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Anjani Portland Cement

BSE: 518091|NSE: APCL|ISIN: INE071F01012|SECTOR: Cement - Mini
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Mar 16
Notes to Accounts Year End : Mar '17

Notes:

(i) Refer to note 41 for information on property, plant and equipment pledged as security by the Company.

(ii) Capital work-in-progress comprises of Plant and Machinery acquired for the new captive power plant in Nalgonda, Telangana.

(iii) Refer to note 37 for disclosure of contractual commitments for the acquisition of property, plant and equipment.

(iv) Refer to note 13 for information on borrowings raised by the Company against the hypothecation of all movable fixed assets.

Nature and purpose of other reserves

(i General reserve

This reserve is used to record the transfers made from the retained earnings and was made on account of the requirements of the Companies Act, 1956 for payment of dividends.

(ii) Debenture redemption reserve

The Company is required to create a debenture redemption reserve out of the profits which is available for payment of dividend, for the purpose of redemption of debentures.

(iii) Securities premium

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

The borrowings are secured as follows;

a) 10% Non-convertible debentures are secured under hypothecation by way of first pari-passu charge on movable fixed assets of the Company and Corporate guarantee issued by Chettinad Cement Corporation Limited (The Holding Company).

b) Term loan from banks are secured by a First Pari Passu charge on all Movable Fixed Assets and Corporate Guarantee issued by Chettinad Cement Corporation Limited (The Holding Company).

The carrying amount of financial and non-financial assets pledged as security for current and non-current borrowings are disclosed in Note 41.

(i) Compensated absences

The compensated absences obligations cover the Company''s liability for the earned leave. The provision is presented as current and non-current based on the actuarial report obtained by the Company. However, based on past experience the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.

(ii) Post-employment obligations - Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to the recognized funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

(iii) Defined contribution plans

The Company also has certain defined contribution plans. Contributions are made to the provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to the registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligations. The expense recognized during the period towards defined contribution plan is INR 73.81 Lakhs (March 31, 2016 - INR 74.26 Lakhs).

(i) Fair value hierarchy

This section explains the judgments and estimates made in determining the fair values of the financial instruments that are (a) recognized and measured at fair value and (b) measured at amortized 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 group 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, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximize 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.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.

There are no transfers between levels 1 and 2 during the year. The Company''s policy is to recognize transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.

The fair values for security deposits were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 2 fair values in the fair value hierarchy since significant inputs required to fair value an instrument are observable. Since there are no changes in the borrowing rate contracted with the bank, thus the fair value is equal to the amortized cost.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

Note 1 : Financial Risk Management

All amounts in INR Lakhs unless otherwise stated

The Company''s activities expose it to credit risk, liquidity risk and market risk.

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk.

The Company''s risk management is carried out by the treasury team under policies approved by the board of directors. The treasury identifies, evaluates and hedges financial risks in close co-operation with the Company''s operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(A) Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks and credit exposures to customers including outstanding receivables with dealers and advances given to vendors.

(i) Credit risk management

Credit risk is managed on a holistic basis. For banks and financial institutions, only high rated banks/institutions are accepted.

For other financial assets, the Company assesses and manages credit risk based on external credit rating system. The finance department under the guidance of the board, assess the credit rating system. Credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

VL 1 : High-quality assets, negligible credit risk

VL 2 : Quality assets, low credit risk

VL 3 : Standard assets, moderate credit risk

VL 4 : Substandard assets, relatively high credit risk

VL 5 : Low quality assets, very high credit risk

VL 6 : Doubtful assets, credit-impaired

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 throughout each reporting period. To assess whether there is a significant increase in credit risk The Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are included -

- Internal credit rating assessment

- External credit rating (as far as available)

- Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower''s ability to meet its obligations

- Macroeconomic information (such as regulatory changes, market interest rate or growth rates) is incorporated as part of the internal rating model.

In general, it is presumed that credit risk has significantly increased since initial recognition if the payments are more than 30 days past due.

A default on a financial asset is when the counterparty fails to make contractual payments within 60 days of when they fall due. This definition of default is determined by considering the business environment in which entity operates and other macro-economic factors.

(B) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. The funding sources of the Company include short-term working capital loans from banks and related parties. Long term borrowings are primarily in the form of non-convertible debentures and term loans from banks.

(i) Financing arrangements

The Company had access to the following undrawn borrowing facilities at the end of the reporting period:

The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and have an average maturity of ''5 '' years.

(ii) Maturities of financial liabilities

The tables below analyze the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for non-derivative liabilities.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Contractual maturities of financial liabilities:

(C) Market risk

(i) Foreign currency risk

The Company is exposed to foreign exchange risk arising from foreign currency transactions with respect to US $ and EUR on account of purchase of capital goods. Foreign exchange risk arises from recognized liabilities denominated in a currency that is not the Company''s functional currency (INR). Since then there are only insignificant foreign currency transactions, there are no high risks foreseen by the Company on account of foreign currency fluctuations.

The Company has not taken forward contracts, options, futures or any other derivative instruments to manage the foreign currency risk. The strategy followed by the Company is tracking the foreign currency exchange rates and settlement of the payables at the time when the exchange rates are favorable.

* Holding all other variables constant

(ii) Interest rate risk

The Company''s main interest rate risk arises from borrowings with variable rates, which expose the Company to cash flow interest rate risk.

The Company''s fixed rate borrowings are carried at amortized 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.

The Company has not taken any interest rate swaps to convert the floating rate borrowings to fixed rate loans. The Company monitors the movement in the interest rates and uses the prepayment option to repay the borrowings at the time when the interest rates are unfavorable. The assessment of viability of using the pre-payment option shall be evaluated by the finance team.

- Holding all other variables constant

Note - 2. : Capital Management

(a) Risk management

For the purpose of capital management, capital includes issued equity capital attributable to the parent Company. The Company''s objectives when managing capital are too;

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, The Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, The Company monitors capital on the basis of the following gearing ratio: (i Loan covenants

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 borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period. No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2017 and March 31, 2016.

Note - 3 : Segment information

(a) Description of segments and principal activities

The Company primarily operates in the cement segment. The Chief Operating Decision Maker (CODM) reviews the performance of the cement segment at the consolidated level and makes decisions on sales volumes and profitability.

(b) Major Customers in Cement Segment

25% of Revenue is coming from 28 customers in cement segment.

Note - 4 : Related Party Transactions

(a) Parent entities

The Company is controlled by following entity:

(b) Subsidiaries and Fellow Subsidiaries

The Company does not have any subsidiaries and fellow subsidiaries.

(c) Key management personnel compensation

Mr A.Subramanian, Managing Director

*Does not include penalty amount of Rs.180.32 Lakhs **Does not include penalty amount of Rs.103.70 Lakhs

(b) Contingent assets

The Company does not have any contingent assets as at March 31, 2017, March 31, 2016 and April 1, 2015.

Note - 5 : Commitments

(a) Capital commitments (net of capital advances)

Capital expenditure contracted for at the end of the reporting period but not recognized as liabilities is as follows:

(b) Corporate Social Responsibility (CSR)

Section 135(5) of the Companies Act 2013 stipulates that the Company needs to spend two per cent of the average net profits made during the three immediately preceding financial years in pursuance of its Corporate Social Responsibility (CSR) Policy.

The Company has spent Rs 24.49 lakhs during financial year 2016-17 towards CSR activities.

(c) The Company has recorded all known liabilities in the financial statements. The Company has not received any intimations from suppliers regarding their status under the micro, small and medium enterprises development act, 2006 and hence disclosures, if any relating to amounts unpaid as at the yearend together with interest paid or payable as required under the said Act have not been given.

(d) Power & Fuel cost shown in Note 28 is net of Captive Power Plant Income.

Note - 6 : Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS (Refer note 1 on the basis for preparation). The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet at 1 April 2015 (The Company''s date of transition).

In preparing its first Ind AS financial statements in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standards, the Company has applied the relevant mandatory exceptions and certain optional exemptions from full retrospective application of Ind AS. Material optional exemptions applied by the Company are as follows:

A.1 Ind AS optional exceptions

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 per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.

The Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

2. Stripping costs in the production phase of a surface mine

The Company has elected to apply this exemption and follow the requirements of Appendix B of Ind AS 16 only for the stripping activity undertaken after the transition date.

A.2 Ind AS mandatory exceptions

A.2.1 Estimates

An entity''s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Impairment of financial assets based on expected credit loss model.

C: Notes to first-time adoption:

Note 1: Trade receivables

As per Ind AS 109, The Company is required to apply expected credit loss model for recognizing the allowance for doubtful debts. As a result, the allowance for doubtful debts increased by INR 8.37 lakhs as at 31 March 2016 (1 April 2015 - 66.46 lakhs). Consequently, the total equity as at 31 March 2016 decreased by INR 66.46 lakhs (1 April 2015 - 8.37 lakhs) and profit for the year ended 31 March 2016 increased by INR 58.09 lakhs.

Note 2: Security deposits

Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at fair value. Accordingly, The Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognized as prepaid rent. Consequent to this change, the amount of security deposits decreased by INR 9.60 lakhs as at 31 March 2016 (1 April 2015 - INR 11.46 lakhs). The prepaid rent increased by INR 9.17 lakhs as at 31 March 2016 (1 April 2015 - INR 11.46 lakhs). However there was no change in equity as at April 1, 2015. The profit for the year and total equity as at 31 March 2016 decreased by INR 0.43 lakhs due to amortization of the prepaid rent of INR 2.29 lakhs which is partially off-set by the notional interest income of INR 1.86 lakhs recognized on security deposits.

Note 3: Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31 March 2016 increased by INR 78.04 lakhs. There is no impact on the total equity as at 31 March 2016.

Note 4: Borrowings

Ind As 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of the borrowings on initial recognition. These costs are recognized in the statement of profit or loss over the tenure of the borrowing as a part of the interest expense by applying the effective interest rate method. Under the previous GAAP, these transaction costs were charged to profit or loss as and when incurred. Accordingly, borrowings as at 31 March 2016 have been reduced by INR 3.98 lakhs (1 April 2015 - INR 7.09 lakhs) with a corresponding adjustment to the retained earnings. The total equity increased by an equivalent amount. The profit for the year ended 31 March 2016 reduced by INR 3.11 lakhs as a result of the additional interest expense.

Note 5: Decommissioning cost

Under the previous GAAP, recognition of decommissioning cost liability was not mandatory and also discounting of provisions was not allowed. Under Ind AS, the decommissioning liability in respect of the mines have been recognized at discounted amounts since the effect of time value of money is material. Accordingly the non-current provisions have been discounted to their present values. This change has reduced the non-current provisions as at 1 April 2015 by INR 9.36 lakhs. Consequently the profit for the year ended 31 March 2016 decreased by INR 0.62 lakhs due to unwinding of interest on the decommissioning liability initially recognized.

Note 6: Excise duty

Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under the Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in the total revenue and total expenses for the year ended 31 March 2016 by INR 4624.48 lakhs. However there is no impact on total equity and profit.

Note 6: Capitalization of stores and spares

Under the previous GAAP, there was no guidance on capitalization of the stores and spares as an item of property, plant and equipment. Under the Ind AS 16, stores and spares whose estimated useful life is more than one period (assumed to be equal to normal operating cycle of 12 months) are to be capitalized and be depreciated over the useful life. Consequently the Company had capitalized stores and spares for INR 49.63 lakhs as at 1 April 2015. The accumulated depreciation on those spares from the respective date adjusted against the retained earnings has reduced the equity by INR 8.98 lakhs as at 31 March 2016 (1 April 2015 - INR 4.97 lakhs).

Note - 7: Events Occurring after the Reporting Period

No events were noted after the reporting period which require an adjustment nor disclosure as provided under Ind

AS 10.

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