1 Background:
Kaira Can Company Limited is a company incorporated in India on March 1, 1962. The company started its manufacturing activity as a Private Limited Company at Anand in the state of Gujarat, which later became a public limited company on August 24th, 1964 and is listed on Bombay Stock Exchange (BSE). The Company is engaged in the manufacture of Open Top Sanitary Cans, Lithographed and Plain Metal Containers and Special Containers. The company is also in the business of manufacturing of Ice Cream Cones since financial year 20002001 and processing and packing of Amul milk at Vashi (Discontinued w.e.f. July 1,2013) . The head office of the Company is situated at Mahalaxmi, Mumbai in the state of Maharashtra. The factories are located at Kanjari and Vithal Udyog Nagar in the State of Gujarat.
The above property is valued at deemed Cost, as per Ind AS 101 whereas the market value of the investment property is As at March 31, 2018, March 31, 2017 and April 1, 2016 the fair value of the property are Rs. 308.04 lakhs, Rs. 280.04 lakhs and Rs. 254.58 lakhs respectively. These fair value of the investment property are categorised as level 2 in the fair valuation hierarchy and has been determined by external, independent valuer, having approprate recognised professional qualifications and recent experience in the location and the category of the property being valued.
These valuations are based on valuation performed by Anmol Sekhri Consultants Pvt. Ltd. on accredited independent valuer and has been worked out the value of the property based on the information’s and study of Micro market in discussion with industry experts, local brokers and regional developers.
2. No shares have been issued for consideration other than cash in five years immediately preceeding the current financial year, financial year 2016-17 and financial year 2015-16.
3. Equity Shares: The Company has issued only one class of equity shares having a par value of Rs.10/- per share. Each shareholder is eligible for one vote per share held. The dividend recommended by the Board of Directors is subject to the approval of the shareholders, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.
4. The Board of Directors has recommended a dividend of Rs. 6.50 per share (March 31, 2017 : Rs. 5 per share, April 1, 2016: Rs. 5 per share) which is subject to approval of shareholders and subject to dividend distribution tax at applicable rate.
5. Cash Credit from Bank of Baroda and DBS Bank Ltd. are Secured by way of a pari passu charge by Hypothecation of Stocks of raw material, Work-in-Progress, Finished Goods, Book Debts, Stores & Spares and Movable Machinery at Kanjari and Anand. The cash credit accounts are further secured by the first charge by way of equitable mortgage on the Company's factory land and building of Metal Can Division situated at village Kanjari & Office premises situated at Anand, in the state of Gujarat.
Applicable Rate of Interest is ranging from 10.15% p.a. to 11.85% p.a. (March 31, 2017: 10.35% p.a. to 10.40% p.a. , April 01, 2016: 11.00% p.a. to 11.65% p.a.).
6. Company has taken the Short term Working Capital Demand Loan of Rs. Nil (March 31, 2017: Rs. 400 lakhs, April 01, 2016: Rs. Nil) from DBS Bank at interest @ Nil (March 31, 2017: 8.90%, April 01, 2016: Nil). Refer 23.1 for security details.
7. Overdraft facility from Kotak Mahindra Bank Ltd. Rs. 125.06 lakhs (March 31, 2017: Rs. 1.21 lakhs, April 01, 2016: Rs. 220.17 lakhs) are Secured by Hypothecation of existing and future tangible and current assets & movable fixed assets of Ice Cream Cone Division. The Overdraft facility is further secured by the equitable mortgage over factory / land and building situated at GIDC, Vitthal Udhyog Nagar, Karamsad, Anand, in the state of Gujarat.
Applicable rate of interest is 9.75% (March 31, 2017: 11.05% p.a., April 01, 2016 : 11.25% p.a.)
8. Due to Micro and Small Enterprises
Micro and small enterprises as defined under the Micro Small and Medium Enterprises Development Act 2006 (MSMED Act) have been identified by the Company on the basis of the information available with the Company. The disclosures pursuant to MSMED Act based on the books of account are as under:
There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2018. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the company. The auditors have relied on the information provided by the management.
Some of the Trade Payables balance are subject to confirmation.
9A Disclosure as required under Ind AS 19 - Employee Benefits
[A] Defined contribution plans:
The Company makes contributions towards provident fund and superannuation fund to defined contribution retirement benefit plan for qualifying employees. The provident fund contributions are made to Government administered Employees Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plan equal to a specified percentage of the covered employee's salary.
The superannuation fund is administered by the Life Insurance Corporation of India. Under the plan, the Company is required to contribute a specified percentage of the covered employee's salary to the retirement benefit plan to fund the benefits.
The Company recognised Rs.55.02 lakhs (March 31, 2017: Rs. 56.80 lakhs, April 1, 2016: Rs.59.21 lakhs) for provident fund contributions in the Statement of Profit and Loss.
[B] Defined benefit plan:
The Company makes annual contributions to "Kaira Can Employees Gratuity Fund", a funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under:
i) On normal retirement / early retirement / withdrawal / resignation: As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of service.
ii) On death in service: As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.
The following table sets out the status of the gratuity plan and the amounts recognised in the Company's financial statements as at March 31, 2018.
10. The Company was required to spend an amount of Rs. 8.20 lakhs (Previous Year Rs. 11.00 lakhs) being 2% of the average net profits of the three immediately preceding financial years on CSR as per the provisions of section 135 of the Companies Act, 2013. The Company has during the year spent Rs. 8.50 lakhs (Previous Year Rs. 11.00 lakhs) only. The Concerned Expenditure has been paid and debited to the following heads as below :
11. SEGMENT INFORMATION
(1) Primary Segment Reporting (by Business Segment)
- Composition of Business Segments - Based on product lines are as under:
Business Segment Product Line
(i) Tin Containers Segment manufactures Open Top Sanitary Cans, General Line Metal
Containers and Components for Metal Containers.
(ii) Ice Cream Cones Segment manufactures Rolled Sugar Cones for filling Ice cream.
12. Related party transactions as per Ind AS 24
The disclosure of related party transactions is presented as per "Indian Accounting Standard (Ind AS) 24 Related Party Disclosures" on an aggregate basis for shareholders, their relatives and companies controlled by shareholders. In addition, there may be additional disclosures of certain significant transactions (balances and turnover) with certain related parties.
13. Financial instruments - Fair values and risk management
A. Accounting classification and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
FVTPL - Fair Value Through Profit and Loss
FVTOCI - Fair Value Through Other Comprehensive Income
The carrying amounts of trade receivables, electricity deposit, cash and cash equivalents and other short term receivables, trade payables, unclaimed dividend, borrowings, capital creditors and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds 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, traded bonds, 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 included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
B Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments.
- the fair value of forward foreign exchange contracts is determined using forward exchange rate as at the balance sheet date.
14. Financial risk management and policies
The company's activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk.
The company's risk management is carried out by finance department of the Company. The Finance department identifies, evaluates and hedges financial risks in close co-operation with the Company's operating units. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(a) Credit Risk
Credit risk is the risk of incurring a loss that may arise from a borrower or debtor failing to make required payments. Credit risk arises mainly from outstanding receivables from debtors, cash and cash equivalents, employee advances and security deposits. The Company manages and analyses the credit risk for each of its new clients before standard payment and delivery terms and conditions are offered.
(i) Credit risk management
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer and including the default risk of the industry, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.
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 through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty's ability to meet its obligations;
iv) Significant increase in credit risk on other financial instruments of the same counterparty;
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.
Financial assests are written off when there is no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized as income in the statement of profit and loss.
The Company measures the expected credit loss of trade receivables based on historical trend, industry practices and the business environment in which the entity operates. We have evaluated percentage of allowance for doubtful debts with the trade receivables over the years:
(b) Liquidity Risk
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company ensures sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the dynamic nature of the underlying businesses, the Treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Company's liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.
(ii) Maturities of financial liabilities
The tables herewith analyse the Company's financial liabilities into relevant maturity groupings based on their contractual maturities for: The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
(c) Market risk
(i) Foreign currency risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The risk is measured through a forecast of foreign currency for the Company's operations. The Company’s exposure to foreign currency risk at the end of the reporting period expressed in INR, are as follows:
(d) Capital Management Risk Management
The Company's objectives when managing capital are to
- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
- maintain an optimal capital structure to reduce the cost of capital.
Currently, there are no borrowings ; and operations are being funded through internal accruals.
15. Disclosure as required by Ind AS 101 first time adoption of Indian Accounting Standards Transition to Ind AS
These are the Company's first Financial Statements prepared in accordance with Ind AS.
The accounting standards notified u/s 133 of the Companies Act, 2013 and the Accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of an opening Ind AS balance sheet at April 1, 2016 (The Company's date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).
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 by the Company in the transition from previous GAAP to Ind AS.
A.1.1 Ind AS optional exemptions
Ind AS 101 permits a first time adopter to elect to continue with the carrying value for all of its Property, Plant and Equipment (PPE) as recognized 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 decommissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and for Investment property covered by Ind AS 40 Investment Property. Accordingly, the Company as elected to measure all of its PPE, Intangible assets and Investment Property at their previous GAAP carrying value.
A.1.2 Designation of previously recognized financial instruments
Ind AS 101 allows an entity to designate investments in equity instruments at Fair Value through Other Comprehensive Income (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.
A.2 Ind AS Mandatory Exceptions
A.2.1 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, 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Investment in equity instruments carried at FVOCI and
- Investment in mutual funds carried at Fair Value through Profit and Loss (FVPL).
A.2.2 De-recognition of financial assets and liabilities
Ind AS 101 requires a first time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity's choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
A.2.3 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
B. Reconcliations between previous GAAP and Ind AS
The following tables represent the reconciliations of Balance Sheet, Total Equity, Total Comprehensive Income and Cash Flows from previous GAAP to Ind AS.
C. Notes to First time adoption
1 Fair valuation of investments
Under the previous GAAP, investments in equity instruments and mutual funds 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. The resulting fair value changes of these investments (other than equity instruments designated as at FVOCI) have been recognized in retained earnings as at the date of transition and subsequently in the profit and loss for the year ended March 31, 2017. This increased the retained earnings by Rs. 0.60 lakhs as at March 31, 2017 (April 1, 2016 -Rs. 2.69 lakhs).
Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognized in FVOCI Equity Investments reserved as at the date of transition and subsequently in the other comprehensive income for the year ended March 31, 2017. This increased other reserves by Rs. 0.71 lakhs as at March 31, 2017 (April 1, 2016 - Rs.2.03 lakhs).
2 Expected Credit Loss provisioning
Under previous IGAAP, provision for bad and doubtful debts has been made as per Company's policy. Under Ind AS, trade receivables are required to be tested for expected credit loss, if any. Accordingly an impairment allowance has been determined based on Expected Credit Loss model (ECL). A provision of Rs. 5.25 Lakhs is credited as at March 31, 2017. Accodingly there is decrease in total retained earning by Rs. 3.51 lakhs as at March 31, 2017.
3 Other Income: Recognition of MEIS
MEIS Income recognised in current year is amounting to Rs. 32.13 lakh (net of tax) but as per Ind AS 101 read with Ind AS 8, it has been reclassified on accrual basis to the year it pertains i.e.amounting to Rs. 8.96 lakh (net of tax) for March 31, 2017 and Rs. 7.63 lakh (net of tax) for April 1, 2016.
4 Proposed Dividend and Corporate Dividend Tax
Under Previous GAAP, Proposed Dividend was recorded as a liability in the period to which it relates. Under Ind AS, dividend to holders of equity instruments is recognized as a liability in the period in which the obligation to pay is established (post approval of shareholders in the AGM). As a result, the Proposed Dividend of Rs. 46.11 Lakh and CDT of Rs. 9.39 Lakh has been added back to "Other Equity". and deducted from "Provisions".
5 Excise Duty
Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the Statement of Profit and Loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended March 31, 2017 by Rs.1,316.63 lakhs. There is no impact on the total equity and profit.
6 Remeasurements of post-employment benefit obligations
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 decreased by Rs. 6.15 lakhs . There is no impact on the total equity as at March 31, 2016.
7 Deferred tax
Deferred tax have been recognized on the adjustments made on transition to Ind AS.
8 Retained Earnings
Retained earnings as at April 1, 2016 has been adjusted consequent to the above Ind AS adjustments.
9 Other Comprehensive Income
Under Ind AS, all items of income and expense recognized in a period should be included in Statement of Profit and Loss for the period, unless a standard requires or permits otherwise. Items of income and expenes that are not recognized in Statement of Profit and Loss but are shown in the Statement of Profit and Loss as “Other Comprehensive Income”, includes remeasurement of Employee Benefit obligation and fair valuation of Equity Instruments through OCI and Income tax relating to these items. The concept did not exist under the previous GAAP.
16. Standards Issued but not yet effective.
The standard issued, but not yet effective up to the date of issuance of the company financial statement is disclosed below. The Company intends to adopt the standard when it becomes effective.
Ind AS 115 Revenue from Contracts with Customers
Ind AS 115 was issued in February 2015 and establishes a five step model to account for revenue arising from contracts with customers. Under Ind AS 115 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled for transferring goods or services to a customer. The new revenue standard will supersede the current revenue recognition requirements under Ind AS. The standard comes into force from accounting period commencing on or after 1st April, 2018. The Company will adopt the new standard on the required effective date. The Company is in process of examining the applicability of the standard.
17. For all periods upto and including the year March 31, 2017 the company prepared its financial statements in accordance with the accounting standard prescribed under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
18. The financial statements were authorized for issue in accordance with a resolution passed by the Board of Directors on May 28, 2018.
19. The figures as on the transition date and previous year have been re-arranged and regrouped wherever necessary and/ or practicable to make them comparable with those of the current year.
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