1. CORPORATE INFORMATION
OCL India Limited (the Company) was incorporated in India on 11th October, 1949. The Company is domiciled in India whose shares are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The registered office is located at Rajgangpur, Sundargarh, Odisha - 770017. The Company is engaged in the manufacturing of cement and refractory products. The Company is a subsidiary of Dalmia Cement (Bharat) Limited (Holding Company) which is a subsidiary of Dalmia Bharat Limited (Ultimate Holding Company).
The financial statements of the Company for the year ended 31st March, 2017 were authorised for issue in accordance with a resolution of the Board of Directors on 10th May, 2017.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
2.1 Statement of Compliance
These financial statements, for the year ended 31st March 2017, are the first, the Company has prepared in accordance with section 133 of the Companies Act 2013, read with Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. For periods up to and including the year ended 31st March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). Adjustments pertaining to transition to Ind AS is detailed in Note No. 42.19 of the financial statements.
2.2 Basis of Measurement
The financial statements have been prepared on a historical cost basis (which includes deemed cost as per Ind AS 101), except for the following assets and liabilities which have been measured at fair value:
(i) Derivative financial instruments
(ii) Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).
(iii) Defined benefits plans - Plan assets measured at fair value
The financial statements are presented in Indian Rupees (‘), which is the Company’s functional currency and all values are rounded to the nearest crore, except wherever otherwise stated.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the amount reported in the financial statements and notes thereto. Differences between the actual results and estimates are recognised in the period in which the results are known / materialised and, if material, their effects are disclosed in the notes to the financial statements.
3.1 Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
3.2 Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are 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 specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
3.3 Defined benefit plans
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using the actuarial valuations. An actuarial valuation involves making various assumptions that may differ from the actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and attrition rate. Due to the complexities involved in the valuation and its long- term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
3.4 Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where it is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility risk. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
3.5 Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward looking estimated at the end of each reporting period.
3.6 Provision for decommissioning
The Company has recognised a provision for mine reclamation until the closure of mine. In determining the fair value of the provision, assumptions and estimates are made in relation to the expected future inflation rates, discount rate, expected cost of reclamation of mines, expected balance of reserves available in mines and the expected life of mines. The Company estimates that the costs would be incurred over its residual economic life estimated as per the mining plan or finite life whichever is lower and calculates the provision using the DCF method based on the following assumptions:
- Inflation rate - 5.37%
- Discount rate - 7.79%
OTHER NOTES TO NOTE NO. 4 TO 8 (a) Disclosures for Property, Plant & Equipment (PPE) and Capital Work-in-Progress (CWIP)
(i) Amount of borrowing cost capitalised and rate of capitalisation
(ii) Additions/ (-) deduction to PPE and Capital work-in-progress includes Rs.-2.39 Crore (Previous Year: Rs.5.76 Crore) towards adjustment of foreign exchange loss / (gain) on long term foreign currency borrowings.
(iii) The Company has clear title to all the items of PPE. All the PPE related to Cement Division (with net carrying values shown at Rs.2,001.10 Crore, Rs.1,923.02 Crore and Rs.1,935.09 Crore, as on 31st March, 2017, 31st March, 2016 and 1st April, 2015 respectively) are either mortgaged or hypothecated against the secured borrowings of the company as detailed in Note No. 22 and 26.
(iv) The Company has elected the option of fair value as deemed cost for following class of PPE:
(v) The above fair valuation has been performed by an external independent valuer and following assumptions/ techniques are applied by the valuer:
Freehold land
The fair valuation of landed properties are based on the benchmark value of land as fixed for different mouzas (village) by the authorities of respective State Governments.
Buildings
The replacement cost of each civil item has been arrived on basis of proper indexing to the cost inflation index. The present value/ fair value has been arrived after deducting depreciation for the life enjoyed till date. The plinth area cost Indices for civil works as set by Central Public Works Department (CPWD), New Delhi has been referred as cost inflation index. Designed/effective life of civil items as standardized for the industry has been referred.
Plant & Machinery & Railway line
The replacement cost has been arrived after proper indexing of the cost capitalised on the installation date. The above indexation are in conformity with the machineries and machine tools price index as standardized by the Reserve Bank of India. The present market value/fair valuation is arrived after deducting depreciation for the life enjoyed till date. Designed/effective life of plant and machinery as standardized for the industry has been referred.
(vi) Capital Work-in-Progress includes the following expenses / (income)
Current year expenses pertains to Green Power Project, Rajgangpur and previous year expenses pertains to OCL Bengal Cement Works, Midnapore.
(b) Disclosures for Investment Property
(i) The Company has identified and reclassifed certain immovable properties as Investment Properties on the date of transition i.e. 1st April, 2015.
(ii) There is no material expenses incurred for the maintenance of investment properties nor income derived out of the same.
(iii) The Company has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Investment properties are either mortgaged or hypothecated against the secured borrowings of the company as detailed in Note No. 22 and 26.
(iv) As at 31st March 2017, 31st March 2016 and 1st April 2015, the fair values of the properties are Rs.2.99 Crore Rs.2.99 Crore and Rs.3.03 Crore respectively. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer. The fair valuation of investment properties comprising land are based on the benchmark value of land as fixed for different mouzas (village) by the authorities of respective State Governments.
(c) Disclosures for Intangible Assets
(i) The mining rights has been granted by various state governments for a finite period. The Company has amortised on straight line basis, the expenditure on mining rights over its residual economic life estimated as per the mining plan or finite life whichever is lower.
(ii) The Company has clear title to the mining rights classified under Intangible Assets.
(d) Other disclosures
(i) Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for the year ended 31st March, 2017 is Rs.59.91 Crore ( 31st March, 2016: Rs.24.63 Crore and 1st April, 2015: Rs.34.83 Crore).
(ii) Disposals/adjustments includes Rs.1.97 Crore and Rs.0.16 Crore for the year ended 31st March 2017 and 31st March 2016, respectively classified to assets held for sale or disposal.
(iii) There has been no impairment loss on above assets during the year.
(iv) The livestock comprises of milch cattles and the produce is utilised for welfare of the employees. It is measured at cost as the fair value cannot be measured reliably.
5 INVENTORIES (Refer Note No. 3.6)
- During the year ended 31st March, 2017 Rs.1.37 Crore ( 31st March, 2016: Rs.2.89 Crore) was recognised as an expense for the
inventories carried at net realisable value.
- The above inventories were valued at FIFO basis, hence reversal for write down of inventories in earlier periods were not required.
- No restriction has been put by the charge holders on the use of the inventories of the Company.
16 TRADE RECEIVABLES
- There are no debts due by directors or other officers of the Company or any of them either severally or jointly with any other persons or debts due by firms or private companies respectively in which any director is a partner or a director or a member.
- Trade receivables are netted with bills discounted as at 31st March, 2017: Rs.8.81 Crore (31st March, 2016: Rs.1.97 Crore and 1st April, 2015: Rs.4.75 Crore)
- The Company has provided for expected credit losses in two parts. Firstly, provision has been made on the basis of realisation pattern or past experience, for receivables outstanding below 181 days. Secondly, provision has been made by applying the provision matrix for receivables outstanding as mentioned below.
7 CASH & CASH EQUIVALENTS
Bank balances includes Rs.45,035 (31 March, 2016: Rs.45,139 and 1st April, 2015: Rs.45,191) lying in a current account with a nationalised bank, to be operated jointly by the authorised signatories of the Company and OCL Iron & Steel Limited in respect of coal block operations as mentioned in Note No. 42.10.
8 EQUITY SHARE CAPITAL (Refer Statement of Changes in Equity)
(a) Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period
(b) Terms/ Rights attached to Equity Shares
The Company has issued only one class of equity shares having a par value of Rs.2 per share. Each equity shareholder is entitled to one vote per share. The Company had declared and paid dividends in Indian rupee.
The Company has proposed Rs.28.45 Crore as dividend ( Rs.5 per share) before the date of approval for issue of financial statements but not recognised as a distribution to owners during the period, (31st March, 2016: nil). During the previous year ended 31st March, 2016 , the amount of interim dividend per share recognised for distribution and distributed to equity shareholders was Rs.4 per share.
In event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(c) 4,24,79,273 (% of shareholding:74.66) shares held by Dalmia Cement (Bharat) Ltd. (Holding Company) w.e.f. 25.02.2015
(d) Details of shareholders holding more than 5% shares in the Company
(e) Aggregate number of bonus shares issued and shares bought back during the period of five years immediately preceding the reporting date: Nil
9 OTHER EQUITY (Refer Statement of Changes in Equity)
a) Security Premium Reserve
Security premium reserve was created on merger of Dalmia Cement (Meghalaya) Ltd during the financial year 2007-08. The Company may use this reserve for issue of fully paid-up bonus shares to its members and for buy-back of its shares.
(b) Capital Reserve
Capital Reserve of Rs.1.57 Crore was created due to merger of Dalmia Cement (Meghalaya) Limited during financial year 2007-08. Rs.0.08 Crore was created out of subsidy received from Orissa State Financial Corporation, Odisha against capital investment as per scheme framed by the Odisha Government. Rs.5.77 Crore has been received from Director of Industries, Odisha as Industrial Policy benefits as per the scheme framed by the Odisha Government.
(c) Debenture Redemption Reserve (DRR)
The Company has issued redeemable non-convertible debentures. The Companies (Share Capital and Debentures) Rules, 2014 (as amended), require the Company to create DRR out of profits of the Company available for payment of dividend. DRR is required to be created for an amount which is equal to 25% of the value of debentures issued. The Company is creating debenture redemption reserve every year out of the profit available for payment of dividend to ensure creation of reserve equal to 25% of the value of debenture issued over the life of the debentures.
10.1 In the opinion of the Board of Directors and to the best of their knowledge and belief, the valuation on realisation of financial assets and other assets in the ordinary course of business would not be less than the amount at which they are stated in the financial statements.
10.2 Scheme of Arrangement and Amalgamation amongst the Company, Dalmia Cement East Limited, Shri Rangam Securities & Holdings Limited, Dalmia Bharat Cements Holdings Limited and Odisha Cement Limited (“Scheme 1”), has been approved by the Board of Directors, Shareholders and Creditors of the Company and the BSE Limited and National Stock Exchange of India Limited (“Stock Exchanges”). Scheme 1 is pending for sanction of the jurisdictional NCLT of the companies involved and has not come into effect.
Scheme of Arrangement and Amalgamation amongst Odisha Cement Limited, Dalmia Bharat Limited and Dalmia Cement (Bharat) Limited (“Scheme 2”) has been approved by the Board of Directors at its meeting held on 5th November, 2016, as Scheme 2 involves its wholly owned subsidiary, i.e., Odisha Cement Limited and is inter alia conditional upon the effectiveness of the Scheme 1, subject to approval of shareholders, creditors and other applicable regulatory authorities. Scheme 2 has been approved by the Stock Exchanges on 5th May, 2017.
The accounting for arrangement and amalgamation as contemplated in the aforesaid schemes will be done upon the scheme coming into effect.
10.3 Standards issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies ( Indian Accounting Standards ) (Amendments) Rules 2017, notifying amendments to Ind AS 7, “Statement of Cash Flows” and Ind AS 102, “ Share-based payments”. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, “Statement of Cash Flows” and IFRS 2, “ Share-based payments”, respectively. The amendments are applicable to the Company from 1st April, 2017.
10.4 Balance confirmation letters were sent in respect of accounts showing debit or credit balances. Balance confirmations have not been received in some cases. In the opinion of the management, adjustments, if any, required on confirmation and reconciliation is not expected to be material.
10.5 Details of the Company’s interest in Joint Venture
In respect of license granted for captive mining block at Radhikapur mines, a Joint Venture company Radhikapur (West) Coal Mining Private Limited has been incorporated on 29th March, 2010 in which the Company’s interest jointly with OCL Iron & Steel Limited (OISL) is 14.696%. The Company has invested Rs.7.35 Crore (PY Rs.7.35 Crore) in equity shares of the JV Company which includes Rs.3.83 Crore (PY Rs.3.83 Crore) being proportionate value of shares to be transferred to OISL after the receipt of approval from the Ministry of Coal, Government of India and other Joint Venture Partners.
Consequent upon decision of the Hon’ble Supreme Court of India cancelling the allocation of Coal block, vide Order dated 24th September, 2014, the Company is in the process of assessing the recoverability of the amounts invested of Rs.3.51 Crore in the Joint Venture Company, Radhikapur (West) Coal Mining Private Ltd. As a matter of prudence, a provision for similar amount has been made in the accounts during the earlier years.
10.6 Disclosure on Corporate Social Responsibility Expenses
(a) Gross amount required to be spent by the Company during the year in pursuance to the provisions of Section 135 of the Companies Act, 2013 and rules made thereunder : Rs.3.61 Crore (PY Rs.3.52 Crore).
(b) Amount spent during the year 2016-17 and shown under Other Expenses in the Statement of Profit and Loss (Refer Note No. 39):
10.7 Disclosures as required by Ind AS 17, Leases
A Finance Lease
(a) Company as Lessor
The Company has purchased wagons under “own your wagon scheme” of Railways and leased it to Railways on rent ,the wagons were recognized as assets and carried in the books at residual value, the company is earning rental income from the arrangement, hence it qualifies to be recognized as finance lease arrangement where Railways is the lessee. Future minimum lease receivables (MLR) and its present value under finance leases are as follows:
(b) Company as Lessee
The Company has finance lease agreements for land at various locations. These leases have term of between 90 and 99 years and are eligible for renewal at the end of lease term. Future minimum lease payments (MLP) and its present value under finance leases are as follows:
B Operating Lease
The Company has taken / given various residential / commercial premises and plant & equipment under cancellable operating lease. These lease agreements are normally renewed on expiry, wherever required.
The future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following periods:
Total operating lease expenses debited to statement of profit and loss is Rs.13.66 Crore (Previous Year: Rs.14.18 Crore)
10.8 Disclosures as required by Ind AS 19, Employee Benefits
(a) Defined contribution plans:
(b) Defined benefit plan:
Gratuity
The Company provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount equivalent to 15 to 30 days’ salary for each completed year of service subject to a maximum of Rs.0.10 Crore. Vesting occurs upon completion of five continuous years of service in accordance with Indian law. The gratuity fund is separately administered by a Gratuity Fund Trust.
(c) Other long-term employee benefits:
Compensated Absences
The Company provides for the expected cost of accumulating paid absences which can be carried forward and used in future periods by the employees. The obligation for accumulating paid absences has been recognised at the end of the reporting period.
The weighted average duration based on discounted cash flows of the defined benefit plan obligation at the end of the reporting period is 5 years (31st March,2016: 5 years).
The weighted average duration based on discounted cash flows of the other long term employee benefits at the end of the reporting period is 7 years (31st March,2016: 5 years).
10.9 Disclosures as required by Ind AS 108, Operating Segments Identification of Segments:
The chief operational decision maker monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the nature of products and services and have been identified as per the quantitative criteria specified in the Ind AS.
Operating Segments identified as follows:
(a) Cement Division which produces various grades of cement and cement related products
(b) Refractory Division which produces various types of refractory products.
No other operating segments have been aggregated to form the above reportable operating segments.
Segment revenue and results:
The expense or incomes which are not directly attributable to any business segment are shown as unallocable expenditure (net of unallocated income).
Segment assets and liabilities:
Segment assets include all operating assets used by the operating segment and mainly consist of property, plant and equipment, trade receivables, cash and cash equivalents and inventories. Segment liabilities primarily include trade payables and other liabilities. Common assets and liabilities which cannot be allocated to any of the segments are shown as part of unallocable assets/liabilities.
Inter segment transfer:
As per practice consistently followed, inter segment transfers for capital jobs recognised at cost and for other jobs at estimated realisable value. Profit or loss on inter segment transfers are eliminated at the Company level.
* In addition to above, perquisite value of Rs.6.53 crore for 36,000 Employee Stock Options were granted by Dalmia Bharat Limited, (Ultimate Holding Company) on February 03, 2016 at a price of Rs.105.50/- per share being the exercise price representing discount of 20% on the price determined as 30 days average of opening price as on May 18, 2012. The said 36,000 ESOPs were vested and exercised by Shri Amandeep on February 03, 2017.
The transactions with related parties are net of taxes & reimbursement of expenses and have been made on terms equivalent to those that prevail in arm’s length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured and settlement occurs in cash.
10.10 Fair Value Measurement
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
(1) Fair value of cash and short-term deposits, trade and other short term receivables, trade payables , other current liabilities, shortterm loans from banks and other financial institutions approximate their carrying amounts largely due to the short term maturities of these instruments.
(2) Financial instruments with fixed and variable interest rate are evaluated by the Company based on parameter such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken into account for the expected losses of these receivables.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique.
Level 1 : quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2 : other techniques for which all inputs which have a significant effects on the recorded fair value are observable, either directly or indirectly.
Level 3 : techniques which use inputs that have a significant effects on the recorded fair value that are not based on observable market data.
10.11 Financial Risk Management Objective and Policies:
The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables and advances from customers. The main purpose of these financial liabilities is to finance the Company’s operations, projects under implementation and to provide guarantees to support its operations. The Company’s principal financial assets include Investment, loans and advances, trade and other receivables and cash and bank balances that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s financial risk management is an integral part of how to plan and execute its business strategies. The Company’s financial risk management policy is set by the Managing Board.
All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes to be undertaken. The Board of Directors reviews and finalises policies for managing each of these risks, which are summarised below.
(a) Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and commodity price risk. Financial instruments affected by market risk include investments and deposits, foreign currency receivables, payables, loans and borrowings and derivative financial instruments.
The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommends risk management objectives and policies, which are approved by Senior Management and the Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowing strategies and ensuring compliance with market risk limits and policies.
(i) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. In order to optimize the Company’s position with regard to interest income and interest expenses to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on the unhedged portion of loans and borrowings. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:
(ii) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating and financing activities. The Company manages its foreign currency risk by hedging transactions that are expected to realise in future.
Note: Details of amount in foreign currency less than 100,000 are given below :
-Forward Contract for imports in Euro (FY 2016: 95,500, FY 2015: 49,725).
-Trade Receivables in GBP (FY 2016: 9,101.85).
-Trade Payables in GBP (FY 2017: 7078.11, FY 2016: 19,481.63, FY 2015: 21,425).
-Cash & bank balance in USD (FY 2017: 0.75, FY 2016: 1259.75, FY 2015: 5.75) , in GBP (FY 2017: 1.20, FY 2016: 1.20, FY 2015: 1.20), in EURO (FY 2017: 6.66, FY 2016: 236.66, FY 2015: 6.66), in RMB (FY 2017: 7.50, FY 2016: 606.50, FY 2015: 3,000), in JPY (FY 2017: 580, FY 2016: 580, FY 2015: 580), and in Kwacha (FY 2017: 30,000, FY 2016: 30,000, FY 2015: 30,000).
-PCFC Loan in USD (FY 2017: 64,986.30) and in GBP (FY 2016: 8,191).
-Interest accrued on term loan & buyers credit in USD (FY 2017: 60,357, FY 2016: 30,799, FY 2015: 17,667) and in EURO (FY 2017: 2,922.08).
Note: Details of amount in Rupee less than 100,000 are given below :
-Cash & bank balance in USD (FY 2017: 48, FY 2016: 83,503, FY 2015: 358) , in GBP (FY 2017: 95, FY 2016: 114, FY 2015: 110), in EURO (FY 2017: 449, FY 2016: 17,750, FY 2015: 445), in RMB (FY 2017: 70, FY 2016: 6,290, FY 2015: 30,600), in JPY (FY 2017: 327, FY 2016: 347, FY 2015: 299), and in Kwacha (FY 2017: 309, FY 2016: 309, FY 2015: 309).
Foreign Currency Sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.
(iii) Commodity price risk
The Company is affected by the price volatility of certain commodities. Its operating activities require the on-going purchase or continuous supply of slag, coal, pet coke, and gypsum for manufacture of cement and quartzise, magnasite and alumina for manufacture of refractory products. The Company procures slag, coal, pet coke domestically by participating in public tenders / e-auctions. Imported pet coke is exposed to price volatility due to fluctuation in international petroleum market. Quartzite is procured from captive mines, magnasite and alumina are imported. Raw material for refractory products are procured under annual rate contracts or by floating tenders. The Company monitors its purchases closely to optimise the price.
(b) Credit Risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables and advances to suppliers) and from its financing activities, including deposits and other financial instruments.
(i) Trade Receivables
Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major clients.
The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets.
The ageing analysis of the receivables (gross of provisions) have been considered from the date the invoice falls due.
(ii) Financial Instruments and Cash and bank balances
Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved authorities. Credit limits of all authorities are reviewed by the Management on regular basis. All balances with banks and financial institutions is subject to low credit risk due to good credit ratings assigned to these entities.
(c) Liquidity Risk
The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash credit, letter of credit and working capital limits.
The table below summarises the maturity profile of the Company’s financial liabilities based on contractual payments.
10.12 Capital Management:
For the purpose of the Company’s capital management, equity includes issued equity capital, securities premium and all other equity reserves attributable to the equity share holders, including capital reserve and net debt includes interest bearing loans and borrowings except lease liability less investment in mutual funds, commercial papers and cash and cash equivalents. The primary objective of the Company’s capital management is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The funding requirement is met through a mixture of equity, internal accruals, long term borrowings and short term borrowings. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements.
10.13 First Time Adoption of Ind-AS:
These financial statements, for the year ended 31st March 2017, are the first, the Company has prepared in accordance with section 133 of the Companies Act 2013, read with Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. For periods up to and including the year ended 31st March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31st March 2017, together with the comparative period data as at and for the year ended 31st March 2016. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1st April 2015, the Company’s date of transition to Ind AS. The figures for the previous periods and for the year ended 31st March, 2015 have been restated, regrouped and reclassified, wherever required to comply with Ind-AS and Schedule III to the Companies Act, 2013 and to make them comparable.
10.14 (a) Exemption applied
The Company has applied following exemptions
(1) Business Combinations
The Company has elected not to apply Ind AS 103 - Business Combinations, retrospectively to past business combinations that are occurred before the date of transition to Ind AS.
(2) Deemed Cost
The Company has elected to measure the certain items of property, plant and equipment on the date of transition to Ind AS i.e. 1st April, 2015 at its fair value and is using that fair value as its deemed cost on that date. Items measured at fair value are plant and machinery, buildings, freehold land and railway sidings. Lease hold land, furniture & fixtures, office equipments and vehicles are carried at their previous GAAP carrying amount.
(3) Leases
The Company has assessed the classification of each element as finance or operating lease at the date of transition to Ind AS on the basis of the facts and circumstances existing as at that date.
(4) Long Term Foreign Currency Monetary Items
The Company has elected to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP. The policy is detailed in Note No. 3.8 of significant accounting policies.
(5) Investments in subsidiaries and joint ventures
The Company has elected to measure investments in subsidiaries and joint ventures at previous GAAP carrying amount, accordingly it has elected to measure the investments at deemed cost in its opening Ind AS Balance Sheet.
(6) Fair value measurement of financial assets or financial liabilities at initial recognition
Under IndAS 109, the financial assets and liabilities are initially recognised at fair value and subsequently measured at amortised cost, less allowance for impairment, if any. For transactions entered into on or after the date of transition to IndAS, the requirement of initial recognition at fair value is applied prospectively.
(7) Decommissioning liabilities included in the intangible assets
The Company has elected to measure the decommissioning liability related to mines, at the date of transition to IndAS in accordance with Ind AS 37.
(8) Non current assets held for sale
The Company has elected to measure non current assets held for sale at carrying value at the date of transition, hence opening IndAS Balance Sheet was not required to be adjusted.
10.14 (b) Exceptions
The following mandatory exceptions have been applied in accordance with IndAS 101 in preparing the financial statements.
(1) Estimates
The estimates at 1st April, 2015 and at 31st March, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies, if any) apart from the following items where application of Indian GAAP did not require estimation.
Fair Value through Other Comprehensive Income
Impairment of financial assets based on expected credit loss model
(2) Classification and measurement of financial assets
The Company has classified the financial assets at fair value in accordance with Ind AS 109 on the basis of facts and circumstances that exists at the date of transition to Ind AS.
10.14 (f) Notes to the Reconciliation
1. (a) Property Plant & Equipment
The Company has elected to measure items of property, plant and equipment on the date of transition to Ind AS i.e. 1st April, 2015 at its fair value and is using that fair value as its deemed cost on that date. Details of increase in amounts due to fair valuation of assets is disclosed under Other Notes to Note No. 5 to 9. This amount has been adjusted in retained earnings.
2. Non Current Investments
A financial guarantee is given against loan to OCL Global, a subsidiary and OCL China, a step-down subsidiary. The financial guarantee is recognised at fair value and resulting gain/loss at the time of transition of Rs.0.73 Crore is recognised in retained earnings and subsequent gain/loss of Rs.0.09 Crore in statement of profit and loss. Preference shares are fair valued through profit or loss at transition date, Rs.3.91 Crore has been adjusted in retained earnings.
3. Loans
Loan to employees are measured at fair value using amortisation method. At transition date, resulting change in assets are adjusted in retained earnings. Subsequent adjustments are recognised in statement of profit and loss.
4. Other Financial Assets
The Company has recognized the present value of future lease rental as receivable and derecognized the carrying value of wagons from PPE. At the time of transition, Rs.1.45 Crore has been recognised under other financial assets and Rs.0.29 Crore derecognised from PPE.
For 31st March 2016, Rs.0.05 Crore has been derecognised from Other operating revenue and has been recognised as interest income.
Current Financial Assets- Others includes, impact of fair valuation of derivative instruments as at 31st March, 2016: Rs. -0.48 Crore and as at 31st March, 2015: Rs.1.17 Crore.
5. Inventories
6. Current Investments
The mutual fund investments are valued at fair value through profit or loss at time of transition and resulting gain/loss is recognised under retained earnings. Subsequently the gain/ loss is recognised under statement of profit and loss.
7. Current Trade Receivables
The Company has applied practical expediency in calculation of the expected credit losses on trade receivables by using the provision matrix for each business segment as detailed in Note No. 16 of notes to the financial statements. Outstanding balance of provision as at 31st March, 2016: Rs.5.03 and as at 31st March, 2015: Rs.10.53 Crore.
8. Current Assets
(i) Impact of fair valuation of PPE on assets held for sale as at 31st March, 2016 : Rs. -0.16 Crore
The adjustments pertaining to opening balance sheet at the time of transition to Ind AS are adjusted into retained earnings and subsequently , the adjustments are made into Profit or Loss or Other Comprehensive Income as prescribed under Ind AS.
10. Borrowings
Under Indian GAAP, transaction costs incurred in connection with borrowings were amortised upfront and charged to profit or loss for the period. Under Ind AS, transaction costs are included in the initial recognition amount of financial liability and subsequently charged to profit or loss using the effective interest method. Fair value of leased land has been recognised on the date of transition to Ind AS.
11. Provisions
The Company has recognised the decommissioning liability of Mines at discounted cost. The policy in respect to the provision amount is envisaged in Note No. 3.16 of notes to the financial statements.
For the year ended 31st March 2016, The Company has recognised Rs.1.09 Crore under finance cost and Rs.0.96 Crore under depreciation. The provision as per previous GAAP of Rs.1.67 Crore has been derecognised by crediting Cost of Material Consumed Rs.1.28 Crore and Mines Restoration expenses Rs.0.39 Crore.
12. Deferred Tax Liability/Asset
Indian GAAP required deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP.
In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. On the date of transition, the net impact on deferred tax liabilities of Rs.273.24 Crore has been recognised in retained earnings and for the year ended 31st March, 2016, Rs.3.30 Crore has been recognised in statement of profit and loss.
13. Short Term Provision
Under Indian GAAP, proposed dividends including dividend distribution tax (DDT), are recognised as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognised as a liability in the period in which it is declared by the Company (usually when approved by shareholders in a general meeting) or paid.
Therefore, the dividend liability including DDT amounting to Rs.27.39 Crore has been derecognised as on transition date and has been recognised in retained earnings during the year ended 31st March, 2016 as declared and paid.
15. Employee Benefit Expenses
Both under Indian GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognised in the balance sheet through OCI. Thus the employee benefit expense is reduced by Rs.1.03 Crore and remeasurement gains/ losses on defined benefit plans has been recognized in the OCI net of tax.
Unwinding of discount on loan to employees recognised as at transition date: Rs.0.02 Crore
16. Finance Cost
10.14 (g)There is no material impact on the Statement of Cash Flows due to the transition from previous GAAP to Ind AS.
10.15 Details of Specified Bank Notes held and transacted during the period 8th November, 2016 to 30th December, 2016 are given below:
10.16 Previous year figures have been regrouped/rearranged/ reclassified where necessary to correspond with current year figures.
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