Note - 1B : Significant Accounting Judgements, Estimates and Assumptions

The preparation of the company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, the accompanying disclosures, and the disclosure of contingent liabilities. These include recognition and measurement of financial instruments, estimates of useful lives and residual value of Property, Plant and Equipment and intangible assets, valuation of inventories, measurement of recoverable amounts of cash-generating units, estimated quantities of noble metals, measurement of employee benefits, actuarial assumptions, provisions etc.

Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The Company continually evaluates these estimates and assumptions based on the most recently available information. Revisions to accounting estimates are recognized prospectively in the Statement of Profit and Loss in the period in which the estimates are revised and in any future periods affected.

Judgements

In the process of applying the company's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements:

Materiality

Ind AS requires assessment of materiality by the Company for accounting and disclosure of various transactions in the financial statements. Accordingly, the Company assesses materiality limits for various items for accounting and disclosures and follows on a consistent basis. Overall materiality is also assessed based on various financial parameters such as Gross Block of assets, Net Block of Assets, Total Assets, Revenue and Profit Before Tax.

Contingencies

Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractual, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgement and the use of estimates regarding the outcome of future events.

higher of its fair value less costs of disposal and its value in use. The fair value less cost of disposal used to determine the recoverable amounts of the impaired assets are not based on observable market data, rather, management's best estimates.

The value in use calculation is based on a DCF model. The cash flows do not include impact of significant future investments that may enhance the asset's performance of the CGU being tested. The results of impairment test are sensitive to changes in key judgements, such as changes in commodity prices, future changes in alternate use of assets etc, which could

i) The cost of land includes provisional payments towards cost, compensation, and other accounts for which detailed accounts are yet to be received from the authorities concerned.

ii) Pending decision of the Government/Court, additional compensation, if any, payable to the land owners and the Government for certain lands acquired, is not quantifiable, and hence not considered.

iii) Refer Note 44.1

B. The cost of assets includes EPCG benefit (net of GST ITC), net of VAT credit/CENVAT/GST ITC wherever applicable

C. I ncludes 5/24 share of total cost of the Railway Siding jointly owned by the Company along with Madras Fertilizers Limited, Madras Petrochem Limited, Steel Authority of India Limited and Rashtriya Ispat Nigam Limited. Net block of Railway Sidings - T 0.003 Crore (2023 : T 0.003 Crore)

The recognition of deferred tax assets / liability is based on the "Asset and liability method", determined on the basis of difference between the financial statement and tax bases of the assets and liabilities, by using the enacted tax rates applicable to the company.

The deferred taxes are recognised to the extent, they are more likely than not to be realised, based on the best estimates as at the balance sheet date. In making such estimates, all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income and pricing assumptions based on the past trend are considered. Such estimates are subject to significant fluctuations in earnings and timing of such earnings.

(i) (A) As per the Formation Agreement entered into between the promoters, an offer is to be made to the Naftiran

Intertrade Company Limited (NICO), an affiliate of National Iranian Oil Company (NIOC) in any issue of the Capital in proportion to the shares held by them at the time of such issue to enable them to maintain their shareholding at the existing percentage.

(B) The Shareholders of the Company at the General meeting held on 24^th August 2018 has accorded approval for

a) Cancellation of unsubscribed equity share capital of ^ 20.87 Crore consisting of 2,08,68,900 equity shares of ^ 10/- each, comprising of partial subscription to Rights Issue made by the company in 1984, by the Government of India and non-subscription by Amoco India Inc., to the Rights Issue made by the company in 1984;

b) Cancellation of 2,19,700 forfeited equity shares of ^ 10/- each totaling ^ 0.22 Crore (1,87,900 equity shares forfeited on 26.09.2003 and 31,800 equity shares forfeited on 26.10.2006).

(ii) Based on special resolution passed by the shareholders through postal ballot on 16.07.2015, the company has allotted 100 Crore Non Convertible Cumulative Redeemable Preference Shares of ^ 10 each for cash at par amounting to ^ 1000 Crore to Indian Oil Corporation Ltd, the holding company on private placement preferential allotment basis on 24.09.2015 after receipt of full subscription amount.

Preference shares to the extent of ^ 500 crore, out of the total outstanding amount of ^ 1000 crore were redeemed on 06.06.2018. Accordingly the outstanding amount as at 31.03.2024 is ^ 500 crore.

Preference Shares classified as financial liability (long term borrowing) as per Ind AS 32 - Refer note - 15(C)

B. Rights, preferences and restrictions attached to Equity shares

Equity Shares: The company has one class of equity shares having a par value of T 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company in proportion to their shareholding.

Retained Earnings

The retained earnings comprises of general reserve and surplus which is used from time to time to transfer profits by appropriations. Retained earnings is free reserve of the Company and is used for the purposes like issuing bonus shares, buy back of shares and other purposes (like declaring Dividend etc.) as per the approval of Board of Directors. It includes the remeasurement of defined benefit plan as per actuarial valuations which will not be re-classified to statement of profit and loss in subsequent periods.

Other Reserves

Reserves created in compliance with the Provision of the Companies Act, the utilisation of which is restricted to the purposes mandated therein:

A Capital Redemption Reserve Account : As per Companies Act 2013, capital redemption reserve is created to redeem preference shares. Utilisation of this reserve is governed by the provisions of the Companies Act 2013.

B Insurance Reserve : Insurance Reserve is created by the company to offset the risk of loss of assets, to the extent not insured with external insurance agencies. The reserve is utilised to offset the losses on such uninsured proportion.

C Securities Premium : Premium on shares issued by the company appropriated under this reserve.

D Capital Reserve: Capital Reserve was created through forfeiture of shares and shall be utilised as per the provisions of

the Companies Act 2013.

C. Non Convertible Cumulative Redeemable Preference Shares

Preference Share is treated as financial liability as per Ind AS 32, as these are redeemable on maturity for a fixed determinable amount and carry fixed rate of dividend.

(i) Rights, preferences and restrictions attached to Preference shares:

The Company has one class of preference shares i.e. Non-Convertible Cumulative Redeemable Preference Shares

(NCCRP Shares) of T 10 per share.

(a) Such shares shall confer on the holders thereof, the right to preferential dividend from the date of allotment i.e., 24.09.2015

(b) Such shares shall rank for capital and dividend (including all dividend undeclared upto the commencement of winding up) and for repayment of capital in a winding up, pari passu inter se and in priority to the Ordinary Shares of the Company, but shall not confer any further or other right to participate either in profits or assets.

(c) The holders of such shares shall have the right to receive all notices of general meetings of the Company and have a right to vote only on resolution placed before the share holders which directly affect their rights attached to preference shares like winding up of company or repayment of preference shares etc.

(d) The tenure of the NCCRP Shares would be 10 years , with put and call option. Either the preference shareholder shall have right to exercise Put option or the Issuer shall have right to exercise Call option to redeem the preference shares, in whole or in part after the 5 years of the preference issue date. However, it is also agreed that Put & Call option before the 5 year period can be exercised by mutual consent of both the parties by giving 30 days notice.

(e) Dividend rate shall be equivalent to the Post tax yield of AAA rated corporate bond i.e. prevailing (at the time of issue) 10 year G-Sec yield plus spread on AAA rated corporate bond i.e., 6.65% p.a.

(v) Preference dividend has been provisionally accrued as finance cost. However, as per the Companies Act 2013, the preference shares is treated as part of share capital and the provisions of the Act relating to declaration of Preference Dividend would be applicableThe Board of Directors have recommended preference dividend of 6.65% on the outstanding preference shares amounting to ^ 33.25 Cr for the year (2022-23 : ^ 33.25 cr).

(vi) Refer Note -13 & 13A - Authorised and issued Preference Share capital and the reconciliation of no. of shares of preference shares

A Includes dues Payable to Indian Oiltanking Limited ^ Nil (2023: ^ 4.76 Crore)

B Refer Note 44.1

C Non-Current Liability pertains to Indian Oil Corporation Ltd., the holding company.

D Th ere are no amounts due for payment to the Investor Education and Protection Fund as at the year end. Balance as at 31^st March 2024 includes ^ 50.60 Crore (2023: ^ 3.49 Crore) of unpaid dividend to Naftiran Inter trade company Limited (NICO) for the financial year ending 2023 and 2022 respectively which could not be remitted due to repatriation restrictions on the part of bankers.

Proposed dividend on equity shares are subject to approval at the Annual General Meeting and are not recognised as a liability as at 31 March 2024

Note : Refer Note-15 C (v) for Preference dividend

Note - 30 : Earnings Per Share (EPS)

Basic and Diluted EPS amounts are calculated by dividing the profit for the year attributable to equity holders by the weighted average number of Equity shares outstanding during the year.

Note - 32 : Employee Benefits

Disclosures in compliance with Ind AS 19 on “Employee Benefits” is as under:

A. Defined Contribution Plans- General Description

Pension Scheme:

During the year, the company has recognised ^ 21.96 Crore (2023: ^ 25.03 Crore) towards contribution to Defined Employees Pension Scheme in the Statement of Profit and Loss / CWIP (included in Contribution to Provident & Other Funds in Note - 25 / Construction period expenses in Note-2.1)

During the year, the company has recognised ^ 1.59 Crore (2023: ^ 1.71 Crore) as contribution to EPS-95 in the Statment of Profit and Loss / CWIP (included in Contribution to Provident and Other Funds in Note - 25 / Construction period expenses in Note-2.1)

B. Defined Benefit Plans- General Description

1 Provident Fund:

The Company's contribution to the Provident Fund is remitted to separate provident fund trust established for this purpose based on a fixed percentage of the eligible employee's salary and charged to Statement of Profit and Loss. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company. The Provident Fund maintained by the PF Trust in respect of which actuarial valuation is carried out. Accordingly, T 2.27 Crore (2023 : T 6.90 Crore) has been provided by the company towards the current and future interest shortfall/losses beyond available surplus. The company has determined its probable liability at T 9.81 Crore (2023: Nil) in respect of defaults on certain securities invested by the PF Trust and accounted as Employee Benefit Expenses.

2 Gratuity:

Each employee rendering continuous service of 5 years or more is entitled to receive gratuity amount equal to 15/26 of the eligible salary for every completed year of service subject to a maximum of T 0.20 Crore at the time of separation from the company. Besides, the ceiling of gratuity increases by 25% whenever IDA rises by 50%. The company has funded the liability through insurance company.

3 Post Retirement Medical Scheme (PRMS):

PRMS provides medical benefit to retired employees and eligible dependant family members.The company has funded the liability through insurer managed funds.

4 Workman Compensation:

The company pays an equivalent amount of 100 months salary to the family member of employee, if employee dies due to accidental death while he is on duty. This scheme is not funded by the company. The liability originates out of the workman compensation Act and Factory Act.

5 Ex gratia Scheme:

Ex-gratia is payable to those employees who have retired before January 01, 2007 and are drawing a pension lower than the ex gratia fixed for a Grade (in such case differential amount between pension and ex gratia is paid).

C. Other Long-Term Employee Benefits - General Description

1 Leave Encashment:

Each employee is entitled to get 8 earned leaves for each completed quarter of service. Encashment of earned leaves is allowed during service leaving a minimum balance of 15 days subject to maximum accumulation of 300 days. In addition, each employee is entitled to get 5 sick leaves (in lieu of 10 Half Pay Leave) at the end of every six months. The entire accumulation of sick leave is permitted for encashment only at the time of retirement. DPE had clarified earlier that sick leave cannot be encashed, though Earned Leave (EL) and Half Pay Leave (HPL) could be considered for encashment on retirement subject to the overall limit of 300 days. Ministry of Petroleum and Natural Gas (MoPNG) has advised the company to comply with the said DPE Guidelines. However, the company, in compliance to the DPE guidelines of 1987 which had allowed framing of own leave rules within broad parameters laid down by the Government and keeping in view operational complications and service agreements the company had requested concerned authorities to reconsider the matter. Subsequently, based on the recommendation of the 3^rd Pay Revision Committee, DPE in its guidelines on pay revision, effective from January 01, 2017 has inter-alia allowed CPSEs to frame their own leave rules considering operational necessities and subject to conditions set therein. The requisite conditions are fully met by the company. The net expenditure accounted towards encashment of sick leave for the year is T 5.09 Crore (2023: T 6.07 crore). The accumulated provision for towards encashment of sick leave is T 33.97 Crore (2023: T 32.16 Crore).

2 Long Service Award:

On completion of specified period of service with the company and also at the time of retirement, employees are rewarded with amounts based on the length of service completed. It is a mode of recognizing long years of loyalty and faithful service in line with Bureau of Public Enterprises (currently DPE) advice vide its DO No. 7(3)/79-BPE (GM.I) dated February 14, 1983. MoPNG has advised that the issue of Long Service Award has been reported as an audit para in the Annual Report of CAG. The Corporation has been clarifying its position to MoPNG individually as well as on industry basis on the rationale that Long Service Awards are not in the nature of Bonus or Ex-gratia or honorarium and is emanating from a settlement with the unions under the Industrial Dispute Act as well as with the approval of the Board in line with the DPE's advice of 1983. The matter is being pursued with MoPNG for resolution. Pending this the provision is in line with Board approved policy. The net expenditure accounted on this account is T 1.38 Crore (2023: T 1.01 Crore). The accumulated provision in this regard is T 10.11 Crore (2023: T 10.54 Crore).

D. The summarised position of various defined benefits / Long Term Employee Benefits recognised in the Statement of Profit & Loss, Balance Sheet are as under:

(Figures presented in Italic Font in the table are for previous year)

As per the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, the Company has no right to the benefits either in the form of refund from the plan or lower future contribution to the plan towards the net surplus of T 20.77 Crore (2023:Nil) determined through actuarial valuation. Accordingly, Company has not recognised the surplus as an asset in line with Ind AS 19, and the remeasurement loss /gains in ‘Other Comprehensive Income', as these pertain to the Provident Fund Trust and not to the Company.

The estimate of future salary increases considered in actuarial valuation takes into account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets held, assessed risks of asset management and historical results of the return on plan assets.

Note - 33 : Commitments and Contingencies

A Leases

(a) As lessee

The Company has entered into various material lease arrangements (including in substance lease arrangements) such as lands and buildings for purpose of its plants, facilities, offices, etc..,

The Employees Township at Cauvery Basin Refinery has been constructed on land area of thirty four acres and forty nine cents of land leased from a trust on five-year renewable basis.

Amount Recognized in Statement of Profit and Loss Account or Carrying Amount of Another Asset

The details of ROU Asset other than leasehold land included in PPE (Note 2) held as lessee by class of underlying asset is presented below :-

Current Year:

As per requirement of the standard, maturity analysis of Lease Liabilities have been shown as part of borrowings under Liquidity Risk of Note 36: Financial Instruments & Risk Factors.

Details of items of future cash outflows which the Company is exposed as lessee but are not reflected in the measurement of lease liabilities are as under;

(i) Variable Lease Payments

As per general industry practice, the Company incurs various variable lease payments which are based on rate, kms covered etc. and are recognized in profit or loss and not included in the measurement of lease liability.

(b) As lessor

(i) Operating Lease

The lease rentals recognized as income in these statements as per the rentals stated in the respective agreements:

These relate to storage tankage facilities for petroleum products, buildings, plant and equipments given on lease. Asset class wise details have been presented under Note 2: Property, Plant & Equipments.

B Contingent Liabilities

Contingent Liabilities amounting to ^630.51 Crore (2023: ^606.82 Crore) are as under:

(i) ^ 564.67 Crore (2023: ^ 539.11 Crore) being the demands raised by the Central Excise / Customs / Service Tax Authorities including interest of ^ 199.31 Crore (2023: ^ 173.16 Crore).

(ii) ^ 10.27 Crore (2023: ^ 10.48 Crore) being the demands raised by the VAT/ Sales Tax Authorities and includes no interest (2023: Nil).

(iii) ^ 54.52 Crore (2023: ^ 54.31 Crore) on account of Projects for which suits have been filed in the Courts or cases are lying with Arbitrator. This includes interest of ^ 9.28 Crore (2023: ^ 8.58 Crore).

(iv) ^ 1.05 Crore (2023: ^ 2.92 Crore) in respect of other claims including interest of ^ 0.23 Crore (2023: ^ 1.37 Crore).

The Company has not considered those disputed demands / claims as contingent liabilities, for which, the outflow of resources has been considered as remote.

C Commitments

(i) Capital Commitments

Estimated amount of contracts remaining to be executed on Capital Account not provided for ^ 98.42 Crore (2023: ^ 199.76 Crore).

(ii) Other Commitments

The Company has an export obligation to the extent of ^ 219.05 Crore (2023: ^ 219.05 Crore) on account of concessional rate of customs duty availed under EPCG license scheme on procurement of capital goods and the same is expected to be fulfilled by way of exports.

# Sitting fees paid to Independent Directors

1. This does not include the impact of provision made on actuarial valuation of retirement benefit/long term Schemes and provision made during the period towards Post Retirement Benefits as the same are not separately ascertainable for individual directors.

2. Remuneration and Loan balances for KMP is reported for the period of tenure as KMP.

3. The number of Independant Directors and Women Independant Directors were less than the minimum number of Independent Directors required in terms of the provisions of the Listing Agreement and the Companies Act, 2013. However , the Independent directors are adequately represented in statutory committees like Audit committee stakeholders Committee except for Nomination and Remuneration committee. The Company has represented to the administrative ministry for appointment of requisite number of Independent Directors in the Board at regular intervals.

1. Levels under Fair Value measurement hierarchy are as follows:

(a) Level 1 items fair valuation is based upon market price quotation at each reporting date.

(b) Level 2 items fair valuation is based upon Significant observable inputs like PV of future cash flows, MTM valuation, etc.

(c) Level 3 items fair valuation is based upon Significant unobservable inputs wherein valuation done by independent valuer.

2. The management assessed that Trade Receivables, Cash and Cash Equivalents, Bank Balances, Deposit for Leave Encashment Fund, Recoverable from Employee Benefits Trusts, Other Non-derivative Current Financial Assets, Shortterm Borrowings, Trade Payables, Floating Rate Loans and Other Non-derivative Current Financial Liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

3. The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Methods and assumptions

The following methods and assumptions were used to estimate the fair values at the reporting date:

Level 2 Hierarchy:

(i) Derivative instruments at fair value through profit or loss viz.Foreign exchange forward contracts: Replacement cost quoted by institutions for similar instruments by employing use of market observable inputs are considered.

(ii) Loans to employees, Loan to related parties, Security deposits paid and Security deposits received,Lease obligations:

Discounting future cash flows using rates currently available for items on similar terms, credit risk and remaining maturities

(iii) Non Convertible Redeemable Preference shares : The fair value of Preference shares is estimated by discounting future cash flows.

(iv) Term Loans from Oil Industry Development Board (OIDB): Discounting future cash flows using rates currently available for similar type of borrowings (OIDB Borrowing rate) using exit model as per Ind AS 113.

Note - 36 : Financial Instruments and Risk Factors

Financial Risk Factors

The Company's principal financial liabilities, other than derivatives, comprise Borrowings, trade and other payables, security deposits and employee liabilities. The main purpose of these financial liabilities is to finance the Company's operations and to support its operations. The Company's principal financial assets include loans & advances, trade and other receivables, short-term deposits and cash / cash equivalents that derive directly from its operations. The company's requirement of crude oil imports are canalized through its holding company, Indian Oil Corporation Limited. The derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company's policy that trading in derivatives are taken only to hedge the various risks that the company is exposed to and not for speculation purpose.

The Company is exposed to a number of different financial risks arising from natural business exposures as well as its use of financial instruments including market risk relating to interest rate, commodity prices, foreign currency exchange rates and equity price, credit risk and liquidity risk.

To ensure alignment of Risk Management system with the corporate and operational objective and to improve upon the existing procedure, the Executive Committee of the company constituted a Committee comprising of officials from various functional areas to identify the risks in the present context, prioritize them and formulate proper action plan for implementation. The Committee has formulated the Risk Management Policy.

The Action Taken Report on the Risk Management Policy for the year 2023-24 was reviewed by the Risk Management Committee, Audit Committee at their meetings held on 23-Apr-2024 and Board of Directors at their meeting held on 24.Apr.2024.

The Board of Directors oversees the risk management activities for managing each of these risks, which are summarised below:

A. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The major components of market risk are interest rate risk, foreign currency risk, commodity price risk and other price risks etc. Financial instruments affected by market risk include Borrowings, Deposits and derivative financial instruments.

The sensitivity analysis in the following sections relate to the position as at 31 March 2024 and 31 March 2023

The analysis exclude the impact of movements in market variables on the carrying values of gratuity and other postretirement obligations, provisions, and other non-financial assets.

The following assumptions have been made in calculating the sensitivity analysis:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held as at 31 March 2024 and 31 March 2023 including the effect of hedge accounting.

- The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant as at 31^st March 2024.

1) Interest rate risk

The Company is also exposed to interest rate risk from the possibility that changes in interest rates will affect future cash flows of a financial instrument, principally financial debt. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long-term debt obligations with floating interest rates.

The Company's interest rate risk management includes to maintain a mix between fixed and floating rates for rupee and foreign currency loans, based on liquidity, availability of cost effective instruments and considering the market / regulatory constraints. As at 31 March 2024, approximately 100% of the Company's Long term borrowings are at fixed rate of interest (31 March 2023: 100%).

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

2) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company's exposure to the risk of changes in foreign exchange rates relates primarily to the Company's operating activities (when revenue or expense is denominated in a foreign currency) and Borrowings.

The Company manages its foreign currency risk through combination of natural hedge, hedging undertaken on occurrence of pre-determined triggers as per the Risk management policy. The hedging is undertaken through forward contracts.

The sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant and the impact on the Company's profit before tax due to changes in the fair value of monetary assets and liabilities is tabulated below. The Company's exposure to foreign currency changes for all other currencies is not material.

The effects of most exchange rate fluctuations are absorbed in business operating results which are offset by changing cost competitiveness, lags in market adjustments to movements in rates to its other non-financial assets like inventory etc. For this reason, the total effect of exchange rate fluctuations is not identifiable separately in the company's reported results.

3) Commodity price risk

The Company is exposed to various commodity price related risk such as Refinery Margins i.e. Differential between the prices of petroleum products & crude oil, inventory valuation fluctuation and crude oil imports etc. As per approved risk management policy, the Company can undertake refinery margin hedging, inventory hedging and crude oil price hedging through swaps, options and futures in the OTC market as well as domestic exchanges to mitigate the risk within the approved limits.

B. Credit risk

1) Trade receivables

Customer credit risk is managed according to the Company's policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored. Transactions other than with oil marketing companies are either generally covered by Letters of Credit, Bank Guarantees or cash-and-carry basis.

2) Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company's treasury department in accordance with the Company's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty so as to minimise concentration of risks and mitigate consequent financial loss.

The Company's maximum exposure to credit risk for the components of the Balance Sheet at 31 March 2024 and 31 March 2023 is the carrying amounts as provided in Note 4, 5, 6, 11 & 12.

C. Liquidity risk

The Company monitors its risk of shortage of funds using detailed cash flow projections which is monitored closely on daily basis. The Company seeks to manage its liquidity requirement by maintaining access to both short term and long term debt markets. In addition, Company has committed credit facilities from banks.

The Company's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, commercial papers, bank loans and debentures. and finance leases. The Company assessed the concentration of risk and concluded it to be low. The Company has access to a sufficient variety of sources of funding.

D. Excessive risk concentration

Substantial portion of the Company's sales is to the Holding Company, Indian Oil Corporation Limited. Consequently, trade receivables from IOCL are a significant proportion of the Company's receivables. Since the operations are synchronised with those of the Holding Company, for optimal results, the same does not present any risk.

E. Collateral

As the Company has been rated investment grade by various rating agencies, there has been no requirement of submitting any collateral for booking of derivative contracts. The Company undertakes derivatives contract only with those counterparties that have credit rating above the internally approved threshold rating. Accordingly, the Company does not seek any collaterals from its counterparties.

Note - 37 : Capital Management

For the purpose of the Company's capital management, capital includes issued equity capital, share premium and all other equity reserves. The primary objective of the Company's capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders or issue new shares. The Company monitors capital using debt equity ratio, which is borrowings divided by Equity. The Company's strategy is to keep the debt equity ratio in the range of 2:1 and 1:1 under normal circumstances. The Company also includes accrued interest in the borrowings for the purpose of capital management.

A Revenue Grants

1 Stipend to apprentices under NATS scheme

The company has received grant of T 0.51 Crore (2023: T 0.64 crore) in respect of stipend paid to apprentices registered under National Apprenticeship Training Scheme (NATS) and the same has been accounted on net basis against training expenses.

2 EPCG Grant

Grant recognised in respect of duty waiver on procurement of capital goods under EPCG scheme of Central Government which allows procurement of capital goods including spares for pre production and post production at zero duty subject to an export obligations of 6 times of the duty saved on capital goods procuredThe unamortized capital grant amount as on March 31, 2024 is T 12.54 Crore (2023: T 12.54 Crore). The company recognised Nil Crore (2023: T Nil Crore) in the statement of profit & loss account as amortisation of revenue grant. The company expects to meet the export obligations in line with the scheme.

B Capital Grants

1 Capital Grant in respect of interest subsidy

The Company has received capital grant in the form of interest subsidy on loans taken from OIDB. The unamortized capital grant amount as on March 31, 2024 is T 0.69 crore (2023:T 1.32 crore). During the year, the company has recognised T 0.62 crore (2023: T 0.86 crore) in the statement of profit and loss as amortisation of capital grants

Note - 41 : EXPOSURE TO FINANCIAL DERIVATIVES

Financial and Derivative Instruments:

1 All derivative contracts entered into by the Company are for hedging its foreign currency relating to underlying transactions and firm commitments and not for any speculative or trading purposes.

2 The company has no outstanding forward contract as at 31^st March 2024(2023 : NIL)

Note - 42 : Revenue from Contracts with Customers

The Company is in the business of refining crude oil and it earns revenue primarily from sale of petroleum products and others. Revenue is recognized when control of the goods and services are transferred to the customer at an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. In determining the transaction price for the sale of products, the company considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any).

Generally, Company enters into contract with customers for sale on EX-MI basis. Majority of Company's sales are to Oil Marketing Companies and Downstream industries for which credit period is less than 1 year. Direct sales to other customers are generally on cash and carry basis. Revenue is recognised when the goods are delivered to the customer by adjusting the amounts deposited by customers, if any.

(i) Accretion of higher Internal accruals generated during the year based on the best ever physical performance coupled with healthy margins, has resulted in repayment of borrowings thereby significantly improving the leverage position.

(ii) The significant improvement in the debt service coverage ratio is mainly due to the fact that, there are no major long term borrowings principal repayments due during the year as compared to higher principal repayments in last year.

(iii) The reduction in ROE is mainly on account of denominator effect, wherein networth base in last year is lower as compared to higher networth base in current year.

(iv) Variation mainly on account of lower sales turnover in the current year due to decrease in product prices and also volatility in prices prevailed during the year.

(v) Mainly due to higher profits reported by Joint Venture, Indian Addtives Limited.

1. Chennai Petroleum Corporation Limited (CPCL) had Cauvery Basin Refinery (CBR) in Nagapattinam with 1 MMTPA capacity which was not in operation since 01.04.2019 due to implementation of BS- IV specifications and in the absence of secondary treatment facilities at CBR. However, certain facilities were continued to be used for Refinery operations at Manali.

CPCL Board and Indian Oil Corporation Limited (IOCL) Board in its meeting dated 15.01.21 & 29.01.21 respectively accorded investment approval and in-principal approval for formation of Joint Venture (JV) for implementation of the 9 MMTPA Cauvery Basin Refinery cum Petrochemical complex at the same CBR location in Nagapattinam situated on 618 acres (carrying value T 10.67 Cr) of freehold land of CPCL and also by acquiring additional land in that area. The existing CPCL land at CBR is proposed to be leased to CBRPL after obtaining necessary statutory approvals.

Approval was accorded by IOCL Board on 29.09.2022 for formation of JV Company amongst IOCL, CPCL and with seed investors with initial seed share capital invested by Financial Institutions pending finalization of financial/strategic /Public Investor.

The Joint Venture Company, Cauvery Basin Refinery and Petrochemicals Ltd (CBRPL) was incorporated on 06^th Jan 2023 with Chennai Petroleum Corporation Limited (CPCL) and its parent company viz. Indian Oil Corporation Limited (IOCL) each holding 25% equity shares, and balance 50% by other seed investors.

The capital structure and project cost of the 9MMTPA Refinery project were revised and approved by the Board of CPCL and IOCL in their meeting held on 20^th Feb, 2024 and 28^th Mar, 2024 respectively.

As per the proposed capital structure (CPCL 25% & IOCL 75%), IOCL has submitted revised application to DIPAM and Niti Aayog for fresh approval and is in the process of submitting application to PIB for CCEA approval. However, the existing capital structure of CBRPL with CPCL holding 25%, IOCL holding 25%, and other seed equity investors holding 50% shall continue till approval is obtained from CCEA, to ensure the continuation of Pre-Project activities.

As per CPCL & IOCL Board of Directors approval and Joint Venture agreement entered between CPCL, IOCL and other seed investors on 22^nd Nov 2022, the expenditure incurred by CPCL on behalf of the Joint Venture shall be considered as CPCL's contribution towards share capital or Quasi-Equity Instruments or as may be decided later as permissible by Applicable law. Investment in JV requires CCEA approval. Till the receipt of CCEA approval, the actual expenditure and the associated liabilities incurred on the project as at the year end, an amount of T 1054.98 Cr, T 18.77 Cr (2023: T 867.87 Cr and T 11.06 Cr) respectively, has been considered as Asset/ Liability included in disposal group held for Transfer. This group consists of Land and site development cost amounting T 170.26 Cr (653.35 acres of freehold land), Licensor / EPCM fees, construction period expenses, etc., and liability for capital expenditure. Further, finance cost allocation towards the project is shown as claims recoverable T 47.78 Cr (2023: Nil) shown as part of Sl.No.3 of Note -8.

The capital commitment as at 31^st March 2024 in respect of CBRPL is T 2350.34 Cr (2023: T 1805.72 Cr) not forming part of Capital Commitment disclosure in Note 33.

CPCL has total quantum of about 29.05 TMT of crude oil at our CBR, Nagapattinam valuing T 152.62 Cr as on 31.03.2024. The transportation of this crude from Nagapattinam to Manali refinery is in progress. Accordingly, such transportation cost assessed for movement of crude oil from Nagapattinam to Manali refinery have been considered for arriving at the Net realizable value workings in line with Ind AS 2.

2. The Company has refineries at two locations viz., Manali and Nagapattinam (Cauvery Basin Refinery - CBR). The operations of the CBR unit have been stopped from 01.04.2019. Accordingly, the value in use of the CBR unit was negative and the recoverable value of the assets was reviewed and it was estimated that there would not be any recoverable value for the same and impairment loss was recognised.Majority of the Assets have been dismantled and scrapped. Impairment provision T 92.15 crore is continued in respect of the balance Assets which have not been dismantled. Some of the facilities continue to be used for storage of crude and transportation to Manali refinery.

3. The Government of India w.e.f. 01.07.2022, levied Duties on Export of Petroleum products at the rates notified on fortnightly basis, which have been reckoned in the Refinery Transfer Pricing. This has resulted in lower revenue realisations with impact on the profitability.

4. CPCL sponsors polytechnic college, for which twenty acres of land of the company has been leased to the CPCL Educational Trust for a period of 50 years.

5. The company operates only in a single segment viz. downstream petroleum sector. As such reporting is done on a single segment basis.

6. The michaung cyclone in December 2023 caused severe floods in Chennai, which has occassioned incidence of restoration costs of the Company's Property, Plant & Equipments and stores & spares. The Company is in the process of assessing and lodging the insurance claims. Post Michaung cyclone, the company has also incurred an amount of T 25.12 Crore towards various rehabilitation activities (including T 7.54 Cr towards Tamilnadu State Disaster Management Authority), in respect of which, Insurance claims have been lodged.

Pursuant to the supplementary audit by the C&AG, the note is further elaborated to disclose that, the National Green Tribunal (NGT) has initiated suo moto proceedings in Chennai on the above subject and Nagapattinam in another matter, in respect of which proceedings are in progress and pending as on 31^st March, 2024. Further, in respect of NGT suo moto case taken up in November 2020 and concluded during the year, an amount of T 6.24 Cr has been accounted under the head Note 27.1 - Sl. No. 19 Pollution control expense.

7. During the review of residual value of Property, Plant and Equipment in the current year in accordance with the provisons of Ind AS, the Company has revised residual value of certain assets, which resulted in additional depreciation of T 0.49 Cr during the year.

8. Th ere are no other significant subsequent events that require adjustments or disclosures in the financial statements as at balance sheet date, other than those disclosed above.

10. Previous year's comparative figures have been regrouped, reclassified and recast wherever necessary and the related disclosures are included in the respective notes.