Avanti Feeds Ltd.
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ISIN No INE871C01038 52Wk High (Rs.) 980 BV (Rs.) 81.25 FV (Rs.) 1.00
Bookclosure 07/08/2018 52Wk Low (Rs.) 390 EPS (Rs.) 32.77 P/E (X) 13.78
Mkt Cap. (Rs. Cr.) 6,152.85 P/BV (X) 5.56 Div Yield (%) 1.33 Mkt Lot 1
2017-03

1. Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 2/- per share ( previous year Rs. 2/- per share). Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees.

The Board, in its meeting on 13th May 2017 has recommended final dividend Rs.9/- per Equity Share for the financial year ended 31.03.2017 (31.03.2016: Rs.7/-). The proposal is subject the approval of Shareholders in the ensuing Annual General Meeting and, if approved, would result in a cash outflow of approximately Rs 4919.46 Lacs (including dividend distribution tax of Rs 832.09 lacs).

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.

2. Vehicle loans are secured by hypothecation of respective vehicles. The loans are repayable in 36 months.

3. Company had availed sales tax deferment scheme in 2001-02. Under the scheme, the sales tax collected from the customers from 2001-02 to 2004-05 was converted in to interest free loan for period of 14 years in the final installment of loan Rs. 180.47 lakhs is due for payment in March 2018.

4. Security Deposits taken from dealers for supplying them shrimp feed on credit terms. Interest is paid on these deposits @ 9% per annum (31st March, 2016: 9% p.a.).

5. Working Capital loans of Rs.131.16 lacs was availed from State Bank of India, Industrial Finance Branch, Hyderabad. The loan is secured by first charge on all current assets, second charge on fixed assets of the company and personal guarantee of Mr. A. Indra Kumar, Chairman and Managing Director of the Company. The loan is repayable on demand and carries interest @ 10.70% p.a.

6. Exceptional income of Rs. 6.17 lacs for the year ending 31.03.2017 (PY Rs. 493.68) is Countervailing Duty (CVD) paid to U.S. Customs department in the year 2013-2014, now refunded by U.S. Customs.

7. An amount of Rs. 45.51 lacs exceptional income raised in the year 2015-16 on account of Slump Sale of Processing & Export Division to company's subsidiary Avanti Frozen Foods Private Limited and an amount of Rs. 102.57 lacs expenditure incurred towards slump sale stamp duty expenditure.

8. During the year 31.03.2017 the company made 100% provision for the advance of Rs.0.42 lakhs given to its wholly owned subsidiary Svimsan Exports & Imports Private Limited (SEIPL), whereas for the year ending 31.03.2016 company provided diminution of Rs. 100.00 lacs in the value of investment and also 100% provision for the advance of Rs. 90.56 lacs given to it. SEIPL was incorporated in the year 1998 and it incurred losses which resulted in erosion of its net worth and there are no operations in SEIPL from financial year 2002-2003. The net worth of the subsidiary company is negative and there is no scope for future operations in the Company.

9. Discontinuing operations :

During the financial year 2015-16 the company (AFL) has divested its Shrimp Processing & Export Division to its subsidiary M/s. Avanti Frozen Foods Private Limited (AFFPL) by way of slump sale, under Business Transfer Agreement. This was done in order to improve business efficacy and to bring global recognition to Shrimp Processing Business. The effective date of transfer of the Shrimp Processing & Export Division to AFFPL was 01.11.2015. However, transfer of statutory licenses from AFL to AFFPL was received in June'16 and transfer of name from US DOC was received on 22.11.2016. From 01.04.2016 to 30.06.2016 AFL operated the Processing & Export unit on behalf of AFFPL and from 01.07.2016 till 22.11.2016, AFFPL did the processing and AFL exported as a merchant exporter. With effect from 23.11.2016, AFFPL is carrying on operations in its own name.

The revenue and related expenditures for the period from 01.04.2016 to 22.11.2016 reflecting processing and export of shrimps made on behalf of AFFPL and as a merchant exporter of shrimps processed by AFFPL are included in statement of profit & loss of AFL. However, the profit from operation for the period starting from 01.04.2016 to 22.11.2016 amounting to Rs. 1864.80 lakhs is

10. Discontinuing operations (Contd.....):

transferred to AFFPL which is reflected in the standalone results of the Company as Extra Ordinary Expense. A detailed statement of the operations of Shrimp Processing & Export Division for the period from 01.04.2016 to 22.11.2016 is given here under.

* During the period from 23.11.2016 to 31.03.2017 no shrimp processing or exports or merchant exports are done by AFL.

11. Gratuity (post-employment benefit plan)

The company operates a defined plans, viz., gratuity for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the respective plan.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

12. Capital commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.Nil (31st March,2016: Rs.1075.22 lakhs) which is net of capital advances of Rs. Nil (31st March,2016: Rs. 658.94 lakhs).

13. The Customs and Central Excise Department raised demand for Rs.1494.59 lacs and levied penalty of Rs.1504.59 lacs for customs duty forgone on duty free imports of raw materials and non-fulfillment of export obligation for the period 1999-2000 to 2001-2002 when the Company was operating as a 100% EOU. Company had achieved Net Foreign Exchange Earnings in 2003-04 and the Development Commissioner of Visakhapatnam Export Procession Zone allowed Company to de-bond upon being satisfied with the fulfillment of exports made by the Company and foreign exchange earning obligations. Further, Company had paid Rs.1655.03 lacs excise duty in lieu of the duty free import of raw materials and spares. However, the Customs and Central Excise Department raised the demand without considering the amounts paid. This demand and levy of penalty was contested by the Company before CESTAT, Bangalore and Hon'ble CESTAT remanded the case back to The Commissioner for fresh adjudication after considering all the aspects raised by the Company. The Commissioner gave his order confirming the demand and Company again approached CESTAT against this order. The matter is pending before CESTAT, Hyderabad.

14. The Company purchased soya bean in the year 2004-05, converted the same in to DOC in 2005-06 and used some part for own consumption in manufacturing of shrimp feed and some part was exported. The resultant soya oil was sold locally. The Commercial Tax Act pertaining to soya bean processing and soya oil sale was amended with effect from 13.12.2004 and Commercial Tax department took the view that the soya bean purchased prior to 13.12.2004 will attract tax at old rates and a demand to Rs.29.22 lacs was raised. This is being contested by the Company in the High Court of Madhya Pradesh.

15. For the Assessment Year 2011-2012 Assessing officer disallowed an amount of Rs. 17.95 lacs U/s. 14A for the Investments made by the Company and raised demand for Rs. 5.13 lacs. Company is contesting the same before Commissioner Appeals.

16. Company approached Supreme Court against the order of High Court of Andhra Pradesh confirming the levy and collection of Electricity Duty on self generated power from DG sets.

17.Company is importing Squid Liver Powder (SLP) which was one of the raw materials for manufacturing of shrimp feed. SLP was imported by the Company under raw material classification. However, Customs has disputed our claim and demanding duty applicable for import of complete feed. Company appealed against the order of Commissioner of Customs (Appeals), Chennai before CESTAT, Chennai.

The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the company's financial position and results of operations.

B. The company has given guarantee of Rs. 7590.00 Lakhs to State Bank of India, Industrial Finance Branch, Somajiguda, Hyderabad for loans facilities sanctioned to Avanti Frozen Foods Private Limited.

18. Derivative instruments and unhedged foreign currency exposures Derivatives outstanding as at the reporting date Particulars Purpose

Forward contract to sell US$

US$ 2,97,030 (US$ 1,21,14,669 as at 31st March, 2016) Hedge of export debtors and Rs.205.14 lacs (Rs.8,188.40 lacs as at 31st March 2016)) for confirmed export orders

Forward contract to buy US$

US$ 23,84,250 (US$ 25,62,897 as at 31st March, 2016) Hedge for import liabilities

Rs. 1590.39 lacs (Rs. 700.04 lacs as at 31st March, 2016))

Closing rate as at 31st March, 2017 - 1 USD = Rs 64.8386 (31st March, 2016: 1 USD = Rs 66.3329)

19.Details of dues to micro and small enterprises as defined under MSMED Act 2006.

With the promulgation of the Micro, Small and Medium Enterprises Development Act, 2006, the Company is required to identify Micro, Small and Medium Suppliers and pay them interest on overdue beyond the specified period irrespective of the terms with the suppliers. The Company has circulated letter to all suppliers seeking their status. Response from the suppliers is still awaited. In view of this, the liability of interest cannot be reliably estimated nor the required disclosures could be made, Accounting in this regard will be carried out after the process is completed and reliable estimate made in this regard. However management is of the opinion that liability in any case will be insignificant having regard to the supplier's profile of the company.

20. Segmental Information

I. Primary Segment

The Company's business is organized into three main business segments mainly Shrimp Feed, Processing & Shrimp Exports (discontinued operations) and Wind Mills. Segments have been identified and reported taking into account the nature of products, the differing risk and returns, the organization structure, and the internal financial reporting system ( refer note no. 37).

Shrimp Feed is manufactured & marketed to the farmers, which is used in Aqua culture to grow shrimp. Shrimp are purchased from the farmers and are further processed and exported to various countries. Company had installed four wind mills of 3.2MW at Chitradurga, Karnataka. Power generated from wind mills is sold to BESCOM under Power Purchase agreement.

Segment Revenue and Results

All segment revenues & expenses that are directly attributable to the segments are reported under the respective segment. The revenues and expenses that are not directly attributable to any segments are shown as unallocated expenses.

Segment assets and liabilities

Segment assets include all operating assets used by the business segment and consist principally Fixed Assets, Debtors and Inventories. Segment liabilities primarily include creditors and other liabilities. Assets and Liabilities that cannot be allocated between the segments are shown as a part of unallocated assets and liabilities respectively.

II. Secondary Segment: Geographical Segment:

Based on the Revenue attributable to the individual customers located in various parts of the world, the company's business is organized into three key geographic segments, viz., India, USA and Rest of World.

21. Related party dislcosures 38.1 Names of related parties and related party relationship: Related parties where control exists

Subsidiary Svimsan Exports & Imports Private Limited

Avanti Frozen Foods Private Limited

Related parties with whom transactions have taken place during the year

Key Managerial Personnel Sri A. Indra Kumar, Chairman and Managing Director

Sri C. Ramachandra Rao, Joint Managing Director, Company Secretary and CFO

Relatives of Key Managerial Peronnel Sri A. Venkata Sanjeev

Associate Companies Srivathsa Power Projects Limited

Patikari Power Private Limited

Companies over which Significant

Influence is exercised Srinivasa Cystine Private Limited

SCL Trading Private Limited

Sanjeev Agro Vet Private Limited

Laxai-Avanti Life Sciences Private Limited

Sri Sai Srinivasa Agro Farms & Developers Private Limited

22. Related party transactions

The following table provides the total amount of transactions that have been entered into with related

parties for the relevant financial year: