3.19. Provisions, contingent liabilities and contingent assets
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the notes to the financial statements. Contingent assets are not recognized in the financial statements.
3.20.Current / non- current classification
An asset is classified as current if:
i) it is expected to be realized or sold or consumed in the Company's normal operating cycle;
ii) it is held primarily for the purpose of trade;
iii) it is expected to be realized within twelve months after the reporting period; or
iv) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current if:
i) it is expected to be settled in normal operating cycle;
ii) it is held primarily for the purpose of trading;
iii) it is expected to be settled within twelve months after the reporting period;
iv) it has no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between acquisition of assets for processing / trading / assembling and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
c) Terms / rights attached to equity shares
Fully paid equity shares, which have a par value of H10/-, carry one vote per share and carry a right to dividends. Dividends if recommend by the Board of Directors need approvals from the Shareholders at the Annual General Meeting. The Board of Directors may also declare interim dividends if in their judgement the position of the Company justifies.
During the year ended March 31, 2024, the amount of per share dividend recognised as H0.90 (March 31, 2023 H0.90)
In the event of winding up / liquidation of the Company, the holder of equity shares will be entitled to receive a residual interest in proportion to the number of shares held by them at that time in the assets of the Company after deducting all of liabilities of the Company.
Term Loan from Bank Against Plant & Machinery /Factory Building Tarapore
H293 (In Lakhs) (Previous Year H481.83 (In Lakhs) secured by hypothecation of movable fixed assets and Factory Building at Tarapore wherein in Term loan for H90000('000) principal payable in equal monthly installment of H11.70 (in Lakhs) over period of 78 months after inital moratorium period of 6 months from date of disbursement from Axis Bank Ltd. and carry interest rate of 9.85 % & 9.60% . 6.65% on Foreign Currency Term Loan (6 months Libor 4.14 %). Second Charge on Current assets by way of Hypothication on Stock and Book debts present and future on pari-passu basiss with Bank of Baroda . Along with personal guarantee of Mr. Vipul Shah & Mr. Mihir Shah.
H66.11 (In Lakhs) (Previous Year H179.44 (in Lakhs) working capital Term Loan secured by existing hypothecation of the bankers and 100% credit gurantee by NCGTC principal payable in equal monthly installment of H9.44 (In Lakhs) over period of 36 months after inital moratorium period of 12 months from date of disbursement from Axis Bank Ltd. and carry interest rate of 7.65%.
H20.67 (In Lakhs) (Previous Year H62.00(In Lakhs) working capital Term Loan secured by existing hypothecation of the bankers and 100% credit gurantee by NCGTC principal payable in equal monthly installment of H3.44(In Lakhs) over period of 36 months after inital moratorium period of 12 months from date of disbursement from Axis Bank and carry interest rate of 8 %.
H160.00 (In Lakhs) (Previous Year H160.00 (In Lakhs) working capital Term Loan secured by existing hypothecation of the bankers and 100% credit gurantee by NCGTC principal payable in equal monthly installment of H3.44(In Lakhs) over period of 60 months from date of disbursement from Axis Bank and carry interest rate of 7.65%
Secured Term Loans from Others
H20.47 (in Lakhs) (Previous Year 41.39) secured by hypothecation of vehicles from Daimler Financials Services India Ltd. Equal monthly instalments over the period of 3 Years by 13th March 2025 and carry interest rate of 6.83 % p.a.
H83.34 (in Lakhs) secured by hypothecation of vehicle from MBFS India P Ltd. Equal monthly installments over the period of 3 years by 29/11/2026 and carry interest rate of 8.45% p.a.
From Bank of Baroda
The working capital facilities from Banks are secured by way of Hypothication of Stock and Book Debts,ranking parri passu. The above loans also covered by following colateral securities as under:-
i) EMDTD of land property & building with machinery/electricals installation situated at Plot no 12 ,Survey no 35,Dewan & Sons Industrial Estate,Palghar
ii) Land & Building along with machineries at Plot no.11, Diwan & Sons Industrial Estate ,Palghar.
iii) Land & Building along with machineries at Plot no 10 & 16, Diwan & Sons Ind.Est.Palghar & Machinery at Plot no 10 of Jayshree Chemicals.
iv) Also covered in personal guarantee of Vipul Shah & corporate gaurantee of M/s. Jayshree Chemicals.
v) Pledge of Fixed Deposit amounting to H50 Lakhs towards Margin money for Letter of Credit and Bank Guarantee..
From Axis Bank
The working capital facilities from Banks are secured by way of Hypothication of Stock and Book Debts ,ranking parri passu. The above loans also covered by following colateral securities as under:-
i) Factory Land & building & Movable Fixed assets at Plot no T-1115 ,Tarapur Industrial Area,Village Pamtembhi,Taluka Palghar, Thane.
ii) Also covered in personal guarantee of Vipul Shah & Mihir Shah..
44 Financial risk management objectives and policies
The Company has exposure to the following risks arising from financial instruments:
- Credit risk;
- Liquidity risk; and
- Market risk”
The Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The board of directors has established Audit Committee, which is responsible for developing and monitoring the Company's risk management policies. The committee reports to the board of directors on its activities.
The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed periodically to reflect changes in market conditions and the Company's activities. The Company, through its training, standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers. The carrying amount of following financial assets represents the maximum credit exposure.
Trade & Other receivable
Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends,including the default risk of the industry and country in which customers operate and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
Credit risk on its receivables is recognised on the statement of financial position at the carrying amount of those receivable assets, net of any provisions for doubtful debts. Receivable balances are monitored on a monthly basis with the result that the Company's exposure to bad debts is not considered to be material. The Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.
Management believes that the unimpaired amounts that are past due by more than 1 year are collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying customers' credit ratings wherever available.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. Where receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
Cash & Cash Equivalents
Credit risk on cash and cash equivalents and other deposits with banks is limited as the Company generally invests in deposits with banks with high credit ratings assigned by external credit rating agencies; accordingly the Company considers that the related credit risk is low. Impairment on these items is measured on the 12-month expected credit loss basis.
ii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Ultimate responsibility for liquidity risk rest with the management, which has established an appropriate liquidity risk framework for the management of the Company's short term, medium-term and long term funding and liquidity management requirements.. Management monitors the Company's net liquidity position through rolling forecast on the basis of expected cash flows without incurring unacceptable losses or risking damage to the Company's reputation.
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruemtns. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables and payables.
The Company manages market risk through a treasury department, which evaluates and excercises independent control over the entire process of market risk management. The treasuy department recommends risk management objectives and policies, which are approved by Management and the Audit Committee. The activities of this deparment include management of cash resources, implementing hedging strategies for foreign currency exposures and ensuring compliance with market risk limits and policies.
a) Foreign currency risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposure to exchange rate fluctuations arise. The Company is exposed to currency risk significantly on account of its trade payables, borrowings and other payables denominated in foreign currency. The functional currency of the Company is Indian Rupee. The Company currently hedge its foreign currency risk by taking foreign exchange forward contracts.
The Company is exposed to the currencies as mentioned above. The following table details the Company's sensitivity to a 5% increase and decrease in the INR against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. A reasonably possible strengthening (weakening) of the Indian Rupee against other currencies at March 31 would have affected the measurement of financial instruments denominated in US dollars and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.
b) Interest rate risk
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing financial assets or borrowings because of fluctuations in the interest rates, if such assets/borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.
The below mentioned sensitivity analysis is based on the exposure to interest rates for floating rate borrowings. For this it is assumed that the amount of the floating rate liability outstanding at the end of the reporting period was outstanding for the whole year. If interest rate had been 50 basis points higher or lower, other variables being held constant, following is the impact on profit.
45 Capital management
The Company manages its capital to ensure that the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company and borrowings.
The Company manages its funds in a manner that it achieve maximum returns (net of taxes) with minimum risk to the capital and consider the liquidity concerns for its working capital requirements.
47 The Board of Directors of the Company has recommended a final dividend of H1.00 per equity share for the year ended March 31, 2024 (Previous Year H0.90 per equity share). The said dividend will be paid after the approval of shareholders at the Annual General Meeting..
48 The Company has deposits of H74 lacs with the Pyrates Phosphates & Chemicals Ltd(PPCL) which is overdue. However the company has filed a suit with District Court and for the same District Court has given the ruling in favour of the Company by the way of decree. The Company has now filled an application for the execution of the preferential claim for the decree against PPCL and as per the latest order given by the Honourable High Court Patna, it has been decided that the claim may be considered upon liquidation / disposal of all the assets of PPCL. In view of that, the management has not made any provision for doubtful deposits.
49 In the opinion of the Board of Directors to the best of Knowledge and belief all the current assets, loans and advances have been stated at realisable value at least of an amount equal to the amount at which they are stated in Balance Sheet which are subject to reconciliation and confirmation, necessary adjustment if required will be after reconciliation.
51 Business Combination :The scheme of Arrangement for the merger of Efferchem Private Limited (ECPL) with the Vipul Organics Limited (the scheme) was approved by the National Company Law Tribunal ("NCLT") at Mumbai vide their order dated May 15,2020. Upon the filing of the order with the Registrar of Companies, Mumbai the scheme became effective from June 26, 2020 having the appointed date April 1, 2017. The scheme has been accounted under the pooling of interest method with effect from appointed date as per the above mentioned NCLT order and accordingly the comparatives for the earlier periods / year have been restated. 18,25,000 new equity shares of H10/ each fully paid up of the Company were allotted on 30th June 2020 to the shareholders of Efferchem Private Limited pursuant to the Scheme of Amalgamation of. Consequent to the allotment, the paid-up Capital of Vipul Organics Limited has increased to H9,54,95,000/- divided into 95,49,500 equity shares of H10/ - each fully paid up. Earnings per share for all earlier periods / year have been computed after considering the shares to be issued to the shareholders of (ECPL) and disclosed as share suspense in the results for previous periods. ECPL is in the same business of manufacturing of Pigments, Napthols and Fast Salts.
52 During the year under review, the Company raised the funds through (i) issue of 5,00,000 warrants convertible into equity shares on preferential basis to promoter group and (ii) issue of 2,00,000 Equity shares pursuant to conversion of 2,00,000 Convertible warrants into Equity Shares to promoter group. The total funds of H3,05,25,000/- (Three Crore, Five Lakhs and Twenty Five Thousand) raised through aforesaid preferential allotment has been fully utilized by the Company during the year 2023-24 and the company affirms that there has been no deviation or variation in utilization of such proceeds raised through the preferential allotment.
53 Additional regulatory information required by Schedule III to the Companies Act, 2013
(i) The Company does not have any benami property held in its name. No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.
(ii) There is no income surrendered or disclosed as income during the year in tax assessments under the Income Tax Act, 1961 (such as search or survey), that has not been recorded in the books of account.
(iii) The Company has not come across any transaction ocurred with struck-off companies under section 248 of the Companies Act, 2013 or section 560 of the Companies Act, 1956.
(iv) The Company has not been declared wilful defaulter by any bank or financial institution or other lender or government or any government authority.
(v) The Company does not have any charges or satisfaction of charges which is yet to be registered with the Registrar of the Companies beyond the statutory period.
(vi) Utilization of borrowed funds and share premium :
(I) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
(b) Provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
(II) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) Provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
(vii) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(viii) The company has not granted any loans or advances in the nature of loans either repayable on demand.
54 The Company had received in FY 2021-2022 ,Credit Linked Capital Subsidy Scheme amounting to H22.62 Lakhs against capital investment made in Plant & Machinery for the year 2019-2020. Government grants relating to the purchase of plant and equipment are included in liabilities as deferred income and are credited to the Statement of Profit and Loss in a systematic basis over the expected life of the related assets and presented within other income.
55 The Company has used accounting software which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software, except that no audit trail was enabled at the database level for accounting software SAP to log any direct data changes. Further, we did not come across any instance of audit trail feature being tampered with, in respect of accounting software for which the audit trail feature was operating.
56 Previous year figures are regrouped / re classified wherever necesarry to correspond with current year classification /disclosure.
57 The figures have been rounded off to the nearest Lakhs of rupees upto two decimal places. The figure 0.00 wherever stated represents value less than H50,000/-.
For J. A. Rajani & Co. For and on behalf of the Board of Directors
Chartered Accountants of Vipul Organics Limited
Firm Registration No. 108331W
P. J. Rajani Vipul P Shah Dr. Shiv Nath Sahai
Proprietor Managing Director Director
Membership No.116740 DIN: 00181636 DIN: 00332652
Mihir V. Shah Priya Shadija
Mumbai Whole Time Director & CFO Company Secretary & Compliance Officer
Dated :30th May, 2024 DIN: 05126125 Membership No.: A72549
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