1. General Information
Nath Pulp and Paper Mills Limited (CIN L21100MH1975PLC018289) is incorporated under the Companies Act, 1956 with its registered office at Nath House, Nath Road, Aurangabad. The company is engaged in the business of Manufacturing of Paper and Paper Board. The Company has a product range of Kraft Paper, Core Board, Thermal Paper & Coated Paper. The Factory is situated at Village Wahegaon, TqPaitha, Dist Aurangabad (MS).
The financial statement for the year ended 31st March 2018 are approved by the Board of Directors and authorized for issue on 30th May 2018.
B) Rights, Preferences and Restrictions attached to Shares
The Company has one class of equity shares having a par value of Rs. 10 per share. Equity shareholder is eligible for one vote per share held. They are eligible for dividend on the basis of their shareholding. In the case of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, if any, in proportion to their shareholding.
Note:-Deferred Sales Tax Liability of VAT as also of SGST has not been valued at fair value, which would have been Rs. 13,18,73,222 as required under the Ind AS - 113: Fair Value Measurement, considering the fact that the company is liable to pay entire dues to the Government as per its schedule of repayment.
Note :
a) Term Loan from ARC Trust
(I) Term Loans are secured by way of first charge on movable and immovable properties of the Company including its movable plant & machinery, spares, Tools and accessories and other movables both present and future (Save and except books debts) situated at Village Wahegaon and Issarwadi, PaithanDist Aurangabad Maharashtra and collaterally secured by mortgage of certain plots of land belonging to a group company and relatives of director.
(II) First Charge by way of hypothecation of entire current Assets, Book debts, both present and future of the Company.
(III) Secured by mortgage of certain land and building.
(IV) Secured by personal guarantee by a promoter of the Company.
b) Inter-corporate deposit from a company
Secured by pledge of shares of a group company owned by Promoter group Companies
Note No 2: First Time adoption of Ind AS
Transition to IndAS .
These are the Company's first financial statement prepared in accordance with Ind AS.
The accounting policies set out in Note 1, have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of opening Ind AS balance sheet as at April 1, 2016. In preparing its opening balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from from previous GAAP to Ind AS has affected the Company's financial position, financial performance and cash flows is set out in the following tables and notes
2.1 emptions and exceptions availed
Ind AS optional exemptions cost.
2.1.1. Deemed cost:-Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as for the previous GAAP and use that as its deemed cost as at date of transition after making necessary adjustments for decommissioning liabilities. The exemption can also be used for intangible assets covered by Ind -38 Intangible Assets. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying values as at April 1, 2016.
2.1.2 Leases: Appendix -C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected not to be material. The Company has elected to apply this exemption for such contracts / arrangements.
2.1.3. Decommissioning liability included in the cost of property, plant and equipment: An entity need not to comply with the requirements of Appendix A of Ind AS -16 changes in Existing Decommissioning, Restoration similar liabilities for liabilities occurred before the date of transition to Ind AS. An entity can measure the liability as at the date transition. The Company has elected to measure such liabilities as on the date of transition and on the basis of such evaluations no liabilities need to be recognized.
3.1. Ind AS mandatory exceptions
3.1.1. De-recognition of financial assets and liabilities: IndAs 101 requires a first time adopter to apply the derecognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity's choosing, provided that the information needed to apply AS 109 to financial assets and Financial liabilities de-recognized as a result of past transactions was obtained at the time of initially accounting for those transactions. The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS
3.2.2 Classification and measurement of financial assets: Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date transition to Ind AS.
3.2.3. Impairment of financial assets: An entity shall determine the approximate credit risk at the date that financial instruments were initially recognized and compare that to the credit risk at the date of transition to Ind. This should be based on reasonable and supportable information that is available without undue cost or efforts. If any entity is unable to make this determination without undue cost or effort, it shall recognize a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognized. The Company has this exception to analyse credit risk of the financial assets as the date of transition instated of the date of initial recognition.
The management assessed that the fair values of short term financial assets and liabilities significantly approximate their carrying amounts largely due to the short term maturities of these instruments. The fair value of financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction among willing parties, other than in a forced or liquidation sale
The Company determines fair values of financial assets and financial liabilities by discounting contractual cash inflows/ outflows using prevailing interest rates of financial instruments with similar terns. The fair value of investment is determined using quoted net assets value from the fund. Further, the subsequent measurement of all finance assets and liabilities (other than investment in mutual funds) is at amortized cost, using the effective interest method.
Discount rates used in determining fair value
The interest rate used to discount estimated future cash flows, where applicable, are based on the incremental borrowing rate of the borrower which in case of financial liabilities is the weighted average cost of borrowing of the Company and in case of financial assets is the average market rate of similar credits rated instrument
The Company maintains policies and procedures to value financial assets or financial liabilities using the best and most relevant data available. In addition, the Company internally reviews valuation, including independent price validation for certain instruments.
Fair value of financial assets and liabilities is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
The following methods and assumptions were used to estimate fair value:-
a. Fair value of short term financial assets and liabilities significantly approximate their carrying amounts largely due to the short term maturities of these instruments.
b. The fair value of the Company's interest borrowing received are determined using discount rate reflects the entity's borrowing rate as at the end of the reporting period. The own non performance risk as at the end of reporting period was assessed to be insignificant.
Fair value hierarchy
All financial instruments for which fair value is recognized or disclosed are categorized within the fair value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.
Level-1: Quoted (unadjusted) price in active market for identical assets or liabilities
Level-2: Valuation technique for which the lowest level input that has a significant effect on the fair value measurement are observed, either directly or indirectly.
Level-3: Valuation technique for which the lowest level input has a significant effect on the fair value measurement is not based on observation market data.
Note No 4: Financial Instruments and Risk Review
I) Capital Management
The Company's capital management objectives are:-
The Board policy is to maintain a strong capital base so as to maintain investor, creditors and market confidence and to future development of the business. The Board of Directors monitors return on capital employed.
The Company manages capital risk by maintaining sound/optimal capital structure through monitoring of financial ratios, such as debt-to-equity ratio and net borrowings-to-equity ratio on a monthly basis and implements capital structure improvement plan when necessary.
The Company uses debt ratio as a capital management index and calculates the ratio as Net debt divided by total equity. Net debt and total equity are based on the amounts stated in the financial statements.
* Net Debts includes Non-Current borrowings, Current borrowings, Current Maturities of non-current borrowing net off Current Investment and cash and cash equivalent
** Equity Includes capital and other equity
II) Credit Risk
Credit risk is the risk of financial loss arising from counter-party failure to repay or service debt according to contractual terms or obligations. Credit risk encompasses both, the direct risk of default and the risk of deterioration of credit worthiness as well as concentration of risks. Credit risk is controlled by analyzing credit limit and creditworthiness of customers on a continuous basis to whom the credit has been granted offer necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consists of trade receivable investments, derivative financial instruments and other financial assets. None of the financial instruments of the Company results in material concentration of credit risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is as under, being the total of the carrying amount of balances with trade receivables.
Trade receivables
Ind AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each date of financial statement whether a financial asset or group of financial assets is impaired. The Company recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to 12 months expected credit losses or at an amount equal to the life time expected credit losses, if the credit risk on the financial asset has increased significantly since initial recognition
Before accenting any new customer, the Company uses an external/internal credit scoring system to assess potential customer's credit quality and defines credit limits by customer. Limits and scoring attributed to customer are reviewed periodic basis
III) Liquidity Risk
a) Liquidity risk management
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
b) Maturities of financial liabilities
The following tables detail the remaining contractual maturities for its financial liabilities with agreed repayment period. The amount disclosed in the tables have been draw up based on the undiscounted cash flow of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.
c) Maturities of financial assets
The following table details the Company's expected maturity for financial assets. The table has been drawn up on based on the undiscounted contractual maturities of the financial assets including interest that will be earned such assets.
IV) Market Risk
Market risk is risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the market prices. Such changes in the value of financial instruments may result from changes in the foreign currency exchange rate, interest rate, credit, liquidity and other market changes.
Note No 5: In the opinion of the Board, Current and Non-current Assets, Loans and Advances are approximately of the value stated, if realized in the ordinary course of the business.
Note No 6: Certain accounts of Trade Receivable, Trade Payable, Unsecured Loans, Employees, certain current account balances with banks, Loans and Advances are subject to confirmations and reconciliations, if any. The difference as may be noticed on reconciliation will be duly accounted for on completion thereof. In the opinion of the management, the ultimate difference will not be material.
Note No 7: Segment Reporting
In the opinion of the management, the Company is mainly engaged in the business of manufacturing of paper. As such, there are no separate reportable segments
Note No 8: In the opinion of the Board, Property, Plant and Equipment have been stated at cost, which is at least equal to or less than the realizable value if sold in the ordinary course of business. Consequently, the management is of the opinion that there is no impairment of Property, Plant and Equipment.
Note No 9: Employee Benefits
The company has classified the various benefits provided to employees as under:
Defined Contribution Plans:
During the year, the Company has recognized the following amounts in the Profit & Loss Account
Defined Benefit Plans:
The company has neither created fund nor contributed to Scheme framed by the Insurance Company for the defined benefit plans for the qualifying employees. The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit credit method with actuarial valuations being carried out at each balance sheet date.
g) Expected contributions to Gratuity Fund next year Rs. NIL (Previous Year Rs. NIL)
h) The liability for leave encashment and compensated absences as at year end is Rs. 36,40,454 (Previous year liability Rs. 41,05,915)
Note
1. Related party relationship is as identified by the Company and relied upon by the Auditors.
2. No amounts in respect of related parties have been written off/back during the year, nor have been provided for as doubtful debts.
Note No 10: Expenditure on Corporate Social Responsibility Activities
As the company is not covered under criterion specified under the provisions of section 135 of the Companies Act, 2013, the company is not liable for spending any amount towards corporate social responsibility.
Note No 11:During the year, the Company has not appointed internal auditor as per the provisions of section 138 of the Companies Act, 2013. However, company has adequate inter control systems commensurate with the size of company and nature of its business.
Note No 12: As per the directions given by Hon'ble BIFR vide sanctioned scheme dated 14th February, 2012
The Department of Sales Tax, Govt. of Maharashtra, vide its order dated 9th May 2017, has extended the repayment period of Deferred Sales Tax under the package scheme of incentive 1988, of Government of Maharashtra by a further 8 years. Accordingly, the repayment will start from April 2019.
The Department of Industries, Government of Maharashtra has sanctioned vide their letter dated 07.12.2015, extension of Eligibility for the unutilized CQB of Rs. 19,51,74,505 under PSI-1988, for a further period of 5 years i.e. from 1st November, 2015 to 31st October, 2020
In accordance with extended eligibility, the company has utilized Rs.3,89,75,747during the year(Previous Year Rs. 1,31,49,044)vide Addenda No IX Dt. 29/02/2016 issued by Joint Director of Industries, Aurangabad Region, Aurangabad.
Note No 13: i)Pursuant to the letter dated 28th September 2017 of ARC Trust , the Company is required to pay Rs. 31.00.00.000 of their dues on or before 30th June, 2018 out of which the company has paid Rs.21.00.00.000 leaving a balance of Rs. 10.00.00.000 and interest thereupon.
II) In addition, the Promoters/Guarantors of the Company are to arrange repurchase of 20,00,000 equity shares of the Company as held by ARC Trust @Rs. 32.50 per share on or before 30th June 2018. The promoters have since purchased 13,33,330 shares.
III) Pursuant to the order of Hon'ble BIFR dated 11th November, 2013, the dues of IFCI is repayable w.e.f. 14th February, 2012 in 16 equal quarterly installments of Rs.5,12,500 each along with simple interest @ 12.50% p.a. on reducing balance method. As on 31st March 2018,the company has paid entire principal dues leaving interest amounting to Rs. 39,46,697 which is yet to be paid.
Note No 14: Previous year's figures have been regrouped / rearranged wherever necessary to conform to the current year's presentation.
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