a) Disclosures relating to fair valuation of investment property
Fair value of the above investment property as at 31 March 2024 is ' 61,432 Lakhs (31 March 2023: ' 61,432 Lakhs) based on valuation report obtained by management from an independent registered valuer in FY 21-22 as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017.
Fair value Hierarchy
The fair values of investment properties have been determined by an external, independent property valuer, having appropriate recognised professional qualifications and relevant experience in the category of the land parcel being valued. The fair value measurement for the investment property has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used. The investment property constitute of Creaticity Mall, land parcels at Panchagini, Khamgaon, Solapur and vacant land at Yerwada.
Description of valuation technique used
The Company obtains independent valuations of its investment property once in every three years. The fair value of the investment property has been derived using the Direct Comparison Method. The direct comparison approach involves a comparison of the investment property to similar properties that have actually been sold in arms-length transaction or are offered for sale in the same region. This approach demonstrates what buyers have historically been willing to pay (and sellers willing to accept) for similar properties in an open and competitive market, and is particularly useful in estimating the value of the land and properties that are typically traded on a unit basis. This approach leads to a reasonable estimation of the prevailing price. Given that the comparable instances are located in close proximity to the investment property; these instances have been assessed for their locational comparative advantages and disadvantages while arriving at the indicative price assessment for investment property.
b) The Company has earned rental income and incurred direct operating expense on the above properties. Details as below :
i) Rental and incidental income earned of ' 1,806 Lakhs (31 March 2023'1,517 Lakhs)
ii) Direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income ' 3,489 Lakhs (31 March 2023'2,250 Lakhs)
iii) Direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income ' NIL (31 March 2023 ' NIL).
Other Information:
The Company has leases mainly for Corporate building, Director building, guest houses, plant & machinery, office equipment and some furniture items. These lease contracts provide for payment to increase each year by inflation.
Company as a Lessor:
The Company has given building on operating lease, Lease are renewed only on mutual consent and at prevalent market price. Operating lease rent and incidental income recognised in the Statement of Profit and Loss ' 1,806 Lakhs (31 March 2023 ' 1,517 Lakhs). (Refer Note No. 28)
* Deemed investement is on account of accounting done in books for fair valuation of corporate guarantee issued to banks and financial institutions on behalf of subsidiary and step-down subsidiary companies.
The company has complied with the number of layers of companies as prescribed under clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017.
** Investment in Deepak International Ltd ' 69 Lakhs (31 March 2023 - ' 69 Lakhs) has been fair valued at ' Nil.
*** During the year, 5,000 Nos. Optionaly Convertible Debenture repaid.
A During the year, company has purchased compulsory convertible debenture issued by Mahadhan AgriTech Limited (formerly known as Smartchem Technologies Limited) from International finance corporation.
Refer Note 37(i) for Fair value measurements of financial assets and liabilities and refer Note 37(ii) for Fair value hierarchy disclosures for financial assets and liabilities.
Refer Note 37(i) for Fair value measurements of financial assets and liabilities and refer Note 37(ii) for Fair value hierarchy disclosures for financial assets and liabilities.
Refer Note 38(i) on credit risk of trade receivables, which explains how the Company manages and measures credit quality of trade receivables that are neither past due nor impaired.
Refer Note 40(b) for amount receivable from related parties which includes debts due by companies in which any director is a director or member.
The Company's exposure to customers is diversified and except 2 customers contributes 45.19% (28.64%), no other customers,contributes more than 10% of the outstanding receivables as at 31 March 2024 and 31 March 2023.
Terms and rights attached to equity shares
The Company has only one class of equity shares having par value of ' 10 per share. Holder of each equity share is entitled to one vote per share.
The Company declares and pays dividend in Indian Rupees except in the case of overseas shareholders where dividend is paid in respective foreign currencies considering foreign exchange rate applied at the date of remittance. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the Annual General Meeting.
In the event of liquidation of the Company the holders of equity share will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts in proportion to their shareholding. The distribution will be in proportion to the numbers of equity shares held by the shareholder.
Note 20: OTHER EQUITY (Refer Statement of Changes in Equity for Reserves movement)
Nature and purpose of other equity
(a) Securities premium: Amount received in excess of face value of the equity shares is recognized in Securities Premium. The reserve is eligible for utilisation in accordance with the provisions of the Companies Act, 2013.
(b) Capital redemption reserve: The Company had issued redeemable preference shares and as per the provisions of the Act where preference shares are redeemed out of divisible profits, an amount equal to the nominal value of shares so redeemed must be transferred to capital redemption reserve, out of divisible profits.
(c) General reserve: This represents appropriation of profits by the Company to General Reserve and is available for distribution of dividend.
(d) Retained earnings: Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.
(e) Re-measurement of defined benefit plans: This represents the cumulative gains and losses arising on the re-measurement of defined benefit plans in accordance with Ind AS 19 that have been recognised in other comprehensive income.
(f) Hedge Reserve : Effective portion of fair value gain/(loss) on all financial instruments designated in cash flow hedge relationship are accumulated in hedge reserve.
a) The term loan (i), (ii) and (vi) has been availed for financing of Nitric Acid project at Dahej. The term loan is secured by pari passu charge on the land & building and hypothecation of all the present & future immovable fixed assets and intangible assets pertaining to Nitric Acid project at Dahej.
b) The term loan (iii) has been availed to shore up the net working capital of the Company. The term loan is secured by exclusive charge on the immovable property situated at Yerwada Pune belonging to joint operation, M/s Yerrowda Investments Limited (YIL). Corporate Guarantee of M/s Yerrowda Investments Limited (YIL) to the extent of the value of Immovable property is offered to Bank of Baroda.
c) The term loan (iv) has been availed to shore up the net working capital of the Company. The term loan is secured by pari passu charge on immovable property situated at Yerwada Pune belonging to joint operation, M/s Yerrowda Investments Limited (YIL) with the subsisting mortgage/charge thereon in favour of the Lender for its Corporate Loan of ' 400 cr sanctioned to Mahadhan AgriTech Limited. Corporate Guarantee of M/s Yerrowda Investments Limited (YIL) to the extent of the value of Immovable property is offered to Bank of Baroda.
d) The term loan (v) has been availed for financing of Nitric Acid project at Dahej. The term loan is secured by pari passu charge on project specific assets of upcoming Nitric Acid plant at Dahej, Gujarat.
e) The Company has registered all the required charges with Registrar of Companies within the statutory period.
f) The Company has not received any funds from any person or entity, including foreign entities ("Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
I#l ' 99 Lakhs (31 March 2023'74 Lakhs) transferred to the Investor Education and Protection Fund during the year. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company except for ' 0.37 Lakhs (31 March 2023 ' 0.37 Lakhs), wherein legal disputes with regards to ownership have remained unresolved.
^Includes a liability of ' 2,043 Lakhs (31 March 2023: ' Nil) on account of a channel financing arrangement, where the bank pays the Company for goods bought by authorized dealers when due and the dealers then pay the bank as per the agreed terms. The Company recognises financial liability to the extent that it has issued First Loss Default Guarantee.
# Provision for tax contingencies does not include all of these account of Entry tax, MVAT applicable on purchase of natural gas and income tax provision.
* The site restoration expense and decommissioning charges outflow is expected to be within a period of one to five years from date of balance sheet.
(B) Defined Benefit Plans i. Gratuity
The Company operates gratuity plan (funded) wherein every employee is entitled to the benefit equivalent to fifteen days salary last drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service.The gratuity plan is governed by the payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member's length of service and salary at retirement age.
In accordance with Ind AS 19 "Employee Benefits”, an actuarial valuation has been carried out in respect of gratuity. The discount rate assumed is 7.20% p.a. (31 March 2023: 7.40% p.a) which is determined by reference to market yield at the Balance Sheet date on Government bonds. The retirement age has been considered at 60 years (31 March 2023: 60 years), withdrawal rate is 10% p.a. (31 March 2023: 10% p.a.) and mortality table is as per IALM (2012-14) (31 March 2023: IALM (2012-14)).
The estimates of future salary increases, considered in actuarial valuation is 8% p.a. (31 March 2023: 8% p.a), taking into account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The plans assets are maintained with Life Insurance Corporation of India in respect of gratuity scheme of the Company. The details of investments maintained by Life Insurance Corporation are not available with the Company, hence not disclosed. The expected rate of return on plan assets is 7.40% p.a. (31 March 2023: 6.90% p.a).
The sensitivity analysis above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the year 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.
Weighted average duration of the plan (based on discounted cash flows using mortality, withdrawal rate and interest rate) is 7.4 years (31 March 2023: 7.53 years)
Expected contribution for next yean
The company intends to contribute ' 523 lakhs in 2024 (' 493 lakhs in 2023)
RISK EXPOSURE AND ASSET LIABILITY MATCHING
Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as companies take on uncertain long term obligations to make future benefit payments.
1. Liability Risks
a. Asset-Liability Mismatch Risk
Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the company is successfully able to neutralize valuation swings caused by interest rate movements.
b. Discount Rate Risk
Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practise can have a significant impact on the defined benefit liabilities.
c. Future Salary Escalation and Inflation Risk
Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management's discretion may lead to uncertainities in estimating this increasing risk.
2. Asset Risks
Plan assets are maintained in a trust fund partly managed by a public sector insurer viz; LIC of India. The company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also interest rate and inflation risk are taken care of.
ii. Defined pension benefits
The Company has a Post Retirement Benefit plan, which is a defined benefit retirement plan, according to which executives superannuating from the service after ten years of service are eligible for certain benefits like medical, fuel expenses, telephone reimbursement, club membership etc. for specified number of year. The liability is provided for on the basis of an independent acturial valuation.
In accordance with Ind AS 19 "Employee Benefits”, an actuarial valuation has been carried out in respect of post retirement benefits. The discount rate assumed is 7.20% p.a. (31 March 2023: 7.40% p.a) which is determined by reference to market yield at the Balance Sheet date on Government bonds. The retirement age has been considered at 60 years (31 March 2023: 60 years), withdrawal rate is 10% p.a. (31 March 2023: 8% p.a.) and mortality table is as per IALM (2012-14) (31 March 2023: IALM (2012-14)).
To comply with the requirement of The Micro, Small And Medium Enterprises Development Act, 2006 ('MSMED Act'), the Company requested its suppliers to confirm whether they are Micro, Small or Medium enterprise as defined in the said MSMED Act. Based on the communications received from such suppliers confirming their coverage as such enterprise, the Company has recognised them for the necessary treatment as provided under the MSMED Act, from the date of receipt of such confirmations.
There is no significant change in the contract asset and contract liabilities.
Performance obligations
The Company satisfies its performance obligations pertaining to the sale of products at a point in time when the control of goods is actually transferred to the customer. No significant judgment is involved in evaluating when a customer obtains control of promised goods. The contract is a fixed price contract subject to refund due to shortages and discounts during the mode of transportation and do not contain any financing component. The payment is generally due within 30-90 days.
The Company is obliged to give refunds due to shortages and discounts. There are no other significant obligations attached in the contract with customer.
Transaction price
There is no remaining performance obligation for any contract for which revenue has been recognised till the period end. Further, the Company has not applied the practical expedient as specified in para 121 of Ind AS 115 as the Company do not have any performance obligations that have an original expected duration of one year or less or any revenue stream in which consideration from a customer corresponds directly with the value to the customer of the entity's performance completed to date.
Determining the timing of satisfaction of performance obligations
There is no significant judgement involved in ascertaining the timing of satisfaction of performance obligations, in evaluating when a customer obtains control of promised goods, transaction price and allocation of it to the performance obligations.
Determining the transaction price and the amounts allocated to performance obligations
The transaction price ascertained for the only performance obligation of the Company (i.e. Sale of goods) is agreed in the contract with the customer. There is no variable consideration involved in the transaction price except for refund due to shortages and discounts which is adjusted with revenue.
Note 36(c): EARNINGS PER SHARE (EPS)
Basic EPS amounts are calculated by dividing the profits for the year attributable to equity share holders of the Company by weighted average number of equity shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit attributable to equity share holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity Shares into equity shares.
There are no potential equity shares having dilutive effect on the EPS.
The following reflects the profit and share data used in the basic and diluted EPS computation.
(ii) Fair value hierarchy
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosures are required) :
The different levels have been defined as follows:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part 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.
There are no transfers between Level 1, Level 2 and Level 3 during the year ended 31 March 2024 and 31 March 2023.
The fair value of the financial assets and liabilities is 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.
(iii) Valuation technique to determine fair value
The following methods and assumptions were used to estimate the fair values of financial instruments:
a) The carrying amount of financial assets and financial liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
b) The investment measured at fair value and falling under fair value hierarchy Level 3 pertains to investment in equity shares of Avaada MHBudhana Private Limited which is regulated by the terms stated in the share purchase agreement. These shares held by the Company are subject to specific limitations regarding the Company's ability to sell them and the permissible valuation at which they can be sold. Given the nature of these restrictions and the management's overall intention concerning the equity shares, the fair value attributed to such shares by the Company is equivalent to their original cost.
c) 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 Balance Sheet date, NAV represents the price at which the issuers will issue further units of mutual fund and the price at which issuers will redeem such units from investor.
d) The Company enters into derivative financial instruments with various counterparties, principally banks. The fair value of derivative financial instrument is based on observable market inputs including currency spot and forward rate, yield curves, currency volatility, credit quality of counterparties, interest rate and forward rate curves of the underlying instruments etc. and use of appropriate valuation models.
Note 38 : FINANCIAL RISK MANAGEMENT
Risk management framework
The Company's Board of Directors have overall responsibility for the establishment and oversight of the Company's risk management framework.
The Company, through three layers of defense namely policies and procedures, review mechanism and assurance aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit committee of the Board with top management oversee the formulation and implementation of the Risk management policies. The risk are identified at business unit level and mitigation plans are identified, deliberated and reviewed at appropriate forums.
The Company has exposure to the following risks arising from financial instruments:
- credit risk;
- liquidity risk; and
- market risk.
i. Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers, loans and investments.
The carrying amount of financial assets represents the maximum credit risk exposure.
Trade receivables and other financial assets
The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before the payment and delivery terms and conditions are offered. The Company's review includes external ratings, if they are available, financial statements, credit agency information, industry information and business intelligence. Sale limits are established for each customer and reviewed annually. Any sales exceeding those limits require approval from the appropriate authority as per policy.
In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a institutional, dealers or end-user customer, their geographic location, industry, trade history with the Company and existence of previous financial difficulties.
Expected credit loss for trade receivables:
The Company based on internal assessment which is driven by the historical experience/ current facts available in relation to default and delays in collection thereof, considers the credit risk for trade receivables to be low. The Company estimates its allowance for trade receivable using lifetime expected credit loss. The balance past due for more than 6 month (net of expected credit loss allowance) is ' 396 Lakhs (31 March 2023: ' 367 Lakhs).
Expected credit loss on financial assets other than trade receivables:
With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from which these financial assets are recoverable, have strong capacity to meet the obligations and hence the risk of default is negligible and accordingly no provision for excepted credit loss has been provided on these financial assets.
Liquidity risk is the risk that the Company will encounter difficulties in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to manage liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
The Company's treasury department is responsible for managing the short term and long term liquidity requirements. Short term liquidity situation is reviewed periodically by treasury. Longer term liquidity position is reviewed on a regular basis by the Board of Directors and appropriate decisions are taken according to the situation.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments.
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates that will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
a. Currency risk
The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of the Company. The currencies in which the Company is exposed to risk are USD, AED and EUR.
The Company follows a natural hedge driven currency risk mitigation policy to the extent possible. Any residual risk is evaluated and appropriate risk mitigating steps are taken, including but not limited to, entering into forward contracts.
Exposure to currency risk
(i) The Company's exposure to foreign currency risk at the end of the reporting period is presented in Note no 43.
(ii) The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments and forward contracts.
b. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The borrowings of the Company are principally denominated in rupees with a floating rates of interest. The Company has exposure to interest rate risk, arising principally on changes in base lending rate and LIBOR rates. The risk is managed by the Company by maintaining an appropriate floating rate borrowings.
(i) Exposure to interest rate risk
The interest rate profile of the Company's interest-bearing financial instruments as reported to the management of the Company is as follows:
The Company has not obtained Interest Rate Swaps (IRS) for variable rate borrowings.
(ii) Sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for floating rate liabilities assuming the amount of the liability outstanding at the year-end was outstanding for the whole year.
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 31 March 2024 before tax would decrease / increase by ' 164 lakhs (for the year ended 31 March 2023: decrease / increase by ' 169 lakhs). This is mainly attributable to the Company's exposure to interest rates on its variable rate borrowings.
Note 39 : CAPITAL MANAGEMENT (a) Risk Management
The Company's objectives when managing capital are to:
- safeguard its ability to continue as a going concern, so that its can continue to provide returns for its shareholders and benefits for other stakeholders, and
- maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:
Net debt (total borrowings net of cash and cash equivalents and other bank balances) and divided by Total equity (as shown in the Balance Sheet).
The company is exposed to commodity price risk because the prices of its purchase of Propylene vary as a result of fluctuations of the natural gas liquid. So, the company has used option contract to hedge its commodity i.e natural gas liquid. This natural gas liquid consists of propane and Butane which is formula linked to the prices of propylene.
For Hedges of this commodity purchases, the company entered into a Hedge relationships where the critical terms of the Hedging instrument match exactly with the terms of the Hedge item. The company therefore performs a qualitative assessment of effectiveness. There were no ineffectiveness during financial years ended 31 March 2024 amd 31 March 2023 in relation to commodity rate hedge.
Pursuant to the provisions of Section 132 and 133A of the Income-tax Act, 1961, a Search Operation was conducted by the Income Tax Department during the period from 15 November 2018 to 21 November 2018. The Company has received assessments orders and necessary appeals/rectification, as is applicable, have been filed which are pending for disposal. Based on advice of the independent tax experts, management is of the view that aforesaid matters will not have any significant impact on the Company's financial position and hence no further provision has been recognised as of 31 March 2024. Appropriate disclosure have been made under Contingent liabilities (Refer Note 41).
Segment information has been presented in the Consolidated Financial Statements as permitted by Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
Note 48
The management based on legal advise is confident that the demand of Entry Tax to the extent of 9.5% of the purchase price of the Natural Gas is revenue neutral since full set-off is available under the MVAT Act. The Company, therefore, had made a provision only of 3% of the demand amount including interest. The penalty on the same had been disclosed under contingent liabilities.
Note 49
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 the Code becomes effective.
The Company has also made deposits with banks on which it is earning return of around 5.75% to 7.5% (31 March 2023: 4%-5%).
|