c) The Company has only one class of equity shares having par value of ' 10/- per share. The holders of the equity shares are entitled to receive dividend as declared from time to time and are entitled to voting rights proportionate to their shareholding at the shareholders meetings.
d) 4,77,40,994 shares (Previous Year: 4,87,93,407) are held in the form of Global Depository Receipts
e) The Company has not issued any shares for a consideration other than cash in immediately preceding five years except 2,19,16,99,881 bonus shares issued during FY 2022-23 and 2,25,50,70,933 bonus shares issued during FY 2019-20.
f) The Company bought back 5,69,85,463 fully paid up equity shares representing 1.28% of the paid-up share capital for an aggregate amount of '1,082.72 crore (excluding taxes) at '190 per equity share. The equity shares bought back were extinguished on 21st June 2022.
The Company bought back 6,97,56,641 fully paid up equity shares representing 1.55% of the paid-up share capital for an aggregate amount of '1,046.35 crore (excluding taxes) at '150 per equity share. The equity shares bought back were extinguished on 22nd March 2021.
Nature and Purpose of reserves
a Retained Earnings
The Retained Earnings represents accumulated earnings of the Company. Retained Earnings is a 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 re-measurement gain/(loss) on defined benefit plans which will not be re-classified to statement of profit and loss in subsequent periods.
b Capital Redemption Reserve
As per the Companies Act 2013, Capital Redemption Reserve is created when the Company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares purchased is transferred to Capital Redemption Reserve. Utilization of this reserve is governed by the provisions of the Companies Act 2013.
c Fair Value Gain/ (Loss) of Equity Instruments
'This reserve represents the cumulative effect of fair value fluctuations of investments made by the company in equity instruments of other entities. The cumulative gain or loss arising on such changes are recognised through Other Comprehensive Income (OCI) and accumulated under this reserve. This will not be re-classified to the statement of profit and loss in subsequent periods.
d Cash Flow Hedge Reserve
The Cash Flow Hedge Reserve represents the cumulative effective portion of gains/ (losses) arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain/ (loss) arising on such changes are recognised through Other Comprehensive Income (OCI) and accumulated under this reserve. Such gains/ (losses) will be reclassified to statement of profit and loss in the period in which the hedged item occurs/ affects the statement of profit and loss.
29 Contingent Liabilities and Commitments:
I. Contingent Liabilities:
a. Claims against the Company not acknowledged as debts:
(i) Legal cases for claim of '2,353.27 crore (Previous Year: '2,118.27 crore) by Suppliers / Contractors etc. on account of Liquidated Damages / Price Reduction Schedule and by Customers for Natural Gas Price Differential and Natural Gas Transmission Charges etc.
(ii) Income Tax Demands & Appeals of '0.40 crore (Previous Year '0.40 crore) is pending and disclosed as Contingent Liability as on 31st March 2024.
b. Corporate Guarantees for raising Loans:
The Company has issued Corporate Guarantees for '4,604.51 crore (Previous Year: '4,583.74 crore) on behalf of related parties for raising loan(s). The amount of loan(s) outstanding as on 31st March 2024 against these Corporate Guarantees are '1918.82 crore (Previous Year: '1,543.30 crore). Further, Company has provided Corporate Guarantees for Non fund based facilities on behalf of related parties for '12,079.30 crore (Previous Year '13,048.56 crore).
II. Commitments:
a. Capital Commitments:
Estimated amount of contracts (Inclusive of Taxes & Net of Advances) remaining to be executed on Capital account as on 31st March 2024 is '11,484.02 crore (Previous Year: '12,381.09 crore).
b. Lease Commitments:
The company has various lease contracts that have not yet commenced as on 31st March 2024. The future lease payments for these non-cancellable lease contracts are as follows:
*It includes demand of differential Central Excise Duty confirmed by CESTAT, Delhi vide order dated 30th November 2018 of '2,889 crore including interest and penalty in the matter pertaining to classification of 'Naphtha' manufactured by the Company. The Company has filed an appeal before the Hon'ble Supreme Court against the order, which was admitted and a stay has been granted by the Hon'ble Supreme Court on compliance of the conditions of depositing a sum of '20 crore and furnishing security to the extent of '132 crore. The Company has obtained opinion from legal expert and according to them; the Company has a good case on merits as well as on limitation. The matter is pending before the Court. Accordingly, an amount of '3,517 crore (Previous Year: '3,391 crore) including interest and penalty is disclosed as Contingent Liability as on 31st March 2024.
(iv) Miscellaneous claims of '9.66 crore (Previous Year: '14.01 crore) includes mainly arbitration cases filed by vendors for delayed payments and losses incurred by them etc.
(v) Few customers have submitted counter claims amounting to '32,600 crore (Previous Year: 'Nil) against Ship or Pay charges / Consequential Losses for not supplying gas out of which in past the Company got favourable order from Arbitral Tribunal for '31,829 crore in few cases.
c. Other Commitments:
(i) The Company has commitment of '4,680.01 crore (Previous Year: '4,357.27 crore) towards further investment and disbursement of loans in the Subsidiaries, Joint Ventures, Associates and Other Companies.
(ii) Commitments made by the Company towards the Minimum Work Programme in respect of Jointly Controlled Assets under various Production Sharing Contracts / Revenue Sharing Contracts in respect of E&P Joint Ventures is '43.79 crore (Previous Year '114.93 crore)
(iii) The Company has been authorized by the Ministry of Petroleum & Natural Gas (MoPNG), Government of India for implementation of City Gas Distribution (CGD) Projects in six Geographical Areas (GAs) along with the Jagdishpur-Haldia-Bokaro-Dhamra Pipeline (JHBDPL). The details of Minimum Work Programme (MWP) (Achievement vs. Targets) towards the same is as under:
31 Claims by the Company not acknowledged as Income / Asset:
I. I. In respect of certain customers towards Ship or Pay charges, matter being sub-judice / under dispute, the Company has been issuing claim letters, aggregate amount of which as on 31st March 2024 is '1,744.84 crore (Previous Year: '1,747.05 crore). Income in respect of the same shall be recognized as and when the matter is finally decided.
II. Pending court cases in respect of certain customers for recovery towards invoices raised by the Company for use of APM gas for non-specified purposes by fertilizer companies pursuant to guidelines of Ministry of Petroleum & Natural Gas (MoPNG), the Company has issued claim letters amounting to '1,704.56 crore (Previous Year: '1,704.56 crore) on the basis of information provided by Fertilizer Industry Coordination Committee (FICC). The proceeds, if received, will be transferred to the Gas Pool.
III. One of the Company's LNG Suppliers did not deliver certain volumes in FY 2022-23. The Company has pursued its contractual rights through arbitration to address this situation, which is pending adjudication . The financial impact, if any, on the Company of the said arbitration will be assessed after the final outcome of the arbitration proceedings.
32 Pricing and Tariff:
I. With effect from 1st April 2002, Liquefied Petroleum Gas (LPG) prices have been de-regulated and decided on the basis of import parity prices fixed by the Oil Marketing Companies.
However, the pricing mechanism is provisional and is yet to be finalized by the Ministry of Petroleum and Natural Gas (MoPNG). Impact on pricing, if any, will be recognized as and when the matter is finalized.
II. Natural Gas Pipeline Tariff and Petroleum Products Pipeline Transportation Tariff are subject to various Regulations issued by Petroleum and Natural Gas Regulatory Board (PNGRB) from time to time. Impact on profits, if any, is being recognized consistently as and when the pipeline tariff is revised by orders of PNGRB.
III. The Company has filed appeal(s) before Appellate Tribunal (APTEL), against various moderations done by PNGRB in respect of Final Tariff Order(s) issued by PNGRB for Dadri-Bawana-Nangal Natural Gas Pipeline (DBNPL), Chhainsa-Jhajjar-Hissar Natural Gas Pipeline (CJHPL), Cauvery Basin, Kochi -Koottanad -Mangaluru-Bengaluru Pipeline (KKMBPL), Krishna Godavari Basin (KG Basin) and Dabhol-Bangalore Pipeline (DBPL) Networks. The same are pending for final adjudication.
IV. During the financial year 2015-16, the Company has filed a Writ Petition before Hon'ble Delhi High Court challenging the jurisdiction of PNGRB to fix transmission tariff for natural gas marketed to consumers. Hon'ble High Court has dismissed the aforesaid Writ Petition vide its Order dated 11th April 2017. In this regard, the Company has filed a Review Petition before the Hon'ble Delhi High Court on 12th May 2017 which has been admitted by the Hon'ble Court and is pending for final adjudication.
V. PNGRB vide Gazette Notification File No. PNGRB/COM/11-
PPPL (1)/2024 Vol-I (E-5022) dated 10th April, 2024, has extended the validity of the existing LPG Pipeline tariff determination regulations till 30th June 2024.
33 On 19th February 2014, PNGRB notified the Amended Affiliate Code of Conduct Regulations by insertion of Regulation 5A mandating that an entity engaged in both marketing and transportation of natural gas shall create a separate legal entity on or before 31st March 2017 so that the activity of transportation of natural gas is carried on by such separate legal entity and the right of first use shall, however, be available to the affiliate of such separate legal entity. The Company has challenged the said PNGRB Regulation before Hon'ble Delhi High Court by way of a Writ Petition and the same is pending for final adjudication.
Pursuant to the notification of PNGRB (Determination of Natural Gas Pipeline Tariff) Amendment Regulations, 2022 dated 17th November 2022, and the subsequent submission of GAIL, PNGRB, vide Tariff Orders dated 22nd March 2023.and 24th March 2023, has determined Integrated Tariff (levelized and zonal apportionment) for GAIL's Integrated Natural Gas Pipeline (comprising Integrated HVJ, DUPL-DPPL, DBPL, DBNPL, CJHPL, JHBDPL, South Gujarat sub-network, Trombay and Uran-Thal-Usar sub-networks) with effect from 1st April, 2023.
34 Pursuant to the notification of PNGRB (Determination of Natural Gas Pipeline Tariff) Second Amendment Regulations, 2020 dated 23rd November 2020 and the amendments in the PNGRB (Determination of Natural Gas Pipeline Tariff) Regulations, 2008, PNGRB, vide Tariff Order dated 29th March, 2023, has determined the 'Unified Tariff for the National Gas Grid System (NGGS), which has been implemented with effect from 1st April, 2023. The NGGS comprises of twelve (12) inter-connected Natural Gas Pipelines of nine (09) entities. Under the same, customers/shippers across the country and located on the NGGS have started paying the same applicable zonal unified tariff for movement of gas from the Unified Entry Point upto the Unified Exit Point on the NGGS. However, Revenue Entitlement of GAIL is as per its Approved Zonal Integrated Tariff and KG-Basin Tariff which are part of the NGGS.
PNGRB, vide Tariff Order Ref No. : TO/ 2023-24/02 dated 31.05.2023, determined the revised tariff of the Agartala Regional Natural Gas Pipeline Network at '2.06/MMBtu with effect from 01.06.2023 as against '1.02/MMBtu and vide Tariff Order Ref No.: TO/2023-24/11 dated 27.12.2023, determined the revised tariff of the KG-Basin Natural Gas Pipeline Network at ' 8.40/MMBtu with effect from 01.01.2024 as against '16.14 /MMBtu impacting transmission revenues.
35 On 1st June 2023, the Company completed the acquisition of GAIL Mangalore Petrochemicals Limited (GMPL) (Formerly known as JBF Petrochemicals Limited) pursuant to a Corporate Insolvency Resolution process implemented under the Insolvency and Bankruptcy Code 2016 approved by National Company Law Tribunal (the Resolution Plan). GAIL infused '2,101 Cr. (Equity : '625 crore & Debt : '1,476 crore) on 1st June 2023 in the Company towards Resolution Plan for settlement of claims as per Resolution Plan. Accordingly, 62.50 crores equity shares were allotted in favor of GAIL and JBFPL became the wholly owned subsidiary of GAIL w.e.f. 1st June 2023. Later on GAIL further infused '88 crore in the form of equity till 31st Mar24. Currently, GAIL is holding 71.30 crore equity shares in GMPL.
II. In the year 1990, Gujarat Industrial Development Corporation (GIDC) allotted Leasehold Land measuring 70.87 Hectares to the Company for 99 years for setting up of LPG Recovery in Vaghodia, Gujarat. The Lease Deed executed is for approx. 66.30 Hectares of Land, whereas the Government of Gujarat has not yet transferred the balance to GIDC accordingly the title deed for the balance land has not made in favour of the Company.
Company is pursuing the matter with GIDC and Government of Gujarat for regularization of the balance land. Company has maintained the stand that no further amount is payable in the absence of demand from GIDC. The Company is of the opinion that since the amount for allotted land has already been paid and there is no additional demand from GIDC, no liability / contingent liability exists on the Company.
III. Details of Land & Buildings being used for CSR activities and accounted as CSR expenses, not included under Property, Plant & Equipment (PPE) and Right of Use Assets are as under:
IV. The Company has entered into a perpetual land lease agreement with Delhi Development Authority (DDA) for its Corporate Office. The lease rent is payable half-yearly, which is under revision w.e.f. 1st January 2018. DDA has not informed revised Lease Rent. Accordingly, the Company has deposited rent till 14th July 2024 as per pre-revised lease agreement. The Company has also applied for conversion of title deed of the said land from Leasehold to Freehold for which confirmation from DDA is awaited.
V. For laying Natural Gas Pipelines, Company acquires Right of Use (ROU) of Land for which advance is generally paid to Special Land Acquisition Officer (SLAO). The said Advance is being operated by the SLAO through a separate Bank account. However, in some cases, for KYC purposes, PAN number of the Company has been used. These Bank Accounts are solely under the control of the SLAO. Accordingly, these accounts are shown under deposits.
II. Gas Pool Money (Provisional) shown under "Other Financial Liabilities - Non-Current" amounting to '581.33 crore (Previous Year: '581.87 crore) with a corresponding debit thereof under Trade Receivable will be invested / paid as and when the said amount is received from the customers.
38 The Company is acting as Pool Operator in terms of the
decision of the Government of India for capacity utilization of the notified gas-based power plants. The Scheme, which was applicable till 31st March 2017, envisaged support to the power plants from the Power Sector Development Fund (PSDF) of the Government of India. The gas supplies were on provisional / estimated price basis, which were to be reconciled based on actual cost. Accordingly, current liabilities include a sum of '87.63 crore (Previous Year: '87.63 crore) on this account, as on 31st March 2024 which is payable to the above said power plants and / or to the Government of India.
39 Ind AS 115 - Revenue from Contracts with Customers:
Ind AS 115 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
Ind AS 115 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.
42 Disclosure under the Ind AS 19 on Employee Benefits is given as below:
I. Defined Contribution Plans
a Employees' Superannuation Benefit Fund
During the year, the Company has contributed '114.67 crore (Previous Year: '107.34 crore) to Superannuation Benefit Fund (including National Pension System) and charged to Statement of Profit and Loss/ CWIP.
b Employee Pension Scheme (EPS-95)
During the year, the Company has contributed '4.99 crore (Previous Year: '5.03 crore) to EPS-95 and charged to Statement of Profit and Loss/ CWIP.
II. Defined Benefit Plans:
a Provident Fund
During the year, the Company has contributed '100.68 crore (Previous Year: '89.75 crore) to Provident Fund Trust at predetermined fixed percentage of eligible employees' salary and charged to statement of profit and loss/ CWIP. Further, the obligation of the Company is to make good shortfall, if any, in the fund assets based on the statutory rate of interest.
b Gratuity
Each employee rendering continuous service of 5 years or more is entitled to receive gratuity amount based on completed tenure of service subject to maximum of '0.20 crore at the time of separation from the Company.
c Post-Retirement Medical Scheme (PRMS)
PRMS provides medical coverage to retired employees and their eligible dependant family members. d Terminal Benefits (TB)
At the time of superannuation, employees are entitled to settle at a place of their choice in India and they are eligible for Transfer Travelling Allowance from their last place of posting.
e Relief Measures for Dependent Family Members of Deceased Employees
The Company provides various assistance to the dependent family members of the deceased employees for Education of Childrens, Medical Benefits and Residential Quarter Facilities in the event of death of an employee during the service.
III. Other Long Term Benefit Plans:
a Earned Leave Benefit (EL)
Earned Leave is accrued 30 days per year. Earned Leave is encashable in the multiple of 5 any no of times in a year while in service, subject to keeping a minimum balance of 15 days in the respective employee's account. Encashment on retirement or superannuation is limited to 300 days.
b Half Pay Leave (HPL)
HPL is accrued 20 days per year. The encashment of unavailed HPL is allowed as per approved Company rules at the time of Superannuation.
c Long Service Award (LSA)
As per approved policy of the Company, on completion of specified period of service with the company and also at the time of retirement, employees are rewarded monetarily based on the duration of service completed.
c Financial Assistance Scheme (FAS)
The Financial Assistance Scheme is formulated by the Company for the welfare of its regular employees. The obligation of the Company is to provide an assured lump sum amount in the event of death or permanent total disablement of an employee while in service.
II. Jointly Controlled Assets
a) The Company has participating interest in blocks offered under New Exploration Licensing Policy (NELP) / Hydrocarbon Exploration Licensing Policy (HELP) in 10 Blocks (Previous Year: 10 Blocks) for which the Company has entered into Production Sharing Contract(s) (PSCs) / Revenue Sharing Contract (RSC), for NELP and HELP respectively, with Government of India along with other partners for exploration and production of oil and gas. The Company is operator in 3 Blocks i.e. CB-ONN-2010/11, CB-ONHP-2017/12 and RJ-ONHP-2021/1 and it is a Non-operating Partner in the remaining 7 blocks. The expenditure, income, assets and liabilities are shared by the Company based upon its Participating Interest(s) in PSC(s) / RSC of respective blocks.
(i) The Company is a Non-operating partner in E&P blocks for which reserves are disclosed.
(ii) The initial oil and gas reserve assessment was made through an expert third party agency / internal expert assessment by respective operators of E&P blocks. The year-end oil reserves are estimated based on information obtained from operators / on the basis of depletion during the year. Re-assessment of oil and gas reserves carried out by the respective Operator as and when there is new significant data or discovery of hydrocarbon in the respective block.
(iii) E&P blocks are assessed individually for impairment.
III The Company's share of balance cost recovery is '310.41 crore (Previous Year '426.19 crore) to be recovered from future revenues from E&P blocks having proved reserves as per production sharing contracts
47 Impairment of Assets - Ind AS-36 & Ind AS 109:
In compliance of 'Ind AS-36-Impairment of Assets' and 'Ind AS 109 Financial Instruments', the Company carried out assessments of impairment in respect of assets of GAIL Tel, Plant and Machinery, Right of Use (RoU) for Pipelines and Start-up-Companies as on 31st March 2024:
I. The Company accounted for impairment loss of 'Nil (Previous Year: '55.38 ) in respect of TAPI Pipeline Company Limited.
II. The Company accounted impairment loss of '1.95 crore (Previous Year: reversal of impairment loss '4.26 crore) in respect of assets
of GAIL Tel.
III. The Company accounted impairment loss of 'Nil (Previous Year: '0.72 crore) in respect of Plant and Machinery.
IV. The Company accounted impairment loss of '19.37 crore (Previous Year: 'Nil) in respect of Producing Property of Exploration and
Production business.
V. The Company conducted impairment study of RoUs for Pipelines in compliance to the provisions of Ind AS 36. There is no impairment loss found in respect of RoUs.
48 In compliance of Ind AS 109 on Impairment of Financial Assets/ Expected Credit Loss (ECL) on Financial Guarantees, the Company has carried out an assessment in respect of its following investments/ Financial Guarantees as on 31st March 2024:
I. During the year, based on fair valuation of investment in Tapi Pipeline Company Limited, the Company has made a provision for impairment of 'nil (Previous Year: '55.38 crore). The Carrying Value of Company's investment in Tapi Pipeline Company Limited as on 31st March 2023 is ' nil (Previous Year: 'nil).
II. During the year, based on the fair valuation of GAIL Global USA Inc. (GGUI), the Company has provided for Expected Credit Loss of '46.05 crore (Previous Year: '46.62 crore) against Corporate Guarantee provided by the company on behalf of GGUI.
49 In compliance of Ind AS 37 on Provisions, Contingent liabilities and Contingent Assets, the required information on Provision for Probable Obligations is as under:
52 Interest free advance has been given to M/s. Petronet LNG Ltd. (PLL) for booking of regasification capacity to the tune of '561.80 crore during FY 2014-15 & FY 2015-16 in two equal tranches. The said advance is to be adjusted within 15 years against regasification invoices of PLL. Out of above advance, PLL has adjusted '38.2 crore during the year (Previous Year: '38.2 crore). Balance amount of '286.42 crore during the year (Previous Year: '324.63 crore) has been accounted as advance in Note No 12 and 12A.
53 In some cases, the Company has received intimation from Micro and Small Enterprises regarding their status under "The Micro, Small and Medium Enterprises Development Act, 2006". As per practice, the payment to all suppliers has been made within 15 days of receipt of valid invoice.
54 Cabinet Committee on Economic Affairs (CCEA), Government of India in its meeting held on 21st September 2016 approved 40% capital grant of estimated capital cost of '12,940 crore i.e. '5,176 crore to the Company for execution of Jagdishpur Haldia Bokaro Dhamra Pipeline Project (JHBDPL). The Company has received '4,926.29 crore (Previous year '4,926.29 crore) towards Capital Grant till 31st March 2024. During the year, the Company has amortised the capital grant amounting '137.48 crore (Previous Year: '100.67 crore) based on the useful life of the asset capitalized.
55 Other current assets includes an amount of '155.08 crore, receivables from Custom Department on account of Custom Duty paid provisionally during FY 2022-23 on import of Liquified Natural Gas (LNG) Cargoes sourced from United Arab Emirates (UAE) under Comprehensive Economic Partnership Agreement in terms of notification No. 22/2022-Cus dated 30th April 2022 issued by Ministry of Finance, Govt. of India.
56 Financial Risk Management:
The company is exposed to a number of financial risks arising from natural business exposures as well as its use of financial instruments. This includes risks relating to commodity prices, foreign currency exchange, interest rates, credit and liquidity.
I. Market Risk
Market risk is a risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of interest rate risk, foreign currency risk, equity price risk and commodity price risk. Financial instruments affected by market risk includes Loans, Borrowings, Deposits and Derivative Instruments.
(a) Interest Rate Risk
Interest rate risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the long-term domestic rupee term loans with floating interest rates. The Company manages its interest rate risk according to its Board approved Foreign Currency and Interest Rate Risk Management Policy. Market interest rate risk is mitigated by hedging through appropriate derivatives products such as interest rate swaps & full currency swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount.
b) Foreign Currency Risk
Foreign currency risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company transacts business in local currency and foreign currency, primarily US Dollars. Company has obtained foreign currency loans and has foreign currency trade payables and receivables and is therefore, exposed to foreign exchange risk. As per its Board approved policy, Company may mitigate its foreign currency risk through plain vanilla derivative products such as foreign exchange option contracts, swap contracts and forward contracts for hedging such risks. These foreign exchange contracts, carried at fair value, may have varying maturities depending upon the underlying contract requirement and risk management strategy of the Company.
Foreign Currency Sensitivity
The following table demonstrates the sensitivity in the USD, EURO, and other currencies to the functional currency of the Company, with all other variables held constant. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives.
c) Commodity Price Risk
The Company imports LNG for marketing and its internal consumption on an on-going basis and is not exposed to the price risk to the extent it has contracted with customers in India and overseas on back to back basis. However, the Company is exposed to the price risk on the volume which is not contracted on back to back basis. As most of the LNG purchase and sales contracts are based on natural gas or crude based index, such price risk arises out of the volatility in these indices. Further, Company has index linked price exposure on sales of LPG/LHC products and sales of crude oil & natural gas produced from E&P blocks. In order to mitigate this index linked price risk, the Company has been taking appropriate derivative products in line with the Board approved Commodity Price Risk Management Policy'..
d) Equity Price Risk
The Company's investment in listed and unlisted equity instruments are subject to market price risk arising from uncertainties about future values of these investments. The Company manages the equity price risk through review of investments on a regular basis. The Company's Board of Directors reviews and approves all the equity investment decisions of the Company.
At the reporting date, the exposure to unlisted equity investments at fair value was '374.75 crore (Previous Year: '280.78 crore).
At the reporting date, the exposure to listed equity investments at fair value was '8276 crore (Previous Year: '4662.74 crore). A variation of ( /-) 10% in share price of equity investments listed on the stock exchange could have an impact of approximately ( /-) '827.6 crore (Previous Year '466.27 crore) on the OCI and equity investments of the Company. These changes would not have an effect on profit or loss.
II. Liquidity Risk
Liquidity risk is a risk that suitable sources of funding for Company's business activities may not be available. The Company's objective is to maintain optimum level of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It also maintains adequate sources to finance its short term and long term fund requirements such as overdraft facility and long term borrowing through domestic and international market.
III. Credit Risk
Credit risk is a risk that a customer or ship party to a financial instrument may fail to perform or pay the due amounts causing financial loss to the Company. It is considered as a part of the risk-reward balance of doing business and is considered on entering into any business contract to the extent to which the arrangement exposes the Company to credit risk. It may arises from Cash and Cash Equivalents, Derivative Financial Instruments, deposits with financial institutions and mainly from credit exposures to customers relating to outstanding receivables. Credit exposure also exists in relation to guarantees issued by the Company. Each segment is responsible for its own credit risk management and reporting.
The Company has issued Corporate Guarantees on behalf of its group companies, refer note no. 50 (II) for details.
Trade Receivables
Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and controls relating to customer credit risk management. Outstanding receivables from customers are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major clients.
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 approved limits of its empaneled banks, for the purpose of investment of surplus funds and foreign exchange transactions. Foreign exchange transaction and investments of surplus funds are made only with empaneled Banks and Liquid & Overnight Mutual Funds. Credit limits of all Banks are reviewed by the Management on regular basis.
IV. Capital Management
Capital includes issued capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize 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, return capital to shareholders, or issue new shares. No changes were made in the objectives, policies or processes during the reporting year.
57 Accounting Classifications and Fair Value Measurements:
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: technique which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
i) The carrying cost of Interest-bearing loans & borrowings is approximately equal to their Fair Market Value.
ii) The carrying amount of trade receivables, cash and cash equivalents, other bank balance, others receivables, trade payables, interest accrued and due, other payables and other financial liabilities are considered to be same as their fair value due to their short term nature.
iii) With respect to borrowings, the fair value was calculated based on cash flows discounted using the current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.
The fair values 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.
58 Hedging Activities and Derivatives
Derivatives not designated as Hedging Instruments:
The Company uses forward currency contracts, interest rate swaps, cross currency interest rate swaps, commodity swap contracts to hedge its foreign currency risks, interest rate risks and commodity price risks. Derivative contracts not designated by management as hedging instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value on each reporting date. Such contracts are entered into for periods consistent with exposure of the underlying transactions.
Derivatives designated as Hedging Instruments:
Cash Flow Hedges
The Company enters into hedging instruments in accordance with policies as approved by the Board of Directors with written principles which is consistent with the risk management strategy of the Company. Company has decided to apply hedge accounting for certain derivative contracts that meets the qualifying criteria of hedging relationship entered into post October 01, 2017.
Foreign Currency Risk
Foreign exchange forward contracts are designated as hedging instruments in cash flow hedges of firm commitment of capital purchases in USD and existing borrowings e.g. USD / Japanese Yen etc.
Commodity Price Risk
The Company purchases and sells natural gas / liquefied petroleum gas on an ongoing basis as its operating activities. The significant volatility in natural gas / liquefied petroleum gas prices over the years has led to Company's decision to enter into hedging instruments through swap transactions including basis swaps. These contracts are designated as hedging instruments in cash flow hedges of forecasted sales and purchases of natural gas / liquefied petroleum gas.
The table below shows the position of hedging instruments and hedged items (underlying) as at the balance sheet date.
60 Confirmation of Assets & Liabilities:
I. Some balances of trade and other receivables, trade and other payables are subject to confirmation / reconciliation. Adjustment, if any, will be accounted for on confirmation / reconciliation of the same, which will not have a material impact.
II. In the opinion of management, the value of assets, other than fixed assets and non-current investments, on realization in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet.
63 Based on the opinion of Expert Advisory Committee (EAC) of The Institute of Chartered Accountants of India (ICAI) and Technical analysis by the Company, the residual value of Natural Gas/ LPG/ City Gas Distribution (CGD) pipelines has been revised to 'NIL', which resulted in additional depreciation of '174 crore during the financial year ended 31st March 2024. Further, the estimated impact for future period is not ascertainable.
64 The Company has deferred interest accrued on loan given to one of its Subsidiary for a further period of two years, which was due from 01.04.2023. Further, payment terms of the interest accrued upto March 2023, which was earlier due from December 2023, has also been deferred upto December 2025.
67 Wilful Defaulter:
The Company has not been declared as a wilful defaulter by any bank or financial institution or any other lender as on 31st March 2024 and 31st March 2023.
68 Benami Property:
The Company is not holding any Benami Property as on 31st March 2024 and 31st March 2023. Further, no proceedings have been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder.
69 Borrowings Secured against Current Assets:
During the financial year ended 31st March 2024, the Company has not availed any borrowings from banks or financial institutions against security of current assets. Accordingly there is no requirement for filing quarterly return/statements of current assets by the Company with Banks or Financial Institutions.
70 Registration of Charges or satisfaction with Registrar of Companies (ROC):
During the financial year 2023-24, the Company has registered charges or satisfaction with ROC on or before the statutory date and there is no delay in registration.
72 Previous Year's figures have been regrouped / reclassified, wherever necessary to correspond with the current year's classification / disclosure.
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