Q. Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
R. Cash flow statements and Cash and cash equivalents
Cash flows are reported using the indirect method, whereby profit/ (loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
For the purpose of presentation in the cash flow statement, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
S. Standards (including amendments) issued but not yet effective:
Ministry of Corporate Affairs ("MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
Notes:
(i) The average credit period on sale is 20 days. No interest is charged on trade receivables for the first 30 days from the date of the invoice. Thereafter, interest is charged at 18% per annum on the outstanding balance.
(ii) Before accepting any new customer, the Company has a credit evaluating system to assess the potential customer's credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed twice a year. Of the trade receivables balance, H 2,185.95 lakhs (as at March 31, 2023: H 1,934.98 lakhs) is due from customers who represent more than 5% of the total balance of trade receivables.
(iii) The Company maintains an allowance of credit impaired accounts based on financial condition of the customer, ageing of customer receivable and overdues, available collaterals and historical experience of collections from customers. Accordingly, the Company creates provision towards credit impaired trade receivables after recovering the underlying collaterals. Besides, the Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a historical loss rate method. The historical loss rate takes into account historical credit loss experience and adjusted for forward-looking information. The expected credit loss allowance is based on the average loss rate of the collections against the receivables.
C. Other Commitments:
The Company has applied for benefits under Export Promotion Capital Goods (EPCG) scheme to import capital goods by availing customs duty exemption as per terms of Notification of the Government of India in the Ministry of Finance (Department of Revenue) No: 16/2015 dated 01.04.2015 under which it has an export obligation of six times the duty saved on import of capital goods on Free on Board (FOB) basis within a period of six years. In the event of failure of the export obligation as specified in the said notification and license, the Company is liable to pay duties of customs proportionate to duty saved amount on total unfulfilled Export Obligation and also interest @ 18% P.a. The management believes that it will be able to comply with aforesaid regulations and hence no adjustments have been made to the financial statements.
33. Employee Benefits
A. Defined contribution plans:
Provident fund:
The Company contributed H 265.88 lakhs (Previous year: H 491.88 lakhs) to the Provident Fund Trust maintained by the Company and H 469.14 lakhs (Previous year: H 132.45 lakhs) to Regional Provident Fund Commissioner, which was recognised as an expense in Statement of Profit and Loss during the year.
Superannuation:
The Company recognized H 12.78 lakhs (Previous year: H 12.92 lakhs) as an expense towards contribution as superannuation in the Statement of Profit and Loss during the year.
34. Segment reporting Operating Segments
The Chairman and Managing Director of the Company has been identified as the Chief Operating Decision Maker (CODM) who evaluates the Company's performance and allocates resources for manufacture and sale of pulp, paper and paperboard. Accordingly, manufacturing and sale of pulp, paper and paperboard is considered as the single operating segment of the Company.
Geographical Information
The Company operates in India and makes certain sales to customers situated outside India. The revenue from external customers by location of customers is detailed below. All the non-current assets of the Company are situated within India.
42. Calculation of fair values
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended March 31, 2023 except unquoted equity investment.
Financial assets and liabilities measured at fair value as at Balance Sheet date.The fair values of investments in unquoted equity investments has been estimated using a NAV method under cost approach.
43. Fair value hierarchy:
The fair value of financial instruments as referred to in Note No. 42 above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identified assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
The categories used are as follows:
Level 1 — Quoted prices for identified instruments in an active market.
Level 2 — Directly or indirectly observable market inputs, other than Level 1 inputs; and
43. Fair value hierarchy: (Contd.)
Level 3 — Inputs which are not based on observable market data.
This note provides information about how the Company determines fair values of various financial assets and financial liabilities.
Fair value of the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis.
Some of the Company's financial assets and financial liabilities are measured at the fair value at the end of each reporting period (Refer note 47).
44. Financial Risk Management and Capital Management
The Company's business activities are exposed to a variety of financials risks, namely Interest rate risk, credit risk, liquidity risk and foreign currency risk. The Company's senior management has the overall responsibility for establishing and governing the Company's risk management framework. The Company's risk management policies are established to identify and analyze the risks faced by the Company, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are overseen by the Board of Directors of the Company.
A. Interest rate risk
The Company is exposed to interest rate risk because Company borrow funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
The sensitivity analyses below have been determined based on the exposure to interest rates for the nonderivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company's:
Profit for the year ended March 31, 2024 would decrease/increase by H 26.18 lakhs (for the year ended March 31, 2023: decrease/increase by H 20 lakhs). This is mainly attributable to the Company's exposure to interest rates on its variable rate borrowings.
B. 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. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
44. Financial Risk Management and Capital Management (Contd.)
Customer credit risk is managed by the Company's established policy, procedures and control relating to the customer credit risk management. The Company uses financial information and past experience to evaluate credit quality of majority of its customers and individual credit limits are defined in accordance with this assessment. Outstanding receivables and the credit worthiness of its counterparties are periodically monitored and taken up on case to case basis. Considering the historical experience of collecting trade receivables, the Company evaluates the concentration of risk with respective trade receivables as low.
The credit risk on cash and bank balances and deposits with financial institutions is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
C. Liquidity risk management
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Also, the Company has un-utilised credit limits with banks. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended March 31, 2024 and March 31, 2023. Cash flow from operating activities provides the funds to service the financial liabilities on a day to day basis.
The Company regularly maintains the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest-bearing short-term deposits with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.
D. Financing facilities
The Company has access to financing facilities (Fund and non-fund based) of which H 11,077.00 Lakhs (March 31, 2023 : H 11,297.55 Lakhs) were unused at the end of the reporting period. The Company expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.
Foreign currency sensitivity analysis
Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar, Great Britain Pound and Euro against the functional currency of the Company.
H 1 strengthening of INR against US Dollar, to which the Company is majorly exposed, would have led to approximately H 75.22 lakhs loss in the Statement of Profit and Loss (Year ended March 31, 2023 -H 5.28 lakhs loss). A H 1 weakening of the INR against US Dollar would have led to an equal but opposite effect.
The sensitivity analysis includes only outstanding foreign currency denominated monetary items.
Derivative financial instruments
The Company holds derivative financial instruments such as foreign currency forward to mitigate the risk of changes in exchange rate on foreign currency exposure. The counterparty for these contracts is generally a Bank. These derivative financial instruments are valued based on quoted prices for similar asset and liabilities in active markets or inputs that is directly or indirectly observable in the marketplace.
Foreign currency outstanding for the purpose of hedging as at the Balance Sheet date
Capital management
The Company's capital management objective is to maximise the total shareholder return by optimising cost of capital through flexible capital structure that supports growth. Further, the Company ensures optimal credit risk profile to maintain/enhance credit rating.
The Company determines that amount of capital on the basis of annual operating plan and long-term strategic plans. The funding requirements are met through internal accruals and long-term/short-term borrowings. The Company monitors the capital structure on the basis of Net debt to equity ratio and maturity profile of the overall debt portfolio of the Company.
For the purpose of Capital management, capital includes equity capital, securities premium and all other reserves. Net debt includes all long and short-term borrowings as reduced by cash and cash equivalents.
45. The Company's wholly owned subsidiary, Andhra Paper Foundation, carries out Corporate Social Responsibility activities. The same is not considered for the purpose of consolidation, as the objective of control over this entity is not to obtain economic benefits from its activities. The Board of Directors on its meeting held on August 3, 2023 has approved for conversion into a Private Limited company and winding off of the subsidiary.
46. In the year ended March 31, 2017, the Hon'ble High Court for the State of Telangana and the State of Andhra Pradesh upheld the validity of levy of electricity duty @ 25 paisa per unit by the State Government on consumption of electricity by captive generating units relating to earlier years. The Company (along with other petitioners) filed a Special Leave Petition in the Hon'ble Supreme Court, which in the interim, directed the petitioners to pay partial amount without prejudice to the rights and contentions of the petitioners, pursuant to which the Company had paid H 1,502.05 lakhs under protest in the year ended March 31, 2017. The matter is pending hearing.
In view of the inherent uncertainty in predicting the final outcome of the above litigation, the Management has, on grounds of prudence and abundant caution, made a provision amounting to H 2,357.43 lakhs during the year ended March 31, 2017 towards the potential liability in the event of an un-favourable verdict in this matter. Additionally, an amount of H 1,571.62 lakhs has been disclosed as a contingent liability. On the basis of the legal advice obtained, in the opinion of the Management no further provision would be required in relation to this disputed matter.
47. Exceptional item
During the previous year on temporary closure of Andhra Pradesh Gas Power Corporation Limited (APGPCL), a provision has been created for the value of our investment of H 1,538.37 lakhs, which was valued as on March 31, 2022 at H 1,947.02 lakhs. An amount of H 408.65 lakhs has been debited through Other Comprehensive Income (OCI) and the cost of investment is shown as an exceptional item in statement of profit and loss.
48. The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment 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 the Code becomes effective.
49. As per Section 135 of the Companies Act, 2013 ('Act), 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 focus areas of Company's CSR activities are Education, Health & Wellness and Community Engagement. The CSR activities of the Company are in line with the Schedule VII of the Companies Act, 2013. A CSR committee has been formed by the company as per the Act.
50. Investments and Loans & Advances:
No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries”) with the understanding that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
52. Other Statutory Information:
a) The Company does not have any Benami property, where any proceeding have been initiated or pending against the Company for holding any Benami property.
b) The Company has not traded or invested in Crypto currency or Virtual currency during the financial year.
c) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (Such as, search or survey or any other relevant provision of the Income Tax Act, 1961).
d) The Company has complied with the number of layers prescribed under clause (87) of Section 2 of the Act read with the Companies (Restriction on number of layers) Rules, 2017.
e) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
f) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
g) The Company does not have any transactions with companies struck off.
53. Subsequent event disclosure: Subsequent to the balance sheet date, the operations at Company's Rajahmundry manufacturing facility ("plant") was interrupted due to an illegal workers strike commencing on April 2, 2024. Consequently, on April 24, 2024, a lockout was implemented at the plant to safeguard assets and personnel, following this prompt resolution, the illegal strike was called off by the workers and normal operations was resumed on April 25, 2024.
54. The financial statements are approved for issue by the Board of Directors on May 14, 2024.
As per our report of even date For and on behalf of the Board of Directors
For M S K A & Associates of Andhra Paper Limited
Chartered Accountants CIN: L21010AP1964PLC001008
Firm Registration No.:105047W
S. K. Bangur
Chairman & Managing Director (DIN: 00053237)
Prakash Chandra Bhutada Saurabh Bangur Mukesh Jain
Partner Joint Managing Director Executive Director
Membership No:404621 (DIN:00236894) (DIN: 09380039)
Rajesh Bothra Bijay Kumar Sanku
Chief Financial Officer Company Secretary
Membership No: 15449
Place: Hyderabad Place: Rajahmundry
Date : May 14, 2024 Date : May 14, 2024
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