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Company Information

Home » Market » Company Information

Arvind Ltd.

Dec 03
116.90 +0.45 (+ 0.39 %)
 
VOLUME : 69309
Prev. Close 116.45
Open Price 115.60
TODAY'S LOW / HIGH
115.60
 
 
 
119.85
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
40.20
 
 
 
146.75
Dec 03
116.85 +0.35 (+ 0.30 %)
 
VOLUME : 963456
Prev. Close 116.50
Open Price 115.60
TODAY'S LOW / HIGH
115.60
 
 
 
119.90
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
40.10
 
 
 
146.90
Company Information Menu

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Market Cap. ( ₹ ) 3044.95 Cr. P/BV 1.12 Book Value ( ₹ ) 104.42
52 Week High/Low ( ₹ ) 147/40 FV/ML 10/1 P/E(X) 0.00
Bookclosure 18/08/2021 TTM EPS ( ₹ ) 5.35 Div Yield (%) 0.00
NOTES TO ACCOUNTS
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2018-03 

1. Corporate Information

Arvind Limited (‘the Company’) is one of India’s leading vertically integrated textile companies with the presence of almost eight decades in this industry. It is among the largest denim manufacturers in the world. It also manufactures a range of cotton shirting, denim, knits and bottom weights (Khakis) fabrics and Jeans and Shirts Garments. The Company through its subsidiary company, Arvind Fashions Limited and its subsidiaries is marketing in India the branded apparel under various brands. The brands portfolio includes Domestic and International brands like Flying Machine, Arrow, US Polo, Izod, Elle, Cherokee etc. It also operates apparel value retail stores UNLIMITED. The Company also has the presence in Telecom business directly and through its subsidiaries and joint venture companies. Recently, The Company has made foray in to Technical Textiles on its own and in joint venture with leading global players.

The Company is a Public Limited Company domiciled in India and incorporated under the provisions of the Companies Act, 2013 (“the Act” erstwhile Companies Act, 1956) applicable in India. Its equity shares are listed on the National Stock Exchange (“NSE”) and the BSE Limited. The registered office of the Company is located at Naroda Road, Ahmedabad - 380025.

The financial statements have been considered and approved by the Board of Directors at their meeting held on May 09, 2018.

2. Statement of Compliance and Basis of Preparation:

The financial statements have been prepared on a historical cost convention on the accrual basis except for the certain financial assets and liabilities measured at fair value, the provisions of the Companies Act, 2013 to the extent notified (“the Act”) and guidelines issued by the Securities and Exchange Board of India (SEBI).

Accounting policies were consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standards requires a change in the accounting policy hitherto in use.

These financial statements comprising of Balance Sheet, Statement of Profit and Loss including other comprehensive income, Statement of Changes in Equity and Statement of Cash Flows as at March 31, 2018 have been prepared in accordance with Ind AS as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 ofthe Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

Amounts for the year ended March 31, 2017 were audited by the predecessor auditor.

Rounding of amounts

The financial statements are presented in Indian Rupee (“INR”) and all values are rounded to the nearest crore as per the requirement of Schedule III, except when otherwise indicated. Figures less than Rs.50,000 which are required to be shown separately, have been shown actual in brackets.

2. Critical accounting estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

2.1. Estimates and assumption

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(a) Taxes

The Company has Rs.152.38 crores (March 31, 2017: Rs.180.38 crores) of tax credits carried forward. These credits expire in 15 years from the date of initial recognition. The Company has taxable temporary difference and tax planning opportunities available that could partly support the recognition of these credits as deferred tax assets. On this basis, the Company has determined that it can recognise deferred tax assets on the tax credits carried forward.

Further details on taxes are disclosed in Note 29.

(b) Useful life of Property, plant and equipment and Intangible Assets

As described in Note 3.6 and 3.10 of the significant accounting policies, the Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period.

(c) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

(d) Provisions and contingencies

The assessments undertaken in recognising provisions and contingencies have been made in accordance with the applicable Ind AS. A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows. The Company has significant capital commitments in relation to various capital projects which are not recognized on the balance sheet. In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Guarantees are also provided in the normal course of business. There are certain obligations which management has concluded, based on all available facts and circumstances, are not probable of payment or are very difficult to quantify reliably, and such obligations are treated as contingent liabilities and disclosed in the notes but are not reflected as liabilities in the financial statements. Although there can be no assurance regarding the final outcome of the legal proceedings in which the Company involved, it is not expected that such contingencies will have a material effect on its financial position or profitability (Refer Note 16 and 30).

(e) Defined benefit plans

The determination of Company’s liability towards defined benefit obligation to employees is made through independent actuarial valuation including determination of amounts to be recognised in the Statement of Profit and Loss and in other comprehensive income. Such valuation depend upon assumptions determined after taking into account inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. Information about such valuation is provided in notes to the financial statements.

Further details about defined benefit obligations are provided in Note 34.

The description of the nature and purpose of each reserve within equity is as follows

a. Capital reserve

Capital Reserve includes forfeiture of application money received on issue of share warrants and Capital Reserves on amalgamation/Business Combinations.

b. General reserve

General Reserve is a free reserve created by the Company by transfer from Retained earnings for appropriation purposes.

c. Amalgamation reserve

The reserve was created pursuant to scheme of amalgamation in earlier years. Amalgamation Reserve is a reserve which arose pursuant to the scheme of amalgamation and shall not be considered to be a reserve created by the Company.

d. Securities premium account

Securities premium reserve is created due to premium on issue of shares. These reserve is utilised in accordance with the provisions of the Companies, Act.

e. Capital redemption reserve

Capital Redemption Reserve is created for redemption of preference shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount ofthe preference shares redeemed. Capital Redemption Reserve may be applied by the Company in paying up unissued shares of the Company to be issued to shareholders of the Company as fully paid bonus shares.

f. Debenture redemption reserve

The Company is required to create a debenture redemption reserve out of the profits which is available for purpose of redemption of debentures. This reserve will not be utilised by the Company except to redeem debentures.

g. Share based payment reserve

This reserve relates to share options granted by the Company to its employee share option plan. Further information about share-based payments to employees is set out in Note 37.

h. Equity instruments through OCI

The Company has elected to recognise changes in the fair value of certain investment in equity instrument in other comprehensive income. This amount will be reclassified to retained earnings on derecognition of equity instrument.

i. Cash flow hedge reserve

The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on the changes of the fair value of the designated portion of the hedging instruments that are recognised and accumulated under the cash flow hedge reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item.

Notes :

I) Installments falling due within a year in respect of all the above Loans aggregating Rs.124.73 crore (March 31, 2017 : Rs.104.33 crore) have been grouped under “Current maturities of long-term debt” (Refer Note 15(c))

II) Nature of security:

Term loan of Rs.558.71 Crores

Loans amounting to Rs.543.23 Crores (March 31, 2017 Rs.639.56 Crores) are secured by (a) first pari passu charge on all the Immovable Properties, Movable Properties, Intangible Properties and General Assets of the Company presently relating to the Textile Plants and Garment Division at Bangalore; and all Immovable Properties, Movable Properties, Intangible Properties and General Assets acquired by the Company at any time after execution of and during the continuance of the Indenture of Mortgage; (b) charge on the Company’s Trademarks; (c) Secured by second pari passu charge on all the Company’s Current Assets presently relating to the Textile Plants and Garment Division and all the current assets aquired by the Company at any time in future .

Loans of Rs.15.48 Crores (March 31, 2017 Rs.17.31 Crores) are secured by hypothecation of related vehicles.

Nature of Security

Cash Credit and Other Facilities from Banks

(a) Secured by first pari passu charge on all the Company’s Current Assets presently relating to the Manufacturing Locations and all the Current Assets acquired by the Company at any time after the execution of and during the continuance of the Indenture of Mortgage. (b) Secured by a second pari passu charge over all the Immovable Properties relating to Textile Plants, Movable Properties presently relating to the Company and all the movable properties aquired by the Company at any time in future after execution of and during the continuance of the Indenture of Mortgage.”

Rate of Interest

i. Working Capital Loans from banks carry interest rates ranging from 4.45% to 9.60% per annum.

ii. Inter Corporate Deposit carries interest rate of 8% per annum.

iii. Commercial Papers carry interest rates ranging from 7.60% to 7.65% per annum.

iv. Buyer’s credit arrangements carry interest rates ranging from 0.30% to 5.25%

Note

“(i) The Company has not received any intimation from suppliers regarding their status under the Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 and hence disclosures as required under Section 22 of The Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 regarding:”

(a) Principal amount and the interest due thereon remaining unpaid to any suppliers as at the end of accounting year;

(b) Interest paid during the year;

(c) Amount of payment made to the supplier beyond the appointed day during accounting year;

(d) Interest due and payable for the period of delay in making payment;

(e) Interest accrued and unpaid at the end of the accounting year; and

(f) Further interest remaining due and payable even in the succeeding years, until such date when the interest dues above are actually paid to the small enterprise have not been given.

The Company is making efforts to get the confirmations from the suppliers as regard to their status under the said Act.

(ii) For amount payable to related parties, refer Note 35.

There are certain income-tax related legal proceedings which are pending against the Company. Potential liabilities, if any have been adequately provided for, and the Company does not currently estimate any probable material incremental tax liabilities in respect of these matters. (Refer note 30)

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company has unused tax capital losses amounting to Rs.386.40 crores as at March 31, 2018 (March 31, 2017: Rs.416.00 crores). Tax credits on such losses have not been recognised on the basis that recovery is not probable in the foreseeable future. Unrecognised tax capital losses will expire on March 31, 2025, if unutilized, based on the year of origination.

Notes :

(a) It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

(b) The Company does not expect any reimbursements in respect of the above contingent liabilities.

(c) The Company believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position and results of operations.

Note 3 : Foreign Exchange Derivatives and Exposures not hedged

The Company holds derivative financial instruments such as foreign currency forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counter party for these contracts is generally a bank.

All derivative financial instruments are recognized as assets or liabilities on the balance sheet and measured at fair value. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation.

The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities depending upon the maturity of the derivatives.

The use of derivative instruments is subject to limits, authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by management and the Board. The market risk on derivatives is mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.

Cash Flow Hedges

The Company also enters into forward exchange contracts for hedging highly probable forecast transaction and account for them as cash flow hedges and states them at fair value. Subsequent changes in fair value are recognized in equity until the hedged transaction occurs, at which time, the respective gain or losses are reclassified to the statement of profit or loss. These hedges have been effective for the year ended March 31, 2018 and March 31, 2017.

The Company uses foreign exchange contracts from time to time to optimize currency risk exposure on its foreign currency transactions.

The cash flow hedges are taken out by the Company during the year for hedging the foreign exchange rate of highly probable forecast transactions. The cash flows related to above are expected to occur during the year ended March 31, 2019 and consequently may impact the statement of profit or loss for that year depending upon the change in the foreign exchange rates movements.

Note 4 : Segment Reporting Identification of Segments:

The chief operational decision maker monitors the operating results of its Business segment separately for the purpose of making decision about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segment have been identified on the basis of nature of products and other quantitative criteria specified in the Ind AS 108. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”) of the Company.

Operating Segments:

(a) Textiles : Fabrics, Garments and Fabric Retail.

(b) Branded Apparels : Branded Garments, accessories and manufacturing & selling of customised clothing. Manufacturing and selling of branded accessories is reclassified and considered as branded apparels segment w.e.f. July 1,2017.

(c) Arvind Internet : E-commerce

(d) Engineering : Engineering

(e) Others : Technical Textiles, Agriculture Produce, EPABX and One to Many Radio, Water Treatment, Other including newly commenced business.

Segment revenue and results:

Revenue and expenses directly attributable to segments are reported under each reportable segment. The expenses and income which are not directly attributable to any business segment are shown as unallocable expenditure (net of unallocable income). Unallocated expenditure consists of common expenditure incurred for all the segments and expenses incurred at corporate level.

Segment assets and Liabilities:

Assets and liabilities that are directly attributable or allocable to segments are disclosed under each reportable segment. Segment assets include all operating assets used by the operating segment and mainly consist of property, plant and equipments, trade receivables, Inventories and other operating assets. Segment liabilities primarily includes trade payable and other liabilities excluding borrowings.

Inter Segment transfer:

Inter Segment revenues are recognised at sales price. The same is based on market price and business risks. Profit or loss on inter segment transfer are eliminated at the company level.

The accounting policies ofthe reportable segments are the same as the Company’s accounting policies described in Note 3. The Company’s financing (including finance costs and finance income) and income taxes are reviewed on an overall basis and are not allocated to operating segments.

Geographical segment

Geographical segment is considered based on sales within India and rest of the world.

Summarised segment information for the years ended March 31, 2018 and March 31, 2017 are as follows:

Note

(a) The Company’s Provident Fund is administered by approved Trust and are charged to the Statement of Profit and Loss as and when it is incurred. The Company is liable for the contribution and any shortfall in interest rates between the amount of interest realised by the investments and the interest payable to the members at the rates declared by the Government of India in respect of the administered trust. Having regard to the assets of the fund and the return on the investments, the Company does not have any deficiency as at March 31, 2018.

(b) Certain employees of the company are eligible for contribution to Pension Fund. The Company has no further obligation to the plan beyond its contribution which are periodically contributed to the government agencies.

(c) The Company’s Superannuation Fund is administered by approved Trust. The Company is required to contribute the specified amount to the Trust. The Company has no further obligations to the plan beyond its contribution to a Trust Fund.

B. Defined benefit plans:

The Company has following post employment benefit plans which are in the nature of defined benefit plans:

(a) Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The Gratuity plan is a Funded plan administered by a Trust and the Company makes contributions to recognised Trust in India.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the Arvind Limited Employees’ Gratuity Fund Trust (the Trust). Trustees administer contributions made to the Trusts and contributions are invested in a scheme as permitted by Indian law.

The Company recognizes the net obligation of a defined benefit plan in its Balance Sheet as an asset or liability. Gains and losses through remeasurements of the net defined benefit liability/(asset) are recognized in other comprehensive income and are not reclassified to profit or loss in subsequent periods. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligations recognized in other comprehensive income.

(b) Post-Retirement Medical Benefit

Under this Scheme, employees & their spouse are covered for hospitalisation benefits after the employee has retired from the company only on completion of specified number of years services. The cover is available to these beneficiaries until they are alive. These beneficiaries are covered under Company’s general group hospitalisation cover from insurance company. Liabilities with regard to the Post- Retirement Medical Benefit Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company recognizes the net obligation of a defined benefit plan in its Balance Sheet as an asset or liability. Gains and losses through remeasurements of the net defined benefit liability/(asset) are recognized in the statement of profit and loss.

(c) Compensatory Pension Scheme

The Company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees who have joined before 30th June 1983 and who have rendered not less than 31 years of service before their retirement. The plan is unfunded. Employees do not contribute to the plan.Liabilities with regard to the Compensatory Pension Scheme are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company recognizes the net obligation of a defined benefit plan in its Balance Sheet as an asset or liability. Gains and losses through re-measurements of the net defined benefit liability/(asset) are recognized in the statement of profit and loss.

The above sensitivity analysis may not be representative of the actual benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

In presenting the above sensitivity analysis, the present value of defined benefit obligation has been calculated using the projected unit credit method at the end of reporting period.

The followings are the expected future benefit payments for the defined benefit plan :

The Company does not have any contributions expected towards planned assets for the next year.

C. Other Long term employee benefit plans:

Leave encashment

The Company has a policy on leave encashment which are both accumulating and non-accumulating in nature. The expected cost of accumulating leave encashment is determined by actuarial valuation performed by an independent actuary at each Balance Sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the Balance Sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.

The Company has recognised Rs.14.27 Crores (March 31, 2017: Rs.11.93 Crores) as expenses and included in Note No. 24 “Employee benefit expense”.

(d) Terms and conditions of transactions with related parties

(1) Outstanding balances other than loan given and taken and fair value of financial guarantee contract, at the year-end are unsecured and interest free and settlement occurs in cash.

(2) Loans in INR given to the related party carries interest rate of 8.00% - 8.15% (March 31, 2017: 8.00% - 10.25% ). Loans in USD given to the related party carries an interest rate of 3.90% (March 31, 2017 : 3.90%).

(3) Loans in INR taken from the related party carries an interest rate 8.00% (March 31, 2017 : 8.00%-10.25%)

(4) Financial guarantee given to Bank on behalf of subsidiaries and joint ventures carries no charge and are unsecured.

(5) No repayment schedule has been fixed in case of above mentioned Loans in the nature of loans given to Subsidiary Companies and are repayable on demand.

(e) Commitments with related parties

The Company has not provided any commitment to the related party as at March 31, 2018 (March 31, 2017: ‘ Nil)

The amounts disclosed in the table are the amounts recognised as an expense during the year excluding expense of share based payment of Rs.1.85 crores (March 31, 2017 Rs.2.84 crores) in respect of Director & Chief Financial Officer. The remuneration of key management personnel is determined by the Remuneration committee.

Note 5 : Share based payments

A. The Company has instituted Employee Stock Option Scheme 2008 (ESOP 2008), pursuant to the approval of the shareholders of the company at their extra ordinary general meeting held on October 23, 2007. Under ESOP 2008, the Company has granted options convertible into equal number of equity shares of the face value of Rs 10 each to its certain employees.

D. Share Options Outstanding at the end of the year:

The share options outstanding at the end of the year had a weighted average exercise price of Rs.266.72 (as at March 31,2017: Rs.257.40),and a weighted average remaining contractual life of 4.25 Years (as at March 31,2017: 5.23 years)

E. Expense arising from share- based payment transactions

Total expenses arising from share- based payment transactions recognised in profit or loss as part of employee benefit expense were as follows :

Note 6 : Lease Rent

A. Where company as a lessee in case of Operating Lease

The Company has various cancellable and non-cancellable operating leases for Buildings, Plant and Machineries and various residential and office premises. The lease has varying terms, escalation clauses and renewal rights. On renewal, terms of the leases are renegotiated. These leasing arrangements are ranging in between 11 months and 20 years generally. The Company has not given any property on sub-lease which is taken under operating lease contracts. Future minimum lease payments in respect of which are as follows:

B. Where company as a lessor in case of Operating Lease

The Company has given Land and Buildings under non-cancellable operating lease, the future minimum lease payments receivables in respect of which are as under:

Note 7 : Corporate Social Responsibility (CSR) Activities:

(a) The Company is required to spend Rs.8.50 Crores (March 31, 2017 : Rs.8.76 Crores) on CSR activities under section 135 of the Act.

(b) Amount spent during the year towards CSR activities are as follows:

Note 8 : Fair value disclosures for financial assets and financial liabilities:

Set out below is a comparison, by class, of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:

The management assessed that the fair values of cash and cash equivalents, other bank balances, loans, trade receivables, other current financial assets, trade payables and other current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values.

The fair value of borrowings is calculated by discounting future cash flows using rates currently available for debts on similar terms, credit risk and remaining maturities.

For financial assets and financial liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

Fair value hierarchy

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the counter derivatives) 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.

Level 3: 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.

There are no transfer between level 1, 2 and 3 during the year.

The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

Note 9 : Financial instruments risk management objectives and policies

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s risk management assessment and policies and processes are established to identify and analyse 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.

The Company’s risk management is carried out by a Treasury department under policies approved by the Board of directors. The Company’s treasury identifies, evaluates and hedges financial risks in close co-operation with the Company’s operating units. The board provides written principles for overall risk.

(a) Market risk

Market risk refers to the possibility that changes in the market rates may have impact on the Company’s profits or the value of its holding of financial instruments. The Company is exposed to market risks on account of foreign exchange rates, interest rates, underlying equity prices, liquidity and other market changes.

Future specific market movements cannot be normally predicted with reasonable accuracy.

(ai) Interest rate risk

Interest rate risk refers to the possibility that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Company is exposed to interest rate risk on short-term and long-term floating rate instruments and on the refinancing of fixed rate debt. The Company’s policy is to maintain a balance of fixed and floating interest rate borrowings and the proportion of fixed and floating rate debt is determined by current market interest rates. The borrowings of the Company are principally denominated in Indian Rupees and US dollars with mix of fixed and floating rates of interest. These exposures are reviewed by appropriate levels of management at regular interval.

As at March 31, 2018, approximately 33% of the Company’s Borrowings are at fixed rate of interest (March 31, 2017 : 38%).

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings as follows:

(a2) Foreign currency risk

The Company’s foreign currency risk arises from its foreign operations, investments in foreign subsidiaries, foreign currency transactions and foreign currency borrowings. The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company. The major foreign currency exposures for the Company are denominated in USD and EURO.

Since a significant part of the Company’s revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Company’s performance. Exposures on foreign currency sales are managed through the Company’s hedging policy, which is reviewed periodically to ensure that the results from fluctuating currency exchange rates are appropriately managed. The Company strives to achieve asset liability offset of foreign currency exposures and only the net position is hedged. Consequently, the overall objective of the foreign currency risk management is to minimize the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance. The Company may use forward contracts, foreign exchange options or currency swaps towards hedging risk resulting from changes and fluctuations in foreign currency exchange rate. These foreign exchange contracts, carried at fair value, may have varying maturities varying depending upon the primary host contract requirements and risk management strategy of the company. Hedge effectiveness is assessed on a regular basis.

Foreign currency sensitivity

The foreign exchange rate sensitivity is calculated by the aggregation of the net foreign exchange rate exposure in USD and EURO with a simultaneous parallel foreign exchange rates shift in the currencies by 2% against the functional currency of the respective entities. The company’s exposure to foreign currency changes for all other currencies is not material.

The movement in the pre-tax effect is a result of a change in the fair value of financial instruments not designated in a hedge relationship. Although the financial instruments have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur.

(b) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Financial instruments that are subject to concentrations of credit risk materially consists of trade receivables, investments and derivative financial instruments.

The Company is exposed to credit risk from its operating activities (primarily trade receivables and also from its investing activities including deposits with banks, forex transactions and other financial instruments) for receivables, cash and cash equivalents, financial guarantees and derivative financial instruments.

All trade receivables are subject to credit risk exposure. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. 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 established policies, controls relating to credit approvals and procedures for continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit. The history of trade receivables shows a negligible provision for bad and doubtful debts. Therefore, the Company does not expect any material risk on account of non-performance by any of the Company’s counterparties. The Company does not have significant concentration of credit risk related to trade receivables. No single third party customer contributes to more than 10% of outstanding accounts receivable (excluding outstanding from subsidiaries) as of March 31, 2018 and March 31, 2017.

Trade receivables are non-interest bearing and are generally on 7 days to 180 days credit term.

With respect to derivatives, the Company’s forex management policy lays down guidelines with respect to exposure per counter party i.e. with banks with high credit rating, processes in terms of control and continuous monitoring. The fair value of the derivatives are credit adjusted at the period end.

(c) Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time, or at a reasonable price. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company generates cash flows from operations to meet its financial obligations, maintains adequate liquid assets in the form of cash & cash equivalents and has undrawn short term line of credits from banks to ensure necessary liquidity. The Company closely monitors its liquidity position and deploys a robust cash management system.

The Company requires funds both for short-term operational needs as well as for long-term investment programmes mainly in growth projects The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

* Includes contractual interest payment based on interest rate prevailing at the end of the reporting period over the tenor of the borrowings.

# Other financial liabilities includes interest accrued but not due of Rs.11.38 Crores (March 31, 2017 : Rs.5.15 Crores).

Note 10 : Capital management:

For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximise shareholder value.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions or its business requirements to optimise return to our shareholders through continuing growth. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The funding requirements are met through a mixture of equity, internal fund generation and other non-current borrowings. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings less cash and short-term deposits (including other bank balance). The Company is not subject to any externally imposed capital requirements.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any long term borrowing in the current period except for two loans. The Company has obtained letter from the lender before the date of adoption of financial statements for not accelerating the payment of these loans within one year from the balance sheet date subject to regularisation ofthe breach by end of March 31, 2019. Accordingly, the management has considered the classification of loan based upon the original repayment schedule.

No changes were made in the objectives, policies or processes for managing capital during the current period.

Note 11 : Standards issued but not yet effective

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

The amendment will come into force from April 1, 2018. The Company is evaluating the requirement ofthe amendment and the impact on the financial statements. The effect on adoption of Ind AS 21 is expected to be insignificant.

Ind AS 115 Revenue from contracts with customers

In March 2018, the Ministry of Corporate Affairs has notified the Companies (Indian Accounting Standards) Amended Rules, 2018 (“amended rules”). As per the amended rules, Ind AS 115 “Revenue from contracts with customers” supersedes Ind AS 11, “Construction contracts” and Ind AS 18, “Revenue” and is applicable for all accounting periods commencing on or after April 1, 2018.

Ind AS 115 introduces a new framework of five step model for the analysis of revenue transactions. The model specifies that revenue should be recognised when (or as) an entity transfer control of goods or services to a customer at the amount to which the entity expects to be entitled. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The new revenue standard is applicable to the Company from April 1, 2018.

The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach)

The Company is evaluating the requirement of the amendment and the impact on the financial statements. The effect on adoption of Ind AS 115 is expected to be insignificant

Ind AS 112 Disclosure of Interests in Other Entities

The amendments clarify that the disclosure requirements in Ind AS 112, other than those in paragraphs B10-B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal Company that is classified) as held for sale.

The amendment will come into force from April 1, 2018. The Company is evaluating the requirement ofthe amendment and the impact on the financial statements. The effect on adoption of Ind AS 112 is expected to be insignificant.

Ind AS 12 Income Taxes

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity ofthe earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.

The amendment will come into force from April 1, 2018. The Company is evaluating the requirement ofthe amendment and the impact on the financial statements. The effect on adoption of Ind AS 12 is expected to be insignificant.

Ind AS 40 Investment Property

The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. Entities should apply the amendments prospectively to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. An entity should reassess the classification of property held at that date and, if applicable, reclassify property to reflect the conditions that exist at that date. Retrospective application in accordance with Ind AS 8 is only permitted if it is possible without the use of hindsight.

The amendment will come into force from April 1, 2018. The Company is evaluating the requirement of the amendment and the impact on the financial statements. The effect on adoption of Ind AS 40 is expected to be insignificant.

Ind AS 28 Investment in Associates and Joint Ventures

The amendments clarify that a venture capital organisation or a mutual fund, unit trust and similar entities may elect, at initial recognition, to measure investments in an associate or joint venture at fair value through profit or loss separately for each associate or joint venture. Further, Ind AS 28 permits an entity that is not an investment entity to retain the fair value measurement applied by its associates and joint venture (that are investment entities) when applying the equity method. Therefore, this choice is available, at initial recognition, for each investment entity associate or joint venture.

The amendment will come into force from April 1, 2018. The Company is evaluating the requirement of the amendment and the impact on the financial statements. The effect on adoption of Ind AS 28 is expected to be insignificant.

Note 12 : Business Combinations

(I). Pursuant to the Scheme of Amalgamation (the Scheme) sanctioned by National Company Law Tribunal vide its order dated August 24, 2017, Arvind Brands and Retail Limited (ABRL), Arvind Garments Park Private Limited (AGPPL) and Dholka Textile Park Private Limited (DTPPL) (collectively referred as “subsidiaries” or “amalgamated entities”) have been merged with the Company w.e.f April 1, 2016 (the appointed date). The Scheme came into effect on October 7, 2017, the day on which the order was delivered to the Registrar of the Companies. Entire business, assets and liabilities, income and expense have been transferred to the Company included w.e.f. April 1, 2016.

No new shares are being issued and the investments held in the amalgamated companies by the Company stand cancelled and difference has been adjusted against Amalgamation Reserve.

The comparative Ind AS financial statements of the Company for the year ended March 31, 2017 is approved by shareholders in its annual general meeting held on August 4, 2017 which is audited by the predecessor auditor. Subsequently, to give the effect of the scheme on account of amalgamation of the subsidiaries with the Company in accordance with Ind AS 103, comparative Ind AS financial statements of the Company for the year ended March 31, 2017 were restated.

ABRL, wholly owned subsidiary of the Company was engaged in business of Branded Garments.

AGPPL and DTPPL, subsidiaries of the Company were engaged in business of textiles.

(II). I n the board meeting held on November 8, 2017, the Board of Directors of the Company has approved a scheme of arrangement between the Company and its subsidiary companies, Arvind Fashions Limited (AFL) and The Anup Engineering Limited (Anup) as well as with Anveshan Heavy Engineering Limited (Anveshan) whereby it is proposed to demerge Branded Apparel Undertaking and Engineering undertaking of the Company to AFL and Anveshan respectively and Anup will be merged with Anveshan. Subsequently, as part of the Scheme AFL and Anup would be demerged from the Group. The Scheme is subject to approval of relevant regulatory authorities. Pending such approvals, the Company has not given effect of the scheme in the financial statements for the year ended March 31, 2018.

(III). The company has acquired the business of “Aditexfab LLP” w.e.f June 1, 2017 at a consideration of Rs.34.50 crores. Value of net assets acquired is determined at Rs.34.50 crores, consequently no goodwill has been recognized. The management believes that the fair value of the net assets acquired is not likely to remain significantly different from the book value of the net assets acquired. Accordingly, Management has exercised the option to measure the business purchase on provisional basis for a period of 12 months in accordance with Ind AS 103 - “Business Combination”.

Aditexfab LLP was engaged in the business of the giving looms for Spinning and Weaving to Arvind Limited on lease basis.

Note 13 Expenditure on Research and Development

The Company has separate in-house Research and Development Centre at Naroda, Santej, Khatraj and Pune locations. From the four locations, Naroda, Santej and Khatraj are duly recognized and approved by Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. The details of Capital and Revenue expenditure incurred on Research and Development by all Centres are as under:

Note 14 : Regrouped, Recast, Reclassified

Previous period’s figures in the financial statements, including the notes thereto, have been reclassified wherever required to conform to the current period’s presentation/classification.

Note 15 : Events occurring after the reporting period

(i) The Board of Directors recommended dividend of Rs.2.40 per equity share (March 31, 2017 : Rs.2.40 per equity share) of face value of Rs.10 each, which is subject to approval by shareholders of the Company.