Mar 31, 2017
Atul Ltd (the Company) is a public company limited by shares, incorporated and domiciled in India. Its registered office is located at Atul House, G I Patel Marg, Ahmedabad 380 014, Gujarat, India and principal place of business is located at Atul, Gujarat, India.
The Company is in the business of Life Science Chemicals and Performance and Other Chemicals and cater to the needs of varied industries such as Adhesives, Agriculture, Animal Feed, Automobile, Composites, Construction, Cosmetic, Defence, Dyestuff, Electrical and Electronics, Flavour, Food, Footwear, Fragrance, Glass, Home Care, Horticulture, Hospitality, Paint and Coatings, Paper, Personal Care, Pharmaceutical, Plastic, Polymer, Rubber, Soap and Detergent, Sports and Leisure, Textile, Tyre and Wind Energy across the world.
a) Rights, preferences and restrictions:
The Company has one class of shares referred to as Equity shares having a par value of Rs.10.
i) Equity shares:
In the event of liquidation of the Company, the holders of Equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts and Preference shares. The distribution will be in proportion to the number of Equity shares held by the Shareholders.
Each holder of Equity shares is entitled to one vote per share.
The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board is subject to the approval of the Shareholders in the ensuing Annual General Meeting.
b) Shares reserved for allotment at a later date:
56 Equity shares are held in abeyance due to disputes at the time of earlier rights issues.
c) Details of Shareholders holding more than 5% of Equity shares:
Note 1 Other equity
Nature and purpose of other reserves
a) Securities premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
b) FVOCI - Equity instruments
The Company has elected to recognise changes in the fair value of certain investments in equity securities in Other Comprehensive Income. These changes are accumulated within the FVOCI equity instruments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are de-recognised.
c) Cash flow hedging reserve
The Company uses hedging instruments as part of its management of foreign currency risk associated with its highly probable forecast sale and inventory purchases and interest rate risk associated with variable interest rate borrowings. For hedging foreign currency risk, the Company uses foreign currency forward contracts, foreign currency option contracts and Interest rate swaps. They are designated as cash flow hedges to the extent these hedges are effective, the change in fair value of the hedging instrument is recognised in the cash flow hedging reserve. Amounts recognised in the cash flow hedging reserve is reclassified to profit or loss when the hedged item affects profit or loss (for example, sales and interest payments). When the forecast transaction results in the recognition of a non-financial asset (for example, inventory), the amount recognised in the cash flow hedging reserve is adjusted against the carrying amount of the non-financial asset.
a) Rupee term loan from a foreign financial institution is secured by first pari passu charge by way of hypothecation of all movable property, plant and equipment and mortgage of immovable properties of the Company, present and future, excluding specific assets with first pari passu charge with other lenders and second charge on entire current assets of the Company, both present and future.
b) Foreign currency term loan from a foreign bank is secured by first pari passu charge by way of hypothecation of all movable property, plant and equipment and mortgage of immovable properties of the Company, present and future, excluding specific assets with first pari passu charge and second charge on entire current assets of the Company, both present and future.
c) Foreign currency term loan from a bank is secured by first pari passu charge on the entire movable and immovable property, plant and equipment of the Company, both present and future.
d) Foreign currency term loan from a foreign bank is secured by first pari passu charge by way of hypothecation of all movable property, plant and equipment and mortgage of immovable properties of the Company, present and future, excluding specific assets with first pari passu charge with other lenders charge and second charge on entire current assets of the Company, both present and future.
e) Security details:
Working capital loans repayable on demand from banks is secured by hypothecation of tangible current assets, namely, inventories and book debts of the Company as a whole and also secured by second and subservient charge on immovable and movable assets of the Company to the extent of individual bank limit as mentioned in joint consortium documents. This also extends to guarantees and letter of credits given by the bankers aggregating Rs.83.24 cr (March 31, 2016: Rs.65.03 cr, April 01, 2015: Rs.70.66 cr)
f) The carrying amount of assets hypothecated | mortgaged as security for current and non-current borrowings are:
Note 2 Provisions
a) Information about individual provisions and significant estimates
i) Compensated absences
The Compensated absences covers the liability for sick and earned leave. Out of the total amount disclosed above, the amount of Rs.6.08 cr (March 31, 2016: Rs.5.35 cr, April 01, 2015: Rs.5.53 cr) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.
The entity has provided for expenses it estimates to be incurred for safe disposal of effluent in line with the regulatory framework it operates in. The provision represents the unpaid amount the entity expects to incur for which the obligating event has already arisen as on the reporting date.
The entity has provided for payments expected pertaining to wealth tax in line with the provisions of the erstwhile applicable the Wealth Tax Act, 1957. The application of the Act was discontinued from April 01, 2016. (amount as on April 01, 2015 is Rs.0.22 cr)
b) Movement of provision for effluent disposal
01 Sales to and purchases from Related Parties were made on normal commercial terms and conditions and at prevailing market prices or where market price is not available, at cost plus margin.
02 Transactions relating to dividends, subscriptions for new Equity shares were on the same terms and conditions that applied to other Shareholders.
03 All outstanding balances are unsecured and are repayable in cash.
The major components of income tax expense for the years ended March 31, 2017 and March 31, 2016 are:
Note. 3.1 Employee benefit obligations
a) Defined benefit plans:
The Company operates a gratuity plan through the âAtul Employees Gratuity Trustâ. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972 or Company scheme whichever is beneficial. The same is payable at the time of separation from the Company or retirement, whichever is earlier. The benefits vest after five years of continuous service.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change as compared to the prior year.
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
i) Asset volatility
The plan liabilities are calculated using a discount rate set with reference to bond yields, if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in Government securities. These are subject to interest rate risk. The Company has a Risk Management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The Company intends to maintain the above investment mix in the continuing years.
ii) Changes in bond yields
A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of bond holdings.
The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The Company has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that the failure of any single investment will not have a material impact on the overall level of assets.
A large portion of assets in 2017 consists of insurance funds, although the Company also invests in corporate bonds and special deposit scheme. The plan asset mix is in compliance with the requirements of the respective local regulations.
Expected contributions to post-employment benefit plans for the year ending March 31, 2018 are Rs.2.71 cr.
The weighted average duration of the defined benefit obligation is 5 years (2015-16: 5 years). The expected maturity analysis of gratuity is as follows:
b) Defined contribution plans:
Amount of Rs.9.36 cr (March 31, 2016: Rs.9.15 cr) is recognised as expense and included in the Note 24 âContribution to Provident and Other fundsâ.
c) Provident Fund:
The Company has established an Employee Provident Fund Trust administered by the Company to which both the employee and the employer make monthly contribution equal to 12% of basic salary of employee respectively. The Companyâs contribution to the Provident Fund for all employees is charged to Statement of Profit and Loss. In case of any liability arising due to short fall between the return from its investments and the administered interest rate, the same is required to be provided for by the Company. The actuary has provided an actuarial valuation and indicated that the interest shortfall liability is â Nil. The Company has contributed the following amounts towards Provident Fund during the respective period ended:
d) Compensated absences amount of Rs.5.99 cr (March 31, 2016: Rs.3.39 cr) is recognised as expense and included in the Note 24 âSalaries, wages and bonusâ.
Note 3.2 Fair value measurements
a) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the Financial Statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the Accounting Standard. An explanation of each level follows underneath the table.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual fund units that have a quoted price. The fair value of all equity instruments which are traded on the Stock Exchanges is valued using the closing price as at the reporting period. The mutual fund units are valued using the closing net assets value (NAV).
Level 2: The fair value of financial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Financial assets valued using Level 3 valuation techniques comprise of unquoted Preference shares in subsidiary company with a fair value amount of Rs.2.40 cr as on April 01, 2015. These Preference shares have been redeemed in the financial year ended March 31, 2016. These investments are collectively not material and hence disclosures regarding significant unobservable inputs used in Level 3 fair values have not been made.
b) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
i) the use of quoted market prices or dealer quotes for similar instruments
ii) the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves
iii) the fair value of forward foreign exchange contracts are determined using forward exchange rates at the Balance Sheet date
iv) the fair value of foreign currency option contracts is determined using the Black Scholes valuation model
v) the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 1 and 2.
c) Valuation processes
The finance department of the Company includes a team that performs the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values.
d) Fair value of financial assets and liabilities measured at amortised cost
The carrying amounts of trade receivables, trade payables, other receivables, short-term security deposits, bank deposits with more than 12 months maturity, capital creditors dividend receivable, other liabilities (including discount payable) and cash and cash equivalents including bank balances other than cash and cash equivalents are considered to be the same as their fair values due to the current and short-term nature of such balances.
The fair values for loans and investment in Preference shares were calculated based on cash flows discounted using a current lending rate.
The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
Note 3.3 Financial Risk Management
Risk Management is an integral part of the business practices of the Company. The framework of Risk Management concentrates on formalising a system to deal with the most relevant risks, building on existing Management practices, knowledge and structures. With the help of a reputed international consultancy firm, the Company has developed and implemented a comprehensive Risk Management System to ensure that risks to the continued existence of the Company as a going concern and to its growth are identified and remedied on a timely basis. While defining and developing the formalised Risk Management System, leading standards and practices have been considered. The Risk Management System is relevant to business reality, pragmatic and simple and involves the following:
i) Risk identification and definition - Focused on identifying relevant risks, creating | updating clear definitions to ensure undisputed understanding along with details of the underlying root causes | contributing factors.
ii) Risk classification - Focused on understanding the various impacts of risks and the level of influence on its root causes. This involves identifying various processes generating the root causes and clear understanding of risk interrelationships.
iii) Risk assessment and prioritisation - Focused on determining risk priority and risk ownership for critical risks. This involves assessment of the various impacts taking into consideration risk appetite and existing mitigation controls.
iv) Risk mitigation - Focused on addressing critical risks to restrict their impact(s) to an acceptable level (within the defined risk appetite). This involves a clear definition of actions, responsibilities and milestones.
v) Risk reporting and monitoring - Focused on providing to the Board and the Audit Committee periodic information on risk profile evolution and mitigation plans.
a) Management of liquidity risk
The principal sources of liquidity of the Company are cash and cash equivalents, borrowings and the cash flow that is generated from operations. The Company believes that current cash and cash equivalents, tied up borrowing lines and cash flow that is generated from operations is sufficient to meet requirements. Accordingly, liquidity risk is perceived to be low. The following table shows the maturity analysis of financial liabilities of the Company based on contractually agreed undiscounted cash flows as at the Balance Sheet date:
b) Management of market risk
The size and operations of the Company result in it being exposed to the following market risks that arise from its use of financial instruments:
i) price risk,
ii) interest rate risk and
iii) foreign exchange risk
The above risks may affect income and expenses, or the value of its financial instruments of the Company. The objective of the Management of the Company for market risk is to maintain this risk within acceptable parameters, while optimising returns. The Company exposure to, and the Management of, these risks is explained below:
iii) Management of credit risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations.
Concentrations of credit risk with respect to trade receivables are limited, due to the customer base being large, diverse and across sectors and countries. All trade receivables are reviewed and assessed for default on a quarterly basis.
Historical experience of collecting receivables of the Company is supported by low level of past default and hence the credit risk is perceived to be low.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments in Government securities, Preference shares and loans to subsidiary companies. The Company has diversified portfolio of investment with various number of counter-parties which have secure credit ratings hence the risk is reduced. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the treasury department of the Company.
Note 3.4 Capital Management Risk Management
The primary objective of Capital Management of the Company is to maximise Shareholder value. The Company monitors capital using Debt-Equity ratio which is total debt divided by total equity.
For the purposes of Capital Management, the Company considers the following components of its Balance Sheet to manage capital.
Total equity includes General reserve, Retained earnings, Share capital, Security premium. Total debt includes current debt plus non-current debt.
Note 3.5 Segment information
In accordance with Ind AS 108 âOperating Segmentâ, segment information has been given in the Consolidated Financial Statements of Atul Ltd, and therefore, no separate disclosure on segment information is given in the Standalone Financial Statements.
Note 3.6 Earnings per share
Earnings per share (EPS) - The numerators and denominators used to calculate basic and diluted EPS:
Note 3.7 Leases
a) Operating lease
The Company has taken various residential and office premises under operating lease or leave and license Agreements. These are generally cancellable, having a term between 11 months and 3 years and have no specific obligation for renewal. Payments are recognised in the Statement of Profit and Loss under âRentâ in Note 26.
b) Finance lease
i) The Company has given a building on finance lease for a term of 30 years.
Future minimum lease payments receivable under finance leases together with the present value of the net minimum lease payments (MLP) are as under:
ii) The Company has taken on lease a parcel of land from Gujarat Industrial Development Corporation for a period of 99 years with an option to extend the lease by another 99 years on expiry of lease at a rental that is 100% higher than the current rental. However, the Company has no specific obligation for renewal. The Company believes has considered that such a lease of land transfers substantially all of the risks and rewards incidental to ownership of land, and has thus accounted for the same as finance lease.
Note 3.8 Loans
Disclosures pursuant to the Regulation 34(3) read with para A of Schedule V to the SEBI (Listing obligations and disclosure requirements) Regulations, 2015 read with Section 186 (4) of the Companies Act, 2013.
Note 3.9 Disclosure requirement under MSMED Act, 2006
The Company has certain dues to suppliers (trade and capital) registered under Micro, Small and Medium Enterprises Development Act, 2006 (âMSMED Actâ). The disclosures pursuant to the said MSMED Act are as follows:
Note 3.10 Disclosures on specified bank notes (SBNs)
During the year, the Company had specified bank notes or other denomination notes as defined in the MCA notification G.S.R. 308(E) dated March 31, 2017 on the details of Specified Bank Notes (SBN) held and transacted during the period from November 08, 2016 to December 30, 2016 are as under:
Note 3.11 Expenditure on Corporate Social Responsibility initiatives
a) Gross amount required to be spent by the Company during the year is Rs.6.60 cr
b) Amount spent during the year on:
Note 3.12 Exceptional items
Consequent to the capital reduction of Â£ 1.05 million in Atul Europe Ltd (AEL), a wholly-owned subsidiary company of Atul Ltd, following impact has been given to the Financial Statement:
Note 3.13 Regrouped | Recast | Reclassified
Figures of the earlier year have been reclassified to confirm to Ind AS presentation requirements.
Note 3.14 Rounding off
Figures less than Rs.50,000 have been shown at actuals in bracket.
Note 3.15 Offsetting financial assets and liabilities
The below Note presents the recognised financial instruments that are offset or subject to enforceable master netting arrangements and other similar Agreements, but not offset as at March 31, 2017, March 31, 2016 and April 01, 2015.
a) Collateral against borrowings
The Company has hypothecated | mortgaged financial instruments as collateral against a number of its borrowings. Refer to Note 15 for further information on financial and non-financial collateral hypothecated | mortgaged as security against borrowings.
b) Master netting arrangements - not currently enforceable
Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, only where certain credit events occur (such as default), the net position owing | receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. As the Company does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Balance Sheet.
Note 3.16 Events occurring after the reporting period
The proposed dividend on Equity shares at Rs.10.00 per share is recommended by the Board of Directors which is subject to the approval of Shareholders in the ensuing Annual General Meeting.
Note 3.17 The Financial Statements were authorised for issue by the Board of Directors on May 05, 2017.
Note 3.18 Transition to Ind AS
These are the first Financial Statements of the Company prepared in accordance with Ind AS.
The Accounting Policies set out in Note 1 have been applied in preparing the Financial Statements for the year ended March 31, 2017, the comparative information presented in these Financial Statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS Balance Sheet as at April 01, 2015 (the date of transition). In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in Financial Statements prepared in accordance with the Accounting Standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (IGAAP). An explanation of how the transition from IGAAP to Ind AS has affected the financial position, financial performance and cash flows of the Company is set out in the following tables and notes:
A) Exemptions and exceptions availed
In preparing these Ind AS Financial Statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101 First-time Adoption of Indian Accounting Standards, as explained below. The resulting difference between the carrying values of the assets and liabilities in the Financial Statements as at the transition date under Ind AS and IGAAP have been recognised directly in equity (retained earnings or another appropriate category of equity). This Note explains the adjustments made by the Company in restating its IGAAP Financial Statements, including the Balance Sheet as at April 01, 2015 and the Financial Statements as at and for the year ended March 31, 2016.
a) Ind AS optional exemptions
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from IGAAP to Ind AS.
i) Deemed cost
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the Financial Statements as at the date of transition to Ind AS, measured as per IGAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for decommissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 âIntangible Assetsâ and investment properties covered by Ind AS 40 âInvestment Propertyâ. Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investment properties at their IGAAP carrying value in their Financial Statements.
ii) Designation of previously recognised financial instruments
Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS.
The Company has elected to apply this exemption for its investment in equity investments.
iii) Investments in subsidiary companies, associate company and joint venture company
Ind AS 101 permits a first-time adopter to measure itâs investment, at the date of transition, at cost determined in accordance with Ind AS 27, or deemed cost, The deemed cost of such investment shall be itâs fair value at date of transition to Ind AS of the Company, or IGAAP carrying amount at that date. The Company has elected to measure its investment in subsidiary companies, associate company and joint venture company at the IGAAP carrying amount as its deemed cost on the transition date.
iv) Long-term foreign currency monetary items
Under IGAAP, para 46A of AS 11 âThe Effects of Changes in Foreign Exchange Ratesâ, provided an alternative accounting treatment to companies with respect to exchange differences arising on restatement of long-term foreign currency monetary items. Exchange differences on account of depreciable assets can be added | deducted from the cost of the depreciable asset, which will be depreciated over the balance life of the asset. Ind AS 101 includes an optional exemption that allows a first-time adopter to continue the above accounting treatment in respect of the long-term foreign currency monetary items recognised in the Financial Statements for the period ending immediately before the beginning of the first Ind AS financial reporting period.
The Company has opted to apply this exemption.
b) Ind AS mandatory exceptions
The Company has applied the following exceptions from full retrospective application of Ind AS as mandatorily required under Ind AS 101.
i) Hedge accounting
Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in Ind AS 109 at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation cannot be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of April 01, 2015 are reflected as hedges in the results of the Company under Ind AS. The Company had designated various hedging relationships as cash flow hedges under the IGAAP. On date of transition to Ind AS, the entity had assessed that all the designated hedging relationships qualifies for hedge accounting as per Ind AS 109. Consequently, the Company continues to apply hedge accounting on and after the date of transition to Ind AS.
Estimates in accordance with Ind AS at the transition date will be consistent with estimates made for the same date in accordance with IGAAP (after adjustments to reflect any difference in Accounting Policies) unless there is objective evidence that those estimates were in error.
Ind AS estimates as at April 01, 2015 are consistent with the estimates as at the same date made in conformity with IGAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under IGAAP:
1) Investment in equity instruments carried at FVPL or FVOCI;
2) Fair value of investment properties
iii) Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
B) Reconciliations between IGAAP and Ind AS
Ind AS 101 requires an entity to reconcile equity, Total Comprehensive Income and cash flows for prior periods. The following tables represent the reconciliations from IGAAP to Ind AS.
C) Notes to the reconciliations
a) Investment property
Under the IGAAP, land, buildings or part thereof were not evaluated for currently determined or undetermined future use for classification into property, plant and equipment or investment property. Under Ind AS, the Company has identified certain parcels of freehold land that are held for a currently undetermined future use. These investment properties are required to be separately presented on the face of the Balance Sheet. There is no impact on the total equity or profit as a result of this adjustment.
Under IGAAP, leasehold land was accounted under AS 10 - âAccounting for fixed assetsâ . Under Ind AS, leasehold land is to be evaluated for operating or a finance lease as per the definition and classification criteria under Ind AS 17.
Accordingly, a combined lease agreement of land and building for 30 years between the Company and its joint venture that is Rudolf Atul Chemicals Ltd has been assessed for separation into its land and building components. The building element is recognised as a finance lease while land will remain an operating lease. Present values of minimum lease payments are allocated between land and building elements based on their relative fair values.
c) Fair valuation of investments
Under IGAAP, investments in equity instruments were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognised in other equity as part of âOther reserves - FVOCI Equity instrumentsâ at the date of transition. This increased other reserves by Rs.287.50 cr as at March 31, 2016 (April 01, 2015: Rs.325.88 cr).
d) Proposed dividend
Under IGAAP, dividends proposed by the Board of Directors after the Balance Sheet date, but before the approval of the Financial Statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the Shareholders in the General Meeting. Accordingly, the liability for proposed dividend (including dividend distribution tax) of Rs.35.70 cr as at March 31, 2016 (April 01, 2015: Rs.30.35 cr) included under current provisions has been reversed with corresponding adjustment to Retained earnings. Consequently, the total equity has increased by an equivalent amount.
e) Deferred tax
Under IGAAP, deferred tax accounting was done using the income statement approach which focuses on differences between taxable profit and accounting profit for the period. Ind AS requires entities to account for deferred taxes using the Balance Sheet approach which focuses on temporary differences between the carrying amount of an asset or liability in the Balance Sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred taxes on temporary differences which were not required to be recorded under IGAAP.
In addition, the various transitional adjustments have led to deferred tax implications which the Company has accounted for. Deferred tax adjustments are recognised in correlation to the underlying transaction either in Retained earnings or Other Comprehensive Income on the date of transition.
f) Excise duty
Under IGAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive excise duty. Excise duty paid is presented on the face of the Statement of Profit and Loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended March 31, 2016 by Rs.154.47. There is no impact on the total equity and profit.
g) Investments in debt instruments - Redeemable Preference share and loans to Related Parties
Under IGAAP, current investments were measured at cost or fair value, whichever is lower. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. The Redeemable Preference shares and loans given to Related Parties were long-term in nature and measured at cost less provision for other than temporary decline in the value of such investments.
Ind AS requires all financial instruments to be measured on initial recognition at fair value. Where a loan is advanced on normal commercial terms (both in terms of principal and interest), the fair value at inception will usually equal the loan amount. In case of loans advanced to Related Parties, the terms are either not on normal commercial terms or they are forced. On initial recognition the fair value of loans and Redeemable Preference shares to Related Parties has been estimated by discounting the future loan repayments using the rate the borrower may pay to an unrelated lender for a loan | Preference share with otherwise similar conditions (for example, amount, duration, currency, ranking and any security). Having separated the âoff-marketâ element of the transaction, the remaining part of the loan receivable is accounted for as a financial instrument at amortised cost or FVPL.
Accordingly, the difference between the transaction amount and its fair value at the date of transaction has been recorded as an investment in equity of the related entity in the Financial Statements (as a component of the overall investment) with a corresponding impact to the investment in Preference share and loans. Going forward, the interest income and fair value changes in the instruments are recognised in the Statement of Profit and Loss.
h) Hedge accounting
i) The Company has decided to avail the option of continuing the accounting of long-term foreign currency monetary items under the option of para D13AA of Ind AS 101 for items outstanding as on the adoption date. On availment of the option, the Company has no corresponding foreign currency exposure that affects profit or loss as it capitalises the exchange differences to the cost of the asset. In view of the above, hedge accounting is not applicable to foreign currency swaps. Such foreign currency swaps are considered as held for trading and any change in fair value has been recorded in the Statement of Profit and Loss under Ind AS. Further, the consequential impact on depreciation and deferred tax has been taken to the Statement of Profit and Loss under Ind AS.
ii) The contracts, which were designated as hedging instruments under IGAAP, have been designated as at the date of transition to Ind AS as hedging instrument in cash flow hedges of either expected future sales for which the Company has firm commitments or expected purchases from suppliers that are highly probable. The corresponding adjustment has been recognised as a cash flow hedge reserve. On the date of transition, cash flow hedge reserve was recognised in Other Comprehensive Income net of tax.
i) Remeasurements of post-employment benefit obligations
Under Ind AS, remeasurements that is actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in Other Comprehensive Income instead of profit or loss. Under the IGAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31, 2016 increased by Rs.2.00 cr. There is no impact on the total equity as at March 31, 2016.
j) Cash Discount
Under IGAAP, revenue from sale of products was measured at transaction price. Under Ind AS, revenue from sale of goods is measured at fair value of consideration received or receivable. Hence, cash discount is reduced from revenue to present the same at its fair value. This change has resulted in a decrease in total revenue and total expenses for the year ended March 31, 2016 by Rs.9.85 cr. There is no impact on the total equity and profit.
k) Deferred discount on issuance of Commercial Paper
Under the IGAAP, deferred discount on issuance of Commercial Paper were presented as part of current assets. Under Ind AS, in order to reflect Commercial Paper at amortised cost, the deferred discount on issuance is presented within the borrowings by netting off. There is no impact on the total equity or profit as a result of this adjustment.
l) Retained earnings
Retained earnings as at April 01, 2015 has been adjusted consequent to the above Ind AS transition adjustments.
m) Other Comprehensive Income
Under Ind AS, all items of income and expense recognised in a period are to be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss, but are shown in the Statement of Profit and Loss as Other Comprehensive Income which includes remeasurement of defined benefit plans, effective portion of gain | (loss) on cash flow hedging instruments and fair value gain | (loss) on FVOCI equity instruments. The concept of Other Comprehensive Income did not exist under IGAAP.
Mar 31, 2013
Founded by Mr Kasturbhai Lalbhai in 1947, Atul Ltd has emerged, starting with the manufacture of a few dyes, as one of the diverse chemical companies, serving industries such as Adhesives, Aerospace, Agriculture, Animal feed, Automobile, Chemical, Composites, Construction, Cosmetics, Defence, Dyestuff, Electrical & Electronics, Flavour & Fragrance, Glass, Home Care, Paint & Coatings, Paper, Personal Care, Pharmaceutical, Plastic, Polymer, Rubber, Soap & Detergent, Textile and Tyre. The Company has established subsidiary companies in Brasil, China, Germany, the UK and the USA to work closely with its customers and expand its business. The Company is listed on Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd. (Rs.cr)
NOTE 1.1 CONTINGENT LIABILITIES As at As at March 31, 2013 March 31, 2012
(i) Claims against the Company not acknowledged as debts in respects of:
(a) Excise 5.84 6.25
(b) Income tax 35.03 27.70
(c) Sales tax - 0.74
(d) Customs 2.78 2.78
(e) Water charges 71.92 68.63
(f) Others 13.54 13.26
Note: Future cash outflows in respect of (a) to (f) above are determinable on receipt of judgements | decisions pending with various forums | authorities.
(ii) Guarantees given by the Company :
(a) Corporate guarantee to a bank on behalf of subsidiary company for facilities availed by them 8.23 1.11
NOTE 1.2 LEASE
(a) The Company has taken various residential and office premises under operating lease or leave and license Agreements. These are generally cancellable, having a term between 11 months and 3 years and have no specific obligation for renewal. Payments are recognised in the Statement of Profit and Loss under ''Rent'' in Note 26.
(b) The Company has given certain buildings and plant and machinery on operating lease, the details of which are as under:
NOTE 1.3 DERIVATIVES
The use of Derivative instruments is governed by the policies of the Company approved by the Board of Directors, which provide written principles on the use of such financial derivatives consistent with risk management strategy of the Company.
(a) Derivatives outstanding as at Balance Sheet date
(b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below.
(c) Financial Derivatives Hedging Transactions:
Pursuant to the announcement issued by The Institute of Chartered Accountants of India dated March 29, 2008 in respect of derivatives, the Company has applied the Hedge Accounting Principles set out in the Accounting Standard-30 ''Financial Instruments : Recognition and Measurement''. Accordingly, Derivatives are Mark-to-Market and the gain aggregating Rs. 0.74 cr (Previous year loss Rs. 0.78 cr) arising consequently on contracts that were designated and effective as hedges of future cash flows has been recognized directly in the Hedging Reserve Account. Actual gain or loss on exercise of these Derivatives or any part thereof is recognised in the Statement of Profit and Loss. Hedge accounting will be discontinued if the hedging instrument is sold, terminated or no longer qualifies for hedge accounting.
NOTE 1.4 INTEREST IN JOINT VENTURE COMPANY
The Company has acquired 50 percent interest in Rudolf Atul Chemicals Limited (RACL), a Joint Venture Company in India between IB Industriechemie Beteiligungs GmbH, Germany and Atul Ltd on August 18, 2011. RACL is engaged in the business of manufacturing and marketing textile chemicals. As per the contractual arrangement between the Shareholders of RACL, both the parties have significant participating rights such that they jointly control the operations of the Joint Venture Company. The aggregate amount of assets, liabilities, income and expenses related to the share of the Company in RACL as at and for the year ended March 31, 2013 as per audited financial statements are given below :-
NOTE 1.5 REGROUPTED / RECAST / RECLASSIFED
Figures of the earlier year have been regrouped | recast | reclassified wherever necessary.
NOTE 1.6 ROUNDING OFF
Figures less than Rs. 50,000 has been shown at actual in bracket.
Mar 31, 2011
1 Included under Loans and Advances is an amount of Rs. 11.29 crores (Previous year Rs. 21.29 crores) given to an associate company. The said company is registered under BIFR and is implementing its revival plan. First charge over all their assets has been assigned exclusively in favour of the Company. The Company has also given an unsecured loan of Rs. 3.59 crores (Previous year Rs. Nil) as promoters contribution (repayable in two equal instalments in financial year 2015-16 and 2016-17). Considering the progress of the revival plan, the present market value of assets, etc these amounts included under loans and advances are considered as good and recoverable.
2 The Company has revalued (i) Leasehold land and (ii) Commercial land & building at Ahmedabad, Mumbai and Delhi as at March 31, 2008 at fair market value as determined by an independent valuer appointed for the purpose. Resultant increase in book value amounting to Rs. 107.47 crores has been transferred to Revaluation Reserve.
3 In the opinion of the management, the diminution in the value of the investment in shares (see Schedule 6) held by the Company is temporary in nature and accordingly, no provision is considered necessary by the management.
4 Significant accounting policies followed by the Company are as stated in the statement annexed to this Schedule.
5 Previous years figures have been regrouped recastreclassified wherever necessary
Mar 31, 2010
1 Contingent liabilities not provided for in respect of 2009-10 2008-10
(a) Disputed excise demands - matter under appeal 13.92 14.13 (b) Disputed customs demands - matter under appeal 11.99 12.03 (c) Disputed water charges - matter under appeal 61.96 59.26 Pursuant to the order passed by Honourable High Court of Gujarat, dated ; November 17, 2008 and April 17, 2009 in case of disputed water charges, Company i has created first charge over its certain land & buildings in favour of Government of i Gujarat. (d) Claims against the Company not acknowledged as debts 11.52 10.79 (e) Income tax demands (including interest) - matter under appeal 18.72 18.66
(f) Sales tax - matter under appeal 1.31 1.29 (g) Guarantees given by the Company to banks and financial institutions on behalf of 0.92 0.92 the third parties
a) As certified by General Manager - Works | Manufacturing | Executive Director and being a technical matter, accepted by the Auditors, as correct.
b) Class of goods based on classification given in the Industries (Development & Regulation) Act, 1951, under DGTD Registration.
c) In addition to existing licensed capacity, Colors Division has also filed memorandum for manufacture of 400 Tons of Vat Dyes with the Department of Industrial Development Ministry of Industry, Government of India
1 Segments have been identified in line with the Accounting Standard - 17 "Segment Reporting" taking into account the organisation structure as well-as the differing risks and returns.
2 Company has disclosed business segment as the primary segment.
(a) The Company has taken various residential and office premises under operation lease or leave and license agreements. These are generally cancellable, having a term between 11 months and 3 years and have no specific obligation for renewal. Payments are recognised in the Profit and Loss Account under "Rent" in Schedule 15.
4 Provision for Contingency represents provision made for irrecoverable Loans & Advances created by way of utilisation of Capital Redemption Reserve Account totally and Security Premium Account partly in terms of Order dated February 01, 2005 passed by the Honourable High Court of Gujarat.
5 The use of Derivative instruments is governed by the policies of the Company approved by the board of Directors, which provide written principles on the use of such financial derivatives consistent with the Companys risk management strategy.
(a) The Company has entered into the following derivatives:
(1) The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions.
(c) Financial Derivatives Hedging Transactions:
Pursuant to the announcement issued by The Institute of Chartered Accountants of India dated March 29, 2008 in respect of forward exchange contracts and currency and interest rate swaps, the Company has applied the Hedge Accounting principles set out in the Accounting Standard (AS) 30 Financial Instruments: Recognition and Measurement. Accordingly, Range Forward Contracts are marked to market and the loss aggregating Rs 15.03 crores arising consequently on contracts that were designated and effective as hedges of future cash flows has been recognised directly in the Hedging Reserve Account. Actual gain or loss on exercise of these Range Forward contracts or any part thereof is recognised in the Profit and Loss Account. Hedge accounting will be discontinued if the hedging instrument is sold, terminated or no longer qualifies for hedge accounting.
6 Significant accounting policies followed by the Company are as stated in the statement annexed to this Schedule.
(b) Defined contribution plan:
Amount of Rs 5.93 crores (Previous year Rs 5.73 crores) is recognised as expense and included in the Schedule 13 " Contribution to Provident & Other Funds" to the Profit and Loss Account.
(c) The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Mortality rates are obtained from the relevant data.
(d) Amount recognised as an expense in respect of Compensated Leave Absences in Rs 2.21 crores (Previous year Rs 3.00 crores).
7 Included under loan & advances is an amount of Rs 21.29 crores given to an associate company. The said Company is registered under BIFR and is in the process of implementing its revival plan. First charge over all their assets have been assigned exclusively in favour of the Company. Considering present market value of assets, this amount is considered as good and recoverable.
8 The Company has revalued (i) Leasehold land and (ii) Commercial land & building at Ahmedabad, Mumbai and Delhi as at March 31, 2008 at fair market value as determined by an independent valuer appointed for the purpose. Resultant increase in book value amounting to Rs 107.47 crores has been transferred to Revaluation Reserve.
9 With effect from April 01, 2009 the Company has implemented Oracle as ERP platform and the valuation of inventories is done on the basis of Moving Weighted Average Method instead of FIFO | YTD average basis applied in the earlier years. The impact on profits due to this change is not material.
10 Decline in value of a certain long term investment, considered as temporary in nature, has not been recognised and accordingly, no provision for diminution in value has been made (see Schedule 6, page 46 I 47)
11 Previous years figures have been regrouped wherever necessary.
12 Figures less than Rs 50,000 has been shown at actual in bracket as the figures have been rounded off to nearest lacs.