1) Corporate information about the Company

Future Lifestyle Fashions Ltd (“the Company”) is a company incorporated in India under the provisions of Companies Act, 1956 on May 30, 2012. The registered address of the Company is knowledge House, Shyam Nagar, Off. Jogeshwari-Vikhroli Link Road, Jogeshwari (East) Mumbai - 400060. The Company is engaged in the business of Retailing of Fashion products through Departmental and neighbourhood stores under various formats across the country. The shares of the Company are listed on the National Stock Exchange of India Limited and BSE Limited. The Financial Statements were approved for issue by the Board of Directors on May 01, 2019. The Financial Statements are presented in Indian Rupees (Rs.) and all values are rounded to the nearest crore except where otherwise indicated.

Terms/Rights Attached to Equity Shares

The company has only one class of equity shares having a par value of Rs.2/- per share. Each holder of equity share is entitled to one vote per share.

The company declares and pays dividends in Indian Rupees (Rs.). The dividend proposed by the Board of Directors is subject to approval of the shareholders in the Annual General Meeting,

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 distributions will be in proportion to the number of equity shares held by the shareholders,

Share options granted under the Company’s employee share option plan

Share options granted under the company’s employee share option plan carry no right to dividends and no voting rights, Further details of the employee share option plan are provided in Note 36,

Nature of Reserves Capital Reserve

Capital reserve is created for excess of net book value of assets taken and liabilities assumed over the consideration transferred for various business combinations in earlier years.

Securities Premium

Securities premium is used to record the premium received on issue of shares. The securities premium can be utilised only in accordance with the provisions of the Companies Act 2013.

Debenture Redemption Reserve

Debenture Redemption Reserve is a Statutory Reserve (as per Companies Act, 2013) created out of profits of the Company available for payment of dividend for the purpose of redemption of Debentures issued by the Company.

Share Options Outstanding Account

This reserve relates to share option granted by the Company to its employees under its employee share option plan. Further information about share-based payments to employees is set out in note 36.

General Reserve

The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income. Items included in the general reserve will not be reclassified subsequently to profit or loss.

Retained Earnings

This represents the surplus/(deficit) of the statement of profit or loss. The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the separate financial statements of the Company and also considering the requirements of the Companies Act, 2013.

Equity Instruments through Other Comprehensive Income

Company has designated an investment in equity instrument at fair value through other comprehensive income in which cumulative changes in fair value of such instrument is accumulated in a separate reserve ‘Equity instruments through other comprehensive income’ within other comprehensive income.

2) Segment Information

The Company is engaged in the business of Branding, Manufacturing, Processing, Selling and Distribution of ‘Fashion Products’ which constitutes a single reporting Segment. Hence there is no separate reportable segment under Ind AS 108 Operating segment.

Company does not derive its revenue of 10% or more from any of its single customer.

3) Disclosure Relating to Leases

The Company has entered into operating lease arrangements for premises. The future minimum lease rental obligation under non-cancellable operating leases in respect of these premises is Rs.500.89 crore (2017-18: Rs.323.96 crore). The Lease Rent payable not later than one year is Rs.165.47 crore (2017-18: Rs.122.61 crore), payable later than one year but not later than five year is Rs.330.69 crore (2017-18: Rs.201.35 crore) and payable later than five years is Rs.4.74 crore (2017-18: ‘ Nil crore).

4) Employee Benefit Plans

a) Defined Contribution Plan

The Company operates defined contribution plan (Provident Fund) for all qualifying employees of the Company as per Ind AS 19. The employees of the Company are members of a retirement contribution plan operated by the government. The Company is required to contribute a specified percentage of payroll cost to the retirement contribution scheme to fund the benefits. The only obligation of the Company with respect to the plan is to make the specified contributions.

b) Defined Benefit Plans - Gratuity

The Company operates a gratuity plan covering qualifying employees as per Ind AS 19. The benefit payable is greater of the amount calculated as per the Payment of Gratuity Act, 1975 or the Company Scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. The gratuity benefits payable to the employees are based on the employee’s service and last drawn salary at the time of leaving. The employees do not contribute towards this plan and the full cost of providing these benefits are met by the Company. In case of death while in service, the gratuity is payable irrespective of vesting. The Company’s obligation towards Gratuity is a Defined Benefit plan and is not funded.

The estimate of rate of escalation in salary considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market.

(vi) Sensitivity Analysis

Significant actuarial assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the defined 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.

c) Other Employee Benefits

The Company has recognised an amount of Rs.4.29 crore (2017-18: Rs.2.26 crore) for long term compensated absences in the statement of Profit and Loss account. Actuarial assumptions for long term compensated absences are

5) Related Party Disclosures

a) Name of Related Parties and Nature of Relationship:

i. Holding Company

Ryka Commercial Ventures Private Limited

ii. Ultimate Controlling Entity

Lifestyle Trust

iii. Subsidiaries

FLFL Business Services Limited

Future Speciality Retail Limited

Future Trendz Limited

iv. Joint Ventures

Celio Future Fashion Private Limited

Clarks Future Footwear Private Limited

FLFL Lifestyle Brands Limited

FLFL Travel Retail West Private Limited (w.e.f. May 30, 2018)

FLFL Travel Retail Bhubaneswar Private Limited (w.e.f. May 30, 2018)

FLFL Travel Retail Guwahati Private Limited (w.e.f. May 30, 2018)

FLFL Travel Retail Lucknow Private Limited (w.e.f. May 30, 2018)

v. Associates

Elisir Lifestyle Private Limited

Future Style Lab Limited

Future Style Lab UK Limited

Indus-League Clothing Limited

Indus Tree Crafts Private Limited

Indus Tree Producer Transform Private Limited

Mineral Fashions Limited

Rachika Trading Limited

vi. Key Management Personnel (KMP)

Managing Director : Kishore Biyani

Non-Executive Directors : Avni Biyani

C. P. Toshniwal Rakesh Biyani Ravinder Singh Thakran

Independent Directors : Bijou Kurien

Dr. Darlie Koshy Shailesh Haribhakti Sharda Agarwal

Alternate Director : Narayan Ramachandran

vii. Entities Controlled by KMP

Bansi Mall Management Company Private Limited

Future Brands Limited

Future Consumer Limited

Future Corporate Resources Private Limited

(Formerly known as Suhani Trading and Investment

Consultants Private Limited)

Future Entertainment Private Limited Future Enterprises Limited

Future Generali India Life Insurance Company Limited

Future Generali India Insurance Company Limited

Future Human Development Limited

Future Ideas Company Limited

Future Market Networks Limited

Future Retail Limited

Future Sharp Skills Limited,

Future Supply Chain Solutions Limited

Idiom Design and Consulting Limited

Retail Light Techniques (India) Limited

Skechers South Asia Private Limited

Suhani Mall Management Company Private Limited

c) Disclosure in respect of Material Transactions with Related Parties

(i) Revenue from Operations includes Future Specialty Retail Limited Rs.0.31 crore (2017-18: Rs.0.20 crore), FLFL Lifestyle Brands Limited Rs.14.43 crore (2017-18: Rs.3.33 crore), Future Enterprises Limited Rs.20.01 crore, Future Retail Limited Rs.16.40 crore.

(ii) Purchase of Goods and Service includes Future Specialty Retail Limited Rs.147.34 crore (2017-18: Rs.151.33 crore), Future Style Lab Limited Rs.13.68 crore (2017-18: Rs.13.09 crore), Rachika Trading Limited Rs.10.00 crore (2017-18: Rs. 7.95 crore), Celio Future Fashion Private Limited Rs.10.93 crore (2017-18: Rs.8.66 crore), Mineral Fashions Limited Rs.15.30 crore, Future Enterprises Limited Rs.629.92 crore, Future Retail Limited Rs.348.21 crore.

(iii) Purchase of Fixed Assets includes Retail Light Techniques (India) Limited Rs.16.72 crore.

(iv) Sale of Fixed Assets includes Future Specialty Retail Limited Rs.1.86 crore (2017-18: Rs.0.06 crore).

(v) Investment made includes FLFL Lifestyle Brands Limited Rs.77.73 crore (2017-18: Rs.0.52 crore).

(vi) Loans and Advance given includes FLFL Lifestyle Brands Limited Rs.82.46 crore (2017-18: Rs.69.52), Future Corporate Resources Private Limited Rs.13.79 crore

(vii) Loans and Advance given received back includes Future Style Lab Limited Rs.5.30 crore, Indus Tree Crafts Private Limited Rs.3.65 crore, Indus Tree Producer Transform Private Limited Rs.0.40 crore.

6) Capital Commitment

The estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances) as at March 31, 2019 is Rs.80.55 crore (2017-18: Rs.74.75 crore)

7) Share Based Payments

Details of the employee share based plan of the Company

a) FLFL Employees Stock Options Scheme - 2013 (FLFL ESOS - 2013):

The Shareholders of the Company at their Extraordinary General Meeting held on December 16, 2013 had approved FLFL ESOS -2013 and also approved the issue of 15,00,000 Stock Options exercisable into 15,00,000 fully paid-up Equity Shares of Rs.2 each of the Company, to the eligible employees in terms of the FLFL ESOS -2013 in one or more tranches and on such terms and conditions, as may be determined by the Nomination and Remuneration Committee (NRC) in accordance with the provisions of FLFL ESOS 2013, the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (“SEBI SBEB Regulations”) and in due compliance with other applicable laws and regulations.

The Stock Options granted under FLFL ESOS - 2013 would vest after 1 year and not more than 3 years from the Grant Date of such Stock Options in one or more tranches, as may be specified and approved by the NRC. The Maximum term for exercise of vested Stock Options is 3 years from the respective date of vesting of Stock Options.

b) FLFL Employees Stock Options Plan - 2015 (FLFL ESOP - 2015):

The Shareholders of the Company at their Annual General Meeting held on August 26, 2015 had approved the FLFL ESOP - 2015 and also approved the issue of 35,00,000 Stock Options exercisable into equivalent number of Equity Shares, to be issued and allotted under primary issue or to be acquired by way of secondary acquisition, to or for the benefit of Eligible Employees under FLFL ESOP 2015, not exceeding 35,00,000 Equity Shares of Rs.2 each, in one or more tranches, at such price and on such terms and conditions as may be determined by NRC, in accordance with the provisions of this FLFL ESOP 2015, SEBI SBEB Regulations and in due compliance with other applicable laws and regulations.

Pursuant to the applicable provisions of the Act and the SEBI SBEB Regulations, the Company has set up a ‘Future Lifestyle Fashions Limited Employees’ Welfare Trust’ (“Trust”) for implementation of FLFL ESOP 2015.

Stock Options granted under FLFL ESOP - 2015 would vest not less than 1 year and not more than 3 years from the Grant Date of such Stock Options in one or more tranches, as may be specified and approved by the NRC. The Maximum term for exercise of Stock Options granted is 3 Years from the respective date of vesting of Stock Options granted.

Stock Options were priced using a Black Scholes option pricing model. Expected Volatility was calculated using standard deviation of daily change in stock price. The historical period for Expected Volatility taken into account to match the expected life of the option. There are no market conditions attached to grant and vest,

8) In terms of the Composite scheme of Arrangement and Amalgamation, which is approved by the Hon’ble High Court of Bombay vide its order dated May 10, 2013, Capital reserve was permitted to be utilised for the purpose of adjusting value of any assets including goodwill, investment/offset any charge on account of impairment/write off/amortisation. Accordingly Company has charged a sum of Rs.48.10 crore being impairment of Assets received under the aforesaid scheme to the capital reserve.

9) Disclosure Requirement of Loans, Guarantee and Investment under section 186(4) of the Companies Act,2013 and under Regulation 34(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

10) Financial Instruments and Risk Review Capital Management

The Company manages its capital to ensure that it will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt (i.e. borrowings offset by cash and bank balances) and equity of the Company (comprising issued capital, reserves and retained earnings). The Company monitors capital using a ratio of ‘net debt’ to equity. The Company’s net debt to equity ratio was as follows.

Financial risk management objectives

The Company has a Risk Management Committee instituted by its Board of Directors for overseeing the Risk Management Framework and developing and monitoring the Company’s risk management policies. The risk management policies are established to ensure timely identification and evaluation of risks, setting acceptable risk awareness and transparency, Risk management policies and systems are reviewed regularly to reflect changes in the market conditions and the Company’s activities to provide reliable information to the Management and the Board to evaluate the adequacy of the risk management framework in relation to the risk faced by the Company,

- Market risk

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rate risk and other price risk. The Company enters into derivative financial instruments to manage its exposure to foreign currency risk including forward foreign exchange contracts,

- Foreign exchange risk

The Company is exposed to foreign exchange risk arising from foreign currency transactions primarily on account of import of trading goods and capital goods. Foreign exchange risk arises recognised liabilities denominated in a currency that is not the functional currency of the Company. The Company hedges its foreign exchange risk using foreign exchange forward contracts which is within the guidelines laid down by risk management policy of the Company, Overall, Company always have a limited exposure to foreign currency risk,

Following table contains details of the carrying amounts of Company’s unhedged foreign currency denominated in Indian Rupees at the end of the reporting period,

A 5% strengthening in USD and GBP will decrease the profit for the year by Rs.0.29 crore (2017-18: Rs.0.64 crore) and a 5% weakening in USD and GBP will increase the profit for the year by Rs.0.29 crore (2017-18: Rs.0.64 crore), In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year,

- 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 borrows the money at variable interest rate and therefore it is exposed to interest rate risk.

The interest rate risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. The company is not exposed to significant interest rate risk as at the respective reporting dates.

- Other price risk

The Company is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The Company does not actively trade these investments,

If equity prices had been 5% higher/ lower, other comprehensive income for the year would increase/decrease by Rs.2.00 crore (2017 - 2018: increase/decrease by Rs.2.00 crore) as a result of the changes in fair value of shares measured at fair value through other comprehensive income,

(i) Credit risk

Credit risk is the risk that counterparty will default on its contractual obligation resulting in a financial loss to the company. The credit risk arises primarily on trade receivables, store deposit with landlord of stores and deposits with banks and financial institutions and other financial instruments,

Most of the Company’s sales is on the counter sale i.e. cash and carry basis on which no credit risk arises, however credit risk arises to the Company on sales to institutional customers/ wholesale customers. Company manages the credit risk arising from trade receivables through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers. Company’s customer base is widely spread and therefore it does not have concentration of credit risk. Company manages credit risk on store deposits by timely advance negotiation with landlord of store or through legal action.

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that there is no substantial change in the economic environment affecting customers of the Company, the Company expects the historical trend of immaterial credit losses to continue. Following is the change in the loss allowance measured using life-time expected credit loss.

Credit risk on cash and bank balances is limited as company counterparties are banks or financial institutions with high credit ratings assigned credit rating agencies.

(ii) Liquidity risk

Liquidity risk is the risk that the company will fail in meeting its obligations associated with its financial liabilities. The company’s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. The Company monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs.

The following tables detail the Company’s remaining contractual maturity for its financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based. It include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Company may be required to pay

11) The Hon’ble Supreme Court of India by its order dated February 28, 2019, in the case of M/s. Surya Roshni Limited and others v/s EPFO, set out the principles based on which allowances paid to the employees should be identified for inclusion in basic wages for the purposes of computation of Provident Fund contribution. There are interpretative issues related to the judgement which require clarification. Further Surya Roshni Limited has filed a review petition with Hon’ble Supreme Court of India which is pending for disposal. Pending decision on the subject review petition and clarificatory directions from the EPFO, the impact, if any, is not ascertainable and consequently no effect has been given in the accounts.

12) The Company has transferred its Lee Cooper business on slump exchange to its step down subsidiary Future Speciality Retail Limited (FSRL) during the financial year 2016-17. The Company along with other parties have entered into an investment agreement with the subscribers of CCPS issued by FSRL which allow an exit option to them at an agreed price as per the terms of the agreement.