11. CURRENT VERSUS NON CURRENT CLASSIFICATION
11.1 The Company presents assets and liabilities in the balance sheet based on current/ non- current classification.
11.2 An asset is treated as current when it is:
* Expected to be realised or intended to be sold or consumed in normal operating cycle or is held for trading
* Expected to be realised within twelve months after the reporting period, or
* Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.
All other assets are classified as non- current.
11.2 A Liability is current when:
* Expected to be realised or intended to be sold or consumed in normal operating cycle or is held for trading
* It is due to be settled within twelve months after the reporting period, or
* There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting date.
All other liabilities are classified as non current 12.FINANCIAL INSTRUMENTS:
12.1 Financial Assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
o Financial Assets at amortised cost
o Debt instruments at fair value through other comprehensive income (FVTOCI) o Equity instruments at fair value through other comprehensive income (FVTOCI) o Financial assets and derivatives at fair value through profit or loss (FVTPL)
12.1.1 Financial Assets at amortised cost
A financial asset is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows,and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables.
12.1,2Debt instrument at FVTOCI
A ‘debt instrument’ is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The asset's contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
12.1,3Equity investments at FVTOCI
All equity investments in scope of Ind AS 109 are measured at fair value. The company has made an irrevocable election to present subsequent changes in the fair value in other comprehensive income, excluding dividends. The classification is made on initial recognition/transition and is irrevocable.
There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the company may transfer the cumulative gain or loss within equity. 12.1,4Debt instruments and derivatives at FVTPL
FVTPL is a residual category. Any financial asset, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
This category also includes derivative financial instruments entered into by the company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
In addition, the company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ‘accounting mismatch’). The company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in theP&L.
12.1 5Derecognition
Afinancial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the balance sheet) when:
? The rights to receive cash flows from the asset have expired, or
? The company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the company continues to recognise the transferred asset to the extent of the company’s continuing involvement. In that case, the company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
12.1 6lmpairment of financial assets
In accordance with Ind AS 109, the company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, trade receivables and bank balance
b) Financial guarantee contracts which are not measured as at FVTPL
c) Lease receivables under Ind AS 17
The company follows 'simplified approach’ for recognition of impairment loss allowance on Trade receivables that do not contain a significant financing component.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
Lifetime ECLare the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:
? All contractual terms of the financial instrument (including prepayment extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
? Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L). The balance sheet presentation for various financial instruments is described below:
? Financial assets measured as at amortised cost: ECL is presented as an allowance,
i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the company does not reduce impairment allowance from the gross carrying amount.
? Financial guarantee contracts: ECL is presented as a provision in the balance sheet, i.e. as a liability.
Debt instruments measured at FVTOCI: Since financial assets are already reflected at fair value, impairmentallowance is not further reduced from its value. Rather, ECL amount is presented as ‘accumulated impairment amount’ in the OCI
12.2 Financial liabilities
12.2.1 Initial recognition and measurement.
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings including financial guarantee contracts.
12.2.2Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
A. Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
B. Financial liabilities at amortised cost:
Financial liabilities that are not held fortrading and are not designated at FVTPLare measured at amortised cost at the end of subsequent accounting periods based on the Effective Interest Rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
This category generally applies to borrowings. The EIR amortisation has been calculated based on the managements perception of cash outflow which is based on expected progress of the project.
C. Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially asa liability atfairvalue, adjusted fortransaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation. 12.2.3Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
12.2.40ffsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
13. CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
14. FAIR VALUE MEASUREMENT
14.1 Fair value is 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 at each balance sheet date in the principal market or most advantageous market assuming that market participants act in their economic interest.
14.2 A fair value measurement of a non financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use using techniques which are appropriate and for which sufficient data is available.
14.3 Fair value hierarchy:
LEVEL 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
LEVEL 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
LEVEL 3: Others including using external valuers as required
2. SIGNIFICANTACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and accompanying disclosures and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets and 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 recognised prospectively in the statement of profit and loss in the period in which the estimates are revised and in any future periods attached.
3. CONTINGENCIES
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.
Note : 1 Bank of Baroda Corporate Covid Emergency Credit Line Loan was sanctioned on 14/06/2022 and repayable in 47 monthly instalments of ? 7.02lakhs after the moratorium period of 2 years and at a sanctioned interest rate of BRLLR 1% and maximum 9.25%._
Note a) Company has used the borrowing sanctioned by Bank of Baroda for working capital purposes for the same.
b) There is a variation of ?684.82 lakhs in value of inventories due to difference in valuation method.
SECURITY : 1. The above two Bank of Baroda term loans are secured by paripassu charge by way of
1. First charge by way of equitable mortgage of 21.35 Acres of land in Survey Nos.92/4A, 92/4B.97/1 A part, 97/1B1, 1B2, 1B3.97/2B2, 97/3-1, 97/3-2 part, 98/1A part, 98/1B part,95/4 Part,95/6 Part, 95/7 part, 96/1-1,96/1-2,96/2, 96/3Apart, 96/3B part, 96/4Part, 96/5-1 part, 97/1B-3 part, 97/2A-1 part, 98/1A Part, 132/11-A, 132/12,132/13,95/3 part, 95/5 part, 97/3 part 135/3B, 135/2B, 135/2A,135/1 at Parur Taluk, Kadungallur Village together with building, plant and machinery and movables(save and except inventories of all nature, book debts and other current assets which form part of the primary security towards the working capital advance in the ordinary course of business) including movable machinery, machinery spares, tools and accessories present and future.
2. By personal guarantee of Dr S.N.Sasidharan Kartha, Managing Director
32. Dues to Micro, Small and Medium Enterprises
Based on the information available with the management, the amount payable to micro, small and medium enterprises in respect of whom information is to be disclosed under the Micro, Small and Medium Enterprises Development Act 2006 is ? 190.34 lakhs.
c) No charges or satisfaction is yet to be registered with Registrar of Companies beyond the statutory period.
d) The Company has complied with the no. of layers prescribed u/s 2(87) read with the applicable Rules.
e) There is no Scheme of Arrangements that has been approved in terms of sections 230
to 237._
f) The Company has not advanced/loaned/invested or received funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall 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 provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
g) There are no transactions that are not recorded in the books of account to be surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES:
The financial liabilities of CMRL comprise of loans and borrowings, trade and other payables with the main purpose of financing the Company's activities. The financial assets of CMRL comprise of Investments, receivables,loans and advances and cash and cash equivalents CMRL is exposed to market risk, credit risk and liquidity risk. This is managed by the Company's management team under guidance of the Board of Directors. This team ensures that the financial risk activities are governed by appropriate policies and procedures and financial risks are identified, measured and managed in accordance with the Company's policies and risk objectives.
The Board of Directors reviews and agrees policies for managing these risks as summarised below.
a. Market Risk : Market risk is the risk that the fairvalue offuture cash flows of a financial instrument will fluctuate because of change in market price and comprises of Interest rate risk, Currency risk and Other risks. Financial instruments affected by market risk includes loans and borrowings , deposits and interest on deposits.
(i) Interest Rate Risk : Risk that the fair value of future cash flows will fluctuate due to changes in market interest rates and primarily affects the long term debt obligations of the Company which is based on MCLR and reset annually. As per IND AS interest is charged as per Effective Interest Method based on the IRR of the loan.
(ii) Foreign currency risk : Company has no borrowings in foreign currency.
(iii) Other Risk : The other risk factors are the unpredictable situation in the availability and price of ilmenite and Hydrochloric acid, the major and critical raw materials of the company.
The demand and volatile nature of prices of Synthetic Rutile and foreign exchange fluctuations also have an impact.
b. Credit Risk : Risk of the counter party not meeting its obligations if a customer or counter party fails to meet its contractual obligations and arises principally from the Company’s trade receivables and loans and advances. The carrying amounts of financial instruments represent the maximum exposure.
The Company's exposure to credit risk is influenced mainly by the characteristics of each customer and the geography in which it operates. Credit risk is managed by credit approvals, establishing credit limits and continuously monitoring the credit worthiness of its customers to which the Company grants credit terms in the normal course of its business.
The Company's export sales are backed by letters of credit.
The Company monitors each loans and advance given and makes any provision whenever required.
Based on prior experience and assessment of current business environment, management believes there is no requirement for any credit provision and there is no significant concentration of credit risk.
36. CAPITAL MANAGEMENT
For the purpose of Company’s capital management, capital includes share capital and other equity with the primary objective of increasing shareholder value. The Company manages its capital structure in light of changes in economic conditions and requirements of the financial covenants through a mix of debt and equity.
37. The figuresappearing in financial statements are rounded off to the nearest? in Lakhs. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification / disclosure.
38. Consequent to Search operations under section 132 of the Income Tax Act on 25th January 2019, the Income Tax Department re-opened the income tax assessments of the company for the Financial Years 2011 -12 to 2018-19 proposing to disallow certain expenditure claimed by the company in the profit and loss account as inflation / not relating to business. The company filed petition before the Interim Board for Settlement, New Delhi for the financial years 2012-13 to 2018-19 and the litigation was settled as per the Order of the Interim Board for Settlement dated 12.6.2023. The company had paid a sum of Rs.18,09,75,368/- as income tax for the above financial years and the same is disclosed as a separate item in the profit and loss account for the year ended 31.3.2024. The company has contested the re-opening of the assessment for the financial year 2011-12 before the Kerala High Court and the same is subjudice.
39. PENDING LITIGATIONS:
1. Pursuant to a MCA Order dated 31.01.2024, the SFIO has initiated an investigation into the affairs of the Company vide its order No. SFIO/lnv/AOI/2023-24 dated 31.01.2024. The Company has challenged the cited order and filed Writ Petition in the Honourable High Court of Delhi and the litigation is pending.
2. ED has registered an ECIR against the Company and its officials u/s50 of the PMLA Act, 2002. As there exists no scheduled offence, the Company has approached the Honourable High Court of Kerala, questioning the jurisdiction of ED and the same is pending before the Court.
|