In the separate financial statements of the investor, investments in subsidiary companies are carried at fair value. On adoption of IFRS 9, the Group made an irrevocable election at the time of initial recognition to account for equity investments at fair value through OCI (‘FVOCI’). There is no subsequent reclassification of fair value gains and losses to profit and loss following the derecognition of these investments. On disposal of these equity investments, any related balance within the FVOCI reserve is reclassified to retained earnings.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired are recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss as a bargain purchase gain.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount being recognised in profit and loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets and liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to retained earnings.
This section explains the judgements and estimates made in determining fair values of the financial instruments that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its investments in subsidiaries into the three levels prescribed under the accounting standards.
(i) On 15 February 2022, C-Care (International) Ltd (previously known as CIEL Healthcare Ltd), reduced its stated capital by MUR 200M. CIEL Limited share was MUR 106M.
(ii) During the financial year, CIEL Finance Ltd redeemed MUR 31M of its redeemable shares. CIEL Limited’s share was MUR 23M.
Specific valuation techniques used to value the Company's investments include:
Level 1 investments - Unadjusted quoted prices have been used to value these investments.
Level 2 investments - The quoted prices, adjusted by a 10% premium has been used to value investments. This is explained by the fact that the Company holds a controlling stake in those subsidiaries and would expect to offer such a premium, should it wish to acquire more shares in these entities. This premium falls within the range of those offered on previous similar transactions. Level 2 investments adjusted quoted price on DEM - Investment has been valued using the Volume Weighted Average Price (“VWAP”) model as at 30 June 2022 as management considers it is a more appropriate valuation of the Company.
Where appropriate, the ratio of the cumulative share price to the cumulative volume traded over a given time period has been used to fair value the investment.
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements.
| CIEL Finance Limited | |||||||
| Description | Fair value | Valuation technique | Unobservable inputs | Range of inputs | |||
| MUR '000 | |||||||
| 30-Jun-22 | |||||||
| CIEL Finance Limited | 2,582,931 | Price-earnings ratio | Price-earnings ratio | 10 | (i) | ||
| Price to Book | Price to Book | 1.8 X | (ii) | ||||
| 30-Jun-21 | |||||||
| CIEL Finance Limited | 2,623,716 | Price-earnings ratio | Price-earnings ratio | 10 | (i) | ||
| Dividend discount model | Weighted-average cost of capital | 19.70% | (iii) |
(i) Increase in PE ratio by 2.5 % (2021 - 2.5%) would increase fair value by MUR 104M (2021 - MUR 111M).
(ii) Increase in Price to Book multiple by 2.5% (2021 – Nil) would increase fair value by MUR 19 M (2021 – Nil)
CIEL Textile Limited
| Description | Fair value | Valuation technique | Unobservable inputs | Range of inputs | |
| MUR ‘000 | |||||
| 30-Jun-22 | |||||
| CIEL Textile Limited * | 7,049,191 | Discounted Cash Flow |
Weighted-average cost of capital
|
10.40% - 11.20% | |
| Terminal Growth Rate | 2% - 3.4% | ||||
| MUR ‘000 | |||||
|
Sensitivity to changes in assumptions
|
|||||
| Terminal +0.5% point | 555,000 | ||||
| Terminal -0.5% point | (555,000) | ||||
| Weighted-average cost of capital +0.5% point | 577,000 | ||||
| Weighted-average cost of capital -0.5% point | (577,000) | ||||
| Description | Fair value | Valuation technique | Unobservable inputs | Range of inputs | |
| MUR ‘000 | |||||
| 30-Jun-21 | |||||
| CIEL Textile Limited | 5,446,700 | Discounted Cash Flow |
Weighted-average cost of capital
|
10.6%-11.4% | |
| Terminal Growth Rate | 2%-3.5% | ||||
| MUR ‘000 | |||||
|
Sensitivity to changes in assumptions
|
|||||
| Terminal +0.5% point | 75,000 | ||||
| Terminal -0.5% point | (71,000) | ||||
| Weighted-average cost of capital +0.5% point | (567,000) | ||||
| Weighted-average cost of capital -0.5% point | 651,000 | ||||
* CIEL Textile Limited value includes 75.94% of Evolis group. Evolis Group has been valued at its net asset value as it holds mainly investment properties. The properties have been fair valued at year end by CDDS using the Discounted Cash Flow model.
The net assets value of Evolis as at June 30, 2022 was MUR 1.2Bn. CTL’s share represents MUR 940M.
CIEL Agro Limited, CIEL Properties Limited and CIEL Healthcare Limited have been valued at their net asset value as they hold mainly investments in two quoted entities, which have been valued using the prevailing quoted price and adjusted quoted price, where appropriate.
C-Care (Mauritius) Ltd
C-Care is listed on the Development Enterprise market (DEM) of the Stock Exchange of Mauritius. As at 30 June 2022, the investment in C-Care has been valued using the Volume Weighed Average Price (“VWAP”) as management considers it is a more appropriate valuation of the company. Investment is reported as Level 2 investment in the fair value hierarchy. The share price as at 30 June 2022 was MUR 17.20 (2021: MUR 19.70) and the VWAP used for valuing the investment was MUR 18.82 (2021: MUR 10.35).
Valuation process
Management has a team that performs the valuations of non-property items required for financial reporting purposes, including level 3 fair values.
The team reports to the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussions of valuation processes and results are held between the CFO, AC and the valuation team quarterly, in line with the group’s quarterly reporting periods.
The main level 3 inputs used by the group are derived and evaluated as follows:
• Discount rates for financial assets and financial liabilities are determined using a capital asset pricing model to calculate a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the asset.
• Risk adjustments specific to the counterparties (including assumptions about credit default rates) are derived from credit risk gradings determined by VALUE IFRS Plc’s internal credit risk management group.
• Earnings growth factors for unlisted equity securities are estimated based on market information for similar types of companies.
• Contingent consideration – expected cash inflows are estimated based on the terms of the sale contract and the entity’s knowledge of the business and how the current economic environment is likely to impact it.
Changes in level 2 and level 3 fair values are analysed at the end of each reporting period during the quarterly valuation discussion between the CFO, AC and the valuation team. As part of this discussion the team presents a report that explains the reason for the fair value movements.
(b) The list of the Group's significant subsidiaries is as follows:
| Name of subsidiary company | Class of Shares | Year End | Denominated Currency | Stated capital | Percentage holding | Proportion of ownership interests held by non-controlling interests | Country of Incorporation / Principle place of business | Main business | ||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||
| Direct | Direct | |||||||||||
| 000's | 000's | % | % | % | % | |||||||
| CIEL Agro Limited (formerly known as CIEL Agro & Property Limited) | Ordinary | 30/June | MUR | 1,413,865 | 1,413,865 | 100.00 | 100.00 | - | - | Mauritius | Investment | |
| CIEL Properties Limited | Ordinary | 30/June | MUR | 2,177,701 | 2,177,701 | 100.00 | 100.00 | - | - | Mauritius | Investment | |
| CIEL Corporate Services Ltd | Ordinary | 30/June | MUR | 25 | 25 | 100.00 | 100.00 | - | - | Mauritius | Management services | |
| CIEL Finance Limited | Ordinary | 30/June | MUR | 1,933,231 | 1,933,231 | 75.10 | 75.10 | 24.90 | 24.90 | Mauritius | Investment | |
| C-Care (International) Ltd (formerly known as CIEL Healthcare Limited) | Ordinary | 30/June | MUR | 1,637,895 | 1,637,895 | 53.03 | 53.03 | 46.97 | 46.97 | Mauritius | Investment | |
| CIEL Textile Limited | Ordinary | 30/June | MUR | 685,865 | 685,865 | 100.00 | 100.00 | - | - | Mauritius | Investment | |
| Rockwood Textiles Ltd | Ordinary | 30/June | MUR | 1 | 1 | 100.00 | 100.00 | - | - | Mauritius | Property | |
| Sun Limited | Ordinary | 30/June | MUR | 1,945,451 | 1,945,451 | 50.10 | 50.10 | 49.90 | 49.90 | Mauritius | Investment | |
| C-Care (Mauritius) Ltd* | Ordinary | 30/June | MUR | 289,801 | 289,801 | 20.08 | 20.08 | 44.17 | 44.17 | Mauritius | Healthcare Services | |
* CIEL Limited indirectly holds 35.75% of C-Care (Mauritius) Ltd through CIEL Healthcare Limited and the effective shareholding is 55.83%.
(c) Summarised financial information on subsidiaries with material non-controlling interests.
¹ Non-controlling interests in CIEL Textile Limited includes 24.06% directly held by CIEL Properties Ltd
² Non-controlling interests in CIEL Healthcare Ltd includes 20.08% of C-Care (Mauritius) Ltd’s share
The summarised financial information above is the amount before intra-group eliminations.
For subsidiary companies having a different reporting date, management accounts have been prepared as at 30 June.
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