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Rana Sugars

BSE: 507490|NSE: RANASUG|ISIN: INE625B01014|SECTOR: Sugar
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Notes to Accounts Year End : Mar '18

1. Corporate Information

Rana Suqars Limited (the Company) is a public company domiciled in India and is incorporated under the provisions of the Companies Act 1956 applicable in India. Its shares are listed on two recognized stock exchanges in India. The registered office of the company is located at S.C.O. 49-50 Sector 8 - C Chandigarh.

The Company is having its operations in the State of Punjab and Uttar Pradesh and is principally engaged in the manufacturing of Sugar Ethanol and co generation of power. Power is used captively as well as exported to the State Grids of Punjab and Uttar Pradesh respectively.

The financial statements were authorized for issue in accordance with a resolution by the Board of Directors of the Company on 30 May 2018.

2. Significant Accounting Policies

2.1 Basis of Preparation

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).

For all periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended 31 March 2018 are the first financial statements which have been prepared in accordance with the Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time. The Company is in Phase il of Ind AS adoption and accordingly the date of transition is 1 April 2016.

In respect of financial information for the year ended 31” March 2018, the Company followed the same accounting policies and accounting policy choices (both mandatory exceptions and optional exceptions availed as ppr Ind AS 101) as initially adopted on transition date i.e. 1” April 2016. Refer to note 34 for information on how the Company adopted Irtd AS.

The financial statements have been prepared on a historical cost basis except for the following assets and liabilities which have been measured at fair value:

a. Plan assets under defined benefit plans. .

b. Certain financial assets and liabilities.

In accordance with IND AS 101 First-time Adoption of Indian Accounting Standard, the Company has presented a reconciliation from the presentation of Financial Information under Accounting Standards notified under Previous GAAP to IND AS of Restated Shareholders equity as at March 31, 2017 and 2016 and of the Statement of Profit and loss and other comprehensive Income for the year ended March 31, 2017.

The financial information are presented in Indian Rupees (INR) and all values are rounded to the nearest lakhs, except where otherwise indicated.

3. Contingent Liabilities, Commitments and Contingencies

(Claims against the company not acknowledged as debts)

Liabilities in respect of Income Tax and Sales Tax have been accounted for on the basis of respective returns filed with the relevant authorities. Additional demand, if any, arising at the time of assessment shall be accounted for in the year in which the assessment is completed. The status of completed assessments is as under:-

a) Income Tax assessments have been completed up to the assessment year 2015-16 and there is no demand pending in respect of the completed assessments.

b) Sales Tax assessments

i) In respect of Sugar Units in Uttar Pradesh, the Excise & Taxation Department has raised demand on account of VAT on molasses for INR 35.41 lakhs, 201.31 lakhs, 103.99 lakhs, 178.90 lakhs and 122.52 lakhs for the Financial years 2011-12, 2012-13, 2013-14, 2014-15 and 2015-16 respectively. However, the as per the order of the Han’ble Allahabad High Court dated 30 March, 2010 the said VAT has not been deposited with the Excise & Taxation Department, Uttar Pradesh. Since Excise & Taxation Department, Uttar Pradesh has filed an appeal with Hon’able Supreme Court of India against such order of the Hon’able High Court of Allahabad;

- the said liability for VAT on molasses has been classified as contingent liability.

ii) The Company has deposited INR Nil (FY 2016-17 INR 6.60 lakhs) under protest with department against alleged demand raised of entry tax and shown the same under the head Payments of Taxes under protest/appeal under Other Assets {Refer note no. 10). The Company has filed appeal against such demand with the respective appellate authorities.

ii,) in respect of Sugar Unit in Punjab, the Department has raised the demand for Purchase Tax on cane for INR 140_40 lakhs 297^22 lakhs 347.25 lakhs, 227.62 lakhs, 90.52 lakhs and 381.98 lakhs for the Financial years 2005-06, 2008-09, 2009-10, 2010-11, 201112 arid 2013-14 respectively. The Company has preferred appeals against such orders with the appellate authorities. Though, the Company has provided purchase tax liability for the years 2005-06 to 2013-14, the same has not been paid as the above mentioned appeals against assessment orders are pending with the appellate authorities.

iv) In respect of Distillery unit in Punjab, the office of Excise & Taxation Commissioner, runjao raisea a aemang u, (INR 55.69 lakhs for VAT and INR 292.78 lakhs for CST) vide its order dated 30 April, 2015 against which the Company has filed appeal with DETC (Appeals) Amritsar,

cl In respect of its Sugar unit at Moradabad, the company has deposited INR 49.90 lakhs in FY 2010-11 on account of Excise Duty under protest against alleged demand of Excise duty and the same has been shown under the head Payments of Taxes under protest/appea under Other Assets {Refer note no. 10). The Company has filed an appeal with CESTAT (Central Excise & Service Tax Appellant Tribunal) against the order of Commissioner, Central Excise.

d) in respect of its Sugar unit at Amritsar, the company has deposited INR 2.50 lakhs in FY 2010-11 onaccountofExciseDutyunder orotestand the same has been shown under the head Payments of Taxes under protest/appeal under Other Assets (Refer note no. 10). The Company has filed an appeal with CESTAT (Central Excise & Service Tax Appellant Tribunal) against the order of Commissioner,

Appeals.

e) Bank Guarantees/LC’s issued INR 1005.25 lakhs (previous year INR 931.96 lakhs) are secured by pledge of FDRs of INR 726.74 lakhs (previous year INR 377.66 lakhs) given by the Company.

n as per the Tripartite agreement between the Company, Bankers and the Individual farmers, Banker disburses the Crop Loan to farmers through the Company The Company has provided guarantee to the Bank on behalf of farmers for repayment of loan with interest The crap bans outstanding as at the end of the Financial Year were INR 4,06*22 lakhs (Previous year NR 6 475.60 lakhs) against the corporate guarantee given by the company amounting to INR 4400.00 lakhs (Previous year INR 6400.00 lakhs).

g) The estimated amount of contracts remaining to be executed on capital account and not provided for was INR 39.03 Lakhs (Previous Year INR 144,90 Lakhs).

3. EXPENDITURE ON EMPLOYEES:

There was no employee employed for full or part of the year who was getting remuneration in excess of the limits specified in Section 197 read with schedule V of the Companies Act, 2013.

Terms and conditions of transactions with related partipg

Loan to Companies in which Directors are interested

4. Deferred Tax:

The Company has tax looses (Business Loss) of INR 9,921.84 lakhs (31 March 2017: INR 8 564 12 lakhs 1 Aoril 2016- INR 1 nn bLh i

5. Employee Benefits:

i) Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

ii) Mortality & disability - Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities

A. Defined Contribution Plan

Contribution to defined contribution plan, recognized as expense for the year is as under:

6. Segment Information:

A. Description of the segments and principal activities:

The Company’s executive committee examines the Company’s performance from a product and geographic perspective and has identified three reportable segments of its business:

a. Sugar Manufacturing: (India - Punjab and Uttar Pradesh)

This part of the business manufactures and sells sugar, molasses and bagasse. Whereas sugar is main product; others are the bye products and are produced at various stages of the production of the sugar. The Company has sugar manufacturing facilities at three locations in India viz. Buttar (Punjab), Moradabad and Rampur (Uttar Pradesh). The committee monitors the performance in the respective region separately. While the committee receives separate reports for each region, the facilities have been aggregated in to one reportable segment as they have similar average gross margins and similar expected growth rates.

b. Ethanol Manufacturing: (India - Punjab)

This part of the business is further integration of the sugar process wherein bye product molasses is further processed to manufacture Ethanol.

c. Power Generation: (India - Punjab and Uttar Pradesh)

This part of the business consumes the bye product bagasse from sugar process and co generates the power. The segment also procures fuel from outside to generate power. After meeting the captive requirements offlhe respective sugar unit the power is exported the respective State Grids under long term Power Purchase Agreements (PPA). .

The management assessed that trade receivables, cash and cash equivalents, other bank balances, loans and advances to related parties, interest receivable, trade payables, capital creditors, other current financial assets and liabilities are considered to be the same as their fair values, due to their short term nature.

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. The following methods and assumptions were used to estimate the fair values:

The fair value of loans from banks and other financial liabilities are estimated by discounting future cash flows Using rates currently available for debt on similar terms, credit risk and remaining maturities. The valuation requires management to use observable and unobservable inputs in the model, of which the significant observable and unobservable inputs are disclosed below. Management regularly assesses a range of reasonably possible alternatives for those significant observable and unobservable inputs and determines their impact on the total fair value.

The fair values of the Company’s interest-bearing borrowings are determined by using DCF method using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at March 31, 2018 was assessed to be insignificant.

Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

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

Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: Techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

7. Financial risk management objectives and policies

instruments and non-derivative financial instruments.

The Company is exposed to capital risk, market risk, credit risk and liquidity risk. These risks are managed pro-actively by the Semor Management of the Company, duly supported by various Groups and Committees.

Investment Logger term cash flow forecasts are updated from time to time and reviewed by the Senior management of the Company.

The table below represents the maturity profile of Company’s financial liabilities at the end of April 01, 2016, March 31, 2017 and March

fihased on contractual undiscounted payments -

(b) Credit Risk

nnanri^T™* tk ^ th® counter ^ wil1 not meet i,s obligation under a financial instrument or customer contract, leading to a Th« Company is exposed to credit risk from its operating activities (primarily trade receivables) including deposits with banks, foreign exchange transactions and other financial assets. y u^iu, mm

C?dMriSk iS ma?agec! subject t0 the ConnPany’s established policy, procedures and control relating to customer credit risk ^Ma,nf9enn®n’ evaluate credit risk relating to customers on an ongoing basis. Receivable control management team assesses the credit quality of the customer, taking into account its financial position, past experience and other factors Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on group\category basis The calculation is based on exchange losses historical data and available facts as on date of evaluation. Trade receivables comprise a widespread customer base. The Company evaluates the concentration of risk with respect to trade receivables as low as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Foreign currencyrisk is the risk that the fair value or future cash flows of a financial instrument 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, expense or capital expenditure is denominated in foreign currency). Foreign currency exchange rate exposure is partly balanced by purchasing of goods from the respective countries. The Company evaluates exchange rate exposure arising from foreign currency transactions and follows established risk management policies.

(g) Interest rate risk

Interest rate 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 long term debt obligation at floating interest rates.

8. Capital Management

For the purpose of the Company’s capital management, capital includes issued equity attributable to the equity shareholders of the Company, Liability Component of compound financial instrument (CFI), security premium and all other equity reserves. The primary objective of the Company’s capital management is that it maintain an efficient capital structure and 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, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, other bank balances.

9. First-time adoption of Ind AS

These financial statements, for the year ended 31 March 2018, are the first financial statements the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared financial statements which comply witH-.Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1 April 2016, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

- The Company has opted to continue with the carrying value as recognized in previous GAAP financials as deemed cost for all its Property, Plant & Equipment (PPE) after considering the necessary. Freehold land and buildings (properties), other than investment property, were carried in the balance sheet prepared in accordance with Indian GAAP on the basis of valuations perfomned on 31 March 2016. The Company has elected to regard those values of property as deemed cost at the date of the revaluation since they were broadly comparable to fair value. The company has also determined that revaluation as at 31 March 2016 does not differ materially from fair valuation as at 1 April 2016. Accordingly, the company has not revalued the property at 1 April 2016 again.

Estimates:

The estimates at 1 April 2016 and at 31 March 2017 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) except for Impairment of financial asfets based on expected credit loss model where application of Indian GAAP did not require estimation. .

The estimates used by the Company to present such amounts in accordance with Ind AS reflect conditions at 1 April 2016, the date of transition to Ind AS and as of 31 March 2017.

1. Property. Plant & Equipment:

As per Ind As 20, accounting for Government grants and disclosure of Government Assistance, the Company has already deducted the amount of grant from the cost of fixed assets and it has recognized the amount of unamorttfed deferred income as at the date of transition in accordance with paragraph 10 of Ind As 101. The corresponding adjustment has been made.in the carrying value of PPE (Net of cumulative depreciation impact) and retained earning respectively, as the grant is directly linked to PPE.

Further, the deferred income is recognized as income over the period of the EPCG licence.

Under Indian GAAP, the transaction costs incurred in connection with borrowings are capitalized as part of the fixed assets and amortized accordingly. However as per Ind As 109, the carrying amount of loan is required to be restated to its amortised cost as at the date of the transition. Since the Company had already capitalized the processing cost as a part of the cost of the fixed assets to restate the carrying amount of loan in accordance with paragraph 10 of Ind AS 101, the carrying amount of fixed assets as at the date of the transition has been reduced by the amount of processing cost (net of cumulative depreciation impact).

2. Deferred Tax:

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind-AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base The application of Ind-AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not reauired under Indian GAAP.

In addition, the various transitional/ restatement adjustments lead to temporary differences. According to the accountinq policies the company has to account for such differences.

Under Indian GAAP the processing cost incurred for loans was accounted as under:

a. In Case the foan has been availed for funding of capital asset, the processing fee was capitalized as part of the cost of the asset;

b. In case the loan has been availed for meeting working capital gap the processing fee incurred is charged to profit and loss account However as per ind As 109, the carrying amount of loan is required to be restated to its amortised cost as at the date of the transition. Since the respective loans availed by the Company carried floating rate of interest and the transaction cost was not material hence the transaction cost has been amortized on straight line basis over the tenure of the respective loan.

4. Cash & Cash Equivalents:

As per Indian GAAP ail amounts in the bank used to be classified as Cash & Cash equivalents. However as per Ind AS cash or a cash equivalent the use of which is restricted from being exchanged or to settle a liability for at least twelve months after the reporting period are to be shown as Other Bank Balances. Accordingly the amounts which are held by the bank as margin money resulting in to restriction on its usage has been classified as Other Bank Balances which are not part of Cash or a Cash Equivalent.

5. Errors:

a. Banking of Power Units: The Company is in to power co generation and has its power co generation facilities in Punjab and Uttar Pradesh (U.P.). In case of U.P. the Company Banks some of its power units exported to the UUar Pradesh Power Corporation Limited (UPPCL) and raises the invoice net of the banked units. The Company adjusts these banked units during the year against the electricity purchased from UPPCL. However post implementation of the Ind AS the Company shows the banked units as inventory. The effect of any such reclassification has been transferred to retained earnings.

b. Reclassification of assets’. The Company acts as a channel partner for facilitating crop loans to the farmers attached with the Company from the banks. For this purpose the Company enters in to a tripartite agreement with the bank and the respective farmer. The Bank disburses the loans to the Company accounts which further is transferred to the respective cane grower’s account either in cash or in kind. Earlier the Company used to classify the loan received from the bank as liability and amount disbursed to the farmer as an asset. The amount which was left for further disbursement used to be reduced from the loan amount. However as per the Ind AS framework neither such an advance to farmer nor loan from the bank qualifies as an asset or liability respectively. Hence the Company has derecognized the corresponding assets and liabilities. Further the amount received from bank for disbursement to farmers which could not be disbursed as at ths reporting date has been classified as Other Liability and corresponding balance in the bank has been classified as Cash & Cash equivalents.

c. Derecognition of Current Asset There was an interest reflecting as on transition date which does not qualify to be an asset either current or noncurrent and hence has been derecognized.

d. Molasses Storage Fund: In case of its U.P. sugar units the Company is required to create a Molasses Storage Fund annually by appropriating part of its reserves. Although the Company was creating such fund no appropriation was made to the reserves, which has now been provided.

6. 8% Non Cumulative/ Non Convertible Redeemable Preference Share Capital:

The Company has issued redeemable preference shares. The preference shares carry fixed non cumulative dividend which is discretionary. Under Indian GAAP, the preference shares were classified as equity and dividend payable thereon was treated as distribution of profit. Under Ind AS, nonconvertible redeemable preference shares are separated into liability and equity components based on the terms of the contract. The Interest on liability component is recognised using the effective interest method. Thus the preference share capital is reduced by INR 1,298.18 lakhs (March 31, 2017:1,298.18 lakhs) with a corresponding increase in borrowings as liability component. Also, the equity portion is recognised as other equity for INR 2,811.16 lakhs net of tax impact.

7. EPCG/ Deferred Income:

As per Ind AS 20, accounting for government grants and disclosure of government assistance, the Company has already deducted the amount of grant from the cost of the fixed assets and it has recognised the amount of unamortised deferred income as at the date of the transition in accordance with paragraph 10 of Ind AS 101. The corresponding adjustment has been made to the carrying amount of property, plant and equipment (net of cumulative depreciation impact) and retained earnings, respectively, as the grant is directly linked to the property, plant and equipment.

Further, the deferred income is recognised as income on the basis of fulfilment of corresponding export obligations with respect to the grant availed.

8. Sale of Goods:

Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise duty on sale of goods is separately presented on the face of statement of profit and loss.

9. Retained Earnings:

Retained earnings as at March 31, 2017 and April 1, 2016 has been adjusted consequent to the Ind AS transition adjustments mentioned herewith.

10. Statement of Cash Flows:

The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.

11. Other Comprehensive Income:

Under Ind AS, all items of income and expenses recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ include remeasurement of defined benefit plans. The concept of other comprehensive income did not exist under Indian GAAP.

12. Remeasurements of post-emplovment benefit obligations:

Both under previous GAAP and Ind AS, the Company recognized costs related to its post employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to statement of profit or loss. Under Ind AS, measurements (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined liability) are recognized in balance sheet through other comprehensive income. ^

10. During the Current year, Company transferred INR Nil (Previous year INR Nil) to Capital Redemption Reserve.

11. In preference to the Companies Act, 2013 the company has not provided for Dividend on non-cumulative Preference share in view of the stipulation imposed by the lending institutions.

12. Previous year figures have been recasted/regrouped/rearranged wherever necessary to make them comparable with that of current year.

Source : Dion Global Solutions Limited
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