparels UK (P) Ltd and S.P. Retail Ventures Limited. |
463.74 |
459.10 |
(ii) Operating lease arrangements
The rental expenses towards operating lease is charged to statement of profit & loss amount of Rs. 50.12 Millions (for the year ended March 31, 2022 Rs. 59.78 Millions). Some of the lease agreements have escalation clause ranging from 5 % to 15%. There are no exceptional / restrictive covenants in the lease agreements.
3.14 Dues to micro and small enterprises
As per the Office memorandum issued by the Ministry of Micro, Small and Medium Enterprises dated August 26, 2008 recommends that the Micro and Small Enterprises should mention in their correspondence with its customer the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the âMicro ,Small and Medium Enterprises Development Act,2006â(âthe Actâ).Accordingly , disclosure in respect of amounts payable to such enterprises as at March 31, 2023 and March 31, 2022 has been made in financial statements based on the information received and available with the Company.
3.15 Business Transfer ( Discontinued Operations )
âDuring the previous year, pursuant to the approvals received from the Board of Directors on August 20, 2021, and from the shareholdersonAugust21,2021,theCompanyhashivedoffitstheretailoperationstoitswhollyownedsubsidiary,S.P.RetailVentures Limited on a going concern basis by way of slump sale effective from January 01,2022 for a consideration of Rs 535.00 Million. All the assets and liabilities pertaining to the above retail operations has been transferred from the effective date of January 1, 2022. The consideration is received on August 19, 2022.
3.17 Additional Regulatory Information:
(i) Title deeds of Immovable Properties not held in name of the Company:
The company does not have the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) of which title deeds not held in the name of the company.
(ii) The Company does not have the investment property to disclose as to whether the fair value of such investment property (as measured for disclosure purposes in the financial statements) is based on the valuation by a registered valuer as defined under rule 2 of Companies ( Registered Valuers and Valuation) Rules, 2017.
(iii) The Company has not revalued its Property, Plant and Equipment (including Right-of-Use Assets)
(iv) The Company does not have the Intangible assets so the revaluation of the Intangible is not applicable.
(v) The Company does not made any loans or advances in the nature of loans are granted to promoters, directors, KMPs and the related parties (as defined in the Companies Act, 2013), either severally or jointly with any other person.
Note: The Company does not have any CWIP which is overdue or has exceeded its cost compared to its original plan and hence CWIP completion schedule is not applicable
(vii) Details of Benami Property held:
No proceedings has been initiated or pending against company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.
The company is not declared as wilful defaulter by any bank or financial institution other lender.
(ix) Relationship with Struck off Companies:
The Company has no transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
(x) Registration of Charges or satisfaction with Registrar of Companies (ROC):
Company has no charges or satisfaction which are yet to be register with ROC beyond the statutory period.
(xi) Compliance with number of layers of companies:
The Company has no layers as stipulated under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.
(xiii) Compliance with approved Scheme(s) of Arrangements:
The Company has not entered into any arrangements which requires approval from the Competent Authority in terms of section 230 to 237 of the Companies Act, 2013.
(xiv) Utilisation of Borrowed funds and share premium:
(A) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries); or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiariesâ
(B) The Companyhavenotreceived anyfund fromany person(s)orentity(ies), includingforeign entities (FundingParty)with the
understanding (whether recorded in writing or otherwise) that the Company shall:(i) directly or indirectly lend or invest in otherpersonsorentitiesidentifiedinany mannerwhatsoever by oron behalfoftheFundingParty (Ultimate Beneficiaries)or
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
(xv) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies (âROCâ) beyond the statutory period.
(xvi) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(xvii) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
Mar 31, 2018
20. Recent accounting pronouncements
New Standards and interpretations not yet adopted
The Ministry of Corporate Affairs (MCA) vide notification dated March 28, 2018 has issued new standard, Ind AS 115 - Revenue from contracts with customers and also amended Ind AS 40
- Investment property, Appendix to IND AS 21 - The effects of changes in foreign exchange rates, Ind AS 12 - Income taxes, Ind AS 28 - Investment in associates and joint ventures and Ind AS 112
- Disclosure of interest in other entities.
a) Ind AS 115 - Revenue from contracts with customers
The core principle of the new standard is that an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from entity''s contracts with customers. The standard permits the use of either the retrospective or cumulative effect transition method.
The Company will adopt the standard on April 1, 2018 by using the cumulative effect transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted.
The effective date for adoption of Ind AS 115 is annual periods beginning on or after April 1, 2018. The management is in the process of analysis of the effect on adoption of Ind AS 115 on Statement of Profit and Loss.
b) Ind AS 40 - Investment property
The amendment lays down the principle regarding when an entity should transfer asset to, or from, investment property.
An entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use.
The effective date for adoption of amendments is from annual periods beginning on or after April 1, 2018. The Company has evaluated the requirements of amendment and the effect on the financial statement is expected to be insignificant.
c) Ind AS 21 - The effects of changes in foreign exchange Rates
The amendment clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the
related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The effective date for adoption of the amendment is annual reporting periods beginning on or after April 1, 2018 (Retrospective application is permitted). The company has evaluated the requirements of amendment and the effect on the financial statement is expected to be insignificant.
d) Ind AS 12 - Income taxes
The amendment lays down the principles regarding offsetting of deductible temporary differences against each other on combined basis or individual basis in accordance with the tax laws. The amendments are applicable retrospectively for annual periods beginning on or after April 1, 2018. The effect of amendment to Ind AS 12 is expected to be insignificant.
Other amendments to Ind AS 28 - Investment in associates and joint ventures and Ind AS 112 - Disclosure of interest in other entities are applicable retrospectively for annual periods beginning on or after April 1, 2018. The Company has evaluated the requirements of amendment and the effect on the financial statement is expected to be insignificant.
Note: Previous year figures are given in brackets.
(1) Leasehold land represents land leased from SIPCOT amortized over a period of 99 years and 95 years.
(2) Depreciation as per P&L included adjustments out of depreciation effect due to Export Promotion Capital Goods (EPCG) INDAS adjustments and Technology Up gradation Fund TUF grant receivable IND AS adjustments.
(3) Includes adjustments towards Government grant accounting related to Export Promotion Capital Goods Scheme as per IND AS 20 and 16.
(4) Includes assets purchased under finance lease obligation with Gross Block Rs.31.78 Million (As at March 31, 2017 Rs.24.01 Million) and Net Block Rs. 26.27 Million (As at March 31, 2017 Rs.21.02Million]
(5) The company has elected to continue with the carrying amount of property, plant and equipment measured as per previous GAAP & use that as its deemed cost as at the date of transition to IND AS [i.e., April 1, 2016], The carrying vlaue as on balance sheet date of those Property, Plant and Equipment are included below.
(6) Refer note on capial commitment & Secuity for the borrowings.
(7) During financial year 2017-18, the company has tested for impairment and no impairment loss is recognized as the estimated recoverable amount of the cash generating unit is greater than the carrying vlaue.
Notes
i) Terms & Condition of Equity shares
The Company has only one class of equity shares having a par face value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The Dividend, if any, proposed by the Board of Directors has to be approved by the shareholders in the Annual General Meeting.
In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the company, after settling the dues of preferential and other creditors as per priority. The distribution will be in proportion to the number of equity shares held by the shareholders.
(ii) During the year 2016-17, further additional charges accounted as interest expenses amounts to Rs, 26.34 million out of which dividends including dividend distributions taxes cost amounted to Rs, 24.07 million and balance Rs, 2.27 million related to interest charges. The cash flow from operating activities for the year ended 31st March, 2017 is reduced by Rs, 24.07 millions.
b. Unsecured Loan
(i) As per Ind AS 109 financial liability which were received at consessional rate compared to market rate are to be valued at fair value from the date of its availment and difference between the loan amount and fair value has to be treated as deferred loan and unwound during the term of loan.
Further differences have to be disclosed as additional paid in equity [w.r.to unsecured loans related to equity holders] and as part of retaining earnings [for other than equity holders]. (? in Millions)
(ii) During the year 2016-17, interest expenses amounting to Rs, 20.65 millions have been charged to profit or loss as unwinding of above defferred loans.
c. Lease income deferral
"(i) The company has accepted refundable trade deposits as part of the lease agreements amounting to Rs,1.6 millions. The same have been measured at transaction price as per Previous GAAP. However, as per Ind AS, trade deposits should be measured at fair value on initial recognition. The initial fair value is estimated as the present value of the refundable amount of trade deposits, discounted using the market interest rates for similar instruments. The difference between nominal amount and fair value of refundable deposits is classified as lease income deferral. Subsequent to initial recognition, the trade deposits are measured at amortized cost using the effective interest method with the carrying amount increased over the lease period up to the refundable amount. The amount of increase in the carrying amount of deposit is recognized as interest expenses. The lease income deferral is amortized on a straight line basis over the lease term as lease rental income." (? in millions)
d. Lease prepayments
â(i) The company has given refundable security deposits as part of the lease agreements amounting to Rs, 45.79 millions. The same have been measured at transaction price as per Previous GAAP. However, as per Ind AS, security deposits should be measured at fair value on initial recognition. The initial fair value is estimated as the present value of the refundable amount of security deposits, discounted using the market interest rates for similar instruments. The difference between nominal amount and fair value of refundable deposits is classified as lease prepayments. Subsequent to initial recognition, the security deposits are measured at amortized cost using the effective interest method with the carrying amount increased over the lease period up to the refundable amount. The amount of increase in the carrying amount of deposit is recognized as interest income. The lease prepayment is amortized on a straight line basis over the lease term as lease rental expense.â
(ii) During the year 2016-17, lease prepayments amounting to Rs, 2.96 millions have been amortized as rent and Rs, 2.73 millions has been recognized as interest income on deposits in respect of lease prepayments referred above.
e. Deferral of Government Grant Receivables( TUF Subsidy & EPCG)
â(i) The Company receives Technology up gradation Fund [TUF] Subsidy from Government for investment in assets. The Company receives interest cost benefit and have been accounted as an adjustments to interest cost in the previous GAAP. However under INDAS the subsidy has to be accounted as grant related to assets under IND AS 20 ''"''Accounting for Government Grants and Disclosure of Government Assistanceââ. The details of subsidy received from the begining has been considered for fair value adjustments and differences have been disclosed as deferred income.â
(ii) The Company has a policy of purchasing assets and consumables under Export Promotion Capital Goods (EPCG) Scheme under which capital equipmentâs are permitted to be imported against a specific licence at a substantially reduced customs duty, subject to fulfillment of obligation to export services rendered by use of capital equipment imported under the scheme to the extent of over 6 times the value of duty saved over a period of 6 years from the date of obtaining the licence. In case of failure to meet the export obligation, the company would be liable to pay the difference between the normal duty and the duty saved under the scheme along with interest. The same has been disclosed as part of notes and no adjustments is required to be made under previous GAAP. However under INDAS the subsidy [Basic customs duty saved] has to be accounted as grant related to assets under IND AS 20 "Accounting for Government Grants and Disclosure of Government Assistanceâ. The details of license outstanding as of March 31, 2016 has been fair valued and adjustments have been accounted as adjustments to value of fixed assets and as part of deferred income.
(iii) Subsequent to initial recognition, the deferred income is recognized as income - to depreciation expenses over the period of fulfillment of export obligation. The asset value has been depreciated over the useful life of the asset.
(iv) During the year 2016-17, deferred grant receivables amounting to Rs, 12.62 millions is recognized as income by adjusting to depreciation expenses. Further grant receivables amounting to Rs, 3.09 millions accounted as Income as per Previous GAAP was deferred.
(vi) During the year 2016-17, deferred grant receivables amounting to Rs, 1.88 millions related to EPCG Subsidy is recognized as income by adjusting to depreciation expenses.
f. Hedge Accounting
The Company enters into derivative financial instruments to manage its exposure foreign exchange rate risks, including foreign exchange forward contracts. Further details of derivative financial instruments are disclosed in note 3.10(a).
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item.
The Company designates certain hedging instruments, which include derivatives and non-derivatives in respect of foreign currency risk, as cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in other comprehensive income and are grouped under head of cashflow hedge reserve. The gain or loss relating to the ineffective portion is recognized immediately in the profit or loss. The cumulative gain or loss previously recognized in other comprehensive income remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when it is recognized. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in the other comprehensive income is transferred to profit or loss.
During the year 2016-17,the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in other comprehensive income and are grouped under head of cashflow hedge reserve which amounts to Rs, 33.54 millions.
g. Cash and cash equivalents
As per Previous GAAP, cash and cash equivalents for the purpose of Statement of Cash Flows comprises of cash and bank balances and deposits with bank. As per Ind AS, the same comprises of cash and bank balances, deposits with bank and bank overdraft.
Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.
Expected rate of return on plan assets: This is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.
Salary escalation rate: The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors.
Contributions: The Company expects to contribute Rs, 54.85 Millions to its gratuity fund during the year ending March 31, 2019
The Company recognized a net gain/(loss) on the forward contracts of Rs, (147.02) (Previous year : Rs, 20.81) for the year ended March 31, 2018.
The forward exchange contracts and option contracts mature between one and twelve months. The table below summarizes the notional amounts of derivative financial instruments into relevant maturity groupings based on the remaining period as at the end of the year:
3.11 Financial risk management
The Company has exposure to the following risks from its use of financial instruments:
- Credit risk
- Liquidity risk
- Market risk
The Board of Directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Board of Directors has established a risk management policy to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed periodically to reflect changes in market conditions and the Company''s activities. The Audit Committee oversees how management monitors compliance with the Company''s risk management policies and procedures, and reviews the risk management framework. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
Credit risk:
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company''s trade receivables, treasury operations and other activities that are in the nature of leases.
Trade and other receivables
The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Management considers that the demographics of the Company''s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. The Company is not exposed to concentration of credit risk to any one single customer since the services are provided to and products are sold to customers who are spread over a vast spectrum and hence, the concentration of risk with respect to trade receivables is low. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of the customers to which the Company grants credit terms in the normal course of the business.
Cash and cash equivalents and other investments
In the area of treasury operations, the Company is presently exposed to counter-party risks relating to short term and medium term deposits placed with public-sector banks, and also to investments made in mutual funds.
The Chief Financial Officer is responsible for monitoring the counterparty credit risk, and has been vested with the authority to seek Board''s approval to hedge such risks in case of need.
Financial assets that are neither past due nor impaired
Cash and cash equivalents, other assets and other receivables are neither past due nor impaired. The total trade receivables that are not past due as at March 31, 2018 amounts to Rs, 1,191.83 (March 31, 2017: Rs, 1,106.73) and impairment has not been recorded on the same.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation. Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses, servicing of financial obligations. In addition, the Company has concluded arrangements with well reputed Banks, and has unused lines of credit that could be drawn upon should there be a need. The Company is also in the process of negotiating additional facilities with Banks for funding its requirements.
Market risk:
Market risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk (currency risk), interest rate risk and the market value of its investments. Thus the Company''s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.
Currency risk:
The Company''s exposure in USD, GBP, EUR and other foreign currency denominated transactions gives rise to Exchange rate fluctuation risk. Company''s policy in this regard incorporates:
- Forecasting inflows and outflows denominated in USD, GBP and EUR for a twelve-month period
- Estimating the net-exposure in foreign currency, in terms of timing and amount.
- Determining the extent to which exposure should be protected through one or more risk-mitigating instruments to maintain the permissible limits of uncovered exposures.
- Carrying out a variance analysis between estimate and actual on an ongoing basis, subject to review by Audit Committee.
A 10% strengthening of the rupee against the respective currencies as at March 31, 2018 and 2017 would have increased / (decreased) other comprehensive income and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2017.
A 10% weakening of the rupee against the above currencies as at March 31, 2018 and 2017 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk:
Interest rate risk is the risk that an upward movement in interest rates would adversely affect the borrowing costs of the Company.
(ii) Operating lease arrangements
The Company has taken several premises under cancellable and non-cancellable operating leases. The lease agreements are normally for one to ten years and have option of renewal on expiry of lease period based on mutual agreement. The rental expenses towards cancelable and non-cancelable operating lease is charged to statement of profit & loss amount of Rs, 69.46 Millions (for the year ended 31st March 2017 Rs,.66.72 Millions). Some of the lease agreements have esclation clause ranging from 5 % to 15%. There are no exceptional / restrictive convenants in the lease agreements. As lessor the Company realized an income of Rs, .0.28 Millions (for the year ended 31st March 2017 Rs, 0.30 Millions) on properties under lease.
3.16 Dues to micro and small enterprises
The Company has not received any memorandum (as required to be filed by the supplier with the notified authorities under Micro, Small and Medium Enterprises Development Act, 2006) claiming their status as Micro, Small or Medium Enterprises. Accordingly the amount paid/ payable to these parties is considered to be nil.
3.17 Contribution towards Corporate Social Responsibility
Section 135 of the Companies Act, 2013, requires Company to spend towards Corporate Social Responsibility (CSR). The Company is expected to spend Rs, 12.73 Millions towards CSR in compliance of this requirement. A sum of Rs,. 2.4 Millions has been spent during the current year towards CSR activities as per details given below. The balance amount to be spent is Rs,. 10.33 Millions.
3.18 Related party transaction
The related parties where control / significant influence exist are subsidiaries and associates. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director whether executive or otherwise. Key management personnel includes the Board of Directors and other senior management executives. The other related parties are those with whom the Company has had transaction during the year ended March 31, 2018 and March 31, 2017 as follows:
Name of Related Party Nature of Relationship
Key managerial Personnel
P.Sundararajan Managing Director
S.Latha Whole Time Director (Wife of Mr.P.Sundararajan)
S.Chenduran Whole Time Director (Son of Mr.P.Sundararajan)
P.Jeeva Chief Executive Officer (Garment Division)
VBalaji Chief Financial Officer
K.Vinodhini Company Secretary
Relative of Key managerial Personnel
P.Velusamy Brother of Mr.P.Sundararajan
P.Ashokaramam Brother of Mr.P.Sundararajan
Subsidiary
Crocodile Products Private Limited Subsidiary Company
S.P. Apparels UK (P) Limited Subsidiary Company
Enterprises owned by key managerial Personnel
Poornam Enterprises Private Limited Enterprise over which Key Managerial Personnel are able to exercise
significant influence
S.P.Textiles Enterprise over which Key Managerial Personnel are able to exercise
significant influence
S.P. Lifestyles Enterprise over which Key Managerial Personnel are able to exercise
significant influence
Enterprises owned by relatives of key managerial Personnel
SP Superfine Cotton Mills Private Limited Enterprise over which relative of Key Managerial Personnel are able
to exercise significant influence
Note: Related party relationships are as identified by the Management and relied upon by the Auditors.
Mar 31, 2017
i) Terms & Condition of Equity shares
The Company has only one class of equity shares having a par face value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The Dividend, if any, proposed by the Board of Directors has to be approved by the shareholders in the Annual General Meeting.
In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the company, after settling the dues of preferential and other creditors as per priority. The distribution will be in proportion to the number of equity shares held by the shareholders.
ii) Terms & Condition of 10% Redeemable cumulative preference shares
1. The Company has converted a part of the unsecured loans given by the directors as Redeemable Cumulative Preference shares
2. The coupon rate is 3% for first 4 years and 10% thereafter;
3. The period of redemption is 10 years or as allowed by the Directors subject to liquidity;
4. The preference shares are of cumulative in respect of dividend payout;
5. The redemption shall be out of accumulated profits or out of fresh issue of shares.
- With respect to Term Loans from Banks, the first charge on fixed assets is given to respective banks. second charge on the current assets been extended to the banks Where ever possible. Promoters guarantee and security has been provided in cases of non-provision of first charge on fixed assets to banks.
- Loan amounting to Rs.18.62 Million (Previous year Rs.30.71 Million) is repayable in 8 quarterly installments
- Loan amounting to Rs.15.92 Million (Previous year â Nil) is repayable in 20 quarterly installments
- Loan amounting to Rs.13.37 Million (Previous year Rs.14.28 Million) is repayable in 15 quarterly installments
- Loan amounting to Rs.51.37 Million (Previous year Rs.52.37 Million) is repayable in 9 quarterly installments
- Interest rate relating to term loans from banks is in the range of 12.5 % to 13.5 %.
- Unsecured loan from promoters are repayable after two years
- Finance Lease repayable with in a period from one year to 5 years and has been secured by Hypothecation of asset purchased under hire purchase.
The Company has not defaulted in repayment of principles and interest during The year.
- Refer Note 8 for Current Maturities of Long Term Borrowings.
- Working Capital loans are secured by first charge on the current assets of and second charge on the fixed assets of the company in favour of lending banks on paripassu basis.
- The Company has not defaulted in repayment of principles and interest during The year.
1 Additional information to the financial statements
The Companyâs building are located on own land and lease own lands. The promoter director has executed lease deeds in favour of the company in respect of land measuring 43.3 acres for a period of 29 years and 3 acres for a period of 20 years. Of the 43.3 acres, the lease deed has been registered in respect of 28.74 acres and for the balance 14.56 acres registration remains to be effected.
The Companyâs processing division building at Perundurai is located on lease hold land taken from SIPCOT for a period of 99 years. The company had acquired leasehold rights for land from SIPCOT which earlier stood in the name of M/s. Poornam Enterprises Pvt Ltd for remaining period of 95 years. The Building was taken on lease form M/s. Poornam Enterprises Pvt. Ltd.
2 In accordance with the G.S.R 679 (E) dated 04.09.2015 issued by the Ministry of Corporate Affairs, certain disclosures are required to be made relating to Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Development Act, 2006. Dues to micro and small enterprises have been determined to the extent such parties have been identified on the basis of intimation received from the âsuppliersâ regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. This has been relied upon by the auditors.
3 Equity investment to subsidiary company
- M/s Crocodile products private limited
The Company is carrying an equity investment of Rs.63.74 Million (Previous Year Rs.63.74 Million) in the above subsidiary company. Though the net worth of the subsidiary is eroding due to losses of the past years, in the opinion of the management, the investment made in the company is long and strategic.
- M/s. S.P. Apparels UK (P) Limited
The Company is carrying an equity investment of Rs.15.75 Million (Previous Year Rs.15.75 Million) in the above subsidiary company. Though the net worth of the subsidiary is eroding due to losses of the past years, in the opinion of the management, the investment made in the company is long and strategic.
4 Details of leasing arrangements
(i) Finance lease obligation relating to Vehicles
(ii) Operating lease arrangements
The Company has taken several premises under cancellable and non-cancellable operating leases. The lease agreements are normally for one to ten years and have option of renewal on expiry of lease period based on mutual agreement. The rental expenses towards cancelable and non-cancelable operating lease is charged to statement of profit & loss amount of Rs.63.76 Millions (for the year ended 31st March 2016 Rs.43.31 Millions). Some of the lease agreements have esclation clause ranging from 5 % to 15%. There are no exceptional / restrictive convenants in the lease agreements. As lessor the Company realized an income of Rs.0.13 Millions (for the year ended 31st March 2016 Rs.0.40 Millions) on properties under lease.
5 The notes to accounts relating to CSR expenditure should also contain the following:
(a) Gross amount required to be spent by the company during the period Rs.4.61 Million
(b) Amount spent during the year on:
6 Employee benefit plans Defined contribution plan
The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised Rs.75.95 Millions (Year ended 31 March, 2016 Rs.57.57 Millions) for Provident Fund contributions; Rs.31.19 Millions (Year ended 31 March, 2016 Rs.23.84 Millions) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
Defined benefit plan
The Company offers gratuity employee benefit scheme to its employees. The following table sets out the funded status of gratuity and non funded status of leave encashment and the amount recognised in the financial statements:
The Discount rate is based on the prevailing market yields of Government of India Securities as at the Balance sheet date for the estimated term of the obligations.
The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and othe relevant factors such as supply and demand in the employment market.
The entire fund related gratuity is fully managed by life Insurance Corporation of India.
7 Details of Derivative Instruments(For Hedging)
A MTM on Forward Contracts
During the period the company has recognised Mark to Market gain(net) on outstanding forward contracts amounting to Rs.20.81 Millions(March 31, 2016(Net Loss) Rs.3.61 Millions).
B Forward Contracts entered into by the group and outstanding as at 31st March 2017 for hedging currency related risks
8 The details of the Specified Bank Notes held and transacted during the period from 8th November 2016 to 30th December 2016 is as provided in the table below.
9 Donations
Donations include payments of Rs.5,86,500/- (for the year ended March 31, 2016: Rs.2,65,500/-) made to Communist Party of India, Communitist Party Marxist, Paatali Matkal katchi, Bharatya Janata Party, Diravida Munnetra Kalagam and etc
10 Previous yearâs figures have been regrouped / reclassified wherever necessary to correspond with the current yearâs classification / disclosure.
Mar 31, 2016
Notes I) Terms & Condition of Equity shares
The Company has only one class of equity shares having a par face value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The Dividend, if any, proposed by the Board of Directors has to be approved by the shareholders in the Annual General Meeting.
In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the company, after settling the dues of preferential and other creditors as per priority. The distribution will be in proportion to the number of equity shares held by the shareholders.
ii) Terms & Condition of 10% Redeemable cumulative preference shares
1. The Company has converted a part of the unsecured loans given by the directors as Redeemable Cumulative Preference shares
2. The coupon rate is 3% for first 4 years and 10% thereafter;
3. The period of redemption is 10 years or as allowed by the Directors subject to liquidity;
4. The preference shares are of cumulative in respect of dividend payout;
5. The redemption shall be out of accumulated profits or out of fresh issue of shares.
With respect to Term Loans from Banks, the first charge on fixed assets is given to respective banks, second charge on the current assets been extended to the banks Where ever possible. Promoters guarantee and security has been provided in cases of non-provision of first charge on fixed assets to banks.
With respect to Term Loans from financial institutions, the second charge on fixed assets of Retail stores have been provided to financial institutions.
Secured Term Loans from banks are repayable Monthly / Quarterly over a period of 7 Years.
Unsecured loan from promoters are repayable after two years
Finance Lease repayable in less than 5 years has been secured by Hypothecation of asset purchased under hire purchase.
The Company has not defaulted in repayment of dues Refer Note 8 for Current Maturities of Long Term Borrowings.
6 Additional information to the financial statements
The Company''s building are located on own land and lease own lands. The promoter director has executed lease deeds in favor of the company in respect of land measuring 34.37 acres for a period of 29 years. Of the 34.37 acres, the lease deed has been registered in respect of 28.93 acres and for the balance 5.44 acres registration remains to be effected.
The Company''s processing division building at Perundurai is located on lease hold land taken from SIPCOT fora period of 99 years. The company had acquired leasehold rights for land from SIPCOT which earlier stood in the name of M/s. Poornam Enterprises Pvt Ltd for remaining period of 95 years. The Building was taken on lease from M/s. Poornam Enterprises Private Limited.
7 In accordance with the notification No. GSR 719(E) dated 16.11.2007 issued by the Ministry of Corporate Affairs, certain disclosures are required to be made relating to Micro, Small & Medium Development Act, 2006. The Management during their review has not identified any supplier covered under this Act.
8 Equity investment and loans to subsidiary company M/s Crocodile products private limited
The Company is carrying an equity investment of Rs. 63.74 Million (Previous Year Rs. 63.74 Million) in the above subsidiary company. Though the net worth of the subsidiary is eroding due to losses of the past years, in the opinion of the management, the investment made in the company is long and strategic.
9 Employee benefit plans
Defined contribution plan
The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs.57.57 Millions (Year ended March 31, 2015 Rs.41.85 Millions) for Provident Fund contributions; Rs.23.84 Millions (Year ended March 31,2015 Rs.18.83 Millions) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
Defined benefit plan
The Company offers gratuity employee benefit scheme to its employees. The following table sets out the funded status of the defined benefit scheme and the amount recognized in the financial statements:
The Discount rate is based on the prevailing market yields of Government of India Securities as at the Balance sheet date for the estimated term of the obligations.
The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors such as supply and demand in the employment market.
The entire fund is fully managed by Life Insurance Corporation of India.
10 Segment Information
Primary Segment by products
The Company operates primarily in a single business segment of Manufacture and Sale of Garments
(ii) Operating lease arrangements
The Company has cancellable operating lease agreements for rental building space. As per the lease terms an amount of Rs.43.31 Millions (for the year ended March 31,2015 Rs.22.23 Millions) is charged to statement of Profit and Loss account. As less or the Company realized an income of Rs. 0.40 Millions (for the year ended March 31,2015 Rs.0.66 Millions) on properties under lease
11 The notes to accounts relating to CSR expenditure should also contain the following:
(a) Gross amount required to be spent by the company during the period Rs. 2.88 Million
(b) Amount spent during the year on:
12. Related party transaction
Key Managerial Personnel
Mr. P.Sundararajan Managing Director
Mrs. S.Latha Executive Director (Wife of Mr.P.Sundararajan)
Relative of Key Managerial Personnel
Mr. S.Chenduran Son of Mr.P.Sundararajan
Mr. P.Velusamy Brother of Mr.P.Sundararajan
Mr. P.Ashokaramam Brother of Mr.P.Sundararajan
Subsidiary
Crocodile Products Private Limited Subsidiary Company
S.P. Apparels UK (P) Limited Subsidiary Company
Enterprises owned by Relatives of key Managerial Personnel
SP Superfine Cotton Mills Private Limited Enterprise over which relatives of Key Managerial
Personnel are able to exercise significant influence
Enterprises owned by key Managerial Personnel
Poornam Enterprises Private Limited Enterprise over which Key Managerial Personnel are
able to exercise significant influence
S.P.Textiles Enterprise over which Key Managerial Personnel are
able to exercise significant influence
S.P.Lifestyles Enterprise over which Key Managerial Personnel are
able to exercise significant influence
"Note: Related party relationships are as identified by the Management and relied upon by the Auditors."
13 Details of Derivative instruments(For Hedging)
A MTM on Forward Contracts
During the period the company has recognized Mark to Market gain on outstanding forward contracts amounting to Rs. 39.76 Millions.
B Forward Contracts entered into by the company and outstanding as at March 31, 2016 for hedging currency related risks
14 The Company has acquired the assets of 12 stores owned by Poornam Enterprises Private Limited through slump sale agreement dated July 31,2015 (Effective Date August 01,2015). The assets acquired include fixed assets of Rs. 16.63 Million, rental advances of Rs. 8.77 Million and stock of garments Rs. 19.03 Million and liabilities amounting to Rs. 44.43 Million of the retail network.
15 Exceptional Item
Exceptional item constitutes of Rs. 168.70 Millions pertaining to the loss on crystallization of option / swap / forward contracts taken to hedge the foreign exchange exposure on forecasted receivables on contracts taken from a bank.
16 Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/disclosure.
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