1. NOTES FORMING PART OF THE FINANCIAL STATEMENTS

a) Brief description of the Company

TVS Electronics Limited (‘the Company’) is a public limited company incorporated and domiciled in India whose shares are publicly traded. The registered office is located at “Jayalakshmi Estates”, 29, Haddows Road, Nungambakkam, Chennai - 600006, Tamil Nadu, India.

The Company manufactures and sells Point of sale devices, Printers & Keyboards besides providing service for extensive product lines across various brands via various delivery models like exclusive service centers, multi brand service centers, Onsite support, repair centers and factories. The company is also into ‘Distribution Services’ though e-commerce.

Note:

1) Business Rights relating to servicetec business, with carrying value of Rs. 1,868 Lakhs has been considered as having an indefinite useful life as there are no technical, technological obsolence or limitations under the contract. This Business Right has been tested for impairment by obtaining a valuation from an independent valuer based on the Discounted Cashflow method. Based on the valuation there was no impairment required to be recorded on the reporting date.

2) Amortization expense of intangible asset have been included under ‘Depreciation & Amortization’ expense in statement of profit and loss account.

2.1. Investment in Benani Foods Private Limited has been considered as a subsidiary by the virtue of control by the Company as explained in Ind AS 110 (refer note 1(3)(c))

2.2. During the year ended March 2018, the Company has converted 7,197 preference shares of Rs.10/- each aggregating to Rs. 355 Lakhs in to 7,197 equity shares of Rs. 10 each of Benani Foods Private Limited. Further during the year, the company has invested in 2,413 equity shares of Rs. 10 each of Benani Foods Private Limited agrregating to Rs. 95 lakhs.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivable based on a provision matrix. The provision matrix takes in to account historical credit loss experience and adjusted for forward - looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates are given in the provision matrix. The provision matrix at the end of the reporting period is as follows:

The ageing based provision matrix is not applied on the receivables relating to Distribution Business based on the historical credit loss experience with the customers of this business.

Note 3

Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks, cheques and drafts on hand. Cash and cash equivalents at the end of the reporting period as shown in the statement of cash flows can be reconciled to the related items in the balance sheet as follows:

4.1Terms attached to Equity Shares:

The Company has one class of equity share having a par value of Rs.10 per share. Each holder of equity share is entitled to one vote per share. The dividend when proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General meeting. Repayment of capital on liquidation will be in proportion to the number of equity shares held.

Share options granted under the Company’s employee share option plan carry no rights to dividends and no voting rights. 14.4Details of shares issued for consideration other than cash during the period of five years immediately preceding the reporting date: Nil.

a. Working Capital facilities from Consortium Banks are secured by hypothecation of raw materials, components, work in process, finished goods, book debts, stores and spares and further secured by a second charge over the immovable properties of the company on a pari passu basis of the consortium banks.

Note

a) of this an amount of Rs. 52 lakhs (2017 - 83 Lakhs; 2016 - 41 Lakhs) was due to enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006 which is on the basis of such parties having been identified by the management and relied upon by the auditors.

Note 5

Amalgamation of Prime Property Holdings Limited with the Company

i. The Scheme of Amalgamation of Prime property Holdings Limited , an wholly owned subsidiary (“transferor company”) with the Company, was sanctioned by the National Company Law Tribunal vide their order dated March 27, 2018. The appointed date for merger as per the scheme is April 01, 2016 and the scheme was made effective on March 29, 2018 on which date, the copy of the order of the tribunal sanctioning the scheme has been filed with the Registrar of Companies.

This merger being a business combination involving entities under common control, has been accounted for under the Pooling of Interest Method which is in accordance with Ind AS 103 - Business Combinations. Accordingly,

a. the assets and liabilities of Prime Property Holdings Limited are reflected at their carrying values.

b. the financial information as on April 01, 2016 and the period from April 01, 2016 to March 31, 2017 have been restated to reflect the scheme of amalgamation.

ii. As per the scheme of amalgamation, an amount of Rs. 837 lakhs representing the retained earnings of the transferor company as on April 01, 2016 has been added to the retained earnings of the Company

iii. Details of assets and liabilities taken over on Amalgamation:

v. The transferor company is engaged in the business of acquisition of land and buildings as owners/lease holders or otherwise by itself or through promoters to construct, erect, repair or remodel, demolish or develop and maintain immoveable properties.

Note 6

Share based payments

6. 1 Employee share option plan of the Company

6.1.1 Details of the employee share option plans of the Company

Refere note 1 (14) for accounting policy on share-based payment.

The shareholders of the company had approved Employee Stock Option scheme 2011, at previous annual general meetings which will be administered by the Nomination and Remuneration committee of the Board of Directors.

Each employee share option converts into one equity share of the Company on exercise. No amount in excess of face value of the share are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

The following share-based payment arrangement were in existence during the current and prior years

The risk free interest rate are determined based on zero coupon soverign bond yield with maturity equal to expected life of the option. Volatality calculation is based on historical stock price using the standard deviation daily change in stock price. The historical period is taken into account to match the expected life of the option. Dividend yield has been arrived based on the historical trend of dividend declaration by the company as on valuation date.

Weighted Average remaining contractual life for option outstanding as at March 31, 2018 was 2,192 days (March 31, 2017: 2,557 days) 33.1.4. Share options exercised during the year: Nil (2017 - 60,000 options)

Note 7

First-time Ind AS adoption reconciliation

7.1 Reconciliation of total equity as at March 31, 2017 and April 01, 2016

7.2 Notes to the reconciliations

a. Amalgamation of Prime Property Holdings Limited

Prime Property Holdings Limited, a subsidiary of the Company was amalgamated with the Company with the appointed date of April 01, 2016. This amalgamation would get covered as part of the common control transactions as provided in Ind AS 103 - Business Combinations. Ind AS 103 requires that the amalgamation should be accounted as if it was there on the earliest period reported being April 01, 2016. The effect of this change is an increase in total equity as at April 01, 2016 of Rs. 765 lakh and March 31, 2017 of Rs. 793 lakh

b. Intangible asset with indefinite useful life

Business Rights having a carrying value of Rs. 1,809 lakhs as on transition date (April 01, 2016) was reassessed to be an intangible with indefinite useful life as there was no impairment, depreciation/amortisation of Rs. 310 lakhs relating to the year ended March 31, 2017 has been reversed.

c. Actuarial gains and losses

Under previous GAAP, actuarial gains and losses were recognised in profit or loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability/asset which is recognised in other comprehensive income. Consequently, the tax effect of the same has also been recognised in the other comprehensive income under Ind AS instead of profit or loss. The actuarial loss for the year ended March 31, 2017 net of taxes were Rs. 21 lakhs.

d. Long term investments as FVTPL / FVTOCI

Under previous GAAP, long term investments were measured at cost less diminution in value which is other than temporary. Under Ind AS, these financial assets have been classified as FVTPL / FVTOCI. On the date of transition to Ind AS, these financial assets have been measured at their fair value which is higher than the cost as per preivous GAAP, resulting in an decrease in carrying amount by Rs. 13 lakhs as at March 31, 2017 and increase of Rs. 69 lakhs as at April 01, 2016. The corresponding deferred taxes have also been recognised as at March 31, 2017 and April 01, 2016.

e. Share based payments in Fair value

Under previous GAAP, the cost of equity settled employee share-based payments was recognised using the intrinsic value method. This did not result in recognising any expense in profit or loss in respect of these share-based payments because the fair value of the shares on the grant date equaled the exercise price. Under Ind AS, the cost of equity-settled employee share-based payments is recognised based on the fair value of the options as on the grant date. The change does not affect total equity, but there is a decrease in profit before tax as well as total profit of Rs. 9 lakhs.

f. Other comprehensive income

Under previous GAAP, there was no concept of other comprehensive income. Under Ind AS, specified items of income, expense, gains or losses are required to be presented in other comprehensive income.

g. MTM on Forward Contracts

Under previous GAAP, the Forward contracts outstanding as on reporting date were not requried to be restated basis MTM valuation. Under Ind AS, the forward contracts outstanding needs to be valued as per MTM. On the date of transition to Ind AS, these financial assets have been measured at MTM which is higher than the liability as per preivous GAAP, resulting in an increase in liability by Rs. 10 lakhs as at March 31, 2017 and Rs. 36 lakhs as at April 01, 2016.

Note 8

Financial Instruments

8.1 Capital Management

The Company’s capital management is intended to maximise the return to shareholders for meeting the long-term and short-term goals of the Company through the optimization of the debt and equity balance.

The Company determines the amount of capital required on the basis of annual and long-term operating plans and strategic investment plans. The funding requirements are met through equity and long-term/short-term borrowings. The Company monitors the capital structure on the basis of Net debt to equity ratio and maturity profile of the overall debt portfolio of the Company.

For the purpose of capital management, capital includes issued equity capital, securities premium and all other reserves attributable to the equity shareholders of the Company. Net debt includes all long and short-term borrowings as reduced by cash and cash equivalents.

The following table summarises the capital of the Company:

8.2 Financial risk management objectives

The Company has adequate internal processes to assess, monitor and manage financial risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company seeks to minimise the effects of these risks by using financial instruments such as foreign currency forward contracts to hedge risk exposures and appropriate risk management policies as detailed below. The use of these financial instruments is governed by the Company’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk. The Company does not enter into trade financial instruments, including derivative financial instruments, for speculative purposes.

8.3 Market Risk

The Company’s financial instruments are exposed to market rate changes. The Company is exposed to the following significant market risks:

- Foreign currency risk

- Interest rate risk

- Other price risk

Market risk exposures are measured using sensitivity analysis. There has been no change to the Company’s exposure to market risks or the manner in which these risks are being managed and measured.

8.4 Foreign Currency risk management

The company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.

The carrying amounts of the company’s foreign currency denominated monetary liabilities at the end of the reporting period.

8.4.1.Foreign Currency sensitivity analysis

The following table details the company’s sensitivity to a 10% increase and decrease in the Rs. against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in profit or equity where the Rs. strengthens 10% against the relevant currency. For a 10% weakening of the Rs. against the relevant currency, there would be a comparable impact on the profit or equity.

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.

8.5 Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company manages its interest rate risk by having a mixed portfolio of fixed and variable rate loans and borrowings.

8.5.1 Interest rate sensitivity analysis

The sensitivity analysis below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

8.6 Other price risks

The Company is exposed to equity price risks arising from equity investments. Equity investments are held for strategic purposes. The Company doesn’t actively trade these investments.

8.6.1. Equity Price Sensitivity Analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the end of the reporting period. If equity prices had been 100 points higher/lower;

8.7 Credit Risk Management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The company uses other publicly available financial information and its own trading records to review its major customers. The company’s exposure is continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

8.8 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the company’s short, medium, and long-term funding and liquidity management requirements. The company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

8.8.1. Liquidity and interest risk tables

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

8.9. Fair value measurements

8.9.1 Fair value of the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis Some of the company’s financial assets and financial liabilities are mesured at fair value at the end of the reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique (s) and inputs used).

Note 9

Employee benefit plans

A. Description of plans

The Company makes contributions to both Defined Benefit and Defined Contribution Plans for qualifying employees. These Plans are administered through approved Trusts, which operate in accordance with the Trust Deeds, Rules and applicable statutes. The concerned Trusts are managed by Trustees who provide strategic guidance with regard to the management of their investments and liabilities and also periodically review their performance.

Provident Fund, Gratuity Benefits are funded and Leave Encashment Benefits are unfunded in nature.

Under the Provident Fund, Gratuity and Leave Encashment Schemes, employees are entitled to receive lump sum benefits. The liabilities arising in the Defined Benefit Schemes are determined in accordance with the advice of independent, professionally qualified actuaries, using the projected unit credit method at the year end. The Company makes regular contributions to these Employee Benefit Plans. Additional contributions are made to these plans as and when required based on actuarial valuation.

B. Defined benefit plans :

Gratuity -

In respect of Gratuity plan, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as March 31, 2018 by Mr.Bhargava, Fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit cost method.The following table sets forth the status of the Gratuity Plan of the Company and the amount recognized in the Balance Sheet and Statement of Profit and Loss. The Company provides the gratuity benefit through annual contributions to a fund managed by the Life Insurance Corporation of India (LIC).

The Company is exposed to various risks in providing the above gratuity benefit which are as follows:

Interest Rate risk :

The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in thevalue of the liability (as shown in financial statements).

Investment Risk :

The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.

Salary Escalation Risk :

The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan’s liabilty.

Demographic Risk :

The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.

The Company has invested the plan assets with the insurer managed funds. The insurance company has invested the plan assets in Government Securities, Debt Funds, Equity shares, Mutual Funds, Money Market Instruments and Time Deposits.The expected rate of return on plan asset is based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligation.

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

Please note that 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. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

There was no change in the methods of assumptions used in preparing the sensitivity analysis from prior years.

D. Long Term Compensated Absence

The assumption used for computing the long term accumulated compensated absences on actuarial basis are as follows:

Note 10

Approval of Financial Statements

The Financial Statements were approved for issue by the Board of Directors on May 11, 2018.