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Notes to Accounts of Finolex Industries Ltd.

Mar 31, 2016

Terms/ Rights attached to equity shares:

The Company has only class of equity shares having a par value of Rs. 10 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. For year ended March 31, 2016, the amount of per share dividend recognised as distributed to equity shareholders was Rs. 10 (March 31, 2015 Rs. 2)

In the event of liquidation of the company, the holders of equity shares are entitled to receive remaining assets of the company after distribution of all preferential amounts.The distribution will be in proportion to the number of equity shares held by the shareholders.

1.1) Terms of borrowings:

Terms of debenture

1,000 privately placed 10.90 % secured redeemable non-convertible debentures of Rs. 10 lakhs each, aggregating to Rs. 10,000 lakhs (10.90% NCDs) will be redeemed in 3 years bullet from the date of allotment i.e. 31st December, 2013

Nature of security for secured borrowings and working capital:

Debentures

The outstanding amount payable on 10.90% NCDs of Rs. 10,000 lakhs with the interest accrued there on but unpaid and all other costs, charges, expenses and fees payable to the debenture trustees namely Axis Trustee Services Limited ("ATSL") secured under the Debenture Trust Deed and creation of simple mortgage on pari passu basis in favour of ATSL on immoveable properties of the Company falling within the battery limit of the site of the Company''s plant for manufacture of PVC Resin, situated at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plants and machinery attached to the earth or permanently fastened to anything attached to the earth.

Working capital

The aggregate limits of working capital borrowings of Rs. 1,39,575 lakhs from the Bank of India Consortium together with all interest, liquidated damages, costs, charges and other moneys payable under working capital consortium agreement/sanction letters are secured by:

(i) Hypothecation of inventories and book debts; and

(ii) Extension of second equitable mortgage, created in favour of Bank of India Consortium on pari passu basis with other second charge holder by deposit of title deeds with Axis Bank Ltd. (ABL), New Delhi. ABL acting as an agent for Bank of India Consortium, which ranks subsequent and subservient in rank of priority over the first equitable mortgages created by deposit of title deeds in respect of immoveable properties falling within the battery limit of the site of the Company''s plant for manufacture of PVC Resin, situated at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.

1.2 Electricity duty exemption amounting to Rs. 2,447.79 lakhs for earlier periods, although it is another form of subsidy, is accounted in the Statement of Profit and Loss and disclosed as an exceptional item. Exceptional item for the previous year includes settlement of claim against derivative and write off of insurance claim on aircraft.

1.3 Effective from 1st April, 2014 the company had charged depreciation based on the revised useful life of the assets as per the requirements of Schedule II of the Companies Act, 2013 and in certain cases on the basis of technical evaluation. Consequently, depreciation charged was lower by Rs. 477.28 lakhs for the previous year. Further, carrying value of the assets whose useful life was already exhausted as on 1st April,2014, amounting to Rs. 3,073.12 lakhs and deferred tax credit of Rs. 1,044.55 lakhs thereon has been recognised in the opening balance of Retained Earnings.

1.4 a) In terms of eligibility certificate and sanction letter received under Package Scheme of Incentives from Government of Maharashtra during the year, Industrial Promotion Subsidy of Rs. 8,614.80 lakhs in respect of the Company''s plant located at Ratnagiri, is accounted for as capital subsidy under Reserves and Surplus in the Balance Sheet.

b) The Company during the current year has paid off its sales tax deferral loan of Rs. 2,115.80 lakhs at the net present value of Rs. 1,059.12 lakhs and has taken the balance amount of Rs. 1,056.68 lakhs to the Statement of Profit and Loss under the heading other non operating income.

1.5 CSR Expenditure:

a) Amount required to be spent by the Company during the year is Rs. 317.24 lakhs.

b) Amount spent by the Company during the year is Rs. 352.83 lakhs.

1.6 Segment Reporting:

Primary Segment

Based on the guiding principle given in the Accounting Standard-17 "Segment Reporting" issued by the Institue of Chartered

Accountants of India, the Company''s primary segments are PolyVinyl Chloride (PVC), Pipes & fittings and Power.

The above business segments have been identified considering :

i) The nature of the products

ii) The related risks and returns

iii) The internal financial reporting systems

Revenue and expenses have been accounted for on the basis of their relationship to the operating activities of the segment .

Revenue and expenses , which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis , have been included under "Net unallocable (expenditure)/income". Assets and liabilities which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Other than segment".


Mar 31, 2015

1.Share Capital

Terms/ Rights attached to equity shares:

The Company has only class of equity shares having a par value of Rs. 10 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. During the year ended March 31, 2015, the amount of per share dividend recognised as distributed to equity shareholders was Rs. 2 (March 31,2014 Rs. 7)

In the event of liquidation of the company, the holders of equity shares are entitled to receive remaining assets of the company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. Terms of borrowings:

Terms of debenture

1,000 privately placed 10.90 % secured redeemable non-convertible debentures of Rs. 10 lakhs each, aggregating to Rs. 10,000 lakhs ("10.90% NCDs") will be redeemed in 3 years bullet from the date of allotment i.e. 31st December, 2013.

Terms of loan repayment

The term loan from Central Bank of India amounting to Rs. 10,000 lakhs was availed in the financial year 2011-12 and 2012-13 and carried interest at the Base rate of 10.25% 0.75 % p.a. The loan is repayable in 3 equal annual instalments starting from 31st March, 2015. From 01st Feb 2015, the interest rate has been changed to 10.25% 0.25% p.a.

The term loan from Bank of Maharashtra amounting to Rs. 5,000 lakhs was availed in the financial year 2013-14 at the Base interest rate of 10.25% 0.75% p.a. repayable in 12 quarterly instalments starting from January, 2015.

The term loan from Citibank NA amounting to Rs. 10,000 lakhs was availed in the financial year 2013-2014 at the interest rate of 10.75% p.a. From 1st July 2014, the rupee loan has been converted into USD loan at spot rate at the interest rate of 6 months USD libor 270 basis points repayable on 1st July 2015.

Nature of security for secured borrowings and working capital:

Debentures:

The outstanding amount payable on 10.90% NCDs of Rs. 10,000 lakhs with the interest accrued thereon but unpaid and all other costs, charges, expenses and fees payable to the debenture trustees namely Axis Trustee services Limited(ATSL) secured under the Debenture Trust deed and creation of simple mortgage on pari passu basis in favour of ATSL on immovable properties of the company falling within the battery limit of the site of the company's plant for the manufacture of PVC resin, situated at village Golap, district Ratnagiri in the state of Maharashtra together with all buildings and structures thereon and all plants and machinery attached to the earth or permanently fastened to anything attached to the earth.

Term Loans:

From Central Bank of India: The outstanding amount payable on term loan of Rs. 10,000 lakhs availed from Central Bank of India with all interest, liquidated damages, commitment charges, premia on prepayment, costs, expenses and other moneys and fees payable as applicable are secured by equitable mortgage created in favour of Central Bank of India, Pimpri, Pune by depositing all the documents of title, evidences, title deeds and writings in respect of immovable properties of the Company falling within the battery limit of Company's captive power plant situated at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.

From Bank of Maharashtra: The outstanding amount payable on term loan of Rs. 5,000 lakhs availed from Bank of Maharashtra with all interest, liquidated damages, commitment charges, premia on prepayment, costs, expenses and other moneys and fees payable as applicable are secured by movable property of the Company viz., plant and machinery and other movable assets falling within the battery limit of the PVC manufacturing plant situated at Village Golap-Ratnagiri, District Ratnagiri, Maharashtra State.

From Citibank N.A.: The outstanding amount payable on term loan of Rs. 10,000 lakhs availed from Citibank N.A. with all interest, liquidated damages, commitment charges, premia on prepayment, costs, expenses and other moneys and fees payable as applicable are secured by:

Extension of second equitable mortgage, to be created in favour of Citibank by deposit of title deeds with Axis Bank Ltd., New Delhi ("ABL") on pari passu basis with other second charge holders, ABL acting as an agent of Citibank N.A. which ranks subsequent and subservient in rank of priority over the first equitable mortgages created / to be created by deposit of title deeds in respect of immoveable properties falling within the battery limit of the site of the Company's plant for manufacture of PVC Resin, situated at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.

Working capital:

The aggregate limits of working capital borrowings of Rs. 1,39,575 lakhs from the Bank of India Consortium together with all interest, liquidated damages, costs, charges and other moneys payable under working capital consortium agreement/sanction letters are secured by:

(i) Hypothecation of inventories and book debts; and

(ii) Extension of second equitable mortgage, created in favour of Bank of India Consortium on pari passu basis with other second charge holder by deposit of title deeds with Axis Bank Ltd. (ABL), New Delhi. ABL acting as an agent for Bank of India Consortium, which ranks subsequent and subservient in rank of priority over the first equitable mortgages created by deposit of title deeds in respect of immoveable properties falling within the battery limit of the site of the Company's plant for manufacture of PVC Resin, situated at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.

Amount Amount (Rs.In lakhs (Rs.In lakhs) 2014-15 2013-14

3. Contingent liabilities and commitments:

I) Claims against the Company not acknowledged as debt:

a) Liabilities in respect of income tax matters for which the Company 10.17 10.17 has succeeded in appeal but Income Tax Department has gone in further appeal and exclusive of the effect of similar matters in respect of pending assessments

b) Liabilities in respect of income tax matters for which the Company has 930.29 910.97 gone in further appeal and exclusive of the effect of similar matters in respect of pending assessments

c) Excise/Customs/Service Tax in respect of which either show cause notice is 6,322.90 5,702.89 received or the Company/Department is in appeal

d) Sales Tax matters in respect of which either show cause notice is received or 8,122.91 2,422.32 the Company/Department is in appeal

e) Amounts claimed by banks in respect of derivative transactions which 13,022.56 15,980.22 are under dispute not acknowledged as debt in USD 20,821,480/- (USD 26,671,840/-)

In view of counter claims of the Company against the banks, the facts and circumstances of the case and uncertainty of period for which the litigations will continue, a reliable estimate of the liability,if any, cannot be made. It is unlikely that there will be a material liability on the Company on this account in the near future. Therefore, in view of what is stated above no provision is required to be made out of the current year's profit.

The company has been legally advised in respect of this issue confirming the aforesaid.

Commitments:

Estimated amount of contracts remaining 104.89 927.28 to be executed on capital account and not provided for (net of capital advances)

4. Related Party Disclosures

Disclosures as required by Accounting Standard 18 ''related party disclosures'' are given below:

A) Names of related parties and nature of relationship where control exists

Name of the related party Nature of relationship

1. Pawas Port ltd. Substantial interest

B) Names of related parties with whom transactions have been entered into

Mr. Prakash P. Chhabria - Executive Chairman Key Management Personnel

Mr. Saurabh S. Dhanorkar - Managing Director Key Management Personnel

Mr. Sanjay S. Math - Director (Operations) Key Management Personnel

Finolex Cables Limited Associate Company

Finolex Plasson Industries Private Limited Associate Company

Finprop Advisory Services Limited Enterprises over which key

Magnum Machine Technologies Limited management personnel or their

relatives exercise significant

influence

5. Exceptional item includes foreign exchange loss (net) and settlement of claim against derivative Rs. 2,937.65 lacs (previous year Rs. 6,977.01 lacs) and write off of insurance claim on aircraft of Rs. 500 lacs (previous year Rs. Nil).

6. Effective from 1st April, 2014 the company has charged depreciation based on the revised useful life of the assets as per the requirements of Schedule II of the Companies Act, 2013 and in certain cases on the basis of technical evaluation. Consequently, depreciation charged is lower by Rs. 477.28 lakhs for the current year. Further, carrying value of the assets whose useful life was already exhausted as on 1st April,2014, amounting to Rs. 3,073.12 lakhs and deferred tax credit of Rs. 1,044.55 lakhs thereon has been recognised in the opening balance of Retained earnings.

7. Segment Reporting:

Primary Segment

Based on the guiding principle given in the Accounting Standard-17 "Segment Reporting" issued by the Institue of Chartered Accountants of India, the Company's primary segments are PolyVinyl Chloride (PVC), Pipes & fittings and Power.

The above business segments have been identified considering :

i) The nature of the products

ii) The related risks and returns

iii) The internal financial reporting systems

Revenue and expenses have been accounted for on the basis of their relationship to the operating activities of the segment . Revenue and expenses , which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis , have been included under "Unallocable Expenses ". Assets and liabilities which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis , have been included under " Unallocable Assets / Liabilities".


Mar 31, 2014

1.1 Contingent Liabilities and commitments: Rs In lakhs

Particulars 2013-14 2012-13

Claims against the Company not acknowledged as debt:

a) Liabilities in respect of income tax matters for which the Company has 10.17 179.38 succeeded in appeal but Income Tax Department has gone in further appeal and exclusive of the effect of similar matters in respect of pending assessments

b) Liabilities in respect of income tax matters for which the Company has gone 910.97 436.23 in further appeal and exclusive of the effect of similar matters in respect of pending assessments

c) Excise/Customs/Service Tax in respect of which either show cause notice is 5,702.89 4,379.44 received or the Company/Department is in appeal

d) Sales Tax matters in respect of which either show cause notice is received 2,422.32 - or the Company/Department is in appeal

e) Amounts claimed by banks in respect of derivative transactions which are 15,980.22 14,478.81 under dispute not acknowledged as debt.

Claims in foreign exchange have been revalued at exchange rate as on Balance Sheet date.

In view of counter claims of the Company against the banks, the facts and circumstances of the case and uncertainty of period for which the litigations will continue, a reliable estimate of the liability,if any, cannot be made. It is unlikely that there will be a material liability on the Company on this account in the near future. Therefore, in view of what is stated above no provision is required to be made out of the current year''s profit. The company has been legally advised in respect of this issue confrming the aforesaid section.

f) Estimated amount of contracts remaining to be executed on capital account 927.28 1369.93 and not provided for (net off capital advances)

Basis used to determine the overall expected return:

Life Insurance Corporation of India (LIC) manages the investments of Employee Gratuity Scheme. Expected rate of return on investments is determined based on the assessment made by the LIC at the beginning of the year on the return expected on its existing portfolio, along with the estimated incremental investments to be made during the year. Yield on the portfolio is calculated based on a suitable mark-up over the benchmark Government securities of similar maturities.

1.2 Related party disclosures

Disclosures as required by accounting standard 18 ''''related party disclosures'''' are given below:

A) Names of related parties and nature of relationship where control exists

Name of the related party Nature of relationship

1. Pawas Port Ltd. Substantial interest

B) Names of related parties with whom transactions have been entered into

1. Mr. Prakash P. Chhabria - Executive Chairman

2. Mr. Saurabh S. Dhanorkar - Managing Director

3. Mr. Panyam Subramaniam - Assistant Managing Director & CFO Key management personnel (Upto 4th June, 2013)

4. Mr. Sanjay S. Math - Director Operations

5. Finolex Cables Limited Associate Company-

6. Finolex Plasson Industries Ltd. Signifcant Infuence

Enterprises over which key management personnel or their relatives exercise signifcant infuence

1. Finprop Advisory Services Ltd.

2. Magnum Machine Technologies Ltd. Signifcant Infuence

3. Kaya Software Pvt. Ltd.

1.3 Segment reporting:

Primary segment

Based on the guiding principle given in the Accounting Standard-17 "Segment Reporting" issued by the Institute of

Chartered Accountants of India, the Company''s primary segments are PolyVinyl Chloride (PVC), Pipes & fittings and Power.

The above business segments have been identifed considering :

i) The nature of the products

ii) The related risks and returns

iii) The internal financial reporting systems

Revenue and expenses have been accounted for on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable expenses". Assets and liabilities which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable assets / liabilities".


Mar 31, 2013

Note 1.1) Ministry of Corporate Affairs Government of India (MCA) notifcation on AS 11

Pursuant to circular No. 25/2012 dated 09.08.2012 issued by MCA, in respect of clarifcation on para 46A of notifcation number G.S.R 914(E) dated 29.12.2011 on accounting standard 11 relating to "The effects of changes in foreign exchange rates" the Company has capitalized exchange difference to the extent considered as borrowing cost debited to the proft and loss statement in the previous year. Accordingly, in the current fnancial year an amount of ? 320.83 lakhs has been capitalized. This amount includes 224.31 lakhs (net of depreciation of earlier year) credited to general reserve towards exchange difference previously recognised in the proft & loss statement.

The balance of foreign exchange difference capitalised pursuant to MCA notifcation on accounting standard 11 (AS 11) remaining to be depreciated over the balance life is ? 1286.76 lakhs. Note 1.2) Terms of debentures redemption:

500 privately placed secured redeemable non-convertible debentures of ? 10 lakhs each, aggregating to 5000 lakhs with LIC of India will be redeemed in three installments commencing at the end of 3rd, 4th and 5th year from the date of allotment i.e. 21st September, 2009 in the ratio of 3:3:4. 1000 privately placed secured redeemable non-convertible debentures of 10 lakhs each, aggregating to 10000 lakhs with LIC of India will be redeemed in full at par at the expiry of fve years from the date of allotment i.e. 17th November, 2008.

Note 1.2) Segment reporting:

Primary segment

Based on the guiding principle given in the Accounting Standard-17 "Segment Reporting" issued by the Institue of Chartered Accountants of India, the Company''s primary segments are PolyVinyl Chloride (PVC), pipes & fttings and power.

The above business segments have been identifed considering :

i) The nature of the products

ii) The related risks and returns

iii) The internal fnancial reporting systems

Revenue and expenses have been accounted for on the basis of their relationship to the operating activities of the segment. Revenue and expenses which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis have been included under "Unallocable expenses". Assets and liabilities which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis have been included under "Unallocable assets/liabilities".


Mar 31, 2010

1) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advance payments), Rs. 2714.73 lakhs (Rs. 2487.80 lakhs).

a. The Company has entered into derivative transactions with an objective to hedge the financial risks associated with its business, viz., foreign exchange, interest rate.

b. The Company has not hedged the following foreign currency exposures:

i) Borrowings grouped under secured loans equivalent to Rs. 3452.48 lakhs (Rs. 5,083.36 lakhs) and under unsecured loans equivalent to Rs. 15892.52

lakhs. (Rs. 22613.48 lakhs). ii) Creditors for imports equivalent to Rs. 12714.73 lakhs (Rs. 10049.51 lakhs).

2) Debentures: Terms of Redemption

1000 Privately placed Secured Redeemable Non-Convertible Debentures ("Debentures") of Rs. 10,00,000 (Rupees ten lakhs only) each will be redeemed in full at par at the expiry of five years from the date of allotment, i.e., 17th November, 2008.

500 Privately placed Secured Redeemable Non-Convertible Debentures of Rs. 10,00,000 (Rupees ten lakhs only) each will be redeemed in full at par at the expiry of five years from the date of allotment, i.e., 18,h September, 2009.

3) Security for Secured Loans:

(I) The outstanding amount payable on the above referred Debentures with the interest accrued thereon but unpaid and all other costs, charges, expenses and fees payable to the Axis Trustee Services Limited ("ATSL or "Trustees" for 1000 Debentures under the Debenture Trust deed dated 16th February, 2009 and for 500 Debentures under the Debenture Trust Deed dated 5th March, 2010 respectively) have been secured by creation of English mortgage on pari passu basis in favour of Trustees on the Companys immovable properties situate at IB, 1st Floor, Mahakant Building, Ellisbridge, Ahmedabad in the State of Gujarat.

(II) The above referred Debentures and the borrowings from ICICI Bank Limited, Singapore Branch ("ICICI Bank") (Axis Bank is acting as Security Trustee of ICICI Bank) by way of foreign currency loan together with all interest, liquidated damages, commitment charges, premia on prepayment or on redemption, costs, expenses and other moneys and fees payable as applicable to the trustees under the Debentures Trust Deeds and Security Trustee Agreement have been secured by creating equitable mortgage on pari passu basis in favour Axis Bank and the ATSL by depositing with Axis Bank, Axis Bank acting for itself as a Trustee of the above referred foreign currency loan of ICICI Bank and as an agent of ATSL, all the documents of title, evidences, title deeds and writings in respect of immovable properties falling within the battery limit of the site of the Companys plant for manufacture of PVC, situate at Village Golap, District Ratnagiri in the State of Maharashtra ("Title Deeds") together with all buildings and structures thereon and all plants and machinery attached to the earth or permanently fastened to anything attached to the earth.

(Ill) The aggregate limits of working capital borrowing of Rs. 129575 lakhs from the Bank of India Consortium together with all interest, liquidated damages, costs, charges, and other monies payable under working capital consortium agreement/sanction letters are secured by:

(a) Hypothecation of inventories and book debts.

(b) By extension of second equitable mortgage created in favour of Bank of India Consortium by deposit of Title Deeds with Axis Bank, Axis Bank acting as an agent for Bank of India Consortium, which ranks subsequent and subservient in rank of priority over the first equitable mortgages created/to be created by deposit of Title Deeds in respect of immoveable properties falling within the battery limit of the site of the Companys plant for manufacture of PVC Resin, situate at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.

4) Sundry Creditors

A) Outstanding to creditors other than Micro, Small & Medium Enterprise Rs. 18765.19 lakhs (Rs. 17687.58 lakhs) [Interest Paid/Payable is Rs. Nil (Rs. Nil)].

B) Outstanding to Micro, Small & Medium Enterprise: Rs. 39.44 lakhs (Rs. 90.46 lakhs)

The identification of suppliers as "Micro, Small and Medium Enterprises Development Act, 2006" was done on the basis of information to the extent provided by the suppliers of the company. Total outstanding dues of Micro, Small and Medium which were outstanding more than stipulated period are given below.

5) Donation includes political donation of Rs. 10 lakhs each (Nil) paid to Nationalist Congress Party and Shiv Sena.

6) Segment Reporting:

Primary Segment

Based on the guiding principle given in the Accounting Standard - 17 "Segment

Reporting" issued by the Institute of Chartered Accountants of India, the Companys primary segments are Polyvinyl Chloride ( PVC ) and Pipes & fittings.

The above business segments have been identified considering:

i) The nature of the products

ii) The related risks and returns

iii) The internal financial reporting systems

Revenue and expenses have been accounted for based on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable Expenses". Assets and liabilities which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable Assets/Liabilities".

7) Figures in respect of the previous year have been regrouped or rearranged wherever necessary to conform to the current periods classification.

 
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