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KCP Sugar Ind Corp

BSE: 533192|NSE: KCPSUGIND|ISIN: INE790B01024|SECTOR: Sugar
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Notes to Accounts Year End : Mar '18

Note 1. Corporate Information

K.C.P Sugar and Industries Corporation Ltd is a listed entity, one among the leading sugar manufacturing companies in India . Its allied business consists of manufacturing and marketing of Rectified Spirit, Extra Neutral Alcohol, Ethanol, Incidental Cogeneration of Power, Organic Manure, Mycorrhiza Vam, Calcium Lactate and CO2. Company has two sugar factories located in Krishna District, Andra Pradesh having an aggregate crushing capacity of 11,500 tons per day. It has its registered office at 239/183, Ramakrishna Buildings, Anna Salai, Chennai, Tamil Nadu 600006, India.

The financial statements were approved by the Board of Directors and authorised for issue on 25.05.2018

2.1 Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Re.1/- per share. The holders of the equity shares are entitled to receive dividends as declared from time to time, and are entitled to voting rights proportionate to their share holding at the meetings of shareholders.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive the remaining assets of the company , after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Secured by hypothecation of work-in-progress, finished goods, raw materials, stores and spares, book debts, all other currents assets and further secured by a second charge created on movable fixed assets of Sugar units at Vuyyuru and Lakshmipuram.

3 Transition to IND AS

These are the Company’s first financial statements prepared in accordance with Ind AS. The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (The Company’s date of transition).

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

3.2 A: Ind AS optional exemptions and mandatory exceptions availed

1. Deemed cost of Property Plant and Equipment

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments as required to be made as per para 10 of Ind AS 101.

The Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value after making the necessary adjustments now required to be made as required by the Ind AS.

2. Evaluation of arrangements in the nature of lease

Ind AS 101 allows an entity to determine whether an arrangement existing at the date of transition to Ind AS contains a lease on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.

The Company has elected to determine whether the arrangements existing contains a lease on the basis of the facts existing on transition date.

3. Revenue from Contracts with customers

A first-time adopter is not required to restate contracts that were completed before the earliest period presented. A completed contract is a contract for which the entity has transferred all of the goods or services identified in accordance with previous GAAP

Accordingly the Company has not restated the contracts completed in accordance with the previous GAAP as as at the transition date.

3.3 B: Ind AS mandatory exceptions

1. Estimates

An entity’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Investment in Mutual fund carried at FVPL

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

2. Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

3.4 C : First time adoption

The impact on First time adoption of Ind AS is set out in Note

1. Fair valuation of investments

Uner IND AS investment in Equity and mutualfunds is measured at fair value and the changes in value are recognised in profit and loss account

2. Re measurements of post-employment benefit obligations

Under Ind AS, re measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised net of tax in other comprehensive income, net of tax instead of profit or loss. Under the previous GAAP these re measurements were forming part of the profit or loss for the year.

3. Excise duty

Under the previous GAAP revenue from sale of products was presented exclusive of excise duty. Under the Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in the total revenue and total expenses for the year ended 31 March 2018. However there is no impact on total equity and profit.

4. Under Section 135 of The Companies Act, 2013 the company is required to spend Rs.3,22,726/- during the year under review towards Corporate Social Responsibility (CSR) activities as framed by the Company in its Corporate Social Responsibility program. However, the Company has spent Rs.21,25,577/-

5. Contingent Liabilities:

a. Outstanding Guarantees issued by Banks on behalf of the company is Rs.3,46,17,938/- (PY Rs. 3,46,53,563/-)

b. Demands raised on the company by the respective authorities are as under:

The Company has not received any intimation from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the yearend together with interest paid / payable as required under the Act have not been given.

Disclosure requirements of Indian Accounting Standards

6. Disclosures in respect of Ind AS 107 - Financial Instruments

a. Financial Instruments by Categories

The carrying value and fair value of financial instruments by categories were as follows:

b. Fair Value Hierarchy

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

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

c. Valuation Technique used to determine Fair Value:

Specific valuation techniques used to value financial instruments include:

Use of quoted market prices for Listed instruments

d. The following tables present fair value hierarchy of assets and liabilities measured at fair value:

7. Financial risk management

The Company’s activities expose to limited financial risks: market risk, credit risk and liquidity risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.

Market risk

Market risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument.

The company is exposed to market risk primarily related to foreign exchange rate risk (currency risk), Interest rate risk and the market value of its investments.

Securities Prices Risk:

The company’s exposure to equity securities price risk arises from Investments held and classified in the Balance Sheet as Fair Value through P&L. the company has investment in a form of Mutual funds and Equity shares. The company monitors the movement in the value of the Investments by observing the NAV.

Credit Risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. It principally arises from the Company’s Trade Receivables, Advances and deposit(s) made

Trade receivables

The company has outstanding trade receivables amounting to Rs. 22,59,40,321 and Rs. 23,28,77,136 as of March 31, 2018 and March 31, 2017, respectively. Trade receivables are typically unsecured are derived from revenue earned from customers. Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The company is not exposed to concentration of credit risk to any one single customer. Default on account of Trade Receivables happens when the counterparty fails to make contractual payment when they fall due.

Further for amounts overdue are constantly monitored by the management and provision towards expected credit loss are made in the books. Management estimated of expected credit loss for the Trade Receivables are provided below with the classification on debtors.

Credit risk exposure:

An analysis of age of trade receivables at each reporting date is summarized as follows:

Trade receivables are impaired in the year when recoverability is considered doubtful based on the recovery analysis performed by the company for individual trade receivables. The company considers that all the above financial assets that are not impaired for each reporting dates under review are of good credit quality.

Liquidity Risk

Our liquidity needs are monitored on the basis of monthly and yearly projections. The company’s principal sources of liquidity are cash and cash equivalents, cash generated from operations, Term loans, deposits from public and short term borrowings from Bank.

The company manages liquidity needs by continuously monitoring cash inflows and by maintaining adequate cash and cash equivalents. Net cash requirements are compared to available cash in order to determine any shortfalls.

Short term liquidity requirements consist mainly of sundry creditors, expense payable, employee dues, repayment of loans and retention & deposits arising during the normal course of business as of each reporting date. We maintain a sufficient balance in cash and cash equivalents to meet our short-term liquidity requirements.

Long term liquidity requirements on a periodical basis and manage them through internal accruals. Our noncurrent liabilities include non-convertible debentures, optionally convertible debentures, Unsecured Loans from Promoters, Term Loans from Banks, Retentions & deposits.

The table have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the company can be required to pay.

Interest Rate Risk

Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. Any movement in the reference rates could have an impact on the Company’s cash flows as well as costs. The Company is subject to variable interest rates on some of its interest-bearing liabilities being short term borrowings.

The following table represents the contractual obligation and receivables to/from financial liabilities and financial assets respectively.

The Company’s variable interest rate exposure is mainly related to debt obligations arising from short debt borrowings

The interest expenses and impact on it on account of Increase/decrease of 100 basis points in interest rates at the balance sheet is provided in table below:

The model assumes that interest rate changes are instantaneous parallel shifts in the yield curve. Although some assets and liabilities may have similar maturities or periods to re-pricing, these may not react correspondingly to changes in market interest rates. Also, the interest rates on some types of assets and liabilities may fluctuate with changes in market interest rates, while interest rates on other types of assets may change with a lag. The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date.

The period end balances are not necessarily representative of the average debt outstanding during the period. Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets or by adequate funding by the shareholders to absorb the losses of the Company.

The Company’s capital comprises equity share capital, retained earnings and other equity attributable to equity holders. The primary objective of Company’s capital management is to maximize shareholders value. The Company manages its capital and makes adjustment to it in light of the changes in economic and market conditions. The capital gearing ratio is provided in table below:

*Debt represents long term loan from banks and deposits from public.

8. Disclosure in respect of Indian Accounting Standard (Ind AS)-19 “Employee Benefits”

a. General description of various defined employee’s benefits schemes are as under:

a) Provident Fund:

The company’s Provident Fund is managed by Regional Provident Fund Commissioner. The company pays fixed contribution to provident fund at pre-determined rate.

b) Gratuity:

Gratuity is a defined benefit plan, provided in respect of past services based on the actuarial valuation carried out by LIC of India and corresponding contribution to the fund is expensed in the year of such contribution.

The scheme is funded by the company and the liability is recognized on the basis of contribution payable to the insurer, i.e., the Life Insurance Corporation of India, however, the disclosure of information as required under Ind AS-19 have been made in accordance with the actuarial valuation.

b. The summarized position of various defined benefits recognized in the Statement of Profit & Loss, Other Comprehensive Income(OCI) and Balance Sheet & other disclosures are as under:

Movement in defined benefit obligation:

a) Under the previous GAAP dividends on equity shares recommended by the board of directors after the end of the reporting period but before the financial statements were approved for issue were recognised in the financial statements as a liability. Under Ind AS, such dividends are recognised when approved by the members in a general meeting. The effect of this change is an increase in total equity as at April 1, 2016 of Rs. 3,41,16,895, but does not affect profit before tax and total profit for the year ended March 31, 2017.

b) Under previous GAAP actuarial gains and losses were recognised in profit or loss. Under Ind AS, the actuarial gains and losses form part of remeasurernent of the net defined benefit liability / asset which is recognised in other comprehensive income. Consequently, the tax effect of the same has also been recognised in other comprehensive income under lnd AS instead of profit or loss. The actuarial losses for the year ended March 31, 2017 were Rs. 171,528/- (Net of taxes)

c) Under previous GAAP Security deposits were carried at transaction cost, while under Ind AS, present value of these deposits are retained in the financial statement and balance value of these deposits are carried as pre-paid rent.

d) Under previous GAAP there was no concept of other comprehensive income. Under Ind AS, specified items of income, expense, gains, or losses are required to be presented in other comprehensive income.

e) Under previous GAAP investments are carried at cost at the end of the reporting period. Under Ind AS, investments are carried at fair value through PL. The effect of this is reduction in total equity as at April 1, 2016 of (Rs.10,95,29,389), the effect of same on statement of profit and loss of March 31, 2017 is gain of is Rs.25,93,70,650/-

f) Under Previous GAAP Provision for bad and doubtful debts for the advances given are made on incurred loss model. Under Ind AS, provision is made on expected credit loss model.

g) Under previous GAAP Financial liabilities were carried at book value, while under Ind AS fair value of the liabilities are computed and retained in Balance sheet and interest is accounted accordingly based in the repayment. This change has resulted in increase of equity as at 01April, 2016 to the tune of Rs.5,74,65,276, the same has resulted in additional expense of Rs.2,80,72,569 to the statement of profit and loss for the year ended March 31 2017.

Source : Dion Global Solutions Limited
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