Bharat Dynamics Ltd.
You can view the entire text of Notes to accounts of the company for the latest year
ISIN No INE171Z01018 52Wk High (Rs.) 425 BV (Rs.) 106.74 FV (Rs.) 10.00
Bookclosure 27/03/2019 52Wk Low (Rs.) 225 EPS (Rs.) 28.82 P/E (X) 10.20
Mkt Cap. (Rs. Cr.) 5,384.80 P/BV (X) 2.75 Div Yield (%) 2.48 Mkt Lot 1
2018-03

(ii) 146 Acres 32 Guntas (March 31,2017: 146 Acres 32 Guntas) received free of cost from State Government, is valued at Rs.28.42 Lakh (as at March 31,2017 Rs.28.42 Lakh), title to this land is yet to be received.

(b) In respect of land admeasuring 82 Acres 31 Guntas (as at March 31,2017: 82 Acres 31 Guntas) acquired by state government for the company for which an amount of Rs.21.66 Lakh (as at March 31 2017 : Rs.21.66 Lakh) paid/provided by the company is capitalised

(c) Title is yet to be received for 10 Acres 13 Guntas (as at March 31,2017 : 10 Acres 13 Guntas) for which an amount of Rs.376.13 lakh (as at March 31,2017: Rs.376.13 lakh) paid/provided is capitalised.

(d) Free hold land of 597 Acres 22.50 Guntas (as at March 31,2017: 597 Acres 22.50 Guntas ) is taken possesion on agreement of sale by paying Rs.5831.28 Lakh (as at March 31,2017: ‘.5831.28 lakh) based on tentative fixation of price is capitalised. One of the condition of agreement of sale is, if the unit does not commence commercial production within 2 year from date of agreement or extended time, if allowed, shall be at a penalty based on the cost of land at that time. Execution of sale deed, passing of title is only after commencing commercial production.

Leasehold Land :

(a) Land measuring 3 acres 25 guntas (March 31, 2017: 3 acres 25 guntas) was taken on lease from Government of India at a rental of Rs.1.00 per acre per annum. As no premium has been paid for the lease, no capital cost is considered.

(b) Leasehold land measuring 553 Acres 34 Guntas (as at March 31,2017:553 Acres 34 Guntas ) at Amravati for which a premium of Rs.3922.37 lakh was paid is taken on lease on 07/02/2014 with certain conditions attached to it. One of the main condition is, if the factory building and works are not completed within 60 months from the date of allotment, unless the time is extended, the lease agreement may be cancelled and the lessor may take possession of the leasehold land together with all the erections, if any, on the said land, without paying any compensation to the company.

Buildings :

(a) Buildings include Rs.111.01 Lakh as at March 31, 2018 (March 31, 2017 : Rs.111.01 Lakh) being the value of buildings constructed on land not belonging to the Company.

(i) The Estimated useful life of various categories of assets (As per schedule II to the companies Act, 2013) is described as follows:

Notes:

(i) Capital Work-in-Progress includes Rs.40.09 Lakh as at March 31, 2018 (March 31, 2017: Rs.40.09 Lakh) of Buildings kept in abeyance. Subsequent to the report of the Dy. Collector and Tahasildar, the Company obtained Survey report from Asst. Director, Survey Settlement and Land Records, R.R District. In order to proceed further, the company is in the process of obtaining clearances from environmental authorities. Necessary adjustments would be carried out in the books on receipt of clearance from environmental and other authorities.

(ii) Refer note 36(6) for capital commitments and Note 36(7) for details relating to short closed projects.

(ii) Contractual obligations

The Company has no contractual obligations to sell, construct or develop investment property or for its repairs, maintenance or enhancements.

(iii) Leasing arrangements

Land admeasuring 5 acres and 1 gunta at Kanchanbagh is leased to Government of India under long-term operating leases with rentals payable yearly. The lease rentals for such property is Rs.1 per annum per acre. Leasing arrangements are the same for year ended March 31, 2018 and March 31, 2017.

Significant judgement:

As the land given to Indian Navy, Government of India Organisation is within the premises of the company and it would not be possible for the company to give the land to a third party, the Registration department value of the land is considered to be the fair value of the land. The fair value arrived at is Rs.0.06 lakh per square yard as per the Registration department.

(v) Impairment is tested as per the accounting policy 15. the company has assessed that there are no indicators of impairment.

Warranties:

Warranty estimates are established using historical information on the nature, frequency and average cost of warranty claims and also management estimates regarding possible future outflow on servicing the customers for any corrective action in respect of product failure which is generally expected to be settled within a period of 1 to 2 years from the date of supply.

Liquidated damages:

Liquidity damages are established using historical information on the scheduled delivery period and the trend of delays and also management estimates regarding possible future outflow on delay of delivery of goods or services to the customers.

Onerous contract:

Provision for onerous contract represents the loss assessed by the company on its executory sale contracts. Such loss will be provided as and when the assessment is made, by the company during the course of execution of such contracts.

CSR & Sustainable development:

CSR & Sustainable development expenses are recognised based on the expenditure incurred / to be incurred as per the provisions of Companies Act, 2013.

Future charges:

Provision for future charges represents the estimated liability on account of revised ancillary/ packing material accepted to be delivered in line of ancillary/ packing material originally stipulated in the contract terms for the sales effected earlier.

1: General Notes:

Statement of Compliances:

The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) [as notified under the section 133 of Companies Act, 2013 (the “Act”) read with Rule 3 of Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.

1(1) Offsetting Financial Assets and Financial Liabilities

The following table presents the recognised financial instruments that are offset as at March 31 2018, March 31 2017. The column “net amount” showns the impact on the Company’s Balance Sheet if all offset rights are exercised.

Note: EPS is calculated based on profits excluding the other comprehensive income.EPS for previous year is adjusted for Bonus issue made during the year.

* Since there is a splitting of shares during the year, the previous year figures are revised accordingly

(ii) For discontinuing operations:

There are no discontinuing operations.

(iii) For continuing and discontinuing operations:

Refer to the table (i) 36 (3) Employment Benefit obligations

(i) Post-employment obligations- 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 day’s salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognized funds in India. The company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

Gratuity

The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as and when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Defined benefit liability and employer contributions

The Company has purchased insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. The company considers that the contribution rate set at the last valuation date is sufficient to eliminate the deficit over the agreed period and that regular contributions, which are based on service costs will not increase significantly.

Risk exposure

Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:

Interest Rate Risk: The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.

Salary Inflation risk : Higher than expected increases in salary will increase the defined benefit obligation.

Demographic Risk: This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.

(ii) Defined Contribution plans

Employer’s Contribution to State Insurance Scheme: Contributions are made to State Insurance Scheme for employees at the rate of 4.75%. The Contributions are made to Employee State Insurance Corporation(ESI) to the respective State Governments of the Company’s location. this Corporation is administered by the Government and the obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

(iii) Compensated absences

The leave obligations cover the company’s liability for earned leave.

The company maintains a funded plan for the purpose of compensated absences. The company recognises the obligations net of planned assets as per the actuarial valuation. A summary of employee benefit obligation and planned assets is presented below: 36(4) Construction contracts:

Following disclosures are made relating to Revenue Recognition of Construction Contracts.

Methods of recognising contract revenue:

Percentage of completion method is used to determine the contract revenue recognised in the period.

Method used to determine stage of completion of contract:

Proportion of contract costs incurred for work performed to the estimated total cost of contracts is used to determine the stage of completion.

Notes:

(i) In case of a supplier, the Company initiated legal action for recovery of advance amount of Rs.17.19 lakh with interest etc., as the Contract was not executed. Though District Court issued a decree for an amount of Rs.48.10 Lakh together with interest etc., in favour of the Company, the decretal amount has not been recognised as claims receivable / income since the supplier was granted stay of operation of the decree by Hon’ble High Court and the matter is sub-judice as on date.

(ii) In case of another supplier, the Company has initiated legal action for recovery of advance amount of Rs.4.45 lakh with interest, being amount paid towards material purchases, which were subsequently rejected and taken back by the supplier but failed to supply the correct material. The case was decreed in favour of M/S BDL(ex-parte) and has to be executed.

1(2) Details of short closed projects:

Out of the advances of Rs.38456.42 Lakh (as at March 31,2017 Rs.39272.87 Lakh) received from the customers, in respect of four contracts/ indents and one LOI which are short closed, the Company has made payments to suppliers for procurement of Special Tools and Equipment and Inventory. Against these payments, Special Tools and Equipment (Note 1) include an amount of Rs.114.05 Lakh (as at March 31,2017 ‘114.05 Lakh), Current Assets (Note 10-16) include an amount of Rs.11271.64 Lakh (as at March 31,2017 Rs.11271.64 Lakh) in Advances to vendors and Rs.7903.45 Lakh (as at March 31,2017 Rs.8025.31 Lakh) in Inventories, total amounting to ‘19289.14 Lakh (as at March 31,2017 Rs.19411.00 Lakh). As these assets had been acquired/expenditure had been incurred by the company based on firm orders/ LOI and out of the funds provided by the customer, no loss devolves on the company on account of long outstanding advances and non-moving Special Tools and Inventory. Hence, no provision is considered necessary. Further, in respect of these short closed Indents/contracts/LOI, the company approached the customers for compensation of ‘3590.00 Lakh (as at March 31,2017 Rs.5525.00 lakh) being the net amount of expenditure after adjustment of the available advance. Hence, for want of finalisation of the amount from the Government/ Customers, no claim/ impact on profit has been accounted in the books.

1(3) Capital Management

a) Risk management:

The Company has equity capital and other reserves attributable to shareholders as only source of capital and the company doesn’t have borrowings or debts.

b) Dividends

Events occurring after the reporting period:

Refer above note for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing annual general meeting.

1(4) Confirmation of Balances:

Letters requesting Confirmation of Balances have been sent in respect of Debtors, Creditors, Claims Receivable, Materials with Contractors / SubContractors, Advances, Deposits and others. Based on the replies wherever received, reconciliations / provisions / adjustments are made as considered necessary.

1(5) Retention Sales:

The value of the retention sales (i.e, goods retained with the company at the customers’ request and at their risk) included in gross turnover during the year is Rs.2,75,981.41 lakh (2016-17 Rs.2,62,524.61 lakh)

1(6) Charges registered:

Company has registered floating charge with State Bank of India and Andhra Bank to the extent of Rs.41,010.00 lakh (as at March 31,2017 Rs.31,010.00 lakh) on book debts.

1(7) Operating Cycle:

As per the requirement of Schedule III to the Companies Act, 2013, the operating cycle has been determined at the product level as applicable.

1(8) Contingent Assets:

Fair value hierarchy:

Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:

Level 1: Quoted prices (unadjusted) in active market for identical assets or liabilities.

Level 2: Inputs other than quoted price including within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). 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 significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). 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 with listed instruments where market is not liquid and for unlisted instruments.

Valuation technique used to determine fair value:

Specific valuation techniques used to value financial instrumenats include:

- The fair value of unquoted equity instrument are determined with respect to the net worth of the company.

- The fair value of 45 years deferred credit and receivables is determined using foreign exchange rates as per the contract.

The resulting fair value estimates are included in level 3.

1(9) Financial Risk Management:

The Company’s activities expose it to market risk, liquidity risk and credit risk. The analysis of each risk is as follows:

A) Credit risk

Credit risk arises from cash and cash equivalents, instruments carried at amortised cost and deposits with banks, as well as credit exposures to customers including outstanding receivables.

(i) Credit risk management

A. Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks with highcredit ratings assigned by external agencies.

B. Credit risk on claims/refunds receivables, trade receivables and unbilled revenues are evaluated as follows:

(i) Year ended March 31, 2018:

(a) Expected credit loss for financial assets where general model is applied

(iv) Significant estimates and judgements:

Impairment of financial assets:

The impairment provisions for financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

B) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding to meet obligations when due and to close out market positions. Company’s treasury maintains flexibility in funding by maintaining availability under deposits in banks.

Management monitors cash and cash equivalents on the basis of expected cash flows.

C) Market risk

(i) Foreign currency risk

The company operates in a business that exposes it to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD, Euro, GBP, CHF and SEK. Foreign exchange risk arises from future commercial transactions and recognised liabilities denominated in a currency that is not the company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows. As per the sales contract, the company is eligible for exchange rate variation upon settlement of foreign exchange liabilities. Hence, the company is protected against the foreign currency risk.

1(10) Segment information:

As the Company is engaged in defence production, exemption was granted from applicability of Accounting standard on Segment reporting under Sec 129 of Companies Act 2013 vide Notification dated 23rd February 2018 of Ministry of Corporate Affairs.

1(11) Foreign Exchange Exposure:

Pursuant to the announcement of ICAI requiring the disclosure of “Foreign Exchange Exposure”, the major currency-wise exposure as on 31 March 2018 (As at 31 March,2017 are shown in brackets) given below.

1 (12) 5MW solar plant was installed during 2017-18 at Bhanur Unit under Jawaharlal Nehru National Solar Mission (JNNSM) scheme. As per JNNSM scheme, Company is eligible for Viability Gap Fund (VGF) for commissioning of solar plant. The VGF is accounted based on the project cost as per the contract. It is being maintained under Deferred Revenue in compliance with the laid down conditions of the scheme. VGF amount of Rs.995.89 Lakh is accounted as Deferred Revenue. 4% of Deferred Revenue is to be recognised as revenue each year. A sum of Rs.23.24Lakh (being proportionate amount from September,2017) is recognised as revenue during the year.

1 (13) Accounting Standards issued but not yet effective:

Ministry of Corporate Affairs, Government of India, has issued notification vide GSR.........(E) dated 28/03/2018 prescribing Ind AS 115 and withdrawing Ind AS 11 and Ind AS 18 and also incorporating the consequential changes in some other Indian Accounting Standards, effective from April 01, 2018. The effect of Ind AS 115 and consequential changes in other Accounting Standards are being evaluated.

1 (14) Previous year figures have been regrouped or rearranged wherever necessary. Negative figures are indicated in parenthesis.

Significant Accounting Policies and accompanying Notes form an integral part of the Financial Statements