NOTE 1: SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Preparation of Financial Statements a) These financial statements have been brpared to comply with the Generally Accepted Accounting Principles in India, including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. b) The financial statements are brpared on accrual basis under the historical cost convention. The financial statements are brsented in Indian rupees. 2. Use of Estimates The brparation of financial statements requires judgements, estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/ materialised. 3. Tangible and Intangible Fixed assets a) Tangible fixed assets i) Fixed Assets are stated at cost net of CENVAT / VAT wherever applicable and less accumulated debrciation. Cost comprises of Purchase Price and attributable Cost. The Preoperative expenses are capitalised. ii) Expenditure (including financing costs) incurred for fixed assets, the construction/installation/acquisition of which is not completed up to the year end is included under the capital work-in-progress and on such completion the same is related/classified to the respective fixed assets. b) Intangible fixed asset i) Software licenses are stated at cost of acquisition including any cost attributable bringing the asset to its working condition, less accumulated amortisation. Any expenses on such software licenses for support and maintenance payable annually are charged to the Statement of Profit and Loss. 4. Investments a) Investments are classified into Non Current and Current Investments. b) Non Current investments are being valued at cost of acquisition. Provision is made to recognize a decline, other than temporary, in the carrying amount of long term investments. c) Current investments are being valued at cost or market value whichever is lower. 5. Debrciation/Amortisation a) Debrciation on fixed assets is being provided on "Straight line method" in accordance with Companies Act 2013 as per the useful life specified in schedule II of the act till the written down value is reduced to 5% of the gross value being Residual value. No further debrciation is provided on such balance. b) Debrciation in respect of addition to the fixed assets is provided on Pro-rata basis from the month in which such assets are acquired/installed/started commercial production. c) Debrciation on fixed assets sold, discarded or demolished during the year is being provided at their respective rates up to the month in which such assets are sold, discarded or demolished. d) The provision for debrciation for multiple shifts, wherever applicable, as per records, and as advised, has been made on the basis of the actual utilisation of respective eligible assets. 6. Inventories a) Valuation of inventories is inclusive of taxes or duties incurred and on FIFO basis except otherwise stated. b) Raw materials and Work in progress are being valued at cost or net realisable value whichever is lower. c) Stores, Spares and Tools are being valued at weighted average cost. d) Goods in Transit, if any, are stated at actual cost up to the date of the Balance Sheet. e) Finished Stocks are being valued at direct cost or net realisable values whichever is lower. 7. Sales Sales are inclusive of excise duty; however, in conformity with the requirements of Accounting Standard 9 "Recognition of Revenue" the sales are brsented in the financial statements as sales less excise duty. Sales exclude sales tax and value added tax discount, claims, and shortage. The commission, brokerage and incentives are recognised as an expense for the sales. Transportation and marine insurance recovered from customers are reduced from the respective expenses. 8. Retirement and other benefits to employees a) Employees' benefit under defined contribution plan such as contribution to provident fund and employees' benefits under defined benefit plan for leave encashment are charged off at the undiscounted amount in the year in which the related service provided. b) Post employment benefits under defined benefit plan such as gratuity are charged off in the year in which the employee has rendered services at the brsent value of the amounts payable determined using actuarial valuation techniques. Actuarial gain and/or losses in respect of post employment benefits are charged to Statement of Profit and Loss or capitalised in case of new projects are taken up by the company. 9. Prior period income / expenses The company follows the practice of making adjustments through "Prior Period items" in respect of all material transaction pertaining to the period prior to current accounting period/year. 10. Income from investments Incomes from Investments, where appropriate, are taken into revenue in full on declaration or receipt and tax deducted at source thereon is treated as advance tax. 11. Contingent liabilities Contingent liabilities are not recognised but are disclosed by way of notes to accounts. Disputed demands in respect of Central Excise, Customs, Income Tax and other proceedings etc. are disclosed as contingent liabilities. Payments in respect of such demands, if any, are shown as advance till the final disposal of the matters. 12. Excise duty a) CENVAT credit available as per the provisions of the Excise Rules on raw material, packing material, etc purchased, is accounted for by reducing the cost of the respective items. b) Excise duty payable on finished goods lying at the factory brmises at the close of the year is provided in the books as per the Excise Rules. c) CENVAT credit available as per the provisions of the Excise Rules on capital goods is accounted for by reducing the cost of capital goods. 13. Leases The brsent value of the lease payments is recognised as an asset with a corresponding liability. Annual lease payments are allocated into financial charge and also principal repayment. The financial charge is charged to the Statement of Profit and Loss and the portion of the principal amount paid is deducted from the liability. The debrciation is also charged to Statement of Profit and Loss on the assets taken on finance lease. 14. Taxes on income Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, on timing differences, being the difference between taxable incomes and accounting income that originate in one year and are capable of reversal in one or more subsequent years. Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax against which the MAT paid will be adjusted. 15. Segment reporting Segments have been identified in line with the AS-17, taking into account the organisational structure as well as the differing risks and returns. The business segment is disclosed as primary segment. 16. Borrowing costs The company capitalises interest and other costs incurred by it in connection with funds borrowed for the acquisition of fixed assets. Where specific borrowings are identified to a fixed asset or a new unit, the company uses the interest rates applicable to that specific borrowing as the capitalisation rate. Capitalisation of borrowing costs ceases when all the activities necessary to brpare the fixed assets for their intended use are substantially complete or the fixed assets are put to use. Other borrowing costs are charged to Statement of Profit and Loss. 17. Transaction in Foreign Currencies a) Initial Reorganisation: Transactions denominated in foreign currencies are recorded by applying the exchange rates brvailing at the date of the transactions. b) Conversion: Monetary items denominated in foreign currencies remaining unsettled at the end of the year, are restated using the closing rates. c) Exchange Difference: The exchange difference arising on the settlement of monetary items or on reporting unsettled monetary items at the rates different from those at which they were initially recorded during the year, or reported in the brvious financial statements, are recognised as income or as expenses in the year in which they arise. In case the monetary items are covered by the forward exchange contracts, the difference between the yearend exchange rate and the exchange rate at the date of the inception of the forward exchange contract is recognised as exchange difference. d) Forward Exchange Contracts: In case of transactions covered by forward exchange contracts, which are not intended for trading or speculation purposes, the brmium/discount rebrsented by difference between the exchange rate at the date of the inception of the forward exchange contract and forward rate specified in the contract is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of Profit and Loss in the year in which the exchange rate changes. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year. In case of transactions covered by forward exchange contracts, which are intended for trading or speculation purposes, the brmium/discount is ignored and at each balance sheet date, the value of the contract is marked to its market value and gain/ loss on the contract is recognised. e) Non-monetary foreign currency items such as investments are carried at cost. 18. Impairment loss Impairment loss is provided to the extent the carrying amount(s) of assets exceed their recoverable amount(s). Recoverable amount is the higher of an assets net selling price and its value in use. Value in use is the brsent value of estimated future cash flow expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm length transaction between knowledgeable, willing parties, less the cost of disposal. 19. Cash and Cash equivalents Cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less. NOTE2: Corporate Debt Restructuring Raj Rayon Industries Limited hereinafter referred to as the 'Borrower', who have availed various financial facilities from the secured lenders. At the request of the Borrower, the Corporate Debt Restructuring Proposal ('CDR Proposal') of the Borrower was referred to Corporate Debt Restructuring Cell ("CDR Cell") by the consortium of lenders led by the State Bank of India. The CDR Proposal as recommended by State Bank of India, the lead lender and approved by lenders who are members of CDR Cell hereinafter referred to as the 'CDR Lenders' was approved by CDR Empowered Group ('CDR EG') on March 24, 2014 and communicated vide Letter of Approval dated March 27,2014. The cutoff date for CDR Proposal was August 01, 2013. The Master Restructuring Agreement ('MRA') between the Borrowers, guarantors and the CDR Lenders has been executed, by virtue of which the restructured facilities are governed by the provisions specified in the MRA having cutoff date ('COD') of August 01, 2013. The key features of the CDR Proposal are as follow: 1. Restructuring of repayment Schedule of Restructured Term Loan - 1 & 2 (RTL - 1 & 2) 2. Repayment of Restructured Term Loan - 3 ('RTL - 3') after moratorium of 2 year from COD in 24 structured quarterly installments commencing from October, 2015 to July, 2021. 3. Conversion of various irregular/outstanding/devolved financial facilities into Working Capital Term Loan ('WCTL'). Repayment of WCTL after moratorium of 2 year from COD in 24 structured quarterly installments commencing from October, 2015 to July, 2021. 4. Restructuring of existing fund based and non fund based financial facilities, subject to renewal and reassessment every year. 5. Interest accrued on certain financial facilities from COD till the facility wise specified period shall be converted into Funded Interest Term Loan ('FITL'). The interest payable on RTL 1 & RTL - 2 for a period of 18 months from COD till January 31, 2015 shall be converted to FITL - I. The Interest payable on RTL -3 and WCTLI, WCTL II & WCTL III during moratorium period of 2 years from COD shall also be converted to FITL - II. The Interest paid on Unhedged Foreign Currency Facilities (LC, BC and FCNR) post Dec 31, 2013 shall also be converted into FITL - 3. 6. The rate of interest on RTL 1 & RTL - 2 remains unchanged whereas rate of Interest on RTL - 3, WCTL, FITL shall be 12.70% and fund based working capital facilities shall be 11% with reset option in accordance with MRA. 7. Waiver of all liquidated damages / penal charges / processing fees / penal interest or excess interest (in excess of documented rate) on any of the facilities till the implementation of Restructuring Scheme. 8. Right of Recompense to CDR Lenders for the relief and sacrifice extended, subject to provisions of CDR Guidelines and MRA. 9. Contribution of Rs.10.98 Crores in the Company by promoters in lieu of lenders sacrifice in the form of introduction of funds by way of Unsecured Loans. In case of financial facilities availed from the Non-CDR Lenders, the terms and conditions shall continue to be governed by the provisions of the existing financing documents. Expenditure on restructuring and refinancing of earlier financial facilities has been charged off over a period of 9 years. The Borrowers and the CDR Lenders executed a MRA during the year. The MRA as well as the provisions of the Master Circular on Corporate Debt Restructuring issued by the Reserve Bank of India, give a right to the CDR Lenders to get a recompense of their waivers and sacrifices made as part of the CDR Proposal. The recompense payable by the borrowers is contingent on various factors including improved performance of the borrowers and many other conditions, the outcome of which currently is materially uncertain and hence the proportionate amount payable as recompense has been treated as a contingent liability. The aggregate brsent value of the outstanding sacrifice made/ to be made by CDR Lenders as per the MRA is approximately Rs.37.06 crore for the Company. NOTE 1: As informed by the management, the Company's Continuous Polymerization Plant (CP Plant), Direct Polymer Melt POY Plant (DPM POY Plant) and other Plants (POY, FDY & PTY) are operational. NOTE 2: In the Opinion of the Board, the Current Assets / Non Current Assets, Loans & Advances (including Export benefits/ incentive / interest subsidy under TUF) and Trade Payables are subject to confirmation / reconciliation. NOTE 3: Figures for the brvious year have been reworked, regrouped, rearranged and reclassified wherever necessary. Amounts and other disclosures for the brceding year are included as an integral part of the current year financial statements and are to be read in relation to the amounts and other disclosures relating to the current year. The accompanying notes are an integral part of the financial statements As per our attached report of even date For K. M. Garg & Co. Chartered Accountants Firm registration No. 120712W CA. K K Garg Partner Membership no. 033940 For and on behalf of the board Rajkumari Kanodia Non Executive Chairperson and Director DIN No. 00229331 Naval Kanodia Director DIN No. 03063554 Gita Yadav Company Secretary Sushil Kumar Kanodia C.E.O. & C.F.O. Place : Mumbai Dated: 30th May, 2015 |