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Chennai Petroleum Corporation

BSE: 500110|NSE: CHENNPETRO|ISIN: INE178A01016|SECTOR: Refineries
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Notes to Accounts Year End : Mar '18

A. Corporate Information

The stand-alone financial statements of “Chennai Petroleum Corporation Limited” (“the Company” or “CPCL”) are for the year ended 31st March 2018. The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognised stock exchanges in India. The registered office of the Company is located at 536, Anna Salai, Teynampet, Chennai- 600018. (CIN - L40101TN1965GOI005389)

CPCL is in the business of refining crude oil to produce & supply various petroleum products.

Information on related party relationships of the Company is provided in Note-34.

The stand-alone financial statements were approved for issue in accordance with a resolution of the Board of directors on 10th May, 2018.

B. Amendments to Standards effective 1st April,2017

- Amendments to Ind AS 7, Statement of Cash flows

Effective April 1st, 2017, the Company adopted the amendment to IndAS7, which require the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non cash changes. Further, the amendment suggest inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement. The adoption of the amendment will have impact only on disclosures in relation to cash flow statement within the financial statements.

- Amendments to Ind AS 102, Share Based payments

Effective April 1st, 2017, amendment to Ind AS 102 specifies the accounting for cash-settled share based payments or share based payments with a net-settled feature. The same is not relevant to the Company as it does not have any transactions of this nature.

C. Standards issued but not yet effective

On March 28th, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration and the Ind AS 115, Revenue from Contract with Customers. They shall come into force from April 1st, 2018. The information that is expected to be relevant to the financial statements is provided below.

- Amendments to Ind AS 21, The Effects of Changes in Foreign Exchange Rates

The amendment to Ind AS 21, Foreign currency transactions and advance consideration clarifies the date of the transaction for the purpose of determining the exchange rate to be used on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The Company will adopt the standard on April 1st, 2018. The effect on adoption of Ind AS 21 is expected to be insignificant.

- Amendments to Ind AS 115, Revenue from Contract with Customers

The Ind-AS 115 Revenue from Contract with Customers supersedes Ind-AS 11 Construction Contracts and Ind-AS 18 Revenue. The standard is effective for periods beginning on or after April 1st, 2018. The amendment is not relevant for the company as it does not have any revenue from construction contracts.

Note – 1A : SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, the accompanying disclosures, and the disclosure of contingent liabilities. These include recognition and measurement of financial instruments, estimates of useful lives and residual value of Property, Plant and Equipment and intangible assets, valuation of inventories, measurement of recoverable amounts of cash-generating units, measurement of employee benefits, actuarial assumptions, provisions etc.

Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The Company continually evaluates these estimates and assumptions based on the most recently available information. Revisions to accounting estimates are recognized prospectively in the Statement of Profit and Loss in the period in which the estimates are revised and in any future periods affected.

JUDGEMENTS

In the process of applying the company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the standalone financial statements:

Contingencies

Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events

ESTIMATES AND ASSUMPTIONS

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the company. Such changes are reflected in the assumptions when they occur.

Defined benefit plans / Other Long term employee benefits

The cost of the defined benefit plans and other long term employee benefit plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. The management considers the interest rates of government securities based on expected settlement period of various plans.

Further details about various employee benefit obligations are given in Note 32.

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model based on level-2 and level-3 inputs. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as price estimates, volume estimates, rate estimates etc. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Also refer Note-35 for further disclosures of estimatesand assumptions.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less cost of disposal used to determine the recoverable amounts of the impaired assets are not based on observable market data, rather, management’s best estimates. The value in use calculation is based on a DCF model. The cash flows do not include impact of significant future investments that may enhance the asset’s performance of the CGU being tested. The results of impairment test are sensitive to changes in key judgements, such as changes in commodity prices, future changes in alternate use of assets etc, which could result in increase or decrease of the recoverable amounts and result in additional impairment charges or recovery of impairment charged.

Refer Note 42.1 on impairment recognized during the year.

(i) (a) As per the Formation Agreement entered into between the promoters, an offer is to be made to the Naftiran Intertrade Company Limited (NICO), an affiliate of National Iranian Oil Company (NIOC) in any issue of the Capital in proportion to the shares held by them at the time of such issue to enable them to maintain their shareholding at the existing percentage.

(b) Refer Note-40 - Events occuring after Reporting Period(Sl.No.3)

(ii) (a) Based on special resolution passed by the shareholders through postal ballot on 16.07.2015, the company has allotted 100 Crore Non Convertible Cumulative Redeemable Preference Shares of ‘10 each for cash at par amounting to Rs.1000 Crore to Indian Oil Corporation Ltd, the holding company on private placement preferential allotment basis on 24.09.2015 after receipt of full subscription amount.Preference Shares classified as financial liability (long term borrowing) as per Ind AS 32 - Refer note - 15(II) (B) and note

(ii) thereon

(b) Refer Note-40 - Events occuring after Reporting Period(Sl.No.2)

A With regard to disclosure requirements under the provisions of section 22 of Micro, Small and Medium Enterprises Development Act, 2006, the company has carried out the same based on the confirmation received from its suppliers. No interest amount remains unpaid to such Micro and Small enterprises as on 31st March 2018 and no payments were made to such enterprises beyond the “appointed day” during the year. Also, the company has not paid any interest in terms of section 16 of the above mentioned act or otherwise.

B Represents dues to Indian Oil Corporation Ltd., the holding company Rs.402282.36 Lakhs (2017: Rs.114882.02 Lakhs) and IOT Infrastructure and Energy Services Limited Rs.351.46 Lakhs (2017: Rs.107.81 Lakhs)

A (i) Goods and Services Tax (GST) has been implemented w.e.f.01.07.2017 wherein some of the petroleum products have come under its ambit. Accordingly, GST is being levied on these products as against Excise Duty applicable hitherto. Since Excise duty is included in revenue and GST is not included in revenue, the comparable turnover after netting off Excise duty on products on which GST has now been levied, for periods before 01.07.2017, is tabulated below :

(ii) Sale to certain customers, which involves return of material upon extraction of relevant products are being invoiced for the gross supply quantity by the company and quantity returned is being invoiced by the customer on the company upon GST implementation. Accordingly, the quantity supplied to the extent received by the company after extraction is included in both Revenue from operations and purchase of stock in trade to the extent of Rs.20929.30 Lakhs in line with the invoicing pattern under GST.

A Represents interest on Income tax refund received under the Income Tax Act, 1961

B Represents Dividends received from Indian Additives Limited (Non-Current Investments in Joint Ventures)

Note – 2 EMPLOYEE BENEFITS

Disclosures in compliance with Ind AS 19 on “Employee Benefits” is as under:

A. Defined Contribution Plans- General Description

Pension Scheme:

During the year, the company has recognised Rs.2214.54 Lakhs (2017: Rs.2286.41 Lakhs) towards Defined Contributory Employees Pension Scheme in the Statement of Profit and Loss/ CWIP (included in Contribution to Provident & Other Funds in Note - 25/ Construction period expenses in Note-2.1)

During the year, the company has recognised Rs.234.04 Lakhs (2017: Rs.227.88 Lakhs) as contribution to EPS-95 in the Statement of Profit and Loss/ CWIP (included in Contribution to Provident and Other Funds in Note - 25/ Construction period expenses in Note-2.1)

B. Defined Benefit Plans- General Description

1 Provident Fund:

The Company’s contribution to the Provident Fund is remitted to separate provident fund trust established for this purpose based on a fixed percentage of the eligible employee’s salary and charged to Statement of Profit and Loss. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company. The Provident Funds maintained by the PF Trust in respect of which actuarial valuation is carried out does not have any deficit as on 31st March 2018.

2 Gratuity:

Each employee rendering continuous service of 5 years or more is entitled to receive gratuity amount equal to 15/26 of the eligible salary for every completed year of service subject to a maximum of Rs.20 Lakhs at the time of separation from the company.

3 Post Retirement Medical Scheme (PRMS):

PRMS provides medical benefit to retired employees and eligible dependant family members.

4 Workman Compensation:

The company pays an equivalent amount of 100 months salary to the family member of employee, if employee dies due to accidental death while he is on duty. This scheme is not funded by the company. The liability originates out of the workman compensation Act and Factory Act

C. Other Long-Term Employee Benefits - General Description

1 Leave Encashment:

Each employee is entitled to get 8 earned leaves for each completed quarter of service. Encashment of earned leaves is allowed during service leaving a minimum balance of 15 days subject to maximum accumulation up to 300 days. In addition, each employee is entitled to get 5 sick leaves at the end of every six months. The entire accumulation of sick leaves is permitted for encashment only at the time of retirement.

2 Long Service Award:

On completion of specified period of service with the company and also at the time of retirement, employees are rewarded with Prepaid Card as per eligibility, based on the duration of service completed.

D. The summarised position of various defined benefits / Long Term Employee Benefits recognised in the Statement of Profit & Loss, Balance Sheet are as under:

(Figures presented in Italic Font in the table are for previous year)

Note - 3 : COMMITMENTS AND CONTINGENCIES

A. Leases

Operating lease - as lessee

The company has taken certain assets (including office/residential premises/Land) on Operating Lease which are cancellable by giving appropriate notice as per the respective agreements. During the year Rs.1739.10 Lakhs (2017: Rs.2063.92 Lakhs) had been paid towards cancellable Operating Lease.

B Disclosure under Finance Lease as Lessee:

The company has entered into BOOT arrangement with IOT Infrastructure & Energy Services Limited in respect of LPG Bottling facilities for a period of 10 years. During the year, on completion of the contracted period of 10 years, the Lessor has transferred ownership of the assets to the company at Nil Value.

C Contingent Liabilities

Contingent Liabilities amounting to Rs.69142.11 Lakhs (2017: Rs.65184.02 Lakhs) are as under:

(i) Rs.2520.31 Lakhs (2017: Rs.539.66 Lakhs) being the demands raised by the Central Excise /Customs/ Service Tax Authorities including interest of Rs.807.62 Lakhs (2017: Rs.189.74 Lakhs).

(ii) Rs.52998.44 Lakhs (2017: Rs.50592.22 Lakhs) being the demands raised by the VAT/ Sales Tax Authorities and includes no interest (2017:Nil).

(in)? 9815.98 Lakhs (2017: Rs.10002.51 Lakhs) in respect of Income Tax demands including interest of Rs.4802.51 Lakhs (2017: Rs.2582.58 Lakhs).

(iv)Rs.3807.38 Lakhs (2017: Rs.4049.63 Lakhs) including Rs.239.68 Lakhs (2017: Rs.2241.64 Lakhs) on account of Projects for which suits have been filed in the Courts or cases are lying with Arbitrator. This includes interest of Rs.867.83 Lakhs (2017: Rs.827.75 Lakhs).

The Company has not considered those disputed demands/claims as contingent liabilities, for which, the outflow of resources has been considered as remote.

D Commitments

(i) Capital Commitments

Estimated amount of contracts remaining to be executed on Capital Account not provided for Rs.115254.48 Lakhs (2017: Rs.82208.01 Lakhs).

(ii) Other Commitments

The Company has an export obligation to the extent of Rs.10145.90 Lakhs (2017: Rs.59057.65 Lakhs) on account of concessional rate of customs duty availed under EPCG license scheme on import of capital goods.

Note - 4 “Related Party Disclosures” in compliance with Ind-AS 24, are given below:

1. Relationship with Entities

A. Details of Holding Company

i) Indian Oil Corporation Limited (IOCL)

E. Government related entities where significant transactions are carried out:

Apart from transactions reported above, the company has transactions with other Government related entities, which includes but not limited to the following:

Name of Government: Government of India ( Central and State Government)

Nature of Transactions:

- Sale of Product and Services

- Purchase of Product

- Purchase of Raw Materials

- Handling and Freight Charges, etc.

These transactions are conducted in the ordinary course of the Company’s business on terms comparable to those with other entities that are not Government-related

2) Key Managerial Personnel

A. Whole Time Directors / Company Secretary

1) Shri.B.Ashok (Upto 31.05.2017)

2) Shri.Sanjiv Singh

3) Shri Gautam Roy (Upto 31.1.2018)

4) Shri S.Venkataramana (Upto 31.7.2017)

5) Shri U.Venkata Ramana

6) Shri S.Krishna Prasad (Upto 31.1.2018)

7) Shri.Farzad Bahrami

8) Shri.Mohammad Bagher Dakhili

9) Shri S.N. Pandey (w.e.f 01.02.2018)

10) Shri G.Aravindan (w.e.f 30.01.2018)

11) Shri PShankar

B. Independent / Government Nominee Directors

1) Shri .K.M.Mahesh (Upto 24.11.2017)

2) Shri .Mrutunjay Shaoo

3) Dr.P.B.Lohiya

4) Smt. Perin Devi (w.e.f . 24.11.2017)

Note - 5 : FAIR VALUES

Set out below, is a comparison by class of the carrying amounts as per financial statements and fair value of the Company’s financial instruments, along with the fair value measurement hierarchy:

Notes:

1. Levels under Fair Value measurement hierarchy are as follows:

(a) Level 1 items fair valuation is based upon market price quotation at each reporting date.

(b) Level 2 items fair valuation is based upon Significant observable inputs like PV of future cash flows, MTM valuation, etc.

(c) Level 3 items fair valuation is based upon Significant unobservable inputs wherein valuation done by independent valuer.

2. The management assessed that Trade Receivables, Cash and Cash Equivalents, Bank Balances, Deposit for Leave Encashment Fund, Recoverable from Employee Benefits Trusts, Other Non-derivative Current Financial Assets, Short-term Borrowing, Trade Payables, Floating Rate Loans and Other Non-derivative Current Financial Liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

3. The fair value of the financial assets and liabilities is 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.

Methods and assumptions

The following methods and assumptions were used to estimate the fair values at the reporting date:

Level 2 Hierarchy:

(i) Derivative instruments at fair value through profit or loss viz.Foreign exchange forward contracts: Replacement cost quoted by institutions for similar instruments by employing use of market observable inputs are considered.

(ii) Loans to employees, Loan to related parties, Security deposits paid and Security deposits received: Discounting future cash flows using rates currently available for items on similar terms, credit risk and remaining maturities

(iii) Finance lease obligation: For obligation arrived based on IRR, implicit rate applicable on the reporting date and for obligation arrived based on incremental borrowing rate, applicable rate for remaining maturity.

(iv) Term Loans from Banks - In Foreign Currency: Discounting future cash flows using rates currently available for items on similar terms, credit risk and remaining maturities (Excluding floating rate borrowings)

(v) Non Convertible Redeemable Preference shares : The fair value of Preference shares is estimated by discounting future cash flows.

Note - 6 : FINANCIAL INSTRUMENTS AND RISK FACTORS Financial Risk Factors

The Company’s principal financial liabilities, other than derivatives, comprise Borrowings, trade and other payables, security deposits and employee liabilities. The main purpose of these financial liabilities is to finance the Company’s operations and to support its operations. The Company’s principal financial assets include loans & advances, trade and other receivables, shortterm deposits and cash / cash equivalents that derive directly from its operations. The company’s requirement of crude oil imports are canalized through its holding company, Indian Oil Corporation Limited. The derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that trading in derivatives are taken only to hedge the various risks that the company is exposed to and not for speculation purpose.

To ensure alignment of Risk Management system with the corporate and operational objective and to improve upon the existing procedure, the Executive Committee of the company constituted a Committee comprising of officials from various functional areas to identify the risks in the present context, prioritize them and formulate proper action plan for implementation. The Committee has formulated the Risk Management Policy. The Action Taken Report on the Risk Management Policy for the year 2016-17 was reviewed by the Audit Committee and Board at the Meeting held on 15.05.2017 respectively and the Report for the year 2017-18 has been reviewed by the Audit Committee and Board at the Meeting held on 10.05.2018.

The Board of Directors oversees the risk management activities for managing each of these risks, which are summarised below:

Market risk

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. The major components of market risk are interest rate risk, foreign currency risk, commodity price risk and other price risks etc. Financial instruments affected by market risk include Borrowings, Deposits and derivative financial instruments.

The sensitivity analyses in the following sections relate to the position as at 31st March 2018 and 31st March 2017

The analyses exclude the impact of movements in market variables on the carrying values of gratuity and other postretirement obligations, provisions, and other non-financial assets.

The following assumptions have been made in calculating the sensitivity analyses:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31st March 2018 and 31st March 2017 including the effect of hedge accounting.

- The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant as at 31st March 2018.

Interest rate risk

The Company is also exposed to interest rate risk from the possibility that changes in interest rates will affect future cash flows of a financial instrument, principally financial debt. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The Company’s interest rate risk management includes to maintain a mix between fixed and floating rates for rupee and foreign currency loans, based on liquidity, availability of cost effective instruments and considering the market / regulatory constraints. As as 31st March 2018, approximately 93% of the Company’s borrowings are at a fixed rate of interest (31st March 2017: 94%).

The sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, with all other variables held constant, on floating rate borrowings is as follows:

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years .

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 the Company’s operating activities (when revenue or expense is denominated in a foreign currency) and Borrowings.

The Company manages its foreign currency risk through combination of natural hedge, hedging undertaken on occurrence of pre-determined triggers as per the Risk management policy. The hedging is undertaken through forward contracts.

The sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant and the impact on the Company’s profit before tax due to changes in the fair value of monetary assets and liabilities is tabulated below. The Company’s exposure to foreign currency changes for all other currencies is not material.

The effects of most exchange rate fluctuations are absorbed in business operating results which are offset by changing cost competitiveness, lags in market adjustments to movements in rates to its other non-financial assets like inventory etc. For this reason, the total effect of exchange rate fluctuations is not identifiable separately in the company’s reported results.

Credit risk Trade receivables

Customer credit risk is managed according to the Company’s policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored. Transactions other than with oil marketing companies are either generally covered by Letters of Credit, Bank Guarantees or cash-and-carry basis.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counter parties and within credit limits assigned to each counter party so as to minimize concentration of risks and mitigate consequent financial loss.

Liquidity risk

The Company monitors its risk of shortage of funds using detailed cash flow projections which is monitored closely on daily basis. The Company seeks to manage its liquidity requirement by maintaining access to both short term and long term debt markets. In addition, Company has committed credit facilities from banks. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, commercial papers, bank loans and debentures. and finance leases. The Company assessed the concentration of risk and concluded it to be low. The Company has access to a sufficient variety of sources of funding.

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

Excessive risk concentration

Substantial portion of the Company’s sales is to the Holding Company, Indian Oil Corporation Limited. Consequently, trade receivables from IOCL are a significant proportion of the Company’s receivables. Since the operations are synchronised with those of the Holding Company, for optimal results, the same does not present any risk.

Collateral

As the Company has been rated investment grade by various rating agencies, there has been no requirement of submitting any collateral for booking of derivative contracts. The Company undertakes derivatives contract only with those counter parties that have credit rating above the internally approved threshold rating. Accordingly, the Company does not seek any collaterals from its counter parties.

Note - 7: CAPITAL MANAGEMENT

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves. 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 or issue new shares. The Company monitors capital using debt equity ratio, which is borrowings divided by Equity. The Company’s strategy is to keep the debt equity ratio in the range of 2:1 and 1:1. The Company also includes accrued interest in the borrowings for the purpose of capital management.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2018 and 31 March 2017.

1. The Board of Directors has recommended a dividend of 6.65% on the paid-up Preference Capital of the company, representing Rs. 0.665 per preference share and 185% on the paid-up Equity Capital of the company, representing Rs.18.50 per equity share.

2. The Board of Directors of the Company at the meeting held on 05th April 2018, has accorded approval for the partial redemption of Non- Convertible Cumulative Redeemable Preference shares to the extent of Rs.50000 Lakhs, out of the total outstanding amount of Rs.100000 Lakhs. Accordingly, in terms of the issue, offer for partial redemption of Non-Convertible Cumulative Redeemable Preference shares to the extent of Rs.50000 Lakhs, would be made to Indian Oil Corporation Limited. Based on the acceptance of the offer by IndianOil, further action in this regard would be initiated.

3.The Board of Directors of the Company at the meeting held on 05th April 2018 has accorded approval, (subject to the approval of the shareholders of the Company in the General Meeting)

a) For cancellation of unsubscribed equity share capital of Rs.2086.89 Lakhs consisting of 2,08,68,900 equity shares of Rs.10/- each, comprising of partial subscription to Rights Issue made by the company in 1984, by the Government of India and non-subscription by Amoco India Inc., to the Rights Issue made by the company in 1984;

b) For cancellation of 2,19,700 forfeited equity shares of Rs.10/- each totaling Rs.21.97 Lakhs (1,87,900 equity shares forfeited on 26.09.2003 and 31,800 equity shares forfeited on 26.10.2006)

Note - 8 : EXPOSURE TO FINANCIAL DERIVATIVES Financial and Derivative Instruments:

1. All derivative contracts entered into by the Company are for hedging its foreign currency relating to underlying transactions and firm commitments and not for any speculative or trading purposes.

2. The company has No Outstanding forward contract as at 31st March 2018(2017 : NIL) which has been undertaken to hedge its exposure to borrowings and other financial liabilities.

3. Foreign currency exposure that are not hedged by a derivative instrument as on 31st March 2018 is given below:

1 Details of impairment loss in respect of Cauvery Basin Refinery

The Company has refineries at two locations viz., Manali and Nagapattinam (Cauvery Basin Refinery). Consequent to implementation of BS- IV specifications on a pan India basis w.e.f 01.04.2017 and in the absence of secondary treatment facilities, the BS - III grade of diesel production from CBR would not be marketable in the local market, entailing significant coastal/export under recoveries, which has adversely impacted the profitability of CBR and hence the value in use is negative. Accordingly, in line with the requirements of Ind AS -36, an amount of Rs.432.77 Lakhs has been accounted as impairment loss during the year, being the difference between the carrying value of additions during the year Rs.3345.16 Lakhs and the recoverable value of Rs.1003.55 Lakhs after adjusting the impairment loss of ‘1908.84 Lakhs already accounted as part of Capital work in progress in previous year. This impairment loss has been recognised as part of Depreciation, Depletion and Amortisation of tangible and intangible assets in the statement of profit and loss as the carrying value of the assets is lower than the value in use/ estimated recoverable amount of this CGU. Total impairment loss recognized as on 31.03.2018 - Rs.6611.41 Lakhs.

In estimating the value in use, the approximate weighted average capital cost has been considered as the discount rate used to calculate the net present value of the estimated future cash flows, which are subject to changes in the external environment.

The fair value less cost of disposal used to determine the recoverable amounts of the impaired assets are classified as level 3 fair value measurements (as detailed in statement of significant accounting policy no.4), as the estimated recoverable amounts are not based on observable market data, rather, management’s best estimates. The results of impairment test are sensitive to changes in key judgements, such as changes in commodity prices, future changes in alternate use of assets etc, which could result in increase or decrease of the recoverable amounts and result in additional impairment charges or recovery of impairment charged.

2 Pay revision in respect of supervisory employees due from 01.01.2017 has been implemented based on receipt of presidential directives on 29.10.2017 and accounted accordingly. Pending finalization of revision in pay and benefits in respect of non -supervisory employees, provision of Rs.3783 Lakhs, including consequential impact of retirement benefits has been reckoned during the year - Refer note 25.( 2017: Rs.11064 Lakhs for all employees )

3 The Employees Township at Cauvery Basin Refinery has been constructed on land area of thirty four acres and forty nine cents of land leased from a trust on five-year renewable basis.

4 As part of CSR activities, CPCL sponsors polytechnic college, for which twenty acres of land of the company has been leased to the CPCL Educational Trust for a period of 50 years.

5 (a) The cost of land includes provisional payments towards cost, compensation, and other accounts for which detailed accounts are yet to be received from the authorities concerned.

(b) The company has valid title for all immovable properties. However, in respect of 186.86 acres of land allotted by Government of Tamil Nadu (classified as Poramboke) assignment deed is yet to be received. Out of this, value is to be determined by Government of Tamilnadu in respect of 135.93 acres.

(c) Pending decision of the Government/Court, additional compensation, if any, payable to the landowners and the Government for certain lands acquired, is not quantifiable, and hence not considered.

6 The Company’s Property, Plant & Equipments and stores & spares were damaged due to the severe floods in Chennai during December 2015. As against the final claim amount of Rs.607.13 Lakhs (replacement & repair cost net of deductibles), on account payment of Rs.300.00 Lakhs received from the insurance company in FY 2015-16, has been disclosed as income in that year. In respect of damages suffered due to Vardha cyclone during December 2016, the Company has filed insurance claim for an estimated amount of Rs.992.34 Lakhs (replacement cost after considering the deductibles). Final claim is yet to be lodged with the insurance company

7 Valuation of Finished Products:

The overall gross margin percentage for all joint products is subtracted from the final net realisable value of each product to arrive at the total cost of each product which is taken as the basis for valuation of closing stock of finished products. (Refer Policy No 7.2 in Note - 1 - “Statement of Significant Accounting Policies”).

8 The company operates only in a single segment viz. downstream petroleum sector. As such reporting is done on a single segment basis.

9 Previous year’s comparative figures have been regrouped, reclassified and recast wherever necessary.

Source : Dion Global Solutions Limited
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