Summary of significant accounting policies and other explanatory information to the standalone financial statementsas at and for the year ended 31 March 2015 Corporate Information Subrme Infrastructure India Limited ("the Company") was incorporated in the year 1983 and is engaged in construction and development of roads, highways, buildings, bridges, etc. The Company also owns and operates Ready Mix Concrete ("RMC") plant, Asphalt plant and Crushing plant. 1 Significant Accounting Policies a. Basis of accounting and brparation of financial statements The financial statements have been brpared to comply in all material respects with the accounting standards notified by the Companies (Accounting Standards) Rules, 2006 read with Rule 7 to the Companies (Accounts) Rules 2014 in respect of Section 133 to the Companies Act, 2013. The financial statements are brpared under the historical cost convention, on an accrual basis of accounting. The accounting policies applied are consistent with those used in the brvious year. All the assets and liabilities have been classified as current or non-current, wherever applicable, as per the operating cycle of the Company as per the guidance as set out in the Schedule III to the Companies Act, 2013. Operating cycle for the business activities of the Company covers the duration of the specific project/ contract /project line / service including the defect liability period, wherever applicable, and extends up to the realization of receivables (including retention monies) within the agreed credit period normally applicable to the respective project. b. Accounting Estimates The brparation of the financial statements, in conformity with generally accepted accounting principles, requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of financial statements and the results of operation during the reported period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates which are recognised in the period in which they are determined. c. Fixed assets Tangible assets are stated at cost of acquisition including attributable interest and finance costs till the date of acquisition / installation of the assets and improvement thereon less accumulated debrciation and accumulated impairment losses, if any. Cost includes inward freight, duties, taxes, and incidental expenses related to acquisition and installation up to the point the asset is ready for its intended use. Subsequent expenditures related to an item of Tangible Asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance. Intangible assets comprise of license fees, implementation cost for software and other application software acquired for in-house use. These assets are stated at cost less accumulated amortisation and impairment losses, if any. Capital work in progress rebrsents expenditure incurred in respect of assets under development and are carried at cost. Cost includes related acquisition expenses, construction cost, borrowing costs capitalized and other direct expenditure. d. Debrciation and amortisation Debrciation on tangible assets is provided on straight line basis at rates brscribed in Schedule II to the Companies Act, 2013 on a pro-rata basis. However, certain class of plant and machinery are debrciated at the rates different from the rates brscribed in Schedule II to the Companies Act, 2013 having regard to useful life of those assets in construction projects based on the management's experience of use of those assets which is in line with industry practices. The cost of leasehold land is not amortised as these are perpetual lease. Amortisation on intangible assets is provided on written down basis at the rate of 40%. e. Impairment of assets The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised in the Statement of Profit and Loss whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. A brviously recognized impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation if there was no impairment. f. Borrowing costs Borrowing costs relating to acquisition, construction or production of a qualifying asset which takes substantial period of time to get ready for its intended use are added to the cost of such asset to the extent they relate to the period till such assets are ready to be put to use. Other borrowing costs are charged to the Statement of Profit and Loss in the period in which it is accrued. g. Investments Investments, which are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as non-current investments. Current investments are carried in the financial statements at lower of cost or fair value determined on an individual investment basis. Non-current investments are carried at cost and provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. Trade investments are the investments made for or to enhance the Company's business interests. On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss. h. Inventories Inventory of construction materials is valued at cost, or net realisable value, whichever is lower. Cost is determined using First-in-First-out (FIFO) method and includes all applicable cost of bringing the goods to their brsent location and condition. i. Employee benefits (a) Defined Contribution Plan Contributions to defined contribution schemes such as provident fund, employees' state insurance and labour welfare fund, etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions. (b) Defined Benefit Plan The Company provides for retirement/ post-retirement benefits in the form of gratuity and compensated absences. The Company's liability towards such defined benefit plans is determined based on valuations, as at the balance sheet date, made by independent actuaries using the projected unit credit method. Actuarial gains and losses in respect of the defined benefit plans are recognised in the Statement of Profit and Loss in the period in which they arise. The classification of the Company's net obligation into current and non-current is as per the actuarial valuation report. (c) Other Employee Benefits The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for the measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuations using the projected unit credit method at the period end. Accumulated leave which is expected to be utilised within next 12 months, is treated as short-term employee benefit. Actuarial gains and losses in respect of the defined benefit plans are recognised in the Statement of Profit and Loss in the period in which they arise. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. j. Revenue recognition (i) Revenue from construction contracts The Company follows the percentage completion method, on the basis of physical measurement of work actually completed at the balance sheet date, taking into account the contractual price and revision thereto by estimating total revenue and total cost till completion of the contract and the profit so determined has been accounted for proportionate to the percentage of the actual work done. Unbilled work for projects under execution as at balance sheet date are valued at cost less provision for estimated losses, if any. The costs of projects in respect of which revenue is recognised under the Company's revenue recognition policies but have not been billed are adjusted for the proportionate profit recognized. The cost comprise of expenditure incurred in relation to execution of the project. Provision for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on current estimates. (ii) Revenue from joint venture contracts (a) Contracts executed in Joint Venture under work sharing arrangement (consortium) are accounted in accordance with the accounting policy followed by the Company as that of an independent contract to the extent work is executed. (b) In respect of contracts executed in Integrated Joint Ventures under profit sharing arrangement (assessed as AOP under the Income tax laws), the services rendered to the Joint Ventures are accounted as income on accrual basis. The profit / loss is accounted for, as and when it is determined by the Joint Venture and the net investment in the Joint Venture is reflected as investments, loans & advances or current liabilities. (iii) Revenue from supply contract is recognised when the substantial risk and rewards of ownership is transferred to the buyer and the collectability is reasonably measured. Revenue from product sales are shown as net of all applicable taxes and discounts. (iv) Dividend is recognized when the right to receive the payment is established. (v) Interest and other income are accounted for on accrual basis except where the receipt of income is uncertain in which case it is accounted for on receipt basis. k. Leases Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. l. Foreign currency transactions i) Initial Recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. ii) Conversion Foreign currency monetary items are reported using the closing rate. Non monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. iii) Treatment of Exchange Differences Exchange differences arising on settlement/restatement of short term foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss. Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalised and debrciated over the remaining useful life of the asset. m. Taxation (a) Current tax Provision for current tax is recognised based on the estimated tax liability computed after taking credit for allowances and exemptions in accordance with the Income Tax Act, 1961. (b) Deferred tax Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences between the financial statements' carrying amount of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates or tax rates that are substantively enacted at the Balance Sheet dates. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the period that includes the enactment date. Where there is unabsorbed debrciation or carry forward losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. Where there is no unabsorbed debrciation/carry forward loss, deferred tax assets are recognised only to the extent there is a reasonable certainty of realisation in future. Such assets are reviewed at each Balance Sheet date to reassess realisation. n. Earnings per share "Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and weighted average number of equity shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares." o. Cash and cash equivalents Cash and cash equivalents comprise of cash at bank and cash on hand. The Company considers all highly liquid investments with an original maturity of three month or less from date of purchase, to be cash equivalents. p. Share issue expenses Share issue expenses are charged off against available balance in the Securities Premium Account. q. Provisions and Contingent liabilities A provision is recognised when the Company has a brsent obligation as a result ofpast events and it is probable that an outflow of resources will be required to settle the obligation, in respect ofwhich a reliable estimate can be made. Provisions are not discounted to their brsent value and are determined based on management's estimate required to settle the obligation at the balance sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates. Provisions are recognised in the financial statements in respect of brsent probable obligations, for amounts which can be reliably estimated. Contingentliabilities are disclosed in respect ofpossible obligations that arise from past events, whose existence would be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are neither recognised nor disclosed in the financial statements. 2 Commitments The Company has entered into agreements with various government authorities and semi government corporations to develop road and water supply facilities on Build-Operate-Transfer (BOT) and Public Private Partnership (PPP) basis through certain subsidiary entities. The Company has a commitment to fund the cost of developing the infrastructure through a mix of debt and equity as per the estimated project cost. The Company along with its subsidiary company, Subrme Infrastructure BOT Holdings Private Limited, has given an undertaking to the lenders of a subsidiary Company, not to dilute their shareholding below 51% during the tenure of the loan. 3 Micro and Small Enterprises There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2015. 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. There is no interest paid or payable during the year. 4 Operating lease The Company has taken various residential/commercial brmises and construction equipment on cancellable operating lease. These lease agreements are normally renewed on expiry. Rental expenses in the statement of profit and loss for the year includes lease payments towards brmises Rs. 389,385,289 (31 March 2014 - Rs.488,382,333). 5 The activities of the Company comprises of only one business segment viz Engineering, Procurement and Construction (‘EPC’). The Company operates in only one geographical segment viz India. Hence the Company’s financial statements also rebrsents the segmental information. 6 (a) Trade receivables and unbilled work as at 31 March 2015 include Rs.106,624,566 (31 March 2014: Nil) and Rs. 91,625,360 (31 March 2014: Nil), respectively in respect of a contract which client has terminated and recovered the advances through encashment of bank guarantee. The Company has brferred an appeal in the Honb’le High Court for restoration of contract and providing stay on bank guarantee invoked by the client. The Company is also communicating with the client and is hopeful of resolving this matter amicably. (b) Trade receivables as at 31 March 2015 include Rs. 975,191,826 (31 March 2014: Nil) which are overdue for a substantial period of time. The Company has formed a senior management team led by the Managing Director to rigorously follow up including negotiate/ initiate legal action where necessary. Based on the contract terms and these ongoing recovery procedures adoptedby the company, the management is reasonably confident of recovery of old outstanding receivables. (c) Trade receivables and unbilled work as at 31 March 2015 include Rs. 207,315,829 (31 March 2014: Nil) and Rs. 8,710,520 (31 March 2014: Nil), respectively in respect of a contract which client has terminated and recovered the advances through encashment of bank guarantee. The Company is communicating with the client and is hopeful of resolving this matter amicably. 7 The Company has adequately recognized an expected loss on a project wherever it was probable that total contract costs will exceed total contract revenue. 8 Previous year’s figures have been regrouped or reclassified, to conform to the current year’s brsentation wherever considered necessary. For Walker Chandiok & Co LLP (formerly Walker, Chandiok & Co) Chartered Accountants Firm Registration No. 001076N / N500013 Adi P. Sethna Partner For Shah & Kathariya Chartered Accountants Firm Registration No: 115171W P. M. Kathariya Partner For and on behalf of the Board of Directors B. H. Sharma Chairman Vikas Sharma Wholetime Director Vijay Joshi Company Secretary Place : Mumbai Date : 2 June, 2015 |