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Amal Ltd. Notes to Accounts
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You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 447.84 Cr. P/BV 5.78 Book Value (Rs.) 62.68
52 Week High/Low (Rs.) 436/170 FV/ML 10/1 P/E(X) 0.00
Bookclosure 01/09/2023 EPS (Rs.) 0.00 Div Yield (%) 0.00
Year End :2019-03 

1. Background

Amal Ltd (the Company) is a public company limited by shares, incorporated and domiciled in India. The company is a subsidiary of Atul Ltd. Its registered office is located at Atul House, 310 B, Veer Savarkar Marg, Dadar (West), Mumbai 400 028, Maharashtra, India and its principal place of business is located at Ankleshwar 393 002, Gujarat, India.

The Company is engaged in manufacturing of bulk chemicals such as Sulphuric acid and Oleum and their downstream products such as Sulphur dioxide and Sulphur trioxide.

Notes:

'The lease term in respect of leasehold land is 99 years. The lease term in respect of land acquired under finance lease is up to 99 years with ability to opt for renewal of the lease term on fulfillment of certain conditions.

2Includes assets retired from active use.

3All property, plant and equipment are pledged as security {Refer Note 9(ii)}.

i) Inventories are given as security against the secured loan from a related party - (refer Note 9).

ii) Written-down value of inventories to net realisable value amounted to Rs. 9.32 lakhs. These were recognised as an expense during the year and included in repairs and maintenance in the Statement of Profit and Loss.

ii) Rights, preferences and restrictions:

The Company has one class of shares referred to as equity shares having a par value of Rs. 10 each.

a) Equity shares:

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts and preference shares. The distribution will be in proportion to the number of equity shares held by the shareholders.

b) Dividend:

There is currently restriction on payment of dividend. The dividend proposed by the Board is subject to the approval of the shareholders in the ensuing Annual General Meeting.

i) Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

ii) As per Modified sanctioned Scheme MS-10 and MS-13 approved by the Board of Industrial Finance and Reconstruction, the Company had issued 0% Redeemable Preference shares of Rs. 1,000 lakhs to Atul Ltd (Promoter) and received interest free secured loan of Rs. 1,128.89 lakhs and interest free unsecured loan of Rs. 539.58 lakhs from Atul Ltd. These financial liabilities are measured at amortised cost and the initial fair value difference is recognised as Capital contribution from Atul Ltd.

i) The Company had reached one time settlement with the secured creditors (comprising of loans availed from the banks and financial institutions) under which the payments were made directly by the lender Company (Atul Ltd) to them. By way of execution of deed of assignment of debts owed by the Company, the lender Company has now acquired from these banks and financial institutions the debts and rights, title and interest in encumbrances, facility and underlying securities including inter alia comprised of all movable and immovable properties that have been charged by the Company in favour of these banks and financial institutions pursuant to the original deed of hypothecation entered into by the Company. The entire dues | debts against the banks and financial institutions have been fully satisfied for which 'no dues | debts certificates' have been obtained from them and the charges have been modified and stands in favour of the lender Company as Secured loans.

ii) Security:

The secured loan from related party is secured by the whole immovable and movable properties including machinery, machinery spares, tools and accessories, inventory and other movable assets both present and future.

iii) Terms of repayment of term loans:

a. Secured loan from Atul Ltd does not carry any interest and shall be repaid in three installments, first installment of Rs. 200 lakhs in FY 2017-18 (paid in 2017-18), second installment of Rs. 300 lakhs in FY 2018-19 (paid during the year) and third installment will be of Rs. 628.89 lakhs in FY 2019-20 as per the approved modified sanctioned scheme MS-13.

b. Unsecured loan as on March 31, 2019 also does not carry any interest is repayable after March 31, 2019 upon terms and conditions which will be mutually decided between the Company and the lender Company (Atul Ltd).

iv) Terms | rights attached to preference shares:

The Company has only one class of 0% Redeemable preference shares having a par value of Rs. 10 per share. These shares are redeemable at par over a period of 7 years, starting Rs. 100 lakhs every year from financial year 2016-17 to 2019-20 and Rs. 200 lakhs every year from financial year 2020-21 to 2022-23.

v) Preference share capital

!Revenue from operations for periods up to June 30, 2017 includes excise duty Rs. 67.51 lakhs, which is discontinued effective July 01, 2017 upon implementation of Goods and Services Tax (GST) in India. In view of the aforesaid restructuring of indirect taxes, revenue from operations for the year ended March 31, 2019 is not comparable with the previous year.

2Contracts with customers are for short-term, at an agreed price basis having contracted credit period ranging up to 90 days. These contracts are mainly for sale of chemical products and steam besides sale of scrap and other goods. Delivery of goods are at ex-works. The contracts do not grant for any rights to return to the customer. Returns of goods are accepted by the company only on exception basis.

i) During 2018-19, unabsorbed depreciation has been used Rs. 978.93 lakhs to reduce tax liability of Rs. 272.34 lakhs

ii) The Company was declared sick by the BIFR under section 17(1) of SICA (Special Provisions), 1985 and hence there is no MAT liability under section 115JB of the Income Tax Act, 1961 for the current year.

The Company has taken land on cancellable lease at Atul from Atul Ltd for 99 years from February 03, 1996 on annual lease rent of Rs. 8,000.

Note 2. Going Concern

The Company was declared sick by the BIFR on July 20, 2006 and the BIFR, vide its order dated July 16, 2009, sanctioned the revival scheme for the Company which was further modified in June 2010. Relevant adjustments as required by the scheme including recasting of creditors had been carried out in the books of account.

Subsequently, the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) vide its order dated March 22, 2011 allowed the appeal filed by one of the unsecured creditors and remanded the case back to the BIFR for considering revival scheme through Operating Agency (OA). IDBI Bank Ltd (IDBI), appointed as OA by BIFR, reviewed the Draft Rehabilitation Scheme (DRS) prepared by the Company and submitted it to BIFR on February 16, 2012. The Company revised the DRS with cut-off date as March 31, 2013 and the same was approved by BIFR in its meeting held on July 01, 2013 as modified sanctioned scheme MS-13.

The salient features of MS-13 include implementation of project, settlement of unsecured creditors at 30% of principal dues (as approved under earlier scheme) and issue of shares to promoter Company towards advance received against share application money. Further, the Company had applied to Central Board of Direct Taxes (CBDT) for carry forward of business losses beyond eight years which was approved subject to certain conditions specified in CBDT order.

Due to adverse market condition and change in regulatory norms in USA, the Company has proposed to shelve the plan of setting-up p-MPAA project as stated in MS-13. However, in order to turnaround, the Management has contemplated other alternatives and considered the Merger with its parent Company Atul Ltd.

The Board of Directors had approved the proposed merger of the Company with Atul Ltd at its meeting held on December 05, 2014. The Company had submitted the Modified Draft Rehabilitation Scheme ('Merger Scheme') to the BIFR through OA on March 31, 2016, for obtaining their approval.

The Central Government has, vide notification dated November 28, 2016, notified 'The Sick Industrial Companies (Special Provisions) Repeal Act, 2003' effective from December 01, 2016, as a result, the BIFR | AAIFR have been abolished and the Sick Industrial Companies (Special Provisions) Act 1985 is repealed. Pursuant to the same, all proceedings or appeals of whatever nature pending before BIFR | AAIFR have been abated. However, any scheme of revival, which has already been sanctioned by the BIFR in the past and is under implementation, will continue to be in force. Accordingly, the MS-13 approved by BIFR in its meeting held on July 01, 2013 continues to be in place. In view of the above, books of account have been prepared on going concern basis.

The merger scheme pending approval of BIFR, stands abated. Subsequently, the Board of Directors in its meeting held on March 24, 2017 decided not to proceed with merger scheme.

Note 3. Employee Benefit Obligation

a) Defined contribution plans:

i) Provident fund

ii) State defined contribution plans

Employers' contribution to employees' state insurance Employers' contribution to employees' pension scheme 1995

The provident fund and the state defined contribution plan are operated by the Regional Provident Fund Commissioner. Under the scheme, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit scheme to fund the benefits. These funds are recognised by the income tax authorities.The Company's contribution to the provident fund and other contribution plans for all employees is charged to Statement of Profit and Loss.

b) Defined benefit plans:

Gratuity

The gratuity fund is maintained with the Life Insurance Corporation of India under Group Gratuity scheme.

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change as compared to the prior year.

Risk exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

i) Interest rate risk

A fall in the discount rate which is linked to the government securities rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.

ii) Salary risk

The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan's liability.

iii) Investment risk

The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.

iv) Concentration risk

Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.

c) Other long-term benefits

Long term compensated absences (Unfunded scheme)

Leave encashment is payable to eligible employees who have earned leaves, during the employment and | or on separation as per the policy of the Company. Valuation in respect of leave encashment have been carried out by independent actuary, as at the Balance Sheet date, based on the following assumptions:

Note 4. Capital Management

a) The Company was declared sick by the BIFR through its order dated July 31, 2006. Presently, the Modified Sanctioned Scheme (MS-13) approved by BIFR in its meeting held on July 01, 2013 continues to be in place. The management is taking all steps to maximise shareholder value as per approved MS-13 to revive the Company and make its net worth positive.

b) The Company has not declared any dividend.

b) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the Financial Statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual fund units that have a quoted price. The fair value of all equity instruments which are traded on the Stock Exchanges is valued using the closing price as at the reporting period.

Level 2: The fair value of financial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. The mutual fund units are valued using the closing net assets value.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

c) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

i) the use of quoted market prices

ii) the fair value of the remaining financial instruments is determined using discounted cash flow analysis

d) Valuation processes

The Company obtains assistance of independent and competent third party valuers to perform the valuations of financial assets and liabilities wherever required for financial reporting purposes, including level 3 fair values. These experts report to the financial risk management team, Chief Financial Officer (CFO) and the Audit Committee (AC). Discussions of valuation processes and results are held between the Chief Financial Officer and the Audit Committee.

The carrying amounts of trade receivables, bank deposits with more than 12 months maturity, cash and cash equivalents, trade payables, employee benefit payables, payable towards expenses and retention payables are considered to be the same as their fair values due to the current and short-term nature of such business.

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

Note:

i) For investment held by the Company in equity shares of Bharuch Enviro Infrastructure Ltd, its cost of acquisition has been considered as fair value, considering the statutory requirement of regulatory authorities relating to purchase and restriction on transfer. All other investments in unquoted equity shares held by the Company relate to non-operating | loss making entities which have been impaired in the past, and there are no factors which indicate upward valuation.

The business activities of the Company are exposed to a variety of financial risks, namely liquidity risk, market risk and credit risk. Responsibility for the establishment and oversight of the risk management framework lies with the senior management of the Company. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the risk management policies of the Company. The key risks and mitigating actions are also placed before the Audit Committee of the Company. The 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 regularly to reflect changes in market conditions and the activities of the Company.

The Risk Management Committee of the Company is supported by the Finance team and experts who provides assurance that the financial risk activities of the Company are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the policies and risk objectives of the Company. The activities are designed to protect the financial results and position from financial risks, maintain market risks within acceptable parameters, while optimising returns and protect the financial investments, while maximising returns.

A) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, financial assets measured at amortised cost or fair value through profit and loss and deposits with banks and financial institutions, as well as credit exposures to trade | non-trade customers including outstanding receivables.

i) Credit risk management

Credit risk is managed through the policy surrounding Credit Risk Management.

ii) Provision for expected credit losses

The Company provides for expected credit loss based on the following:

Trade receivables

Trade receivables consist of few customers, majorly of amount receivable from Atul Ltd, the Holding Company, for which ongoing credit evaluation is performed on the financial condition of the account receivables.

B) Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors, who has approved an appropriate liquidity risk management framework for short, medium and long term funding and liquidity management requirements of the company. The Management monitors rolling forecasts of the liquidity position of the Company and cash and cash equivalents on the basis of expected cash flows and manages liquidity risk by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

C) Market risk

i) Cash flow and fair value interest rate risk

Entire borrowings of the Company are from Atul Ltd (Holding Company) and are fixed rate borrowings that is 0% are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

ii) Price risk

a) Exposure

The Company is mainly exposed to the price risk due to its investments in mutual funds. The price risk arises due to uncertainties about the future market values of these investments. In order to manage its price risk arising from investments in equity instruments, the Company maintains its portfolio in accordance with the framework set by the risk management policies.

The Company operates in a single business segment that is manufacturing of bulk chemicals. Further, its operations are confined within India and major customer of the Company is Atul Ltd. Accordingly, there are no separate reportable segments as per Ind AS-108 on 'Operating Segments' and no further disclosures are required.

Note 5. Loans

During the year, the Company has not entered into any transaction in nature of loans and advances which falls within the purview of Regulation 34(3) read with para A of Schedule V to the SEBI (listing obligations and disclosure requirements) Regulations, 2015 read with Section 186(4) of the Companies Act, 2013.

Note 6. Regrouping Reclassification

Figures for previous year have been regrouped reclassified rearranged wherever necessary to make them comparable to those for the current year.

Note 7. Rounding off

All amounts are rounded off to the nearest thousand unless otherwise stated.

Note 8. Authorisation for issue of the Financial Statements

The Financial Statements were authorised for issue by the Board of Directors on April 18, 2019.


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