Notes to Accounts of Atul Ltd.
Mar 31, 2023
a) Rights, preferences and restrictions:
The Company has one class of shares referred to as equity shares having a par value of '' 10 each.
i) Equity shares
I n 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, if any. 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.
ii) Dividend
The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board is subject to the approval of shareholders in the ensuing Annual General Meeting, except in case of interim dividend.
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.
Nature and purpose of reserves
a) General reserve
General reserve represents amount appropriated out of retained earnings pursuant to the earlier provisions of the Companies Act, 1956. Mandatory transfer to general reserve is not required under the Companies Act, 2013.
b) Retained earnings
Retained earnings are the profits that the Company has earned till date, less, any transfers to general reserve, any transfers from or to other comprehensive income, dividends or other distributions paid to shareholders.
c) Capital redemption reserve
In accordance with Section 69 of the Companies Act, 2013, the Company has created capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from general reserve.
d) FVTOCI 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 FVTOCI equity instruments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
e) Cash flow hedge 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.
i) Information about individual provisions and significant estimates
a) Compensated absences
The Compensated absences cover the liability for sick and earned leave. Out of the total amount disclosed above, the amount of '' 8.09 cr (March 31, 2022: '' 9.34 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.
b) Others
Regulatory and other claims:
The Company has provided for certain regulatory and other charges for which it has received claims. The provision represents the unpaid amount that it expects to incur | pay for which the obligating event has already arisen as on the reporting date.
Effluent disposal:
The Company has provided for expenses it estimates to incur for safe disposal of effluent in line with the regulatory framework it operates in. The provision represents the unpaid amount it expects to incur for which the obligating event has already arisen as on the reporting date.
a) Security details
Working capital loans repayable on demand from banks (March 31, 2023: '' 5.41 cr, March 31, 2022: '' 72.94 cr) 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 letters of credit given by the bankers aggregating to '' 200.08 cr (March 31, 2022: '' 195.80 cr).
b) Quarterly statement of current assets filed with banks during the year are in agreement with the books of accounts.
c) The carrying amount of assets hypothecated | mortgaged as security for borrowing limits are
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 while calculating the defined benefit liability recognised in the Standalone Balance Sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change as compared to the previous 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 are 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. All deviations from the range are corrected by rebalancing the portfolio. It intends to maintain the above investment mix in the coming 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 other 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. It 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 consists of insurance funds; it also invests in corporate bonds and special deposit schemes. 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, 2024, are '' 4.17 cr.
The Company has established an employee provident fund trust for employees based at Ankleshwar. It is administered by the Company to which both the employee and the employer make monthly contributions equal to 12% of basic salary of employee. The contribution of the Company to the provident fund for all employees is charged to the Standalone Statement of Profit and Loss. In case of any liability arising due to shortfall 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 '' nil. The Company has contributed the following amounts towards provident fund during the respective period ended:
There were no transfers between any levels during the year.
Level 1: This includes financial instruments measured using quoted prices. The fair value of all equity instruments that are traded on the stock exchanges is valued using the closing price as at the reporting period.
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. The mutual fund units are valued using the closing net assets value. 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.
b) Valuation techniques 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 forward foreign exchange contracts are determined using forward exchange rates at the Standalone Balance Sheet date,
iii) the fair value of foreign currency option contracts is determined using the Black Scholes valuation model,
iv) 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 levels 1, 2 and 3.
c) Valuation processes
The Finance department of the Company includes a team that performs the valuations of financial assets and liabilities with assistance from independent external experts when required, for financial reporting purposes, including level 3 fair values.
The carrying amounts of trade receivables, cash and cash equivalents, other bank balances, dividend receivables, other receivables, trade payables, capital creditors, other liabilities 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 investments in preference shares were calculated based on cash flows discounted using a prevailing lending rate at the time of inception.
Note 29.8 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, investment in mutual funds, borrowings and the cash flow that is generated from operations. It believes that the current cash and cash equivalents, tied up borrowing lines and cash flow that are generated from operations are sufficient to meet the requirements. Accordingly, liquidity risk is perceived to be low.
Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations. Trade receivables
Concentrations of credit risk with respect to trade receivables are limited due to the customer base being large, diverse and across sectors and countries. A portion of trade receivables are secured by insurance policies or Export Credit Guarantee Corporation schemes. All trade receivables are reviewed and assessed for default on a quarterly basis.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments in government securities, preference shares, mutual funds, bonds and loans to subsidiary companies. It has a diversified portfolio of investments with various number of counterparties which have secure credit ratings, hence the risk is reduced. Individual risk limits are set for each counterparty based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by its treasury department.
The primary objective of capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. It determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through equity and operating cash flows generated. The Company is not subject to any externally imposed capital requirements (refer Note 29.19 (b) for debt- equity ratio).
Note 29.10 Segment information
In accordance with Ind AS 108, âOperating Segments'', 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.
a) As a lessee
The Company has taken various residential and office premises under operating lease or leave and license agreements. These are cancellable by the Company, having a term between 11 months and three years and have no specific obligation for renewal. Payments are recognised in the Standalone Statement of Profit and Loss under âRent'' in Note 28.
b) As a lessor
i) Operating lease
The Company has entered into operating leases on its office buildings and land. These are cancellable by the Company, having a term between 11 months and three years and have no specific obligation for renewal. Rents received are recognised in the Standalone Statement of Profit and Loss as lease income in Note 22 âOther income''.
The Company has not offset any financial asset and financial liability. It offsets a financial asset and a financial liability when it currently has a legal enforceable right to set-off the recognised amounts and it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
a) Master netting arrangements - not currently enforceable
Agreements with derivative counterparties are based on an International Swaps and Derivatives Association Inc 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 are considered as terminated. As the Company does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Standalone Balance Sheet.
b) Collateral against borrowings
The Company has hypothecated | mortgaged assets as collateral against a number of its sanctioned line of credit (Refer Note 17(c) for further information on assets hypothecated | mortgaged as security). In case of default as per borrowing arrangement, such collateral can be adjusted against the amounts due.
The Company declares and pays dividend in Indian rupees. Companies are required to pay | distribute dividend after deducting applicable withholding income taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
The Board of Directors in its meeting held on March 25, 2022, had approved a proposal to buy-back fully paid-up equity shares of face value of '' 10 each of the Company. The buy-back of equity shares through the open market stock exchange route commenced on April 07, 2022, and it was completed on May 09, 2022. The Company bought back and extinguished a total of 73,296 equity shares at an average buy-back price of '' 9,536.31 per equity share, constituting 0.25% of the pre buy-back paid-up equity share capital of the Company. The buy-back resulted in a cash outflow of '' 69.90 cr (excluding transaction costs). The Company purchased the said shares out of its free reserves and created capital redemption reserve of '' 0.08 cr equal to the nominal value of the shares bought back as an appropriation from general reserve in accordance with Section 69 of the Companies Act, 2013.
The Company does not have any transactions during the year and also does not have outstanding balance as at March 31, 2023, with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of the Companies Act, 1956.
Note 29.22 Other statutory information (required by Schedule III to the Companies Act, 2013)
a) The Company has not entered into any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
b) The Company has complied 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.
c) The Company is not declared wilful defaulter by any bank or financial institution or other lender.
d) The Company has not traded or invested in crypto currency or virtual currency during the financial year.
e) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the year.
f) No proceedings have been 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 there under.
g) No loans or advances in the nature of loans are granted to promoters, Directors, Key Managerial Personnel and the related parties (as defined under Companies Act, 2013) either severally or jointly with any other person.
h) The Company does not have any charges or satisfaction of charges which is yet to be registered with Registrar of Companies beyond the statutory period.
An incident of fire occurred on April 20, 2022, in one of the plants at Atul, Gujarat. There was no fatality or injury to any person, and damage was restricted to the affected plant. The Company has written off the carrying value of the assets destroyed by fire amounting to '' 35.60 cr during the quarter ended on June 30, 2022 | year ended on March 31, 2023, by including it in other expenses. The Company has filed a claim in this regard with the insurance company which is under process. Against this claim, the Company has received an interim approval of '' 31.28 cr during the year ended on March 31, 2023, which is included in other income. The Company will claim further amounts when spent.
Figure less than '' 50,000 have been shown as â0.00'' in the relevant notes in these Standalone Financial Statements.
Note 29.25 Authorisation for issue of the Standalone Financial Statements
The Standalone Financial Statements were authorised for issue by the Board of Directors on April 28, 2023.
Mar 31, 2022
Notes:
Pursuant to the order passed by The Honourable High Court of Gujarat, dated November 17, 2008, and April 17, 2009, in case of water charges, the Company has created first charge over its certain land and buildings having carrying value of ? 9.27 cr (March 31, 2021: ? 9.66 cr) in favour of the Government of Gujarat and paid a security deposit of ? 2 cr (March 31, 2021: ? 2 cr).
2The 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 prevailing rent. It has considered that such a lease of land transfers substantially all of the risks and rewards incidental to ownership of land.
includes premises on ownership basis of ? 1.10 cr (March 31, 2021: ? 1.10 cr) and cost of fully paid share in co-operative society of ? 2,000 (March 31, 2021: ? 2,000).
4Capital work-in-progress mainly comprises addition | expansion projects in progress.
Refer Note 17 (b) for information on property, plant and equipment hypothecated | mortgaged as security by the Company.
Refer Note 28. 2 for disclosure of contractual commitment for acquisition of property, plant and equipment.
a) Amount recognised in the Standalone Statement of Profit and Loss for investment properties:
The Company has classified parcels of freehold land held for a currently undeterminable future use as investment properties. There are no amounts pertaining to these investment properties recognised in the Standalone Statement of Profit and Loss, since the Company does not receive any rental income, incur any depreciation or other operating expenses
b) The Company does not have any contractual obligations to purchase, construct or develop, for maintenance or enhancements of investment properties.
The Company obtains valuations from an independent valuer for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the valuer considers information from a variety of sources, including current prices in an active market for investment properties of different nature or recent prices of similar investment properties in less active markets, adjusted to reflect those differences.
a) Rights, preferences and restrictions:
The Company has one class of shares referred to as equity shares having a par value of '' 10 each. 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, if any. 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.
ii) Dividend:
The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board is subject to the approval of shareholders in the ensuing Annual General Meeting, except in case of interim dividend.
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.
Nature and purpose of other reserves
a) General reserve
General reserve represents amount appropriated out of retained earnings pursuant to the earlier provisions of the Companies Act, 1956. Mandatory transfer to general reserve is not required under the Companies Act, 2013.
b) Retained earnings
Retained earnings are the profits that the Company has earned till date, less, any transfers to general reserve, any transfers from or to other comprehensive income, dividends or other distributions paid to shareholders.
c) Capital redemption reserve
In accordance with Section 69 of the Companies Act, 2013, the Group has created capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from general reserve.
d) FVTOCI 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 FVTOCI equity instruments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
e) 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.
i) Information about individual provisions and significant estimates
a) Compensated absences:
The Compensated absences cover the liability for sick and earned leave. Out of the total amount disclosed above, the amount of '' 9.34 cr (March 31, 2021: '' 7.61 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.
b) Others:
Regulatory and other claims:
The Company has provided for certain regulatory and other charges for which it has received claims. The provision represents the unpaid amount that it expects to incur | pay for which the obligating event has already arisen as on the reporting date.
Effluent disposal:
The Company has provided for expenses it estimates to incur for safe disposal of effluent in line with the regulatory framework it operates in. The provision represents the unpaid amount it expects to incur for which the obligating event has already arisen as on the reporting date.
a) Security details:
Working capital loans repayable on demand from banks (March 31, 2022: '' 72.94, March 31, 2021: nil) 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 letters of credit given by the bankers aggregating to '' 195.80 cr (March 31, 2021: '' 144.73 cr).
b) Quarterly statement of current assets filed with banks during the year are in agreement with the books of accounts.
c) The carrying amount of assets hypothecated | mortgaged as security for borrowing limits are:
Consideration payable to customers like discounts and price reductions offered to customers are estimated on specific identified basis and reduced from the contract price when the Company recognises revenue from the transfer of the related goods or services to the customer and the entity pays or promises to pay the consideration.
2Unsatisfied performance obligation for sale of services comprises revenue from insurance and freight services for exports in-progress as at March 31, 2022, of '' 16.37 cr, net of revenue recognised for such services for similar contracts in-progress as at March 31, 2021. for '' 10.11 cr. The revenue for exports in- progress as at March 31, 2022, will be recognised in 2022-23 upon completion of the exports.
Note 28.6 Employee benefit obligations Funded schemesa) Defined benefit plans Gratuity
The Company operates a gratuity plan through the Atul Ltd Employees Gratuity Fund. Every employee is entitled to a benefit equivalent to the last drawn salary of 15 days for each completed year of service in line with the Payment of Gratuity Act, 1972 or the Company scheme, whichever is more beneficial. Gratuity is payable at the time of separation or retirement from the Company, whichever is earlier. The benefit vests 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 while calculating the defined benefit liability recognised in the Standalone Balance Sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change as compared to the previous 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 are 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. All deviations from the range are corrected by rebalancing the portfolio. It intends to maintain the above investment mix in the coming 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 other 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. It 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 consists of insurance funds; it also invests in corporate bonds and special deposit schemes. 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, 2023, are '' 4.13 cr.
The Company has established an employee provident fund trust for employees based at Ankleshwar. It is administered by the Company to which both the employee and the employer make monthly contributions equal to 12% of basic salary of employee. The contribution of the Company to the provident fund for all employees is charged to the Standalone Statement of Profit and Loss. In case of any liability arising due to shortfall 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 '' nil. The Company has contributed the following amounts towards provident fund during the respective period ended:
f cr)
b) Defined contribution plans Provident and other funds
Amount of '' 14.33 cr (March 31, 2021: '' 12.87 cr) {net of '' 0.06 cr (March 31, 2021: '' 0.17 cr) from the Pradhan Mantri Rojgar Protsahan Yojana} is recognised as expense and included in Note 25 âContribution to provident and other funds''.
Compensated absences
Amount of '' 7.94 cr (March 31, 2021: '' 7.62 cr) is recognised as expense and included in Note 25 âSalaries, wages and bonus''.
c) The Parliament of India has approved the Code on Social Security, 2020 (the Code), which may impact the contributions by the Company towards provident fund, gratuity and ESIC. The Ministry of Labour and Employment, Government of India, has released draft rules for the Code on November 13, 2020. Final rules are yet to be notified. The Company will assess the impact of the Code when it comes into effect and will record related impact, if any.
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, b) measured at amortised cost and for which fair values are disclosed in the Standalone 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 in the Indian Accounting Standard. An explanation of each level follows underneath the table:
âIncludes investments in Bharuch Enviro Infrastructure Ltd (70,000 equity shares), Narmada Clean Tech Ltd (7,15,272 equity shares) and Bhadreshwar Vidyut Pvt Ltd (formerly known as OPGS Power Gujarat Pvt Ltd; 5,03,000 equity shares), which are for operation purpose and the Company has to hold it till the production site continues. The Company estimates that the fair value of these investments are not materially different as compared to its cost.
There were no transfers between any levels during the year.
Level 1: This includes financial instruments measured using quoted prices. The fair value of all equity instruments that are traded on the stock exchanges is valued using the closing price as at the reporting period.
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. The mutual fund units are valued using the closing net assets value. 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.
b) Valuation techniques 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 forward foreign exchange contracts are determined using forward exchange rates at the Standalone Balance Sheet date,
iii) the fair value of foreign currency option contracts is determined using the Black Scholes valuation model,
iv) 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 levels 1 and 2.
The Finance department of the Company includes a team that performs the valuations of financial assets and liabilities with assistance from independent external experts when required, for financial reporting purposes, including level 3 fair values.
The carrying amounts of trade receivables, cash and cash equivalents, other bank balances, dividend receivables, other receivables, trade payables, capital creditors, other liabilities 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 investments in preference shares were calculated based on cash flows discounted using a prevailing lending rate at the time of inception.
Note 28.8 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.
The principal sources of liquidity of the Company are cash and cash equivalents, investment in mutual funds, borrowings and the cash flow that is generated from operations. It believes that the current cash and cash equivalents, tied up borrowing lines and cash flow that are generated from operations are sufficient to meet the requirements. Accordingly, liquidity risk is perceived to be low.
The size and operations of the Company exposes it to the following market risks that arise from its use of financial instruments:
i) price risk
ii) foreign exchange risk
The above risks may affect income and expenses or the value of its financial instruments. Its objective for market risk is to maintain this risk within acceptable parameters while optimising returns. The exposure to these risks and the management of these risks are explained as follows:
Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations. Trade receivables
Concentrations of credit risk with respect to trade receivables are limited due to the customer base being large, diverse and across sectors and countries. A portion of trade receivables are secured by insurance policies or Export Credit Guarantee Corporation schemes. 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.
The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments in government securities, preference shares, mutual funds, bonds and loans to subsidiary companies. It has a diversified portfolio of investments that various number of counterparties which have secure credit ratings, hence the risk is reduced. Individual risk limits are set for each counterparty based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by its treasury department.
The primary objective of capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. It determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through equity and operating cash flows generated. The Company is not subject to any externally imposed capital requirements (refer Note 28.19 (b) for debt-equity ratio).
Note 28.10 Segment information
In accordance with Ind AS 108, âOperating Segments'', 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.
The Company has taken various residential and office premises under operating lease or leave and license agreements. These are cancellable by the Company, having a term between 11 months and 3 years and have no specific obligation for renewal. Payments are recognised in the Standalone Statement of Profit and Loss under âRent'' in Note 27.
i) Operating lease
The Company has entered into operating leases on its office buildings and land. These are cancellable by the Company, having a term between 11 months and three years and have no specific obligation for renewal. Rents received are recognised in the Standalone Statement of Profit and Loss as lease income in Note 22 âOther income''.
Note 28.16 Offsetting financial assets and liabilities
The Company has not offset any financial asset and financial liability. It offsets a financial asset and a financial liability when it currently has a legal enforceable right to set-off the recognised amounts and it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
a) 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 are considered as terminated. As the Company does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Standalone Balance Sheet.
b) Collateral against borrowings
The Company has hypothecated | mortgaged assets as collateral against a number of its sanctioned line of credit (refer Note 17(c) for further information on assets hypothecated | mortgaged as security). In case of default as per borrowing arrangement, such collateral can be adjusted against the amounts due.
a) The Company has not entered into any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
b) The Company has complied with the number of layers prescribed under clause (87) of Section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017.
c) The Company is not declared wilful defaulter by any bank or financial institution or other lenders.
d) The Company has not traded or invested in crypto currency or virtual currency during the financial year.
e) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the year.
f) No proceedings have been 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 there under.
g) No loans or advances in the nature of loans are granted to promoters, Directors, Key Managerial Personnel and the related parties (as defined under the Companies Act, 2013) either severally or jointly with any other person.
Note 28.23 Events after the reporting period
An incident of fire occurred on April 20, 2022, in one of the plants at Atul, Gujarat. Damage was restricted to that plant, and there was no injury or casualty of any individual. The Company is in the process of assessing the impact of this fire on the plant and related operations and filing necessary insurance claims. This subsequent non-adjusting event does not impact these financial results.
Figures less than '' 50,000 have been shown at actual in brackets.
Note 28.25 Authorisation for issue of the Standalone Financial Statements
The Standalone Financial Statements were authorised for issue by the Board on April 26, 2022.
Mar 31, 2021
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) General reserve
General reserve represents amount appropriated out of retained earnings pursuant to the earlier provisions of the Companies Act, 1956. Mandatory transfer to general reserve is not required under the Companies Act, 2013.
c) Retained earnings
Retained earnings are the profits that the Company has earned till date, less, any transfers to general reserve, any transfers from or to other comprehensive income, dividends or other distributions paid to shareholders.
d) Capital redemption reserve
In accordance with Section 69 of the Companies Act, 2013, the Company has created capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from general reserve.
e) 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 derecognised.
f) 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.
i) Information about individual provisions and significant estimates
a) Compensated absences:
The Compensated absences cover the liability for sick and earned leave. Out of the total amount disclosed above, the amount of '' 7.61 cr (March 31, 2020 : '' 8.25 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.
b) Others:
Regulatory and other claims:
The Company has provided for certain regulatory and other charges for which it has recevied claims. The provision represents the unpaid amount that it expects to incur | pay for which the obligating event has already arisen as on the reporting date.
Effluent disposal:
The Company has provided for expenses it estimates to incur for safe disposal of effluent in line with the regulatory framework it operates in. The provision represents the unpaid amount it expects to incur for which the obligating event has already arisen as on the reporting date.
a) Security details:
Working capital loans repayable on demand from banks (March 31, 2021: nil, March 31, 2020: nil) 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 letters of credit given by the bankers aggregating to '' 144.73 cr (March 31, 2020: '' 133.02 cr).
Consideration payable to customers like discounts and price reductions offered to customers are estimated on specific identified basis and reduced from the contract price when the Company recognises revenue from the transfer of the related goods or services to the customer and the entity pays or promises to pay the consideration.
2Unsatisfied performance obligation for sale of services comprises revenue from insurance and freight services for exports in-progress as at March 31, 2021, of '' 10.11 cr, net of revenue recognised for such services for similar contracts in-progress as at March 31, 2020, for '' 3.73 cr. The revenue for exports in progress as at March 31, 2021, will be recognised in 2021-22 upon completion of the exports.
The Company has evaluated the impact of the COVID-19 pandemic resulting from i) the possible constraints in its operations and revisions in costs to fulfill the pending obligations ii) onerous obligations iii) penalties, if any, relating to breaches of agreements and iv) termination or deferment of contracts by customers. The Company has concluded that the impact of the COVID-19 pandemic is not material based on the aforesaid evaluation. Due to the nature of the pandemic, it will continue to monitor developments to identify significant uncertainties relating to revenue in future periods.
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 are 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. All deviations from the range are corrected by rebalancing the portfolio. It intends to maintain the above investment mix in the coming 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 other 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. It 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 consists of insurance funds; it also invests in corporate bonds and special deposit schemes. 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, 2022, are '' 3.53 cr.
The weighted average duration of the defined benefit obligation is six years (2020-21: six years). The expected maturity analysis of gratuity is as follows:
The Company has established an employee provident fund trust for employees based at Ankleshwar. It is administered by the Company to which both the employee and the employer make monthly contributions equal to 12% of basic salary of employee. The contribution of the Company to the provident fund for all employees is charged to the Standalone Statement of Profit and Loss. In case of any liability arising due to shortfall 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 '' nil. The Company has contributed the following amounts towards provident fund during the respective period ended:
b) Defined contribution plans Provident and other funds
Amount of'' 12.87 cr (March 31, 2020: '' 12.78 cr) {net of '' 0.17 cr (March 31, 2020: '' 0.26 cr) from the Pradhan Mantri Rojgar Protsahan Yojana} is recognised as an expense and included in Note 25 âContribution to provident and other funds''.
Compensated absences
Amount of'' 7.62 cr (March 31, 2020: '' 4.96 cr) is recognised as an expense and included in Note 25 âSalaries, wages and bonus''.
c) The Parliament of India has approved the Code on Social Security, 2020 (the Code), which may impact the contributions by the Company towards provident fund, gratuity and ESIC. The Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. Final rules are yet to be notified. The Company will assess the impact of the Code when it comes into effect and will record related impact, if any.
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 Standalone 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 in the Indian Accounting Standard. An explanation of each level follows underneath the table:
''¦Includes investments in Bharuch Enviro Infrastructure Ltd (70,000 equity shares), Narmada Clean Tech Ltd (7,15,272 equity shares) and Bhadreshwar Vidyut Pvt Ltd (formerly known as OPGS Power Gujarat Pvt Ltd) (5,03,000 equity shares), which are for operation purpose and the Company has to hold it till production site continues. The Company estimates that the fair value of these investments are not materially different as compared to its cost.
There were no transfers between any levels during the year.
Level 1: This includes financial instruments measured using quoted prices. The fair value of all equity instruments that are traded on the stock exchanges is valued using the closing price as at the reporting period.
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. The mutual fund units are valued using the closing net assets value. 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.
b) Valuation techniques 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 forward foreign exchange contracts are determined using forward exchange rates at the Standalone Balance Sheet date,
iii) the fair value of foreign currency option contracts is determined using the Black Scholes valuation model,
iv) 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.
The Finance department of the Company includes a team that performs the valuations of financial assets and liabilities with assistance from independent external experts when required, for financial reporting purposes, including level 3 fair values.
The carrying amounts of trade receivables, cash and cash equivalents, other bank balances, dividend receivables, other receivables, trade payables, capital creditors, other liabilities 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 investments in preference shares were calculated based on cash flows discounted using a prevailing lending rate at the time of inception.
Note 28.8 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.
The principal sources of liquidity of the Company are cash and cash equivalents, investment in mutual funds, borrowings and the cash flow that is generated from operations. It believes that the current cash and cash equivalents, tied up borrowing lines and cash flow that are generated from operations are sufficient to meet the 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 Standalone Balance Sheet date:
The size and operations of the Company exposes it to the following market risks that arise from its use of financial instruments:
i) price risk
ii) foreign exchange risk
The above risks may affect income and expenses or the value of its financial instruments. Its objective for market risk is to maintain this risk within acceptable parameters while optimising returns. The exposure to these risks and the management of these risks are explained as follows:
Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations. Trade receivables
Concentrations of credit risk with respect to trade receivables are limited due to the customer base being large, diverse and across sectors and countries. A portion of trade receivables are secured by insurance policies or Export Credit Guarantee Corporation schemes. 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.
The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments in government securities, preference shares, mutual funds, bonds and loans to subsidiary companies. It has a diversified portfolio of investments with various number of counterparties which have secure credit ratings, hence the risk is reduced. Individual risk limits are set for each counterparty based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by its treasury department.
The primary objective of capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. It determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through equity and operating cash flows generated. The Company is not subject to any externally imposed capital requirements.
Note 28.10 Segment information
In accordance with Ind AS 108, âOperating Segments'', 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.
The Company has taken various residential and office premises under operating lease or leave and license agreements. These are cancellable by the Company, having a term between 11 months and three years and have no specific obligation for renewal. Payments are recognised in the Standalone Statement of Profit and Loss under âRent'' in Note 27.
i) Operating lease
The Company has entered into operating leases on its office buildings and land. These are cancellable by the Company, having a term between 11 months and three years and have no specific obligation for renewal. Rents received are recognised in the Standalone Statement of Profit and Loss as lease income in Note 22 âOther income''.
ii) Finance lease
The Company has given a building on finance lease for a term of 30 years and a machine for a term of 10 years.
Future minimum lease payments receivable under finance leases, together with the present value of the net minimum lease payments (MLP), are as under:
The Company has not offset any financial asset and financial liability. It offsets a financial asset and a financial liability when it currently has a legal enforceable right to set-off the recognised amounts and it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
a) 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 are considered as terminated. As the Company does not presently have a legally enforceable right of set-off, these amounts have not been offset in the Standalone Balance Sheet.
b) Collateral against borrowings
The Company has hypothecated | mortgaged assets as collateral against a number of its sanctioned line of credit (Refer Note 17(b) for further information on assets hypothecated | mortgaged as security). In case of default as per borrowing arrangement, such collateral can be adjusted against the amounts due.
In accordance with the provisions contained in the SEBI (Buy-back of Securities) Regulations, 2018 and the Companies Act, 2013 and rules made thereunder, the Board in its meeting held on January 29, 2021 approved a proposal to buy-back fully paid-up equity shares of face value of '' 10 each of the Company, at a price not exceeding '' 7,250 per equity share (maximum buy-back price) and for an amount not exceeding '' 50 cr (maximum buy-back size) from the open market through stock exchange mechanism.
The buy-back of equity shares through the stock exchange commenced on February 10, 2021, and was completed on February 19, 2021. The Company bought back and extinguished a total of 74,682 equity shares at an average buy-back price of '' 6,678.58 per equity share comprising 0.25% of the pre buy-back paid-up equity share capital of the Company. The buy-back resulted in a cash outflow of '' 49.88 cr (excluding transaction costs). The Company funded the buy-back from its free reserves.
Note 28.19 Events after the reporting period
There was no significant event after the end of the reporting period, which require any adjustment or disclosure in the Standalone Financial Statements.
Figures less than '' 50,000 have been shown at actual in brackets.
Note 28.21 Authorisation for issue of the Standalone Financial Statements
The Standalone Financial Statements were authorised for issue by the Board on April 30, 2021.
Mar 31, 2019
1. Background
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 the principal place of business is located at Atul and Ankleshwar, Gujarat, India.
The Company is in the business of Life Science Chemicals and Performance and Other Chemicals and caters to the needs of varied industries across the world 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, Sport and Leisure, Textile, Tyre and Wind Energy.
Notes:
Pursuant to the order passed by The Honourable High Court of Gujarat, dated November 17, 2008 and April 17, 2009 in case of water charges, the Company has created first charge over its certain land and buildings in favour of the Government of Gujarat and paid a security deposit Rs. 2 cr (March 31, 2018: Rs. 2 cr).
2Refer Note 28.12 (b) (ii) for disclosures where the Company is a lessee under a finance lease.
3includes premises on ownership basis Rs. 1.10 cr (March 31, 2018: Rs. 1.10 cr) and cost of fully paid share in co-operative society: Rs. 2,000 (March 31, 2018: Rs. 2,000).
4Capital work-in-progress mainly comprises addition expansion projects in progress.
5Exchange rate difference capitalised during current year: nil (Previous year: Rs. 0.05 cr).
Refer Note 17 for information on property, plant and equipment hypothecated | mortgaged as security by the Company.
Refer Note 28. 2 for disclosure of contractual commitment for acquisition of property, plant and equipment.
a) Amount recognised in the Statement of Profit and Loss for investment properties:
The Company has classified parcels of freehold land held for a currently undeterminable future use as investment properties. There are no amounts pertaining to these investment properties recognised in the Statement of Profit and Loss, since the Company does not receive any rental income, incur any depreciation or other operating expenses.
b) The Company does not have any contractual obligations to purchase, construct or develop, for maintenance or enhancements of investment property.
c) Fair value:
Estimation of fair value
The Company obtains valuations from independent valuer for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the valuer considers information from a variety of sources including current prices in an active market for investment properties of different nature or recent prices of similar investment properties in less active markets, adjusted to reflect those differences.
All resulting fair value estimates for investment properties are included in level 3.
*Book value includes equity component of Rs. 18.12 cr (March 31, 2018: Rs. 18.12 cr) recognised on 0% preference shares and loans given to Amal Ltd carried at amortised cost 2Conversion option exercised and allotment of resultant shares in process 3Received in terms of demerger scheme 4Shares with differential voting rights (DVR) carrying value of Rs. 8,520 (March 31, 2018: Rs. 12,700) | 5Under liquidation
* Valued at cost or net realisable value, whichever is lower.
Amounts recognised in the Statement of Profit and Loss:
Written-down value of inventories to net realisable value amounted to Rs. 12.26 cr (March 31, 2018: Rs. 6.85 cr). These were recognised as an expense during the year and included in cost of materials consumed, and changes in value of inventories of work-in-progress, stock-in-trade and finished goods in the Statement of Profit and Loss.
a) Rights, preferences and restrictions:
The Company has one class of shares referred to as equity shares having a par value of Rs. 10 each.
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, if any. 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.
ii) Dividend:
The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board is subject to the approval of shareholders in the ensuing Annual General Meeting, except in case of interim dividend.
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:
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) General reserve
General reserve represents the amount appropriated out of retained earnings pursuant to the earlier provisions of Companies Act, 1956. Mandatory transfer to general reserve is not required under the Companies Act, 2013.
c) Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, any transfers from or to OCI, dividends or other distributions paid to shareholders.
d) 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.
e) 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 fairvalue 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) Information about individual provisions and significant estimates
i) Compensated absences:
The Compensated absences cover the liability for sick and earned leave. Out of the total amount disclosed above, the amount of Rs. 6.56 cr (March 31, 2018 : Rs. 6.86 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.
ii) Others:
Regulatory and other charges:
The Company has provided for certain regulatory and other charges for which claims have been received by the Company. The provision represents the unpaid amount that the entity expects to incur | pay for which the obligating event has already arisen as on the reporting date.
Effluent disposal:
The entity has provided for expenses it estimates to incur 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.
a) Security details:
Working capital loans repayable on demand from banks (March 31, 2019: nil, March 31, 2018: nil) 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 letters of credit given by the bankers aggregating to Rs. 102.31 cr (March 31, 2018: Rs. 88.30 cr).
b) The carrying amount of assets hypothecated | mortgaged as security for current and non-current borrowing limits are:
Revenue from operations up to June 30, 2017 includes excise duty of Rs. 40.07 cr, which is discontinued effective July 01, 2017 upon implementation of Goods and Services Tax (GST) in India. In view of the aforesaid restructuring of indirect taxes, revenue from operations for the year ended March 31, 2019 is not comparable with the previous year.
Consideration payable to customers like discounts and price reductions offered to customers are estimated on specific identified basis and reduced from the contract price when the Company recognises revenue from the transfer of the related goods or services to the customer and the entity pays or promises to pay the consideration.
2Unsatisfied performance obligation for sale of services comprises revenue from insurance and freight services for exports in-progress as at March 31, 2019 of Rs. 6.12 cr, net of revenue recognised for such services for similar contracts in-progress as at March 31, 2018 for Rs. 4.69 cr. The revenue for exports in progress as at March 31, 2019 will be recognised in 2019-20 upon completion of the exports.
Water and other claims includes claims received with respect to water charges, customer and other claims aggregating to Rs. 102.41 cr.
The above matters are currently being considered by the tax authorities various forums and the Company expects the outcome will be in its favour and has therefore, not recognised the provision in relation to these claims. Future cash outflow in respect of above will be determined only on receipt of judgement decision pending with tax authorities various forums. The above (except in respect of water charges matter) excludes interest penalties which may become payable in case of unfavourable outcome.
Note 2.1 Commitments Capital commitments
Capital expenditure contracted for at the end of the reporting period, but not recognised as liabilities, is as follows:
Note 2.2 Research and Development
Details of expenditure incurred on approved in-house Research and Development facilities:
Note 2.3 (J) Terms and conditions
1 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.
2 Transactions relating to dividends were on the same terms and conditions that applied to other shareholders. Subscriptions for new equity shares were on preferential basis.
3 All outstanding balances are unsecured and are repayable in cash and cash equivalent.
Note 3.1 Current and deferred tax
The major components of income tax expense for the years ended March 31, 2019 and March 31, 2018 are:
Note 3.2 Employee benefit obligations
Funded schemes
a) Defined benefit plans:
Gratuity
The Company operates a gratuity plan through the âAtul Ltd Employees Gratuity Fund''. Every employee is entitled to a benefit equivalent to 15 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.
Sensitivity analysis
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
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 while 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.
Risk exposure
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 are 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 other 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 consists insurance funds, although the Company also invests in corporate bonds and special deposit schemes. 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, 2020 are Rs. 2.57 cr.
The weighted average duration of the defined benefit obligation is 6 years (2017-18: 6 years). The expected maturity analysis of gratuity is as follows:
Provident fund:
The Company has established an Atul Products Ltd (ANK. DIV.) Employee Provident Fund Trust for employees at Ankleshwar location, 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 contribution of the Company to the provident fund for all employees is charged to the Statement of Profit and Loss. In case of any liability arising due to shortfall 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 '' Nil. The Company has contributed the following amounts towards provident fund during the respective period ended:
b) Defined contribution plans:
Provident and other funds:
Amount of Rs. 14.27 cr (March 31, 2018: Rs. 9.60 cr) {net of Rs. 0.21 cr from the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY)} is recognised as expense and included in Note 25 âContribution to provident and other funds''.
Compensated absences:
Amount of Rs. 3.24 cr (March 31, 2018: Rs. 0.71 cr) is recognised as expense and included in Note 25 âSalaries, wages and bonus''.
Note 3.3 Fair value measurements
Financial instruments by category
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 3 levels prescribed in the Indian Accounting Standard. An explanation of each level follows underneath the table:
includes investments in Bharuch Enviro Infrastructure Ltd (70,000 equity shares), in Narmada Clean Tech Ltd (7,15,272 equity shares) and in OPGS Power Gujarat Pvt Ltd (5,03,000 equity shares) which are for operation purposes and the Company expects its refund on exit. The Company estimates that the fair value of these investments are not materially different as compared to its cost.
There were no transfers between any levels during the year.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. 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.
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. The mutual fund units are valued using the closing net assets value. If all significant inputs required to fair value an instrument are observable, the instrument is included in levels 1 and 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.
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 forward foreign exchange contracts are determined using forward exchange rates at the Balance Sheet date
iii) the fair value of foreign currency option contracts is determined using the Black Scholes valuation model
iv) the fairvalue of the remaining financial instruments is determined using discounted cash flow analysis All of the resulting fair value estimates are included in levels 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 3fairvalues.
The carrying amounts of trade receivables, cash and cash equivalents, other bank balances, dividend receivables, other receivables, trade payables, capital creditors, other liabilities 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 investments in preference shares were calculated based on cash flows discounted using a current lending rate at the time of inception.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
Note 3.4 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.
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 size and operations of the Company exposes it to the following market risks that arise from its use of financial instruments:
i) price risk
ii) 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:
includes hedges for highly probable transactions up to next 12 months
c) Management of credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations.
Trade receivables
Concentrations of credit risk with respect to trade receivables are limited, due to the customer base being large, diverse and across sectors and countries. Significant portion of trade receivable are secured by insurance policies or EPCG schemes. 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 a diversified portfolio of investments with various number of counterparties which have secure credit ratings, hence the risk is reduced. Individual risk limits are set for each counterparty 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.
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 purpose 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 Segments'', 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 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 ''Rent'' in Note 27.
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. The Company 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.
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.
* at amortised cost
a) Loans given to employees as per the policy of the Company are not considered.
b) The loanees did not hold any shares in the share capital of the Company.
Note 3.7 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 Act''). The disclosures pursuant to the said MSMED Act are as follows:
Note 3.8 Expenditure on Corporate Social Responsibility initiatives
a) Gross amount required to be spent by the Company during the year is Rs. 7.90 cr
b) Amount spent during the year on:
Note 3.9 Offsetting financial assets and liabilities
The below Note presents the recognised assets that are offset, or subject to enforceable master netting arrangements and other similar agreements but not offset, as at March 31, 2019 and March 31, 2018.
a) Collateral against borrowings
The Company has hypothecated | mortgaged assets as collateral against a number of its sanctioned line of credit. Refer to Note 17 for further information on assets hypothecated | mortgaged as security.
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 3.10 Changes in accounting policies
The Company adopted Ind AS 115 by using the modified retrospective transition method effective April 01, 2018. Under this method, the Company recognised the cumulative effect of initially applying Ind AS 115 as an adjustment to the opening balance of retained earnings as at April 01, 2018. Comparative prior period has not been adjusted.
Entities applying the modified retrospective method can elect to apply the revenue standard only to contracts that are not completed as at the date of initial application (that is, they would ignore the effects of applying the revenue standard to contracts that were completed prior to the date of initial application). However, the Company elected to apply the standard to all contracts as at April 01, 2018.
There is no impact on the retained earnings as at April 01, 2018.
The following table presents the amounts by which each financial statement line item is affected in the current year ended March 31, 2019 by the application of Ind AS 115 as compared with the Ind AS 18 revenue recognition requirements. Line items that were affected by the changes have been included.
As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided. The adjustments are explained as below:
Note:
i) Revenue deferment of Rs. 6.12cr representing unsatisfied performance obligation for export contracts in current year.
ii) Expenses deferment of Rs. 6.12cr representing unsatisfied performance obligation for export contracts in current year.
iii) Presentation of assets and liabilities related to contracts with customers:
Liabilities relating to expected discounts of Rs. 3.92 crwere previously presented as other current financial liabilities are now included as contract liabilities.
Advance from customers of Rs. 4.23 cr were previously presented as other current liabilities are now included as contract liabilities.
Note 3.11 Events after the reporting period
The proposed dividend on equity shares at Rs. 15 per share is recommended by the Board which is subject to the approval of shareholders in the ensuing Annual General Meeting.
Note 3.12 Rounding off
Figures less than Rs. 50,000 have been shown at actual in brackets.
Note 3.13 Authorisation for issue of the Financial Statements
The Financial Statements were authorised for issue by the Board on April 26, 2019.
Mar 31, 2018
Notes:
1 Pursuant to the order passed by The Honorable High Court of Gujarat, dated November 17, 2008 and April 17, 2009 in case of water charges, the Company has created first charge over its certain land and buildings in favour of Government of Gujarat and paid security deposit Rs, 2 cr (March 31, 2017: Rs, 2 cr).
2 Refer Note 27.12 (b) (ii) for disclosures where the Company is a lessee under a finance lease.
3 Includes premises on ownership basis Rs, 1.10 cr (March 31, 2017: Rs, 1.10 cr) and cost of fully paid share in co-operative society Rs, 2,000 (March 31, 2017: Rs, 2,000).
4 Capital work-in-progress mainly comprises addition | expansion projects in progress.
5 Exchange rate difference capitalized during current year Rs, 0.05 cr (Previous year: Rs, (0.07) cr).
6 Refer Note 1 5 for information on property, plant and equipment hypothecated | mortgaged as security by the Company.
7 Refer Note 27.2 for disclosure of contractual commitment for acquisition of property, plant and equipment.
a) Amount recognized in the Statement of Profit and Loss for investment properties:
The Company has classified parcels of freehold land held for a currently undeterminable future use as investment properties. There are no amounts pertaining to these investment properties recognized in the Statement of Profit and Loss, since the Company does not receive any rental income, incur any depreciation or other operating expenses.
b) The Company does not have any contractual obligations to purchase, construct or develop, for maintenance or enhancements of investment property.
Estimation of fair value
The Company obtains valuations from independent valuer for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available, the valuer considers information from a variety of sources including current prices in an active market for investment properties of different nature or recent prices of similar investment properties in less active markets, adjusted to reflect those differences.
1 Associate company up to November 30, 2016
2 Book value includes equity component of Rs, 18.12 cr (March 31. 2017: Rs, 18.12 cr) recognized on 0% preference shares and loans given to Amal Ltd carried at amortized cost
3 Shares with differential voting rights (DVR) carrying value of Rs, 12,700 (March 31, 2017: Rs, 12,040)
4 Under liquidation
5 Previous year includes Rs, 1 cr due for redemption as on March 31, 2017 * Valued at cost or net realizable value, whichever is lower.
Amounts recognized in the Statement of Profit and Loss:
Written-down value of inventories to net realizable value amounted to Rs, 6.85 cr (March 31, 2017: Rs, 6.21 cr). These were recognized as an expense during the year and included in cost of materials consumed, and changes in value of inventories of work-in-progress, stock-in-trade and finished goods in the Statement of Profit and Loss.
a) Rights, preferences and restrictions:
The Company has one class of shares referred to as equity shares having a par value of Rs, 10 each.
i) Equity shares:
I n 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, if any. 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.
ii) Dividend:
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.
Nature and purpose of other reserves
a) Securities premium reserve
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-recognized.
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 recognized in the cash flow hedging reserve. Amounts recognized 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 recognized 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 was 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 was 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 was secured by first pari passu charge on the entire movable and immovable property, plant and equipment of the Company, both present and future.
d) 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 letters of credit given by the bankers aggregating to Rs, 88.30 cr (March 31, 2017: Rs, 83.24 cr).
a) Information about individual provisions and significant estimates
i) Compensated absences:
The Compensated absences cover the liability for sick and earned leave. Out of the total amount disclosed above, the amount of Rs, 6.86 cr (March 31, 2017: Rs, 6.08 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.
ii) Effluent disposal:
The entity has provided for expenses it estimates to incur 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.
a) Defined benefit plans:
Gratuity
The Company operates a gratuity plan through the ''Atul Employees Gratuity Trust''. Every employee is entitled to a benefit equivalent to 15 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 5 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 while calculating the defined benefit liability recognized 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.
Risk exposure
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 are 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 other 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 consists insurance funds, although the Company also invests in corporate bonds and special deposit schemes. 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, 2019 are Rs, 2.53 cr.
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 Company''s contribution to the Provident Fund for all employees is charged to the 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 '' Nil. The Company has contributed the following amounts towards Provident Fund during the respective period ended:
b) Defined contribution plans:
Provident and other funds:
Amount of Rs, 9.60 cr (March 31, 2017: Rs, 9.36 cr) is recognized as expense and included in Note 24 ''Contribution to Provident and other funds''.
Compensated absences:
Amount of Rs, 0.71 cr (March 31, 2017: Rs, 5.99 cr) is recognized as expense and included in Note 24 ''Salaries, wages and bonus''.
a) Fair value hierarchy
This section explains the judgments and estimates made in determining the fair values of the financial instruments that are (a) recognized and measured at fair value and (b) measured at amortized 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 3 levels prescribed under the Accounting Standard. An explanation of each level follows underneath the table:
There were no transfers between any levels during the year.
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.
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.
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.
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.
Risk Management is an integral part of the business practices of the Company. The framework of Risk Management concentrates on formalizing 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 formalized 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 a clear understanding of risk interrelationships.
iii) Risk assessment and prioritization: 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 exposes it to the following market risks that arise from its use of financial instruments:
i) price risk
ii) interest rate risk
iii) foreign exchange risk
11ncludes hedges for highly probable transactions up to next 12 months
c) Management of credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations.
Trade receivables
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 counterparties which have secure credit ratings, hence the risk is reduced. Individual risk limits are set for each counterparty 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.
The primary objective of Capital Management of the Company is to maximize Shareholder value. The Company monitors capital using Debt-Equity ratio which is total debt divided by total equity.
For the purpose 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 and Security premium. Total debt includes current debt plus non-current debt.
In accordance with Ind AS 108 ''Operating Segments'', 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.
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 recognized in the Statement of Profit and Loss under ''Rent'' in Note 26.
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 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 27.13 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.
* At amortized cost Notes:
a) Loans given to employees as per the policy of the Company are not considered.
b) The loanees did not hold any shares in the Share capital of the Company.
Note 27.16 Rounding off
Figures less than Rs, 50,000 have been shown at actual in brackets.
Note 27.17 Offsetting financial assets and liabilities
The below Note presents the recognized financial instruments that are offset, or subject to enforceable master netting arrangements and other similar Agreements, but not offset, as at March 31, 2018 and March 31, 2017.
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.
Mar 31, 2017
Background
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.
ii) Dividend:
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.
ii) Others
Effluent disposal
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.
Wealth tax
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
Funded schemes
a) Defined benefit plans:
Gratuity
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.
Risk exposure
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.
Trade receivables
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 £ 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.
ii) Estimates
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.
b) Leases
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
General information
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.
3 Lease:
(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.
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