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Notes to Accounts of Madras Fertilizers Ltd.

Mar 31, 2023

Rights, preferences and restriction relating to each class of share capital:

Equity shares: The Company has one class of equity shares having a face value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting, except in the case of interim dividend.

In the event of liquidation of the Company, the shareholders will be eligible to receive remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.

Preference shares: The Company has a class of preference shares having face value of Rs.10 per share with such rights, privileges and conditions respectively attached thereto as may be from time to time confirmed by the regulations of the company.No such preference shares are issued and outstanding as of March 31, 2023 (2022: Nil)

Note :The procedure for release of subsidy has been revised with the introduction of Direct Benefit Transfer (DBT) Scheme in a phased manner for all fertilizers. The revised procedure entails 100% payment of subsidy under DBT scheme on the basis of actual sale by the retailers to the beneficiaries on weekly basis through POS machines.

Pursuant to above procedure, pending sale of Urea, P&K fertilizer and City Compost totalling 19,175.535 MT and 472.181 MT respectively through POS machine to beneficiaries as on March 31,2022, subsidy of '' 71.80 Cr which has accrued on sale to dealers but shall become due for payment under DBT upon sale through POS machines has been recognized in the current period (CPLY quantities 49059 MT, 8595 MT and 1401 MT respectively and subsidy '' 115.30 Cr).

a. The Company has withheld payments due toM/s Sri Krishna Lorry Service (SKLS) for non-supply of trucks. SKLS invoked arbitration proceeding and got an award in their favourfora sum of ''1.96 Cr and interest @ 18% from the date of the award. The companyhasfiled a petition against this said award before the Hon''ble Madras High Court and the matter is pending for adjudication. As per Arbitration award, the probable outflow to the company as at 31st March,2023 works out to '' 6.33 Cr inclusive of interest of ''4.37Cr(PY - M5.97Cr includes interest component of ''4.01Cr).

b. The Company suspended the supply of Carbon di-oxide (CO2)toSICGIL India Limited,(SICGIL) since they defaulted in its payments as per the terms of the contract. SICGIL invoked arbitration proceedings and got an awardin their favourfor ''3.25 Cr after adjusting the amount due to the Company of ''0.03 Cr. Alongwith the interest @18%. Further the arbitrator has awarded the company to reimburse the cost of arbitration of ''0.08 Cr with interest @ 6% to the SICGIL.

The company has filed anappealagainst the saidawardbeforeHon''ble Madras High Court, which got dismissed on 09.08.2021. The company had preferred an appeal before the Divisional Bench of the Hon''ble Madras High Court and the matter is pending for final disposal by divisional bench. As per Arbitration award, the probable outflow till 31st March,2023 works out to ''6.87 Cr inclusive of interest of ''3.53Cr (PY-''6.44 Cr inclusive of interest of ''3.10 Cr).

c. M/s Davey Products a contractor for undertaking supply, erection and commissioning of RO Plant has invoked the arbitration proceedings and has been award of work for ''4.380Cr to be paid by the company. After netting of '' 3.87Cr being the payment effected by the company to said contractor and the balance of '' 1.51 Cr together with the Interest of 18% payable in terms of the award and amounting to Rs. 1.33Cr is considered as a contingent Liablity.

d. In 2007 Pay Revision, GOI has increased the gratuity ceiling from ''3.50 lakhs to ''10.00 lakhs effective from 01.01.2007 whereas the Payment of Gratuity Act has amended only from 24.05.2010. In view of above, employees separated during the period from 01.01.2007 to 30.04.2010 were paid gratuity reckoning the ceiling as ''3.50 lakhs. Some of the employees separated during the above period filed appeal before the High Court of Madras for the differential Gratuity amounting to ''2.85 Cr (PY - ''2.85Cr) and the matter is subjudice. The matter is stayed by the Hon''ble Madras High Court with an order that the enhanced Gratuity is not payable with retrospective effect based on SC order on the issue.

e. As per the DPE guidelines on wage revision effective 01.01.2017, the package includes higher gratuity of ''20 lakhs from that date. However the Company has not till date implemented the wage revision, the question of higher gratuity does not arise. The Company is paying the enhanced gratuity to all the employees who are separated from the Company after the amendment made in the payment of Gratuity Act with effect from 29.03.2018. Some employees have gone to labour court for enhanced gratuity amounting to '' 5.70 Cr (PY - '' 5.70 Cr)for the period from 01.01.2017 to 28.03.2018 which was dismissed by the Labour Court and separated employees have filed an appeal in Hon''ble High Court of Madras.

f. Income tax department has raised a demand of ''6.54 Cr (PY - ''6.54Cr) on April 22,2021 for the A.Y 2018-19 for which the Company has filed an appeal before CIT(Appeals) Chennai. However, the Department has adjusted the refund of A.Y 2019-20 and A.Y 2020-21 towards the said demand amounting to ''0.99 Cr (including interest thereon). Further, the Income Tax Department has initiated the penalty proceedings and levied penalty of ''20,000/-.

g. I n respect of Tax deducted at source (TDS), department has raised a demand due to short-deduction and/or short payment of ''0.30Cr(PY- ''0.30 Cr), for which the company is in the process of rectification.

h. ESI Authorities raised Demand Notice of

• ''0.62Cr(PY - ''0.62 Cr) towards interest and damages for the belated payment of ESI dues arising out of increase in wage ceiling. Out of which the Company has preferred an Appeal before ESI Court and obtained a stay by depositing a sum of ''0.07 Cr which is still pending.

• ''0.12Cr (PY - ''0.12 Cr) for belated payment of ESI dues of contract employees. The Company has obtained stay and the matter is pending before ESI Court.

i. One of the employees of the company Mr M V Seshachary (E.No.2226) was dismissed and reinstated after the Court Order. The employee went to Court for payment of back wages. The Court ordered the Company to pay an amount of ''0.63 Cr(PY - ''0.63Cr)alongwith the interest @ 6% p.a. Against the order of the Court, the company has preferred an appeal before the Hon''ble High Court of Telangana. As per the Court Order, the Company has deposited ''0.35 Cr as a pre-condition for the appeal, which is still pending.

j. M/s Keerthana Enterprises having canteen contract with the Company has filed the petition before MSME Counsel by claiming a dues of principal ''0.31 Cr(PY-''0.31 Cr)and interest of ''0.09 Cr(PY - ''0.09 Cr) for the non-payment of dues as per the provisions of MSMED Act 2006. The company is of the view that there is no such liability.

k. Department of Commercial Tax, Kerala has preferred an appeal against the Company for the AY 2009-10 and 2010-11 before the Hon''ble Supreme Court for considering the subsidy received from the Government as a part of turnover in order to levy the value added tax. The total tax demanded by the Department is ''5.11 Cr inclusive of interest of ''1.10 Cr (PY-''5.11 Cr). The case is pending before the Court.

l. Assistant Commissioner of Central Tax, West Division has issued a show-cause notice to the Regional Office in Bengaluru for excess availment of input tax credit for the period April-21 to September-21 amounting to Rs.1.11 cr. The Company is contesting the said demand.

m. Commissioner of Customs ordered the company for the differential customs duty of ''65.86 Cr (inclusive of penalty and redemption fine of ''32.88 Cr and ''0.10 Cr) (PY-''65.86 Cr) against which the company has filed a case before the CESTAT, South Zone, Chennai by depositing ''0.05 Cr. The CESTAT has set aside the demand and remanded the matter to the original adjudicating authority to first decide the issue of jurisdiction after availability of decision of Hon''ble Supreme Court in the case of M/s Mangli Impex. Against the said remanded order, Commissioner of Customs has filed Civil Miscellaneous Appeal (CMA) before Hon''ble High Court of Madras which is pending.

n. National Green Tribunal has “Suo Moto” filed an application based on the News item in New Indian Express Chennai edition dated May 16, 2020 and the Tamil Nadu Pollution Control Board imposed compensation of '' 0.96 Cr for which the Company has filed objection and the case is still pending.

o. The Company has requested GOI for waiver of Interest accrued and penal interest on GOI loans as a part of revival package. However, as per the office memorandum on ''Loans and Advances by the Central Govt.- interest rate and the other terms and conditions'', in case of non-acceptance of revival package submitted by the Company, the Company is under obligation to pay penal interest of 2.75% p.a amounting to '' 311.40 Cr for the current year (PY - ''275.35 Cr).

2. Tamil Nadu Pollution Control Board (TNPCB) has issued a Show cause Notice for non-compliance of emission norms by levying an environmental compensation of ''0.37 Cr. u/s 5 of the Environment (Protection) Act, 1986. The Company has represented the matter before the appropriate authority. Decision of the TNPCB is yet to be received.

3. Disclosure of Contingent Asset

The Company filed a recovery suit against M/s Hastalloy India Ltd, having business transactions of supply of Uranus Rods amounting to ''0.08 Cr together with interest of ''0.04 Cr before Hon''ble Court of Principal District Judge at Tiruvallur . In 2007, the Court ordered the decree in favour of the company for an amount of ''0.12 Cr, as claimed in the suit and to reimburse the cost of suit of ''0.01 Cr along with the interest @ 18% from the date of decree to till date of realization. Subsequently for transfer of decree necessary executive petition papers were filed in the District Court, Tiruvallur. Since the jurisdiction of supplier lies in Visakhapatnam, the Company initiated to transfer the executive petition for the recovery. Due to non-availability of virtual certainty of inflow to the company, it is disclosed as contingent asset.

a. Interest Accrued but not due on GOI Loans amounted to ''15.55 Cr and the same is classified under Other Financial Liabilities.

b. Interest on loan from GOI for FY 2022-23 amounted to ''54.58 Cr

5. During the year, company has formed an internal committee for carrying out the physical verification of Property Plant & Equipment (PPE). Based on the recommendation of committee, the company has written off salvage value of Furniture amounting to ''34/- from PPE

7. Inventories

As per Ind AS-2, ''Valuation of Inventories'', raw materials and other supplies used in the production of inventories are not written down below the cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed net realizable value, the materials are written down to net realizable value.

The eligible subsidy claim realisable and calculated as per the policy parameters laid down by Fertilizer Industry Coordination Committee (FICC) is considered as a part of net realizable value (NRV) and accordingly reckoned for the valuation of finished goods of Urea, in accordance with accounting policy followed by the company.

8. Exchange rate fluctuation included in other expenditure is Nil (PY ''1.68 Cr)

9. During the year 2021-22, the Company opted to exercise the option permitted under section 115BAA of the Income Tax Act, 1961 as promulgated by the GOI vide the Taxation Laws (Amendment) Ordinance, 2019 and has taken 25.17%

Deferred tax assets and liabilities have been offset wherever the company has a legally enforceable right to setoff current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.

The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the year in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income and tax planning strategies in making the assessment.

Based on the level of historical taxable income and projections for future taxable income over the years in which the deferred income tax assets are deductible, management believes that the company will realize the benefits of those deductible differences. The amount of deferred income tax assets considered realizable could be reduced in the near term if estimates of future taxable income during the carry forward periods are reduced.

10. In the opinion of the Management, the sum of '' 165.35 Cr being the input tax credit eligible and included under other current assets is eligible in full for the set-off against GST output liability arising out of sale of products in the future years. The management has made a provision of '' 1.77 Cr during the current financial year towards the probable ineligible GST ITC in books as a prudent measure. A sum of '' 46.56 Cr being the GST ITC which was written off in the financial year 2021-22 has been reversed and added to the provision retained for the probable ineligible GST input, resulting in the total provision retained for GST ITC being '' 48.33 Cr. The management is taking steps in undertaking the reconciliation which is an on-going process.

11. Entry tax of '' 2.52 Cr provided for payment during the years 2013-14 to 2017-18, has not been remitted, since the appeal filed by ITC Ltd. against the Tamil Nadu Government in this regard, has not been disposed off. The said amount is retained as provision in the books of accounts by the Company for payment, when demanded.

a. Entities under the control of same government:

Government of India (GOI) as on 31st March 2023 is holding 59.50% equity shares of the company, which is held by President of India through Ministry of Chemicals & Fertilizers. GOI controls the company through Ministry of Chemicals & Fertilizers.

The company has made various transactions with entities being controlled or jointly controlled or having significant influence of the Ministry of Petroleum & Natural Gas.

16. The Company has 70 acres of surplus land at Manali, which has been approved by the shareholders through special resolution during the FY 2019-20. Initially, CPCL has shown its interest to purchase the entire 70 acres of land. Later on, CPCL has conveyed its willingness to purchase 4.98 acres of land only. Accordingly, the company has classified the 4.98 acres of Manali land under “Assets held for Sale” amounting to ''18,484/- (valued at cost price), whose fair value as on the March 31,2023 is '' 65.08 Cr.

For the remaining 65.02 acres of surplus land, the company has made communication to all the PSUs and Government of Tamil Nadu, the availability of land for sale. The company decided to classify the 65.02 acres of land under “Investment Property” due to lack of marketability of the land and the same was informed to DIPAM for further action.

Further, during the 310th Board Meeting, the Board of Directors approved for sale of Guindy property having an area of 19 grounds & 1064 sq.ft, subject to approval of Dept.of Fertilizers, Govt. of India and Shareholders. Pending approval from the shareholders, the same is retained under “Investment Property’. During the year, the Board has approved appointment of NBCC (India) limited as a land management agency for said property for which MOU is yet to be entered.

17. Employee Benefit Expenses Defined Benefit Plans:

The Company has floated the following defined benefit plans i) Gratuity, ii) Post-retirement medical benefits, iii) Compensated absences, iv) Service awards and v) Contribution to Provident Fund trust.

Funding:

Gratuity is the only defined benefit plan that is funded by the Company. The funding requirements are based on the fund''s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purpose.

The Company has determined that in accordance with the terms and conditions of the defined benefit plan, and in accordance with statutory requirements, the present value of refunds or reductions in future contributions is not lower than the balance of the total fair value of the plan asset less the total present value of obligations.

Movement in net defined benefit (Asset) / Liabilities

Gratuity

The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India.

This defined benefit plan exposes the Company to actuarial risks, such as longevity risk, interest rate risk and market (investment) risk.

Every employee who has rendered continuous service of five years or more is entitled to gratuity at 15 days salary (15/26 * last drawn basic salary plus dearness allowance) for each completed year of service subject to a ceiling of '' 0.20 Cr on superannuation, resignation, termination, disablement or on death. The Company has carried out actuarial valuation of gratuity benefit considering the enhanced ceiling.

Other Benefits

Obligations on post - retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year. These are unfunded plans.

The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 10 years (31 March 2022: 10 years)

Obligations on post-retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

Provident Fund and Superannuation Fund:

The amount expended in respect of employer''s contribution to the provident fund and superannuation fund during the year, are '' 5.85Cr (Previous year '' 5.76 Cr) and '' 7.09 Cr (Previous year '' 6.60 Cr) respectively.

18. The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its Standalone financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

19. Financial Instruments - Fair Value Disclosures

Some of the Company''s financial assets and financial liabilities are measured at fair value at the end of the reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation techniques and inputs used):

Unquoted Equity shares

The fair value of the unquoted equity shares has been estimated at Net Book Value model based on the latest available audited consolidated financial statements of M/s Indian Potash Limited and Standalone Financial Statements of M/s Fortune Biotech Limited (FBL) for the year ended 31st March 2022.

Fair value of financial assets and financial liabilities that are equivalent to it carrying amount which are subsequently measured at amortized cost:

The Management assessed that trade receivables, cash and cash equivalents, trade payables, borrowings and other financial assets and liabilities, fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.

i. Management uses its best judgment in estimating the fair value of its financial instruments. However, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented above are not necessarily indicative of the amounts that the Company could have realised or paid in sale transactions as of respective dates. As such, fair value of financial instruments subsequent to the reporting dates may be different from the amounts reported at each reporting date.

20. Capital Management:

For the purpose of the Company''s Capital management, capital includes equity capital and all other reserves. The Company''s capital management objective is to maximize the total shareholder return by optimizing cost of capital through flexible capital structure that supports growth.

The Company manages its capital structure and makes adjustments in the 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. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings less cash and short-term deposits.

21. Financial Risk Management

I n course of its business, the Company is exposed to certain financial risks that could have significant influence on the Company''s business and operational / financial performance. These include market risk (including currency risk, interest rate risk and equity risk), credit risk and liquidity risk.

The Board of Directors reviews and approves risk management framework and policies for managing these risks and monitors suitable mitigating actions taken by the management to minimize potential adverse effects and achieve greater predictability to earnings.

Borrowings, trade payables and other financial liabilities constitute the Company''s primary financial liabilities and investment in unquoted equity shares, trade receivables,loans, cash and cash equivalents and other financial assets are the financial assets.

a. Credit Risk Trade receivables

Credit risk refers to the risk of default on the receivables to the Company that may result in financial loss. The maximum exposure from trade receivables is amounting to '' 503.61 Cr as of March 31, 2023 ('' 983.64 Cr as of March 31, 2022).

Trade receivables mainly constitute subsidy receivable from Government of India and from sale of manufactured and traded fertilizers to dealers.As far as Government portion of receivables is concerned, risk of default is nil or insignificant, subject to approval of subsidy rate by Government of India.In the case of dealers, credit risk is being managed through credit approvals, establishing credit limits and monitoring the creditworthiness of customers to allow credit terms in the normal course of business. In the case of the Company, the credit period offered varies between 30 to 60 days. There have been few cases of impairment historically for which the Company has made requisite provisions.

Investment in unquoted equity shares

The Company has investments in unquoted equity shares of Indian Potash Limited and Fortune Bio-Tech Limited. The Company does not expect any losses from non-performance by the investee companies and hence no impairment is recognizedin the Statement of Profit and Loss.

Loans and Advances

The company provides loans / advances to its employees on concessional or interest free basis. The company manages its credit risk in respect of such loans to employees through recovery of the same in a number of predetermined installments.

Cash and cash equivalents, deposits with banks and other financial Assets

The credit risk on cash and bank balances is limited because the counterparties are banks with high credit ratings. Therefore, the risk of default is considered to be insignificant.

In case of other financial Assets, there are certain credit impaired cases mainly due to breach of contract arising due to default or bankruptcy proceedings.

Provision for expected credit losses

Financial assets for which loss allowance is measured using life time expected credit losses

The Company''s customer base is the Government of India and a number of dealers.Historically the risk of default is very low. Further, management believes that the unimpaired amounts that are past due by more than 60 days are still collectible in full, based on historical payment behavior and extensive analysis of customer credit risk.

b. Liquidity risk

The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk through cash credit limits and undrawn borrowing facilities by continuously monitoring forecast and actual cash flows. The Company invests its surplus funds in bank fixed deposit which carry minimal mark to market risks.

c. Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk for the entity comprises three types of risk: currency risk, interest rate risk and equity risk.

Financial instruments affected by market risk include borrowings, trade payables in foreign currency and investment in unquoted equity shares. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

d. Currency risk

The Company executes import agreements for the purpose of purchase of raw materials. These are not hedged by the Company owing to the materiality of such foreign exchange gain / loss values.

Fair value sensitivity analysis for fixed-rate instruments

The company''s fixed rate instruments are carried at amortized cost. They are therefore not subject to interest rate risk, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

f. Equity price risk

Equity price risk is related to the change in market reference price of the investments in quoted equity securities. In the case of the Company, the sole investment in equity shares is unquoted and therefore, the Company is not exposed to equity price risks. However there can be changes in fair value of equity investments based on valuations done at different reporting periods owing to the operations and general business environment in which the investee operates. In general, the investment is not held for trading purposes.

Contract Liabilities in the Balance Sheet constitutes advance payments and billings in excess of revenue recognized. The Company expects to recognize such revenue in the next financial year. There were no significant changes in contract liabilities during the reporting period except amount as mentioned in the table and explanation given above. Under the payment terms generally applicable to the Company''s revenue generating activities, prepayments are received only to a limited extent. Typically, payment is due upon or after completion of delivery of the goods.

23. Subsidy under New Pricing Scheme (NPS) for Urea

a. Subsidy on Urea Sales for FY 2022-23 has been recognized at '' 3044.54 Cr in accordance with the policy parameters prescribed by Fertilizer Industry Coordination Committee(FICC) for escalation claim whereas subsidy for escalation claims provisionally approved by FICC amounts to '' 3105.97 Cr, the difference being an amount of '' 61.46 crores. The effect for the difference in the subsidy accounted will be considered as and when the final notification is received based on the escalation / de-escalation of claims for FY 2022-23 to be submitted by the Company.

b. Freight subsidy of '' 70.58 Cr considered under Revenue from Operations includes a sum of ''15.06 Cr relating to differential freight subsidy of earlier accounting years starting from FY 2016-17 for which notification was received during the FY 2022-23.

24. The company has made a request to Dept. of fertilizers, for granting additional subsidy of '' 64.97 Cr in order to compensate the higher cost of production of “N” due to usage of Naphtha as captive ammonia in production of complex fertilizers under Nutrient Based Subsidy (NBS) for the extended period from FY 2012-13 to till the conversion of feedstock to RLNG i.e. July,2019. The Additional Compensation will be considered as income, only when final order is received by the company from the Dept. of Fertilizers, Government of India.

25. Disclosure as per Ind AS 108 ‘Operating segments’

Basis for segmentation

In the case of the Company, Chairman & Managing Director(CMD) is considered to be the Chief Operating Decision Maker (CODM). The CMD reviews the performance of the Company and allocate resources based on the various management information reports provided by the respective departments of the Company.

The CODM reviews the performance of the Company primarily as two segments:

a. Fertilizers (Urea and NPK);

b. Other activities (Trading activities and Bio fertilizers);

However, since the revenue from other activities constitutes less than 5% of the reported revenue and no significant assets are employed for these activities, the management is of the view that the Company has only one reportable segment that relates to manufacture of sale of fertilizers.

Geographical information

The Company is in the operation of manufacture and sale of fertilizers within India, the entire revenue is domestic and all non-current assets are situated in India only.

Revenue from major customer

There is no single customer that accounts for more than 10% of the Company''s revenue.

28. The Sick Industrial Companies (Special Provisions) Act (SICA) has been repealed from December 01, 2016 and the Board for Industrial and Financial Restructuring (BIFR) stand dissolved from that date. The Company is pursuing legal options to file the Revival proposal to the National Company Law Tribunal (NCLT). However, based on PDIL report, The Company has submitted financial restructuring proposal with D.F, G.I for their consideration.

29. Being a Sick Company, the company has not implemented the pay revision of employees in pursuance of DPE OM No. W-02/0028/2017-DPE(WC)-GL-XIII/17 dated August 03, 2017 with effective from January 01, 2017 for Board Level and Below Board level Executives and Non-Unionized supervisors of CPSEs dated 3 August 2017 due to pending approval of revival / financial restructuring proposal. Accordingly, the amount of Arrears is not quantifiable at this stage.

30. The Company has agreed to allot Land for erecting of 400 KV DC Transmission line by TANTRANSCO, as the project is conceived by TANTRANSCO for public purpose. The Tower is erected inside the Company premises and approximately 410 meters transmission line crossing through the company premises.

31. Penalty on Non-Compliance of Composition of Board:

The company is not having the required number of Independent Directors on its Board due to vacancy arising out of expiry of term from 6th June, 2019 onwards. Accordingly, National Stock Exchange (“NSE”) has levied a penalty of '' 1.03 Cr on the said non-compliance, which has been duly paid by the company.

Being a public sector undertaking, appointment of independent directors on the board lies in the hands of the Govt. of India, which is to be treated as Impossibility of compliance. The company has shown the said amount under “Other Financial Assets - Current”, as the same can be claimed back once the said non-compliance is being rectified by the company.

32. Other Statutory Information:

a. The title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date. For immovable properties given as collateral for loans from banks and financial institutions, the title deeds were deposited with the said banks/ financial institutions.

In respect of immovable properties of land and building that have been taken on lease and disclosed as Right to use assets in the financial statements, the lease agreements are in the name of the Company except for CMWSSB land, for which MOU is yet to sign.

b. The Company has not revalued its Property, Plant and Equipment (including Right-of-Use Asset) since the Company has adopted cost model as its accounting policy to an entire class of Property, Plant and Equipment in accordance with Ind AS 16.

c. The Company has not granted any loan or advance in the nature of loan to promoters, directors, KMPs and other related parties that are repayable on demand or without specifying any terms or period of repayment.

d. The Company has used the borrowings from banks and financial institutions for the specific purpose for which it was taken as at the reporting date.

e. Registration, Modification and Satisfaction of charges relating to the year under review, had been filed with the Registrar of Companies, within the prescribed time. However, in respect of certain Modification and Satisfaction of charges relating to the year under review, the Company is in the process of filing the necessary forms with the Registrar of Companies.

f. There are no proceedings initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

h. The Company is not declared as willful defaulter by any bank or financial Institution or other lenders.

i. The Company did not have any transactions with Companies struck off under Section 248 of Companies Act, 2013 or Section 560 of Companies Act, 1956 considering the information available with the Company.

j. The Company do not have any parent company and accordingly, compliance with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable for the year under consideration.

k. There is no Scheme of Arrangements approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013 during the year.

l. The company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall

i. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

ii. provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

m. The company has also not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall

i. 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

ii. provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

n. The Company do not have any transactions which are not recorded in the books of accounts that has been surrendered or disclosed as income in the tax assessments under the Income Tax Act, 1961 during any of the years.

o. The Company did not trade or invest in Crypto Currency or virtual currency during the financial year. Hence, disclosures relating to it are not applicable.

33. The Company is in the process of signing MOU with DOF for the FY 2023-24 and is yet to be signed.

34. Balances shown under trade receivable, advances and trade payables are subject to confirmation / reconciliation/ adjustment, if any. The company has been sending letters for confirmation to parties. However, the Company does not expect any material dispute with respect to the recoverability/payment of the same.

In the opinion of the management, the value of current assets, current liabilities, loans and advances on realization in the ordinary course of business, will not be less than the value at which these are stated in the balance sheet.

35. The Company is engaged in manufacturing and trading of fertilizers, which is an essential input for agriculture. Central and State Governments are giving top most priority on agriculture activities during Covid19 situation also.The Company expects to continue the normal operations and does not expect any impact of Covid19 in its operations which is evident from the fact that the production of Urea during the year 2022-23 is at 106.79% capacity with 5,19,800 MT of Urea production.

37. The figures for the previous year have been regrouped/reclassified to correspond with the current year''s classification and disclosure.


Mar 31, 2021

Rights, preferences and restriction relating to each class of share capital:

Equity shares: The Company has one class of equity shares having a face value of 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting, except in the case of interim dividend.

In the event of liquidation of the Company, the shareholders will be eligible to receive remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.

Preference shares: The Company has a class of preference shares having face value of 10 per share with such rights, privileges and conditions respectively attached thereto as may be from time to time confirmed by the regulations of the company.No such preference shares are issued and outstanding as of March 31, 2021 (2020: Nil)

"GOI loans are obtained for revamp which is specifically to be used for the revamp of plant used to manufacture fertilizers, plan loan which is used for capital expenditure and non plan loans for the working capital needs of the Company. These are unsecured in nature. The loan carries a fixed rate of interest as below:

- Revamp loan - 7%

- Plan loan - I Tranch @ 7%, II Tranch @ 12.50% and III Tranch @ 11.50%

- Non plan loan - I Tranch @ 7% and II Tranch @ 15.50%

The said loans were availed in the period 2003 to 2012 and are repayable in 10 equal annual instalments which begin after a moratorium period of 2 years The current portion of GOI loans due within one year have been disclosed under Note 12.1.b"

"Note :The procedure for release of subsidy has been revised with the introduction of Direct Benefit Transfer (DBT) Scheme in a phased manner for all fertilizers. The revised procedure entails 100% payment of subsidy under DBT scheme on the basis of actual sale by the retailers to the beneficiaries on weekly basis through POS machines.

Pursuant to above procedure, pending sale of Urea, P&K fertilizer and City Compost totalling 49059 MT, 8595 MT and 1401 MT respectively through POS machine to beneficiaries as on March 31,2021, subsidy of '' 115.30 Cr which has accrued on sale to dealers but shall become due for payment under DBT upon sale through POS machines has been recognized in the current period (CPLY quantities 33742 MT & 6296 MT respectively and subsidy '' 94.97 Cr)."

Foot Notes:

1. During the year, the company has restated its standalone financial statements for the year ended March 31, 2020 & April 1,2019 in order to give effect to significant prior period errors in accordance with Ind AS-8.

The following are significant prior period errors which came into light in the current year:

a. Change in Fair Value Measurement for Equity Instruments:

Since transition to Ind AS, the company adopted cost or comparable price whichever is higher in fair valuing its investments in equity shares of M/s Indian Potash Limited (''IPL''). The IPL is an unlisted company and falls under the category of Level-3 as defined in the Ind AS-113. Accordingly, valuation should be either cost model approach or income approach model approach.

In view of the qualification in the Independent Auditors vide their Report dated October 9, 2020, for the year ended March 31, 2020, the practice of the peers in Industry and due to non- availability of observable market inputs, the company has changed the fair value measurement for the Equity Instruments of Indian Potash Limited from Comparable Company Multiple Method to the Net Book Value method. As the change is in the basis of measurement, the consequential impact on the valuation of IPL shares is effected retroactively.

Being a material error, for which information was available at the time of approval of standalone financial statements for the year ended March 31, 2020, is corrected retrospectively with effect from financial year 2019-20.

The company has adopted the Net Book Value per share from the latest available audited consolidated financial statements of the Indian Potash Limited as fair value.

b. Reconciliation and Rectification of Stores ledger and Financial Ledger:

The Stores and Spares lying in the inventories consists of negative figures amounting to ? 13.07 Cr due to recognition of issue of items which are not physically available in previous year.

In addition to the above, there has been an overvaluation to the tune of ? 2.00 Cr in the year 2019-20.

Further, there is a variation of ? 7.18 Cr between the balance as per the Stores Ledger and the Financial Ledger as on the 31st March, 2021.

The company has rectified the above errors by making adjustments to tune of ? 2.12 Cr to the opening retained earnings and the ?15.39 Cr and ? 0.74 Cr is being written back in the statement of the profit and loss account for year ended March 31, 2020 & 2021 respectively.

c. Identification and Capitalization of Capital Spares:

The company has made a technical assessment for the stores & spares and identified of Capital Spares worth of ? 28.82 Cr, which are to be treated as PPE in accordance with the Ind AS-16, which are lying in the Stores at the beginning of the year.

d. Capitalisation of POS Machines:

The company purchased PoS Devices during 2017-18 and 2018-19 amounting to ? 2.81 Cr are debited in "Retailer Margin” account. As the ownership rest with the company, this has been capitalized under ‘Office Equipment” during the current year and depreciated over its useful life of 3 years retrospectively.

Depreciation calculated from the date of purchase to March 31, 2021 is ? 2.81 Cr out of which ? 2.40 Cr relate to the previous years and apportioned by restating the financials.

e. Provision for Shortfall for Provident Fund:

The company has an obligation to make good the short fall, if any, between the return from the investment of the trust and the notified interest rate.

Accordingly, there was a shortfall in the Trust for the year ended March 31,2020 to the extent of ? 0.83 Cr which has been made good by the company.

2. First time adoption of Ind AS-116 ‘Leases’ from April 1,2019 onwards:

The Company has adopted Ind AS 116 Leases effective April 1, 2020, using the modified retrospective method with a transition date of April 1, 2019. Accordingly, the company has restated its standalone financial statements. The effect of Implementation of Ind AS-116 is insignificant on the profit/(loss) and earnings per share.

Ind AS 116 is applied retrospectively as per paragraph C5 (b) and the right of use asset is measured by applying paragraph C8 (b)(ii), the rent equalization reserve has been regarded as ''accrued lease payments and the amount of right of use asset is determined by deducting the said liability from the amount of ''lease liability'' determined in accordance with paragraph C8(a).

The adoption of the new standard resulted in recognition of ‘Right of Use’ asset of'' 1.71 Cr and a lease liability of'' 3.79 Cr without any impact on the opening retained earnings of the company as on April 1, 2019.

Ind AS 116 has resulted in an increase in cash inflows from operating activities and an

increase in cash outflows from financing activities on account of lease payments.

The following is the summary of practical expedients elected on initial application:

a. Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date

b. Applied the exemption not to recognize ROU assets and liabilities for leases with less than 12 months of lease term on the date of initial application.

c. Excluded the initial direct costs from the measurement of the ROU asset at the date of initial application.

d. Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to contracts that were previously identified as leases under Ind AS 17.

The difference between the lease obligation recorded as of March 31,2019 under Ind AS 17 disclosed under Note 35 of the standalone financial statements and the value of the lease liability as of April 1, 2019 is primarily on account of inclusion of extension and termination options reasonably certain to be exercised, in measuring the lease liability in accordance with Ind AS 116 and discounting the lease liabilities to the present value under Ind AS 116.

The weighted average incremental borrowing rate applied to lease liabilities as at April 1, 2019 is @ 13.90%.

3. As required by Ind AS 1 - Presentation of Financial Statements, the company has presented Balance Sheet as at April 1, 2019 for retrospective application of changes in accounting policies and restatement due to significant prior period erro The company has given a detailed note for changes in accounting policies and significant prior period errors and has disclosed the impact on the standalone financial statements in the above notes and accordingly, accompanying notes to Balance Sheet as at April 1, 2019 has not been disclosed in the standalone Ind AS financial statements.

4. The figures have been regrouped/reclassified to correspond with the current year''s classification and disclosure.

a. '' 4.56 Cr for non-supply of trucks the Company withheld payments against that SKLS went to arbitration and got an award in his favour. Against this award the Company filed an appeal in the Hon''ble High Court of Madras.

b. MFL suspended the supply of CO2 as SIGGIL defaulted in its payments and not complied with the installation of ‘flow meter'' at the Battery limit as per the terms agreed, against which SIGGIL invoked arbitration proceeding and got an award in its favour for a sum of '' 4.02 Cr towards compensation. MFL preferred appeal against the Arbitration Award.

c. In 2007 Pay Revision, GOI has increased the gratuity ceiling from '' 3.50 lakhs to '' 10.00 lakhs effective from 01.01.2007 whereas the Payment of gratuity Act has amended only from 24.05.2010 In view of above, employees separated during the period 01.01.2007 to 30.04.2010 were paid gratuity reckoning the ceiling as '' 3.50 lakhs. Some of the Employees separated during the above period filed appeal before the High Court of Madras for the differential Gratuity amounting to '' 2.85 Cr and the matter is subjudice.

d. Income tax department has raised a demand of '' 6.54 Cr on April 22,2021 for the A.Y 2018-19 for which the Company has filed an appeal before CIT(Appeals) Chennai. However, the Department has adjusted the refund of A.Y 2019-20 towards the said demand amounting to '' 0.48 Cr (including interest thereon).

# The Company has requested GOI for waiver of Interest accrued and penal interest on GOI loans as a part of revival package. However, as per the office memorandum on ‘Loans and Advances by the Central Govt.-interest rate and the other terms and conditions'', in case of waiver of penal interest, the Company is under obligation to pay minimum penal interest of 0.25% p.a amounting to '' 21.94 Cr which will arise in the year of waiver and the same has been included.

3. Inventories:

As per Ind AS 2 materials and other supplies used in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the prices of materials and it is estimated that the cost of finished products will exceed net realizable value, the materials are written down to net realizable value.

The carrying amount of stores and spares are to be treated as NRV. During the year no inventories has been written down to NRV.

4. An Independent CA firm has been appointed to carry out the physical verification of movable fixed assets and stores & spares. The physical verification is being carried out in a phased manner and during the year a portion of stores & spares amounting to '' 0.49 Cr were written off as approved in the 315th Board Meeting held on 03rd February 2021.

5. The catalyst in use as reflecting under inventories has been issued during the FY 2019-20 by estimating the life of usage as 4 years and the same were charged off to profit and loss account respectively. During the year, the management has re-assessed the life of usage of catalyst, which is in use as 3 yea Accordingly, the company has charged off the balance carrying amount catalyst in use for remaining period.

6. NPK A&B Trains are removed from PPE, which are not in operation since 2005. The Board of Directors in their 314th Board Meeting held on 9th Nov 2020, revised the installed capacity of NPK Plant from 8.40 lac MTPA to 2.80 lac MTPA until these trains are revived for usability. The carrying cost (NAV) of these Assets as of 01.04.2020 is reclassified under "capital work in progress (CWIP)”.

7. Impairment of assets:

A detailed valuation has been done by a reputed Chartered Engineer and valuer and as per his report no adjustment towards impairment loss is considered necessary by the Company as on 31.03.2021. Net selling price of the major Plant and equipment has been assessed against the book value on that date is detailed below:

8. Exchange rate fluctuation included in other income is '' 2.00 Cr (Previous year '' 0.01 Cr)

9. Income taxes:

No provision towards income tax liability has been made during the year even though the operations resulted in profit, due to Carried forward business losses and unabsorbed depreciation. Being a Sick Company, the Company is not liable for MAT

10. Entry tax of ''2.52 Cr provided for payment during the years 2013-14 to 2017-18, has not been remitted, since the appeal filed by ITC Ltd. against the Tamilnadu Government in this regard, has not been disposed off. The said amount is retained as provision in the books of accounts by the Company for payment, when demanded.

11. The Input Tax Credit balances of GST available in the e-credit ledger and books of accounts shows a variation of '' 56.83 Cr as on 31.03.2021. The Company is in the process of reconciling the same cannot be quantified and could not be accounted during the current year.

12. Payment of ITC-VAT others of ''2.51 Cr, provided in the books for the period 2009-10 to 2017-18, towards ITC availed on sale of by-product Carbon-di-oxide, will be affected only on completion of sales tax assessment of the respective years and issue of demand notice. Hence the said amount is retained as provision in the books of the Company.

13. Tax u/s 3(4) of the TNGST Act, 1959 of '' 7.78 Cr for the period 2002-03 to 2005-06, provided for, represents the differential tax demanded by the Commercial tax authorities, by deviating from the normally adopted formula followed by the authorities upto 2001-02. Since the finalization of the same will be made during the sales tax assessment of the said years, the amount is retained as liability in the books of accounts.

14. Related Party Disclosures:

d. Entities under the control of same government:

Government of India (GOI) as on 31st march 2021 is holding 59.50% equity shares of the company, which is held by President of India through Ministry of Chemicals & Fertilizers GOI controls the company through Ministry of Chemicals & Fertilizers.

The company has made various transactions with entities being controlled or jointly controlled or having significant influence of the Ministry of Petroleum & Natural Gas.

16. Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) has allotted 43.13 acres of land for a lease period of 33 years at Kodungaiyur for TTP Plant in the year 1989. However, the MOU is yet to be signed. Further, the Board of Directors of the company in its 315th meeting dated 3rd February 2021 approved for further extension of lease which is going to expire in 2022 for another 33 yea

17. Other Income includes a sum of '' 0.58 Cr (Previous Year '' 0.58 Cr) being the rent from CPCL for the area let out for their LPG pipeline, for which the renewal of agreement is under negotiation.

18. Disclosure on Investment Property:

a. The Management classifies the Asset which are held for rental incomes or surplus assets for capital appreciation under investment property.

19. The Company has 70 acres of surplus land at Manali, which has been approved by the shareholders through special resolution during the FY 2019-20. Initially, CPCL has shown its interest to purchase the entire 70 acres of land. Later on, CPCL has conveyed its willingness to purchase 4.98 acres of land only. Accordingly, the company has classified the 4.98 acres of Manali land under "Assets held for Sale" amounting to '' 18,484/-, whose fair value as on the March 31,2021 is ''21.17 Cr.

For the remaining 65.02 acres of surplus land, the company has made communication to all the PSUs and Government of Tamilnadu, the availability of land for sale. The company decided to classify the 65.02 acres of land under "Investment Property" due to lack of marketability of the land.

Further, during the 310th Board Meeting, the Board of Directors approved for sale of Guindy property having an area of 19 grounds & 1064 sq.ft, subject to approval of Dept.of Fertilizers, Govt. of India and Shareholde Pending approval from the shareholders, the same is retained under "Investment Property".

20. The unused Naphtha lying in inventory not required for operation, since the Company has converted its feedstock to RLNG during the FY 2019-20 has been reclassified as Asset held for sale. As on the reporting date, the stock of naphtha held since 2019 got reduced from 4104 MT valued at '' 17.04 Cr to 3799 MT as confirmed by the Surveyor report and DPR report. The consequential reduction in value of '' 1.26 Cr is charged off to the statement of profit and loss account. A committee has been formed to look into the marketability of the same.

21. Employee Benefit Expenses:

Defined Benefit Plans:

The Company has floated the following defined benefit plans i) Gratuity, ii) Post-retirement medical benefits, iii) Compensated absences, iv) Service awards and v) contribution to provident fund trust.

Funding:

Gratuity is the only defined benefit plan that is funded by the Company. The funding requirements are based on the fund''s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purpose.

The Company has determined that in accordance with the terms and conditions of the defined benefit plan, and in accordance with statutory requirements, the present value of refunds or reductions in future contributions is not lower than the balance of the total fair value of the plan asset less the total present value of obligations.

Movement in net defined benefit (Asset) / Liabilities Gratuity

The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. This defined benefit plan exposes the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

Every employee who has rendered continuous service of five years or more is entitled to gratuity at 15 days salary (15/26 * last drawn basic salary plus dearness allowance) for each completed year of service subject to a ceiling of '' 0.20 Cr on superannuation, resignation, termination, disablement or on death. The Company has carried out actuarial valuation of gratuity benefit considering the enhanced ceiling.

Other Benefits

Obligations on post - retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year. These are unfunded plans.

Provident fund and superannuation fund:

The net amounts expended in respect of employer''s contribution to the provident fund and superannuation fund during the year, are '' 5.79 Cr (Previous year '' 5.83 Cr) and '' 7.00 Cr (Previous year '' 6.71 Cr) respectively. An amount of ''1.13 Cr towards shortfall in the EPFO declared interest rate which is to be made good by the Company (For the year 2019-20 '' 0.83 Cr & for 2020-21 '' 0.30 Cr).

22. The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its Standalone financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

23. The Company is in the process of evaluating the impact of the recent Supreme Court Judgment in case of "Vivekananda Vidyamandir And Others Vs The Regional Provident Fund Commissioner (II) West Bengal” and the related circular (Circular No. C-I/1(33)2019/Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employees'' Provident Fund Organization in relation to non-exclusion of certain allowances from the definition of "basic wages” of the relevant employees for the purposes of determining contribution to provident fund under the Employees'' Provident Funds & Miscellaneous Provisions Act, 1952. In the assessment of the management which is supported by legal advice, the aforesaid matter is not likely to have a material impact for the year ended March 31, 2021 and accordingly, no provision has been made in these Standalone financial statements.

Unquoted Equity shares of Indian Potash Limited

The fair value of the unquoted equity shares has been estimated at Net Book Value model based on the latest available audited consolidated financial statements of the Indian Potash Limited.

Fair value of financial assets and financial liabilities that are equivalent to it carrying amount which are subsequently measured at amortized cost:

For the purpose of the Company''s Capital management, capital includes equity capital and all other reserves. The Company''s capital management objective is to maximize the total shareholder return by optimizing cost of capital through flexible capital structure that supports growth.

The Company manages its capital structure and makes adjustments in the 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. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings less cash and short-term deposits.

In course of its business, the Company is exposed to certain financial risks that could have significant influence on the Company''s business and operational / financial performance. These include market risk (including currency risk, interest rate risk and equity price risk), credit risk and liquidity risk.

The Board of Directors reviews and approves risk management framework and policies for managing these risks and monitors suitable mitigating actions taken by the management to minimize potential adverse effects and achieve greater predictability to earnings.

Borrowings, trade payables and other financial liabilities constitute the Company''s primary financial liabilities and investment in unquoted equity shares, trade receivables, loans, cash and cash equivalents and other financial assets are the financial assets.

a. Credit Risk

Trade receivables

Credit risk refers to the risk of default on the receivables to the Company that may result in financial loss. The maximum exposure from trade receivables amounting to '' 293.31 Cr as of March 31, 2021 (? 521.74 Cr as of March 31, 2020).

Trade receivables mainly constitute subsidy receivable from Government of India and from sale of manufactured and traded fertilizers to deale As far as Government portion of receivables is concerned, risk of default is nil or insignificant. Credit risk is being managed through credit approvals, establishing credit limits and monitoring the creditworthiness of customers to allow credit terms in the normal course of business. In the case of the Company, the credit period offered varies between 30 to 60 days and there have been no significant cases of impairment historically.

Investment in unquoted equity shares

The Company has an investment in unquoted equity shares of Indian Potash Limited and Fortune Bio-Tech Limited. For Indian Potash Limited, the Company does not expect any losses from non-performance by the investee and hence no impairment is recognized whereas with respect to Fortune Bio-tech Limited, the company expects loss from nonperformance by the investee. Accordingly, the company has provided impairment allowance fully in earlier yea

Loans and Advances

The company provides loans / advances to its employees on concessional or interest free basis. The company manages its credit risk in respect of such loans to employees through recovery of the same in a number of predetermined instalments.

Cash and cash equivalents, deposits with banks and other financial Assets

The credit risk on cash and bank balances is limited because the counterparties are banks with high credit ratings. Therefore, the risk of default is considered to be insignificant.

In case of other financial Assets, there are certain credit impaired cases mainly due to breach of contract arising due to default or bankruptcy proceedings.

Provision for expected credit losses

Financial assets for which loss allowance is measured using life time expected credit losses

The Company''s customer base is the Government of India and a number of deale Historically the risk of default has been negligible or nil. Further, management believes that the unimpaired amounts that are past due by more than 60 days are still collectible in full, based on historical payment behavior and extensive analysis of customer credit risk.

The company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables excluding Subsidies from the Government and other financial Assets. The provision matrix of ECL for Trade Receivables at the end of reporting period is as follows:

b. Liquidity risk

The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk through cash credit limits and undrawn borrowing facilities by continuously monitoring forecast and actual cash flows. The Company invests its surplus funds in bank fixed deposit which carry minimal mark to market risks.

c. market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk for the entity comprises three types of risk: currency risk, interest rate risk and equity price risk.

Financial instruments affected by market risk include borrowings, trade payables in foreign currency and investment in unquoted equity shares. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

d. Currency risk

The Company executes import agreements for the purpose of purchase of raw materials. These are not hedged by the Company owing to the materiality of such foreign exchange gain / loss values.

Fair value sensitivity analysis for fixed-rate instruments

The company''s fixed rate instruments are carried at amortized cost. They are therefore not subject to interest rate risk, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

Equity price risk

Equity price risk is related to the change in market reference price of the investments in quoted equity securities. In the case of the Company, the sole investment in equity shares is unquoted and does not expose the Company to equity price risks, however there can be changes in the equity price based on valuations done at different reporting periods owing to the operations and general business environment in which the investee operates. In general, the investment is not held for trading purposes.

Equity price sensitivity analysis

A 5% change in prices of equity instruments held as at March 31, 2021 and March 31, 2020 would result in an increase/ decrease of ''10.14 Cr and '' 8.99 Cr in fair value of the equity instrument respectively.

7. Revenue from Contract with Customers:

a. The Company generates revenue primarily from manufacturing and trading of Fertilizers. The Company has recognised revenue by satisfying its performance obligations at a point of time basis.

Contract Liabilities in the Balance Sheet constitutes advance payments and billings in excess of revenue recognised. The Company expects to recognize such revenue in the next financial year. There were no significant changes in contract liabilities during the reporting period except amount as mentioned in the table and explanation given above. Under the payment terms generally applicable to the Company''s revenue generating activities, prepayments are received only to a limited extent. Typically, payment is due upon or after completion of delivery of the goods.

28. Subsidy under New Pricing Scheme (NPS) for Urea

Escalation/De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of '' 52.30 Cr (Previous year '' 144.46 Cr payable) has been reckoned as receivable from FICC for the year 2020-21 towards annual escalation of input prices.

Subsidy includes an amount of '' 14.87 Cr (Previous year'' 81.74 Cr) being the additional fixed cost of '' 350 / MT for the years 2018-19 ('' 14.14 Cr) and 2019-20 ('' 0.73 Cr) is yet to be received. An amount of '' 7.19 Cr (PY '' 4.88 Cr) being the additional fixed cost benefit of '' 150/MT for conversion of Feed Stock from Naphtha to RLNG as per the approval of CCEA is yet to be received for both the yea

29. The company has made a request to Dept. of fertilizers, for granting additional subsidy of '' 64.97 Cr in order to compensate the higher cost of production of "N” due to usage of Naphtha as captive ammonia in production of complex fertilizers under Nutrient Based Subsidy (NBS) for the extended period from FY 2012-13 to till the conversion of feedstock to RLNG ie., July,2019. The Additional Compensation may be taken into account only as and when final order will be received from the Dept. of Fertilizers, Government of India.

30. During the year, the company has recognised its of subsidy income for Urea, NPK & city compost on the quantity sold to dealers at the applicable rates notified in line with the DBT scheme and general industry practices. Accordingly, the subsidy income towards opening unsold stock to dealers got de-escalated to the extent of '' 0.85 Cr, which has been duly accounted.

31. Disclosure as per Ind AS 108 ''Operating segments''

Basis for segmentation

In the case of the Company, Chairman & Managing Director (CMD) is considered to be the Chief Operating Decision Maker (CODM). The CMD reviews the performance of the Company and allocate resources based on the various management information reports provided by the respective departments of the Company.

The CODM reviews the performance of the Company primarily as two segments:

a. Fertilizers (Urea and NPK);

b. Other activities (Trading activities and Bio fertilizers);

However, since the revenue from other activities constitute less than 5% of the reported revenue and no significant assets are employed for these activities, the management is of the view that the Company has only one reportable segment that relates to manufacture of sale of fertilizers.

Geographical information

The Company is in the operation of manufacture and sale of fertilizers within India, the entire revenue is domestic and all non-current assets are situated in India only.

Revenue from major customer

There is no single customer that accounts for more than 10% of the Company''s revenue.

33. The Sick Industrial Companies (Special Provisions) Act (SICA) has been repealed from December 01, 2016 and the Board for Industrial and Financial Restructuring (BIFR) stand dissolved from that date. The Company is pursuing legal options to file the Revival proposal to the National Company Law Tribunal (NCLT). However, based on PDIL report, The Company has submitted financial restructuring proposal with DOF, GOI for their consideration.

34. Being a Sick Company, the company has not implemented the pay revision of employees in pursuance of DPE OM No. W-02/0028/2017-DPE(WC)-GL-XIII/17 dated August 03, 2017 with effective from January 01, 2017 for Board Level and Below Board level Executives and Non-Unionized supervisors of CPSEs dated 3 August 2017 due to pending approval of revival / financial restructuring proposal. Accordingly, the amount of Arrears is not quantifiable at this stage.

35. The Company has agreed to allot Land for erecting of 400 KV DC Transmission line by TANTRANSCO, as the project is conceived by TANTRANSCO for public purpose. The Tower is erected inside the Company premises and approximately 410 meters transmission line crossing through the company premises.

36. Penalty on Non-Compliance of Composition of Board:

The company is not having the required number of Independent Directors on its Board due to vacancy arising out of expiry of term from 6th June,2019 onwards. Accordingly, National Stock Exchange (‘NSE”) has levied a penalty of '' 0.57 Cr on the said non-compliance, which has been duly paid by the company.

Being a public sector undertaking, appointment of independent directors on the board lies in the hands of the Govt.of India, which is to be treated as Impossibility of compliance. The company has shown the said amount under "Other Current Assets”, as the same can be claimed back once the said non-compliance is being rectified by the company.

37. The Company is in the process of signing MOU with DOF for the FY 2021-22 and is yet to be signed.

38. Confirmation of Balances has not been received in respect of Loans for GOI, Trade Receivables/Payables and Loans and Advances.

39. The Company is engaged in manufacturing and trading of fertilizers, which is an essential input for agriculture. Central and State Governments are giving top most priority on agriculture activities during Covid 19 situation also. The Company expects to continue the normal operations and does not expect any impact of Covid 19 in its operations which is evident from the fact that the production of Urea during the year 2020-21 is at 99% capacity with 4,80,865 MT of Urea production.

40. Amount in the standalone financial statements is presented in Crores (up to two decimals) except for per share data and as other-wise stated. Certain amounts, which do not appear due to rounding off, are disclosed separately.

41. The figures for the previous year have been regrouped / reclassified to correspond with the current year''s classification and disclosure.


Mar 31, 2018

1. Reporting entity

Madras Fertilizers Limited (“MFL” or “the Company”), is a Public Sector Undertaking (‘PSU’) under the administrative control of the Department of Fertilizers (‘DOF’), Ministry of Chemicals & Fertilizers, Government of India (‘GOI’) and is registered under the erstwhile Companies Act, 1956 with its registered office located at Manali industrial area, Chennai - 600 068.

The Company’s equity shares are listed on the National Stock Exchange (‘NSE’). MFL is engaged in the manufacture of Urea and Complex Fertilizers. It is also engaged in manufacturing Bio-fertilizers and trading eco-friendly Agro Chemicals and City Compost under the brand name ‘Vijay’.

2. Basis of preparation

a) Statement of compliance

These financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS’) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of the Companies Act, 2013 (the ‘Act’) and the relevant provisions of the Act.

The Company’s financial statements up to and for the year ended March 31, 2017 were prepared in accordance with Generally Accepted Accounting Principles in India (‘Indian GAAP’) under the historical cost convention using the accrual basis. Indian GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and the provisions of the Act (to the extent notified).

The Company has adopted the Ind AS in preparation of the financial statements from the Financial Year (‘FY’) 2017-18. Accordingly the comparatives for the year ended March 31, 2017 are restated in accordance with Ind AS.

As these are the Company’s first financial statements prepared in accordance with Ind AS, Ind AS 101, First-time Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flows of the Company is provided in Note 1-50.

The financial statements were authorized for issue by the Company’s Board of Directors on 28.05.2018.

Details of the Company’s significant accounting policies are included in Note 3.

b) Functional and presentation currency

These financial statements are presented in Indian Rupees (‘INR’), which is also the Company’s functional currency. All amounts have been rounded-off to the nearest crores, unless otherwise indicated.

c) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following items:

d) Use of estimates and judgements

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and related disclosures concerning the items involved as well as contingent assets and liabilities on the date of the financial statements and the reported amount of income and expense during the reporting period. Although these estimates are based on the management’s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes, requiring a material adjustment in the carrying amounts of assets or liabilities in future periods. Difference between the actual results and estimates are recognized in the period in which the results are known or materialized.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements and information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment for the year ended March 31, 2018 are included in the following notes:

i. Re-classification of inventory as capital spares

The Company performs an assessment at initial recognition of spares to be classified as property, plant and equipment based on the provisions for capitalization for an asset as mentioned under Ind AS 16 Property, plant and equipment and such items that fall within the definition of an asset are accounted for under Ind AS 16 instead of Ind AS 2 Inventories.

ii. Re-classification of property, plant and equipment as investment property

The Company identifies and assesses land and building that is held for earning rentals / for an undetermined future use / capital appreciation as investment property and accounts for the same under Ind AS 40 Investment Property

iii. Useful life and residual value of property, plant and equipment (including capital spares) and investment property

The useful life and residual value is estimated considering several factors such as usage, obsolescence, technological advancements and expenditure to be incurred to maintain the asset in a condition to obtain future economic benefits.

The Company reviews at the end of each reporting date, the useful life and residual value of property, plant and equipment and investment property and changes if any are adjusted prospectively.

iv. Fair value measurement

Certain financial assets and liabilities in the Company are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where observable inputs are not available, the Company engages third party qualified valuers to perform the valuation.

v. Defined benefit plans and other long term benefits

The Company uses actuarial assumptions to determine the obligations for employee benefits at each reporting period. These assumptions include the discount rate, expected long-term rate of return on plan assets, rate of increase in compensation levels, mortality rates, etc.

vi. Revenue

The Company offers various incentives to dealers which is estimated and assessed to predict the variability in its consideration receivable arising on account of the same.

vii. Subsidy income

For the new pricing scheme of urea (New Pricing Scheme, ‘NPS’) subsidy, the rates are revised every year based on the actual input prices submitted by the Company on a quarterly basis. Since the actual rates for the subsidy for any given year is announced only in the subsequent year the Company records revenue based on an estimated rate for that year. The difference between the estimated rates used by the Company for recognition of revenue and the actual rates that are approved by the Government are accounted as escalation / de-escalation of input prices in the year in which the rate is notified.

viii. Lease classification

The Company has entered into lease agreements with various parties both in the capacity of a lessor and a lessee for assets predominantly in the nature of land and building. The management has exercised judgment in line with the principles enunciated under Ind AS 17 Leases to appropriately classify these leased assets as either operating lease or finance lease.

ix. Taxes

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits.

x. Impairment of non-financial assets

Assessment for impairment is done at each balance sheet date for any indication that a non-financial asset may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets is considered as a cash generating unit.

xi. Impairment of financial assets

A financial asset is regarded as credit impaired when one or more events that may have a detrimental effect on estimated future cash flows of the asset have occurred. The Company applies the expected credit loss model for recognizing impairment loss on financial assets (i.e. the shortfall between the contractual cash flows that are due and all the cash flows (discounted) that the Company expects to receive).

xii. Discount rates used for fair valuation

Estimates of rates of discounting are made for measurement of fair values of certain financial assets and liabilities, which are based on prevalent bank interest rates and the same are subject to change.

xiii. Contingent liabilities

Recognition of contingent liabilities are made in accordance with the provisions of Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets. Ind AS 37 requires the application of judgment with regards to the likelihood of a contingent event resulting in potential outflow of resources embodying economic benefits. In case there are any changes to the circumstances, following unforeseeable developments, this likelihood could alter. The Company recognizes items such as claims against the Company, etc as contingent liabilities.

e) Measurement of fair values

The Company’s accounting policies and disclosures require the measurement of fair values for financial assets and liabilities.

The Company has an established control framework with respect to the measurement of fair values. The Company regularly reviews significant unobservable inputs and valuation adjustments. In cases where fair values is to be computed by third parties, the Company assesses the evidence obtained by such third parties to support the conclusions that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

f) Current and non-current classification

All the assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in Ind AS 1 Presentation of Financial Statements.

Operating cycle:

Operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. The Company’s normal operating cycle is considered as 12 months for the purpose of current and non-current classification of assets and liabilities.

Assets:

An asset is classified as current when it satisfies any of the following criteria:

1) it is expected to be realized in, or is intended for sale or consumption in, the Company’s normal operating cycle;

2) it is held primarily for the purpose of being traded;

3) it is expected to be realized within 12 months after the reporting date; and

4) cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

All other assets are classified as non-current.

Liabilities:

A liability is classified as current when it satisfies any of the following criteria:

1) it is expected to be settled in the Company’s normal operating cycle;

2) it is held primarily for the purpose of being traded;

3) i t is due to be settled within 12 months after the reporting date; and

4) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months from the reporting date.

All other liabilities are classified as non-current.

Deferred tax assets / liabilities are always classified as noncurrent.

3 (A) First-time Adoption of Ind AS

With effect from April 1, 2017, the Company is required to prepare its financial statements under the Indian Accounting Standards (‘Ind AS’) prescribed under section 133 of the Companies Act, 2013 read together with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015.

These financial statements, for the year ended March 31, 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

The accounting policies set out in the notes have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of an opening balance sheet at April 1, 2016 under Ind AS. The adoption of Ind AS has been carried out in accordance with Ind AS 101 First time adoption of Ind AS, with April 1, 2016 as the transition date. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s balance sheet, statement of profit and loss and cash flow statement is set out below. Set out below are the applicable Ind AS 101 mandatory exemptions and optional exemptions applied in the transiton from previous GAAP to Ind AS.

Mandatory exceptions and optional exemptions

Deemed cost - Property, plant and equipment, investment property and capital work in progress

The Company has elected to continue with the carrying value of all of its property, plant and equipment, investment property and capital work-in- progress recognised as of April 1, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.

Classification and measurement of financial assets

The Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.

Derecognition of financial assets and financial liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after April 1, 2016 (the transition date).

Notes: 1 Straight lining of lease rental income / expense

Under Ind AS, lease rental escalations that are not solely to factor for expected general inflation need to be straight lined over the term of the lease agreement. The Company has entered into lease agreements with various parties in the capacity of both a lessee and a lessor and certain leases contain escalations that are not solely to factor general inflation. Such escalations are straight lined over the respective lease terms with the corresponding impact on transition date taken to retained earnings and subsequent impacts recognized in the statement of profit and loss.

2 I nterest free / below market interest rate financial assets and liabilities

Under the previous GAAP, interest free / below market interest rate deposits and advances were recorded at transaction value. Under Ind AS, such deposits and advances have to be recorded at fair value. Accordingly, the Company has fair valued interest free security deposits received and provided and staff advances. Difference between the transaction value and the fair value in case of staff advances and security deposits given are recognzied as prepaid staff cost and prepaid rent expenses, respectively and amortised over the tenure of the advance / lease. In case of security deposits received, such difference is accounted for as income received in advance and recognized in the statement of profit and loss over the lease term. The other leg in case of the above fair valuations are recorded as interest income / expense which are accounted over the tenure of the respective asset / liability.

3 Capital machinery spares

The adjustments relates to recognition of spare parts in accordance with Ind AS 16 in cases where they meet the definition of property, plant and equipment. Under previous GAAP, these items were carried as inventory. The adjustment on transition with respect to depreciation till the transition date has been adjusted to retained earnings. The depreciation impact subsequent to transition has been recognized in the statement of profit and loss.

4 Fair valuation of investment in unquoted equity shares of Indian Potash Limited

I n accordance to Ind AS 109, the Company has measured the investment in unquoted equity shares held in Indian Potash Limited as a fair value through profit and loss (‘FVTPL’) investment and accordingly accounted for the gain / (loss) on initial recognition in retained earnings. The subsequent gain / (loss) has been accounted in the statement of profit and loss.

5 Reassessment of residual value

The Company has reassessed the residual value provided in case of the plants constructed on the land taken on lease from lessors and the impact on such reassessment has been taken prospectively over the remaining useful life as depreciation in the statement of profit and loss.

6 Cost of logistics park written off

The Company had included in its capital work in progress an amount in respect of logistics park feasibility study. The Company did not receive clearance from the GOI to setup the same in the current year, the amount capitalized as part of CWIP has been accordingly charged off to the statement of profit and loss in the comparative year as this being a prior period item.

7 Employee benefits

Both under previous GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost, including actuarial gains and losses, were charged to the statement of profit and loss. Under Ind AS, remeasurements (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability) have been recognised in other comprehensive income

8 Adjustment of certain expenses on the date of transition

The Company had in the period prior to the date of transition to Ind AS accounted for certain expenses as revenue instead of capitalizing them as CWIP. This was identified during the year 2017-18 and accordingly has been adjusted against retained earnings as at 1 April 2016 with a corresponding impact to CWIP

9 Reclassifications on transition to Ind AS

Under previous GAAP separate classification of properties held as investment property was not required and was included under fixed assets. However under Ind AS these have been shown separately as investment property in accordance to Ind AS 40 Investment Property as on the date of transition. Also on account of spares that met the definition of a property, plant and equipment, these have been classified as the same and accordingly depreciated at the date of transition.

Impact of Ind AS adoption on the Statement of Cash Flows for the year ended 31 March 2017

The impact on cash flows is not considered to be material for the Company and hence not disclosed

a. I n all these cases, outflow of economic benefits is expected within next one year

b. The assumptions made for provisions relating to current period are consistent with those in the earlier years. The assumptions and estimates used for recognition of such provisions are qualitative in nature and their likelihood could alter in next financial year. It is impracticable for the Company to compute the possible effect of assumptions and estimates made in recognizing these provisions.

Employee benefit trusts managed by MFL

MFL Covered Employee Group Gratuity cum Life assurance Scheme Trust MFL Employees Superannuation Scheme Trust Entities under the control of same government

The Company is a Public Sector Undertaking (PSU) in which shares are held by the President of India. Pursuant to Paragraph 25 & 26 of Ind AS 24, entities over which the same government has control or joint control of, or significant influence, then the reporting entity and other entities shall be regarded as related parties. The Company has applied the exemption available under Paragraph 25 & 26 of Ind AS 24 for government related entities and have made limited disclosures in the financial statements.

4 Financial Instruments - Fair value disclosures

The management has assessed that the carrying amounts of financial assets such as trade receivables, loans, cash and cash equivalents and financial liabilities like borrowings, trade payables recognised in the financial statements approximate their fair values. With respect to the investment in unquoted shares, the Company has availed the services of a professional valuer and performed fair valuation.

Valuation technique and key inputs used for fair valuation of investment in unquoted shares of Indian Potash Limited

The Company by using the service of an external valuer has computed the fair value of the investment using the following two techniques:

i.) Net Asset Value (NAV) method

Under this method, total external liabilities of the Company are subtracted from the total assets to arrive at the NAV. Alternatively, the sum of paid up capital and reserves can also be calculated to arrive at the NAV. The Company has taken all assets and liabilities at their book value. The NAV is divided by the total number of outstanding equity shares to arrive at the fair value per share.

ii.) Comparable Company Market (CCM) method

11 CCM multiple uses the valuation ratios of a publicly traded company and applies that ratio to the Company being valued. The valuation ratio typically expresses the valuation as a function of a measure of financial performance or book value. A key benefit of CCM analysis is that the methodology is based on the current market stock price. The current stock price is generally viewed as one of the best valuation metrics because markets are considered somewhat efficient.

For valuation analysis of the Company, the methodology has been used by comparing the market cap to sales multiple vis-a-vis certain companies listed on the stock exchange belonging to the fertilizer industry."

5. Leases

i) Operating lease

a) As lessee

The lease rent paid during the year is Rs. 0.68 Cr (Previous year Rs. 2.88 Cr). These have been classified under the line item ‘Rent’ in ‘Other expenses’. The future lease rent payable for each of the following periods are:

b) As lessor

Rental income on operating leases of the spaces rented out to Fortune bio-tech and CPCL are included under ‘Rent’ in ‘Other Income’. The future lease rent receivable for each of the following periods are:

Details of lease rental receivable over the remaining contract period is provided below:

6 Employee benefits

(i) Defined benefit plans

The Company has floated the following defined benefit plans i) Gratuity, ii) Post retirement medical benefits, iii) Compensated absences and iv) Service awards

A. Funding

Gratuity is the only defined benefit plan that is funded by the Company. The funding requirements are based on the fund’s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purpose.

The Company has determined that in accordance with the terms and conditions of the defined benefit plan, and in accordance with statutory requirements, the present value of refunds or reductions in future contributions is not lower than the balance of the total fair value of the plan asset less the total present value of obligations.

B. Movement in net defined benefit (asset) / liabilities Gratuity

The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. This defined benefit plan exposes the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

Every employee who has rendered continuous service of five years or more is entitled to gratuity at 15 days salary (15/26 * last drawn basic salary plus dearness allowance) for each completed year of service subject to a earlier ceiling of Rs. 0.10 crore on superannuation, resignation, termination, disablement or on death. The maximum ceiling of Rs. 0.10 crore has been now enhanced to Rs. 0.20 crore by the Report of the 3rd Pay Revision Committee appointed by the GOI. The Company has carried out actuarial valuation of gratuity benefit considering the enhanced ceiling.

Other benefits

Obligations on post - retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year. These are unfunded plans.

The estimates of salary escalations considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Further, the expected return on plan assets is determined considering several applicable factors mainly the composition of plan assets held, assessed risk of asset management and historical returns from plan assets.

III ) Sensitivity Analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have effected the defined benefit obligation by the amounts shown below.

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

The sensitivity analysis above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. This analysis may not be representative of the actual change in the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Expected contributions to post-employment benefit plans for the year ending 31 March 2019 are Rs. 6.55 crore.

The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 10 years (31 March 2017: 10 years)

Obligations on post -retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(ii) Defined contribution plans

Provident fund and superannuation fund

Eligible employees of the Company are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees’ salary. The contributions are made to the provident fund set up as a trust by the Company. The interest rates declared and credited by trusts to the members have been higher than the statutory rate of interest declared by the Central Government and there have been no shortfalls on this account and hence treated as a defined contribution plan.

The Company also has a superannuation plan. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to the statement of profit & loss statement on accrual basis.

The net amounts expended in respect of employer’s contribution to the provident fund and superannuation fund during the year, are INR 5.79 Cr (Previous year INR 5.93 Cr) and INR 6.93 Cr (Previous year INR 7.08 Cr) respectively.

7 Capital management

For the purpose of the Company’s Capital management, capital includes equity capital and all other reserves. The Company’s capital management objective is to maximise the total shareholder return by optimising cost of capital through flexible capital structure that supports growth.

The Company manages its capital structure and makes adjustments in the 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. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings less cash and short term deposits.

8 Financial risk management

I n course of its business, the Company is exposed to certain financial risks that could have significant influence on the Company’s business and operational / financial performance. These include market risk (including currency risk, interest rate risk and equity price risk), credit risk and liquidity risk.

The Board of Directors reviews and approves risk management framework and policies for managing these risks and monitors suitable mitigating actions taken by the management to minimise potential adverse effects and achieve greater predictablity to earnings.

I n line with the overall risk management framework and policies, the treasury function provides services to the business, monitors and manages through an analysis of the exposures by degree and magnitude of risks.

Borrowings, trade payables and other financial liabilities constitute the Company’s primary financial liabilities and investment in unquoted equity shares, trade receivables, loans, cash and cash equivalents and other financial assets are the financial assets.

Credit risk

Trade receivables

Credit risk refers to the risk of default on the receivables to the Company that may result in financial loss. The maximum exposure from trade receivables amounting to Rs. 803.31 crore as of March 31, 2018 (Rs. 485.51 crore and Rs. 743.07 crore as of March 31, 2017 and 2016, respectively).

Trade receivables mainly constitute subsidy receivable from Government of India and from sale of manufactured and traded fertilizers to dealers / other customers. Credit risk is being managed through credit approvals, establishing credit limits and monitoring the creditworthiness of customers to allow credit terms in the normal course of business. In the case of the Company, the credit period offerred varies between 30 to 60 days and there have been no significant cases of impairment historically.

Investment in unquoted equity shares

The Company has a single investment in unquoted equity shares of Indian Potash Limited. The Company does not expect any losses from non-performance by the investee and hence no impairment is recognized.

Loans and advances

The company provides housing and other loans to its employees on concessional or interest free basis. The company manages its credit risk in respect of such loans to employees through recovery of the same in a number of predetermined instalments.

Cash and cash equivalents and deposits with banks

The credit risk on cash and bank balances is limited because the counterparties are banks with high credit ratings. Therefore the risk of default is considered to be insignificant.

Summary of exposures to financial assets provided below:

Provision for expected credit losses

Financial assets for which loss allowance is measured using life time expected credit losses

The Company’s customer base is the Government of India and a number of dealers. Historically the risk of default has been negligible or nil. Further, management believes that the unimpaired amounts that are past due by more than 60 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. Hence, no impairment loss has been recognised during the reporting periods in respect of trade receivables.

(ii) Ageing analysis of trade receivables

As a policy, the Company does an ageing analysis of debtors, the details of which is stated below.

The ageing analysis of the trade receivables is as below:

Liquidity risk

The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk through cash credit limits and undrawn borrowing facilities by continuously monitoring forecast and actual cash flows. The Company invests its surplus funds in bank fixed deposit which carry minimal mark to market risks.

Maturities of financial liabilities

The following are the contractual maturities (principal and interest in the case of GOI loan) of non-derivative financial liabilities, based on contractual cash flows:

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk for the entity comprises two types of risk: currency risk, interest rate risk and equity price risk. Financial instruments affected by market risk include borrowings, trade payables in foreign currency and investment in unquoted equity shares. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

The Company executes import agreements for the purpose of purchase of raw materials. These are not hedged by the Company owing to the materiality of such foreign exchange gain / loss values.

The currency profile of financial liabilities are as below:

Sensitivity analysis

A strengthening of the Indian Rupee, as indicated below, against the Foregin currency as at 31 March would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for previous year, except that the reasonably possible foreign exchange rate variances were different, as indicated below.

Interest rate risk

The Company is not exposed to any interest rate risk as the interest rate on the sole borrowing from GOI is fixed in nature. At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments is as follows:

Fair value sensitivity analysis for fixed-rate instruments

The company’s fixed rate instruments are carried at amortised cost. They are therefore not subject to interest rate risk, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

Equity price risk

Equity price risk is related to the change in market reference price of the investments in quoted equity securities. In the case of the Company, the sole investment in equity shares is unquoted and does not expose the Company to equity price risks, however there can be changes in the equity price based on valuations done at different reporting periods owing to the operations and general business enviroment in which the investee operates. In general, the investment is not held for trading purposes.

Equity price sensitivity analysis

A 5% change in prices of equity instruments held as at March 31, 2018, March 31, 2017 and April 1, 2016 would result in an increase/ decrease of INR 7.44 Cr, INR 6.81 Cr and INR 5.31 Cr in fair value of the equity instrument respectively.

9 The total amount payable to Micro, Small and Medium Enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006 as at March 31, 2018 as identified by the management and relied upon by the Auditors is provided below:

10 The Company defaulted repayment of loan principal and interest on GOI loans as detailed below:

11 OTHER DISCLOSURES:

a. CESTAT has waived pre-deposit of the duty and penalty on deposit of Rs. 5 lacs, which the Company has complied with. The appeal filed before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty, is disposed in the Company’s favour.

b. Government of India has not so far raised any demand for penal interest amounting to Rs. 167.91 Cr (Previous Year Rs. 152.66 Cr). However, the same is shown under Contingent Liabilities per practice.

c. During December 2016, the operation of the Plant was affected due to the devastating Vardha cyclone and the Company preferred a claim of Rs. 41.52 Cr with the insurer for the loss suffered. The Company has received an amount of Rs. 7.50 Cr being the 50% on account payment in February 2018 and the balance will be received along with the final survey report of the surveyor.

d. Other Income includes a sum of Rs. 0.68 Cr (Previous Year Rs. 0.67 Cr) being the rent receivable from CPCL for the area let out for their LPG pipeline, for which the renewal of agreement is under negotiation.

e. The Company is in the process of signing MOU with DOF for the FY 2018-19 and is yet to be signed.

f. Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) has allotted 43.13 acres of land for a lease period of 33 years at kodungaiyur for TTP Plant in the year 1989. The Company surrendered 20.224 acres of surplus land not used for TTP plant, but CMWSSB refused to take back that land. After negotiations CMWSSB agreed for payment of lease rent up to June 2017 amounting to Rs. 5.64 Cr in a phased manner and based on that, the Company has paid an amount of Rs. 1.60 Cr till date. From July 2017 onwards the lease rent is being paid on aquarterly basis. The MOU is yet to be signed.

g. The Sick Industrial Companies (Special Provisions) Act (SICA) has been repealed from December 01, 2016 and the Board for Industrial and Financial Restructuring (BIFR) stand dissolved from that date. The Company is pursuing legal options to file the Revival proposal to the National Company Law Tribunal (NCLT).

h. CENTRAL EXCISE 25/70 NOTIFICATION

The Deputy Commissioner of Central Excise (DCCE) vide his letter dated January 22, 2007 raised a demand for Rs. 5.42 Cr as interest on the belated realization of the disputed duty of Rs. 2.57 Cr by invoking the Bank Guarantee (BG) of Rs. 3 Cr provided by the Company as per the Order of the Honorable High Court of Madras.

The DCCE adjusted the balance BG amount of Rs. 0.43 Cr towards interest and demanded a further sum of Rs. 4.99 Cr. The Company challenged the interest demand by filing a Writ in the Honorable Madras High Court, which stayed interest demand and ordered the Company to pay a sum of Rs. 1 Cr (which the Company has complied with on March 16, 2007) and directed to approach the Committee on Disputes (COD).

Based on the Company’s submission of facts, the COD accorded permission to proceed with Departmental Authorities on July 08, 2008 and the Company filed an appeal with the Commissioner (Appeals) who rejected the same on April 08, 2011.

Against this rejection, the Company went to CESTAT on July 18, 2011, which directed the Company to pay an amount of Rs. 2 Cr and the same was paid as pre deposit on 11.03.2013 as per the Miscellaneous Order of CESTAT for taking up the appeal for hearing and thus an amount of Rs. 3.43 Cr has been paid by the Company out of the demand of Rs. 5.42 Cr.

After the hearings, the CESTAT vide their Final Order No. 40388 / 2018 dated February 13, 2018 has Set aside the Order demanding interest and the appeal is allowed in our favour. By this Order the Company is eligible to get the entire amount deposited of Rs. 3.43 Cr as refund.

A claim for the refund of the same has been made with the Assistant Commissioner of Central Excise, Thiruvottiyur Division and are yet to get the refund.

12 Exhange rate fluctuation

Exchange rate fluctuation included in other income is INR 0.78 Cr (Previous year expense INR 1.14 Cr)

13 Disclosure as per Ind AS 108 ‘Operating segments’

A Basis for segmentation

I n the case of the Company, the Board of Directors / CMD are considered to be the CODM. The Board of Directors / CMD review the performance of the Company and allocate resources based on the various management information reports provided by the respective departments of the Company.

The CODM reviews the performance of the Company primarily as two segments:

i) Fertilizers (Urea and NPK)

ii) Other activities (Trading activites and Bio fertilizers)

However, since the revenue from other activities constitute less than 5% of the reported revenue and no significant assets are employed for these activities, the management is of the view that the Company has only one reportable segment that relates to manufacture of sale of fertilizers.

B Geographical information

The geographical information analyses the Company’s revenues and non-current assets by the Company’s country of domicile (i.e. India) and other countries. In presenting the geographical information, revenue has been based on the geographic location of customers and non-current assets have been based on the geographical location of the assets. Since the Company is in the operation of manufacture and sale of fertilizers within India, the entire revenue is domestic and all non-current assets are situated in India only.

C Major customer NA

14 Income taxes

No provision towards income tax liability has been made during the year as the operations resulted in loss and being a sick company, the Company is not liable for MAT.

15 Government grants and subsidies

Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for annual escalation / de-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government.

Subsidy under New Pricing Scheme (NPS) for Urea

Escalation/De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 182.13 Cr (Previous year payable Rs. 40.48 Cr) has been reckoned as receivable from FICC for the year 2017-18 towards annual escalation of input prices.

Subsidy includes an amount of Rs. 15.46 Cr (Previous year Rs. 15.71 Cr) being the additional fixed cost of Rs. 350 / MT as envisaged in the modified NPS III Policy announced by DOF dated April 02, 2014, the notification of which is awaited.

I Impairment of assets

A detailed valuation has been done by a reputed Chartered Engineer and valuer and as per his report no adjustment towards impairment loss is considered necessry by the Company as on 31.03.2018. Net selling price of the major Plant and equipment has been assessed against the book value on that date is detailed below:

16 Amount in the financial statements are presented in ‘ Crore (upto two decimals) except for per share data and as other-wise stated. Certain amounts, which do not appear due to rounding off, are disclosed separately.

17 Standards issued but not yet effective

I n March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying the standard Ind AS 115 ‘Revenue from Contracts with Customers’ and amendments to Ind AS 21 ‘The Effects of Changes in Foreign Exchange Rates’. The notified standard and the amendment are applicable to the Company from 1 April 2018.

Ind AS 115 ‘Revenue from Contracts with Customers’

I nd AS 115, establishes a comprehensive framework for determining whether, how much and when revenue should be recognised. It replaces existing revenue recognition guidance, including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and Guidance Note on Accounting for Real Estate Transactions. Ind AS 115 is effective for annual periods beginning on or after 1 April 2018 and will be applied accordingly. The Company has evaluatred the potential impact of the adoption of Ind AS 115 on accounting policies followed in its financial statements and it expects no material impact on adoption of the same.

Ind AS 21 ‘The Effects of Changes in Foreign Exchange Rates’

The amendment to Ind AS 21 applies to entities for foreign currency consideration paid or received in advance. The amendment requires such advance paid or deferred liability to be restated using the spot rate as of the date of such a transaction. The Company has evaluatred the potential impact of the adoption of Ind AS 21 on accounting policies followed in its financial statements and it expects no material impact on adoption of the same.

18 Regrouping / reclassification

The figures for the previous year have been regrouped/reclassified to correspond with the current year’s classification and disclosure


Mar 31, 2016

1. (B) [NOTES ON ACCOUNTS

i. DEPRECIATION

ii. SUBSIDY UNDER NEW PRICING SCHEME (NPS) FOR UREA

Escalation/De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 882.63 Cr (Previous year payable Rs. 159.17 Cr) has been reckoned as payable to FICC for the year 2015-16 towards annual de-escalation of input prices in line with the Accounting policy - Note 24 (A) 10 (i).

iii. NUTRIENT BASED SUBSIDY (NBS) FOR PHOSPHATIC AND POTASSIC FERTILIZERS

Based on the Order of SEBI dated December 16, 2015, regarding reversal of Additional Compensation for NPK, for the FY 2012-13, the Company has reversed entire amount of Additional Compensation recognized during FY. 2012-13 (Rs. 47.40 Cr), 2013-14 (Rs. 20.80 Cr) and 2014-15 (Rs. 23.80 Cr) totaling to Rs. 92 Cr and has disclosed under Exceptional Items during the current financial year as per guidelines provided in SEBI circular.

iv. EXCHANGE RATE FLUCTUATION

Exchange rate fluctuation included in other expenses is Rs. 1.06 Cr (Previous year Rs. 0.63 Cr)

v. CENTRAL EXCISE 25/70 NOTIFICATION

The Company has paid Rs. 2 Cr as pre deposit on 11.03.2013 as per the Miscellaneous Order of CESTAT for taking up the appeal for hearing, which is yet to take place.

No provision is considered necessary in the Books by the Company as the matter is subjudice. However the same is shown under “Contingent Liability”.

vi. As defined under AS - 28 on “Impairment of Assets” a detailed valuation has been done by a reputed Chartered Engineer and Valuer. As per his report, no adjustment towards impairment loss is considered necessary by the Company as on 31.03.2016. Net selling price of the major Plant and Machinery has been assessed against the book value on that date as detailed below:

ix. OTHER DISCLOSURES

i. Information required under AS 15 (Revised) on “Employee Benefit Expenses” is provided in Annexure - I to this note.

ii. The amount of borrowing costs capitalized for the year is ‘NIL'' (Previous year ‘NIL'') per AS 16 (Borrowing Costs).

iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per AS 17 (Segment Reporting).

iv. During the year, there were no transactions with related parties as defined in AS 18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 25.

v. The Company has not entered into joint venture activities as defined in AS 27. Hence AS 27 on “Financial Reporting of Interest in Joint Ventures” is not applicable to the Company at present.

vii. No provision towards Income Tax liability has been made during the year as the operations resulted in loss and being a Sick Company, the Company is not liable for MAT.

viii. The draft rehabilitation scheme (DRS) submitted by the Operating Agency to BIFR is presently under the perusal and consideration of GOI. The BIFR hearing scheduled to be held in February 12, 2015 stands postponed and the date for the next hearing is yet to be announced. Based on DoF letter No. 19071/07/2015-FCA dated February 11, 2016, the Company has initiated action for engaging PDIL as a consultant for drawing of business, operational and financial restructuring plans for revival of the Company.

ix. (a) I n respect of verification of movable fixed assets, the outside professional firm of Chartered Accountants have submitted their final report which contains some discrepancies which are insignificant. Even though insignificant, the report has been sent to the respective Controlling Authorities for confirming the balances.

(b) Based on the Technical Committee report, the Non-moving obsolete automotive Items amounting to Rs. 0.16 Cr has been provided for during the year.

x. Included in Short term Trade Payables under ‘Note 9a'' are:

a. Dues to CPCL Rs. 91.33 Cr (Previous Year Rs. 90.38 Cr) for which mortgage and First charge on Guindy land is given for Rs. 100 Cr till the date of sanction of a rehabilitation scheme for the Company.

b. Dues to IOC Rs. 34.78 Cr (Previous Year Rs. 48.42 Cr) against Credit Limit of Rs. 60Cr, for which First charge on Plant and Machinery is given for Rs. 50 Cr and an additional Rs. 10 Cr against Bank Guarantee.

The same along with Rs. 31.28 Cr due within one year totaling to Rs. 388.14 Cr (Previous Year Rs. 357.70 Cr) is shown under Note 9b - Other Current Liabilities.

xii. Chennai Metropolitan Water Supply and Sewarage Board (CMWSSB) has allotted 43.13 acres of land for a lease period of 33 years at kodungaiyur for TTP Plant in the year 1989. The Company surrendered 20.224 acres of surplus land not used for TTP plant, but CMWSSB refused to take back that land and a dispute is pending and the MOU has not been signed till date.

xiii. Disclosure regarding foreign currency exposure and un hedged foreign currency exposure outstanding on foreign exchange contract entered into by the Company as on 31.03.2016.

Disclosure requirements under AS-15 (Revised) as per Note No: 24 B ix (i)

Defined Contribution Schemes:

The net amounts expended in respect of employer''s contribution to the provident fund and superannuation fund during the year, are Rs. 5.83 Cr (Previous year Rs. 5.58 Cr) and Rs. 6.37 Cr (Previous year Rs. 6.26 Cr) respectively.

2. GENERAL INFORMATION:

a. Pending appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty, CESTAT has waived pre-deposit of the duty and penalty on deposit of Rs. 5 lacs, which the Company has complied with.

b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 287.88 Cr (Previous Year Rs. 230.83 Cr). However, the same is shown under Contingent Liabilities per practice.

c. During December 2015, the operation of the Plant was effected due to the heavy flood and the Company preferred a claim with their insurer for flood loss and based on the interim report of the surveyor, the Company has accounted an income of Rs. 16.10 Cr being 95% of the said amount under the head Other Income.

d. An amount of Rs. 4.39 Cr being VAT on Naphtha charged by CPCL between 7th Jan 2015 and 22nd Feb 2015 has been considered as receivable from Government of Tamil Nadu based on its commitment given to GOI on 31st Dec 2014 willing to forego VAT on Naphtha. This is also confirmed by GOI vide notification dated 7th Jan 2015.

e. The Company is in the process of receiving MOU with DOF for the FY 2016-17. The Company has already received commitment from DOF vide letter dated 17.03.2016, informing their acceptance of estimation of the Company''s production plan for the FY 2016-17, and in the opinion of the Company the concept of going concern has therefore not been affected.

f. Other Income includes a sum of Rs. 0.58 Cr being the rent receivable from CPCL for the area let out for their LPG pipeline, for which the renewal of agreement is under negotiation.

g. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances.

h. Figures for the previous year have been regrouped wherever necessary to conform to Current Year''s classification.


Mar 31, 2015

A. Pending appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty, CESTAT has waived pre-deposit of the duty and penalty on deposit of Rs. 5 lacs.which the Company has complied with.'

b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 230.83 Cr (Previous Year Rs.181.35 Cr). However, the same is shown under Contingent Liabilities per practice.

c. Due to EU and US sanctions on Iran, the insurance companies could not get reinsurance abroad and consequently though the coverage for the year 2015-16 was given for the entire insured value of Rs. 1661 Cr, nevertheless the aggregate annual claim settlement shall be restricted to Rs. 200 Cr. The Company has taken up the issue with Department of Financial Services through Department of Fertilizers and the feedback is awaited.This note is provided per AS-4 (Contingencies and Events occurring after the Balance Sheet date).

d. During turnaround a minor fire accident occurred in April 2014 which resulted in stoppage of production. The Company preferred a claim with their insurers for the loss and the surveyor assessed the loss at Rs. 10.13 Cr. Based on the surveyor's final assessment, the Company has accounted the said amount under the head Other Income.

e. As MOU with DOF has been signed by the Company for the financial year 2015-16 indicating financial and operational support by DOF, GOI, in the opinion of the Company, the concept of Going concern has not been affected.

f. An amount of Rs. 4.39 Cr being VAT on Naphtha charged by CPCL between 7th Jan 2015 and 22nd Feb 2015 has been considered as receivable from Government of Tamil Nadu based on its commitment given to GOI on 31st Dec 2014 willing to forego VAT on Naphtha. This is also confirmed by GOI vide notification dated 7th Jan 2015.

g. Other Income includes a sum of Rs. 0.58 Cr being the rent receivable from CPCL for the area let out for their LPG pipeline, for which the renewal of agreement is under negotiation.

h. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances.

i. Figures for the previous year have been regrouped wherever necessary to conform to Current Year's classification.


Mar 31, 2014

1. CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND L/Cs OUTSTANDING:

2013-14 2012-13

(a) Contingent Liabilities in respect of claims against the Company not acknowledged as 274,82,40,997 221,01,91,119 debts in respect of Income Tax, Excise Duty, Sales Tax and others (Includes Customs Duty on Imported Urea Rs. 65.86 Cr, Penal Interest on GOI Loans Rs. 181.35 Cr and interest on delayed payment of Excise Duty Rs. 5.42 Cr).

(b) L/Cs outstanding (not provided for) 13,97,55,664 1,07,54,814

(c) Estimated amount of contracts remaining to be executed on Capital Account and not 11,20,56,347 6,55,30,814 provided for (after adjusting advance made therefor)

(d) ESI Liability (interest) not provided for, based on Court''s interim injunction. 62,76,790 -

2. GENERAL INFORMATION:

a. The appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty is still pending. CESTAT has waived pre-deposit of the duty and penalty during the pendency of the appeal on deposit of Rs. 5 lacs by the Company which was complied with.

b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 181.35 Cr (Previous Year Rs. 138.51 Cr). However, the same is shown under Contingent Liabilities per practice.

c. Due to EU and US sanctions on Iran, the insurance companies could not get reinsurance abroad and consequently though the coverage for the year 2014-15 was given for the entire insured value of Rs. 1699 Cr, nevertheless the aggregate annual claim settlement shall be restricted to Rs. 160 Cr. The Company has taken up the issue with Department of Financial Services through Department of Fertilizers and the feedback is awaited.

This note is provided per AS-4 (Contingencies and Events occurring after the Balance Sheet date).

d. Out of the total Claims Recoverable of Rs. 1248 Cr pending as at the year end, Rs. 306 Cr has been received subsequently in the month of April 2014. Further an amount of Rs. 497 Cr was released to the Company vide Special Banking Arrangement approved by GOI as a loan by a consortium of Bankers. This amount has been subsequently discharged in full by GOI vide discharge letter dated April 02, 2014 as per the Special Banking Arrangement. Pending such discharge the above amount of Rs. 497 Cr has been reckoned as Claims Recoverable with corresponding amount payable to the consortium of bankers which is shown under Short term Trade payables - Unsecured.

e. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances.

f. Figures for the previous year have been regrouped wherever necessary to conform to Current Year''s classification.


Mar 31, 2013

I. Information required under AS 15 (Revised) on "Employee Benefit Expenses" is provided in Annexure-1 to this note. ''

ii. The amount of borrowing costs capitalised for the year is ''NIL'' (Previous year ''NIL'') per AS 16 (Borrowing Costs).

iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per AS 17 (Segment Reporting).

iv. During the year, there were no transactions with related parties as defined in AS 18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 25.

v. The Company has not entered into joint venture activities as defined in AS 27. Hence AS 27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at present.

vii. a) Considering the carry forward losses and allowances available for set off, there is no Income Tax liability for the . year 2012-13. Hence no provision is made for Income Tax during the year.

b) Deferred tax asset (Net) as at 31.03.2013 has not been recognized since there are no taxable profits in view of the set-bifbf the carry forward loss and depreciation benefits available to the Company'' under the Income-Tax " Act.

viii. The Draft Rehabilitation Scheme (DRS) submitted by the Operating Agency to BIFR is presently under the perusal and consideration ofGOI. The next BIFR hearing is posted on July 01,2013.

ix. In respect ofjfihe verification of movable fixed assets, the outside professional firm of Chartered Accountants have reviewed the reconciliation made by the Company after identifying and locating the high value items. Other small value items shall be taken up for a final review during 2013-14 in the current cycle of verification.

In view of the above, as there is no material financial impact, no provision was considered necessary during the year.

x. Included in ShoitTerm Trade Payables under''Note 9a''are:

a. Dues to CPCL195.68 Cr (Previous Year Rs. 0.02 Cr) for which mortgage and First charge on Guindy land is given fort 100 Cr till the date of sanction of a rehabilitation scheme for the Company.

b. Dues to IOC X 49.67 Cr (Previous Year Rs. 49.60 Cr) for which First charge on Plant and Machinery is given for Rs.50.Cr..''.

xi. During the year, the catalysts .in process were charged off in full amounting to Rs. 18.75 Cr to be in line with the requirement of AS-26 (Intangible Assets). Had the last year method been followed, the charge would have been less by Rs. 12.62 Cr and correspondingly the profit would have been more by the same extent.

1. GENERAL INFORMATION:

a. The appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty is still pending.

Based on the restoration application filed by the Company before CESTAT, which waived pre-deposit of the duty and penalty during the pendency of the appeal on deposit of Rs. 5 lacs by the Company which was complied with.

b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 138.51 Cr (Previous Year Rs. 104.20 Cr). However, the same is shown under Contingent Liabilities per practice.

c. The total borrowings as Of 31st March 2013 are Rs. 554.25 Cr (Previous Year Rs. 554.25 Cr) are exclusive loans from Government of India. The pre-approved limits per Article 44 of Articles of Association are Rs. 550 Cr.

The necessary approval for increase in limits shall be obtained from the shareholders in the Annual General Meeting.

d. Due to EU and US sanctions on Iran, the insurance companies could not get reinsurance abroad and consequently though the coverage for the year 2013-14 was given for the entire insured value ofRs. 1,699 Cr, nevertheless the aggregate annual claim settlement shall be restricted to Rs. 105 Cr. The Company has taken up the issue with Department of Financial Services through Department of Fertilizers and the feedback is awaited.

This note is provided per AS4 (Contingencies and Events occurring after the Balance Sheet date).

e. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances.

f. Figures for the previous year have been regrouped wherever necessary to conform to Current Year''s classification.


Mar 31, 2012

I. SUBSIDY UNDER NEW PRICING SCHEME (NPS) FOR UREA

Escalation/De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs.85.89 Cr. (Previous year Rs. 50.99 Cr.) has been reckoned as receivable from FICC for the year 2011-12 towards annual escalation of input prices.

ii. EXCHANGE RATE FLUCTUATION

Exchange rate fluctuation included in other expenses is Rs. 4.06 Cr (Previous year Rs. 7,362).

iii. CENTRAL EXCISE 25/70 NOTIFICATION

With due permission of COD, the Company has preferred an appeal with CESTAT on 18.07.2011 against (I) demand for delayed payment interest of Rs. 5.42 Cr. for refund of the excess Excise Duty of Rs. 3.10 Cr. collected by the Department and (ii) to quash the order of Commissioner (Appeals).The hearings are yet to take place.

No provision is considered necessary in the Books by the Company as the matter is subjudice. However the same is shown under Contingent Liability.

iv. Advances include a sum of Rs. 63.09 Lacs deposited with ESI authorities being employer contribution to ESI as per the direction of Hon. Madras High Court. The Company has already filed Writ Appeal No. 1228/2010 against the orders passed in WP No. 14642/2006. The Hon. Court on 29.06.2010 granted interim stay until further orders and notice. Pending disposal of the case the amount is shown under advances as of 31.3.2012.

v GOI has approved the 2007 pay revision vide letter No: 84/1/2009-HR-I dated April 18,2011. In terms of the order the perks and allowances on the revised scales are effective 18.04.2011. Accordingly, perks and allowances for the period from 18.04.2011 to 31.03.2012 amounting to Rs. 3.41 Cr. has been provided in the books of accounts to enable implementation of revised perks and allowances per GOI order.

vi. OTHER DISCLOSURES

i. Information required under AS-15 (Revised) on "Employee Benefit Expenses" is provided in Annexure -1 to this note.

ii. The amount of borrowing costs capitalised for the year is 'NIL' (Previous year 'NIL')per AS-16 (Borrowing Costs).

iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per AS -17 (Segment Reporting).

iv. During the year, there were no transactions with related parties as defined in AS -18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 25.

v. The Company has not entered into joint venture activities as defined in AS-27. Hence AS-27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at present.

vi. The movement of Provisions as required under AS- 29 "Provisions, Contingent Liabilities and Contingent Assets" is given below:

Mar 31,2012 Mar 31,2011 (Rs. Cr) (Rs. Cr)

a. Leave Encashment

Provision at the beginning of the year 6.25 5.66

Provision made during the year 4.98 2.48

Utilisation/withdrawal during the year 1.83 1.89

Provision at the end of the year 9.40 6.25

b Retired Medical Benefits

Provision at the beginning of the year 1.43 1.34

Provision made during the year 0.05 0.23

Utilisation/withdrawal during the year 0.15 0.14

Provision at the end of the year 1.33 1.43

c. Service Awards

Provision at the beginning of the year 0.93 0.58

Provision made during the year 0.33 0.35

Utilisation/withdrawal during the year - -

Provision at the end of the year 1.26 0.93

d. Gratuity

Provision at the beginning of the year 12.19 3.72

Provision made during the year 7.40 10.47

Utilisation / withdrawal during the year 4.00 2.00

Provision at the end of the year 15.59 12.19

e. Bad and Doubtful Debts

Provision at the beginning of the year 5.17 4.33

Provision made during the year 0.15 0.98

Utilisation/withdrawal during the year 0.54 0.14

Provision at the end of the year 4.78 5.17

f. Claims Recoverable

Provision at the beginning of the year 0.82 -

Provision made during the year 0.19 0.82

Utilisation/withdrawal during the year

Provision at the end of the year 1.01 0.82

vii. a) Considering the carry forward losses and allowances available for set off, there is no Income Tax liability for the year 2011-12. Hence no provision is made for Income Tax during the year.

b) Deferred tax asset (Net) as at 31.03.2012 has not been recognized since there are no taxable profits in view of the set-off of the carry forward loss and depreciation benefits available to the Company under the Income-Tax Act.

viii. Eight hearings of BIFR have taken place since 02.04.2009 on which date, the Company was declared sick under SIC (SP) Act, 1985. The Operating Agency (SBI, Commercial Branch, Chennai) has submitted a Draft Rehabilitation Scheme (DRS) to BIFR. In the BIFR hearing held on 07.5.2012, the Board wanted certain clarifications/modifications in the DRS and directed the operating agency to resubmit the fully tied up DRS. Next hearing is posted on 27.08.2012.

ix. Based on the preliminary report of the outside professional firm of Chartered Accountants, the Company identified the disposal documents for most of the items reported short under Air Conditioners & Water Coolers and Lab Equipment. In respect of Furniture & Fittings, Office Equipment and Automotive & Service Equipment, the reconciliation is in progress. However, as most of the items reported short are fully depreciated, there is no material financial impact on Accounts.

x. Included in Short term Trade Payables under 'Note 9a' are:

a. Dues to CPCL - Rs. 0.02 Cr (Previous Year Rs. 82.27 Cr) for which mortgage and First charge on Guindy land is given for Rs. 100 Cr till the date of sanction of a rehabilitation scheme for the Company.

b. Dues to IOC - Rs. 49.60 Cr (Previous Year Rs. 49.92 Cr) for which First charge on Plant and Machinery is given for Rs. 50 Cr

xi. The Company settled the dues to LICHFL through One Time Settlement and the benefit of Rs. 1.31 Cr (Previous year Rs. 124.69 Cr with Financial Institutions) has been accounted under extra ordinary items.

xii. The Annual maintenance of Plants was taken up from March 05, 2012. Per normally accepted Accounting Principles, all spares drawn from stores up to March 31,2012 together with connected labour costs were charged in 2011-12 Accounts, though the Plants have not restarted as of year end.

1. CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND L/Cs OUTSTANDING:

2011-12 2010-11 (RS. ) (RS. )

(a) Contingent Liabilities in 183,58,01,504 156,72,77,307 respect of claims against the Company not acknowledged as debts in respect of Income Tax, Excise Duty, Sales Tax and others (Includes Customs Duty on Imported Urea Rs. 65.86 Cr, Penal Interest on GOI Loans Rs. 104.20 Cr, and interest on delayed payment of Excise Duty Rs. 5.42 Cr).

(b) L/Cs outstanding (not provided for) 18,12,30,479 21,72,90,258

(C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for (after adjusting advance made therefor) 19,28,08,775 96,222

(d) ESI Liability (interest) not provided for, based on Court's interim injunction. 38,41,925 42,53,871

2. GENERAL INFORMATION:

a. The Company has filed an appeal before the Commissioner of Customs (Appeals) over the denial of concessional rate of duty for imported Urea for use as manure by the Commissioner of Customs who demanded Rs. 65.86 Cr as differential duty including equal penalty. The appeal is pending.

Based on COD clearance, the Company has filed a restoration application before CESTAT, which vide order No: 66/12 dated 31.01.2012 waived pre-deposit of the duty and penalty during the pendency of the appeal. CESTAT also directed the Company to deposit an amount of Rs. 5 lacs which the Company has complied with. Further hearings are to take place.

b. During the year, the Company has moved 4,86,750 MT of Urea from current year production and 10,615 MTfrom the opening stock totaling to 4,97,365 MT. The Company is eligible for full subsidy upto 100% capacity i.e. 4,86,750 MT and for the balance quantity at the rates notified for the earlier years during which the stock got accumulated. Further, the balance quantity of unmoved opening stock of 4,142 MT is also eligible for subsidy as above. The valuation is done accordingly pending notification from FICC.

c. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables/Payables and Loans and Advances.

d. Figures for the previous year have been regrouped wherever necessary to conform to Current Year's classification.

Information to Investors Dear Shareholders

Dematerilisation of Madras Fertilizers Limited (MFL) Shares

As you may be aware that the shares of MFL are under compulsory dematerialisation (demat) segment of trading as per SEBI directives. This means, MFL shares can be purchased/sold at the Stock Exchanges only in demat form. Shareholders are therefore advised to avail the demat facility.

Dematerialisation

Dematerialisation is the process of converting physical share certificates into electronic form i.e. crediting of equivalent number of shares to your depository account electronically.

Depository Account

For dematerialisation of shares you have to open a depository account with a Depository Participant (DP) having connectivity with National Securities Depository Ltd (NSDL)/Central Depository Services (I) Ltd (CSDL). You are free to open an account with any of the DPs for demat.

Benefits of Dematerialisation

- No risk of loss/misplacement/theft/damage of share certificates

- No risk of bad deliveries

- No stamp duty on transfer of shares

- Faster transfer of shares

Steps involved for Dematerialisation of shares

1. Open a demat account with any of the Depository Participants (DPs)

2. Submit demat request form (DRF) (duly signed by all the holders) along with the share certificates to the DP.

3. Obtain acknowledgement from the DP for having delivered the share certificates

4. Receive a confirmation statement of holding from your DP.

5. PLEASE DO NOT SEND THE SHARE CERTIFICATES/DOCUMENTS FOR DEMAT TO THE COMPANY OR SHARE TRANSFER AGENT OF THE COMPANY.

Some of the DP names are furnished under for your reference.

You may contact nearest DP in this regard.

- Appollo Sindhoori Capital Investments Ltd

- Cholamandalam Securities Ltd

- Fortis Securities Ltd

- Geojit Financial Services Ltd

- HDFC Bank Ltd

- ICICI Bank Ltd

- IDBI Bank Ltd

- India Infoline Securities P Ltd

- Indian Bank

- Induslnd Bank Ltd

- Integrated Enterprises India Ltd

- Kotak Securities Ltd

- State Bank of India

- Stock Holding Corporation of India Ltd

- Union Bank of India

- UTI Bank of India

- UTI Securities Ltd

In order to obtain the complete list of DP locations and other related information you may log on www.nsdl.co.in/ www.cdslindia.com

In case you need any additional information on this matter, please feel free to contact:

G Alagarsamy

Company Secretary Madras Fertilizers Limited Manali,Chennai-600068 Phone: 044-25941001 /25941201 Extn 3456 Fax : 044-25943613


Mar 31, 2011

I. CONCESSION UNDER NEW PRICING SCHEME FOR UREA

Escalation/De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 50.99 Cr (Previous year Rs. 28.62 Cr) has been reckoned as receivable from FICC for the year 2010-11 towards annual escalation of input prices.

ii. EXCHANGE RATE FLUCTUATION

Exchange rate fluctuation loss included in other expenses is Rs. 7,362 (Previous year Rs. 71,162).

iii. CENTRAL EXCISE 25/70 NOTIFICATION

Central Excise claimed Rs. 5.42 Cr as interest on the belated payment of duty of Rs. 3.10 Cr in excess of the dues.

Based on COD permission, an appeal against demand for delayed payment interest of Rs. 5.42 Cr and for refund of the excess Excise Duty of Rs. 3.10 Cr collected by the Department has been preferred with Commissioner (Appeals) on 26.09.08. Commissioner (Appeals) has rejected our appeal vide his order No.05/2011 (M-l) dated 08.04.2011. The Company is proposing to appeal before CESTAT against the order of Commissioner (Appeals).

Since the matter is subjudice, no provision is considered necessary in the Books by the Company. However, the same is shown under Contingent Liability.

iv. Advances include a sum of Rs. 63.09 Lacs deposited with ESI authorities being employer contribution to ESI as per the direction of Hon. Madras High Court. The Company has already filed Writ Appeal No.1228 / 2010 against the orders passed in WP No.14642/2006. The Hon. Court on 29.06.2010 granted interim stay until further orders and notice. Pending disposal of the case the amount is shown under Deposits as of 31.03.2011.

v. SALARY / WAGE REVISION

GOI has approved the 2007 Pay revision vide letter No. 84/1/2009-HR-l dated April 18,2011 which interalia states that •

(i) Pending arrears for 1997 pay revision may be paid in full.

(ii) One third of arrears for 2007 pay revision may be paid subject to recovery of advances already paid.

(iii) Balance arrears to be paid in quarterly instalments with Board approval subject to profitability and availability of cash.

Pending arrears for 1997 pay revision amounting to Rs. 27.88 Cr has been provided in full.

The arrears for the period 01.01.2007 to 31.03.2011 amounting to Rs. 52.33 Cr has also been provided which includes Rs. 14.44 Cr for the year 2010-11.

vi. The Company has leased out its Bio-fertilizer Plant at Vijayawada, having a written down value of Rs. 32.44 Lacs (Previous Year Rs. 33.54 Lacs). The lease rent received during the year is Rs. 1.80 Lacs (Previous Year Rs. 1.70 Lacs).

vii. VALUE ADDED TAX (VAT)

Section 19 of VAT Act was amended by the State Govt, during 2010-11 which reads "when the purchase price is more than the sale price, the input tax credit which is in excess of output tax is to be reversed or lapsed to the State" and the same is introduced retrospectively from 01.01.2007.

Consequent to the above amendment the input tax credit amounting to Rs. 88.92 Cr (Previous Year Rs. 64.59 Cr) upto 31.03.2011 after adjusting the output tax payable of Rs. 21.74 Cr (Previous Year Rs. 16.52 Cr) hitherto shown under 'Claims recoverable' as well as payable to FICC under Current Liabilities has been regularized. There is no impact on Accounts for the year 2010-11 on account of this amendment.

viii. OTHER DISCLOSURES

i. Information required under AS-15 (Revised) on "Employee Benefits" is provided in Annexure -1 to this schedule.

ii. The amount of borrowing costs capitalised for the year is 'NIL' (Previous year 'NIL') per AS-16 (Borrowing Costs).

iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per AS-17 (Segment Reporting).

iv. During the year, there were no transactions with related parties as defined in AS-18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 21.

v. The Company has not entered into joint venture activities as defined in AS-27. Hence AS-27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at present.

vii. a) Considering the cany forward losses and allowances available for set off, there is no Income Tax liability for the year 2010-11. Hence no provision is made for Income Tax during the year.

b) Deferred tax asset (Net) as at 31.03.2011 has not been recognized as there is no taxable profits and set-off of the carry forward loss and depreciation benefits are available to the Company under the Income-Tax Act.

viii. BIFR in its April 02,2009 hearing declared the Company as Sick under SIC (SP) Act, 1985 and registered the case No.501/ 2007. Subsequent hearings were held on 15.10.2009,12.01.2010,22.03.2010,19.08.2010,14.12.2010 and 06.04.2011. Consequent to the directions of BIFR, Department of Fertilizers - GOI has prepared BRPSE note for the rehabilitation of the Company and the same was sent for Inter Ministerial consultations and review which is under progress.

ix. The Movable Fixed Assets have been verified by an outside professional firm, M/s Sundaram and Srinivasan, Chartered Accountants. The preliminary report on the shortage / excess is under review by the Company. After due reconciliation, necessary treatment in Books shall be given in 2011-12 with due approvals.

x. Included in Other Creditors under Schedule 10 - Current Liabilities and Provisions are:

a. Dues to CPCL - Rs. 82.27 Cr (Previous Year Rs. 87.56 Cr) for which mortgage and First Charge on Guindy land is given for Rs. 100 Cr till the date of sanction of a rehabilitation scheme for the Company.

b. Dues to IOC- Rs. 49.92 Cr (Previous Year Rs. 47.27 Cr) for which First Charge on Plant and Machinery is given for Rs. 50Cr

xi. During the year 2010-11 also the Company continued productionof NPKS 20-20-0-13 on tolling basis with Indian Potash Limited (IPL). In terms of the agreement, IPL provided all raw materials and paid conversion cost to the Company. The total quantity of NPKS 20-20-0-13 produced during the year was 40,578 MT and the income on account of the same is included under 'Other Income'.

Annexure-I

Disclosure requirements under AS-15 (Revised) as per Note No: 20 B xii(i)

Defined Contribution Schemes:

The net amounts expended in respect of employer's contribution to the provident fund and superannuation fund during the year are Rs. 3.19 Cr (Previous year Rs. 2.77 Cr) and Rs. 3.35 Cr (Previous year Rs. 2.97 Cr) respectively.

2. CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND L/Cs OUTSTANDING:

2010-11 2009-10 Rs. Rs.

(a) Contingent Liabilities in respect 156,72,77,307 135,42,21,875 of claims against the Company not acknowledged as debts in respect of Income Tax, Excise Duty, Sales Tax and others (Includes Customs duty on Imported Urea Rs. 65.86 Cr, Penal Interest on GOI loans Rs. 76.65 Cr and Interest on delayed payment of Excise Duty Rs. 5.42 Cr).

(b) L/Cs outstanding (not provided for) 21,72,90,258 2,38,17,475

(c) Estimated amount of contracts 96,222 3,07,14,074 remaining to be executed on capital Account and not provided for (after adjusting advance made there for)

(d) ESI Liability not provided for 42,53,871 42,53,871 the period Oct. 1999 to Sep. 2000 based on Court's interim injunction and interest for the earlier period.

25. GENERAL INFORMATION:

a. Department of Fertilizers, permitted the Company to use imported Urea as a source of Nitrogen in the production of complex fertilizers after revamp from 1998 onwards. Licenses were issued by DGFT subject to the condition that only specified quantity of Urea produced indigenously by the Company would be eligible for direct sales under ECA allocation.

The Commissioner of Customs vide his adjudication order denied concessional rate of duty available for Imported Urea for use as manure but diverted for direct sale and demanded differential Customs Duty with equal amount of penalty totaling to Rs. 65.86 Cr. The Company has filed an appeal before the Commissioner of Customs (Appeals), which is still pending. In its hearing held on April 8, 2010, CoD has accorded permission to the Company to represent the matter before CESTAT.

The appeal filed before the CESTAT against the order passed by the Commissioner of Customs was dismissed by CESTAT on 03.08.2009 with a liberty to apply to restoration as and when CoD clearance was granted. CoD vide their communication No.COD/ 26/2010 dated 15.06.2010 accorded clearance. Subsequent to that, MFL has filed a Restoration Application before the CESTAT and the same was listed for hearing on 22.11.2010 and adjourned to 11.04.2011. However, the hearing could not take place even on 11.04.2011 and was again adjourned without fixing any date.

As the matter is subjudice, no provision is considered necessary in the books by the Company. However, the same is shown under . Contingent Liability.

b. Confirmation of balances has not been received in respect of Loans from GQI/ Financial Institutions, Debtors, Creditors, Claims Recoverable and other parties included under Loans and advances.

c. Figures for the previous year have been regrouped wherever necessary to conform to Current Year's classification.

d. Additional information as required under Part IV of Schedule VI to the Companies Act, 1956 is furnished in Annexure II.


Mar 31, 2010

1. CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND L/Cs OUTSTANDING:

2009-10 2008-09

Rs Rs

(a) Contingent Liabilities in respect of claims against the Company not acknowledged as debts in respect of Income Tax, Excise Duty, Sales Tax and others (Includes 135,42,21,875 111,97,51,955

Customs duty on Imported Urea Rs 65.86 Cr., Penal Interes on GOI Loans Rs 54.79 Cr., and interest on delayed payment of Excise Duty Rs 5.42 Cr).

(b) L/Cs outstanding (not provided for) 2,38,17,475 4,68,51,983

(c) Estimated amount of contracts remaining to be executed on Capital Account and not provided for (after adjusting vance made therefor) 3,07,14,074 3,13,02,655

(d) ESI Liability not provided for the period Oct. 1999 to Sep. 2000 based on Courts interim injunction and interest for the earlier period. 42,53,871 42,53,871

2. GENERAL INFORMATION:

a. SALARY/WAGE REVISION :

(i) GOI have approved Salary/Wage revision effective January 1, 1997 for Supervisors and Non-Supervisors vide OM No.118/3/2000-HR-1 dated October 12, 2000 and the same had been implemented effective April 1, 2000. However, arrears for the period January 1,1997 to March 31,2000 shall be paid in 8 instalments subject to the Company making a minimum profit of Rs. 10.50 Cr. The instalments will be spaced to the extent of a maximum of 50% of the profit which shall be permitted to be appropriated for payment of arrears.

In line with the GOI approval as above, since the Company has earned a profit of Rs. 13.68 Cr. during 2009-10, an amount of Rs. 6.80 Cr. has been appropriated from the profit for the year 2009-10 towards partial arrears.

(ii) GOI accepted the 2nd CPSE Pay Revision Committee recommendations and issued an Office Memorandum No.2(70)/ 08-DPE(WC) dated November 26,2008, January 14,2009 and April 02,2009 regarding pay revision effective January 01, 2007 for Executives and Non-unionised Supervisors of CPSEs. The Board approved proposal for Pay Revision has been forwarded to GOI. The amount of Arrears is not quantifiable at this stage as the proposal is yet to be approved by GOI.

b. Department of Fertilizers, permitted the Company to use Imported Urea as a source of Nitrogen in the production of complex fertilizers after revamp from 1998 onwards. Licenses were issued by DGFT subject to the condition that only specified quantity of Urea produced indigenously by the Company would be eligible for direct sales under ECA allocation.

The Commissioner of Customs vide his adjudication order denied concessional rate of duty available for Imported Urea for use as manure but diverted for direct sale and demanded differential Customs Duty with equal amount of penalty totaling to Rs.65.86 Cr. The Company has filed an appeal before the Commissioner of Customs (Appeals), which is still pending. In its hearing held on April 8, 2010, CoD has accorded permission to the Company to represent the matter before CESTAT.

As the matter is subjudice, no provision is considered necessary in the books by the Company. However, the same is shown under Contingent Liability.

c. Confirmation of balances has not been received in respect of Loans from GOI/ Financial Institutions, Debtors, Creditors, Claims Recoverable and other parties included under Loans and advances.

d. Figures for the previous year have been regrouped wherever necessary to conform to Current Years classification.

e. Additional information as required under Part IV of Schedule VI to the Companies Act, 1956 is furnished in AnnexureII.

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