1. EXCEPTIONAL ITEMS
Exceptional items for the financial year 2017-18 includes exceptional gain of Rs, 109,000 Lakhs (previous year Rs, Nil) and exceptional loss of Rs, 125,929 Lakhs (Previous year Rs, 25,149 Lakhs). Exceptional gain include waiver of dues to related parties amounting to Rs, 109,000 Lakhs (Refer note 45(d)). Exceptional loss represents impairment of intangible assets of Rs, 3,144 Lakhs, impairment of inventory amounting to Rs, 24,058 Lakhs and write off of other receivables amounting to Rs, 98,727 Lakhs . Exceptional items for the year 2016-17 represents impairment of property plant and equipment amounting to Rs, 20,100 Lakhs, impairment of inventory amounting to Rs, 4,771 Lakhs and write off of advances to suppliers amounting to Rs, 278 Lakhs.
2. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
During the year the Company had identified certain receivables which were not classified as financial asset for the purpose of impairment assessment under Ind AS 109. The management has applied their impairment policy and recognized impairment loss of Rs, 92,422 Lakhs upto 31 March 2016 and Rs, 20,930 Lakhs for the financial year 2016-17 and accordingly restated the prior year financial statements (financial year 2016-17) and the opening balance of assets, liabilities and equity as at 1 April 2016. The restatement has resulted in an increase in the other financial liabilities reported in Note 23 and a decrease in the retained earnings as at 31 March 2017 and 1 April 2016 by Rs, 113,352 Lakhs and Rs, 92,422 Lakhs respectively, an increase in the other expenses for the year 2016-17 by Rs, 20,930 Lakhs and a decrease in the basic and diluted earnings per share by Rs, 3.19 per share (loss) (Refer note 46). The said financial assets of Rs, 98,820 Lakhs (net of provision of Rs, 113,352 Lakhs) as at 31 March 2017 and Rs, 121,210 Lakhs (net of provision of Rs, 92,422 Lakhs) as at 1 April 2016 have been netted off against the financial liability in Note 23.
Further as required by Ind AS 1, consequently to retrospective restatement of items in the financial statements, the Company has presented balance sheet as at 01 April 2016.
3. STRATEGIC DEBT RESTRUCTURING
The Company had defaulted in repayment of borrowings and payment of interest to the lenders on account of which a 'Joint Lenders Forum' (JLF) was formed. In the JLF meeting held on 28 December 2016 the lenders invoked the 'Strategic Debt Restructuring Scheme' (SDR) dated 8 June 2015, as amended, issued by the Reserve Bank of India
Further in the JLF meeting held on 5 May 2017, the lenders agreed for conversion of portion of the borrowings, including interest, into equity. Accordingly, borrowings and interest totaling to Rs, 100,985 Lakhs was converted into equity and the Company issued 637,931,917 equity shares to the lenders at a price of Rs, 15.83 per share (face value Rs, 2/- per share) on a preferential basis in compliance with the provisions of Companies Act 2013 and other statutory requirements, as applicable.
Post implementation of the SDR, the equity share capital of the Company is Rs, 25,871 Lakhs which comprises 1,293,455,756 equity shares of Rs, 2/- each.
4. PUT OPTIONS
The Company has given certain Put Options to the Private Equity (PE) Investors of its stepdown subsidiary, BILT Paper BV. The Company is not in a position to quantify the liability towards put options due to the ongoing financial restructuring with lenders.
5. GOING CONCERN
The Company's operations was significantly affected during previous year due to lack of adequate working capital. The lenders of the Company had invoked standstill provision due to delays in repayment of debts and payment of interest. The Company has been in discussion with the lenders to ease of the financial stress and regulate the operations of the Company. During the year the Company has also implemented a Strategic debt restructuring scheme (Refer Note 39) Subsequent to SDR the company was able to run the manufacturing facility at Yamunanagar (Shree Gopal Unit) without major shutdowns. Further the Company has taken various initiatives to recommence operations of its manufacturing facility at Kamalapuram and is confident of recommencing operations during FY 2018-19.
The management has carried out an internal assessment of the future operating cash flows of the Company and is confident that the company has the ability to continue as a going concern in spite of the significant cash losses incurred in previous year and current year, considering the better capacity utilization and improved financial position of the Company.
(c) Guarantee/Letter of Credit/Put Option provided in respect of loans availed by subsidiary companies
(i) The Company has granted to the lender a corporate guarantee of USD 97.75 million [' 63,609 Lakhs] (previous year - USD 97.75 million [' 63,421 Lakhs]) in respect of loan availed by Ballarpur International Holdings B.V, a wholly owned subsidiary of the Company. The Company has also executed an indemnity and undertaking for stand-by Letter of credit facility of USD 55 million [' 35,790 Lakhs] (previous year - USD 55 million [' 35,684 Lakhs] ) in respect of the subsidiary.
(ii) As at 31 March 2017, the Compnay had granted to the lender a corporate guarantee of ' 51,000 Lakhs in respect of loan availed by BILT Graphic Paper Product Limited (BGPPL), a step-down subsidiary of the Company. During the year, BGPPL has executed a 'Master Restructuring Agreement' (MRA) its lender and inaccordance with the terms of the MRA the corporate guarantee stands resolved. However the execution of the MRA has been contested by one of the non-assenting lender and the case is pending at High Court, Delhi, as at 31 March 2018. The management is confident that BGPPL will be able to get a favorable Order in this respect and hence the said guarantee is not reported as a contingent liability as at 31 March 2018.
(iii) As at 31 March 2017, the Compnay had provided a Put Option to the lender, Yes Bank Limited of ' 6500 Lakhs against financing facilities provided to Avantha Agritech Limited, a subsidiary of the Company. The Option does not exist as at 31 March 2018.
It is not possible to predict the outcome of the pending litigations with accuracy, the Company believes, based on legal opinions received, that it has meritorious defences to the claims. The management believe the pending actions will not require outflow of resources embodying economic benefits and will not have a material adverse effect upon the results of the operations, cash flows or financial condition of the Company.
(b) Defined benefit plan
i) Nature of the benefit
Gratuity: In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit plan, covering eligible employees. This Plan provides for a lump sum payment to vested employees on retirement, death, incapacity or termination of employment of amounts that are based on salary and tenure of employment. Liability with regard to this plan are determined by actuarial valuation.
viii) Major risks to the plan
Actuarial valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary overtime. Thus, the Company is exposed to various risks in provision the gratuity benefit which are as follows
1) Interest rate risk
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability.
2) Liquidity risk
This is the risk that the Company is not able to meet the short-term gratuity payouts. This may arise due to no availability of enough cash / cash equivalent to meet the liabilities or holding of non-liquid assets not being sold in time.
3) Salary escalation risk
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liabilty.
4) Demographic risk
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
5) Regulatory risk
Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts.
45 DISCLOSURE OF RELATED PARTIES / RELATED PARTY TRANSACTIONS PURSUANT TO IND AS 24 'RELATED PARTY DISCLOSURES'
(a) Enterprises where control exist
(i) Subsidiary - Avantha Agritech Limited (Formely known as BILT
Tree Tech Limited)
- Ballarpur International Holdings B.V
- Ballarpur Speciality Paper Holdings B.V.
- Premier Tissues (India) Limited
(ii) Step down subsidiary - BILT Paper B.V. (Subsdiary of Ballarpur International
Holdings B.V)
- Ballarpur Paper Holdings B.V. (Sudsidiary of BILT Paper B.V.)
- BILT Graphic Paper Products Limited (Sudsidiary of Ballarpur Paper Holdings B.V.)
- Sabah Forest Industries Sdn. Bhd. (Sudsidiary of Ballarpur Paper Holdings B.V.)
- BILT General Trading FZE (Sudsidiary of Ballarpur Speciality Paper Holdings B.V.)
(b) Key Management Personnel (KMP)
(i) Mr. B. Hariharan
(ii) Mr. Gautam Thapar
(c) Related parties with whom the company had transactions during the current year and / or previous year
(i) Subsidiaries (including step down subsidiaries)
1) Avantha Agritech Limited - Subsidiary
2) Ballarpur International Holdings B.V - Subsidiary
3) Ballarpur Speciality Paper Holdings B.V. - Subsidiary
4) Premier Tissues India Limited - Subsidiary
5) BILT Paper B.V. - Step-down subsidiary
6) Ballarpur Paper Holdings B.V. - Step-down subsidiary
7) BILT Graphic Paper Products Limited - Step-down subsidiary
8) Sabah Forest Industries Sdn. Bhd. - Step-down subsidiary
9) BILT General Trading FZE - Step-down subsidiary
(ii) Enterprise over which KMP is able to exercise control
1) Saraswati Travels Private Limted - Other related parties
2) SMI New Quest India Private Limited - Other related parties
3) Biltech Building Elements Limited - Other related parties
4) CG Power and Industrial Solutions Limited - Other related parties (formerly known as Crompton Greaves Limited)
5) Avantha Holdings Limited - Other related parties
6) Imerys Newquest (India) Private Limited - Other related parties
7) Avantha Realty Limited - Other related parties
8) Mirabelle Trading Pte. Ltd. - Other related parties
9) Varun Prakashan Private Limited - Other related parties
10) BILT Industrial Packaging Company Limited - Other related parties
11) Solaris Chemtech Industries Limited - Other related parties
12) Karam Chand Thapar & Bros. Ltd-PF Trust - Other related parties
13) Arizona Printers & Packers Private Limited - Other related parties
14) Avantha Power and Infrastructure Limited - Other related parties
15) Korba West Power Company Limited - Other related parties
16) Avantha Technologies Limited - Other related parties
17) Global Green Company Limited - Other related parties
18) UHL Power Company Limited - Other related parties
"0"represent amount below Rs, 50,000/-
(g) Terms and conditions of transactions with related parties
(i) All the transactions with related parties entered during the year were in the ordinary course of business.
(ii) Balances due to and due from related parties, other than interest bearing loans, are unsecured, interest free and will be settled in cash.
(iii) There have been no write back of dues to related parties during the year (2016-17 - Rs, Nil) other than the waiver as reported in the related party transactions.
(iv) There have been no write off of dues from related parties during the year (2016-17 - Rs, Nil).
(v) For the year ended 31 March 2018, the Company has not recognized any impairment of receivables relating to amounts due from related parties (2016-17 - Rs, Nil). This assessment is undertaken each financial year examining the financial position of the related party and the market in which the related party operates.
47 DISCLOSURE PURSUANT TO IND AS 108 'OPERATING SEGMENTS'
(a) Factors used in identifying segments
The Company's operating segments are established on the basis of those components of the company that are evaluated regularly by the Chief Operating Officer (COO) of the Company (the ‘Chief Operating Decision Maker' as defined in Ind AS 108 - ‘Operating Segments'), in deciding how to allocate resources and in assessing performance. These have been identified taking into account nature of products and services, the differing risks and returns and the internal business reporting systems.
The Company had reported 'Paper' and 'Paper products & office supplies' as two operating segments under Ind AS 108 upto financial year 2016-17. On account of discontinuation of the 'Paper products & office supplies' segment and recent changes in the operations, the manner in which the COO reviews the operations of the Company has changed. At present the COO reviews the operations as ‘coated paper' and ‘uncoated paper', identified in the manner stated above. The segment disclosures for the year 2017-18 has been made in line with the revised operating segments and the comparatives for the year 2016-17 has been restated to align with the revised operating segments.
The accounting policies adopted for segment reporting are in line with the accounting policy of the Company.
(i) Revenue and Expenses have been identified to a segment on the basis of relationship to operating activities of the segment. Revenue and Expenses which relate to enterprise as a whole and are not allocable to a segment on reasonable basis have been disclosed as "Unallocable".
(ii) Segment Assets and Segment Liabilities represent Assets and Liabilities in respective segments. Investments, tax related assets and other assets and liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as "Unallocable".
(b) The Company does not have total taxable income under the provisions of Income Tax Act 1961 during the current and previous financial year and hence no provision for current tax is recognized. Accordingly calculation of effective tax rate and reconciliation of income tax expense to the accounting profit are not applicable.
6. DISCLOSURES PURSUANT TO IND AS 17 LEASES:
(a) Where the Company is a lessee
(i) Operating leases:
1) Property, plant and equipment acquired on non-cancellable operating lease comprises Buildings, the future minimum lease payments in respect of these non-cancellable operating leases are as follows:
2) Lease rental expense recognized in the Statement of Profit and Loss for the year is Rs, 447 Lakhs (previous year: Rs, 2,080 lakhs) including contingent rent of Rs, Nil (Previous year Rs, Nil)
3) Significant lease agreements can be renewed on mutual consent of the parties and are normally renewed on expiry.
4) There are no exceptional / restrictive covenants imposed in these lease agreements.
(b) Where the Company is a lessor
(i) Operating leases:
The Company has given a property (Building) under cancellable operating leases. These lease agreements are normally renewed on expiry. There are no exceptional / restrictive covenants in these lease agreements.
Lease income recognized in the statement of profit and loss for the year is Rs, 23 lakhs (Previous year Rs, 23 lakhs) including contingent rent/sublease receipt of Rs, Nil (Previous year Rs, Nil).
7. FINANCIAL INSTRUMENTS (a) Capital management
The company manages its capital to ensure the Company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances.
The company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirement of the financial covenants. The funding requirement is met through a mixture of equity, internal accrual, long term borrowings and short term borrowings. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
(c) Financial risk management objectives and policies
The operations of the Company are subject to a variety of financial risks, including market risk, foreign currency risk, credit risk, interest rate risk and liquidity risk. The Company has formulated a financial risk management framework whose principle objective is to minimize the Company's exposure to risks and/or costs associated with the financing, investing and operating activities of the Company.
Various risk management policies are approved by the Board for monitoring on the day-to-day operations for the control and management of the risks associated with financial instruments.
(i) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument may fluctuate because of changes in market prices. Market prices comprise three types of risk: currency rate risk, interest rate risk and other price risks, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments.
1) Foreign exchange risk and sensitivity
The Company transacts business primarily in Indian Rupee, USD, Euro, GBP and JPY and other foreign currency. The Company has obtained foreign currency loans and has foreign currency trade payables and receivables and is therefore, exposed to foreign exchange risk. Certain transactions of the Company act as a natural hedge as a portion of both assets and liabilities are denominated in similar foreign currencies. For the remaining exposure to foreign exchange risk, the Company adopts a policy of selective hedging based on risk perception of the management. Foreign exchange hedging contracts are carried at fair value.
2) Interest rate risk and sensitivity
Interest rate risk is the risk that the fair value of future cash flows of the Company's financial instruments will fluctuate because of changes in market interest rates. The Company's exposure to interest rate risk arises primarily because of the bank borrowings comprising term loans, loans against import and revolving credits which are at the aggregate of Base rate / MCLR and the applicable margin. The interest rates for the said bank borrowings are disclosed in Note No. 22.
The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.
3) Commodity price risk and sensitivity
The Company has in place policies to manage the Company's exposure to fluctuation in the prices of the key materials and commodities used in the operations. Nevertheless, it believes that it has competitive advantage in terms of high quality products and by continually upgrading its expertise and range of products to meet the needs of its customers. The company enters into fixed price contracts to establish determinable prices for raw materials and consumables used. The management does not consider the Company's exposure to market risk significant as on 31 March 2018. Therefore, sensitivity analysis for market risk is not disclosed.
(ii) Credit risk
Credit risk arises from the possibility that counter party may not be able to settle their obligation as agreed.
Banks and other financial institutions: Th
The Company considers factors such as track record, size of the institution, market reputation and service standards to select the banks with which balances and deposits are maintained. The Company does not maintain significant cash and deposit balances other than those required for its day to day operations.
(ii) Liquidity risk
Liquidity risk is defined as the risk that the company will not be able to settle or meet its obligation on time or at reasonable price. The company has taken steps to reduce the financial burden by restructuring its financial liabilities (Refer Note 39) and is in the process of further negotiating with the lenders for the second phase of restructuring as per its revival plan & also exploring various other options like renegotiation of the terms of borrowings, sale of non-core assets, etc., to further ease out the financial burden. The Company has also improved its operational efficiency during the current financial year and is actively considering new initiatives to improve the contribution from operations. The Company also expects the improving market conditions to sustain in the near future. Considering the above, company is confident of the positive outcome of the above assumptions and developments and has relies on mix of borrowings, capital infusion and excess operating cash flows from operations to meet its obligations.
Maturity profile of financial liabilities
The table below provides regarding the remaining contractual maturities of financial liabilities at the reporting date based on contractual undiscounted payments.
8. DISCLOSURES PURSUANT TO IND AS 10, 'EVENTS AFTER THE REPORTING PERIOD'
(a) Fire incident
On 23 April 2018, inventories valuing ' 272 lakhs and plant and equipment with carrying value of ' 8 lakhs were damaged by a fire incident that broke out in one of the Units of the Company. The salvage value, if any, has not been determined as on date and will be determined upon completion of survey and insurance process. It is expected that the insurance proceeds will be sufficient for rebuilding the loss of inventories and plant and equipment. This event occurred after the balance sheet date do not affect the figures stated in the financial statements and thus requires no adjustment.
9. FAIR VALUE MEASUREMENT
(a) Fair value technique and hierarchy
The Company maintains policies and procedures to value financial assets and financial liabilities using the best and most relevant data available. The fair values of the financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
i) Level 1 hierarchy includes financial instruments measured using quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
ii) The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize 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.
iii) If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in Level 3.
(e) Other assumptions used in the estimation of fair values
(i) The fair value of trade receivables, cash and cash equivalents, other bank balances and other current financial assets approximate their carrying amount due to the short-term nature of these instruments.
(ii) The fair value of trade payables and other current financial liabilities approximate their carrying amount due to the short-term nature of these instruments.
(iii) The fair value of borrowings with floating rate of interest are considered to be close to their carrying amount.
10. Previous year figures have been regrouped / reclassified wherever necessary to conform to current year grouping / classification.
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