Corporate information

Divgi Torq Transfer Systems Private Limited (Formerly known as Divgi Metal Wares Private Limited) (the ‘Company’) is a private company domiciled in India and incorporated under the provisions of the Companies Act, 1956of India. The Company is engaged in the manufacture and sale of transfer cases, automatic locking hubs, synchronizers and components thereof (transmission components) and related services to automotive Original Equipment Manufacturers (OEMs) and other customers in the Indian and global market.


Significant accounting policies

Basis of Preparation

The financial statements are brpared in accordance with the Generally Accepted Accounting (‘GAAP”) in India under the historical cost convention on an accrual basis, and are in conformity with mandatory accounting standards, as brscribed under Section 133 of the Companies Act, 2013 (“Act”) read with Rule 7 of the Companies (Accounts) Rule 2014, the provisions of the Act (to the extent notified). The accounting policies have been consistently applied by the Company during the period and are consistent with those used in brvious year. All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current – non current classification of assets and liabilities.

Use of Estimates

The brparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.

Fixed assets and Debrciation

Tangible Assets are stated at acquisition cost and net of accumulated debrciation.

Subsequent expenditures related to an item of fixed 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.

Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss.

Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are
carried at cost are recognised in the Statement of Profit and Loss..

Debrciation and Amortisation is provided on a pro-rata basis on the straight-line method over the estimated useful lives of the assets which are as per rates brscribed under Schedule II to the Companies Act, 2013, in order to reflect the actual usage of the assets.






Impairment

Assessment is done at each balance sheet date as to whether there is any indication that an asset (tangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset’s or cash generating unit’s net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each balance sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased.

Borrowing Cost

General and specific borrowing costs attributable to acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

Investments

Investments that are readily realisable and are 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 long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

Inventories

Inventories are stated at lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises material cost, direct labour and manufacturing expenses which is determined using absorption costing method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Foreign currency transactions

Initial Recognition

On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Subsequent Recognition

As at the reporting date, 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.

All monetary assets and liabilities in foreign currency are restated at the end of accounting period.

Exchange differences on restatement of all other monetary items are recognised in the Statement of Profit and Loss.




Revenue recognition

Sale of goods: Sales are recognised when the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are recognised net of trade discounts, rebates, sales taxes and excise duties.

Sales of services: In contracts involving the rendering of services, revenue is measured using the completed service contract method and is recognised net of service tax.

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend income is recognised when the right to receive dividend is established.


Taxes on Income

Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws brvailing in the respective jurisdictions.

Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the group reassesses unrecognised deferred tax assets, if any.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set-off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing tax laws.

Employee Benefits

Defined contribution plans

Superannuation: The Company has defined contribution plans for post-employment benefits in the form of superannuation fund for certain class of employees, which is administered through Life Insurance Corporation (LIC). The Company has no further obligation beyond its contribution.

Provident Fund: The Company has defined contribution plan for post-employment benefits in the form of provident fund for all employees, which is administered by the Regional Provident Fund Commissioner. The Company has no further obligation beyond its monthly contributions.

Defined benefit plans

Gratuity: The Company has a defined benefit plan for post-employment benefit in the form of gratuity for all employees, which is administered through Life Insurance Corporation (LIC).Liability for above defined benefit plan is provided on the basis of actuarial valuation, as at the Balance Sheet date, carried out by an independent actuary. The Company’s liability is actuarially determined (using the Projected Unit Credit
method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.






Compensated absences

Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefits.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Company’s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

In respect of encashment of leave, the Defined Benefit Obligation is calculated taking into account all type of the decrement and qualifying salary projected up to the assumed date of encashment.

Provisions and Contingent liabilities

Provisions: Provisions are recognised when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance sheet date and are not discounted to its brsent value.

Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

Warranty

The provision is based on management's estimate of future cost of corrective action on product failure established using historical information regarding frequency and average cost of servicing the warranty claims. The timing and amount of cash flows that will arise from these matters will be determined at the time of receipt of claims from customers.

Leases

Operating leases

As a lessee:
Assets taken on lease under which all the risk and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognized as expenses on straight line basis in accordance with the respective lease agreements.

Notes to the financial statements

(a)	Disclosure as per Accounting Standard 15 (contd)
iv.	Expenses recognised in the Statement of Profit and Loss
						Year ended March 31, 2019	Year ended March 31, 2018
						Rs.	Rs.
	(a)	Current Service Cost				22,78,445	18,76,374
	(b)	Interest Cost				23,06,287	19,93,925
	(c)	Expected Return on Plan Assets				(16,11,465)	(13,99,338)
	(e)	Past Service Cost				-	33,26,717
	(d)	Net actuarial (Gain)/Loss				(3,80,664)	(43,59,253)
		Total Expenses recognised in the Statement of Profit and Loss		25,92,603	14,38,425
v.	The Company has a defined benefit plan for post-employment benefit in the form of gratuity, which is administered through Life Insurance Corporation (LIC).
vi.	The overall expected rate of return on assets is based on the expectation of the average long term rate of return expected on investments of the Fund during the estimated term of obligations.
vii.	The Actual Return on Plan Assets is Rs. 1,611,465 (March 31, 2018: Rs. 1,399,338).
viii.	Principal actuarial assumptions used as at the balance sheet date
						Year ended March 31, 2019	Year ended March 31, 2018
						Rs.	Rs.
	(a)	Discount Rate				7.64%-7.76%	7.80% - 7.88%
	(b)	Expected Rate of Return on Plan Assets			0.00 % - 7.76%	0.00 % - 7.88%
	(c)	Salary Escalation Rate				5% - 10%	5% - 10%
	(d)	Attrition rate				5% - 10%	5% - 10%
	The estimates of future salary increases considered of actuarial valuation takes into account inflation, seniority, promotion and other relevant factors.
ix.	Accounting Standard 15 (Revised 2005), Para 132, does not require any specific disclosures except where expenses resulting from compensated absence is of such size, nature or incidence that its disclosure is relevant under Accounting Standard 5 or Accounting Standard 18. Accordingly as the expense resulting from compensated absence is not significant, no disclosures are made under various paragraphs of AS 15 (Revised 2005).
x.	Amounts recognised in current year and brvious years
						As at March 31, 2019	As at March 31, 2018
						Rs.	Rs.
	Defined Benefit Obligation				3,03,87,506	2,93,11,933
	Plan Asset				2,07,77,689	2,04,50,066
	Surplus / Deficit				96,09,817	88,61,867
	Experience adjustments in plan liabilities			(7,45,804)	(28,35,006)
	Experience adjustments in plan assets				(81,626)	51,478
xi.	Current and Non-Current Liability
	Current Liability				59,38,333	60,94,813
	Non-Current Liability				36,71,484	27,67,054
						96,09,817	88,61,867
xii.	Expected contribution to the gratuity fund in the next year
						As at March 31, 2019	As at March 31, 2018
						Rs.	Rs.
	Gratuity				43,77,420	36,68,126

Primary segment
The Company operates only in one business segment viz. Auto Components and Parts.
Secondary segment
The secondary segment is based on geographical demarcation, i.e. domestic and exports
Information about secondary segment is as follows:
		Year ended March 31, 2019	Year ended March 31, 2018
		Rs.	Rs.
Segment Revenue (net)
Domestic		1,14,08,78,937	98,55,57,099
Export		72,79,74,708	60,92,77,628
		1,86,88,53,645	1,59,48,34,727
		Year ended March 31, 2019	Year ended March 31, 2018
		Rs.	Rs.
Segment Assets
Domestic		23,72,18,173	22,10,85,528
Export		14,27,94,715	14,98,56,523
		38,00,12,888	37,09,42,051
Note: The Company's tangible assets are located entirely in India.