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Vinati Organics

BSE: 524200|NSE: VINATIORGA|ISIN: INE410B01029|SECTOR: Chemicals
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Notes to Accounts Year End : Mar '19

A General Information

The Company was established in 1989 and is engaged in manufacturing of speciality chemicals. The manufacturing facilities are located at Mahad and Lote Parashuram, Maharashtra. The company is listed on Bombay Stock Exchange and National Stock Exchange. The registered office is located at B-12 & B-13/1, MIDC indl. Area, Mahad - 402 309, Dist. Raigad, Maharashtra.

B Basis of preparation of Financial Statements

The principal accounting policies applied in the preparation of these financial statements are set out in Para C below. These policies have been consistently applied to all the years presented:

i Statement of Compliance

These Separate financial statements (also known as Standalone Financial Statements) have been prepared in accordance with IND AS as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) rules, 2015 and subsequent amendments thereto.

ii Basis of preparation and presentation

The financial statements have been prepared on historical cost basis considering the applicable provisions of Companies Act 2013, except for the following material item that has been measured at fair value as required by relevant Ind AS. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services

A) Certain financial assets/liabilities measured at fair value and

B) Any other item as specifically stated in accounting policy.

The Financial Statement are presented in Indian Rupee (‘INR’) and all values are rounded to the Rupee in Lacs, unless otherwise stated.

Whenever the company changes the presentation or classification of items in its financial statements materially, the company reclassifies comparative amounts, unless impracticable. No such material reclassification has been made during the year.

The financial statements of the Company for the year ended 31st March, 2019 were authorised for issue in accordance with a resolution of the board of directors on 11th May, 2019.

iii Major Sources of Estimation Uncertainty

In the application of accounting policy which are described in note (C) below, the management is required to make judgment, estimates and assumptions about the carrying amount of assets and liabilities, income and expenses, contingent liabilities and the accompanying disclosures that are not readily apparent from other sources.The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant and are prudent and reasonable. Actual results may differ from those estimates. The estimates and underlying assumptions are reviewed on ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.

The few critical estimations and judgments made in applying accounting policies are:

Property, Plant and Equipment:

Useful Life of Property plant and Equipment and intangible Assets are as specified in Schedule II to the Companies Act, 2013 and on certain intangible assets based on technical advice which considered the nature of the asset, the usage of the asset and anticipated technological changes. The company reviews the useful Life of Property, plant and Equipment at the end of each reporting period. This reassessment may result in change in depreciation charge in future periods.

Impairment of Non-financial Assets:

For calculating the recoverable amount of non-financial assets, the company is required to estimate the value-in-use of the asset or the Cash Generating Unit and the fair value Less costs to disposal. For calculating value in use the company is required to estimate the cash flows to be generated from using the asset. The fair value of an assets is estimated using a valuation technique where observable prices are not available. Further, the discount rate used for value in use calculations includes an estimate of risk assessment specific to the asset.

The company impairs financial assets other than those measured at fair value through profit or Loss or designated at fair value through other comprehensive income on expected credit Losses.The estimation of expected credit Loss includes the estimation of probability of default (PD), Loss given default (LGD) and the exposure at default (EAD). Estimation of probability of default apart from involving trend analysis of past delinquency rates include an estimation on forward-Looking information relating to not only the counterparty but also relating to the industry and the economy as a whole. The probability of default is estimated for the entire Life of the contract by estimating the cash flows that are likely to be received in default scenario. The Lifetime PD is reduced to 12 month PD based on an assessment of past history of default cases in 12 months. Further, the Loss given default is calculated based on an estimate of the value of the security recoverable as on the reporting date. The exposure at default is the amount outstanding at the balance sheet date.

Defined Benefit Plans:

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

Fair Value Measurement of Financial Instruments:

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgments include considerations of inputs such as Liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

ii. The disposal/adjustment includes an amount of RS.3173.38 Lacs, representing reimbursement towards capital contribution for specific items of plant And equipment incurred by the Company during the earlier and current financial year. Consequently, the Company has written back a sum of RS.208.44 Lacs representing depreciation for the year ending 31st March, 2017 of RS.157.25 Lacs and for the year ending 31st March, 2016 of RS.51.19 Lacs.

iii. During the year, the company has capitalised the following expenses of revenue nature to the cost of property, plant & Equipment/ capital Work-In-Progress;

The management determines that the segment information reported is sufficient to meet the disclosure objective with respect to disaggregation of revenue under Ind AS 115 Revenue from contract with Customers. Hence, no seperate disclosures of disaggregated revenues are reported. (Refer Note 28(c))

Note 1.

A. Capital Management

For the purpose of Company’s capital Management, capital includes Issued Equity capital, Securities Premium, and all other Equity Reserves attributable to the Equity Holders of the Company, The primary objective of the Company’s capital Management is to maximise the Share Holder value.

As at 31st March, 2019, the Company has only one class of equity shares and has no Long term debt. Consequent to such capital structure, there are no externally imposed capital requirements. The Company allocates its capital for distribution as dividend or re-investment into business based on its Long term financial plans.

B. Financial Risk Management

The Company’s principal financial liabilities comprise Loans and borrowings, trade and other payables. The main purpose of these

Financial liabilities is to finance the operations of the Company, The principal financial assets include trade and other receivables, investments in mutual funds and cash and short term deposits.

The Company has assessed market risk, credit risk and Liquidity risk to its financial liabilities.

I) Market Risk

Market Risk is the risk of Loss of future earnings, fair values or cash flows that may result from a change in the price of a financial instrument, as a result of interest rates, foreign exchange rates and other price risks. Financial instruments affected by market risks, primarily include Loans And borrowings, investments and foreign currency receivables, payables and borrowings.

Interest Rate Risks

The Company borrows funds in Indian Rupees to meet short term funding requirements. Interest on Short term borrowings is subject to floating interest rate and are repriced regularly, The sensitivity analysis detailed below have been determined based on the exposure to variable interest rates on the average outstanding amounts due to bankers over a year.

If the interest rates had been 1% higher / Lower and all other variables held constant, the company’s profit for the year ended 31st March, 2019 would have been decreased/increased by RS.3.68 Lacs.

Foreign Currency Risks

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate due to changes in foreign exchange rates.Foreign currency risks from financial instruments at the end of the reporting period expressed in INR :

The company is mainly exposed to changes in US dollar, The sensitivity to a 0.25% to 1% increase or decrease in US dollar against INR with all other variables held constant will be RS.153.75 Lacs (Previous Year - 102.26 Lacs)

The Sensitivity analysis is prepared on the net unhedged exposure of the company at the reporting date.

Derivatives - Forward Contracts

The Company enters into foreign exchange forward contracts with the intention to minimise the foreign exchange risk of firm commitments. The derivative that is either not designated as hedge or is so designated but is ineffective is categorised as a financial asset or liability at fair vale through Profit or Loss.

Price Risks

More than two-third of the Company’s revenues are generated from exports and the raw materials are procured through import and local purchases where local purchases track import parity price. The Company is affected by the price stability of certain commodities. Due to the significantly increased volatility of certain commodities, the Company enters into contract with the customers that has provision to pass on the change in the raw material prices and also the volatility in the exchange rate. The Company has a risk management framework aimed at prudently managing the risk arising from the volatility in commodity prices and freight costs.

The Company’s investments in Unquoted Securities are susceptible to market price risk arising from uncertainties about future values of investment securities. The company manages the securities price risk through investments in debt funds and diversification by placing Limits on individual and total investments. Reports on Investment portfolio are reviewed on regular basis and all approvals of investment decisions are done in concurrence with the senior management.

As at 31st March 2019 the investments in mutual funds/Debt Instruments amounts to RS.9647.34 Lacs. A 1% point increase or decrease in the NAV with all other variables held constant would have Lead to aprroximatly an additional RS.96.47 Lacs on either side in the statement of profit and Loss.

ii) Credit Risk

Credit Risk is the risk that a counterparty will default on its contractual obligations resulting in a financial Loss to the Company, It arises from credit exposure to customers, financial instruments viz., Investments in Debt Funds and balances with Banks.

The Company holds cash and cash equivalents with banks which are having highest safety rankings and hence has a Low credit risk.

The Company Limits its exposure to credit risk by generally investing in Liquid securities and only with counterparties that have a good credit rating. The Company does not expect any Losses from non-performance by these counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks. Investments in mutual funds are primarily debt funds, which have high safety ratings and are monitored on a monthly basis and the Company is of the opinion that its investments in mutual funds and debt securities have Low credit risk.

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit Limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company also has an external credit risk insurance cover with ECGC Policy, The outstanding trade receivables due for a period exceeding 180 days as at the year ended 31st March 2019 is 0.01% of the total trade receivables. The company uses Expected Credit Loss (ECL) model to assess the impairment Loss or gain.

iii) Liquidity Risk

The Company manages Liquidity risk by maintaining adequate surplus, banking facilities and reserve borrowings facilities by continuously monitoring forecasts and actual cash flows.

The Company has obtained fund and non-fund based working capital Lines from various banks. The Company invests its surplus funds in bank fixed deposit/Debt mutual Funds which carry Low mark to market risks. The Company monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility

ALL payments are made along due dates and requests for early payments are entertained after due approval and availing early payment discounts.

The Company has a system of forecasting rolling one month cash inflow and outflow and all Liquidity requirements are planned.

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 estimated interest payments.

Note 2. Fair Values and Hierarchy

Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:

The management assessed that cash and cash equivalents, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The Fair value of financial assets included is the amount at which the instrument could be exchanged in a current transaction between willing parties. The following methods and assumptions were used to estimate the fair value.

1. The Fair values of Investments in mutual Funds and Debt Securities are based on NAV at the reporting date.

2. Non current financial assets measured at amortised cost - Discounted cash flow technique : The valuation model considers present value of expected payments discounted using an appropriate discounting rate.

3. The Company enters into Derivative financial instruments with counterparties principally with Banks with investment grade credit ratings. The foreign exchange forward contracts are valued using valuation techniques which employs the use of market observable inputs namely, Marked-to-Market,

b) The Company has taken certain facilities under operating Lease arrangements. The Lease can be terminated at the option of either parties by giving due notice. The rental expenses under operating Leases -Other expenses- in the statement of profit and Loss. The Company does not have any non-cancellable Leasing arrangements. The Lease rentals recognised in the Statement of Profit and Loss (Refer note 24) for the year are RS.3.25 Lacs/- (previous year RS.4 Lacs/-).

(ii) Geographic information

The geographic information analyses the Group’s revenues and non-current assets by the Company’s country of domicile and other countries. In presenting geographic information, segment revenue has been based on the selling Location in relation to sales to customers and segment assets are based on geographical Location of assets.

(iii) There are no transactions with single external customer which amounts to 10% or more of the Company’s revenue.

Note:-

The Company is engaged interalia in the manufacture of chemicals. These in the context of Ind AS 108 - Operating Segment- is considered to constitute one single primary segment.

c) Disclosures under The Micro, Small and Medium Enterprises Development Act, 2006 (‘MSMED’):

The details of liabilities to Micro and Small Enterprises, to the extent information available with the Company are given under and have been relied upon by the auditors:

Note: Other information/ disclosures relating to payments made beyond appointed date, interest accrued And paid and cumulative intrest are not applicable, being NIL.

d) As required by section 135 of Companies Act, 2013 and rules therein, a Corporate Social Responsibility committee has been formed by the Company, The Company has spent the following amount during the year towards corporate Social Responsibility (CSR) for activities Listed under Schedule VII of the Companies Act, 2013.

e) Terms and conditions of transactions with related parties;

The transactions with related parties are made on terms equivalent to those that prevail in arm’s Length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31st March 2019, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (31st March 2018: hnil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

vii) Amount, Timing and Uncertainty of Future Cash Flows

A. Sensitivity Analysis

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality, The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

B. Asset Liability Matching Strategies

The scheme is managed on funded basis.

C. Effect of Plan on Entity’s Future Cash Flows - Funding arrangements and Funding Policy

The scheme is managed on funded basis.

a) Commitment

(i) Estimated amount of contracts remaining to be executed on capital Account, net of advances and not provided for -RS.11036.95 Lacs (Previous Year RS.21571.91 Lacs)

I) Contingent Liabilities not provided for:

(i) Bank Guarantees - RS.1181.74 Lacs (Previous Year - RS.1732.63 Lacs)

(ii) Letters of Credit issued by the Banks - RS.1018.75 Lacs (Previous Year - RS.1684.83 Lacs)

(iii) claims not acknowledged as debts:

(a) Disputed Excise/Customs Duty demands pending before the appellate Authorities/High Court - RS.87.61 Lacs (Previous Year RS.87.61 Lacs) against which payment of RS.11.95 Lacs (Previous Year RS.11.95 Lacs) has been made.

(b) Disputed Income Tax Demands - RS.3.48 Lacs ((Previous Year RS.3.48 Lacs)

(c) Disputed demand by The tahasildar, Mahad for royalty and penalty on Sand/metal of RS.23.25 Lacs (Previous Year RS.23.25 Lacs). The Company had filed the appeal to The collector of Raigad, alibag,and hopeful for the demand likely to be waived off against which payment of RS.6.99 Lacs (Previous Year - RS.6.99 Lacs) has been made (d) delayed Payment Charges (DPC) of Water bill demanded by MIDC, Mahad for plot No. B-5/6 RS.14.39 Lacs (Previous Year RS.14.39 Lacs). The Company requested MIDC to waive the DPC and hopeful to be waived off.

D) Events Occuring after the Balance Sheet date

The proposed final dividend for FY 2018-19 amounting to RS.3597.37 Lacs will be recognised as distribution to owners during the financial year 2019-20 on its approval by Shareholders. The proposed final dividend per share amounts to RS.7.

Source : Dion Global Solutions Limited
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