Nature and purpose of reserves
(i) Capital reserve
The Company recognises profit or loss on purchase or cancellation (including forfeiture) of its own equity instruments to capital reserve. It also includes gain arising from business combination transactions.
(ii) Securities premium reserve
Securities premium reserve is used to record the premium on issue of shares. These reserve is utilised in accordance with the provisions of the Companies Act, 2013. In line with Ind AS 32 - Financial Instruments: Presentation, the shares of the Company held by the Asian Oilfield Services Limited Employees Welfare Trust (ESOP Trust), are deducted from the equity component.
(iii) Outstanding employee stock options
The Company has stock option schemes under which options to subscribe for the Company’s shares have been granted to certain employees including key management personnel. This reserve is used to recognise the value of equity-settled share-based payments provided to employees, as part of their remuneration. The unutilised balance at the end of exercise period, is transferred to retained earnings.
(iv) Retained earnings
Retained earnings represents the accumulated profits / losses made by the Company over the years as reduced by dividends or other distributions paid to the shareholders and remeasurement gains/ loss on defined benefit plan.
(v) Money received against share warrants
Represents money received on allotment of convertible share warrants against which equity shares are yet to be allotted by the Company.
(vi) Equity instruments through other comprehensive income
Represents changes in the fair value of certain investments measured in other comprehensive income.
The accompanying notes forms an integral part of these standalone financial statements This is the Standalone Statement of Changes in Equity referred to in our report of even date.
Also, interest on loan receivable from one of the subsidiaries has not been accrued in books of account considering the financial position of such subsidiary.
3. Loan to a related party (considered good) carries an interest rate of 10.00% p.a. (March 31,2023 : 10.00% p.a.) and it is repayable on demand.4. Amount for both the reporting years represent funds deposited with a financial institution for short duration and carries fixed rate of interest of 7.00% p.a. (March 31,2023 : 7.00 % p.a).
5. There are no loans due from any director or any officer of the Company, either severally or jointly with any other person, or from any firms or private companies in which any director is a partner, a director or a member.
1. There are no trade receivables due from any director or any officer of the Company, either severally or jointly with any other person.
2. Trade receivables due from a private company in which director of the Company is a director amounts to ' 1,130.86 lakhs (March 31,2023: ' 2,523.52 lakhs).
3. Trade receivables includes retention money amounting to ' 2,303.49 lakhs (March 31,2023 : ' 765.60 lakhs).
(b) Terms and rights attached to equity shares
The Company has only one class of equity shares having a par value of ' 10 per share. Each holder of equity share 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 the approval of the shareholders in the Annual General Meeting except for interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive 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 shareholder.
A (i) There is an increase in the percentage holding of Oilmax Energy Private Limited by 2.65% (March 31,2023: 3.09%) as additional shares were purchased vide open market transaction during the respective reporting periods.
(ii) There is a reduction in the percentage holding of Ritu Garg by 50.65% (March 31,2023: Nil) as shares were sold vide open market transaction during the year.
*Computed excluding the equity shares held in trust for the employees under the ESOP scheme.
(f) No additional shares were allotted as fully paid up by way of bonus shares or for consideration other than cash and also no shares have been bought back during the last five years.
(i) The balance unexercised equity shares held by the ESOP Trust at the end of the year had been reduced against the share capital as if the trust is administered by the Company itself. The securities premium related to the unexercised equity shares held by the trust at the close of the year amounting to ' 228.44 lakhs (March 31,2023: ' 355.60 lakhs) has been reduced from securities premium account and adjusted against the loan outstanding from the ESOP Trust.
(ii) The shareholders of the Company, at their meeting held on September 27, 2021 had approved the "Asian Energy Services Limited - Employee Stock Option Plan - 2021" ("AESL ESOP 2021") authorising grant of maximum 380,744 stock options to the eligible employees. During the current year, the Company has granted Nil (March 31, 2023: 380,000) employee stock options to the eligible employees including that of group company pursuant to such scheme.
(iii) During the current year, 109,183 stock options were exercised by the employees (March 31,2023: Nil).
(iv) During the current year, no equity shares of the Company were purchased by the ESOP trust (March 31,2023: Nil). (h) Share warrants
The Allotment Committee of the Board of Directors of the Company, on August 21, 2023, considered and approved the allotment of 67,00,000 convertible share warrants on preferential basis to certain persons/ entities each carrying right upon being fully paid up, to subscribe one equity share of face value of ' 10 each at an issue price of ' 127.50 per share. Out of these warrants, the Company has allotted 28,50,000 equity shares during the year ended March 31,2024. The Company has complied with the provisions of section 42 and section 62 of the Companies Act, 2013 and the rules framed thereunder in relation to such preferential allotment on a private placement basis.
(a) Nature of security and terms of repayment of long term borrowings
The Company has availed vehicle loans. Interest rate charged ranges from 8.75% p.a. to 10% p.a. The vehicles financed through such borrowing are forming part of the property, plant and equipment and have been hypothecated for the said borrowings. The borrowings will be repaid by the Company in equal predetermined instalments over a period ranging from 39 to 48 months from the borrowings origination date with the last instalment repayable in F.Y. 2026-27.
(b) Working capital facilities from bank :
(i) Cash credit facility is secured by way of exclusive charge on certain fixed deposits and counter indemnity, hypothecation of stock and book debts of the Company. The facility is also secured by way of personal security of Mr. Kapil Garg (Managing Director), Mrs. Ritu Garg (Promoter) and Mr. Aman Garg (relative of promoter and managing director). The interest rate applicable to the facility is computed using prevailing MCLR plus spread (9.80% p.a. as on March 31,2024). These are repayable on demand.
(ii) During the current year, the Company has availed overdraft facilities which is secured by way of exclusive charge on certain fixed deposits of the Company. The interest rate applicable to the facility is computed using prevailing fixed deposits rate 1% (3.75% as on March 31,2024. These are repayable within a period of 1 year.
(c) The Company has utilized the borrowings for the specific purpose for which it was obtained.
(d) The Company is not declared willful defaulter by any bank or financial institution or lender during the year and it has complied with the applicable debt covenants, prescribed in the terms of borrowing.
25.2 : The Company has acquired an oil asset during the year for which the Company has estimated provision towards decommissioning as per the principles of Ind AS 37 'Provisions, Contingent Liabilities and Contingent Assets’ for the future decommissioning of oil asset at the end of its economic life. The economic life of the oil asset is estimated on the basis of long- term production profile of the relevant oil asset. The decommissioning activity would be in the future for which the exact requirements that may have to be met when the removal event occur is uncertain.
2. Other monies for which the Company is contingently liable:
(b) The Hon’ble Supreme Court of India ("SC") by their order dated February 28, 2019, in the case of Surya Roshani Limited & others v/s EPFO, set out the principles based on which allowances paid to the employees should be identified for inclusion in basic wages for the purposes of computation of Provident Fund contribution. Due to numerous interpretation issues relating to the applicability of SC judgement for the past period, if any, the impact is not ascertainable at present and consequently no effect has been given in the financial statements.
It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of pending resolution of the respective proceedings, as it is determined only on receipt of judgements/decisions pending with various authorities.
EE1 DISCLOSURES PERTAINING TO IND AS 116 - LEASES
The Company has lease contracts for its office premises and oilfield equipment. Generally, the Company is restricted from
assigning the leased assets. The Company’s obligation under its leases are secured by the lessor’s title to leased assets.
1. Recognition and derecognition Right-of-use assets:
(i) The net carrying value of right-of-use assets as at March 31, 2024 amounts to ' 161.17 lakhs (March 31, 2023: ' 299.13 lakhs) and has been disclosed separately in note 6 to the standalone financial statements.
2. The Company has recognised the following in the statement of profit and loss:
(i) Depreciation expense from right-of-use assets of ' 137.96 lakhs (March 31,2023: ' 418.82 lakhs) (Refer note 6).
(ii) Interest on lease liabilities of ' 14.34 lakhs (March 31,2023: ' 18.60 lakhs) (Refer note 33).
(iii) Expense amounting to ' 1,131.70 lakhs (March 31,2023: ' 1,035.60 lakhs) related to leases of low-value assets and leases with less than twelve months of lease term. These have been included under machine hire charges, vehicle hire charges and rent expenses (Refer note 30 and note 35).
(iv) Rental income amounting to '40.73 lakhs (March 31,2023: Nil) related to assets given on lease with less than twelve months of lease term. It has been included other operating income (Refer note 28).
3. The total net cash outflow for the payment of lease liability and interest is ' 275.48 lakhs (March 31,2023: ' 496.17 lakhs). Hfli FAIR VALUE MEASUREMENTS
The fair value of financial assets and liabilities is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
Fair value hierarchy:
Financial assets and financial liabilities measured at fair value in the Balance sheet are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: Prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
The carrying amounts of trade receivable, cash and cash equivalents, other bank balances, loans, current security deposit, trade payables and other current financial liabilities are considered to be the same as their fair values, due to their short term nature. The fair value of security deposit has been calculated based on the cash flows discounted using an estimate of current lending rate.
The fixed deposit and non-current borrowing are with highly rated banks and financial institution at fair interest rate, and their carrying values approximates fair value.
The fair values of investments in mutual fund units is based on the net asset value ('NAV') as stated by the issuers of these mutual fund units in the published statements as at reporting date.
Fair value of financial assets at FVTOCI
The fair value of investments carried at FVTOCI is determined, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. The fair value of these investments is categorized as Level 3 because the shares are neither listed on an exchange and there were no recent observable arm’s lenght transactions in the shares.
There are no transfers in either level during the reporting periods.
HH FINANCIAL RISK MANAGEMENT
The Company's activities expose it to credit risk, liquidity risk and market risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements. The Companies risk management is done in close co-ordination with the board of directors and focuses on actively securing the Company's short, medium and long-term cash flows by minimizing the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns. The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Company is exposed are described below: Credit risk
Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. The Company is exposed to credit risk from loans and advances to related parties, trade receivables, bank deposits and other financial assets. Bank deposits are placed with reputed banks / financial institutions. Hence, there is no significant credit risk on such fixed deposits.
The Company does not have significant credit risk from loans given considering these are provided to related parties or to financial institution for shorter duration. Mutual fund investments are made in liquid and overnight plans of renowned asset management company only. The credit risk associated with bank, security deposits and mutual fund investments is relatively low.
The Company trades with recognised and credit worthy third parties. The Company periodically assesses the financial reliability of the counter party, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable.
Credit risk on trade receivables is limited as the Company's customer base majorly includes reputed and large corporate groups and public sector enterprises. It is the Company's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Also, generally the Company does not enter into sales transaction with customers having credit loss history. In addition, trade receivable balances are monitored on an on-going basis with the result that the Company’s exposure to bad debts is not significant. In case of trade receivables due from related parties and in case of disputed trade receivables, the Company performs individual credit risk assessment and creates expected credit loss allowance (ECL) based on internal assessment. Further, the Company computes ECL on undisputed trade receivables (including those where ultimate customer is a non-related party) at each reporting date, based on provision matrix which is prepared considering historically observed overdue rate over expected life of trade receivables and is adjusted for forward-looking estimates.
b) For reconciliation of loss allowance on trade receivables, refer note 15.1.Liquidity risk
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. For the Company, liquidity risk arises from obligations on account of financial liabilities - borrowings, trade payables, lease liabilities and other financial liabilities.
The Company’s principal sources of liquidity are cash and cash equivalents, current investments and the cash flow that is generated from operations. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. The Company closely monitors its liquidity position and maintains adequate source of funding.
Maturities of financial liabilities :
The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on the maturities for all non-derivative financial liabilities. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. For contractual maturities of lease liabilities, refer note 39.
Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and net asset value (NAV) of mutual fund units will affect the Company’s income or the value of its holdings of financial instruments.
Mutual fund price risk
The value of unquoted mutual fund investments measured at fair value through profit and loss as at March 31,2024 is ' 340.93 lakhs (March 31,2023: ' 1,314.93 lakhs). A 10% change in value for year ended March 31, 2024 would result in an impact of ' 34.09 lakhs (March 31,2023: ' 131.49 lakhs) on profit/ (loss) before tax and other equity (holding all other variables constant).
Foreign currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Companies functional currency. The Companies operations in foreign currency creates natural foreign currency hedge. This results in insignificant net open foreign currency exposures considering the volumes and operations of the Company.
An equal and opposite impact would be experienced in the event of decrease by a similar percentage.
Interest rate risk
This refers to risk to Company’s cash flow and profits on account of movement in market interest rates.
For the Company the interest risk arises mainly from interest bearing borrowings which are at floating interest rates. To mitigate interest rate risk, the Company closely monitors market interest and as appropriate makes use of hedged products and optimise borrowing mix / composition.
An equal and opposite impact would be experienced in the event of an opposite change in interest rate by a similar percentage.
The above calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.
WHi CAPITAL MANAGEMENT
The Company objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal structure to reduce the cost of capital. In order to maintain or adjust the Capital structure, the Company may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell new assets to reduce debt. The Company does not have externally imposed capital requirements.
Note: In the long run, the Company’s strategy is to maintain a gearing ratio within acceptable range as deemed appropriate by board of directors, which at present is to have less than 0.50.
1E1 EMPLOYEE BENEFITS1. Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, incentives and allowances, short terms compensated absences, etc., and the expected cost of bonus, ex-gratia are recognized in the year in which the employee renders the related service.
2. Long term employee benefits
(i) Defined benefit plan
Gratuity (funded) :
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service.
E. Assumptions
The actuarial calculations used to estimate commitments and expenses in respect of gratuity is based on the following assumptions which if changed, would affect the commitment's size, funding requirements and expense:
The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the method (Projected Unit Credit Method) used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period. Sensitivities due to mortality and turnover are not material and hence impact of change due to these not calculated.
G. Risk exposure
The Company is exposed to a number of risks, the most significant of which are actual salary growth rate and reduction in discount rate in future, which can increase the obligation.
(ii) Defined contribution plan
Provident fund and employee's state insurance corporation
The Company pays fixed contribution to the provident fund, employee's state insurance corporation entities and labour welfare fund in relation to several state plans and insurances for individual employees. This fund is administered by the respective Government authorities, and the Company has no legal or constructive obligations to pay contributions in addition to its fixed contributions, which are recognized as an expense in the year that related employee services are received.
(iii) Share-based payment transactions
The shareholders of the Company, at their meeting held on September 27, 2021 had approved the "Asian Energy Services Limited - Employee Stock Option Plan - 2021" ("AESL ESOP 2021") authorising grant of not exceeding 380,744 stock options to the eligible employees. The scheme is designed to provide long term incentives for certain employees to deliver long term shareholders return. During the current year, the Company has granted Nil (March 31, 2023: 380,000) employee stock options convertible into equivalent equity shares to the eligible employees including that of group company pursuant to such scheme. The details of activity under the ESOP schemes are summarized below:
D. Other outstanding arrangements:
Kapil Garg and Ritu Garg have provided personal security towards cash credit facility availed by the Company.
The Holding Company has also provided a Corporate Guarantee to the bankers towards cash credit facilities availed by the Company. Such facility has a debit balance amounting to ' 1.79 lakhs as on March 31,2024 (March 31,2023 - credit balance of ' 1,557.14 lakhs).
AThe figures does not include provision for gratuity since it is actuarially determined for the Company as a whole. Further, no stock options were granted to KMP during the current year (March 31,2023: 72,736). Further, 29,314 stock options are available with KMP’s as on March 31,2024 (March 31,2023: 72,736).
*The figures are based on contractual arrangement executed and does not include the impact of Ind AS.
** Provision towards outstanding loan and interest accrued thereon aggregating ' 208.50 lakhs was made during the previous year. Also, interest on loan receivable from such subsidiary has not been accrued in books of account considering the financial position of such subsidiary.
Notes:
(i) The closing amount pertaining to investment made in subsidiaries and joint ventures is not considered as a part of disclosure on outstanding balance due.
(ii) Represents Company’s share of expenses in joint operation at Indrora oilfield.
(iii) The closing balance with related parties are unsecured in nature. The settlement of receivable/ payable balances would be done through cash or other financial asset.
IE1 UN-HEDGED FOREIGN CURRENCY EXPOSURES
For un-hedged foreign currency exposure, refer section 'Foreign currency risk’ under note 41 - Financial Risk Management. H6i CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE
As per Section 135 of the Companies Act, 2013, a Company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. The Board of Directors of the Company had constituted CSR Committee.
During the current year, since the Company has not met the applicability criteria and hence, the Company has not carried out any CSR activities during the current year.
iii) Nature of CSR activities includes promoting education, healthcare, eradicating hunger, poverty and malnutrition, empowering women and rural development projects.
iv) The Company did not wish to carry forward the excess amount spent during the previous year.
v) The Company does not have any ongoing projects as at March 31,2023.
vi) There is no unspent amount of CSR activities as at March 31,2023 and March 31,2024.
vii) There is no related party transaction in relation to CSR expenditure.
F7i EVENTS OCCURRING AFTER THE REPORTING PERIOD
No adjusting or significant non-adjusting events have occurred between March 31,2024 and the date of authorization of these standalone financial statements.
PH SEGMENT INFORMATION
(a) The Company publishes standalone financial statements along with the consolidated financial statements. Accordingly, as per Ind AS 108 'Operating Segments’, no disclosures related to the segments are presented in these standalone financial statements.
[El EXPLANATION IN RELATION TO INVESTMENT IN A SUBSIDIARY - ADMCC
As at March 31, 2024, the Company has an investment of ' 651.50 lakhs in its wholly owned subsidiary company, Asian Oilfield and Energy Services DMCC ('ADMCC’). Also, the Company has payable of ' 266.46 lakhs to ADMCC. The contract with a major customer of ADMCC was terminated during the previous year and in the current year, ADMCC has incurred losses amounting to ' 476.52 lakhs. While the discussion with the aforesaid customer is still on and ADMCC has legal rights available for claiming its receivables, ADMCC on prudent basis has recognized loss allowance of ' 166.89 lakhs on its net receivables towards such customer during the current year. As at March 31,2024, the reported net worth of ADMCC is positive however it is not adequate to cover the exposure in terms of investment which the Company is carrying as on that date. ADMCC is in process of entering into new revenue generating contracts which is expected to generate sufficient profits and cash flows in the forthcoming years. Also, ADMCC has certain capital assets that are completely depreciated but because of their utility, these assets have a value that is higher than the salvage amount. Basis above facts along with other relevant assessment carried out by the management of ADMCC, the Company believes that the reported net worth of ADMCC as at March 31,2024 is not reflective of its future financial position as the execution of new contracts and recovery of receivables shall further enhance ADMCC’s net worth. The Company’s management is confident of realizing the value of its investments in ADMCC and accordingly no impairment has been recognised in these standalone financial statements.
Note: During the current year, increase in contract assets is primarily due to lower progress billing as compared to revenue recognition during the year in certain projects which has also resulted in decrease in contract liability in the current year.
f) Cost to obtain or fulfil the contract:
(i) Amount of amortization recognized in Statement of Profit and Loss during the year : Nil (March 31,2023: Nil)
(ii) Amount recognized as contract assets in relation to cost incurred for obtaining contract as at March 31,2024 : Nil (March 31,2023: Nil)
g) In the normal course of business, the payment terms given to majority of the customers ranges from 30 to 60 days except retention monies which are due after the completion of the project as per the terms of contract.
EQ| CODE ON SOCIAL SECURITY, 2020
The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and post employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period in which the Code becomes effective.
Above joint ventures are engaged in the business of providing engineering, procurement and construction services, and related services. It has been established as a separate entity (Association of Persons) and the Company has a proportionate residual interest in the net assets of the joint ventures. The Company is not required to have any investment in these entities as per the joint venture agreement. The summarized financial information of the joint ventures is given below:
KE1 OTHER STATUTORY INFORMATION AS PER SCHEDULE III TO THE ACT
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any transactions with Companies whose name has been struck off from the register of Companies.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with registrar of companies (ROC) beyond the statutory period except the below cases :
(iv) The Company has not traded or invested in Crypto currency or Virtual currency during the year.
(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries); or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(vi) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries); or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
EE1 ACQUISITION OF A PARTICIPATORY INTEREST IN AN OILFIELD (i) Background
Government of India (GOI) had awarded an oil field in the Cambay basin having surface coverage of 150.77 sq.km to Oilmax Energy Private Limited (Holding Company) for a period of 20 years. Pursuant to such award, a revenue sharing contract (RSC) was entered into between GOI and the Holding Company in September 2022. Such RSC allows for assignment of Participatory Interest ('PI') to other parties with the prior consent of GOI.
Subsequently, a Farmout agreement and a joint operating agreement (JOA) were entered between the Company and Oilmax on April 08, 2023. Under this agreement, the Holding Company sold 50% of PI to the Company in this oilfield for a consideration of ' 1,770 lakhs (including indirect taxes). This agreement also provides for rights and obligations concerning operations and activities under the contract.
Post that, an application was filed with GOI for approval of such sale of PI to the Company. The GOI approved the sale of PI which was effective from June 30, 2023. As a result, an amendment was made to RSC which also included the Company in it.
As per joint operating agreement, the parties have rights to assets and obligation for the liabilities pertaining to the assets of a joint arrangment in their respective PI.
The above acquisition of PI is in a producing oil field which already had proved reserves (inputs) on which the operational process will be applied to achieve the sale of crude oil (output) and hence such acquisition constitute a business as per Ind AS 103 - "Business Combinations".
As a result of above acquisition, the Company will further strengthen its position in the oil and gas segment.
For the purpose of the valuation, the basis of value was fair value. Fair value is the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.
In the present scenario, the Company has acquired the rights towards reserves of crude oil and hydrocarbons (natural resource) after purchasing 50% PI in a producing oil field. The underlying value of PI is derived from the reserves of such natural resources. The transaction was done by the Company for having access to such natural resource and the related well facility. The operations in such PI has been purchased are located in a specified region of Indrora, Gujarat. As on acquisition date, no brand that is acquired by the Company. No material customer contracts/ relationships exists as on the acquistion date. The business utilizes its own resource for supplying goods to customers and deploys its own sales force to interface with them. Further, there is no material assembled workforce acquired.
Basis the facts mentioned above, fair value of entire purchase consideration has been attributable towards a single class
of asset which is an oil asset under property, plant and equipment.
Notes :
(i) Ind AS 103 requires the identifiable assets and liabilities to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities. These valuations are conducted by external valuation experts. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by the management.
(ii) Discount rate of 20.62% has been used to determine free cash flows to the equity.
(iii) Tax rate of 25.17%, based on prevailing corporate tax rate in India, has been considered by the Company.
(iv) The acquisition contributed revenue from operations of ' 379.50 lakhs and profit before tax of ' 71.31 lakhs during the current financial year.
(v) The consideration of ' 1,770 lakhs (including indirect taxes) has been paid in cash by the Company.
(vi) Capital reserve arising on acquisition has been recognized directly in equity.
_viwyiMa_Ý_
Proved reserves are those quantities of petroleum that, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations.
EBI AUDIT TRAIL (EDIT LOG) FEATURE IN THE ACCOUNTING SOFTWARE
The Ministry of Corporate Affairs (MCA) introduced a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules, 2021 requiring companies, which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
From April 01,2023 to July 29, 2023, the Company used Tally.ERP 9 accounting software for maintaining its books of account. However, this software version did not have an audit trail (edit log) feature. To address this, the Company has migrated to TallyPrime Edit Log 2.1 version of the accounting software from July 29, 2023, which includes an audit trail (edit log) feature for recording all the relevant transactions.
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