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Punjab Chemicals & Crop Protection

BSE: 506618|NSE: PUNJABCHEM|ISIN: INE277B01014|SECTOR: Chemicals
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Notes to Accounts Year End : Mar '18

Note 1. Corporate Information

Punjab Chemicals and Crop Protection Limited (“the Company”) is a public limited company domiciled in India and incorporated under the provisions of Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The registered office of the Company is situated at Milestone 18, Ambala Kalka Road, Village & P.O. Bhankharpur, Derabassi, Distt. SAS Nagar, Mohali (Punjab)-140201

The Company is engaged in business of manufacturing of agro chemicals, speciality chemicals and bulk drugs and its intermediates.

Note

a. Plant and equipment includes INR 44 (previous year: INR 44) worth of equipment acquired under United Nations Industrial Development Organization grant scheme.

b. Plant and equipment includes INR 55 (previous year: INR Nil) of capitalization towards research and development.

c. Refer note 19 for information on property, plant and equipment pledged as security by the Company.

d. Refer note 42 for disclosure of contractual commitments for the acquisition of property, plant and equipment.

e. Refer note 38 for reconciliation of deemed cost as considered by the Company pursuant to transition provision under Ind AS 101.

f. Amounts capitalized in the respective project costs and excluded from:

g. The Company has capitalized the following expenses of revenue nature to the cost of fixed asset/capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalized by the Company.

Notes

(a) During the year ended 31 March 2016, the company had decided to sell off one of its office premises for INR 1,200 having a net book value of INR 1,267. The Company had recognized a loss of INR 67 in the year ended 31 March 2016 and the asset was shown under Other current assets as Assets held-for-sale. In the year ended 31 March 2017, the Company had entered into sale agreement of the office premise for a consideration of INR 1,115. Accordingly, the Company has recognized additional loss of INR 85 in the Statement of Profit and Loss for year ended 31 March 2017.

(b) During the financial year 2015-16, the Company had carried out physical verification and technical evaluation for usability of property, plant and equipment and intangible assets at Tarapur unit. On such evaluation the management had identified property, plant and equipment and intangible assets aggregating to INR 1,163 of no use by the Company. Accordingly, the management had decided to discarded / scrapped the assets. The Company had recognized the losses of INR 1,131 in the Statement of Profit and Loss and INR 32 categorized as assets held for sale from Property, Plant and Equipment as at 31 March 2016. During the year 31 March 2017, assets held for sale has been reduced to INR 28 on account of assets sold worth INR 4.

(iii) Rights, preference and restriction attached to shares

The Company has only one class of equity shares having a par value of INR 10 per share. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets on winding up. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders (except for interim dividend) in the ensuing Annual General Meeting. 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.

(v) Bonus shares, shares buyback and issue of shares for consideration other than in cash during five years immediately preceding 31 March 2018

During the five years immediately preceding 31 March 2018, neither any bonus shares have been issued nor any shares have been bought back. Further, no shares have been issued for consideration other than cash except for 69,293 equity shares allotted as fully paid up pursuant to scheme of amalgamation in year ended 31 March 2012.

Note 2: Other equity

(i) Capital reserve

Capital reserve represents the forfeited share application money of INR 185 received for preferential convertible warrants in 2008-2009 and INR 124 received for equity convertible warrant in 2009-2010.

(ii) Capital redemption reserve

Capital redemption reserve is carried forward in the balance sheet of the Company post merger of Parul Chemical Limited into the Company during the year 2010-2011.

(iii) Capital reduction reserve

Capital reduction reserve is carried forward in the balance sheet of the Company post merger of Parul Chemical Limited into the Company during the year 2010-2011.

(iv) Securities premium

Securities premium represents the excess consideration received by the Company over the face value of the shares issued to shareholders. This will be utilized in accordance with the applicable provisions of the Companies Act, 2013.

(v) Amalgamation reserve

Amalgamation reserve is carried forward in the balance sheet of the Company post merger of Parul Chemical Limited into the Company during the year 2010-2011.

(vi) Retained earnings

Retained earnings represents the profits that the Company has earned till date less any transfer to general reserve, less any dividends, or other distributions paid to shareholders.

(vii) Equity instruments through Other Comprehensive Income

The Company has elected to recognize changes in the fair value of certain investments in equity securities of other comprehensive income. These changes are accumulated within the equity instrument through OCI within equity. The company transfers amounts there from to retained earning when the relevant equity securities are derecognized.

* Current and non-current classification of borrowings is based on contractual maturities.

a. In accordance with the Corporate Debt Restructuring Scheme (CDR) approved by the Corporate Debt Restructuring Empowered Group, SBICAP Trustee Company Limited was appointed as the Security Trustee for the benefit of the Lenders of the Company and acting as an agent for SBI Antwerp, Belgium for the loan taken by one of the subsidiary of the Company. In pursuance of master restructuring agreement signed as per CDR scheme and the SBI Antwerp document, the term loan amounting to INR 6,272 (31 March 2017: INR 9,187 ; 1 April 2016: INR 10,915) and working capital demand loan amounting to INR 51 (31 March 2017: INR 51 ; 1 April 2016: INR 177) is secured by way of first pari passu charge on movable assets including current assets and immovable assets of Derabassi and Lalru unit, pledge of unencumbered shares of one of the promoter and the personal guarantee of promoter of the Company. These comprise:

i. Term loans amounting to INR 3,070 (31 March 2017: INR 4,970 ; 1 April 2016: INR 6,020) is carrying interest rate of 10.75% p.a. (31 March 2017: 10.75% ; 1April 2016:10.75%). Principal amount of INR 191 (31 March 2017: INR 347 ; 1 April 2016: INR 269) is overdue for a period of 1 day (31 March 2017: 1-91 days; 1April 2016 1 day) as on the reporting date.

ii. Working capital term loans amounting to INR 1,633 (31 March 2017: INR 2,005 ; 1 April 2016: INR 2,352) is carrying interest rate of 8% p.a. (31 March 2017: 8% p.a; 1 April 2016:8%.). Principal amount of INR 43 (31 March 2017: INR 38 ; 1 April 2016: INR 14) is overdue for a period of 1 day (31 March 2017: 1day; 1 April 2016 1 day) as on the reporting date.

iii. Funded interest term loan amounting to INR 1,569 (31 March 2017: INR 2,206 ; 1 April 2016: INR 2,543) is carrying interest rate of 8% p.a. (31 March 2017: 8% p.a. ; 1 April 2016 : 8% p.a.). Principal amount of INR 54 (31 March 2017: 87 ; 1 April 2016: 54) is overdue for a period of 91 days (31 March 2017: 1 day; 1 April 2016: 1 day) as on the reporting date.

iv. Working capital demand loans amounting to INR 51 (31 March 2017: INR 51 ; 1 April 2016: INR 177) is carrying interest rate of 10.75% p.a. (31 March 2017: 10.75% ; 1 April 2016: 10.75% p.a.). Principal amount INR 51 (31 March 2017: INR 51 ; 1 April 2016 : INR 177) is overdue for 2009 days (31 March 2017: 1644 days ; 1 April 2016: 1279 days) as on the reporting date. (Refer note 19(j)(ii) for further details).

b. Loan from Axis Bank Limited under vehicle finance scheme amounting to INR 10 (31 March 2017: 16 ; 1 April 2016: Nil) is secured by exclusive charge by way of hypothecation of vehicles purchased under said Scheme and carrying interest rate of 9.41% and is repayable in 20 EMIs.

c. Loan from Housing Development Finance Corporation Limited for INR 10 (31 March 2017: INR 11 ; 1 April 2016: INR 14) is secured by equitable mortgage by way of the deposit of the title deeds of the properties of respective employees who have availed the loan under said Schemes and is carrying interest rate of 11% p.a. (31 March 2017: 12%-16% p.a.; 1 April 2016: 12%-16%) and is repayable in 24 EMIs.

d. Loan from Kotak Mahindra Prime Limited under vehicle finance scheme amounting to INR 4 (31 March 2017: 7 ; 1 April 2016: Nil) is secured by exclusive charge by way of hypothecation of vehicles purchased under said Scheme and carrying interest rate of 9.4% and is repayable in 20 EMIs.

e. Loan from Mahindra & Mahindra Finance Services Limited under vehicle finance scheme amounting to INR 58 (31 March 2017: 8 ; 1 April 2016: Nil) is secured by exclusive charge by way of hypothecation of vehicles purchased under said Scheme and carrying interest rate of 11.02% and is repayable in 24-32 EMIs.

f. One time settlement

i. One Time Settlement (OTS) with Central Bank of India

During the year, the Company has paid balance amount of INR 1,208 towards One Time Settlement (OTS) from Central bank of India and obtained No Dues Certificate. Accordingly, net write back of INR 326 has been recognized and disclosed as exceptional items.

ii. Corporate Debt Restructuring

In the earlier periods, the Company had obtained an approval for Debt Restructuring (referred to as ‘CDR’) from the Corporate Debt Restructuring Empowered Group (‘CDR EG’). As per the CDR Scheme, the Company was liable to pay working capital demand loan amounting to INR 5,000 till September 2012, out of which the Company has repaid INR 4,949 (31 March 2107: INR 4,949 ; 1 April 2016: INR 4,823) as of 31 March 2018. The balance amount of INR 51 represents excess interest charged by one of the member of the CDR Scheme which will be adjusted/refunded.

Notes

g. In accordance with the Corporate Debt Restructuring Scheme (CDR) approved by the Corporate Debt Restructuring Empowered Group, SBICAP Trustee Company Limited was appointed as the Security Trustee for the benefit of the Lenders of the Company and acting as an agent for SBI Antwerp, Belgium for the loan taken by one of the subsidiary of the Company. In pursuance of master restructuring agreement signed as per CDR scheme and the SBI Antwerp document, the cash credit amounting to INR 4,665 (31 March 2107: INR 4,669 ; 1 April 2016: INR 4,619) is secured by way of first pari passu charge on movable assets including current assets and immovable assets of Derabassi and Lalru unit, pledge of unencumbered shares of one of the promoter and the personal guarantee of promoter of the Company.

h. Cash credit amounting to INR 4,665 (31 March 2017: INR 4,669 ; 1 April 2016: INR 4,619) is carrying interest rate of 10.75% p.a. (31 March 2017: 10.75% p.a.; 1 April 2016: 10.75% p.a.).

i. Inter-corporate deposits amounting to INR 485 (31 March 2017: INR 314 ; 1 April 2016: 344) is carrying interest rate of 11% to 12.75% p.a (31 March 2017: 12.75% p.a; 1 April 2016:12.75% p.a.).

The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondences with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of amounts payable to such enterprises as at the year end has been made in the financial statements based on information available with the Company as under :

Note 3: First-time adoption of Ind AS

As stated in note 2 (a)(i), these are the Company’s first financial statements prepared in accordance with Ind AS. For the year ended 31 March 2017, the Company had prepared its financial statements in accordance with Companies (Accounting Standards) Rules, 2014 notified under section 133 of the Act and other relevant provisions of the Act (‘previous GAAP’).

The accounting policies set out in Note 2 have been applied in preparing these standalone Ind AS financial statements for the year ended 31 March 2018 including the comparative information for the year ended 31 March 2017 and the opening Ind AS balance sheet on the date of transition i.e. 01 April 2016.

In preparing its Ind AS balance sheet as at 01 April 2016 and in presenting the comparative information for the year ended 31 March 2017, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP. This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with previous GAAP, and how the transition from previous GAAP to Ind AS has impacted the Company’s financial position, financial performance and cash flows.

A. Optional exemptions availed

(i) Deemed cost for property, plant and equipment and intangible assets

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 recognized 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. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets. Accordingly, the Company has adopted to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value. Information relating to gross carrying amount of assets and accumulated depreciation as on the transition date as per previous GAAP is as follows:

(ii) Determining whether an arrangement contains a lease

Ind AS 101 includes an optional exemption that permits an entity to apply the relevant requirements in Appendix C of Ind AS 17 for determining whether an arrangement existing at the date of transition contains a lease by considering the facts and circumstances existing at the date of transition (rather than at the inception of the arrangement). The Company has adopted to avail of the above exemption.

(iii) Investments in Subsidiaries and Joint ventures

Ind AS 101 permits a first time adopter to measure its each investment in subsidiaries and joint ventures, at the date of transition, at cost determined in accordance with Ind AS 27 “Separate Financial Statements”, or deemed cost. The deemed cost of such investment can be it’s fair value at date of transition to Ind AS of the Company, or Previous GAAP carrying amount at that date. Paragraph D15 of Ind AS 101 allows the choice between fair value and IGAAP carrying amount for each of its investments in subsidiaries and joint ventures that it elects to measure using deemed cost. The Company has elected to measure its investment in SD Agchem (Europe), subsidiary of the Company, at its fair value on transition date which will be regarded as it’s deemed cost. The rest of the investments in subsidiaries and joint ventures are carried at their Previous GAAP carrying values as its deemed cost on the transition date.

B. Mandatory exceptions

(i) Estimates

As per Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to Ind AS (i.e. 1 April 2016) or at the end of the comparative information period presented in the entity’s first Ind AS financial statements (i.e. 31 March 2017), shall be consistent with estimates made for the same date in accordance with previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any difference in accounting policies. An entity’s estimates in accordance with Ind AS 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.

As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates the were not required under previous GAAP, those estimates should be made to reflect conditions that exist at the transition date or at the end of the comparative period.

The Company’s estimates under Ind AS are consistent with the above requirement. The key estimates considered in preparation of financial statements that was not required under previous GAAP are listed below:

- Fair valuation of financial instruments carried at FVTPL

- Determination of the discounted value for financial instruments carried at amortized cost

- Impairment of financial assets based on expected credit loss model

(ii) Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortized cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable. Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of financial assets accounted at amortized cost has been done retrospectively except where the same is impracticable.

(iii) De-recognition of financial assets and liabilities

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transaction to Ind AS. However, Ind AS 101 allows a first time adopter to apply the derecognition requirements in Ind AS 109 retrospectively from the date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financials assets and liabilities derecognized as a result of past transaction was obtained at the time of initially accounting for those transactions.

As permitted by Ind AS 101, the Company has adopted to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

Footnotes to the reconciliation of equity as at 1 April 2016 and 31 March 2017 and profit or loss for the year ended 31 March 2017:

i Fair valuation of Financial Investments

a) Investment in equity (other than subsidiary and JV) (quoted and unquoted):For investments in equity (other than subsidiary and JV), Company has elected to follow fair value through OCI option and accordingly all fair value fluctuation shall be recognized directly in OCI. Accordingly, investments in other equity are carried at fair value with resulting gain of INR 0.09 on 1 April 2016 and loss of INR 0.47 as on 31 March 31 2017.

Investments in Mutual Fund (quoted):Under Ind AS 109, Mutual funds are classified and measured at fair value through profit and loss (FVTPL). Accordingly, investments in mutual mutual funds are carried at fair value with resulting loss of INR 0.11 on 1 April 2016 and gain of INR 0.20 as on 31 March 2017.

b) Investment in equity (other than subsidiary and JV) (unquoted):In case of investment in unquoted equity shares fair value cannot be reliably estimated. The Company has currently measured them at net book value as per the latest audited financial statements available. Accordingly, investment in unquoted equity share have resulted in gain of INR 95 on 1 April 2016 and gain of INR 12 for year ended 31 March 2017.

c) Investment in subsidiary and JV) (unquoted):

Ind AS 101 permits a first time adopter to measure its each investment in subsidiaries and joint ventures, at the date of transition, at cost determined in accordance with Ind AS 27 “Separate Financial Statements”, or deemed cost. The deemed cost of such investment can be it’s fair value at date of transition to Ind AS of the Company, or Previous GAAP carrying amount at that date. Paragraph D15 of Ind AS 101 allows the choice between fair value and IGAAP carrying amount for each of its investments in subsidiaries and joint ventures that it elects to measure using deemed cost.The Company has elected to measure its investment in SD Agchem (Europe), subsidiary of the Company, at its fair value on transition date which will be regarded as it’s deemed cost. The rest of the investments in subsidiaries and joint ventures are carried at their Previous GAAP carrying values as its deemed cost on the transition date.

ii Fair valuation of Loans under Corporate Debt restructuring (CDR)

As per Ind AS 109, a substantial modification of the terms of an existing financial liability shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability at fair value. Accordingly Company has recognized the borrowings under CDR at fair value on initial recognition and subsequently at amortized cost. Difference between the CDR rate and fair value rate of borrowing of INR 899 is recognized in retained earrings on transition date and subsequent interest as per effective interest rate method as charged to profit and loss for the period ended on 31 March 2017 INR 367.

iii Government grant

As per Ind AS 20, Grant received will be recognized separately as deferred income and recognized in income statement over the period of useful life of Plant setup for availing grant. Since condition attached to capital subsidy recognized under IGAAP are fulfilled, entire amount capital subsidy of INR 35 is transferred to retained earnings and unamortized UNIDO grant of INR 20 and government grant of INR 15 as of the date of transition to Ind AS is reclassified to liability from other equity.

iv Reversal of rent equalization reserve

Under Ind AS, operating lease is recognized as an expense on a straight-line basis over the lease term except where the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases. Accordingly, rent equalization reserve of INR 25 on rent is reversed in the previous year.

v Excise duty on sales

Under previous GAAP, revenue form sale of goods was presented net of excise duty on sales. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty.

The impact arising from the change is as follows:

vi Employee benefit expense

Under Ind AS, re-measurements i.e. actuarial gains and losses and the return on plan assets on the net defined benefit obligation are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, actuarial gain amounting to INR 8.07 has been recognized in other comprehensive income instead of profit or loss. There is no impact on the total equity as at 01 April 2016 and 31 March 2017.

vii Deferred Tax

Under Ind AS, deferred tax is calculated using balance sheet approach on various transitional adjustments which lead to temporary differences between the carrying amount of an asset or liability and its tax base. On transition date, Deferred tax asset of INR 1,037 is created due to transition adjustment. Further, following the definition of Deferred tax asset as per Ind AS 12, MAT credit has been reclassified from Loans and advances under IGAAP to Deferred tax assets under Ind AS. During the year ended 31 March 2017, net decrease in deferred tax asset is INR 80.

(a) Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.

(b) Fair value of non-current financial assets has not been disclosed as there is no significant differences between carrying value and fair value.

(c) The fair value of borrowings is based upon a discounted cash flow analysis that used the aggregate cash flows from principal and finance costs over the life of the debt and current market interest rates. Management have used external valuation report for the fair value rate of borrowings under CDR arrangement. Fair value of non-current financial liabilities has not been disclosed as there is no significant difference between carrying value and fair value.

(d) As per paragraph D 15 of Ind AS 101, the Company has elected to measure its investment in SD Agchem (Europe) (Subsidiary of the Company), at its fair value on transition date which will be regarded as it deemed cost. The rest of investment in subsidiaries are carried at their previous GAAP value as its deemed cost on transition date.

(e) For quoted investments, market value is taken as fair value. The fair value in respect of the unquoted equity investments cannot be reliably estimated. The Company has currently measured them at net book value as per the latest audited financial statements available.

Note 3(b): Financial risk management

(i) Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to effect changes in market conditions and Company’s activities. The Company, through its training and management standards and procedures, aims to maintain discipline and constructive control environment in which all employees understand their roles and obligations.

The Company’s audit committee oversees how management monitors compliance with Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to risk faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the result of which are reported to audit committee.

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

- Credit risk (see (ii));

- Liquidity risk (see (iii));and

- Market risk (see (iv))

(ii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of financial assets represents the maximum credit risk exposure and arises principally from the Company’s receivable from customers and loans. The maximum exposure to credit risks is represented by the total carrying amount of these financial assets in the Balance Sheet:

Trade receivables

The Company has established a credit policy under which each new customer is analyzed individually for credit worthiness before the payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and business intelligence. The Company evaluates the customer credentials carefully from trade sources before appointment of any distributor and only financially sound parties are appointed as distributors. The Company secures adequate deposits from its distributor and hence risk of bad debt is limited. The credit outstanding is sought to be limited to the sum of advances/deposits and credit limit determined by the company.

The following table provides information about the exposure to credit risk and expected credit loss for trade receivables.

The loans primarily represents security deposits, advances recoverable and loans to related parties. The management believes these to be high quality assets with negligible credit risk. The management believes the parties to which these deposits and loans have been given have strong capacity to meet the obligations and where the risk of default is negligible or nil and accordingly no provision for excepted credit loss has been provided on these financial assets. Credit risk on cash and cash equivalents and bank deposits is limited as the Company generally invests in deposits with banks with high credit ratings assigned by domestic credit rating agencies.

Cash and cash equivalents

The Company holds cash and cash equivalents of INR 375 at 31 March 2018 (31 March 2017: INR 167; 1 April 2016 INR 113). The cash and cash equivalents are held with scheduled banks.

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial assets. The Company’s approach to manage liquidity is to have sufficient liquidity to meet it’s liabilities when they are due, under both normal and stressed circumstances, without incurring unacceptable losses or risking damage to the Company’s reputation.Management manages the liquidity risk by monitoring cash flow forecasts on a periodic basis and maturity profiles of financial assets and liabilities. This monitoring takes into account the accessibility of cash and cash equivalents and additional undrawn financing facilities. The Company will continue to consider various borrowings or leasing options to maximize liquidity and supplement cash requirements as necessary.

Exposure to liquidity risk

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

(iv) Market risk

(a) Commodity price risk

The Company is exposed to the movement in price of key raw materials in domestic and international markets. The Company has in place policies to manage exposure to fluctuations in the prices of the key raw materials used in operations. The Company manages fluctuations in raw material price through hedging in the form of advance procurement when the prices are perceived to be low and also enters into advance buying contracts as strategic sourcing initiative in order to keep raw material and prices under check cost of material hedged to the extent possible.

(b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s borrowings. However Company’s borrowings are fixed rate of interest. Hence, the Company is not significantly exposed to interest rate risk.

Exposure to interest rate risk

The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings. The exposure of the Company’s borrowing to interest rate changes as reported to the management at the end of the reporting period are as follows:

(b) Foreign currency risk

The Company is exposed to currency risk to the extent that there is mismatch between the currencies in which purchases are denominated and the functional currency of the Company. The currencies in the which the Company is exposed to risk are GBP, USD, EUR. The Company evaluates this risk on a regular basis and appropriate risk mitigating steps are taken, including but not limited, entering into forward contracts.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the Indian Rupee against below currencies at 31 March 2018 and 31 March 2017 would have affected the measurement of financial instruments denominated in foreign currency and affected Statement of Profit and Loss by the amounts shown below. This analysis is performed on foreign currency denominated monetary financial assets and financial liabilities outstanding as at the year end. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Fair value hierarchy

The fair value of investment property has been determined by external property valuers, having appropriate recognized professional qualifications and recent experience in the location and category of the property being valued.

The fair value measurement for the investment property has been categorized as a Level 3 fair value based on the inputs to the valuation technique used.

Valuation technique

The Company follows discounted cash flows technique. The valuation model considers the present value of net cash flows to be generated from the property, taking into account the expected rental growth rate, vacant periods, occupancy rate, lease incentive costs such as rent-free periods and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), tenant credit quality and lease terms.

Investment property comprise of a commercial property that is leased to third party. Subsequent renewals are negotiated with the lessee. No contingent rents are charged.

Note 4(a): Capital management

Risk management

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The management monitors the return on capital. The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘total equity’. For this purpose, adjusted net debt is defined as total borrowings net of cash and cash equivalents and other bank balances. Equity comprises all components of equity (as shown in the Balance Sheet).

II. Defined contribution plan

a. Provident Fund

The Company’s provident fund scheme and employee’s state insurance (ESI) fund scheme are defined contribution plans. The Company has no obligation other than to make the specified contributions.

b. Superannuation Fund

Superannuation Fund is a defined contribution scheme and contributions to the scheme are charged to the statement of profit and loss in the period when the contributions are due. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

III. Defined benefit plan - Gratuity

The employees’ gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The Company made annual contributions to the LIC of India of an amount advised by the LIC.

The above defined benefit plan exposes the Company to following risks:

Interest rate risk:

The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.

Salary inflation risk:

Higher than expected increases in salary will increase the defined benefit obligation.

Demographic risk:

This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.

The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. The funds are managed by specialised team of Life Insurance Corporation of India.

a) Funding

Gratuity is a funded benefit plan for qualifying employees. 100% of the plan assets are managed by LIC.. The assets managed are highly liquid in nature and the Company does not expect any significant liquidity risks.

The expected contribution to defined benefit plan in 2018-2019 is insignificant.

The following table sets out the status of the defined benefit plan as required under Ind-AS 19 - Employee Benefits:

h) Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same methods (present value of defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Notes:

1. The Company is contesting the demands and the management, including its tax advisors, believe that its position will be likely be upheld in appellate process. No tax expense has been accrued in financial statements for the tax demand raised. The management believes that the ultimate outcome of the proceeding will not have a material adverse effect on the company’s financial position and results of operations.

2. The Company shall indemnify the damages to the Managing Director/Directors in case their personal guarantees are invoked in respect of loans, backed by their personal guarantees.

V. Terms and conditions of transactions with related parties

a. The transaction with related parties are made on terms equivalent to those that prevail in arm’s length transactions and within ordinary course of business. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. b. In accordance with the Corporate Debt Restructuring Scheme (CDR) approved by the Corporate Debt Restructuring Empowered Group, borrowing are also secured by personal guarantees of Mr. Shalil Shroff for term loans, working capital demand loan and cash credit facility from banks. The aggregate balance of borrowing from banks in respect of which personal guarantees have been given stands at INR 10,988 (31 March 2017: INR 13,901, 1 April 2016: INR. 15,711)

Note 5: Segment Information

The Executive Management Committee monitors the operating results of this segment for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. For management purpose, the Company has identified “Performance Chemicals” as single operating segment.

C] Information about major customers

Revenue from 2 customer of the company amounting INR 22,959 and INR 6,079 during the year 2017-18 (2 customers amounting INR 15,179 and INR 5,314 in the previous year 2016-17) constitutes more than 10% of the total revenue of Company.

Note 6: Sale of Joint Venture

During the previous year, the Company has sold its 45% ownership interest in Stellar Marine Paints Limited, a jointly controlled entity on 11 November 2016.

Note 7: Apporval from Reserve Bank of India (RBI) for conversion of Debtors into Investment

In respect of overdue export receivables from its wholly owned subsidiary i.e. S D Agchem (Europe) NV, the company had received approval on March 31, 2016 from Reserve Bank of India (RBI) under Regulation 11 of Notification No. of FEMA 120/ RB -2004 towards utilisation of said overdue export receivable into further investment. During the current year, the Company has received necessary regulatory and other approvals. Accordingly, the overdue export trade receivable from S D Agchem (Europe) NV of INR 2.594 has been converted into investment in equity share capital of the same Company. This has consequential impact on provisions for diminution in value of investments and trade receivable written back. S D Agchem (Europe) has issued new shares with par value of Euro 615 per share resulting into issue of 5,789 equity shares. and capitalised its overdue Trade Receivable (Export) of INR 2.594 of S D Agchem Europe NV.

Note 8: Write-off Investment upto 25%

Based on the Regulation 16A and 17 of Foreign Exchange Management (Transfer or Issue of any foreign securities) Regulation, 2004 and RBI/FED/2015-16 FED Mater Direction No. 15/2015-16 the Company has written off INR Nil (previous year INR 81) upto 25% of investment (net of INR 956 (previous year INR 875) write back of provision created for diminution in the value of Investment).

Note 9: Disposal of Sintesis Quimica, S.A.I.C Argentina

During the current year, STS Chemicals (‘UK’) Limited (‘STS’) and SD Agchem (Europe) NV, Belgium, (SD Agchem), wholly owned subsidiaries of the Company have on 28 September 2017 sold their entire stake in Sintesis Quimica, S.A.I.C, Argentina, a step down subsidiary of the Company to a unrelated third party after completion of necessary legal formalities in India and Argentina.

Note 10:

The specified bank notes (SBN) as defined under the notification issued by the Ministry of Finance, Department of Economic dated 08 November, 2016 are no longer in existence. Hence the Company has not provided the corresponding disclosures as prescribed in Schedule III to the Companies Act, 2013. The disclosure of SBN made in the financial statements for 31 March 2017 is as follows:

Note 11: Operating lease disclosure

The Company has entered into agreements for leasing office premises on lease and license basis. The lease have life of 5 years and no restriction places upon the Company by entering into said lease. The specified disclosure in respect of lease agreements is given below.

Source : Dion Global Solutions Limited
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