Excel Industries Ltd.
You can view the entire text of Notes to accounts of the company for the latest year
ISIN No INE369A01029 52Wk High (Rs.) 1922 BV (Rs.) 423.58 FV (Rs.) 5.00
Bookclosure 09/08/2018 52Wk Low (Rs.) 800 EPS (Rs.) 58.78 P/E (X) 20.14
Mkt Cap. (Rs. Cr.) 1,487.87 P/BV (X) 2.79 Div Yield (%) 1.06 Mkt Lot 1
2018-03

BACKGROUND

Excel Industries Limited (the company) is a public limited company domiciled in India. Its shares are listed on BsE Limited and National stock Exchange of India Limited. The company is engaged in manufacturing and selling of chemicals, Pharma intermediates and Environmental products. chemicals comprising of Industrial and specialty chemicals and Pesticides Intermediates. Environmental products comprising of soil Enricher, Bio-Pesticides and other Bio-products. The company caters to both domestic and international markets. The company is also engaged in manufacturing activity on behalf of third parties.

1. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the financial statements requires management to exercise judgment and to make estimates and assumptions. These estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in the period in which the estimate is revised if the revision affect only that period, or in the period of the revision and future periods if the revision affects both current and future period.

The areas involving critical estimates or judgements are as under:

(a) Estimation of current tax expenses and payable:

Taxes recognized in the financial statements reflect management’s best estimate of the outcome based on the facts known at the balance sheet date. These facts include but are not limited to interpretation of tax laws of various jurisdictions where the Company operates. Any difference between the estimates and final tax assessments will impact the income tax as well the resulting assets and liabilities.

(b) Estimated fair value of unlisted securities:

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on the market conditions existing at the end of each reporting period.

(c) Useful lives of property, plant and equipment and Intangible assets:

Depreciation and amortisation is based on management estimates of the future useful lives of the property, plant and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions and other factors and may result in changes in the estimated useful life and in the depreciation and amortisation charges.

(d) Estimation of defined benefit obligation:

The liabilities of the Company arising from employee benefit obligations and the related current service cost, are determined on an actuarial basis using various assumptions.

(e) Impairment of financial assets (including trade receivables):

Allowance for doubtful receivables represent the estimate of losses that could arise due to inability of the Customer to make payments when due. These estimates are based on the customer ageing, customer category, specific credit circumstances and the historical experience of the group as well as forward looking estimates at the end of each reporting period.

(f) Estimation of Provisions and contingencies:

Provisions are liabilities of uncertain amount or timing recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable. Contingent liabilities are possible obligations that may arise from past event whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not fully within the control of the Company. The Company exercises judgement and estimates in recognizing the provisions and assessing the exposure to contingent liabilities relating to pending litigations. Judgement is necessary in assessing the likelihood of the success of the pending claim and to quantify the possible range of financial settlement. Due to this inherent uncertainty in the evaluation process, actual losses may be different from originally estimated provision.

(ii) Terms/ rights attached to equity shares

The company has only one class of equity shares having par value of INR 5/- per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting except incase of Interim dividend.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(iv) Buyback of Equity Shares

The board of directors had approved to buyback a maximum upto 11,50,000 equity shares of the company at a price not exceeding INR 275 per equity share and the total consideration not exceeding INR 1800 lacs. during the year ended March 31, 2017, the company has bought back 3,34,938 equity shares utilizing INR 926.71 lacs (including transaction charges, brokerage, tax etc.) from security Premium reserve. As a result of the buyback, total equity shares of the company has reduced from 1,29,05,630 to 1,25,70,692. further the company has transfered INR 16.75 lacs to capital Redemption Reserve from General Reserve being the sum equal to the nominal value of shares so purchased.

Capital Reserve

capital reserve is utilised in accordance with provision of the Act.

Securities premium reserve

securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Act.

Capital Redemption Reserve

Represent reserve created during buy back of Equity shares and it is a non-distributable reserve.

General Reserve

The General Reserve is used from time to time to record transfer of profit from retained earnings, for appropriation purposes. As general reserve is created by transfer from one component of equity to another and it is not an item of other comprehensive income.

Other reserves - FVOCI - Equity Investments

The company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive Income. These changes are accumulated within FVocI equity investments reserve within equity. The company transfer amounts from this reserve to retained earnings when the relevant equity securities are derecognised.

Notes:

(a) I ndian rupee loan from Bank of India amounting to INR Nil (March 31, 2017: INR 331.00 lakhs, April 1, 2016: INR 531.00 lakhs) is for a period of five years repayable in quarterly instalments of INR 50 lakhs and carrying interest rate of 12.25% to 12.90% per annum and is secured by first exclusive charge by way of hypothecation of plant and machinery and further to be secured by registered mortgage of land and buildings of the factory located at Roha. During the year, the Company has made full prepayment of this rupee loan and is in the process of satisfaction of charge created.

(b) I ndian rupee loan from HDFC Bank Limited amounting to INR Nil (March 31, 2017: INR 333.33 lakhs, April 1, 2016: INR 555.56 lakhs) is for a period of five years repayable in quarterly instalments of INR 55.56 lakhs and carrying rate of interest @11.60% to 11.90% per annum and is secured by exclusive charge by way of hypothecation of entire movable assets at Lote Parashuram and further to be secured by registered mortgage of immovable assets at Lote Parashuram. During the year, the Company has made full prepayment of this rupee loan and is in the process of satisfaction of charge created.

(c) Term loans under vehicle finance from a financial institution amounting to INR 41.54 lakhs (March 31, 2017: INR 49.11 lakhs, April 1, 2016: INR 49.99 lakhs) carrying interest rate ranging from 12% to 14% per annum repayable in equated monthly instalments and secured by hypothecation of the vehicles acquired by utilising the said loans.

(d) Finance lease obligation amounting to INR 299.04 lakhs (March 31, 2017: INR 634.56 lakhs, April 1, 2016: INR 780.68 lakhs) from Siemens Financial Services Private Limited for a period of three years and is secured by hypothecation of equipment’s taken on lease. It will be discharged by monthly lease rental payments on various dates and carry the interest @ 11.50% to 12.50% per annum.

(e) Loan from Housing Development Finance Corporation Limited amounting to INR Nil (March 31, 2017: INR 409.60 lakhs, April 1, 2016: INR Nil) carrying interest rate @ 11.50% per annum repayable in sixty equated monthly instalments and secured by first equitable mortgage on property along with stilt area and undivided portion of freehold land at New Delhi both present and future and by way of first charge on all the receivables including lease rent and sale proceeds of the herein mentioned property. During the year, the Company has made full prepayment of this loan and has satisfied charges subsequent to the year end.

(f) Unsecured deposit from shareholder/public amounting to INR Nil (March 31, 2017: Nil, April 1, 2016: INR 239.16 lakhs) carrying interest rate @ 10% per annum repayable after 2 years.

(g) Installments falling due within a year in respect of all the above Loans aggregating INR 251.07 lakhs (March 31, 2017: INR 842.80 lakhs, April 1, 2016: INR 1,145.99 lakhs) have been grouped under “Current maturities of long-term debt” (Refer Note 27).

(h) Refer Note 43(B) for liquidity risk.

(i) The carrying amounts of financial and non financial assets as security for secured borrowings are disclosed in Note 25.

(j) Refer note 25(f) Net debt reconciliation

Notes:

(a) cash credit loan from banks are secured by hypothecation of all tangible movable assets both present and future including stock of raw materials, finished goods, work in process, stores and trade receivables etc. and is further secured by a second charge on the Property, Plant and equipment at Roha and Lote Parashuram. The cash credit loan is repayable on demand and carries interest rates at 9.45% to 11.20% (March 31, 2017 - 11.70% to 13.20%; April 1, 2016 - 11.70% to 13.20%).

(b) outstanding foreign currency buyer’s credit are unsecured and carry an interest rate of 2.70% (March 31, 2017 - libor plus 0.23% to 0.80%; April 1, 2016 -libor plus 46 bps) repayable on demand.

(c) short term unsecured loans from banks are payable within period of 3 to 6 months and carries interest rate of 8.25% to 8.90% (March 31, 2017 - 8.90% to 9.50%; April 1, 2016 - 9.50% to 12.25%) per annum.

(d) outstanding foreign currency loan is unsecured carrying interest rate of Nil (March 31, 2017 - Nil; April 1, 2016- libor plus 90 bps).

e) The carrying amounts of financial and non financial assets hypothecated/ mortgaged as security for current and non-current borrowings are as under:

Note:

Goods and Service Tax (GST) has been effective from July 1, 2017. Consequently, excise duty, value added tax (VAT), Service tax etc have been replaced with GST. Until June 30, 2017, ‘Sale of products’ included the amount of excise duty recovered on sales. With effect from July 1, 2017, ‘Sales of products’ excludes the amount of GST recovered. Accordingly, revenue from ‘Sale of Products’ and ‘Revenue from operations’ for the year ended March 31, 2018 are not comparable with those of the previous year. Had the previously reported revenue was shown net of excise duty, comparative revenue of the Company (Continuing Operations) would have been as follows :

(iii) Gratuity

(a) The Company provides for gratuity for employees as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement / termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. If an employee completes more than 25 years of service as of March 31, 2017 except staff and workers, then instead of 15 days, he / she will be entitled to get gratuity on retirement / termination at 22 days of last drawn salary. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India.

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet.

The method and types of assumptions used in preparing the sensitivity analysis did not change compared to prior period.

(iv) Medical Voluntary retirement scheme (MVRS)

(a) The Company also have a defined benefit plan for its employees, viz., voluntary early separation scheme on account of continued ill-health not amounting to occupational disease and thereby unable to perform normal duties of their post. Under the Scheme, the benefits will be given for a retired employee for a maximum period upto 10 years or age of retirement, whichever is earlier. In case of early death of the employee, the legal heir of the employee shall get 50% of separation benefit for the rest of the benefit period. The costs of providing benefits under the said plan is determined on the basis of actuarial valuation at each year-end. Separate actuarial valuation is carried out for the plan using the projected unit credit method. Actuarial gains and losses for the defined benefit plan is recognised in full in the period in which they occur in the Statement of Profit and Loss. This Scheme is not funded.

(v) Defined Contribution Plan

The Company has certain defined contribution plans such as provident fund, super annuation fund and family pension fund for the benefit of the employees. Contributions are made to provident fund in India for employee at the rate of 12% of basic salary as per regulations. The Contributions are made to registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The Expenses recognised during the period towards defined contribution plan is INR 473.98 lacs (March 31, 2017 - INR 453.16 lacs).

(vi) Risk Exposure for Gratuity (funded plan):

Through its defined benefit plans, the group is exposed to number of risks, the most significant of which are detailed below:

Assets volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan assets has investments in insurance/equity managed fund, fixed income securities with high grades, public/private sector units and government securities. Hence assets are considered to be secured.

Change in bond yields: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in value of plans bond holdings.

(ii) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

The fair value of financial instruments as referred to in note above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurement) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows:

Level 1: Financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds, mutual funds, bonds and debentures, that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is considered here. For example, the fair value of forward exchange contracts, currency swaps and interest rate swaps is determined by discounting estimated future cash flows using a risk-free interest rate. The mutual funds are valued using the closing NAV published by mutual fund.

Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs). When the fair value of unquoted instruments cannot be measured with sufficient reliability, the group carries such instruments at cost less impairment, if applicable.

The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other bank balances, loans and other financial assets and liabilities are considered to be the same as their fair values due to their short-term nature. The carrying amount of long term borrowings are considered to be same as their fair values as these borrowings carry floating interest rates.

2. financial risk management

I n the course of its business, the Company is exposed to a number of financial risks: credit risk, liquidity risk and market risk. This note presents the Company’s objectives, policies and processes for managing its financial risk and capital. The key risks and mitigating actions are also placed before the Board of Directors of the Company. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Company manages the risk through the finance department that ensures that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The activities are designed to:

- protect the Company’s financial results and position from financial risks

- maintain market risks within acceptable parameters, while optimising returns; and

- protect the Company’s financial investments, while maximising returns.

The note explains the Company’s exposure to financial risks and how these risks could affect the Company’s future financial performance.

(A) credit Risk

Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. Credit risks from balances with banks and financial institutions are managed in accordance with the Company’s policy. For derivative and financial instruments, the Company attempts to limit the credit risk by only dealing with reputable banks and financial institutions having high credit ratings assigned by the credit rating agencies. The Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information.

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward-looking information. The outstanding trade receivables are regularly monitored and appropriate action is taken for collection of overdue receivables.

In respect of its investments the company aims to minimize its financial credit risk through the application of risk management policies.

The gross carrying amount of trade receivables is INR 11,978.90 lacs (March 31, 2017: INR 11,690.37 lacs, April 1, 2016: INR 12,747.98 lacs)

The Company maintains exposure in cash and cash equivalents, term deposits with banks, Loans, Security deposits and other financial assets.

Security deposits are interest free deposits given by the Company for properties taken on lease. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of Security deposit is INR 436.83 lacs (March 31, 2017: INR 327.66 lacs, April 1, 2016: INR 396.37 lacs) Other advances are given for trade purpose which is in line with normal business activities of the Company. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of capital advances is INR 329.71 lacs (March 31, 2017: INR 53.86 lacs, April 1, 2016: INR 229.03 lacs)

(B) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach for managing liquidity is to ensure that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking manage to Company’s reputation. In addition, processes and policies related to such risks are overseen by the senior management. The management monitors the Company’s net liquidity position through rolling forecasts on the basis of expected cash flows.

(c) Market risk

The Company is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.

(i) foreign exchange risk

Foreign currency risk is that risk in which the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates internationally and a portion of its business is transacted in multiple currencies and therefore the Company is exposed to foreign exchange risk through its overseas sales and purchases in various foreign currencies. The Company takes decision to hedge by forming view after discussions with it’s advisors and as per policies set by Management.

The Company was also exposed to the foreign currency loans availed from banks to reduce the overall interest cost. The Company had fully hedged loan exposure in foreign currency to mitigate the foreign exchange risk on the same.

3. capital management

(a) Risk Management

The Company aim to manages its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to its shareholders.

The Company’s capital management is driven by Company’s policy to maintain a sound capital base to support the continued development of its business. The Board of Directors seeks to maintain a prudent balance between different components of the Company’s capital. The Management monitors the capital structure and the net financial debt at individual currency level. Net financial debt is defined as current and non-current financial liabilities less cash and cash equivalents and short-term investments.

The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.

The debt equity ratio highlights the ability of a business to repay its debts. As at March 31, 2018, the ratio was 1.70%

4. SEGMENT INFORMATION

(a) Description of segments and principal activities

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”) of the Company. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chairman and Managing Director of the Company. The Company operates in following business segment as per Indian Accounting Standard 108 “operating segments”:

(a) chemicals - Comprising of Industrial and Specialty Chemicals, Pesticides Intermediates, Polymer and Pharma Intermediates

(b) Environment - Comprising of Soil enricher, Bio - pesticides and other Bio products. The Environment and Bio Tech (E&BT) segment has been shown as discontinuing operations (Refer Note 46)

Segment revenue includes sales, export incentives, processing charges and other income from operations

Segment Revenue in the geographical segments considered for disclosure are as follows :

(a) Revenue within India includes sales to customers located within India.

(b) Revenue outside India includes sales to customers located outside India.

Segment Revenue, Results, Assets and Liabilities includes the respective amounts identifiable to each of segments and amounts allocated on a reasonable basis.

5. discontinuing operation

(a) Description:

On March 29, 2017, the Board of Directors of the Company has approved divestment of Environment & Bio-tech (E&BT) division to Excel Bio Resources Limited (EBRL), a wholly owned subsidiary. Accordingly, on March 31, 2017, the Company has signed a Business Transfer Agreement (BTA) to sell E&BT division to EBRL for consideration of INR 975 lacs which is subject to net working capital and other adjustment as on the date of completion. Assets associated with E&BT division has been classified as held for sale as on March 31, 2017 along with liabilities directly associated with these assets.

The transaction is not completed pending fulfillment of certain conditions mentioned in BTA. The management of the Company continues to pursue for achievement of theses conditions as at March 31, 2018.

(c) Key Management personnel (KMp)

Mr. Ashwin C. Shroff (Chairman and Managing Director)

Mrs. Usha A. Shroff (Executive Vice Chairperson)

Mr. Ravi Ashwin Shroff (Executive Director)

Mr. R. N. Bhogale (Independent Director)

Mr. H. N. Motiwala (Independent Director)

Mr. P S. Jhaveri (Independent Director)

Mr. M. B. Parekh (Independent Director)

Mr. S. S. Vaidya (Independent Director)

Mr. R. M. Pandia (Independent Director)

Mr. Dipesh K. Shroff (Non-Executive Director)

Mr. Atul G. Shroff (Non-Executive Director)

Mr. R. K. Sood (Nominee Director - LIC)

Relatives of KMp with whom transactions have taken place:

Mr. Hrishit Ashwin Shroff (Son of Mr. Ashwin C Shroff and Mrs. Usha A. Shroff)

Mrs. Anshul Amrish Bhatia (Daughter Mr. Ashwin C Shroff and Mrs. Usha A. Shroff)

Mrs. Kanaklata A Saraiya (Sister of Mrs. Usha A. Shroff)

Mrs. Uma Shailesh Kapadia (Sister of Mrs. Usha A. Shroff)

(d) Enterprise over which KMp or their relative have significant influence and transactions have taken place:

Agrocel Industries Private Limited

Anshul Specialty Molecules Private Limited (upto August 22, 2017)

Divakar Techno Specialities & Chemicals Private Limited Excel Crop Care Limited (upto October 7, 2016)

Mobitrash Recycle Ventures Private Limited Shree Vivekanand Research and Training Institute C C Shroff Research Institute Transpek Industry (Europe) Limited Transpek Industry Limited TML Industries Limited C C Shroff Self Help Centre

(b) operating Lease:

Office premises and godowns are obtained on operating leases for various tenors. Except for the Office premises, none of the operating leases are renewable. In respect of Office premises, the operating lease are renewable for further period of five years, with an escalation clause of 5% over the existing lease rent. There are no restrictions imposed by lease agreements / arrangements.

The Company has significant operating leases for premises. These lease arrangements range for a period between 11 months and 9 years, which include both cancellable and non-cancellable leases. Most of the leases are renewable for further period on mutually agreeable terms and also include escalation clauses.

* includes INR 220.26 lacs, INR 116.88 lacs and INR 231.00 lacs (Previous Year: INR 142.05 lacs, INR 125.55 lacs and INR 257.11 lacs) in respect

of Research and Development units at Roha, Lote and Mumbai respectively which is approved by the Department of Scientific & Industrial Research, Ministry of Science & Technology.

Capital Expenditure incurred during the year on Research and Development INR 181.32 lacs (Previous Year INR 170.95 lacs) [including capital expenditure on qualifying assets of INR 15.91 lacs, INR 82.40 lacs and INR 72.60 lacs (Previous Year: INR 44.88 lacs, INR 23.92 lacs and INR 89.55 lacs in respect of Research and Development Units at Roha, Lote and Mumbai respectively which is approved by the Department of Scientific & Industrial Research, Ministry of Science & Technology)].

6. FIRsT-TIME Adoption oF IND As

The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from April 1, 2017, with a transition date of April 1, 2016. The adoption of Ind AS has been carried out in accordance with Ind AS 101 - First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS standalone financial statements be applied retrospectively and consistently for all financial years presented. However, in preparing these Ind AS financial statements, the Company has availed of certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under Ind AS and previous GAAP have been recognised directly in equity. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes:

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

Optional Exemptions

(i) Business combinations

Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Company has elected to apply Ind AS 103 prospectively to business combination occurring after its transition date. Business combination occurring prior to transition date have not been restated.

(ii) Deemed cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets. Accordingly, the company has elected to measure all of its property, plant and equipment, intangible assets and investment properties at their previous GAAP carrying value.

(iii) Investment in subsidiaries and joint ventures

Ind AS 101 permits a first-time adopter to measure it’s investment, at the date of transition, at cost determined in accordance with Ind AS 27, or deemed cost. The deemed cost of such investment shall be it’s fair value at date of transition to Ind AS of the Company, or previous GAAP carrying amount at that date. The Company has elected to measure its investment in subsidiary companies, associate Company and joint venture Company under previous GAAP carrying amount as its deemed cost on the transition date.

(iv) Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS. The Company has elected to apply this exemption for its investment in equity investments.

Ind As mandatory exceptions (i) Estimates

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP

(ii) classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Consequently, the Company has applied the above assessment based on facts and circumstances exist at the transition date.

B. Transition to Ind As - Reconciliations

The following reconciliations provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS 101:

(i) Reconciliation of Total Comprehensive Income for the year ended March 31, 2017.

(ii) Reconciliation of Equity as at April 1, 2016 and March 31, 2017.

(iii) Reconciliation of Statement of Cash Flows.

The presentation requirements under previous GAAP differs from Ind AS and hence previous GAAP information has been regrouped for inline with Ind AS. The regrouped previous GAAP information is derived from the Standalone Financial Statements of the Company prepared in accordance with the previous GAAP

C. Notes to first-time adoption:

1. proposed dividend

Under the previous GAAP (upto the year end March 31, 2016) dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events and accordingly, provision for proposed dividend was recognised as a liability. Under previous GAAP (effective April 1, 2016) and Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of INR 680.84 Lakhs as at April 1, 2016 included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity has been increased by an equivalent amount.

2. Investments

(i) Fair valuation of Investments

Under the previous GAAP investments in equity instruments were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under IND AS, these investments are required to be measured at fair value.

Fair value changes with respect to investments in equity instruments designated as FVOCI have been recognised in FVOCI - Equity investments reserve as at the date of transition and subsequently in the Other Comprehensive Income for the year ended March 31, 2017. This increased other reserves and equity by INR 14,036.30 Lakhs as at March 31, 2017 and INR 12,182.18 Lakhs as at April 1, 2016. Further Other Comprehensive Income for the year ended March 31, 2017 has increased by INR 1,854.12 Lakhs (other than the investments which are derecognised during the previous year, see (ii) below).

(ii) profit on sale of Investments

Under previous GAAP profit on sale of Investments was directly recognised in the Statement of Profit and Loss by comparing the sale value with amount appearing in balance sheet (i.e. Cost). Company has sold its investments in Excel Crop Care Limited to Sumitomo Chemical Company, Limited, Japan in accordance with Share Purchase Agreement during the year ended March 31, 2017. As per Ind AS as the Investments are fair valued and recognised through OCI, Company has reversed gain of INR 2,668.78 lacs and accounted the same in Other Comprehensive Income.

3. Loan Given to subsidiary

Under the previous GAAP interest free loans given a subsidiary were recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at their fair value. Accordingly, the Company has fair valued these loans under Ind AS. Difference between fair value of loan given to a subsidiary and the carrying value (transaction value) as per Previous GAAP has been recognized as investment in subsidiary. Consequently, the amount of loan given has been decreased by INR 170.36 lacs as at April 1, 2016 and corresponding increase in investments in subsidiary. During the year ended March 31, 2017, these loan has been repaid and hence interest income has been accounted for INR 170.36 lacs resulting into increase in Income and equity as at March 31, 2017.

4. Remeasurements of post employment benefit obligation

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in Other Comprehensive Income instead of profit and loss. Under the previous GAAP these remeasurements were forming part of the profit and loss for the year. As a result of this change, the profit for the year ended March 31, 2017 increase by INR 175.31 Lakhs. There is no impact on the total equity as at March 31, 2017.

5. Deferred tax

Deferred Tax on aforesaid Ind AS adjustments

6. other Comprehensive Income

Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP

7. Retained Earnings

Retained earnings as at April 1, 2016 has been adjusted consequent to the above Ind AS transition adjustment.

7. standards issued but not yet effective

The standards issued, but not yet effective upto the date of issuance of the Company’s standalone financial statements is disclosed below. The Company shall adopt these as and when they becomes effective.

(a) Ind As 115 Revenue from Contracts with Customers

I n March 2018, the Ministry of Corporate Affairs has notified the Companies (Indian Accounting Standards) Amended Rules, 2018 (“amended rules”). As per the amended rules, Ind AS 115 “Revenue from contracts with customers” supersedes Ind AS 11, “Construction contracts” and Ind AS 18, “Revenue” and is applicable for all accounting periods commencing on or after April 1, 2018.

Ind AS 115 introduces a new framework of five step model for the analysis of revenue transactions. The model specifies that revenue should be recognised when (or as) an entity transfer control of goods or services to a customer at the amount to which the entity expects to be entitled. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The new revenue standard is applicable to the Company from April 1, 2018.

The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach).

The Company is evaluating the requirement of the amendment and the impact on the financial statements. The effect on adoption of Ind AS 115 is expected to be insignificant

(b) Appendix B to Ind As 21, Foreign currency transactions and advance consideration

On March 28, 2018, Ministry of Corporate Affairs (““MCA””) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which 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 amendment will come into force from April 1, 2018. The Company is evaluating the requirement of the amendment and the impact on the financial statements. The effect on adoption of Ind AS 21 is expected to be insignificant.

(c) Amendment to Ind As 40 Investment property - Transfers of Investment property

The amendments clarify that transfers to, or from, investment property can only be made if there is a change in use that is supported by evidence. A change in use occurs when the property meets, or ceases to meet, the definition of investment property. A change in intention alone is not sufficient to support a transfer. This standard will come into force from accounting period commencing on or after April 1, 2018. The Company shall apply the amendment on the required effective date. Management has assessed the effects of the amendment on classification of existing property at April 1, 2018 and concluded that no reclassifications are required.

(d) Amendments to Ind As 12 : Income taxes regarding recognition of deferred tax assets on unrealised losses.

The amendments clarify the accounting for deferred taxes where an asset is measured at fair value and that fair value is below the asset’s tax base. Management has assessed and concluded that there are no such applicable cases.