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Moneycontrol.com India | Notes to Account > Chemicals > Notes to Account from Vinyl Chemicals (India) - BSE: 524129, NSE: VINYLINDIA
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Vinyl Chemicals (India)

BSE: 524129|NSE: VINYLINDIA|ISIN: INE250B01029|SECTOR: Chemicals
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Notes to Accounts Year End : Mar '18

Note 1

Corporate Information

The Company was incorporated in 1986 and is dealing in chemicals,mainly Vinyl Acetate Monomer (VAM) . The equity shares of the Company are listed on BSE Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE).

The address of its registered office is Regent Chambers, 7th Floor, Jamnalal Bajaj Marg, 208 Nariman Point, Mumbai 400 021. The address of principal place of business is Ramkrishna Mandir Road, Off Mathuradas Vasanji Road, Andheri ( E), Mumbai 400 059.

Terms/Rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 1 per share. Each holder of equity shares is entitled to one vote per share.

In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in the proportion of their shareholding.

During the year ended 31st March, 2017, the Company paid the Final Dividend of Rs 1.50 per equity share of Rs 1 each for the Financial Year 2015-2016.

During the year ended 31st March, 2018, the Company had paid Final Dividend of Rs 1.80 per equity share of Rs 1 each for the Financial Year 2016-2017.

On 23rd May, 2018, the Board of Directors of the Company have proposed a dividend of Rs 2.40 per equity share in respect of the year ended 31st March, 2018, subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in a cash outflow of Rs 5,30,57,330 inclusive of dividend distribution tax of Rs 90,48,264.

Note 2

Details of dues to micro and small enterprises

The Company did not have any time during the year, amount due to small and medium enterprises (SME) which is outstanding for more than 45 days. Further, no interest is paid/payable to such SME creditors. The above information has been determined to the extent such parties have been identified on the basis of information available with the Company.

Note 3

Segment information

The Company''s current business activity has only one primary reportable segment, namely trading in chemicals.

Note 4

Gratuity

The Company has classified various employee benefits as under:

A) Defined Contribution Plans

(a) Provident Fund

(b) Superannuation Fund

The Provident Fund is operated by the Regional Provident Fund Commissioner and the Superannuation Fund is administered by the LIC of India as applicable for all eligible employees. Under the schemes, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits. These funds are recognised by the Income Tax Authorities.

B) Defined Benefit Plans

(a) Gratuity

(b) Compensated Absences

Valuations in respect of above have been carried out by independent actuary, as at the balance sheet date, based on the following assumptions:

vi) The expected rate of return on plan assets is determined after considering several applicable factors such as the composition of the plan assets, investment strategy, market scenario, etc. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.

(vii) The discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of the obligations.

(viii) The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors.

Actuarial gains and losses in respect of defined benefit plans are recognised in the financial statements through Other Comprehensive Income.

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility

The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets under-perform compared to the government bonds discount rate, this will create or increase a deficit.

As the plans mature, the Company intends to reduce the level of investment risk by investing more in assets that better match the liabilities.

Changes in bond yields

A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plan''s bond holdings.

Life expectancy

The majority of the plan’s obligations are to provide benefits for the service life of the member, so increases in service life expectancy will result in an increase in the plan’s liabilities. This is particularly significant in the Company''s defined benefit plans, where inflationary increases result in higher sensitivity to changes in service life expectancy.

Note 5

Financial Instruments i. Capital Management

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximising the return to stakeholders through the optimum utilisation of the equity balance.

The capital structure of the Company consists of only equity of the Company. The Company is not subject to any externally imposed capital requirements.

iii. Financial risk management objectives

The Company''s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk, credit risk and liquidity risk.

The Company seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company''s policies approved by the board of directors, which provide written principles on foreign exchange risk, credit risk, the use of financial derivatives and non-derivative financial instruments and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

iv. Market risk

The Company''s activities expose it primarily to the financial risk of changes in foreign currency exchange rates (see note v below). The Company enters into vanilla currency options or forward foreign exchange contracts to manage its exposure to foreign currency risk of imports.

v. Foreign currency sensitivity analysis

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters.

The carrying amounts of the Company''s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

The Company is mainly exposed to the USD.

The following table details the Company''s sensitivity to a 2% increase and decrease in the Rupee against the relevant foreign currency. 2% is the sensitivity rate used when reporting foreign currency risk internally to Key Management Personnel and represents Management''s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period-end for a 2% change in foreign currency rates.

A negative number below indicates a decrease in profit or equity where the Rupee weakens 2% against USD. For a 2% strengthening of the Rupee against USD, there would be a comparable impact on the profit or equity and the balances below would be positive.

This is mainly attributable to the exposure outstanding on USD payables towards imports.

In Management''s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

The line-items in the balance sheet that include the above hedging instruments are “Other financial liabilities”. The aggregate amount of MTM loss/(gain) under options/forward foreign exchange contracts recognised in profit or loss for the year, is Gain of Rs 63,67,382 (Loss of Rs 1,11,40,545 in 2016-17).

vi. Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.

Trade receivables consist of customers spread across diverse industries and geographical areas.

Apart from Pidilite Industries Ltd., the largest customer of the Company, the Company does not have significant credit risk exposure to any single counterparty.

The credit risk on liquid plus funds and derivative financial instruments is limited because the counterparties are fund houses and banks with high credit ratings assigned by international credit rating agencies.

In addition, the Company is exposed to credit risk in relation to guarantees given by banks on behalf of the Company. The Company’s maximum exposure in this respect is the maximum amount the Company could have to pay if the guarantee is called on and the bank recovers the amount from the Company [see note 30(2)].

These financial guarantees have been issued by banks on behalf of the Company to Sales Tax Department.

vii. Liquidity risk management

As the Company is engaged in trading of chemicals, it enjoys a higher credit period from its suppliers as compared to the credit period extended to its customers. Consequently, the Company''s liquidity position is normally strong thereby substantially reducing the requirement of obtaining external finances.

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Company''s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities. Note below sets out details of additional undrawn facilities that the Company has at its disposal to further reduce liquidity risk.

As regards the Company''s remaining contractual maturity for its non-derivative and derivative financial liabilities with agreed repayment periods, the remaining maturity period of all such liabilities of the Company is less than one year.

viii. Fair value measurements

Some of the Company''s financial assets and financial liabilities are measured at fair value at the end of each reporting period.

This note provides information about how the Company determines fair values of various financial assets and financial liabilities.

Financial instruments measured at amortized cost

The carrying amount of financial assets and financial liabilities measured at amortized cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

Note 6

Events after reporting period

There was no significant event after the end of the reporting period which requires any adjustment or disclosure in the financial statement other than the proposed dividend of Rs 2.40 per equity share of Rs 1 each recommended by Board of Directors at its meeting held on 23rd May,2018. The proposed dividend amounting to Rs 5,30,57,330 includes dividend distribution tax of Rs 90,48,264 and is subject to approval at the ensuing Annual General Meeting of the Company and hence, is not recognised as a liability.

Note 7

These financial statements have been approved by the Board of Directors of the Company in the meeting held on 23rd May, 2018.

Note 8

In the opinion of the Management, all assets other than Fixed Assets and Non-current investments have a realisable value in the ordinary course of business, at least equal to the amount at which they are stated in the Balance Sheet.

Note 9

Previous year''s figures have been regrouped wherever necessary.

Source : Dion Global Solutions Limited
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