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IG Petrochemicals

BSE: 500199|NSE: IGPL|ISIN: INE204A01010|SECTOR: Chemicals
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Notes to Accounts Year End : Mar '18

Bank borrowings are secured by Hypothecation of current assets of the company i.e. stock of raw materials, stock in process, finished goods, stores & spares and book debts on first pari passu basis amongst Working Capital lenders under consortium banking arrangement. It is further secured by hypothecation of Fixed and movable properties and registered mortgage of immovable properties of the Company on second charge basis.

The above Bank borrowings are further secured by Personal Guarantee of two Directors of the company.

Dues to parties covered under the Micro, Small and Medium Enterprises as per MSMED Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the Auditor.

The Management is confident that the matters will be in favour of the company as per legal opinions obtained / legal precedents.

f. Income Tax Matters

The Income Tax Assessments have been completed upto Assessment year 2015-16. While completing the Income tax Assessments, the Income Tax department had disallowed certain claims of the Company which resulted in reduction of carried forward benefits available to the Company as per the Income Tax Act, 1961. Due to this the additional liability remains to be provided as on date amounts to Rs. 2,302.20 Lakhs (Previous Year Rs. 5,209 Lakhs). These matters are under Appeal before the Hon’ble Karnataka High Court and with other Appellate Authorities, based on the favourable decisions in similar cases / legal opinions taken by the Company / discussions with solicitors etc. the management is confident that matters will be in favour of the company, hence no provision has been made in the accounts.

Future cash outflows in respect of item b, c, e, and f above are determinable only on receipt of judgments / decisions pending at various forums / authorities.

g. The Board at its meeting held on 28th May, 2018 considered and recommended a dividend @ 40% i.e. Rs. 4/- per share of Rs. 10/ each for the financial year 2017-18 (Previous Year @ 30% i.e. Rs. 3/- per Share taken as deduction under Reserves & Surplus ) subject to approval of the members of the company.

h. Workmen’s Union Demand of the Company at Taloja with effect from June 1, 2017 is under negotiation, amount presently not ascertainable.

H SEGMENT information primary Business Segment

The Company is exclusively engaged in a single business segment of manufacture and sale of organic chemicals and accordingly this is the only primary reportable segment.

Geographical Segments

Secondary segmental reporting is based on the geographical location of customer. The geographical segments have been disclosed based on revenues within India (sales to Customers within India) and revenues outside India (sales to customers located outside India). Secondary segment assets and liabilities are based on the location of such asset / liability.

1 employee benefits

i. General Description of defined benefit plan

The Gratuity scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarises the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognized in the balance sheet.

The estimates of future salary increase, considered in actuarial valuation, taken account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

2 EXPLANATION ON TRANSITION TO IND AS

(i) Ind AS 101 “ First time adoption of Indian accounting standards” permits companies adopting Ind AS for the first time to take certain exemptions from the full retrospective application of Ind AS in the transition period. The company, on transition to Ind AS , has availed the following key exemptions:-

(a) Property, Plant and equipment :

The Company has elected to take the carrying value of its property, Plant & Equipment and intangible assets as per previous GAAP ( IGAAP) as its deemed cost for Ind AS as at 1st April, 2016.

(b) Investment in Subsidiary and associates

The Company has elected to take the carrying amount of the investments in subsidiary as at 1st April, 2016.

(c) Financial Instruments

The Company has designated its investment in equity instruments, other than investment in subsidiary and associate, as at Fair Value through Profit & Loss, based on facts and circumstances existed on the date of transition.

(ii) Exception applicable to company

(a) De-recognition of financial assets and liabilities

The Company has elected to apply the de-recognition provisions of Ind AS 109 ( Financial Instruments ) prospectively from the date of transition to Ind AS.

(b) Classification and measurement of financial assets

The Company has classified the financial assets in accordance with the Ind AS 109 ( Financial Instruments ) on the basis of facts and circumstances that existed as at the date of transition to Ind AS.

Notes :

1 The Company has designated its investments, which are held for trading , at Fair value through Profit & loss Account (FVPL), impact of such fair value changes as on the date of Transition is recognised in the opening reserves and changes thereafter are recognised in Statement of Profit & Loss.

2 Proposed dividend declared by the Company is accounted for once approved in the Annual General Meeting, as opposed to the earlier practice of accounting for the same after being proposed by the Board under IGAAP.

3 The Company has recognised all actuarial gains and losses on post retirement defined benefit schemes in other Comprehensive Income. Deferred taxes pertaining to these losses has also been recognized in other Comprehensive Income.

4 Other adjustment primarily includes re-measurement of retention at fair value.

5 Other Comprehensive Income includes re-measurement gains / losses on actuarial valuation of post-employment defined benefits.

3 FINANCIAL INSTRUMENTS

This section gives an overview of the significance of financial instruments for the Company and provides additional information on balance sheet items that contain financial instruments.

The details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 21(4)(VIII) to the financial statements.

(a) Financial assets and liabilities:

The following table presents carrying amount and fair value of each category of financial assets and liabilities.

(b) The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into level 1 to level 3, as described below :

Level-1 : Quoted (unadjusted) prices in active markets for identical assets or liabilities

Level-2 : Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level-3 : Techniques which use inputs that have a significant effect on the recorded Fair Value that are not based on observable market data.

(c) Financial Risk Management policies and objectives:

The Company’s financial risk management is an integral part of how to plan and execute its business strategies. The Company’s financial risk management policy is set by the Board.

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables, payables and loans and borrowings

The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommends risk management objectives and policies, which are approved by Senior Management and the Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowings.

Interest rate risk

The Company’s exposure to interest rate risk is minimal as the Company does not have any significant interest earning asset or interest bearing liability. As such, the Company is not exposed to significant interest rate risk as at the reporting date.

Foreign currency risk

The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas and purchases from overseas suppliers in various foreign currencies

The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company maintains sufficient cash and cash equivalents to manage its liquidity risk.

credit Risk

Credit risk is the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Company. To manage this, the Company periodically assess the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts and agreeing of accounts receivables. Individual risk limit are set accordingly.

Financial assets are provided for when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. The Company categorises a loan or receivable for provision as per provisioning policy of the Company. Where loans or receivables have been provided, the Company continues to engage in enforcement activity to attaempt to recover the receivable due. Where recoveries are made, these are recognized in the statement of profit and loss.

A upfront processing fees on loan

The Company has amortized upfront processing fees over the term loan.

B Investments

Investments in financial assets are carried at amortized cost in Ind AS compared to being carried at cost under IGAAP.

C Other financial liabilities

Security deposits are carried at amortized cost in Ind AS compared to being carried at cost under IGAAP.

D other equity

a) Adjustments to the retained earnings have been made in accordance with Ind AS for the above mentioned items.

b) In addition, in accordance with Ind AS 19 ‘Employee Benefits’, acturial gains and losses are recognised in other comprehensive income as compared to being recognised in Statement of Profit and Loss under IGAAP.

c) Adjustment reflected dividend (including corporate dividend tax), declared and approved post reporting period.

E Employee benefit expenses

In accordance with Ind AS 19, ‘Employee Benefits’ acturial gains and losses are recognised in other comprehensive income and not reclassified to profit and loss in subsequent period.

F Deferred tax

Ind AS 12, ‘Income taxes’, requires entities to account for deferred taxes using the balance sheet approach, which focusses on temporary differences between the carrying amount of an liability in the balance sheet and its tax base.

In the previous year, in view of the revised profitability projections, the MAT credit which were written down in the respective earlier years amounting to Rs. 3,957.22 lakhs had been recognized by the Company during the last year, on a reassessment by the management at the year end based on convincing evidence that the Company would pay normal income tax during the specified period and would therefore be able to utilize the MAT credit so recognized (which is in accordance with the recommendations contained in the Guidance Note issued by ICAI), the said asset was created by way of Credit to the statement of Profit and Loss account and shown as MAT credit entitlement. Deferred Tax Liability of Rs. 3,864.22 Lakhs provided during the previous year includes the deferred tax liability recalculated and provided on prudential basis on account of reduction of unabsorbed benefits of earlier years.

4 BUSINESS COMBINATION

During the year ended 31st March, 2018 the Company has acquired the manufacturing unit of M/s Mysore Petro Chemicals Limited with effect from 1st April, 2017 for a consideration of Rs. 7,448.00 lakhs on slump sale basis, as per the valuation by Haribhakti & Co. LLP. The transaction was accounted under Ind AS 103 “ Business Combination “ as a business combination with the purchases price being allocated to identifiable assets and liabilities at fair value as determined by an approved valuer.

Goodwill arose in the acquisition of above business because the cost of combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and assembled workforce of acquired business combination. These benefits are not recognised separately from goodwill as they do not meet the recognised criteria for identifiable intangible assets. The Goodwill is expected to be deductiable for Income Tax purposes.

5 disputed foreign currency liability

Foreign currency liability of Rs.4,077.11 lakhs (31st March, 2017 Rs.3,501.89 lakhs, 1st April, 2016 Rs.3,792.62 lakhs) shown under Trade Payables (Current liabilities) has been disputed. A counter claim has been made, however this liability has been converted by applying exchange rate at the close of the year as per Accounting Standard.

6 research & development

Research & Development Expenditure of Rs. 48.07 lakhs (Previous Year Rs. 49.86 lakhs) have been accounted for in the respective heads of the Statement of Profit and Loss.

7 Revenue from operations for Current year includes excise duty which is discontinued effective 1st July, 2017 upon H implementation of Goods and Service Tax (GST), In accordance with Ind AS18 GST is not included in Revenue from I operations. In view of this Revenue from operations for the year are not comparable with the previous year.

8 corporate social responsibility

As per Section 135 of the Companies Act, 2013, a Company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceeding three financial years on Corporate Social Responsibility (CSR) activities.

(a) Gross amount required to be spent by the Company during the year is Rs. 146.42 lakhs, and

(b) Amount spent during the year :

9 previous year comparatives

Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification / disclosure. Previous years accounts has been audited by M/s ASA & Associates LLP (one of the Joint auditors) , and M/s Hariharan & Co. (Predecessor joint auditors)

Source : Dion Global Solutions Limited
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