and the - Hero MotoCorp€¦ · The Company manufactures and sells motorcycles within Bangladesh...

HMCL Niloy Bangladesh Limited

Auditors' report and financial statements as at

and for the year ended 31 March 2018

i

Chartered Accountants9&5Mohakhali C/ADiaka 1212Bangladesh

I ndependent auditors' reportto the shareholders of HMCL Niloy Bangladesh Limited

Rahman Rahman Huq Telephone +880 (2) 988 64bO-2Fax +880 (2) 988 6449E-mail [email protected] www.kpmg.com/bd

Report on the financial statements

We have audited the accompanying financial statements of HMCL Niloy Bangladesh Limited (the

Company) which comprise the statement of financial position as at 31 March 2018, and the statement ofprofit or loss and other comprehensive income, statement of changes in equity and statement of cashflows for the year then ended, and notes, comprising a summary of significant accounting policies andother explanatory information.

Management's responsibility for the financial statementsManagement is responsible for the preparation of financial statements that give a true and fair view in

accordance with Bangladesh Financial Reporting Standards, and for such internal control asmanagement determines is necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditors' responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Bangladesh Standards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial statements. The procedures selected depend on our judgment, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. ln makingthose risk assessments, we consider internal control relevant to the entity's preparation of the financialstatements that give a true and fair view in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity'sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinionln our opinion, the financial statements give a true and fair view of the financial position of the Company

as at 31 March 2018 and of its flnancial performance and its cash flows for the year then ended in

accordance with Bangladesh Financial Reporting Standards.

tBahman Bahman Huq,€ paftnership firm regastered in Eangladeshand a member firm oi the KPMG neMork of independent member lirmsaffiliated wth KPMG lnternational cooperative ('KpMGlnternational'), a Swiss entity.

Tel +880 (31) 710704,710996Fax +880 (31) 2520795E-mail [email protected] M.kpmg.com/bd

R?I

Chihagong oitice address i78 Agrabad C/A (13th Fioor)Chittagong, Bangladesh

Rahman Rahman HuqChsrtered Accountants

Report on other legal and regulatory requirements

ln accordance with the Companies Act '1994, we also report the followingl

a) we have obtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purposes of our audit and made due verification thereofi

b) in our opinion, proper books of account as required by law have been kept by the Company sofar as it appeared from our examination of these books; and

c) the statement of financial position and statement of profit or loss and other comprehensiveincome dealt with by the report are in agreement with the books of accounts and returns.

Rahman Rahman HuqDhaka, 29 April 2018

KR//'?rlra*/,6

2

Wffi

Statement of flnancial osition

ln Taka /Vofe31 March

2018arch2017

AssetsProperty, plant and equipmentlntangible assetsDeferred tax assets

56

17

1,794,204,32543'l,356

1,439,901,80460,556

24 076 745Non-current assets 1.794.635.681 1,464.039,105lnventoriesAdvances, deposits and prepaymentsCurrent tax assetslnvestmentsTrade and other receivablesCash and cash equivalents

7

I9

1011

12

1,653,323,47489,513,438

170,064,06040,505,494

238,784,830743,370.828

7 5,922,62584,205,9254,304,653

869,586419,926,444

Current assets 2,935,562.124 585.229.233Total assets 4,730,197,805 2,049,268,338

EquityShare capitalRetained earnings

13 981,296,000919,09't,911

979,200,000(59,867,445)

Total equity 1,900,387,911 919,332,555LiabilitiesLoans and borrowingsShare money depositEmployee benefltsDeferred tax liability

14

151617

130,454,1202,567,2217,151,978

16,335,555

836,551,3034,663,221

Non-current liabilities 156,508,874 841,214,524Bank overdraftLoans and borrowingsTrade and other payables

12

14

18

18,999,194684,424,505

1.969.877.3201 1 9,81 3,541168,907,718

Curent liabilities 2.673.301.020 288,721,259Total liabilities 2.829.809.894 1,129,935,783Total equity and liabilities 4,730,197,805 2,049,268,338

LP.-

Director

Auditor

Rahman Rahman HuqCha0eted Accountiantrs

Director

Dhaka, 29 April 2018

R?// 3


The notes on pages 7 to 39 are an integral paft of these financial statements.

)|-fl )U'"*/

As per our report of same date.

Statement of profit or loss and other comprehensive income

ln Taka A/ofe

For the year ended 31 March

2018 2017

Revenue

Cost of sales

19

206,837,808,220

{4,889,757,735)Gross profitOther income

General and administrative expenses

Selling and distribution expenses

21

22

23

t,948,050,4854,701,616

(125,184,829)

(596,162,231)

49,241

(91 ,51 1,693)

Operating profiu(loss) 1,231 ,40s,041 (91 ,462,452)Finance costFinance income

(139,803,139)

31,342,087

(12,449,664)

22,278,186

Net finance income/(cost) 24 (108,461,052)

ProfiU(loss) before WPPF & taxContribution to workers profit participation fund

1,122,943,989(56,147,199)

(81,633,930)

ProfiU(loss) before taxlncome tax (expense)/income 25

1,066,796,790(87.837,.t34)

(81,633,930)

23,645,784Profiu(loss) for the vear 978,959,356 (57.988,'146)

Other comprehensive incomeTotal comprehensive income 978,959,356 (57,988,146)

The notes on pages 7 to 39 are an integnl paft ofthese tinancial statements.

y-w 2P

As per our report of same date

Auditor

Rahman Rahman HuqCharleredAcccunlants

Dlrector

Dhaka, 29 April 2018

RF//

4


9,828,522

Director

HMCL Niloy Bangladesh LimitedStatement of changes in equity

For the year ended 31 lrarch 2018

Attributable to the owners of the Company

ln TakaShare

capilalRetainedearninqs

Totalequity

Balance at 1 Aoril 2016 748 200.000 (1,879,299) 746320.701Total comprehensive incomeProfiu(loss) for the yearOther comprehensive income

(57,988,146) (57,988,'146)

Total comprehensive income (57.988,146) (57,988,146)

Transactions with owners of the CompanyContributions and distributionslssue of ordinary sharesDividends

231,000,000 231,000,000

Total transactions with owners of the ComDanv 231.000.000 231,000,000Balance at 3l March 2017 979,200,000 (59,867,445) 919,332,555

At 1 April 2017 979,200,000 (59,867,445) 919,332,5s5Total comprehensive incomeProfiU(loss) for the year0ther comprehensive income

978,959,355 978,959,356

Total comprehensive income 978,959,356 978,959,356

Transactions with owners of the CompanyContributions and distributionslssue of ordinary sharesDividends

2,096,000

Total contributions and distributions 2,096,000 2,096,000Total transactions with owners of the Company 2,095.000 2.096,000Balance at 31 March 2018 981,296,000 919,091,91't 1,900,387,911

The notes on pages 7 to 39 are an integral paft of these financial sfatemenls

*

5

2,096,000

N )U*1

HMCL Niloy Bangladesh LimitedStatement of Cash flows

ln Taka l/oteFor the year ended 3'1 lvlarch

2018 2017

Cash flows from operating activitiesProfiU(Loss) for the yearAdjustments for:- Depreciation- Amortisation- Employee benefits- Loss on sale of property, plant and equipment- Net finance (income)/costs- Tax (income)/expense

978,959,356 (57,988,146)

56

17

2425

84,054,285158,405

7,151,978390,630

(31,342,087].87.837.434

2,797,61031,960

(22,278,186)(23 645,7 84)

1,',t27,210,O01 (101 ,082,546)Changes in:- Advance, deposits and prepayments- lnventories- Trade and other receivables- Trade and other payables

9I

1218

41,0'10,534(1,577,400,849)

1235,574,5711

19,506,938(7 5,922,62s)

1 8 602 114,572,519Cash generated from operatingactivitieslncome taxes paid 10 Q13.1 84,541)

1 ,156,2',14,7 17 (42,925,714)(2,534,300)

Net cash from / (used in) operating activities 176 (45,460,014)

Cash flows from investing activitieslnterest receivedAcquisition of property, plant and equipmentProceeds from sale of property, plant and equipmentAcquisition of intangible assetDevelopment expenditurelnvestments

24 29,001,414(439,057,436)

310,000(529,205)

(46,318,047)(40,505,494)

21,408,600(929,943,408)

(61,272,690)69

11

Not cash used in investing activities (497,098,768) (969,807,498)

Cash flows from financing activitiesProceeds from issue of share capitalShare money depositProceeds from loans and bonowings

141615

2,096,000(2,096,000)

(141,486,218)

231,000,0003,852,7 47

775,111,955Net cash from / (used in) financing activitaes 1,t41,486,2't8l 1,009,964,702Net increase I (decrease) in cash and cash equivalEntCash and cash equivalents at the beginning of year

304,445,'t90419,926,444

(5,302,810)425,229,254

Cash and cash equivalents at the end of year IJ 724,371,634 4'.t9,926,444

The notes on pages 7 to 39 are an integral pad of these financial statements

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6

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Notes to the financial statements

1. Reporting entity

HMCL Niloy Bangladesh Limited. (hereafter referred to as 'HNBL' or "the Company") is a privatelimited company incorporated in Bangladesh on 24 June 2014 under the Companies Act, 1994. ltsshareholders are HMCL Netherlands B.V. and Niloy Motors Limited and the shareholding are 55%and 45% respectively. lts registered office is at Nitol Niloy Tower, Plot-69, Nikunja-oz, Khilkhet,Dhaka-1229, Bangladesh.

The Company manufactures and sells motorcycles within Bangladesh through the distributionchannel of Niloy Motors Limited. The Company has started commercial operation on 1 June 2017 andhas completed setting up a manufacturing plant at Padmabilla, Shakharigati, Kotowali, Jashore.

2. Basls of accounting

The financial statements have been prepared in accordance with Bangladesh Financial ReportingStandards (BFRSS). The financial statements were authorised for issue by the Company's Board ofDirectors on 29 April 2018.

The title and format of these financial statements follow the requirements of BFRS which is slightlydifferent from the requirement of the Companies Act 1994; however, such differences are not materialand in the view of management, BFRS format as mentioned in BAS 1 gives a better presentation tothe shareholders.

Details of the Company's accounting policies are included in note 34

The financial statements are presented in Bangladesh Taka (Taka/Tk), which is the Company'sfunctional currency. All amounts have been rounded to the nearest integer, unless otheMiseindicated.

4. Use of estimates and ludgments

ln preparing these financial statements, management has made judgements, estimates and

assumplions that affect the application of accounting policies and the reported amounts of assets,

liabilities, income and expenses. Actual results may ditfer from ihese estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are

recognised prospectively.

Note 5Note 6Note '17

Note INote 26

DepreciationAmortisationDeferred assets/liabilitiesCunent tax assets/liabilitiesContingencies and commitments

fl7

3. Functional and presentation currency

Assumptions and estimatlon uncertalnties

lnformation about assumptions and estimation uncertainties that have a significant risk of resulting in

a material adjustment in the year ending 31 March 2018 is included in the following notes:

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Notes to the financial statements (continued)

5.1 Under construction

ln Taka /Vore Common costsFactory

Balance atAdditionsTransfers

I 2016 5,069,31069,069,773

buildin,616

338,423,269 514J91.245

Total502,056,161921,68/.,2A7

Balance at 31 March 2017 7 139 083 7137 ,|

504 6 350 861 1,423,740348lance at I Apri 7 713,250,504

170,998,61946,529,379

536,350,243,640,07035,6fi,003

AdditionsTransfers (allocation of common costs)

55

9,995,504(82,140,383)

424,634,293

Transfers to res asset classBalance at 3'l rc 2018

760 848 637761 150 281 999 0427

1 .994. 305 169.929.742 278.451.553 450.375.599

5.1.'l Common costsForthe year ended 31 March 2018

ln TakaBank interest on loanaor cap machineryEreclion and commission materialsLoan facility fee from HSBClnsurance for erection all riskElectrical materialsRental expense - Hydra craneErection Material - Parts and componentsDiesel for generatorElectricity bill

5,905,9235,777,8805,554,5002,442,9U3,1U,4291 ,318,1761,003,845

531,627

54,313,5866,448.3075,7n,8805,554,5003,692,9483,477,1832,'t70,8321,791,905

690,275

Additions Closin6,090,339

542,3U

Unloadi SE

Total common costs before allocation196 72 2'17 72

9,995.604 84.134.58774, 0Allocation of common costsFactory buildingPlant and machineries

(45,529,379)(35,611,003)

Allocated common costs 8 140 383Total common costs after allocation ill be distributed later)

lntangible assetsSee accounting policy in note 34(g)

ln TakaAccounting

sottware - TallyCostBalance at 1 April 2016AdditionsDisposals

'100.926

Balance at 31 March 2017 100,926Balance at 1 Apnl2017AdditionsDisposals

100,926529,205

Balance at 3'l March 2018 630.131

Accumulated amortisationBalance at 1 April 2016Amortisation for the year

8,41031,960

Dis lsBa nce at 31 Ma.ch 20'17 40.370Balance at 1 Aptll2017Amortisation for the yearDisposals

40,370.r58,40s

Balance at 31 March 2018 1 98.775

Carrying amountsAt 1 April 2016 92.5 '16

At 31 March 2017 60.556

At 31 March 2018

Total

9

1

7 92031.960

431,356

Allocation of depreciation 2018 2017

Cost of salesGeneral and administrative expenses

150,48531,960

Plant andmachinsdes

1,249,964292,754852,656788,060158,648

6.

>(

Notes to the financial statements (continued )

7 lnventories

ln Taka 2018 2017Raw materials and coilslJFinished goodsGoods-in-transit

562,603,58777,923,908

1.012.795.979 75,922,6251.653 ,323,474 75,922,625

8. Advances, deposits and prepayments

ln Taka 2018 2017AdvancesVAT Current A,/C

AC World Electronics LimitedReceivable from HSBCArnob EnterpriseSiemens Bangladesh LimitedAvery Bangladesh LimitedARRA Technologies Ltd.Build AsiaUtopian AssociatesAdvance to employeesDhrupadi Techno Consortium LimitedAl Madina Glass HouseBashundhara LP Gas LimitedRahimafrooz Renewable EnergySIMA Labs Pvt. Ltd.Kyto Engineering & Automation Ltd.Amber lT LimitedNitol lnsurance Company Ltd.Eisenmann Surface Finishing Systems lndia Pvt. Ltd.M/s. Pinki TradersOVN Trading Engineers Pvt. Ltd.Siemens Limited (lndia)Energypac Electronics LimitedFire Equipment DepotLinde Bangladesh Limited

28,139,63220,025,00013,597,8143,303,8252,848,9352,565,0001,827,0861,730,168

624,112553,404225,000168,12589,05260,00014,56012,8575,000

13,350,0002,664,968

10,355,226

21,912,064

3,108,0751,104,322

13,944

ln Taka 20't8 2017DepositsJashore Palli Bidyut Samity - 1

UC MarginElite Security Services LimitedLinde Bangladesh LimitedHouse rentM/s. MunshiPrem VarietiesBank guarantee marginNader Ali

9,084,000778,&7389,500336,000240,000200,000

,r5,000

9,084,0003,145,803

389,500140,000240,000

15,000569,578

50 00011.042.987 13,633,881

Prepaymentslnsurance premium (Employee group insurance)Consumables (Carbon dioxide gas)House rent

2,488,531102,350

2,114.261-

90 000 270 0002.680 .88'l 2.3A4.261

10

89.513.438 84,205,925

19 34710,661 184

239,8001.692.747

950,550375,000

1,740,000556

75.789.570 68.187,783

v


9. Curaent tax assets

See accounting policy in note 34(d)

ln Taka irote 2018 2017Advance tncome taxLess; Provision for income tax

9.1 2't7,679,894(47,615,83it)

4 495,353(190,700)

170,064,060 4,304,653

9.1 Advance income tax

ln Taka i/ole 2018 2017Balance at beginning of thAdd: Paid durino the vear

e year 4,495,353213.184,541

2,263,2672,534,300

213,18/,,54',1 2,534,300

Less: Adjustment of advance income tax217 ,679,894 4,797,567

(302.214)Closinq balance 9.1.1 217.579.894 4,495 353

9.1.1

2018 2017Accounting year 2015-2016Accounting year 2016-2017

2,263,2672,232,086

2',t3,184,541

2,263,2672.232,086

Accountino vear 2017 -2018217,579,894 4,495,353

9.2 Provision for income tax

ln Taka Note 2018 2017Balance at beginning of the yearAdd: Provision made during the year

190,70047,425,1U

61,953430,961

47,425,134 430,961

Less: Adjustment on completion of tax return47,615,834 492,914

(3O2,214)

Closing balance 9.2.1 47.615.834 190.700

9.2.1 Closing balance

ln Taka 2018 2017

Accounting year 2015-2016Accounting year 2016-2017Accounting year 2017-2018

61,953't28,747

47,425,lU

6'1 953128.7 47

47,61 190,700

10. lnvestments

ln Taka Note 2014 2017

Trust Bank LimitedThe City Bank Limited

10.110.2

10,505,49430,000,000

10.1

40,505,494

The Company has kept one Fixod Deposit Receipt (FDR) on auto renewal basis with Trust Bank Limited and given this

as security to the bank.

The Company has kept one Fixed Deposit Receipt (FDR) with a maturity period of six months at The City Bank Limited.

v

10.2

11

Closing balance

ln Taka


11. Trade and other receivables

ln Taka ,Vote 2018 2017Trade receivables due fr-m-etateO partiesOther receivables

11.111.2

235,478,547965,5't0

236,444,1s7Accrued interest 2.340.673 869,586

238 784 830 869 586

1'1.1 Trade rgceivables due from related parties

ln Taka 2018 2017Niloy Motors Ltd 235,478,547

235,478,547

11.2 Other receivables

ln Taka 20't8 2017Fatema Enterpnse 965,610

96s,610

12. Cash and cash equivalents

See accounting policy in note 34(h)

ln Taka ,VoteBank balances 12.1Short term fixed deposits 12 2

334,463,920408,905,909

19,004,595400.921,849

Cash and cash equivalents in the statement offinancial positionBank overdrafts used for cash management purposes 12.3

743,370,828(18,999,194)

419.926 444

Cash and cash equivalents in the statement of cash flotys 724,371,634 419.926.444

12.1 Cash at bank

ln Taka 20't 8 2017

Hong Kong and Shanghai Banking Corporation LimitedTrust Bank LimitedThe City Bank LimitedStandard Chartered Bank

74,212,29586r,323

224,605,35934,7W,944

4,601,266211,866

8,437,2915,754,',172

33/1.463.920 19.004.595

12.2 Short term tixed deposits

ln Taka 2018 2017

BRAC BankStandard Bank LimitedTrust Bank Limited

30,000,000220,562,434158,344,,175

239,350,599161.571,250

408,906,909 400,921,849

12.3 Bank overdEfts used for caah management purposes

ln Taka 2018 2017

Honq Konq and Shanqhai Bankinq Corporation 18,999,194

72

18,999,194

)/

201A 2017


13. Share capital

See accounting policy in note 34(t)

ln Taka 2018 2017Authorised15,000,000 Ordinary Shares of Taka 100 each 1.s00.000.000 '1,500,000,000

ln Taka Arole 2018 2017lssued, subscribed and paid-up9,792,000 Ordinary Shares of Taka 100 each9,812

13.1

13.1979,200,000

960 Ordinarv Shares of Taka 100 each 98 1.29981.296.000 979,200,000

l3.l Particulars of shareholding:

Name of the shareholders%ol

shareholdindNo. of

sharesFace value per

shareValue (Taka)

As at 31 Merch 2018

HMCL Netherlands B.VNiloy Motors Ltd.

55%45%

5,397,128 100100

539,712,800441,583,2004.41 s.832

1000/" 9.8t 2.960 981,296,000

As at 3l ilarch 2017

%ofshareholdino

No. ofshares

Face value pershare

Value (Taka)

HMCL Netherlands B.VNilov Motors Ltd.

55%45%

5,385,6004.406.400

100'100

538,560,000440.640.000

'tooo/" 9,792,000 979,200,000

2018 2017Non-cu116nt liabilitiesLoan from HSBC (Taka denominated)Loan from HSBC (USD denominated)

't 30,454,120 346,362,298490,189,005

'130.454.120 836.551.303Current liabilitiesUPAS loan from HSBC (USD denominated)UPAS loan from SCB (USD denominated)Loan from HSBC (Taka denominated)Loan from HSBC (USD denominated)

464,532,968't87,278,OO832,6r3,530 42,767,254

77,046,287684.42.506 119.8'13,541

15. Share money deposit

ln Taka 2018 2017

HMCL Netherlands B.VNiloy Motors Ltd.

4212.566.800

1j53,2213,510,000

2. .221 4. 663.221567

)/ 13

Name of the shar€holders

't4. Loans and borrowings

See accounting policy in note34(h)

ln Taka


16. Employee benefits

ln Taka Note 18 2017ratuity fund 16.1 7 151 978

7 151 978

ln Taka 2018 2017Balance at beginning of the yearAdd: Provision for qratuitv made du nno the 151 .978

Less: Paid durino the vear7,151,978

17. Deferred tax assets/(liabilities)

See accountjng policy in note 34(d)

ln Taka Note 2018 2017Opening balance 24,076,745Deferred tax (expenses )i income (40.412.300 | 24,076,745Closino Bala nce 17.1 (16.335.555) 24.076.745

17.1 Defonedtax(expenses)/income

Carryingamount on

,Vore reporting date

(TaxableYdeductibletemporary

differsncesTax base

Property, plant and equipment excluding CWIP 56

1617.1 .1

17.1.2

1,343,828,62643'1,3s5

(27 ,759 ,5141(7,151,978)

982,138,380498,993

(351,690,246)67,637

27,759,5147,151,974

lntangible assetsProvision for warrantyProvision for gratuityCarry forward of tax lossesUnabsorbed depreciation

Tax rate1326,7 11 ,1171

5.00%Deferred tax liabilities as at 3'l March 2018 (16,33s,55s)

17.1.1 Business loss

ln Taka

For the year ended 31 March2016 2017 2018 Total

Business loss b/fAdjustrnent for accounting year 201&2017Business loss adiusted

3,425,933 62,251,10/t(9,144,fi8)

65,677,037(9,r 44,118)

t56.532.9191.91 9

Business loss c/f 3,425,933 53,106,986 56.s32,919)

17.1.2 Unabsorbeddepreciation

ln Taka

For the year ended 3l ilarch2016 2017 2018 Total

Unabsorbed dep on b/fAdjustment for accounting year 201&2017Absorbed uo to 31 March 2018

2,066,027 3,t95,3,lt25,232

{s.286.570

5,26'1,33825,232

(5.286,570)

Unabsorbed depreciation c/f

v 14

066,027 3.220.543 (5.286.570

16.1 Gratuity fund

7,151,978

Notes to the financial statements continued)(

17.2 Defened tax (oxpsnsesylncoms

Carryingamount on

reporting date Tax base

(TaxableYdeductibletemporary

diff€rencesNote

Tax rate68,790,703

35.000/otax asaets as at 31 March 20'17 24,076,7 45

ln Taka 2016 20't7 TotalBusiness loss b/fUnadiusted loss

3,425,933 62,251j04 55,677,037

Business loss c/f 3,425,933 62,251,'104 55,677,037

17.2.2 Unabsorbed doprsciation

ln Taka Tota I

Accounting year 2015-2016Accounting year 2016-2017

2,066,0273,'195,311

Depreciation loss c/f 5,261,338

18.

NoleTrade payables due to related pa(iesOther trade payablesAccrued expensos

18.1

18.218.3

1,383,142,',t4738,261,609

496,838.927

72,352,880

30.838.802Trade payables 1.918.5/12.683 103.191,682Other payables due to related partiesOther payabl€s

18.418.5

6,95751.327.680

193,23565,522,801

Other payables 51.334,637 65,716.036't.969.877.320 168,907.718

18.1 Trade payables due to related parties

ln Taka ,vote 2014 2017

Hero Motooorp Ltd.Nitol Machineries Ltd

181.1 1,362,839,042 72,352,88020 603 105

,| 383 442 147 72 880

lntangible assets 6 60,556 45,417 (15,139)Carry foMard oftax losses 17.2.1 - 65,677,037 65,677,037Unabsorbed tax depreciation 17.2.2 . 5,261,338 5,261,338

'17.2.1 Business loss

Forthe year ended 31 March

Trade and other payables

See accounting policy in note 34(h)

ln Taka 2018 2017

18.1.1 USD 16,380,276.95 is payable to Hero Motocorp Ltd. for inventories. The conversion rate used is Taka 83.20/USD.

fl 15


18.2 Other trade payables

ln Taka 2018 2017Zhejiang Wanfeng Motorcycles 19,037,318

6,778,6295,674,7033,626,2142,248,817

322,368234,O75133,07689,20352,77339,76019,260

3,3082,106

Run lndustriesM/s. Shamsur RahmanAuto Fit Pvt. Ltd.Berger Paints lndia LimitedBengal Gases CorporationTrade payablesBerger Paints Bangladesh LimitedZeal EnterpriseLinde Bangladesh LimitedSumon Hardware StoreDelcot LimitedExpress lnsurance Ltd.Biswas Hardware Store

38,26'1,609

18.3 Accrued expenses

ln Taka rvote 2018 2017Periodic dealer i '148,050,738

136,756,16576,U2,72555,'t47,19927,759,51427,13/,0U10,071,7U3,737,5073,211,9592,290,7361,500,000

741,750734,554680,000389,426345,000284,53689,58386,65060,95260,837/t0,000

36,53833,82332,38630,92529,90820,wl2,1751,200

RoyaltyAdvertisement expensesWorkers Profit Participation FundWananty and corrective costsSalary and allowancesMarketing expense (discount sharing with Niloy Motors Limited)lnterest on Taka term loanSupport starf expenseConsultancy, professional and legal feeElectricity and gas billAudit feeCanteen expenseSecurity guard expenseContribution to PFGroup reporting feeUnloading chargeDriveis allowancesFuel, toll and parkingMiscellaneous factory indirect expensesStaff weltare expenseVehicle rentPrinting and stationeryRepair and maintenanceConsumable itemsOffice expenseTelephone, mobile and internetOffice suppliesTours and travel local

lT supplies and maintenanceComputer accessorieslnsurance e&enselnterest on USD term loanLicensing and renewal feesOthers

18.3.1

3,519,826370,331763,140

646,300224.817418,000152.47 4310,500

335,33423,327

8,9205,952

31,92415,'108

596

3,883

43,2001,464,5312,195,973

126,50035 352 16 405

16

496 838 927 30 838 802

20,161,361

fl


18.3.1 Salary and allowances

ln Taka 2018 2017Target vaflable pay 14,686,386

s,592,7433,810,4143,0U,521

11,316,6752,302,4803,951,9222,590,284

Earned LeaveHouse rent and car allowanceGross salary

27 134 064 20 16'1 361

18.4 Other payables due to related partiesSee accounting policy in note 34(h)

ln Taka 2018 2017Nitol lnsurance Company td.Niloy Motors LimitedNitol Tours & TravelsNITS Services (Pvt) Ltd

6,9s7 54,01512,272

'126,697

251957 193 235

18.5 Other payables

ln Taka 2014 2017Monita lndustrial CorporationARRA Technologies Limitedlngersoll-Rand Tech. and Service Ltd.Auto Fit Pvt. Ltd.Precision ARC Robotic SystemsFairdeal Agencies (Prop. Goyal)SIMA LabsTransmm Electronics LimitedKhusboo Scientific Pvt. Ltd.Collection of taxLegal MindsMayesha ApparelsPersons (BD) Ltd.Bangla TechHoque Bhattacharjee Das & Co.Withholding tax payableWithholding VAT payableGazi TanksIvVs. Babar Ali Filling StationStar Tech & Engineering Ltd.

Care lnternationalMilon TradersRona Electric & Electronics0iamond lnternationalSabbir AutoKarim Printing WorksMis Build AsiaBuild Trade Engineering LimitedJones Lang Lasalle Bangladesh Private Limited (JLL)

Akhtar Fumishers LimitedPower Engineers Bangladesh Ltd.

Transmarine Logistics Ltd.M/s. Pinki TradersElahi Sutter and Welding WorkshopJAAN ComputerMohona TradersBerger Paints Bangladesh LimitedHighway Filling Station - diesel for generator

Jashore Palli Bidyut Samity 1 - electricity bill

Payable for consumable items

3,808,8963,36'1,8842,522,9122,437,5232,021,1781,297,9201,277,9521,264,932

832,000731,237319,444273,880244,09',1

237,768172,50084,38466,96259,78635,60035,10032,18014,859'14,568

6,9653,9533,r 00

37,994

208,217

58,428950,520

271,317

Retention monev aqainst contractor bill 30,166,107

10,392502,435352,053u,124

5,63012,600

1,184,855546,000150,000

51,57661,126,660

f, 1.7

18.5.1

51 327 680 65 522 801

Notes to the financial statements (continued

18.5.1 Retention money against contractor bill

ln Taka 2018 20't7BUI ld AsiaSiemens Ltd.JSR EngineersUtopian AssociatesEjsenmann Surfac€ Finishing Systems lndia pvt. LtdAmba Tech EngineeringAmmn TechnologiesOVN Trading Engineers Pvt. Ltd.Patvin Engineering Pvt. Ltd.Promat Engineering and Systems Pvt. Ltd.SIMA Labs Pvt. Ltd.Saveer Biotech Ltd.

24,878,7593,753,146

856,640677,563

28,473,633

180,77018,6'13,2483,022 2371,314 7202,555,370

276,0911 .627 ,3253,278,434

784 83230,166.107 61.126,660

19. Revenue

See accounting policy in note 34(a)

ln Taka ,Vote 2018 20't7Revenue from motorcycle sales 19.1 6.837.808.220

6,837 ,808,220

19.1 Revenue from motorcycle sales

ln Taka cc 2018 2017GlamourSplendor PlusHF DeluxeHunkSplendor I SmartHunk SDAchiever

125100100150110150150

2,397,530,1601,635,075,905't,222,129,380

884,467,545359,362,190215,625,000122.618,O10

20 Cost of sales

ln Taka Nore 2018 2017Opening Finished goods at I AprilCost of qoods manufactured 20.1 4.967.58r.643Cost of finished ooods available for sale 4.967.681.643

>f 18

6,837.808,220

Closing finished goods at 31 March (77,923,908) -4,889,757,735 -


2O.1 Cost of goods manufactured

ln Taka 201A 7Raw consu 20.1.1

4.801,653.667

Manufacturlng overhead:DepreciationSalaries and allowancesEmployee benefitsElectricity and gas billRepairs and maintenanceUnloading chargelnsurance expenseLand rentalexpenseGenerator rental expenseEmployee uniformConsumablesOvertime expensesToolsAmortisationlvledical expensesRoad test expenseDentinq and re-work

5 79,85't,57150,747,803

9,025,79.t5,834,8124,925,8163,273,8383,100,3002,700,0002,628,.101'1,357,304

1,241,49',1772,049227,899'150,485

113,72464,64812,343

166,027,9764.967.68't,543

20.1.1 Raw and packing materials consumed

ln Taka Nole 20't8 2017Opening balancePurchase during the year

- lmported- Local purchase

20.1.1.175,922,625

5,854,424,080116,706,528

75,922,625

301 't 30 608 7s 922 625

Closing balance

20.1.1.1 Purchaso during the yoar

ln Taka lmported Local TotalParts & componentsWheelSeatPaints & chemicalsUC related costsDieselConsumable itemsLP Gas

Cou

MigwireRework-paintBarcode

1,714,97t,37178,837,69619,305,4/t2

9,938,98264,491,235

274,409,73267,9U,27956,700,457

16,244,73613,639,3547,896,034

2,103,871

1,854,0001,739,008

4,714,977,37',|357 ,247 A2a87,239,72265,539,44064,491,23516,244,73613,639,3547,896,034

2,103,871'1,854,000

1,739,008't85 057 185 057

1,917,550,726 4,t6,706,528 5.364,257,254

Less: opening goods-in-transitAdd: closing qoods-in-transit

(75,922,62sl. (75,922,625\1,01 2.795,979 1 01 2.795.979

v- 19

s,854.424.080 446,706,528 6.301.'130,608

6,377,053,233(1.575,399,566)

75.922.62517 5 .922 .625)

4.801.553.567

Notes to the financial statements continued)(

21 Other income

ln Taka 2018 2017Scrap sales 4,701,616 49,241

4,701,516 49,241

22. General and administrative expenses

ln Taka Note 2018 20'17

alaries and allowancesDepreciation expenseConsultancy, professional and legal feeSecurity guard expenseEmployee benefitsForeign travel expensesOffice expenseBank chargesRegisuation and renewal expensesTelephone, mobile and intemetFuel, toll and parkingLocal travel expensesRepair and maintenanceAudit feel,Ieeting expens6sPrinting and stationeryOtfice suppliesLoss on disposal of assetsGroup reporting feeConsumable itemsLocal conveyanceVehicle insurancelT supplies and maintenanceElectrical goodsAmortisationMiscellaneous fac1ory indirecl oxpensesPostage and courierVehicle rentEntertainment expenseTransport expensePaper, books and periodicalsRecruitrnent expenseNon Judicial Stamp expenseComputer accessoriesElectricity and gas bill

22.15

80,446,9354,202,714

't5,025,9575,371,7654.508,6792,034,',121

1,919,8061,640,1121,1s6,7221,084,8441,0223141,008,522

750,'1987 4',1,750

627,406581,206390,958390,530345,000300,073217,207201,236200,910161,572

7,920128,890

99,20075,02662,',145

50,08546,43'l37,09831,71115,650

66,168,3572,797,6103,794,9874,916,4734,812,925

804,508277 ,853772,522648,2U849,5227 32,878778.8117 41 .594639,515

1 ,324,343156,37019'1,649

22.2

281 ,7 50'190,024

227 ,625

132,80431,960

21,767

24,92524,15063,44046.95529 24524,867Medicalexpenses

125,184,829 91,511 ,693

l.

20

6

fl


22.1 Salarios and allowances

ln Taka lvoae 2018 2017Gross salarySupport staff expenseTarget variable payGratuityHouse rent and car allowanceGuest house rentEarned leaveBonusDrive/s allowancesRelocation allowance

26.2 2

68,806,76523,547,sO613,296,086

7,151,97A6,873,3033,615,3513,4'13,0683,392,0231,078,1s8

53,589,7481,316,273

3,951,9224,340.145

2,081 .492888.777

19 s00Total salaries and allowances 131,194,738 66,168,357

Allocation of salaries and allowances 2018 2017Cost of salesGeneral and administrative expenses

50,747,80380,/146,935 66,168,357

Total salarles and allowances 13't.'t94.738 66,168,357

22.2 Employee benelits

ln Taka 2018 2017Sta canteen 6,638,796

3,298,2263,499,111

1,393,7581,337,5382,052,80'1

28,828

Health insuranceProvident fundStaff welfare 98 337

'13,534,470 4.812.925

2017Cost of salesGeneral and administrative expenses

9,025,7914,508,679 4,812,925

13,534,470 4,812,925

23 Selling and distribution expenses

ln Taka 2018 20'17Periodic dealer incentivePromotional expense (discount sharing with Niloy MotoG Limited)Royalty expenseAdvertisement expenses

148,050,738147,649,133136,756,165135,946,68127,759,514Warranty and corrective costs

596,162,231

24. Net fi nance income/(cost)

See accounting policy in note 34(b)

ln Taka Note 2018 2017

lnterest income on

FVTPLFinance income 31,342,087 22,278,186

Financial liabilities measured at amorti sed cost - interest expense 24.2 (73,077,013)

Net foreiqn excha loss (66,726, 125) (12.449.664)

Finance costs (139,803, 139) (2.M9.664)Net finance income/(cost) recoqnised in profit or loss

21

(108.461.052) 9.828.522

Allocation of employee benefits 2018

- Unimpaired held{o-maturity investments 24.1 31,342,087 22,278,1Qq

Total interest income arising for financial assets not measured al 3'1,342,087 22,278J86

)d


24.1 Unimpairedhetd.to-maturityinvestments

ln Taka 2018 2017lnterest receipt frorn FDRlnterest receipt from SND accountAccrued interest

28,744,242251,172

21,408,600

2 340 673 869 58631 .u2.087 22,278.186

24.2 Financial liabilities measured at amortised cost - interest expense

ln Taka 20't8 2017lnterest on term loan - local currency 34,564,650

26,505,05110,243,7 47

1,260,814

lnterest on term loan - foreign cunencylnterest on UPAS loanCIL loan interestlnterest on overdraft account 502 751

73 077 013

25. lncome tax (expense)/income

See accounting policy in note 34(d)

Note 20't8 2017Current tax expenseCurrent yearPrior year adjustment

(47,425,1341 (128,747)(3O2,214)

(17,125,1341 (430,961)Dofened tax liabilityOeferred tax (expenses)/income 17 (40,412,300) 24,076,745

(40.412,300) 24,076.745(87,837,434) 23,645,784

26 Contingencies and commitments

See accounting policies in note 34(m).

Contingencies

There is no contingent liability as at 31 March 2018 (2017: Nil).

Commltmonts

Lottel! of credit

The following letters of credit were outstanding as at 31 March 20'18 against which the Company is committed topurchase products trom difierent companies.

UC no. UC issue date Bank Cunoncy UC value Oubtandlng

26.1

26.2

26.2.'.|

411010722',t89-L411010767924-LDC DAK8OOO84

DC DAK8OO859DC DAK801914DC 0AK801922DC OAK801928DC 0AK802194DC DAK8022230c 0AK802633DC DAK802743DC DAK802905

27 November 201701 March 201803 January 201824 January 201827 February 201801 March 201827 Fefiuary 201807 March 201807 March 2018'19 March 201821 March 201828 March 2018

S

SCBHSBCHSBCHSBCHSBCHSBCHSBCHSBCHSBCHSBCHSBC

USDUSDUSOUSDUSDUSDUSDUSDUSDUSDUSDUSD

45,7801,091,072

35,130209,588

1,2872,160,780

2.325206,668

1,892390

63,131715,092

45,7802,6504,807

900623

13,3002,325

95,8491,892

8331,566

351,455

>4 22

552240

ln Taka

IA


26.2.2 Rental lease agreemont

The Company is obligated under two separate cancellable leases for residential spaces that are renewable on a periodicbasis at the option of both the lessor and lessee. The Company intends to renew such leases in the normal course of itsbusiness. During the year ended 31 March 2018 rental expenses under operating leases aggregated to Taka 3,616,351(2017 : T aka 4,340,1 45).

26.2.3 Bank guarantee

Trust Bank Limited issued an unconditional and continuation bank guarantee on behalf of HMCL Niloy BangladeshLimited, which is lien against one F0R ofTaka 10,505,494.

26.2.4 Facilily ltom Standard Chartered Bank

26.2.4.1 Facilities grantedTaka

Term LoansOverdraftlmport LCs - Secured

240,000,00050,000,000

500,000,000Total facilities qrantsd 790,000,000

26.2.4.2 Security / Collateral

- Demand Promissory Note and Letter of Continuation for Taka 79O,OO0,OOO each.

- Registered hypothecation (first charge) over stock and book debts of HMCL Niloy Bangladesh Limited on pari passubasis with HSBC where Standard Chaftered Bank's share would not be less than Taka 790,000 000.

- Registered hypothecation (first charge) over plant and machinery of HMCL Niloy Bangladesh Limited on pad passu basiswith HSBC where Standard Chartered Bank's share would not be less than Taka 790,000,000

26-2-5 Facility from Hongkong Shanghai Banking Corporation

26.2.5.1 Facilities granted

USD Taka

Raw materials importClean import loanShipping guaranteeWorking capital (limited to BDT 400,000,000)Guarantee (limited to BDT 80,000,000)Overdraft (limited to BDT 80,000,000)Capital expenditure (import)Capital expenditure (local purchase)

Term loanCapital expenditure (import)CaDital exoenditure (import)

1.217.000.000

960,000,00016,000 00012,000,000

Totalfacilities g ranted 16,000,000 3,521,000,000

25.2.4.2 Security / Collateral

- Demand Promissory Note for Taka 2,4'16,000,000 with Lefter of Continuity and Revival.

- Corporate Guarantee executed by Niloy Motors Ltd. for Taka '1 ,036,438,2001- (equivalent to USD 12,600,000) with

suppodng Board Resolution.

- First charge over the Companys stocks of raw materials, work-in-progress and finished goods & Book Debts and

Receivabtes with the office of the Registrar of Joint stock companies and Firms (RJSc) for Taka 2,303,196,000.

- First charge over the Borroweds Plant & Machinery with the RJSC forTaka 2,303,196,000.

- Power of Attomey on Hypothecated Goods.

- Trade Financing GensralAgreement for Trade facility.

- Blanket counter indemnity for Guarantee facility

- Letter of Comfort for USD 28,OOO,OOO from HMCL Netherlands B.V to support the credit facilities extended to HNBL.

,

1,344,000,000

/


27. Capacityutilisation

Forthe year ended 31 March 2018Units

MeasurementAnnual

installedUtilisationduring the Over/(under)

Forthe year ended 31 March 2017

Measurement installed during the Over/(under)Production unit capacity period utilisationMotor bikes Number - - -

28. Particulars of employees

During the year ended 31 March 2018 there were 119 employees (2017: 66) who received salary of Taka 36,000 orabove.

29. Subsequent events

No material events had occurred after the reporting date to the date of issue of these financial statements, which could

affect the values stated in the financial statements.

>( 24

Units

Notes to thg financial statements (continued)

30. Financial risk management

The management has overall responsibility for the establishment and oversight of the Company'srisk management framework. The Company's risk management policies are established to identifyand analyse the risks faced by it, to set appropriate risk limits and controls, and to monitor risks andadherence to limits. Risk management policies, procedures and systems are reviewed regula y toreflect changes in market conditions and the Company's activities. The Company has exposure tothe following risks from its use of financial instruments:

o credit risk.liquidity risk. market risk

30.1 Credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximumexposure to credit risk at the reporting date was:

ln Taka /Vote 2018 20't7Trade and other receivables 238,784,830 869,586

238 784 830 869,586

b) lmpairment losses

There were no impairment losses to be recognised for such instrument for the period

30.2 Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations

associated with its flnancial liabilities that are settled by delivering cash or another financial asset.

The Company's approach to managing liquidity is to ensure, as far as possible, that it will have

sufficient liquidity to meet its liabilities when they are due, under both normal and stressed

conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

# 25

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financialinstrument fails to meet its contractual obligations, and arises principally from the Company'sreceivables from customers and investment securities. Credit risk is mainly attributable to trade andother receivables. Management has a credit policy in place and the exposure to credit risk ismonitored on an ongoing basis.

(a) Exposure to credit risk

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Exposure b cunency dsk

The summary quantilative data about the company's exposure to curency risk as repoated to the management of the companybased is as follows:

31 March 20i8uso

31 l/tarch 20'17

USD

Payable - Hero Motocorp Ltd.Payable - Autoft Pvt. Ltd.Payable - Berger Paints tndia LimitedPayable - Zheijiang Wanfeng MotorcyclesPayable - Fairdeal Agencies (prop. coyat)Payable - Monitia lndi.tst ial CorporationPayable - P.ecision ARC Robotic SystemsPayable - Eisenmann Surface Finishing Systems lndia h _ Ltd.Payable - Amba Tech EngineeringPayable - Amcon TechnologiesPayable - OVN Trading Engineers pvt Ltd.Payable - Patvin Engineering Ad. Ltd.Payable - Promat Engineering and Systems pvt Ltd.Payable - SIMA Labs Ad. Ltd.Payable - Saveer Biotech Ltd.Payable - JSR EngineersAdvance - Eisenmann Surface Finishing Systems lndia A/t Ltd.Advance - OVN Trading Engineers Pvt. Ltd.Advance - Siemens Limited (lndia)Advance - SIMA Labs Pvt Ltd.Advance - Rec€ivable trom HSBCUPAS loan from SCBUPAS loan from HSBC

o00)

fl0,296)

132.67 4(2,025,594)(5,584,749)

1908 043)

(233,600)(37,930)(16,s00)(32,0701

(3,465)

120,423)141,145)(22,400)

'133,800

22,44311,930

175

33,797

loan trom HSSCNet exoosure

118 91

t27 .027 .707 \ (8.232 349]'

The blloning signifcant exchange rates have been applied

2018Year end spot rate

2017uS Dollar

Sers,trvity analysis

lh Taka

83.20

Equitv. net of tax

79 68

A reasonably possible strengthening (weakening) of foreign arrency against Taka at 31 March would have effected themeasurement of financial instruments denominated in a forcign currency and increased (decreased) equity and proft or loss by theamounts shown below. This analysis is based on foreign cunency exchange rate variances that the Company considered to bereasonably possible at the end of the reponjng period. The analysis assumes that all other variables, in particular interest lates,remain constant and ignores any impact of frcrecast sales and purchases.

Profit or lossStrengthening Weakeninq Strenqtheninq

3l l'rarch 20'18

USD {30/o movement) (67,,161,'r58) 67,461,158 {67,461,158) 67,461,158(67,,161,158) 67,461,158 {67.46i.'158) 67,461,158

31 Ma,ch 2017USD (3olo movement) (19,678,607) 19.678,607 {19.678.607) 19.678,607

(19,678,607) 19,678,607 (19.678.6071 19,678,607

b) lnterest rate risk

lnterest rate risk is the dsk that arises due to changes in interest rates on bonovings and intercst rates on frxed deposit recerpt

(FDR). The Company is not significantly exposed to fusluation in interest rates as ithas neither floating interest rate bearing financral

liabilities nor has any type of derivative instrument in order to hedge interest rate riskas at the leporting date

At the reporting date, the interest rate profle of he Companys inte.est bearing financial instruments was:

Nominal amountln Taka 2018 20'17

Fixed rate instrumentsFinancialassetslnvestment in FDR

Financial liabilitiesLoans and borrowings

449,412,403

814,878,626

400,921,849

956,364 844

Variable rate instrumentsCash at bank

27

334,463.920 19 004 595


(19,174,657)(72,8E1)(17,029)

(210,8421(15,600)(45,780)

(2,1291-

a* C


31. Related party transactions

(a) Parent and ultimate controlling party

Key management personnel compensation comprised the following

ln Taka

HMCL Niloy Bangladesh Limited is a subsidiary of HMCL Netherlands B.v, which is a wholly ownedsubsidiary of Hero Motocorp Limited. Therefore, HMCL Netherlands B.v is the parent of lhe company andHero Motocorp Limited is the ultimate controlling party.

(b)Transaction with key management pensonnel

2018 2017Salary and allowancesBonus and incentiveProvident fu ndOther benefits

31,772,56411,370,711r,958,9604,688,737

37,615,5716,211,1101,659,2463,652,357

49,790,972 49,138,284

(c) Other related party transactions

ln Taka

Transaction values for the yearended 31 March

Balance outstanding as at3'l March

2018 2017 20'18 2017

Sale of goodsNiloy Motors Limited 7,628,000,906

4,960,692,351320,171,190

1,110,001

33,251

201,296,3019,817,6616,164,0152,873,435

72,352,880

1,090,969650,002560,39650,215

235,478,547

6,957

72,352,880

126 697

OthersNiloy Motors LimitedHero Motocorp Ltd.Nitol lnsurance Company LtdNitol Motors LimitedNiloy Motors Limiled

'1,573,6S3

't,u2,716

215

12,272

The financial statements have been prepared on the historical cost basis except inventories which ismeasured at lower of cost and net realisable value on each reporting date.

33. Going concern

The Company has adequate resources to continue in operation for the foreseeable future. For this reason

the directors continue to adopt going concern basis in preparing the financial statements. The current

resources of the Company provide sufficient fund to meet the present requirements of its existing business.

fl 28

Purchase of goods and servicesHero Motocorp Ltd.Nitol Machineries LtdNitol Tours & TravelsNreach-Net (Pvt) Ltd.Nitol ElectronicsNITS Services (Pvt) Ltd.

1,362,839,04220,603,105

32. Basis of measurement


34. Significantaccounting policies

The Company has consistently applied the following accounting policies to all periods presented in thesefinancial statements.

Set out below is an index of the significant accounting policies, the details of which are available on the pagesthat follow:

A. RevenueB. Finance income and finance costsC. Foreign currencyD. lncome taxE. lnventoriesF. Property, plant and equipmentG. lntangible assetsH. Financialinstrumentsl. Share capitalJ. lmpairmentK. ProvisionsL. LeasesM. ContingenciesN. Employee benefitsO. Workers' profit participation fundP. Statement of cash flowsQ. Reporting period

A. Revenue

Revenue is recognised when products are despatched to custorners, i.e., when the significant risk andrewards of ownership have been transferred to distributors. Niloy Motors Limited is the only and exclusivedistributor for HMCL Niloy Bangladesh Limited according to the Joint Venture agreement of the Company. Asa result revenue will be recognised when the product is transfeffed or sold to Niloy Motors Limited.

B. Finance income and finance costs

. interest income from fixed deposit receipt (FDR)

. interest expense from long term loans

2929303031

31

32

3434Jb3637

383838

il 29

The Company's finance income and finance costs include:

lnterest income or cost is recognised using the effective interest method. Finance income represents interestincome on fixed deposits and is recognised on an accrual basis. As per BAS-23 the finance costs directlyattributable to the acquisition and construction of the factory and plant and machineries during theconstruction period are included in the cost of the asset.

Notes to the flnancial statements (continued)

D

C. Foreign currency

Forei gn cu rrency tran sacti o n s

Transactions in foreign currencies are translated to the respective functional currencies of the Companies atexchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency atthe exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value ina foreign currency are translaled into the functional currency at lhe exchange rate when the fair value wasdetermined. Non-monetary items that are measured based on historical cost in a foreign currency aretranslated at the exchange rate at the date of the transaction. Foreign currency differences are recognised inprofit or loss in accordance with BAS 21 The Etrects of Changes in Foreign Exchange Rates .

lncome tax

lncome tax expense comprises current and deferred tax. ll is recognised in profit and loss except to theextent that relates to an item recognised directly in equity or in other comprehensive income (OCl).

i . Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year andany adjustment to the tax payable or receivable in respect of previous years. The amount of current taxpayable or receivable is the best estimate of the tax amount expected to be paid or received that reflectsuncertainty related to income taxes, if any. lt is measured using tax rates enacted or substantively enacted atthe reporting date.

Currenl tax assets and liabilities are offset only if certain criteria are met.

Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and

liabilities for financial reporting purpose and the amounts used for taxation purposes. Deferred tax is not

recognised for:

. temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business

combination and that affects neither accounting nor taxable profit or loss;

. temporary differences related to investments in subsidiaries, associales and joint arrangements to the extent

that the Group is able to control the timing of the reversal of the temporary differences and it is probable that

they will not reverse in the foreseeable future; and

. taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary

differences to the extent that it is probable that future taxable profits will be available against which they can

be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no

longer probable that the related tax benefit will be realised; such reductions are reversed when the probability

of future taxable profits improves.

EEME

30

As per lncome Tax Ordinance 1984, minimum tax provision for industrial undertakings beforecommencement of commercial production is 0.6% on gross receipt as per section 82C. The applicable taxrate for the Company is cunently 5%.

ii. Defefied tax

{

Notes to the financial statements continued)

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that ithas become probable that future taxable profits will be available against which they ian be used.

Deferred tax is measured at the tax rates that are expected to beapplied to temporary differences when theyreverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in whichthe Company expects, at the reporting date, to recover or settle the carrying amount of its assets andliabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met

E. lnventories

i. Recognition and measurement

lf significant parts of an item of property, plant and equipment have different useful lives, then they areaccounted for as separate items (major components) of property, plant and equipment.

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated withthe expenditure will flow to the Company. The cost of the dayto-day servicing of prope(y, plant and

equipment are recognised in proflt or loss as incurred.

iii. Deprcciation

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated

residual values of 5% using the straighlline method over their estimated useful lives, and is generally

recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful

lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

Depreciation is charged for the full month in the month of acquisition and no depreciation is charged in the

month of disposal or retirement.

trilE

31

lnventories are measured at the lower of cost and net realisable value. ln the case of manufacturedinventories and work in progress, cost includes an appropriate share of production over heads based onnormal operating capacity. Net realisable value represenls the estimated selling price for inventories less allestimated costs of completion and costs necessary to make the sale.

F. Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and anyaccumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition ofthe asset and bringing to the location and condition necessary for it to be capable of operating in the intendedmanner. The cost of self constructed asset includes the cost of material, direct labour and any other costdirectly attributable to bringing the assets to a working condition for their intended use.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

ii. S ub sequ ent expenditure

v


The estimated useful lives of property, plant and equipment for current and comparative periods are asfollows

- Computers and electrical equipment- Furniture and fixtures- Motor Vehicles- Office equipment- Plant and Machineries

3 years10 years6 years5 years

10 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted ifappropriate.

iv. Retirement and drbposals

An asset is derecognised on disposal or when no future economic benefits are expected from its use andsubsequent disposal. Gains or losses arising from the retirement or disposal of an asset is determined by thedifference between the net disposal proceeds and the carrying amount of the asset and is recognised in profitor loss.

v. Capital work in progress

Property, plant and equipment that is in the process of construction/acquisition/import is accounted for ascapital work in progress until construction/acquisition/import is completed and measured at cost. Theexpenditure capitalised under this head is for lhe construclion of factory building along with the acquisitionand installation of plant and machineries. All expenses including borrowing costs, incurred for the constructionof the building and the installation of the machineries until it is converted into working condition are recordedunder this head.

G. lntangible assets

lntangible assets, including software, that are acquired by the Company and have finite useful lives are

measured at cost less accumulaled amortisation and any accumulated impairment losses.

ii. S u bsequenl ex pen d itu re

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the

specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill

and brands, is recognised in proflt or loss as incurred.

iii. Amoftisation

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using

the straight-line method over their estimated useful lives, from the month of purchase, and is generally

recognised in profit or loss. Goodwill is not amortised. Amortisation methods, useful lives and residual values

are reviewed at each reporting date and adjusted if appropriate

The estimated useful life of computer software is 3 years

v 32

i. Recognition and measurement


H. Financialinstruments

The Company classifies non-derivative financial liabilities into the other financial liabilities category

i. Non-dedvative financial assets and financial liabilities - Recognition and d*ecognition

The Company initially recognises loans and receivables and debt securlties issued on the date when they areoriginated. All other linancial assets and financial liabilities are initially recognised on the trade date when theentity becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial asset when the conkactual rights to the cash flows from the assetexpire, or it lransfers the rights to receive the contractual cash flows in a transaction in which substantially allof the risks and rewards of ownership of the financial asset are tEnsferred, or it neither transfers nor retainssubstantially all of the risks and rewards of ownership and does not retain control over the transferred asset.Any interest in such derecognised financial assets that is created or retained by the Company is recognisedas a separate asset or liability.

The Company derecognises a financial liability when its contractual obligations are discharged or cancelled,or expire.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financialposition when, and only when, the Company has a legal right to oflset the amounts and intends either to settlethem on a net basis or to realise the asset and settle the liability simultaneously.

Financia, assets at fair value thrcugh proftt or toss

A financial asset is classified as at fair value through profit or loss if it is classified as held-for-trading or isdesignated as such on initial recognition. Directly attributable transaction costs are recognised in profil or loss

as incurred. Financial assets at fair value through profit or loss are measured at fair vaiue and changes

therein, including any interest or dividend income, are recognised in proflt or loss.

H eld-to-matu tW li nancia, assets

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent

to initial recognition, they are measured at amortised cost using the effective interest method.

Loans and receivabtes

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent

to initial recognition, they are measured at amortised cost using the effective interest method.

Cash and cash equivatents

ln the statement of cash flows, cash and cash equivalents includes cash in hand and cash at bank which form

an integral part of the Company's cash management. Cash and cash equivalent also includes a Fixed Deposit

Receipt (FDR) with a renewal period of 3 months.

The Company classifies non-derivative financial assets into the lollowing categories: financial assets at fairvalue through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-salefinancial assets.

c

55

ii. Non-derivative financial assets - Measurement

il


Available-tor-sale fi nancial assets

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequentto initial recognition, they are measured at fair value and changes therein, other than impairment losses andforeign currency differences on debt instruments are recognised in OCI and accumulated in the fair valuereserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profitor loss.

iii. Non-derivative financial liabilities - measurement

A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading or tsdesignated as such on initial recognition. Directly attributable transaction costs are recognised in profit or lossas incurred. Financial liabilities at fair value through profit or loss are measured at fair value and changestherein, including any interest expense, are recognised in profit or loss.

Other non-derivative financial liabilities are initially measured al fair value less any directly attributabletransaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using theeffective interest method.

lntercompany payableslntercompany payables are comprised of balances that remain outstanding at year end arising fromtransactions with other entities that are sister concern to Nitol Motors Ltd (Shareholdeo. These arerecognised initially at fair value.

Trade and other payablesPayables are recognised initially at fair value. Subsequent to initial recognition, trade payables are stated atamortised cost using the effective interest method. Other payables includes any amounts outstanding tosuppliers/contractors of machineries and equipment, professional and legal fees in relation to factoryconstruction and withholding VAT and tax payables.

Long term liabilitieslnterest bearing loans includes long term bank loans. These are recognised initially at fair value less

attributable transaction costs. Subsequent to initial recognition, interestbearing borrowings are stated at

amortised cost using the effective interest method.

l. Share capital

Ordinary shares

Ordinary shares are classified as equity. lncremental costs directly attributable to the issue of ordinary shares

are recognised as a deduction from equity. lncome tax relating to transaction costs of an equity transaction

are accounled for in accordance with BAS 12.

lmpai]ment

i. Non-dertvative financ,a, assets

Financial assets not classified as at fair value through profit or loss, including an interest in an equity

accounted investee, are assessed at each reporting date to determine whether there is obiective evidence of

impairment.

J

c

il 34

9t.

Notes to the financial statements (continu ed)

Objective evidence that financial assels are impaired includes:. default or delinquency by a debtor;

' restructuring of an amount due to the Company on terms that the Company would not consider otheMise,. indications that a debtor or issuer will enter bankruptcy;. adverse changes in the payment status of borrowers or issuers;. the disappearance of an active market for a security because offinancial difficulties; or' observable data indicating that there is measurable decrease in expected cash flows from a group offinancial assets.

For an investment in an equity security, objective evidence of impairment includes a significant or prolongeddecline in its fair value below its cost.

Financial assets measured at amortised cost

The Company considers evidence of impairment for these assets at both an individual asset and a collectivelevel. All individually significant assels are individually assessed for impairment. Those found not to beimpaired are then collectively assessed for any impairment that has been incurred but not yet individuallyidentifled. Assets that are not individually significant are co{lectively assessed for impairment. Collectiveassessment is carried out by grouping together assets with similar risk characteristics.

ln assessing collective impairment, the Company uses historical information on the timing of recoveries andthe amount of loss incurred, and makes an adjustment if current economic and credit conditions are such thatthe actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss is calculated as the difference between an asset's carrying amount and the present valueof the estimated future cash flows discounted at the assel's original effective interest rate. Losses arerecognised in profit or loss and reflected in an allowance account. When the Company considers that thereare no realistic prospects of recovery of the asset, the relevant amounts are written off. lf the amount ofimpairment loss subsequently decreases and the decrease can be related objectively lo an event occurringafter the impairment was recognised, then the previously recognised impairment loss is reversed throughprofit or loss.

lmpairment losses on available-for-sale financial assets are recognised by reclassifying the losses

accumulated in the fair value reserve to profit or loss. The amount reclassified is the difference between the

acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any

impairment loss previously recognised in profit or loss. lf the fair value of an impaired available-for-sale debt

security subsequently increases and the increase can be related objectively to an event occurring after the

impairment loss was recognised, then the impairment loss is reversed through profit or loss. lmpairment

losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale are

not reversed lhrough profit or loss.

ll. N o n-f in an cial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than

biological assets, investment property, inventories and deferred tax assets) to determine whether there is any

indication of impairment. lf any such indication exists, then the asset's recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash

inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs

35 l)r'i

Avail a bl *fo r-sa I e f i n a n cial assets

V

Notes to the financial statemen ts(continued)

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs tosell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks splcific tothe asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does notexceed the carrying amount that would have been determined, net of depreciation or amortisation, if noimpairment loss had been recognised.

K. Provisions

Provisions are recognised at the repoding date if, as a result of past events, the Company has a present legalor constructive obligation that can be estimated reliably, and it is probable that an outflow of economicbenefits will be required to settle the obligation.

L. Leases

l. Determining whether an arrangement contains a lease

At inception or on reassessment of an arrangement that contains a lease, the Company separates paymentsand other consideration required by the arrangement into those for the lease and those for other elements onthe basis of their relative fair values. lf the Company concludes for a finance lease that it is impracticable toseparate the payments reliably, then an asset and a liability are recognised at an amount equal to the fairvalue of the underlying asset; subsequently, the liability is reduced as payments are made and an imputedfinance cost on the liability is recognised using the Company's incremental borrowing rate.

,r. Leased assets

Assets held by the Company under leases that transfer to the Company substantially all of the flsks andrewards of ownership are classified as finance leases. The leased assets are measured initially at an amountequal to the lower of their fair value and the present value of the minimum lease payments. Subsequent toinitial recognition, the assets are accounted for in accordance wilh the accounting policy applicable to thatasset.

Assets held under other leases are classifled as operating leases and are not recognised in the Company's

statement of financial position.

lll. Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term

of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the

term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the

reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so

as to produce a constant periodic rate of interest on the remaining balance of the liability.

J) 36

At inception of an arrangement, the Company determines whether the arrangement is or contains a lease.

Notes lo the financial statements (contin ued)

M. Contingencies

Contingencies arising from claims, litigation assessments, fines, penalties, etc. are recorded when it isprobable that a liability has been incurred and the amount can reasonably be measured.

i. Conti ngent I iabi lity

Contingent liability is a possible obligation that arises from past events and whose existence will be confirmedonly by the occurrence or non-occurrence of one or more uncertain future events not wholly within the controlof the entity.

Contingent liability should not be recognised in the financial statements, but may require disclosure. Aprovision should be recognised in the period in which the recognition criteria of provision have been met.

ii. ConUngent asset

Contingent asset is a possible asset that arises from past events and whose existence will be confirmed onlyby the occurrence or non-occurrence of one or more uncertain future events not wholly within the control ofthe entity.

A contingent asset should not be recognised. Only when the realisation of the related economic benefits isvirtually certain should recognition take place provided that it can be measured reliably because, at that point,the asset is no longer contingent.

N. Employee benefits

The Company maintains a defined contribution plan for its eligible permanent employees. The eligibility rs

determined according to the terms and conditions set forth in the respective deeds.

Defined contribution plan (provident fund)

A defined contribution plan is a poslemployment benefit plan under which an entity pays fixed contributionsand will have no legal or constructive obligation to pay further amounts. Obligations for contribution to definedcontribution plan are expensed as the related service is provided. Prepaid contributions are recognised as an

asset to the extent that a cash refund or a reduction in future payments is available.

The Company contributes to a provident fund scheme (defined contribution plan) for employees of theCompany eligible to be members of the fund in accordance with the rules of the provident fund. All permanent

employees contribute 7% of their basic salary to the provident fund and the Company also makes equal

contribution.

Retirement benefit obligation (gratuity)

The Company operates an unfunded gratuity scheme for its permanent employees, under which an employee

is entitled to the benefits depending on the length of services and last drawn basic salary.

Projected Unit Credit method is used to measure the present value of defined benefit obligations and related

current and past service cosl and mutually compatible actuarial assumptions about demographic and financial

variables are used.

fl 37

Notes to the financial statements (contin ued)

P

Short-term employee benefits

This relates to leave encashment and is measured on an undiscounted basis and expensed as the relatedservice is provided. A liability is recognised for the amount expected to be paid if the company has a presentlegal or constructive obligation to pay this amount as a result of past service provided by the employee andthe obligation can be estimated reliably. Accordingly, necessary provision is made for the amount of annualleave encashment based on the latest basic salary. This benefit is applicable for employees as per servicerules.

O. Workers' profit participation fund

The Company provides 5% of its net profit as a contribution to workers' profit participation fund before tax andcharging such expense in accordance with The Bangladesh Labour Act 2006 (as amended in 2013).Statement of cash flows

The net cash flow from operating activities is determined by adjusting proflvloss for the year under indirectmethod as per BAS 7.

O. Reporting period

The financial year of the Company covers one year from 1 April to 31 March and is followed consistentlyThese financial statements cover period from 1 April 2017 to 31 March 2018.

35. Standards issued but not yet effective

The lnstitute of Chartered Accountants of Bangladesh (ICAB) has adopted following new standards and

amendments to standards during the yeat 2015. All previously adopted reporting standards are consistentlyapplied by the Company to the extent relevant for the Company.

New standards Summary of the requirementsPossible impact on financial

statementsBFRS 9 Financial

lnstrumentsBFRS 9, published in July 2014, replaces thelexisting guidance in BAS 39 Financialllnstruments: Recognition and Measurement.lBFRS I includes revised guidance on thelclassification and measurement of financialinstruments. a new expected credit loss modelfor calculating impairment on financial assets,

and new general hedge accountingrequirements. lt also carries foMard theguidance on recognition and derecognition offinancial instruments from BAS 39.

BFRS 9 is effective for annual reporlingperiods beginning on or after 1 January 2018,

with early adoption permitted.

The Company is assessing thepotential impact on its financialstatements resulting from theapplication of BFRS 9.

v 38


BFRS 15 Revenue fromContracts with

Customers

BFRS 15 establishes a comprehensiveframework for determining whether, howmuch and when revenue is recognised. ltreplaces existing revenue recognitionguidance, including BAS 18 Revenue, BAS 'l 1

Construction Contracts and BFRIC '13

Customer Loyalty Programmes.BFRS 15 is effective for annual reportingperiods beginning on or after 1 January 2018,with early adoption permitted.

The Company is assessing thepotential impact on its financialstatements resulting from theapplication of BFRS 15.

BFRS 16 Leases BFRS 16 eliminates the currentoperating/finance lease dual accountingmodel for leases. lnstead, there is a single, onbalance sheet accounting model, similar tocurrent finance lease accounting. lssued in

January 2016, the new BFRS will replace theexisting guidance in BAS 17 Leases.

The standard is effective for annual periodsbeginning on or after 1 January 2019. Earlyadoption is permitted.

The Company has yet to assess thepotential impact of BFRS 16 on itsfinancial statements.

36. Comparatives

Comparative information have been disclosed in respect of 20'17 for all numerical information in the financial

statements and also the narrative and descriptive information when it is relevant for understanding of the

current year's fi nancial statements.

To facilitate comparison, certain relevant balances pertaining to the previous year have been

rearranged/restated/reclassifled whenever considered necessary to conform to current period's presentation.

EEtrIB c:

39"l

and the - Hero MotoCorp€¦ · The Company manufactures and sells motorcycles within Bangladesh...

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Transcript of and the - Hero MotoCorp€¦ · The Company manufactures and sells motorcycles within Bangladesh...