A. General information
Cox and Kings Limited (‘the Company’) is engaged in the business of inbound and outbound travel, leisure and foreign exchange dealing. Cox and Kings Limited is a diversified, multinational enterprise focused on the travel sector.
The company is a listed company incorporated and domiciled in India and has its registered office at Mumbai, Maharashtra, India. The company is listed on BSE, NSE and Luxembourg stock exchange.
B. Basis of Preparation
These financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS) to comply with Section 133 of the Companies Act, 2013 (“the 2013 Act”), and the relevant provisions of the Companies Act, 2013.
The financial statements provide comparative information in respect of the previous year.
The significant accounting policies used in preparing financial statements set out below and are applied consistently to all the periods presented.
C. Functional and presentation currency
These financial statements are presented in Indian rupees (INR), which is the Company’s functional currency. All amounts have been rounded off to two decimal places to the nearest Lakhs, unless otherwise indicated.
D. Basis of measurement
The financial statements have been prepared on the historical cost basis except for the following items:
Certain financial assets and liabilities are measured at fair value;
Defined benefit plans - plan assets measured at fair value;
E. Key estimates and assumptions
The preparation of financial statements in accordance with Ind AS requires use of estimates and assumptions for some items, which might have an effect on their recognition and measurement. The actual amounts realised may differ from these estimates.
Estimates and assumptions are required in particular for:
- Recognition and measurement of defined benefit obligations
The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions include discount rate, trends in salary escalation, actuarial rates and life expectancy. The discount rate is determined by reference to market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations.
- Recognition of deferred tax liabilities
Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.
- Provisions and contingent liabilities
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability require the application of judgement to existing facts and circumstances, which can be subject to change. Since the cash outflows can take place many years in the future, the carrying amounts of provisions and liabilities are reviewed regularly and adjusted to take account of changing facts and circumstances.
- Fair Value measurement:
When the fair values of financials assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques, including the discounted cash flow model, which involve various judgements and assumptions.
1.1 Terms / rights attached to equity shares :
The company has only one class of equity shares having a par value of Rs.5/- per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(i) Dividend paid and proposed:
Dividend on equity for the year ended March 31, 2017 was paid in FY 2017-18, at Rs.1/- per share is Rs.1,765.50 Lakhs and Dividend Distribution Tax paid Rs.375 Lakhs
Nature and purpose of the reserve
(i) Capital Reserve
This reserve will be utilised in accordance with the provisions of the Companies Act, 2013.
(ii) Securities Premium Reserve
Securities premium reserve is used to record the premium on issue of shares. The reserves is utilised in accordance with the provisions of the Companies Act, 2013
(iii) Debenture Redemption Reserve
The Company has issued Non-convertible Debentures. In accordance with the requirements of Section 71 of the Companies Act, 2013, the Company has transferred amounts to Debenture Redemption Reserve out of the profits.
(iv) General Reserve
This reserve was created as per the companies act by transferring of profit after tax to this reserve.
2.1 Long Term Borrowings:
(a) Secured Non Convertible debentures to the extent Rs.7,500 Lakhs (Previous year: Rs.7,500 Lakhs) are secured by Pari Passu charge on receivables of the Company.
(b) Vehicle Loans are secured by hypothecation of respective vehicles purchased.
3.1 Working Capital Loan is secured by first pari passu charge on all Current Assets and the movable Fixed Asset of the Company, Corporate guarantee of two promoter companies and personal guarantee of two directors.
The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.
The expected rate of return on plan assets is determined considering several applicable factors, mainly the composition of Plan assets held, assessed risks, historical results of return on plan assets and the Company's policy for plan assets management.
These plans typically expose the Group to actuarial risks such as: investment risk, interest risk, longevity risk and salary risk.
Investment risk
The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of th e reporting period on government bonds. For oth er defin ed benefit plans, the discoun t rate is determined by reference to market yield at the end of reporting period on high quality corporate bonds when there is a deep market for such bonds; if the return on plan asset is below this rate, it will create a plan deficit.
Interest risk
A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan's debt investments.
Longevity risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan's liability.
Salary risk
The present value of the defined plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan's liability.
4. Segment Reporting:
The Company is predominantly engaged in business of Tours & Travels under leisure segment, whose revenue and operating income are reviewed regularly by Chief Operating Decision Maker (CODM). Accordingly, the Company has only one identifiable segment reportable under Ind AS 108 "Operating Segment” (Segment Reporting).
The Company’s significant leasing arrangements are generally from 5 months to 85 months. Under these agreements, generally refundable interest-free deposits have been given. In respect of above arrangements, lease rentals payable are recognised in the Statement of Profit and Loss for the year and included under Rent (Refer Note 24).
5. Details of Loans given, investment made and guarantee given covered under section 186(4) of the Companies Act, 2013:
- Investment made are given under note 2.
- Loan given to subsidiaries,associates and joint venture for Business Purpose are given under note 30
- Loans given to others (as part of treasury operations of the Company bearing interest ranging from 10% to 12% p.a.) and guarantees/ securities given by the Company as at March 31, 2018 are as under:
6. 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 if the carrying amount is a reasonable approximation of fair value.
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability,either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3: Inputs for the asset or liability that are not based on observable market data.
Following methods and assumptions are used to estimate the fair values:
Fair value of cash and short term deposits, trade and other short term receivables, current investment, security deposits, trade payables, other current liabilities, provisions and short term borrowings carried at amortised cost is not materially different from it’s carrying cost largely due to short term maturities of these financial assets and liabilities
Non-listed shares and other securities fall within level 3 of the fair value hierarchy. These investments are not material and their carrying value is considered as fair value.
Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments that are recognised in financial statements.
B. Measurement of fair values
i) Transfers between Levels 1 and 2
There have been no transfers between Level 1 and Level 2 during the reporting periods.
ii) Level 3 fair values
Non-listed shares and other securities fall within level 3 of the fair value hierarchy.
7. Financial instruments - Fair values and risk management (continued)
A) Financial Risks
The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the board of directors on its activities
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The audit committee oversees how management monitors compliance with the company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.
B. Capital Management
The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.
The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘adjusted equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings and obligations under finance leases, less cash and cash equivalents. Adjusted equity is defined as share capital plus reserves and surplus.
The Company’s policy is to keep the ratio below 2.00. The Company’s adjusted net debt to equity ratio at March 31, 2018 was as follows.
C. Risk management framework
The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities.
8. Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. 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 establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.
Trade and other receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company evaluates the concentration of risk with respect to trade receivables as low. The demographics of the customer, including the default risk of the industry and country in which the customer operates, 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.
Expected credit loss assessment for customers as at March 31, 2017 and March 31, 2018
Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. Further, management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. The impairment loss at March 31, 2018 and March 31, 2017 related to customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.
The movement in the allowance for impairment in respect of trade and other receivables during the year was as follows.
Cash and cash equivalents
The Company held cash and cash equivalents with credit worthy banks and financial institutions of Rs.54,479 Lakhs and Rs.51,614 Lakhs as at March 31, 2018 and March 31, 2017 respectively. The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.
Derivatives
The derivatives are entered into with credit worthy banks and financial institution counterparties. The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.
Security deposits given to lessors
The Company has different types of lease agreements for its various branches and offices. The security deposit majorily pertains to rent deposit given to lessors. The Company does not expect any losses from non-performance by counter-parties
Investments in debentures
The Company limits its exposure to credit risk by generally investing in liquid securities and only in instruments that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties.
Loans, investments in group companies
The Company does not expect any losses from non-performance by these counter-parties as these are subsidaries, associates and entities held under common control neither has any significant concentration of exposures to specific industry sectors or specific country risks. The credit risk for loans and advances to group companies is considered negligible.
Other than trade and other receivables, the Company has no other financial assets that are past due but not impaired.
9. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.
The Company has obtained fund and non-fund based working capital lines from various banks and financial institutions. Furthermore, the Company has access to funds from non-convertible debentures and further credit lines from the Banks. The Company also constantly monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.
As of March 31, 2018, the Company had working capital (Total current assets - Total current liabilities) of Rs.2,79,739 Lakhs including cash and cash equivalents of Rs.51,945 Lakhs. As of March 31, 2017, the Company had the working Capital of Rs.2,81,156 Lakhs including cash and cash equivalents of Rs.44,370 Lakhs.
Exposure to liquidity risk
The table below analyses the Company's financial liabilities into relevant maturity groupings based on their contractual maturities for:
* all non derivative financial liabilities
* net and gross settled derivative financial instruments for which the contractual maturities are essential for the understanding of the timing of the cash flows.
10. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to market risk for changes in interest rates relates to fixed deposits and borrowings from financial institutions.
Following table gives company’s short-term and long term loans and borrowings, including interest rate profiles:
Interest rate sensitivity - fixed rate instruments
The company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in IND AS 107, since neither the carrying amount nor the future cash flow will fluctuate because of a change in market interest rates.
Interest rate sensitivity - variable rate instruments
A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased / decreased equity and profit or loss by amounts shown below. This analyses assumes that all other variables, in particular, foreign currency exchange rates, remain constant. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.
11. Currency Risk
Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates and foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk and interest rate risk. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.
Currency risk
The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss account, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the entity.
The Company, as per its risk management policy, uses foreign exchange and other derivative instruments primarily to hedge foreign exchange exposure. The Company does not use derivative financial instruments for trading or speculative purposes.
Exposure to currency risk
The summary quantitative data about the Company's exposure to currency risk as reported to the management of the Company is as follows:
Sensitivity analysis
A 3% strengthening / weakening of the respective foreign currencies with respect to functional currency of Company would result in increase or decrease in profit or loss and equity as shown in table below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. The following analysis has been worked out based on the exposures as of the date of statements of financial position.
12. Other Notes
(a) The Royale India Rail Tours Ltd. (RIRTL) is a 50:50 joint venture between Indian Railway Catering and Tourism Corporation (IRCTC) and Cox & Kings Ltd. IRCTC has terminated the joint venture agreement on August 12, 2011. The Supreme Court has dismissed the Special Leave Petition filed by the company and directed both the parties to go for arbitration. It also made it clear that the observations made by the Courts shall not, in any way, influence the outcome of the arbitral proceedings, if resorted to by the parties. The arbitration proceedings were continuing as at the year end. Company has invested Rs.250 Lakhs in equity capital, Rs.3958.10 Lakhs as loans and has trade receivable of Rs.519.03 Lakhs as at March 31, 2018. Based on the legal opinion, the company is confident of favourable outcome of the arbitration proceeding and no provision is considered necessary in the accounts.
(b) Balances of trade receivables and trade payables are as per books of accounts and subject to confirmation and reconciliation, if any.
(c) I n the opinion of the Board of Directors, other current assets have a value on realisation in the ordinary course of the company’s business, which is at least equal to the amount at which they are stated in the balance sheet.
(d) The Board of Directors at its meeting held on May 28, 2018 has approved the Financial Statement for year ended March 31, 2018.
(e) The Board of Directors have recommended a dividend of 20% (Rs.1/- per equity share) Previous year 20% (Rs.1/- per equity share) subject to shareholders approval at the ensuing AGM.
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