NOTE - 1 : FINANCIAL INSTRUMENTS
The fair values 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, short term loans from banks and other financial institutions approximate their carrying amounts largely due to short term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.
The Financial Instruments are categorised in two level based on the inputs used to arrive at fair value measurements as described below:-
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 effect on the recorded fair value are observable, either directly or indirectly.
Level 3: Inputs which are not based on observable market data
Note 2—Financial Risk Management
Financial risk management objectives and policies
The company’s principal financial liabilities comprises of loans and borrowings, trade and other payables. The Company’s principal financial assets include mutual funds, trade and other receivable and cash and cash equivalents that derive directly from its operations. The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The senior management ensures that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are indentified, measured and managed in accordance with the Company’s policies and risk objectives. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purpose. The Board of Directors reviews policies for managing each of these risks, which are summarized below :
Market risk is the risk that changes in market prices-such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing the return. The major components of market risk are foreign currency risk and interest rate risk .
(i) Market Risk- 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. The Company’s main interest rate risk arises from the long term borrowings with fixed rates. The Company’s fixed rates borrowings are carried at amortized cost. The Company invests the surplus fund generated from operations in mutual funds. Considering these mutual funds are short term in nature, there is no significant interest rate risk. The Company has laid policies and guidelines including tenure of investment made to minimize impact of interest rate risk
(ii) Market Risk- Foreign currency risk.
Foreign currency risk is the risk that the fair fluctuate because in foreign exchange rates. The Company does not have material foreign currency exposure as at balance sheet date. Hence, it does not have any significant foreign currency risk.
(iii) Credit risk
Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the company periodically assess financial reliability of customer, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business,
ii) Actual or expected significant changes in the opertaing results of the counterparty,
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty’s ability to meet its obligations,
iv) Significant increase in credit risk on other financial instruments of the same counterparty,
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements .
(iv) Liquidity Risk
Liquidity risk is defined as the risk that the company will not be able to settle or meet its obligations on time, or at a reasonable price. The company’s treasury deparment is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related such risk are overseen by senior management. Management monitors the company’s net liquidity position through rolling forecasts on the basis of expected cash flows.
(v) Capital risk management
The primary objective of the Company’s capital management is to maximise the shareholder value. The Company manages its capital structure and makes adjustmentss in light of changes in economic conditions and the requirements of the financial covenants.
NOTES 3 FORMING PART OF FINANCIAL STATEMENTS AS AT 31st March 2018
1) First time adoption of Ind AS
These financial statements are the Company’s first standalone financial statements prepared in accordance with Ind AS based on the permissible options and exemptions available to the Company in terms of Ind AS 101 ‘First time adoption of Indian Accounting standards’. For periods up to and including the year ended on March 31, 2017, 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 (previous GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on March 31, 2018, together with the comparative period data as at and for the year ended March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1, 2016, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its previous GAAP financial statements, including the balance sheet as at April 1, 2016 and the financial statements as at and for the year ended March 31, 2017.
1.1 Optional exemptions availed
i) Fair value measurement of financial assets or financial liabilities at Initial Recognition
Company has elected to apply requirement in paragraph B5.1.2A of Ind AS 109 prospectively to transactions entered into on or after the date of transition to Ind ASs.
II) Deemed Cost
The Company has elected to measure all its intangible assets at the previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS.
1.2 Applicable mandatory exceptions i) Estimates
The estimates at April 1, 2016 and at March 31, 2017 are consistent with those made for the same dates in accordance with previous GAAP (after adjustments to reflect any differences in accounting policies, if any) apart from the following items where application of previous GAAP did not require estimation:°% FVTPL investments°% FVTOCI - debt securities°% Impairment of financial assets based on expected credit loss model
II) Classification and measurement of financial assets
As required under Ind AS 101, the classification of financial assets to be measured at amortised cost or fair value through other comprehensive income is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.
2) The amounts in the Balance Sheet and Profit and Loss Account are rounded off to the nearest thousand and indicated in lacs of rupees.
3) Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification / disclosure.
4) The Company has constituted a Corporate Social Responsibility (CSR) Committee and has framed a CSR Policy. The brief details of CSR Committee are provided in the Corporate Governance Report. The Annual Report on CSR activities is annexed to this Report.
5) The Ministry of Corporate Affairs, Government of India, vide General Circular No.2 and 3 dated February 8, 2011 and February 21, 2011 respectively has granted a general exemption from compliance under Companies Act 2013, subject to fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption.Necessary information relating to the subsidiaries has been included in the annexure to the Consolidated Financial Statements.
6) Company has not received any intimation from the suppliers regarding their status under theMicro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relatingto amounts unpaid as at the year end together with interest paid / payable as required under the said Act have not been given.
7) In terms of AS 108 Segment reporting prescribed under sec 133 of companies act 2013, segment information has been appended in the Consolidated Financial Statements (CFS).
8) No commission (Previous Year Rs. NIL) has been paid to the Managing Director / Dy.Managing Director for the year under review in view of resolution passed by the Board of directors and as agreed by the Managing Director.
10) DISCLOSURE PURSUANT TO IND AS - 19 “EMPLOYEE BENEFITS”
i) Gratuity: In accordance with the applicable laws, the Company provides for gratuity, a defined benefit retirement plan (“The Gratuity Plan”) covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement (subject to completion of five years of continuous employment), death, incapacitation or termination of employment that are based on last drawn salary and tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation on the reporting date and the Company makes annual contribution to the gratuity fund administered by Reliance Nippon Life Insurance Company Limited and Future Generali life Insuurance Company Limited under Group Gratuity Scheme.
The disclosure in respect of the defined Gratuity Plan are given below:
C. Assumptions
With the objective of presenting the plan assets and plan liabilities of the defined benefits plans at their fair value on the balance sheet, assumptions under Ind AS 19 are set by reference to market conditions at the valuation date.
11) i) In the Opinion of the Management, any of the assets other than fixed assets and non-current investments have value on realization in the ordinary course of business at least equal to the amount at they are stated. The accounts of certain Trade Receivables, Trade Payables, Loans and Advances are however, subject to formal confirmations/reconciliations and consequent adjustments, if any. The management does not expect any material difference affecting the current year’s financial statements on such reconciliation/ajustments.
ii) Other expenses include bad debts of Rs 440.79 lacs out of which Rs 215.76 lacs is of trade receivables of Anil Limited who has mdae default in payment & legal proceedings are going on with the party and Rs225.03 lacs of loans and advances given to some parties for which amount is not realizable and hence written off as bad debts.
iii) Land is initially recognised at cost During the year land has been revalued by independent professional valuer and revaluation amount is credited to revaluation reserve od RS 3114.62 lacs and carrying amounts of land arising from revaluation is increased by RS 3114.62 Lacs.
iv) Rs.1.68 Lacs being net gain (Previous year Rs.54.40 Lacs being net gain) on account of exchange difference have been adjusted in the respective heads of account in the profit & loss account.
During 1993, the Company had imported plant and machinery under Export Promotion Capital Goods Scheme (‘EPCG’) at concessional rate of custom duty against export obligation under the said Scheme. As the Company could complete only partial Export obligation, it has received a notice of demand from Directorate General of Foreign Trade (‘DGFT’). The Company has paid the entire differential duty amount for Rs.94,68,900 on 10.05.2011 and has made necessary submissions before the authorities. In view of this submission and pending decision of forum, interest liability is not ascertainable.
The company’s pending litigation comprises mainly claims against the Company, proceedings pending with tax & other Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not reasonable expect the outcome of these proceedings to have a material impact on its financial statements. Future cash outflow in respect of the above are determinable only on receipts of judgments/decisions pending with various forums/authorities.
Huntsman International (India) Private Limited, Mumbai has filed arbitration case against the Company for alleged violation of representations and warranties as per the Master Agreement. The above said arbitration proceedings are pending before Arbitration Tribunal.
(ii) Commitment
Operating Lease:
The Company has acquired certain Building/Office Premises under lease arrangement. The future lease payment committed is as under:
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