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Bharat Petroleum Corporation

BSE: 500547|NSE: BPCL|ISIN: INE029A01011|SECTOR: Refineries
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Notes to Accounts Year End : Mar '19

NOTE 59 FINANCIAL INSTRUMENTS

Rs. in Crores

Carrying amount

Fair value

As at 31/03/2018

Note Reference

Mandatory at FVTPL

FVOCI -designated as such

Amortised Cost

Total

Level 1

Level 2

Level 3

Total

Financial

Investment in equity instruments

8&14

2.30

681.20

683.50

575.94

2.30

105.26

683.50

Investment in debt instruments

8&14

4,992.88

0.01

4,992.89

4,992.88

4,992.88

Derivative instruments - Interest rate swap

19

3.13

3.13

3.13

3.13

Derivative instruments - Forward contracts

19

8.51

8.51

8.51

8.51

Deposits

9

27.81

27.81

34.19

34.19

Loan to subsidiary- fixed rate

9

216.81

216.81

267.57

267.57

Loan to subsidiary- variable rate

9

625.00

625.00

Loan to Joint Venture

9

1,254.10

1,254.10

1,429.67

1,429.67

Loan

- Non-current- Loans to employee

9

389.22

389.22

389.22

389.22

- Non-current - Other Loans

9

463.87

463.87

463.87

463.87

- Non-current- Others

9

41.88

41.88

- Current

18

71.02

71.02

Other Deposits

9

71.22

71.22

Cash and cash equivalents

16

153.34

153.34

Bank Balances other than Cash and cash equivalents

17

29.19

29.19

Trade receivables

15

5,151.73

5,151.73

Others

- Non-current

10

56.34

56.34

- Current

19

4,631.48

4,631.48

Total

5,006.82

681.20

13,183.02

18,871.04

Financial liabilities

Derivative Liability on Currency Swaps

32

85.83

85.83

85.83

85.83

Derivative Liability on commodity derivatives

32

4.33

4.33

4.33

4.33

Bonds

25

7,828.78

7,828.78

7,976.51

7,976.51

OIDB Loans

25 & 32

1,357.94

1,357.94

1,373.45

1,373.45

Debentures

25

1,299.52

1,299.52

1,290.49

1,290.49

Term loans

25

2,000.00

2,000.00

Foreign Currency Loans - Syndicated

25

2,771.42

2,771.42

Other Non-Current financial liabilities

26

58.35

58.35

Short term borrowinqs

30

8,093.01

8,093.01

Trade and Other Payables

31

14,989.52

14,989.52

Other Current liabilities

32

15,398.96

15,398.96

Total

90.16

-

53,797.50

53,887.66

Note: There are no other categories of financial instruments other than those mentioned above.

B. Measurement of fair values

Valuation techniques and significant unobservable inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, for financial instruments measured at fair value in the Balance Sheet, as well as the significant unobservable inputs used.

Financial instruments measured at fair value

Type

Valuation technique

Significant unobservable inputs

Inter-relationship between significant unobservable inputs and fair value measurement

Unquoted equity shares (Cochin International Airport Limited)

The Valuation is based on market multiples derived from quoted prices of companies comparable to investee and the expected revenue and PAT of the investee.

Adjusted market multiple (P/E)

The estimated fair value would increase/ (decrease) if Adjusted market multiple were higher/(lower)

Unquoted equity shares- (Sai Wardha Power Generation Limited (SWPGL))

The Fair Valuation is based on the agreement with SWPGL.

Not applicable

Not applicable

Derivative instruments -forward exchange contracts

Forward pricing: The fair value is determined using quoted forward exchange rates at the reporting date.

Not applicable

Not applicable

Derivative instruments -interest rate swap and currency swap

Discounted cash flows: The valuation model considers the present value of expected receipt/ payment discounted using appropriate discounting rates. This technique also involves using the interest rate curve for projecting the future cash flows.

Not applicable

Not applicable

Derivative instruments - commodity contracts

Fair valuation of Commodity Derivative instruments are based on forward assessment done by Platts which is an independent agency which assesses benchmark global crude oil and product prices. Globally counterparties also use Platts assessment for settlement of transactions.

Not applicable

Not applicable

Non current financial assets and liabilities measured at amortised cost

Discounted cash flows: The valuation model considers the present value of expected receipt/ payment discounted using appropriate discounting rates.

Not applicable

Not applicable

Level 3 fair values

Reconciliation of Level 3 fair values

The following table shows a reconciliation of the opening and closing balances for Level 3 fair values.

Rs. in Crores

Paticulars

Equity securities

Opening Balance(1st April 2017)

97.80

Net change in fair value (unrealised)

7.46

Closing Balance (31st March 2018)

105.26

Opening Balance(1st April 2018)

105.26

Net change in fair value (unrealised)

9.04

Closing Balance (31st March 2019)

114.30

Sensitivity analysis

For the fair values of unquoted equity shares, reasonably possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects:

Rs. in Crores

As at 31/03/2019

As at 31/03/2018

Profit or loss

Profit or loss

Significant unobservable inputs

Increase

Decrease

Increase

Decrease

P/E (5% movement)

5.71

(5.71)

5.29

(5.29)

C. Financial risk management

C.i. Risk management framework

The Corporation''s Board of Directors has overall responsibility for the establishment and oversight of the Corporation''s risk management framework. The Risk Management Committee of the Board has defined roles and responsibilities, which includes reviewing and recommending the risk management plan and the risk management report for approval of the Board with the recommendation of the Audit Committee. The Corporation has adopted a Risk Management Charter and Policy for self-regulatory processes and procedures for ensuring the conduct of the business in a risk conscious manner.

The Corporation has exposure to the following risks arising from financial instruments:

• Credit risk;

• Liquidity risk; and

• Market risk C.ii. Credit risk

Credit risk is the risk of financial loss to the Corporation if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Corporation''s trade and other receivables, cash and cash equivalents and other bank balances, derivatives and debt securities. The maximum exposure to credit risk in case of all the financial instuments covered below is restricted to their respective carrying amount.

(a) Trade and other receivables from customers

Credit risk in respect of trade and other receivables is managed through credit approvals, establishing credit limits and monitoring the creditworthiness of customers to which the Corporation grants credit terms in the normal course of business.

As at 31st March 2019 and 31st March 2018, the Corporation''s retail dealers, industrial and aviation customers accounted for the majority of the trade receivables.

Expected credit loss assessment for Trade and other receivables from customers as at 31st March 2019 and 31st March 2018

The Corporation uses an allowance matrix to measure the expected credit losses of trade and other receivables.

The loss rates are computed using a ''roll rate'' method based on the probability of receivable progressing through successive stages till full provision for the trade receivable is made. Roll rates are calculated separately for exposures based on common credit risk characteristics for a set of customers.

The following table provides information about the exposure to credit risk and Expected Credit Loss Allowance for trade and other receivables:

Rs. in Crores

As at 31/03/2019

Gross carrying amount

Weighted average loss rate - range

Loss allowance

Debts not due

4,197.20

0.19%

8.00

Debts over due

2,368.19

11.58%

274.18

Total

6,565.39

4.30%

282.18

Rs. in Crores

As at 31/03/2018

Gross carrying amount

Weighted average loss rate - range

Loss allowance

Debts not due

3,848.76

0.17%

6.46

Debts over due

1,694.78

15.21%

257.80

Total

5,543.54

4.77%

264.26

The Corporation does not provide for any loss allowance on trade receivables where risk of default is negligible such as receivables from other oil marketing companies, if any, hence the same is excluded from above.

Loss rates are based on actual credit loss experience over the past three years.

The movement in the loss allowance in respect of trade and other receivables during the year was as follows:-

Rs. in Crores

Balance as at 1st April, 2017

581.67

Movement during the year

(317.41)

Balance as at 31st March, 2018

264.26

Movement during the year

17.92

Balance as at 31st March, 2019

282.18

(b) Cash and cash equivalents and Other Bank Balances

The Corporation held cash and cash equivalents and other bank balances of Rs. 95.41 Crores at 31st March 2019 (31st March 2018: Rs. 182.53 Crores). The cash and cash equivalents are held with banks with good credit ratings and financial institution counterparties with good market standing. Also, Corporation invests its short term surplus funds in bank fixed deposits, Tri Party Repo and liquid schemes of mutual funds, which carry no / low mark to market risks for short duration and therefore does not expose the Corporation to credit risk.

(c) Derivatives

The derivatives are entered into with banks, financial institutions and other counterparties with good credit ratings. Further exposures to counter-parties are closely monitored and kept within the approved limits.

(d) Investment in debt securities

Investment in debt securities are mainly as loans to subsidiaries, joint venture companies and investment in government securites which do not carry any significant credit risk.

C.iii. Liquidity risk

Liquidity risk is the risk that the Corporation will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Liquidity risk is managed by Corporation through effective fund management. The Corporation has obtained fund and non-fund based working capital lines from various banks. Furthermore, the Corporation has access to funds from debt markets through commercial paper programs, foreign currency borrowings and other debt instruments.

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments

Maturity Analysis of Significant Financial Liabilities

Rs. in Crores

Contractual cash flows

As at 31/03/2019

Total

Upto 1 year

1-3 years

3-5 years

More than 5 years

Non-derivative financial liabilities

Bonds

13,793.62

1,874.54

4,357.79

3,895.21

3,666.08

OIDB Loans

1,560.15

583.69

697.80

278.66

-

Term loans

2,825.80

165.45

566.50

1,993.85

100.00

Non Convertible Debentures

3,052.98

178.39

906.51

1,968.08

-

Foreign Currency Loans - Syndicated

10,886.19

253.17

3,220.62

7,412.40

-

Short term borrowings

3,580.75

3,580.75

-

-

-

Trade and other payables

17,235.18

17,235.18

-

-

-

Other current liabilities

17,508.03

17,508.03

-

-

-

Financial guarantee contracts*

6,630.07

-

581.04

1,068.70

4,980.33

Derivative financial liabilities

Currency Swaps

214.97

214.97

-

-

-

Rs. in Crores

As at 31/03/2018

Contractual cash flows

Total

Upto 1 year

1-3 years

3-5 years

More than 5 years

Non-derivative financial liabilities

Bonds

9,826.50

326.36

1,995.87

3,871.84

3,632.43

OIDB Loans

1,511.08

586.14

836.71

88.23

-

Term loans

2,863.80

160.00

430.89

536.07

1,736.84

Non Convertible Debentures

1,750.08

98.10

196.20

1,455.78

-

Foreign Currency Loans - Syndicated

3,077.48

80.40

2,997.08

-

-

Short term borrowings

8,093.01

8,093.01

-

-

-

Trade and other payables

14,989.52

14,989.52

-

-

-

Other current liabilities

15,398.96

15,398.96

-

-

-

Financial guarantee contracts*

7,210.14

975.66

546.37

1,004.93

4,683.18

Derivative financial liabilities

Currency Swaps

171.09

25.45

145.64

-

-

Commodity Contracts

4.33

4.33

-

-

-

* Guarantees issued by the Corporation on behalf of joint venture/subsidiary are with respect to borrowings raised by the respective entity. These amounts will be payable on default by the concerned entity. As of the reporting date, none of the subsidiary/joint venture have defaulted and hence, the Corporation does not have any present obligation to third parties in relation to such guarantees.

C.iv. Market risk

Market Risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises four types of risk: currency risk, interest rate risk, commodity risk and other price risk.

C.iv.a Currency risk

The Corporation is exposed to currency risk on account of its operating and financing activities. The functional currency of the Corporation is Indian Rupee. Our exposure is mainly denominated in U.S. dollars (USD). The USD exchange rate has changed substantially in recent periods and may continue to fluctuate substantially in the future

The Corporation has put in place a Financial Risk Management Policy to Identify the most effective and efficient ways of managing the currency risks. The Corporation uses derivative instruments, (mainly foreign exchange forward contracts) to mitigate the risk of changes in foreign currency exchange rates in line with our policy

The Corporation does not use derivative financial instruments for trading or speculative purposes.

Exposure to currency risk

The currency profile in INR of financial assets and financial liabilities as at 31st March 2019 and 31st March 2018 are as below:

Rs. in Crores

As at 31/03/2019

USD

EURO

JPY

CHF

Others

Financial assets

Cash and cash equivalents

11.81

-

-

-

-

Trade receivables and other assets

244.04

0.18

-

-

0.01

Net exposure for assets

255.85

0.18

-

-

0.01

Financial liabilities

Bonds

10,332.38

-

-

1,390.54

-

Foreign Currency Loans - Syndicated

8,108.55

-

-

-

-

Short term borrowings

1,632.44

-

-

-

-

Trade Payables and other liabilities

10,370.28

203.55

12.81

12.44

2.88

Add/(Less): Foreign curency forward exchange contracts

(1,743.12)

-

-

-

-

Add/(Less): Foreign currency swaps

1,579.11

-

-

(1,390.54)

-

Net exposure for liabilities

30,279.64

203.55

12.81

12.44

2.88

Net exposure (Assets - Liabilities)

(30,023.79)

(203.37)

(12.81)

(12.44)

(2.87)

in Crores

As at 31/03/2018

USD

EURO

JPY

CHF

Others

Financial assets

Cash and cash equivalents

14.26

-

-

-

-

Trade receivables and other assets

537.05

0.19

-

-

0.01

Net exposure for assets

551.31

0.19

-

-

0.01

Financial liabilities

Bonds

6,465.77

-

-

1,363.01

-

Foreign Currency Loans - Syndicated

2,771.42

-

-

-

-

Short term borrowings

6,286.26

-

-

-

-

Trade Payables and other liabilities

7,631.08

167.28

0.41

19.15

2.81

Add/(Less): Foreign curency forward exchange contracts

(1,654.97)

-

-

-

-

Add/(Less): Foreign currency swaps

1,484.89

-

-

(1,363.01)

-

Net exposure for liabilities

22,984.45

167.28

0.41

19.15

2.81

Net exposure (Assets - Liabilities)

(22,433.14)

(167.09)

(0.41)

(19.15)

(2.80)

Sensitivity analysis

A reasonably possible strengthening (weakening) of the USD against INR at 31st March would have affected the measurement of financial instruments denominated in US dollars and affected profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. In cases where the related foreign exchange fluctuation is capitalised to Property, Plant and Equipment or recognised directly in reserves, the impact indicated below may affect the Corporation''s income statement over the remaining life of the related Property, Plant and Equipment or the remaining tenure of the borrowing respectively.

Rs. in Crores

Effect in INR (before tax)

Profit or loss

Strengthening

Weakening

For the year ended 31st March, 2019

3% movement

USD

(900.71)

900.71

Effect in INR (before tax)

Profit or loss

Strengthening

Weakening

For the year ended 31st March, 2018

3% movement

USD

(672.99)

672.99

C.iv.b Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates, in cases where the borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

The Company''s approach to managing interest rate risk is to have a judicious mix of borrowed funds with fixed and floating interest rate obligation.

Exposure to interest rate risk

Corporation''s interest rate risk arises primarily from borrowings. The interest rate profile of the Corporation''s interest-bearing financial instruments is as follows:

Rs. in Crores

Particulars

Note Reference

As at 31/03/2019

As at 31/03/2018

Fixed-rate instruments

Financial Assets - measured at amortised cost

Investment in debt instruments

8

0.01

0.01

Loan to Subsidiary

9

238.49

216.81

Loan to Joint Venture

9

1,254.10

1,254.10

Financial Assets - measured at Fair Value through Profit & Loss

Investment in debt instruments

14

5,075.89

4,992.88

Total of Fixed Rate Financial Assets

6,568.49

6,463.80

Financial liabilities - measured at amortised cost

Bonds

25 & 32

11,722.91

7,828.78

OIDB Loans

25 & 32

1,358.50

1,357.94

Non- Convertible Debentures

25

2,299.32

1,299.52

Short term borrowings

30

1,737.19

1,500.00

Term Loan

25

29.27

-

Total of Fixed Rate Financial Liabilities

17,147.19

11,986.24

Rs. in Crores

Particulars

Note Reference

As at 31/03/2019

As at 31/03/2018

Variable-rate instruments

Financial Assets - measured at amortised cost

Loan to Subsidiary

9

450.00

625.00

Total of Variable Rate Financial Assets

450.00

625.00

Financial liabilities - measured at amortised cost

Foreign Currency Loans - Syndicated

25

8,108.55

2,771.42

Short term borrowings

30

1,843.56

6,593.01

Term loans

25

2,000.00

2,000.00

Total of Variable Rate Financial Liabilities

11,952.11

11,364.43

Fair value sensitivity analysis for fixed-rate instruments

The Corporation accounts for certain investments in fixed-rate financial assets such as investments in Oil bonds and Government Securities at fair value through profit or loss. Accordingly, a decrease in 25 basis point in interest rates is likely to increase the profit or loss (before tax) for the year ending 31st March 2019 by Rs. 60.87 Crores (31st March 2018 - Rs. 67.15 Crores) and an increase in 25 basis point in interest rates is likely to decrease the profit or loss (before tax) for the year ending 31st March 2019 by Rs. 61.80 Crores (31st March 2018 -Rs. 68.30 Crores).

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 25 basis points in interest rates at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant. In cases where the related interest rate risk is capitalised to Property, Plant and Equipment, the impact indicated below may affect the Corporation''s income statement over the remaining life of the related Property, Plant and Equipment.

Rs. in Crores

Profit or

(loss)

Cash flow sensitivity (net)

0.25 %

0.25%

increase

decrease

As at 31/03/2019

Variable-rate loan instruments

(29.49)

29.49

Interest on Loan given to Subsidiary

1.12

(1.12)

Cash flow sensitivity (net)

(28.37)

28.37

As at 31/03/2018

0.25 %

0.25%

increase

decrease

Variable-rate loan instruments

(24.58)

24.58

Interest on Loan given to Subsidiary

4.47

(4.47)

Cash flow sensitivity (net)

(20.11)

20.11

C.iv.c Commodity rate risk

BPCL''s profitability gets affected by the price differential (also known as Margin or Crack spread) between prices of products (output) and the price of the crude oil and other feed-stocks used in production (input). Prices of both are set by markets. Hence BPCL uses derivatives instruments (swaps, futures, options, and forwards) to hedge exposures to commodity price risk to cover refinery operating cost using Basic Swaps on various products cracks like Naphtha, Gasoline (Petrol), Jet /Kerosene, Gasoil (Diesel) and Fuel Oil against Benchmark Dubai Crude. Further volatility in freight costs is hedged through Freight Forwards and bunker purchases. Settlement of all derivative transactions take place on the basis of monthly average of the daily prices of the settlement month quoted by Platts.

BPCL measures market risk exposure arising from its trading positions using value-at-risk techniques. These techniques make a statistical assessment of the market risk arising from possible future changes in market prices over a one-day holding period.

BPCL uses historical model of VAR techniques based on variance/covariance to make a statistical assessment of the market risk arising from possible future changes in market values over a 24-hour period and within a 95% confidence level. The calculation of the range of potential changes in fair value takes into account positions, the history of price movements for last two years and the correlation of these price movements. VAR calculation for open position as on 31st March 2019 is as given below:

Product

Gasoil - Dubai

FO 180 CST 3.5% S FOB Spore Cargo (ZCC)

Brent Dt -Dubai

Gasoil -Gasoline

Unit

USD/Bbl

USD/Bbl

USD/Bbl

USD/Bbl

Mean

14.60

385.18

1.27

5.59

Standard Deviation

1.75

60.37

1.58

4.73

Var95

2.89

99.29

2.60

7.78

Mean Var95

17.49

285.89

(1.33)

13.37

Avg.Trade Price

18.48

413.10

0.92

18.15

Lots as on 31.03.2019

6.00

3.00

6.00

3.00

Standard Lot size

50000 BBL

3000 MT

50000 BBL

50000 BBL

VAR USD million (-ve VAR of Gasoil and Gasoil-Gasoline ignored)

(0.30)

3.82

0.67

(0.72)

Total Portfolio VAR in USD million

4.49

C.iv.d Price risk

The Corporation''s exposure to equity investments price risk arises from investments held by the Corporation and classified in the financial statements at fair value through OCI. The corporation intends to hold these investments for long-term for better returns and price risk will not be significant from a long term perspective.

Exposure to price risk

Rs. in Crores

Effect in INR (before tax)

Profit or loss

Other components of Equity

Strengthening

Weakening

Strengthening

Weakening

As at 31/03/2019

1 % movement

Investment in Oil India - FVOCI

-

-

4.96

(4.96)

Investment in CIAL-FVOCI

-

-

1.14

(1.14)

Total

(6.10)

Rs. in Crores

Effect in INR (before tax)

Profit or loss

Other components of Equity

Strengthening

Weakening

Strengthening

Weakening

As at 31/03/2018

1 % movement

Investment in Oil India - FVOCI

-

-

5.76

(5.76)

Investment in CIAL-FVOCI

-

-

1.05

(1.05)

Total

-

-

6.81

(6.81)

D. Offsetting

The following table presents the recognised financial instruments that are offset and other similar agreements that are not offset, as at 31st March 2019 and 31st March 2018.

The column ''net amount'' shows the impact on the Corporation''s balance sheet if all set-off rights are exercised.

Rs. in Crores

Particulars

Note reference

Effect of offsetting on the balance sheet

Related amounts not offset

Gross amounts

Gross amounts set off in the balance sheet

Net amounts presented in the balance sheet

Financial Instrument

Amounts which can be offset

Net Amount

As at 31/03/2019

Financial assets

Investment in GOI Bonds

A

-

-

-

5,075.89

1,000.00

4,075.8

Trade and other receivables

B&C

3,590.56

3,530.69

59.87

-

-

Derivative Assets

D

-

-

-

0.98

0.98

Financial liabilities

Short term borrowings

A

-

-

-

3,580.75

1,000.00

2,580.75

Trade and other payables

B&C

7,343.98

3,530.69

3,813.29

-

-

-

Derivative Liabilities

D

-

-

-

17.97

0.98

16.99

As at 31/03/2018

Financial assets

Investment in GOI Bonds

A

-

-

-

4,992.88

1,500.00

3,492.88

Trade and other receivables

B&C

2,385.90

2,380.99

4.91

-

-

-

Derivative Assets

D

-

-

-

1.75

1.75

-

Financial liabilities

Short term borrowings

A

-

-

-

8,093.01

1,500.00

6,593.01

Trade and other payables

B&C

7,024.98

2,380.99

4,643.99

-

-

-

Derivative Liabilities

D

-

-

-

8.56

1.75

6.81

Notes

A. The Corporation has Tri Party Repo limits from Clearing Corporation of India Limited, which are secured by Oil Marketing Companies GOI Special Bonds 2026 and Government Securities. As the Counterparty currently does not have a legally enforceable right to off set these amounts, these amounts have not been offset in the balance sheet, but have been presented separately in the table above.

B. The Corporation purchases and sells petroleum products from different Oil Marketing Companies. Under the terms of the agreement, the amounts payable by the Corporation are offset against receivables and only the net amounts are settled. The relevant amounts have therefore been presented net in the balance sheet.

C. The Corporation enters into derivative transactions under the International Swaps and Derivatives Association (ISDA) master netting agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other.

D. The Corporation enters into derivative transactions under the International Swaps and Derivatives Association (ISDA) master netting agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. The ISDA master netting agreements do not meet the criteria for offsetting in the balance sheet. This is because the Counterparty does not currently have legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence of future events.

NOTE 60 CAPITAL MANAGEMENT

The Corporation''s objective is to maximize the shareholders'' value by maintaining an optimum capital structure. Management monitors the return on capital as well as the debt equity ratio and makes necessary adjustments in the capital structure for the development of the business.

The Corporation''s debt to equity ratio as at 31st March, 2019 was 0.79 (31st March 2018: 0.68)

Note: For the purpose of computing debt to equity ratio, equity includes Equity Share Capital and Other Equity and Debt includes Long term borrowings, short term borrowings and current maturities of long term borrowings.

NOTE 61 SEGMENT REPORTING

As per the requirements of Ind AS 108 on Operating Segments, segment information has been provided under the Notes to Consolidated Financial Statements.

NOTE 62 MICRO, SMALL AND MEDIUM ENTERPRISES

To the extent, the Corporation has received intimation from the suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006, the details regarding Micro and Small enterprises are provided as under:

Rs. in Crores

Particulars

As at 31st March 2019

As at 31st March 2018

Principal amount overdue (remaining unpaid) as on 31st March

0.57

0.50

Interest due thereon remaining unpaid as on 31st March#

0.01

Payment made during the year after the due date*

Principal

Interest

Interest accrued and remaining unpaid as at 31st March#

0.01

# Amount Rs. 1,08,621

*AII undisputed payments to Micro and Small enterprises during the year are made as per the MSMED Act, 2006.

NOTE 63 CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

Rs. in Crores

Particulars

As at 31/03/2019

As at 31/03/2018

(a)

Contingent Liabilities :

In respect of Income Tax matters

55.25

25.78

Other Matters :

i) Claims against the Corporation not acknowledged as debts * :

Excise and customs matters

1,080.83

1,699.21

Service Tax matters

41.92

126.70

Sales tax/VAT matters

10,394.76

9,639.33

Land Acquisition cases for higher compensation @

126.93

113.43

Others @

261.52

314.14

* These include Rs. 7,656.66 Crores (31st March 2018: Rs. 7,055.30 Crores) against which the Corporation has a recourse for recovery and Rs. 96.99 Crores (31st March 2018: Rs. 90.23 Crores) which are on capital account.

@The addition in Land Acquisition cases for higher compensation and Others on account of new claims raised during the current year amounts to Rs. 6.58 Crores and Rs. 30.13 Crores respectively.

ii) Claims on account of wages, bonus / ex-gratia payments in respect of pending court cases

25.81

22.35

iii) Guarantees (Refer Note Below)

1,156.99

758.00

(b)

Capital Commitments :

i) Estimated amount of contracts remaining to be executed on capital account and not provided for

5,820.83

4,673.13

ii) Other Commitments #

137.65

-

Note:

1. BPCL''s subsidiary, BGRL has been authorized by Petroleum and Natural Gas Regulatory Board (PNGRB) for development of 11 Geographical Areas (GAs) in Bid Round 9 and 2 GAs in Bid Round 10. As a promoter, BPCL has issued Parent Company Guarantees (PCGs) to PNGRB guaranteeing all performance obligations of BGRL under these 13 GAs. The outflow that may arise under these PCGs is not quantifiable.

2. BPCL''s subsidiary, BPRL, is engaged in the business of Exploration and Production (E&P) of oil & gas and has participating interest in several blocks held directly or through group companies. BPCL has issued performance guarantees/counter-indemnities/letter of undertakings in favour of Government/Government Agencies/ Operators/other partners towards performance of obligations of BPRL (including its group companies) under the Concession Agreement/Joint Operating Agreements/Production Sharing Contracts/Licenses/ Farmout Agreements relating to various such E&P oil & gas blocks acquired by them. The outflow that may arise under these performance guarantees, is not quantifiable.

3 The Corporation has issued Performance Guarantee on behalf of Petronet LNG Limited against the performance obligations of LNG SPA, the outflow that may arise under the same is not quantifiable.

#Calls received for Rights issue/Private placement during the year from JVs and associates for which subscription of shares was pending as on 31.03.2019.

NOTE 64 RESEARCH AND DEVELOPMENT EXPENDITURE

Rs. in Crores

Particulars

2018-19

2017-18

a) Revenue Expenditure

53.41

47.38

b) Capital Expenditure

35.81

NOTE 65 REVENUE FROM CONTRACTS WITH CUSTOMERS

A.

Contract balances

Rs. in Crores

31-Mar-19

Contract liabilities

201.68

The contract liabilities primarily relates to the liability towards customer loyalty program for unutilized points and the upfront bidding fees/fixed fees pertaining to Retail Outlets

Rs. in Crores

Movement in contract liabilities is as follows

2018-19

At beginning of the year

165.02

Increases due to cash received, excluding amounts recognised as revenue during the year

84.53

Revenue recognised that was included in the contract liability balance at the beginning of the year

47.87

At end of the year

201.68

B. The Corporation has adopted Ind AS 115 Revenue from Contracts with Customers with a date of initial application of 1st April 2018. The Corporation has applied Ind AS 115 following the retrospective cumulative effect method.

a. Bidding Income

All successful dealer in Retail Outlets tender is required to pay non refundable bidding/fixed fees upfront. The fees collected upfront are not refundable and is in the nature of a material right which entitles the dealer to operate the retail outlet in the Company''s name for the specified period. Given that the Company does not have any significant performance obligation against the receipt of the upfront fees, the revenue is recognised on a systematic basis over the period of the contract.

The details of adjustments to opening Other Equity and other account balances as at 1st April 2018 is detailed below:

Rs. in Crores

Extract of Balance Sheet

As at 31/03/2018

As at 01/04/2018 before adjustment

Adjustments on account of Ind AS 115

As at 01/04/2018 after adjustments

II EQUITY AND LIABILITIES

Equity

Other Equity

32,164.61

32,164.61

(39.79)

32,124.82

Non- Current Liabilities

Deferred Tax Liabilities

4,955.52

4,955.52

(21.37)

4,934.15

Other non-current liabilities

143.19

143.19

61.16

204.35

The below table represents impact of revenue and profit before tax for the period, had the earlier policy for revenue recognition been continued during FY 2018-19.

Extract of Statement of Profit and Loss for the year ended 31st March 2019

Particulars

As per Ind AS 115

As per Old Ind AS 11 and 18

Impact due to the change

Other income

2,983.60

2,995.10

11.50

Profit before tax

10,439.62

10,451.12

11.50

NOTE 66

Ministry of Corporate Affairs order approving the merger of wholly owned subsidiary Petronet CCK Limited (PCCKL) with the Corporation was received on 31st May 2018. Both PCCKL and the Corporation have filed the MCA order with Registrar of Companies on 1st June 2018 and PCCKL stands merged with the Corporation w.e.f. 1st June 2018. The appointed date of merger is 1st April 2017. Accordingly, the financial statements for the period 2017-18 has been restated including the PCCKL operations.

The merger of PCCKL was done as per Pooling of Interest Method at book value and the difference between book value of the net assets and investment value was (Rs. 77.50 Crores) which was taken to Capital Reserve (Rs. 33.09 Crores) and Retained Earnings (Rs. 44.41 Crores). The Profit after tax for FY 2017-18 was increased by Rs. 56.96 Crores on account of merger.

NOTE 67

The Corporation has decided to transfer its Gas business into a separate wholly owned subsidiary named Bharat Gas Resources Limited. Accordingly, the carrying amount of the assets and liabilities as at 31st March 2019 pertaining to the Gas business are presented separately from other Assets and Liabilities in the financial statements as a part of Disposal Group in line with Ind AS 105.

NOTE 68

In March 2019, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules, 2019 notifying Ind AS 116 Leases, which replaces Ind AS 17 Leases and is effective from 1st April 2019. The core principle of this standard is that in case of a lessee most of the leases are to be recognised in the balance sheet as Right of use asset on the asset side and lease liability on liability side of balance sheet. The new standard provides two broad alternative transition options- Retrospective method and cumulative effect method. The Corporation is in the process of evaluating the impact of new leases standard.

NOTE 69

Figures of the Previous year have been regrouped wherever necessary, to conform to current period presentation. Signature to Notes ''1'' to ''69''

For and on behalf of the Board of Directors

As per our attached report of even date For and on behalf of

Sd/-

D. Rajkumar

CVK & Associates

Borkar & Muzumdar

Chairman and Managing Director

Chartered Accountants

Chartered Accountants

DIN: 00872597

ICAI FR N0.101745W

ICAI FR NO.101569W

Sd/-

Sd/-

Sd/-

Sd/-

N. Vijayagopal

M. Venugopal

A.K. Pradhan

Devang Vaghani

Director (Finance)

Company Secretary

Partner

Partner

DIN: 03621835

Membership No. 032156

Membership No. 109386

Place: MUMBAI

Date: 20th May 2019

Source : Dion Global Solutions Limited
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