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Andhra Cement

BSE: 532141|NSE: ANDHRACEMT|ISIN: INE666E01012|SECTOR: Cement - Major
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Notes to Accounts Year End : Mar '18

1. Company Overview

Andhra Cements Limited (the Company) is a Public Limited Company domiciled in India and is incorporated in India under the provisions of Companies Act, 1956. Its shares are listed on two stock exchanges in India i.e. Bombay Stock Exchange(BSE) and National Stock Exchange (NSE). The company is engaged in the manufacturing and selling of Cement and Cement related products. The Company caters mainly to the domestic market.

2. Recent accounting pronouncement

In March, 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018 via notification dated 28 March, 2018 to further amend Companies (Indian Accounting Standards) Rules, 2015, notifying a new revenue recognition standard Ind AS 115, ‘Revenue from Contracts with Customer’. This amendment replaces Ind AS 18, ‘Revenue’ and Ind AS 11, ‘Construction Contracts’. Also notifying an insertion of Appendix B, ‘Foreign currency transaction and advance consideration’ to Ind AS 21, ‘The effect of change in foreign exchange rate’, amendment to Ind AS 40, ‘Investment property’ and amendment to Ind AS 12, ‘Income taxes’. The amendments are applicable to the Company from April 01, 2018.

Notification of Ind AS-115 “Revenue from Contract with Customers”: The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition: Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8-Accounting Policies, Changes in Accounting Estimates and Errors. Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach). The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018. The impact on adoption of Ind AS 115 is expected to be insignificant.

Insertion of Appendix B to Ind AS-21, “Foreign currency transactions and advance consideration”: Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

The amendment will come into force from April 01, 2018. The Company has evaluated the effect of this on the financial statements and the impact is not material.

Amendment to Ind AS-40: An entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. In isolation, a change in Management’s intentions for the use of a property does not provide evidence of a change in use. When an entity decides to dispose of an investment property without development, it continues to treat the property as an investment property until it is derecognized (eliminated from the balance sheet) and does not reclassify it as inventory. Similarly, if an entity begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property and is not reclassified as owner-occupied property during the redevelopment.’’ The Company is evaluating the requirements of the amendment and its impact on the financial statements.

Amendment to Ind AS-12: The amendment to Ind AS 12 requires the entities to consider restriction in tax laws in sources of taxable profit against which entity may make deductions on reversal of deductible temporary difference (may or may not have arisen from same source) and also consider probable future taxable profit. The Company is evaluating the requirements of the amendment and its impact on the financial statements.

3.1 Terms/Rights attached to Equity Shares

The Company has only one class of equity shares having a face value of ‘10 per Share and each holder of equity shares is entitled to one vote per share. In the event of liquidation, the holders of equity shares will be entitled to receive the remaining assets of the company, after distribution of all preferential amounts, in proportion to their share holdings. Dividend - Each Share is entitled to dividend, if declared. The dividend if any, proposed by board of Directors is subject to the approval of shareholders in ensuing Annual General meeting, except in case of interim dividend.

3.2 Forfeited shares (amount originally paid up) is Rs. 38,860/-

* Refer Statement of change in equity for the movement in each of the reserves and surplus The Description of the nature and purpose of each reserve within equity is as follows:

Securities premium reserve: The amount of difference between the issue price and the face value of the shares is recognized in Securities premium reserve. It is utilised in accordance with the provisions of the Act.

Capital reserve: The capital reserve was recognized as a result of investment subsidy received for Visaka Cements Works, Vizag during the accounting year ended on Mach 31, 1981. This reserve is not freely available for distribution to the shareholders.

Capital redemption reserve: The company had created Capital redemption reserve out of the profits for redemption of Preference shares. This reserve may be utilized for the specified purpose in accordance with the provisions of the Act.

Quary land amortization reserve: Quary land amortization reserve was created for subsidy granted by the Government for construction of residential quarters for workers at Jayantipuram mines.

Retained earnings: Retained earnings comprise of the profits/(losses) of the company earned till date net of distributions and other adjustments.

4.1 Cash Sweep

At the end of each year, IDFC/EARC and HDFC shall have the right to appropriate 100% of surplus cash flows which contribute to DSCR being above 1.1 x, towards prepayment of the loans and upon such prepayment, the loans shall stand reduced proportionately in the inverse order of maturity. Such prepayment shall not attract any prepayment premium.

The Company has requested the Lender to reschedule the defaulted installment of Working Capital Loan, waiver of Penal Interest (part of which is included above) and reduction in Interest Rate which is under consideration as at Balance Sheet date. The Management is confident of getting the approval for the same.

*Working Capital Loans from banks, repayable on demand are secured by first pari passu charge by way of hypothecation of the current assets and second Charge on fixed assets of the company. These loans are further secured by Personal guarantee of earlier Chairman, Mr. Manoj Gaur.

Notes :

5.1 -During the current year, the Company had transferred amount of Unpaid matured Debentures to Investor Education and Protection Fund (IEPF).

5.2 -The redeemable Cumulative First Preference Shares remain unclaimed aggregating to Rs. 1.92 lakhs (Previous year Rs. 1.92 lakhs). The payment against these shares are being made as and when claimed by the holders.

5.3 -There is an amount of Rs. 101.91 (Previous year Rs. 295.11 lakhs) due for payment to the Investor Education and protection Fund under Section 125 of the Companies Act 2013 as on March 31, 2018.

(iii) Excise authority, although accepted payment of principal amount of Rs. 629 Lakhs under installment scheme in terms of BIFR Order (MS-08), has subsequently filed an appeal in AAIFR against the said order in respect of reliefs for interest etc., granted to the Company. AAIFR allowed the appeal which was contested by the Company before Hon’ble Delhi High Court. The Delhi High Court disposed the appeal by giving liberty to revenue to decide case on merits and as per guidelines applicable to sick Companies which later confirmed by AAIFR in its Final order. The Excise Department has issued a Show Cause Notice (SCN) on 19th June 2015 demanding Rs. 984.70 Lakhs towards interest on the principal amount against which Company file writ petition no. 27732 of 2015 in Hon’ble High Court, Hyderabad. Simultaneously, Company submitted the reply for the SCN on March 21, 2016. Excise Department confirmed the Demand against SCN on 04.10.2016 subjected to decision in writ petition no. 27732 of 2015. Company preferred Writ petition no 36553 of 2016 dated 28.10.2016 in the Hon’ble High Court, Hyderabad against the orders of Commissioner Excise confirming the Demand but the Hon’ble High Court, Hyderabad in its order dated 24.03.2017 has dismissed both the petition with mentioned that there are no merits in the writ petition. Against the order of the Hon’ble High Court, Hyderabad, the Company has filed SLP(C) with Hon’ble Supreme Court of India on 26-05-2017 which was registered as civil appeal No. 9332/2017 and the Company is confident of waiver of interest in terms of Hon’ble BIFR directions in MS08.

(iv) Export obligation: The Company has export obligation in connection with import of machineries under Export Promotion Capital Goods Scheme (EPCG). In the event of non-fulfillment of the export obligation upto FY 2016-17, the company may be held liable for differential custom duty of Rs. 838.16 Lakhs (approximately) and interest thereon. Moreover, the Company has filled request letter for 8 years extension from December 2014 for Export Commitments, dated March 17, 2016, in light of, the commercial production from the Plant started from December 2014 and due to Global recession, Exports of our products (Cement and Clinker) are not viable and rates being offered in international market are lower than even cost and the matter is under consideration with EPCG.

(v) Employee benefit: During the previous period, employee benefit expenses includes arrears of salaries and wages and other expenses of Rs. 1,150 Lakhs in terms of Memorandum of Settlement u/s 18(1) of the Industrial Dispute Act,1947, entered into with the Labour Unions on 6th March, 2012. However, some of the workers and staff have filed an application with Central Government Industrial Tribunal cum Labour Court under section 33(c) (2) of Industrial Dispute Act, 1947 in year 2013-14 and CJ, City Civil Court, Hyderabad respectively demanding payment of Rs. 59.34 Lakhs and Rs. 14.41 Lakhs which had been waived off as per the above settlement with the registered labour union.

(vi) Fuel Surcharge Adjustment (FSA) of Rs. 550.65 lakhs levied by APSPDCL in 2008-09 which is under disputed and challenged by all cement companies in the Hon’ble Supreme Court. The management is confidence that decision will be in favour of Company. FSA as on 31.03.2018 is Rs. 545.80 lakhs (net of Rs. 4.85 lakhs as deposit) and interest thereon amounting Rs. 327.34 lakhs, both have been sufficiently provided for into books of account.

(vii) The Ministry of Textiles vide its Order dated June 30th, 1997 and July 1st, 1999, has deleted the Cement from the list of commodities to be packed in Jute bags, under the Jute Packaging Materials (Compulsory Use of Packing Materials), Act, 1987. In view of this, the Company does not expect any liability for non-dispatch of cement in jute bags in respect of earlier years.

6. The Company has accumulated loss of Rs. 52,145.28 lakhs (including Other Comprehensive Income) against the paid up share capital of Rs. 29,352 lakhs as at March 31, 2018. The Company has implemented various marketing and cost control measures to achieve consistent profitable operations and cash flows. Further, Board of Directors in its meeting held on 30th May 2018 has decided to dispose off its split Grinding Unit located at Visakhapatnam and necessary steps are being initiated for the same. The Management is confident that this will lead to substantial improvement in financial position of the Company through reduction of borrowings and Interest cost. Accordingly, financial statements have been prepared on going concern basis.

7. Remuneration amounting to Rs. 45.26 lakhs to ex-whole time Directors and ex-Managing Director Payable for the earlier years is pending for approval of Central Government.

8. Some of the records of the company like agreements with suppliers/agents, statements of Bank Accounts including those at some of the branches/depots for the period prior to June 1994, have still not been restored by the erstwhile promoters/ management. The matter being pending since considerable long time, no material adjustment, in this respect, is likely to arise.

9. The Company did not have any dues under trade payable to Micro, Small and Medium Enterprises Development Act, 2006. The disclosure on above is based on the information available with the Company.

10. Some of the Sundry Debtors, Deposits Retention Money, Sundry Creditors and Advances are subject to confirmations. The management does not expect any material adjustment on account of such confirmation.

11. The Company is exclusively engaged in the business of cement and cement related products. As per Ind AS 108 “Operating Segments”, specified under Section 133 of the Companies Act, 2013, there are no reportable business and geographical segment applicable to the Company.

12. In accordance with Ind AS 17” Leases”, the company has taken Asset on Operating Lease, the total of Future minimum lease payment under non-cancellable operating lease for each of the following periods are:

a) Lease term is for 60 Months basis, One month moratorium, and 59 rentals.

b) At the end of the lease period following options would be offered to us:

1. Terminate the lease and return the equipment.

2. Renew the Lease for secondary period.

3. Purchase the equipment at Fair Market value.

13. BIFR

(i) Hon’ble BIFR has discharged the Company from the purview of Sick Industrial Companies (Special Provisions) Act, 1985 vide its Order dated 22nd January 2010. In terms of the said Order, the unimplemented provisions of MS-08 (Modified Rehabilitation Scheme sanctioned by BIFR vide its Order dated 21st July 2008) would be implemented by the concerned agencies.

(ii) In terms of the said Scheme, the fixed deposit holders are to accept outstanding principal amount in four annual installments commencing from financial year 2007-08 onwards, on interest-free basis. The unclaimed fixed deposits at year end are shown under the head “Other Financial Liabilities”.

14. Details of Employees Benefits as required by the Ind AS 12 “Employee Benefits” are given below: -

a) Defined contribution plans:

The company has recognized the following amounts in the Statement of Profit and Loss (included in Contribution to provident and other funds:

The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumption occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the method (Projected Unit Credit Method) used to calculate the liability recognized in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.

The estimate of rate of escalation is salary considered in actuarial valuation, taken into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is as certified by the actuary.

15. Fair Value

The fair value of the financial assets are included at amounts at which the instruments 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 value:

(a) Fair value of cash and short term deposits, trade and other short term receivables, trade payables, other current liabilities, approximate their carrying amounts largely due to the short-term maturities of these instruments.

(b) 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 the expected losses of these receivables.

Financial instruments by Category

The carrying value and fair value of financial instruments by categories as of March 31, 2018 are as follows:

16. Financial risk management and policies

16.1 Capital Risk Management

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 parent. The primary objective of the Company’s capital management is to maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company’s policy is to keep optimum gearing ratio. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations.

16.2 Financial-Risk-Management

The Company’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance and support the Company’s operations. The Company’s principal financial assets comprise investments, cash and bank balance, trade and other receivables.

The Company is exposed to various financial risks such as market risk, credit risk and liquidity risk. The financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives.

a) Market Risk

The Company’s activities expose it primarily to the financial risk of changes in foreign currency exchange rates and changes in interest rates. There have been no changes to the Company’s exposure to market risk or the manner in which it manages and measures the risk in recent past.

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include borrowings and bank deposits.

(i) 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 particulars relating to Company’s exposure to the risk of changes in market interest rates as at reporting date is given below:

(a) Interest Sensitivity

Exposure to interest rate risk related to borrowings with floating rate of interest

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to import of store and spare and other materials. The Company’s foreign currency risks are identified, measured and managed at periodic intervals in accordance with the Company’s policies. Particulars of un-hedged foreign currency exposures as at the reporting date:

b) Credit Risk:

Credit risk is the risk that counterparty will default on its contractual obligations resulting in financial loss to the company. The Company has adopted a policy of only dealing with creditworthy customers.

I n many cases an appropriate advance as security deposits or letter of credit / bank guarantee is taken from the customers to cover the risk. In other cases, credit limit is granted to customer after assessing the credit worthiness based on the information supplied by credit rating agencies, publicly available financial information or its own past trading records and trends.

At March 31, 2018, the company did not consider there to be any significant concentration of credit risk, which had not been adequately provided for. The carrying amount of the financial assets recorded in the financial statements, grossed up for any allowances for losses, represents the maximum exposure to credit risk.

c) 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 reasonable price. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Company’s treasury team is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company’s liquidity position through rolling forecasts on the basis of expected cash flows.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

17. The Company is not required to incur any amount on account of Corporate Social Responsibility (CSR) as the average profit before tax during the preceding three financial year is negative.

18.1 No amount pertaining to related parties which have been provided for as doubtful debts or written off.

19. The Company has not given advances in the nature of loans whose particulars are required to be disclosed in terms of Regulation 34(3) and 53(f) of the Listing obligation and Disclosure Requirement.

20. Exceptional items represents profit on sale of surplus land during the year.

21. Events after the end of the reporting year: No subsequent event has been observed which may require an adjustment to the statement of financial position.

22. All amounts in the financial statements are presented in Lakhs (INR) except per share data and as otherwise stated. Figures in brackets represent corresponding previous year figures. Previous year’s figures have been regrouped /rearranged wherever considered necessary.

Source : Dion Global Solutions Limited
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