Notes to Accounts of BASF India Ltd.
Mar 31, 2023
Fair value measurement
Financial instruments
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 Indian accounting standard 113 - âFair value measurementâ.
Explanation of each
Level 1: Determination of the fair value based on quoted, unadjusted prices on active markets.
Level 2: Determination of fair value based on parameters for which directly or indirectly quoted prices on active market are available.
Level 3: Determination of fair value based on parameters for which there is no observable market data.
Fair values for financial assets and liabilities (other than those disclosed below) approximates the carrying amount. All other financial assets and financial liabilities are carried at amortised costs.
The Company is exposed to foreign-currency risks during the normal course of business. These risks are hedged through a determined strategy employing derivative instruments. Hedging is only employed for underlying items from the operating business. The risks from the underlying transactions and the derivatives are constantly monitored. Where the derivatives have a positive value, the Company is exposed to credit risks from the derivative transactions in the event of nonperformance of the other party. To minimise the default risk on derivatives with the positive market values, transactions are exclusively conducted with credit worthy banks and partners and are subject to predefined credit limits. The contracting and execution of derivative financial instruments for hedging purposes are conducted according to internal guidelines and subject to strict control mechanism.
The sensitivity analysis is conducted by simulating a 10% appreciation/ depreciation of the functional currency against respective other currencies.
(ii) Interest rate risk
I nterest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. To hedge interest rate risk, mix of variable and fixed instruments is judiciously applied for financing the Companyâs requirements.
The Company recognises any risk from cash flow fluctuations as a part of liquidity planning. The Company has access to sufficient liquidity from unutilised credit lines from banks and ongoing commercial paper programme.
(a) Financing arrangements
The Company has access to undrawn borrowing facilities from banks for Rs. 9,188 million (Previous Year: Rs. 8,408 million) as on March 31, 2023. The Company also has unused Commercial Papers limit of Rs. 7,500 million (Previous Year: Rs. 7,500 million).
(b) Maturities of financial liabilities
The interest and principal payments as well as other payments for derivative financial instruments are relevant for the presentation of the maturities of the contractual cash flows from financial liabilities. Derivatives are included using their net cash flow, provided they have a negative fair value and therefore represent a liability. Derivatives with positive fair values are assets and are therefore not considered. Trade accounts payable are generally interest-free and due within one year. Therefore, the carrying amount of trade accounts payable equals the sum of future cash flows. Contractual maturities of lease liabilities are disclosed on an undiscounted basis.
(iv) Credit risk
Credit risk arise when counterparties do not fulfil their contractual obligations. The Company regularly analyses the credit worthiness of relevant customers and grants credit limits on the basis of this analysis. Due to the diversified customer structure of the Company, there is no significant concentration of default risk. The company uses simplified approach for trade receivables whereby the loss allowance is measured at an amount equal to the lifetime expected credit losses. The carrying amount of all receivables subject to expected credit loss and default risk represents the maximum default risk for the Company. The expected credit losses are calculated taking into consideration the credit rating of the customer, probability of default for various different credit ratings.
Accordingly expected credit loss is recognised under two stages as follows :
Stage 2 - Loss allowance at an amount equivalent lifetime expected credit losses at the reporting date Stage 3 - Loss allowance on account of credit impaired at the reporting date
Loans to related parties
The company considers the probability of default upon initial recognition of loan and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the company compares the risk of a default occurring on the loan as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:
⢠internal credit rating
⢠external credit rating (as far as available)
⢠actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrowerâs ability to meet its obligations
⢠actual or expected significant changes in the operating results of the borrower
Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal rating model.
Regardless of the analysis above, a significant increase in credit risk is presumed if a counterparty is more than 30 days past due in making a contractual payment.
A default on a financial asset is when the counterparty fails to make contractual payments within 60 days of when they fall due.
Cash and bank balances
For banks and financial institutions, only independently rated parties with a minimum rating of âAâ are accepted.
Security deposits and other receivables
The Company periodically monitors the recoverability and credit risks of its security deposits and other receivables. The Company evaluates 12 month expected credit losses of all the financial assets for which credit risk has not increased. In case credit risk has increased significantly, the Company considers life time expected credit losses for the purpose of impairment provisioning.
Accordingly, financial assets other than trade receivables are subject to the impairment requirements of Ind AS 109 and the identified impairment loss was immaterial.
Significant estimates and judgements Impairment of financial assets
The impairment provision for the financial assets disclosed above are based on credit ratings, assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history, existing market conditions as well as forward looking estimates at the end of each reporting year.
(a) Risk management
The aim of capital structure management is to maintain the financial flexibility needed to further develop the Companyâs business portfolio and take advantage of strategic opportunities. The objective of the Companyâs financing policy are to secure solvency, limit financial risks and optimise the cost of capital. The Companyâs capital structure is managed using equity and debt ratios as a part of the Companyâs financial planning.
Generally a mix of commercial paper programme, inter corporate deposits, overdraft facilities and bank loans are used for short term financing while group external commercial borrowings are used for financing long term requirements.
The goal is to optimise the Companyâs capital cost financing conditions.
|
39. Contingent liabilities |
Rs. in million |
|
|
Nature |
As at March 31, 2023 |
As at March 31, 2022 |
|
Contingent liabilities (excluding interest & penalties) |
||
|
a) Claims against the Company not acknowledged as debts |
31.0 |
29.0 |
|
In respect of which the Company has counterclaim |
â |
- |
|
b) Demand for taxes and duties in respect of which the Company has preferred appeals with appropriate authorities |
||
|
a. Income tax |
1,955.3 |
1,955.3 |
|
b. Customs, Excise, Service tax and Sales tax (refer Note (i) below) |
27.7 |
3,223.7 |
|
Total |
2,014.0 |
5,208.0 |
Note:
(i) The Commercial Tax Department (CTD) of Karnataka had issued demand notices initially for the periods April 2006 to March 2010 by treating the stock transfers from Companyâs Mangalore Plant to various depots in other states as Interstate sales liable to tax under Central Sales Tax Act. Appeals were made by the Company before the Honâble Karnataka Appellate Tribunal (KAT) and Central Sales Tax Appellate Authority (CSTAA), however CTDâs view was upheld therein. Consequently, the CTD reissued revised demand notices for the above period and also issued fresh demand notices for the period April 2010 to June 2017, aggregating to Rs. 7,560.6 million (including interest and penalty till date). However, a stay on recovery of these demands had been granted by KAT for the period 2006-07 to 2016-17.
The Company had also challenged the Order of CSTAA by filing a Writ Petition before the Honâble Karnataka High Court in September 2019. The Honâble Karnataka High Court vide Order dated October 14, 2022, has allowed the Writ Petition filed by the Company and has quashed the Order passed by the CSTAA by holding that the movement of goods between states as merely âStock Transfersâ.
The above order is consistent with the Companyâs stand to not consider these stock transfers as interstate sales and hence, no provision was considered necessary in the books. Accordingly contingent liability has been reduced by Rs 3,196.5 million.
Estimated amount of contracts remaining to be executed on capital account and not provided (net of advances) for Rs. 232.2 million (Previous Year Rs. 348.0 million).
The Company has adopted modified retrospective approach as per para C8 (c) (ii) of Ind AS 116 - Leases. The Company leases warehouses, vehicles, office facilities, storage tanks, equipments etc.
The lease liabilities are measured at the present value of the remaining lease payments, discounted using the leaseeâs incremental borrowing rate. The weighted average incremental borrowing rate used to discount the gross lease liability additions during the current year & previous year was 4 to 9%.
(i) The Company had announced realignment of its business service units, which aims at bundling of services and resources including implementation of a wide-ranging digitalization initiatives thereby simplifying processes and utilizing digital solutions. Considering the aforesaid, the Company had recognised provision aggregating Rs. 215.2 million during the year ended March 31, 2021 as employees compensation towards realignment of business service units. The Company re-assessed the provision in previous year and accordingly, had reversed provision aggregating Rs. 125.6 million during the previous year ended March 31, 2022.
Trade receivables
The Company gives rebates/ discounts for certain business units. Under the terms of contract, the amounts payable by the Company are offset against receivables from customers and only the net amount is settled (i.e. after adjustment of credit notes towards rebates/ discounts). The relevant amounts have therefore been presented net in the Balance Sheet.
Other provisions represents provisions for certain income tax, indirect taxes and other legal matters, the outflow of which would depend on settlement/ conclusion of these matters with the relevant authorities or cessation of the respective events.
46. Corporate Social Responsibility (âCSRâ)
As per Section 135 of the Act, a Company meeting the applicability threshold, needs to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. The major areas for CSR activities are promoting education facilities, sanitation and making available safe drinking water. A CSR committee has been formed by the Company as per the Act.
(a) Gross amount required to be spent by the Company during the year: Rs. 86.0 million (Previous Year: Rs. 29.0 million)
(a) Defined contribution plans:
The Companyâs contribution to defined contribution funds comprising of Superannuation fund, Provident fund, Employeesâ State Insurance Schemes and National Pension System (NPS) scheme amounting to Rs. 85.1 million (Previous Year Rs. 101.0 million) (net of recoveries) has been charged to the Statement of Profit and Loss.
Further effective September 1,2022 provident fund contribution due to transition to Employeesâ Provident Fund Organisation (EPFO) from own managed trust amounting to Rs 103.2 million has been charged to the Statement of Profit and Loss.
The expected rate of return on assets is based on the expectation of the average long term rate of return on investment of the fund, during the estimated term of obligation.
The obligations are measured at the present value of estimated future cash flows by using a discount rate that is determined with reference to the market yields at the Balance Sheet date on Government Bonds which is consistent with the estimated terms of the obligation.
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 defined benefit obligation calculated with projected unit credit method at the end of reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet. The method and type of assumptions used in preparing the sensitivity analysis for current year are in line with previous year.
The contribution expected to be made by the Company during the financial year 2023-24 is Rs. Nil (Previous Year Rs. 104.2 million).
(ii) Provident Fund
Eligible employees receive benefits from a provident fund administered through the Company managed BASF India Limited Provident Fund Trust (âthe Trustâ). During the year, the Company filed an application for surrender of exemption granted from the EPF Scheme, 1952 w.e.f August 31,2022. The surrender application was filed with Regional Provident Fund Commissioner (RPFC) Bandra. The applications were accepted by the RPFC effective September 1, 2022. As a process of transfer of activities to RPFC, all the investments held by the trust were liquidated and the liabilities as on September 1, 2022 were transferred to the EPFO. A deficit funding of Rs. 241.8 million was made by the Company during the year prior to surrender of the trust.
During the year ended March 31, 2023, amount recognised in the Statement of Profit and Loss for the Companyâs contribution to Employee provident fund (net of recoveries, if any) is Rs. 88.8 million (Previous year Rs. 176.3 million) prior to transfer to EPFO.
Risk exposure
The fund assets for Gratuity are maintained by BASF trust fund, a legally independent funded plan, which is financed by contribution of employees and the employer as well as the return on plan asset.
Following risk-mitigating strategies are adopted for the Funds:
Being managed passively, the debt segments of the portfolios are predominantly exposed to Credit Risk and Reinvestment Risk. These risks are managed in the following manner:
Reinvestment risk: Reinvestment risk is minimized by spreading maturities of debt investments across various years. Here a balance is struck between minimizing reinvestment risk and maximizing yield given the term structure of interest rates, issuance pattern of debt instruments and their liquidity.
Owing to the investment regulation, the Funds have also invested in Equity Mutual Funds which are exposed to Market Risk.
Market risk: Market risk is minimized by (a) ensuring that schemes selected for investment have high-ranking by independent agencies (b) large-cap orientation and (c) have a track record of superior downside management. Further, volatilities in returns of these schemes are minimized by staggering deployment in the schemes across months which bring in cost-averaging. Performance of the schemes is monitored on a monthly basis. Corrective action, if required, is recommended for schemes that underperform their peers and the benchmark consistently.
Credit risk: Credit risk is minimized by spreading exposure to multiple debt issuers, i.e. by not allowing exposure to an individual debt issuer to exceed by 5%-10% (depending on the issuer type) of the total portfolio at any time. Further, investments are made only in high grade bonds. Rating migrations in the instruments held in the portfolios are tracked regularly and are reported to the Trustees in case of downgrades. Corrective action on downgrades is suggested, if deemed necessary.
(c) Share-based payments (Long Term Incentive):
The Ultimate Holding Company (âBASF SEâ) offers following two types of Share Price based compensation program for senior executives of BASF group. Participation in these programs is voluntary.
(i) BASF Option Program (âBOPâ):
The option program starts every year on July 1. After the two-year vesting period, the options can be exercised for a period of four years. Options that have not been exercised by the end of the exercise period of the respective program are forfeited, without any subsequent payment obligations towards the bearer. BOP was offered for the last time in 2020. All option rights granted during the BOP program years remain valid until the end of their respective exercise periods.
The model used in the valuation of the option plans are based on the arbitrage-free valuation model according to Black-Scholes. The fair values of the options are determined using the binomial model.
(ii) âStrive!â - Performance Share Units (PSUs):
Since 2020, a new Long term incentive program, known as Strive!, is established in the form of a performance share plan. The new plan is based on achievement of strategic targets and takes into account BASF SEâs share price and dividend performance (total shareholder return) over a four-year period.
A Strive! plan includes a four-year performance period with a fixed disbursement date. A target amount is determined at the beginning of a new Strive! plan for every participant. This target amount is converted into a preliminary number of virtual performance share units (PSUs) by dividing it by the average BASF share price. The number of PSUs that are ultimately paid out at the end of the performance period depends on the achievement of the strategic targets.
Since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options, the Company has recognized both the above plans as equity settled share based payment transactions in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments. Charge for the year and related assumptions are summarised in below tables:
(d) Other long term employee benefits:
(i) Long service awards:
Long Service Awards are payable to employees on completion of specified years of service.
(ii) Compensated absences:
Eligible employees can carry forward and encash leave on superannuation, death, permanent disablement and resignation as per Companyâs policy.
For compensated absences, the amount of the provision of Rs. 480.0 million (Previous Year: Rs. 482.2 million) 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. Leave obligations not expected to be settled within the next 12 months is Rs. 420.9 million (Previous Year: Rs. 423.6 million).
The Company has following business segments for reporting purpose. The divisions are allocated to the segments based on their business models.
Details of type of products included in each segment:
â Agricultural Solution - The Agricultural Solutions segment consists of the Crop Protection division. Agricultural Solution is seasonal in nature
â Materials - The Materials segment comprises Performance Materials divisions, the Monomers divisions and Polyamides business of BASF Performance Polyamides India Private Limited (âBPPIPLâ) merged with the Company
â I ndustrial Solutions - The Industrial Solutions segment consists of the Dispersions & Pigments divisions and Performance Chemicals divisions
â Surface Technologies - The Surface Technologies segment comprises of Catalysts and Coatings divisions
â Nutrition & Care - The Nutrition & Care segment consists of the Care Chemicals and Nutrition & Health divisions
â Chemicals - The Chemicals segment consists of the Petrochemicals and Intermediates divisions
â Others - Others includes activities that are not allocated to any of the continued operating divisions. These includes remaining activities after divestiture of leather and textile chemicals business, paper wet-end and water chemicals business, technical and service charges other than those specifically identifiable to above segments.
Un-allocable Corporate Assets mainly includes Current tax assets (net), Deferred tax assets (net), Cash and cash equivalents, Inter corporate deposit and other un-allocable assets.
50. Disclosure under Indian Accounting Standard 115
(a) Deferred revenue:
The Company considers deferred revenue as contract liability as per terms of customer contracts. There
was no deferred revenue outstanding as on March 31, 2023 and March 31, 2022.
(b) Contract liability:
i. Contract liability in respect of amount collected in advance towards satisfaction of performance obligations for goods/ services to customers has been reflected as âAdvances received from customersâ in Note 22 - Other Current Liabilities.
ii. The Company operates a customer incentive programme where retail customers accumulate reward points for purchases made which entitle them to incentives. A contract liability for the reward points is recognised at the time of the sale. Contract liability in respect of customer incentive schemes has been adjusted in Revenue and reflected as âAccrual for customer incentive schemesâ in Note 22 -Other Current Liabilities.
b) Struck off companies having transactions during the year:
The company did not have any transactions with the companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956 during the current and previous financial year.
52. Previous year figures have been regrouped/ reclassified, wherever necessary to conform to current year classification.
Mar 31, 2022
Fair value measurement
Financial instruments
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 Indian accounting standard 113 -âFair value measurement''.
Explanation of each
Level 1: Determination of the fair value based on quoted, unadjusted prices on active markets.
Level 2: Determination of fair value based on parameters for which directly or indirectly quoted prices on active market are available.
Level 3: Determination of fair value based on parameters for which there is no observable market data.
Fair values for financial assets and liabilities (other than those disclosed below) approximates the carrying amount. All other financial assets and financial liabilities are carried at amortised costs.
Fair value measurement (Continued)
Risk exposure:
(i) Foreign currency risk
The Company is exposed to foreign-currency risks during the normal course of business. These risks are hedged through a determined strategy employing derivative instruments. Hedging is only employed for underlying items from the operating business. The risks from the underlying transactions and the derivatives are constantly monitored. Where the derivatives have a positive value, the Company is exposed to credit risks from the derivative transactions in the event of nonperformance of the other party. To minimise the default risk on derivatives with the positive market values, transactions are exclusively conducted with credit worthy banks and partners and are subject to predefined credit limits. The contracting and execution of derivative financial instruments for hedging purposes are conducted according to internal guidelines and subject to strict control mechanism.
The sensitivity analysis is conducted by simulating a 10% appreciation/depreciation of the functional currency against respective other currencies.
The Company recognises any risk from cash flow fluctuations as a part of liquidity planning. The Company has access to sufficient liquidity from unutilised credit lines from banks and ongoing commercial paper programme.
(a) Financing arrangements
The Company has access to undrawn borrowing facilities from banks for Rs. 8,408 million (Previous Year: Rs. 8,006 million) as on March 31, 2022. The Company also has unused Commercial Papers limit of Rs. 7,500 million (Previous Year: Rs. 7,500 million).
(b) Maturities of financial liabilities
The interest and principal payments as well as other payments for derivative financial instruments are relevant for the presentation of the maturities of the contractual cash flows from financial liabilities. Derivatives are included using their net cash flow, provided they have a negative fair value and therefore represent a liability. Derivatives with positive fair values are assets and are therefore not considered. Trade accounts payable are generally interest-free and due within one year. Therefore, the carrying amount of trade accounts payable equals the sum of future cash flows. Contractual maturities of lease liabilities are disclosed on an undiscounted basis.
Credit risk arise when counterparties do not fulfil their contractual obligations. The Company regularly analyses the credit worthiness of relevant customers and grants credit limits on the basis of this analysis. Due to the diversified customer structure of the Company, there is no significant concentration of default risk. The carrying amount of all receivables, loans plus the nominal value of other financial obligations subject to expected credit loss and default risk represents the maximum default risk for the Company. The expected credit losses are calculated taking into consideration the credit rating of the customer, probability of default for various different credit ratings.
Significant estimates and judgements Impairment of financial assets
The impairment provision for the financial assets disclosed above are based on credit ratings, assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting year.
(a) Risk management
The aim of capital structure management is to maintain the financial flexibility needed to further develop the Company''s business portfolio and take advantage of strategic opportunities. The objective of the Company''s financing policy are to secure solvency, limit financial risks and optimise the cost of capital.
The Company''s capital structure is managed using equity and debt ratios as a part of the Company''s financial planning.
Generally a mix of commercial paper programme, inter corporate deposits, overdraft facilities and bank loans are used for short term financing while group external commercial borrowings are used for financing long term requirements.
The goal is to optimise the Company''s capital cost financing conditions.
( i) The Company has received demand notices from the Commercial Tax Department, Karnataka aggregating Rs. 7,560.6 million (including interest and penalty) for the period 2006-07 to 2017-18 (April 2017 to June 2017), by treating the stock transfers of its Mangalore Plant as interstate sales to dealers. However, recovery of these demands have been stalled by the Hon''ble Karnataka Appellate Tribunal for the period 2006-07 to 2016-17. The Company has filed the appeal for period 2017-18 (April 2017 to June 2017).
The Company has also filed a Writ Petition before the Hon''ble Karnataka High Court against the order passed by Hon''ble Central Sales Tax Appellate Authority (CSTAA).
Demand orders aggregating Rs. 3,196.5 million (excluding interest and penalty) have been disclosed under contingent liabilities. Based on the expert legal advice obtained by the Company, it does not consider these stock transfers as interstate sales. Hence no provision is considered necessary in the books.
Estimated amount of contracts remaining to be executed on capital account and not provided (net of advances) for Rs. 348.0 million (Previous Year Rs. 418.4 million)
The Company has adopted modified retrospective approach as per para C8 (c) (ii) of Ind AS 116 - Leases. The Company leases warehouses, vehicles, office facilities, storage tanks, equipments etc.
The lease liabilities are measured at the present value of the remaining lease payments, discounted using the leasee''s incremental borrowing rate. The weighted average incremental borrowing rate used to discount the gross lease liability additions during the current year & previous year was 4 to 9%.
(i) As intimated to Stock exchanges, the Company''s construction chemicals business (forming part of the Surface Technologies segment) had been transferred to Master Builders Solutions India Private Limited with effect from July 1, 2020. The Company had received net consideration of Rs. 5,951.6 million in advance on June 30, 2020 towards the said divestiture. Certain liabilities had been discharged by the Company, which had been reimbursed by Master Builders Solutions India Private Limited.
The Company had recognized net profit of Rs. 4,651.9 million during the year ended March 31, 2021 pursuant to the aforesaid divestiture.
(ii) The Company had recognised an amount of Rs. 138.5 million towards consideration on sale of a business (forming part of the Nutrition & Care segment), which was subject to attaining certain pre-conditions. During the previous year ended March 31,2021, as these pre-conditions were not met, this amount had been written off.
(iii) Considering the macro-economic situation, the Company had recognised an impairment loss of Rs. 277.3 million during the year ended March 31,2021 towards decline in the recoverable value of certain plant and machineries pertaining to Performance Materials division which forms part of Materials segment.
(iv) The Company has announced realignment of its business service units, which aims at bundling of services and resources including implementation of a wide-ranging digitalization initiatives thereby simplifying processes and utilizing digital solutions. Considering the aforesaid, the Company had recognised provision aggregating Rs. 215.2 million during the year ended March 31,2021 as employees compensation towards realignment of business service units. The Company re-assessed the provision in current year and accordingly, has reversed provision aggregating Rs. 125.6 million during the current year ended March 31, 2022.
Trade receivables
The Company gives rebates / discounts for certain business units. Under the terms of contract, the amounts payable by the Company are offset against receivables from customers and only the net amount is settled (i.e. after adjustment of credit notes towards rebates / discounts). The relevant amounts have therefore been presented net in the Balance Sheet.
Corporate Social Responsibility (âCSRâ)
As per Section 135 of the Act, a Company meeting the applicability threshold, needs to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. The major areas for CSR activities are Covid-19 Support & other healthcare support, promoting education facilities, sanitation and making available safe drinking water. A CSR committee has been formed by the Company as per the Act.
(a) Gross amount required to be spent by the Company during the year: Rs. 29.0 million (Previous Year: Rs. 10.9 million)
(a) Defined contribution plans:
The Company''s contribution to defined contribution funds comprising of Superannuation fund, Employees'' State Insurance Schemes and National Pension System (NPS) scheme amounting to Rs. 101.0 million (Previous Year Rs. 85.0 million) (net of recoveries) has been charged to the Statement of Profit and Loss.
(b) Defined benefit plans:
(i) Gratuity
Gratuity is payable to all eligible employees of the Company on retirement, death, permanent disablement and resignation in terms of provisions of the Payment of Gratuity Act, 1972, or as per the Company''s scheme whichever is more beneficial. The Company irrevocably contributes funds to a separate Gratuity Trust which is recognised by Income Tax authorities.
The expected rate of return on assets is based on the expectation of the average long term rate of return on investment of the fund, during the estimated term of obligation.
The obligations are measured at the present value of estimated future cash flows by using a discount rate that is determined with reference to the market yields at the Balance Sheet date on Government Bonds which is consistent with the estimated terms of the obligation.
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 defined benefit obligation calculated with projected unit credit method at the end of reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet. The method and type of assumptions used in preparing the sensitivity analysis for current year are in line with previous year.
The contribution expected to be made by the Company during the financial year 2022-23 is Rs. 104.2 million (Previous Year Rs. 174.4 million).
Provident Fund
Eligible employees receive benefits from a provident fund administered through the Company managed BASF India Limited Provident Fund Trust (âthe Trust''). The Company has an obligation to fund any shortfall on the yield of the Company''s Trust investments over the administered interest rates on an annual basis. These administered rates are notified by the Government annually. The actuary has accordingly provided a valuation based on the below provided assumptions as at March 31, 2022.
During the year ended March 31, 2022, amount recognised in the Statement of Profit and Loss for the Company''s Contribution to Employee provident fund (net of recoveries, if any) is Rs. 176.3 million (Previous year Rs. 153.4 million).
Risk exposure
The fund assets for Gratuity and Provident fund are maintained by BASF trust fund, a legally independent funded plan, which is financed by contribution of employees and the employer as well as the return on plan asset.
Following risk-mitigating strategies are adopted for the Funds:
Being managed passively, the debt segments of the portfolios are predominantly exposed to Credit Risk and Reinvestment Risk. These risks are managed in the following manner:
Reinvestment risk: Reinvestment risk is minimized by spreading maturities of debt investments across various years. Here a balance is struck between minimizing reinvestment risk and maximizing yield given the term structure of interest rates, issuance pattern of debt instruments and their liquidity. Owing to the investment regulation, the Funds have also invested in Equity Mutual Funds which are exposed to Market Risk.
Market risk: Market risk is minimized by (a) ensuring that schemes selected for investment have high-ranking by independent agencies (b) large-cap orientation and (c) have a track record of superior down-side management. Further, volatilities in returns of these schemes are minimized by staggering deployment in the schemes across months which bring in cost-averaging. Performance of the schemes is monitored on a monthly basis. Corrective action, if required, is recommended for schemes that underperform their peers and the benchmark consistently.
Credit risk: Credit risk is minimized by spreading exposure to multiple debt issuers, i.e. by not allowing exposure to an individual debt issuer to exceed by 5%-10% (depending on the issuer type) of the total portfolio at any time. Further, investments are made only in high grade bonds. Rating migrations in the instruments held in the portfolios are tracked regularly and are reported to the Trustees in case of downgrades. Corrective action on downgrades is suggested, if deemed necessary.
) Probable incremental employee benefit liability that may arise on the Company due to likely shortfall in fund balance considering uncertainty in recoverability of certain investments held by the Provident Fund Trust and probable shortfall in the guaranteed interest rate - Rs. 15 million (gain) (Previous year: Rs. 1.3 million (loss)), has been included as remeasurement costs in âOther comprehensive income''.
) Share-based payments (Long Term Incentive):
The Ultimate Holding Company (âBASF SE'') offers following two types of Share Price based compensation program for senior executives of BASF group. Participation in these programs is voluntary.
(i) BASF Option Program (âBOP''):
The option program starts every year on July 1. After the two-year vesting period, the options can be exercised for a period of four years. Options that have not been exercised by the end of the exercise period of the respective program are forfeited, without any subsequent payment obligations towards the bearer. BOP was offered for the last time in 2020. All option rights granted during the BOP program years remain valid until the end of their respective exercise periods.
The model used in the valuation of the option plans are based on the arbitrage-free valuation model according to Black-Scholes. The fair values of the options are determined using the binomial model.
48. Employee Benefits (Continued)
(d) Share-based payments (Long Term Incentive): (Continued)
(ii) âStrive!'' - Performance Share Units (PSUs):
Since 2020, a new Long term incentive program, known as Strive!, is established in the form of a performance share plan. The new plan is based on achievement of strategic targets and takes into account BASF SE''s share price and dividend performance (total shareholder return) over a four-year period.
A Strive! plan includes a four-year performance period with a fixed disbursement date. A target amount is determined at the beginning of a new Strive! plan for every participant. This target amount is converted into a preliminary number of virtual performance share units (PSUs) by dividing it by the average BASF share price. The number of PSUs that are ultimately paid out at the end of the performance period depends on the achievement of the strategic targets.
Since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options, the Company has recognized both the above plans as equity settled share based payment transactions in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments. Charge for the year and related assumptions
(e) Other long term employee benefits:
(i) Long service awards:
Long Service Awards are payable to employees on completion of specified years of service.
(ii) Compensated absences:
Eligible employees can carry forward and encash leave on superannuation, death, permanent disablement and resignation as per Company''s policy.
For compensated absences, the amount of the provision of Rs. 482.2 million (Previous Year: Rs. 437.3 million) 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. Leave obligations not expected to be settled within the next 12 months is Rs. 423.6 million (Previous Year: Rs. 385.4 million).
The Company has following business segments for reporting purpose. The divisions are allocated to the segments based on their business models.
Details of type of products included in each segment:
â Agricultural Solution - The Agricultural Solutions segment consists of the Crop Protection division. Agricultural Solution is seasonal in nature
â Materials - The Materials segment comprises Performance Materials divisions, the Monomers divisions and Polyamides business of BPPIPL merged with the Company (Refer note 52)
â I ndustrial Solutions - The Industrial Solutions segment consists of the Dispersions & Pigments divisions and Performance Chemicals divisions
â Surface Technologies - The Surface Technologies segment comprises of the Construction Chemicals (upto June 30, 2020), Catalysts and Coatings divisions
â Nutrition & Care - The Nutrition & Care segment consists of the Care Chemicals and Nutrition & Health divisions
â Chemicals - The Chemicals segment consists of the Petrochemicals and Intermediates divisions
â Others - Others includes activities that are not allocated to any of the continued operating divisions. These includes remaining activities after divestiture of leather and textile chemicals business, paper wet-end and water chemicals business, technical and service charges other than those specifically identifiable to above segments.
Un-allocable Corporate Assets mainly includes Current tax assets (net), Deferred tax assets (net), Cash and cash equivalents and other un-allocable assets.
Un-allocable Corporate Liabilities mainly includes borrowings, Current tax liabilities (net) and other un-allocable liabilities.
i) Terms and conditions:
a) All outstanding balances are unsecured and are repayable as per terms of credit and settlement occurs in cash.
b) All related party transactions entered during the year were in ordinary course of business and on arms length basis.
51. Disclosure under Indian Accounting Standard 115
(a) Deferred revenue:
The Company considers deferred revenue as contract liability as per terms of customer contracts. There was no deferred revenue outstanding as on March 31, 2022 and March 31, 2021. Further, an amount Rs. 25.6 million was recognized as revenue in the previous year ended March 31, 2021 which was included in deferred revenue at beginning of the previous year.
(b) Contract liability:
i. Contract liability in respect of amount collected in advance towards satisfaction of performance obligations for goods / services to customers has been reflected as âAdvances received from customersâ in Note 23 - Other Current Liabilities.
ii. The Company operates a customer incentive programme where retail customers accumulate reward points for purchases made which entitle them to incentives. A contract liability for the reward points is recognised at the time of the sale. Contract liability in respect of customer incentive schemes has been adjusted in Revenue and reflected as âAccrual for customer incentive schemesâ in Note 23 - Other Current Liabilities.
Merger of BASF Performance Polyamides India Private Limited (âBPPIPLâ) with the Company
BASF Performance Polyamides India Private Limited (âBPPIPL) was in the business of manufacturing/ trading of performance polyamides and had one manufacturing site in Panoli, Gujarat. It had wide range of engineering plastics and serves automobiles, electrical and consumer goods industries.
Pursuant to the approval from the Board of Directors on July 10, 2020 and the approval from shareholders vide Annual General Meeting dated August 6, 2020, the Company had acquired 100% stake in BPPIPL from BASF Nederland B.V. and BASF SE, for a consideration of Rs. 3,029.0 million on August 18, 2020, consequent to which BPPIPL became a wholly owned subsidiary of the Company.
Further, as intimated to Stock exchanges, subsequent to approval by the Board of Directors on August 27, 2020 for the Scheme of Merger by Absorption of BPPIPL with the Company, the National Company Law Tribunal, Mumbai (âNCLT'') vide order dated January 6, 2021 sanctioned the aforesaid Scheme, with an appointed date of February 1,2021. BPPIPL being a wholly owned subsidiary of the Company, no consideration was paid pursuant to the merger. The certified copy of the NCLT Order was filed with the Registrar of Companies on February 1, 2021. Basis NCLT order, BPPIPL was merged with the Company on the appointed date.
Merger of BASF Performance Polyamides India Private Limited (âBPPIPLâ) with the Company (Continued)
Consequently, basis NCLT order and requirement of Appendix C to Ind AS-103 on Business Combinations, on the appointed date, the Company had accounted the acquisition of BPPIPL as common control transaction effective February 1, 2020 (i.e. the date of global acquisition of Solvay Polyamides business by BASF SE). Accordingly, the financial statements of the Company for the year ended March 31,2020 and year ended March 31,2021 had been restated to include results of erstwhile BPPIPL with effect from February 1, 2020 (i.e. the common control acquisition date).
All assets and liabilities of the erstwhile BPPIPL had been transferred to and vested in the Company at its carrying value effective February 1, 2020 and the excess of carrying value of investments in erstwhile BPPIPL over the net value of assets, liabilities and reserves of erstwhile BPPIPL amounting to Rs. 2,857.4 million had been debited to Capital Reserve as on February 1, 2020.
This merger of BPPIPL with the Company resulted in increased operational efficiencies, brought in economies of scale and resulted in synergetic integration of business.
Previous year figures have been regrouped/ reclassified, wherever necessary to conform to current year classification and in conformity with the requirements of the amended Schedule III to the Companies Act, 2013 effective April 1, 2021.
Mar 31, 2019
a) Includes gross block of Rs. 21.4 million and net block Rs. Nil (Previous Year: gross block Rs. 21.4 million and net block Rs. Nil) for which the Company is in the process of complying with the terms of lease cum sale agreement and basis completion thereof, would execute the final sale agreement to obtain right of ownership thereon.
b) Buildings include Rs. 0.01 million (Previous Year: Rs. 0.01 million) being the value of shares in various co-operative societies.
a) Includes gross block of Rs. 21.4 million and net block Rs. Nil (Previous Year: gross block Rs. 21.4 million and net block Rs. Nil) for which the Company is in the process of complying with the terms of lease cum sale agreement and basis completion thereof, would execute the final sale agreement to obtain right of ownership thereon.
b) Buildings include Rs. 0.01 million (Previous Year Rs. 0.03 million) being the value of shares in various co-operative societies.
c) Gross block and accumulated depreciation of assets written down aggregated Rs. 589.0 million and Rs. 340.3 million, respectively. Also refer Note 39.
Amounts recognised in Statement of Profit and Loss
Write downs of inventories to net realisable value amounted to Rs. 170.0 million (Previous year Rs. 226.8 million). These were recognised as an expense during the year and included in âcost of materials consumed'' and âChanges in inventories of finished goods, stock-in -trade and work-in-progress'' in Statement of Profit and Loss.
(i) The Company intends to dispose off non-core residential apartments as it no longer intends to utilise these assets. A search for a buyer is underway. The Company expects the fair value less cost to sell to be higher than carrying amount.
(ii) The Company has sold certain plots of the land during the current year and it intends to dispose off the balance plot of land for biotechnology research related to âAgricultural Solution'' segment. No impairment loss was recognised on reclassification of the freehold land as held for sale.
(iii) Refer Note 39 for gains/ losses from sale of these assets.
b. Rights, preferences and restrictions attached to the shares
The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
1. Other equity
(a) Securities premium
Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Act.
(b) Amalgamation reserve
Amalgamation reserve is used to record difference between the share capital of the amalgamating companies. It is utilised in accordance with the provisions of the Act.
(c) Share options outstanding account
Share options outstanding account is used to account for effects from employee stock option expense.
(d) General Reserve
General reserves are the retained earnings of the Company which are kept aside out of the profits to meet future (known or unknown) obligations.
(e) Retained earnings
Terms of repayment
Interest is payable on a half yearly basis on June 15 and December 15 at 4.93% p.a. for USD loan and at 6 months EURIBOR 147 basis point per annum for EURO loan.
Total outstanding external commercial borrowings from BASF Belgium Coordination Center Comm. V. as on October 1, 2018 have been assigned to BASF Ireland Limited effective October 1, 2018 with existing terms and conditions.
* Under the agreement terms entered into with BASF Belgium Coordination Center Comm. V. on April 27, 2018, borrowings aggregating USD 20 Million were converted into equivalent EURO loan amount at the EURO/USD exchange rate effective May 29, 2018 with interest rate of 6 months EURIBOR 147 basis point per annum.
Overdraft facilities and Short-term loan from banks carry average interest ranging from 7% to 9% p.a. computed on daily basis on the actual amount utilised and are repayable on demand and maturity respectively.
Commercial papers carry average interest ranging from 6% to 8% p.a. Outstanding Commercial Papers in previous year were repaid in May 2018.
Inter Corporate deposits carry average interest ranging from 7% to 8% p.a. over the financial year. Outstanding Inter corporate deposits are repayable on maturity in June 2019.
2. Fair value measurement
Financial instruments
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 Indian accounting standard 113 -âFair value measurement''.
Explanation of each
Level 1: Determination of the fair value based on quoted, unadjusted prices on active markets.
Level 2: Determination of fair value based on parameters for which directly or indirectly quoted prices on active market are available.
Level 3: Determination of fair value based on parameters for which there is no observable market data.
Fair values for financial assets and liabilities (other than those disclosed below) approximates the carrying amount. All other financial assets and financial liabilities are carried at amortised costs.
Risks exposure:
(i) Foreign currency risk
The Company is exposed to foreign-currency risks during the normal course of business. These risks are hedged through a determined strategy employing derivative instruments. Hedging is only employed for underlying items from the operating business. The risks from the underlying transactions and the derivatives are constantly monitored. Where the derivatives have a positive value, the Company is exposed to credit risks from the derivative transactions in the event of nonperformance of the other party. To minimise the default risk on derivatives with the positive market values, transactions are exclusively conducted with credit worthy banks and partners and are subject to predefined credit limits. The contracting and execution of derivative financial instruments for hedging purposes are conducted according to internal guidelines and subject to strict control mechanism.
The sensitivity analysis is conducted by simulating a 10% appreciation/ depreciation of the functional currency against respective other currencies.
(b) Sensitivity
The sensitivity of profit or loss to changes in exchange rates by 10%* arises mainly from foreign currency denominated financial instruments. Impact of sensitivity on net exposure for major currency balances is as follows:
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. To hedge interest rate risk, mix of variable and fixed instruments is judiciously applied for financing the Company''s requirements.
(iii) Liquidity risk
The Company recognises any risk from cash flow fluctuations as a part of liquidity planning. The Company has access to sufficient liquidity from unutilised credit lines from banks, ongoing commercial paper programme, debentures.
(a) Financing arrangements
The Company has access to undrawn borrowing facilities from banks for Rs. 12,419 million (Previous Year: Rs. 11,547 million), Debentures for Rs. 200 million as on March 31, 2019 (Previous Year: Rs. 200 million).
(b) Maturities of financial liabilities
The interest and principal payments as well as other payments for derivative financial instruments are relevant for the presentation of the maturities of the contractual cash flows from financial liabilities. Derivatives are included using their net cash flow, provided they have a negative fair value and therefore represent a liability. Derivatives with positive fair values are assets and are therefore not considered. Trade accounts payable are generally interest-free and due within one year. Therefore, the carrying amount of trade accounts payable equals the sum of future cash flows.
(iv) Credit risk
Credit risk arise when counterparties do not fulfill their contractual obligations. The Company regularly analyses the credit worthiness of relevant customers and grants credit limits on the basis of this analysis. Due to the diversified customer structure of the Company, there is no significant concentration of default risk. The carrying amount of all receivables, loans plus the nominal value of other financial obligations subject to expected credit loss and default risk represents the maximum default risk for the Company. The expected credit losses are calculated taking into consideration the credit rating of the customer, probability of default for various different credit ratings.
Significant estimates and judgements Impairment of financial assets
The impairment provision for the financial assets disclosed above are based on credit ratings, assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting year.
3. Capital management
(a) Risk management
The aim of capital structure management is to maintain the financial flexibility needed to further develop the Company''s business portfolio and take advantage of strategic opportunities. The objective of the Company''s financing policy are to secure solvency, limit financial risks and optimise the cost of capital.
The Company''s capital structure is managed using equity and debt ratios as a part of the Company''s financial planning.
Generally a mix of commercial paper programme, inter corporate deposits and bank loans are used for short term financing while group external commercial borrowings are used for financing long term requirements. The goal is to optimise the Company''s capital cost financing conditions.
The Company monitors capital on the basis of the following ratios:
1. Equity ratio - Total equity divided by Total assets
(i) Commercial taxes department had issued demand notices amounting to Rs. 893.1 million (excluding interest and penalty) for the periods April 2006 to March 2010 by treating 100% of the stock transfers as interstate sales to unregistered dealers. The Company had filed appeals against the aforesaid demand notices with the Honorable Karnataka Appellate Tribunal which set aside and remanded back the impugned reassessment orders for the above referred periods for fresh assessment to lower authorities. In view of this outcome, currently there are no demand notices against the Company and thus, the contingent liability on this account is Rs. Nil (Previous Year Rs. Nil). The Company was aggrieved by certain observations and inferences of the Honorable Karnataka Appellate Tribunal and thus, had filed the relevant appeals with the Honorable Central Sales Tax Appellate Authority (CSTAA), New Delhi. The Honorable CSTAA has granted stay for the period April 2006 to March 2010 against the de-novo reassessment proceedings considering the pendency of the appeals at CSTAA.
Commercial taxes department has issued demand notice for the period January 2011 to March 2011 amounting to Rs. 63.8 million (excluding interest & penalty) against which company has filed an appeal before Karnataka Appellate Tribunal & also received stay order from the said Tribunal. The amount in respect of other periods, if any, are currently not determinable.
The Company, on the basis of legal opinions, does not consider these stock transfers as interstate sales.
(ii) The Company is in the process of evaluating the impact of the recent Supreme Court Judgment in case of âVivekananda Vidyamandir And Others Vs The Regional Provident Fund Commissioner (II) West Bengalâ and the related circular (Circular No. C-I/1 (33)2019/Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employees'' Provident Fund Organisation in relation to non-exclusion of certain allowances from the definition of âbasic wagesâ of the relevant employees for the purposes of determining contribution to provident fund under the Employees'' Provident Funds & Miscellaneous Provisions Act, 1952.
4. Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided (net of advances) for Rs. 349.8 million (Previous Year Rs. 313.2 million).
5. Operating lease
The Company has taken vehicles and office facilities under operating leases.
a) Total minimum lease payments in respect of non-cancellable leases are as follows:
6. Micro, Small and Medium Enterprises Development Act, 2006
On the basis of information and records available with the Management, the following disclosure pursuant to the Micro, Small and Medium Enterprises Development Act, 2006 (âMSMED Act'') are made for the amounts due to the Micro and Small enterprises, who have registered with the competent authorities:
Trade receivables
The Company gives rebates / discounts for certain business units. Under the terms of contract, the amounts payable by the Company are offset against receivables from customers and only the net amount is settled (i.e. after adjustment of credit notes towards rebates/ discounts). The relevant amounts have therefore been presented net in the Balance Sheet.
Other provisions represent provisions for certain income tax, indirect taxes and other legal matters, the outflow of which would depend on settlement / conclusion of these matters with the relevant authorities or cessation of the respective events.
7. Corporate Social Responsibility (âCSRâ)
As per Section 135 of the Act, a Company meeting the applicability threshold, needs to spend atleast 2% of its average net profit for the immediately preeceding three financial years on CSR activities. The major areas for CSR activities are promoting education facilities, sanitation and making available safe drinking water. A CSR committee has been formed by the Company as per the Act.
(a) Gross amount required to be spent by the Company during the year: Rs. Nil (Previous Year Rs. Nil)
(b) The areas of CSR activities and contributions made thereto are as follows:
8. Employee benefits
(a) Defined contribution plans:
The Company''s contribution to defined contribution funds comprising of Superannuation fund and Employees'' state insurance schemes amounting to Rs. 48.4 million (Previous year Rs. 49.6 million) (net of recoveries) has been charged to the Statement of Profit and Loss.
(b) Defined benefit plans:
(i) Gratuity
Gratuity is payable to all eligible employees of the Company on retirement, death, permanent disablement and resignation in terms of provisions of the Payment of Gratuity Act, 1972, or as per the Company''s scheme whichever is more beneficial. The Company irrevocably contributes funds to a separate Gratuity Trust which is recognised by Income Tax authorities.
The expected rate of return on assets is based on the expectation of the average long term rate of return on investment of the fund, during the estimated term of obligation.
The obligations are measured at the present value of estimated future cash flows by using a discount rate that is determined with reference to the market yields at the Balance Sheet date on Government Bonds which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
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 defined benefit obligation calculated with projected unit credit method at the end of reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet. The method and type of assumptions used in preparing the sensitivity analysis for current year are in line with previous year.
The contribution expected to be made by the Company during the financial year 2019-20 is Rs. 82.7 million (Previous Year Rs. 80.4 million).
Risk exposure
The fund assets are maintained by BASF trust Fund, a legally independent funded plan, which is financed by contribution of employees and the employer as well as the return on plan asset.
Following risk-mitigating strategies are adopted for the Funds:
Being managed passively, the debt segments of the portfolios are predominantly exposed to Credit Risk and Reinvestment Risk. These risks are managed in the following manner:
Reinvestment risk: Reinvestment risk is minimized by spreading maturities of debt investments across various years. Here a balance is struck between minimizing reinvestment risk and maximizing yield given the term structure of interest rates, issuance pattern of debt instruments and their liquidity.
Owing to the investment regulation, the Funds have also invested in Equity Mutual Funds which are exposed to Market Risk.
Market risk: Market risk is minimized by (a) ensuring that schemes selected for investment have high-ranking by independent agencies, (b) large-cap orientation and (c) have a track record of superior down-side management. Further, volatilities in returns of these schemes are minimized by staggering deployment in the schemes across months which bring in cost-averaging. Performance of the schemes is monitored on a monthly basis. Corrective action, if required, is recommended for schemes that underperform their peers and the benchmark consistently.
Credit risk: Credit risk is minimized by spreading exposure to multiple debt issuers, i.e. by not allowing exposure to an individual debt issuer to exceed by 15% of the total portfolio at any time. Further, investments are made only in high grade bonds. Rating migrations in the instruments held in the portfolios are tracked regularly and are reported to the Trustees in case of downgrades. Corrective action on downgrades is suggested, if deemed necessary.
(ii) Provident Fund
The Company has an obligation to fund any shortfall on the yield of the Company''s Trust investments over the administered interest rates on an annual basis. These administered rates are notified by the Government annually. The Actuarial Society of India has issued the final guidance for measurement of provident fund liabilities. The actuary has accordingly provided a valuation based on the below provided assumptions and there is no shortfall as at March 31, 2019.
During the year ended March 31, 2019, amount recognised in the Statement of Profit and Loss for the Company''s Contribution to Employee provident fund (net of recoveries) is Rs. 157.0 million (Previous year Rs. 105.8 million).
(c) Share-based payments
The Ultimate Holding Company (âBASF SE'') offers Share Price based compensation program (âoption program'') for senior executives of BASF group. Participation in this program is voluntary.
The option program starts every year on July 1. After the two-year vesting period, the options can be exercised for a period of six years. Options that have not been exercised by the end of the exercise period of the respective program are forfeited, without any subsequent payment obligations towards the bearer.
The model used in the valuation of the option plans are based on the arbitrage-free valuation model according to Black-Scholes. The fair values of the options are determined using the binomial model.
The Company has recognized share based payment transactions of BASF SE as equity settled share based payment transaction in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options.
d) Other long term employee benefits:
(i) Long service awards:
Long Service Awards are payable to employees on completion of specified years of service.
(ii) Compensated absences:
Eligible employees can carry forward and encash leave on superannuation, death, permanent disablement and resignation as per Company''s policy.
For compensated absences, the amount of the provision of Rs. 348.0 million (Previous Year: Rs. 361.7 million) 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. Leave obligations not expected to be settled within the next 12 months is Rs. 293.7 million (Previous Year: Rs. 305.1 million).
9. Operating Segments
The Company has reorganised its segment structure with effect from January 1, 2019. The new segment structure will enable an even more differentiated steering of the business, taking into account market-specific requirements and the competitive environment. It will further increase the transparency of the segment results. Previous period segment figures are regrouped in accordance with revised segment structure.
The Company has following business segments for reporting purpose. The divisons are allocated to the segments based on their business models.
Details of type of products included in each segment:
â Agricultural Solution - The Agricultural Solutions segment consists of the Crop Protection division. Agricultural Solution is seasonal in nature
â Materials - The Materials segment comprises Performance Materials divisions and the Monomers divisions
â Industrial Solutions - The Industrial Solutions segment consists of the Dispersions & Pigments divisions and Performance Chemicals divisions
â Surface Technologies - The Surface Technologies segment comprises the Catalysts, Coatings and Construction Chemicals divisions
â Nutrition & Care - The Nutrition & Care segment consists of the Care Chemicals and Nutrition & Health divisions
â Chemicals - The Chemicals segment consists of the Petrochemicals and Intermediates divisions
â Others - Others includes activities that are not allocated to any of the continued operating divisions. These includes remaining activities after divestiture of leather and textile chemicals business, paper wet-end and water chemicals business, technical and service charges other than those specifically identifiable to above segments. Also includes transactions relating to leather and textile chemicals business, paper wet-end and water chemicals business during the year of respective divestiture.
Un-allocable Corporate Assets mainly includes Current tax assets (net), Deferred tax assets (net), Cash and cash equivalents and other un-allocable assets.
Un-allocable Corporate Liabilities mainly includes current borrowings and other un-allocable liabilities.
Revenue from major customer:
The Company is not reliant on revenues from transactions with any single customer and does not receive 10% or more of its revenue from transactions with any single external customers.
i) Terms and conditions
a) All outstanding balances are unsecured and are repayable as per terms of credit and settlement occurs in cash.
b) All related party transactions entered during the year were in ordinary course of business and on arms length basis.
10. Disclosure under Indian Accounting Standard 115
Effective April 1, 2018, the Company has adopted Indian Accounting Standard 115 - âRevenue from Contracts with Customers'' (âInd AS 115'') with modified retrospective approach. Accordingly, the comparative information for previous year has not been restated.
Adoption of Ind AS 115 did not have any material impact on the financial statements of the Company.
Deferred revenue:
The Company has disclosed contract liability towards deferred revenue as per terms of customer contracts aggregating Rs. 96.1 million (Previous Year: Rs. 154.8 million) as on March 31, 2019 in Notes 18 and 23. Further, an amount of Rs. 58.7 million was recognized as revenue in the current year which was included in deferred revenue as of April 1, 2018. Remaining deferred revenue will be recognised in subsequent periods based on terms of the contract.
Contract liability in respect of amount collected in advance towards satisfaction of performance obligations for goods/services to customers has been reflected as âAdvances received from customersâ in Note 23 - Other current liability.
11. As per Indian Accounting Standard 115/ Indian Accounting Standard 18 on Revenue and Schedule III of the Companies Act, 2013, Revenue from Operations for the period ended after June 30, 2017 does not include Goods and Service Tax (GST), however Revenue from Operations upto the period ended June 30, 2017 included Excise Duty. In view of the aforesaid restructuring of indirect taxes, Revenue from Operations for the year ended March 31, 2019 are not comparable with previous year. The below table reflects details of Revenue from Operations net of Excise Duty.
12. Previous year figures have been regrouped / reclassified, wherever necessary to conform to current year classification.
Mar 31, 2018
Background of the Company
BASF India Limited (the âCompanyâ) is a public limited Company domiciled in India with its registered office located in Mumbai. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Companyâs portfolio is organized into four segments: Chemicals, Performance Products, Functional Materials & Solutions and Agricultural Solutions.
a. Rights, preferences and restrictions attached to the shares
The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
b. Information on equity shares alloted without receipt of cash or alloted as bonus shares or shares bought back
None
Securities premium
Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Act.
Amalgamation reserve
Amalgamation reserve is used to record difference between the share capital of the amalgamating companies. It is utilised in accordance with the provisions of the Act.
* Under the revised agreement terms entered into with BASF Belgium Coordination Center Comm. V. on April 27, 2018, borrowings aggregating USD 20 Million which were originally due for payment in financial year 2018-19, are now due in financial year 2021-22 with interest rate of 6 months EURIBOR 147 basis point per annum. The said USD loan amount will be converted into equivalent EURO loan amount at the EURO/USD exchange rate as on May 29, 2018.
Overdraft facilities and Short-term loan from banks carry average interest ranging from 7% to 9% p.a. computed on daily basis on the actual amount utilised and are repayable on demand and maturity respectively.
Commercial papers carry average interest ranging from 6% to 8% p.a. over the financial year. Outstanding Commercial Papers are repayable on maturity in May 2018 (Previous Year: repayable in May 2017).
1. Fair value measurement
Financial instruments
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 accounting standard Ind AS 113.
Explanation of each
Level 1: Determination of the fair value based on quoted, unadjusted prices on active markets.
Level 2: Determination of fair value based on parameters for which directly or indirectly quoted prices on active market are available.
Level 3: Determination of fair value based on parameters for which there is no observable market data.
Fair values for financial assets and liabilities (other than those disclosed below) approximates the carrying amount. All other financial assets and financial liabilities are carried at amortised costs.
Risks exposure:
(i) Foreign currency risk
The Company is exposed to foreign-currency risks during the normal course of business. These risks are hedged through a determined strategy employing derivative instruments. Hedging is only employed for underlying items from the operating business. The risks from the underlying transactions and the derivatives are constantly monitored. Where the derivatives have a positive value, the Company is exposed to credit risks from the derivative transactions in the event of nonperformance of the other party. To minimise the default risk on derivatives with the positive market values, transactions are exclusively conducted with credit worthy banks and partners and are subject to predefined credit limits. The contracting and execution of derivative financial instruments for hedging purposes are conducted according to internal guidelines and subject to strict control mechanism.
The sensitivity analysis is conducted by simulating a 10% appreciation/depreciation of the functional currency against respective other currencies.
(a) Foreign currency risk exposure:
The Companyâs exposure to foreign currency risk at the end of the reporting period is as follows:
(b) Sensitivity
The sensitivity of profit or loss to changes in exchange rates by 10%* arises mainly from foreign currency denominated financial instruments. Impact of sensitivity on net exposure for major currency balances is as follows:
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. To hedge interest rate risk, mix of variable and fixed instruments is judiciously applied for financing the Companyâs requirements.
(a) Interest rate risk exposure
The exposure of Companyâs borrowing to interest rate changes at the end of the year are as follows:
(b) Sensitivity
The sensitivity of profit or loss to changes in interest rates/exchange rates:
(iii) Liquidity risk
The Company recognises any risk from cash flow fluctuations as a part of liquidity planning. The Company has access to sufficient liquidity from unutilised credit lines from banks, ongoing commercial paper programme, debentures.
(a) Financing arrangements
The Company has access to undrawn borrowing facilities from banks for Rs. 11,547 million (Previous Year Rs. 9,447 million), Debentures for Rs. 200 million (Previous Year Rs. 200 million) as on March 31, 2018.
(b) Maturities of financial liabilities
The interest and principal payments as well as other payments for derivative financial instruments are relevant for the presentation of the maturities of the contractual cash flows from financial liabilities. Derivatives are included using their net cash flow, provided they have a negative fair value and therefore represent a liability. Derivatives with positive fair values are assets and are therefore not considered. Trade accounts payable are generally interest-free and due within one year. Therefore, the carrying amount of trade accounts payable equals the sum of future cash flows.
(iv) Credit risk
Credit risk arise when counterparties do not fulfill their contractual obligations. The Company regularly analyses the credit worthiness of relevant customers and grants credit limits on the basis of this analysis. Due to the diversified customer structure of the Company, there is no significant concentration of default risk. The carrying amount of all receivables, loans plus the nominal value of other financial obligations subject to expected credit loss and default risk represents the maximum default risk for the Company. The expected credit losses are calculated taking into consideration the credit rating of the customer, probability of default for various different credit ratings.
(a) Provision for expected credit loss
- For trade receivables under life time expected credit loss model (simplified approach)
Significant estimates and judgements Impairment of financial assets
The impairment provision for the financial assets disclosed above are based on credit ratings, assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history, existing market conditions as well as forward looking estimates at the end of each reporting year.
2. Capital management
(a) Risk management
The aim of capital structure management is to maintain the financial flexibility needed to further develop the Companyâs business portfolio and take advantage of strategic opportunities. The objective of the Companyâs financing policy are to secure solvency, limit financial risks and optimise the cost of capital.
The Companyâs capital structure is managed using equity and debt ratios as a part of the Companyâs financial planning.
Generally a mix of commercial paper programme and bank loans is used for short term financing while group loans are used for financing funding requirements.
The goal is to optimise the Companyâs capital cost financing conditions.
The Company monitors capital on the basis of the following ratios:
1. Equity ratio - Total equity divided by Total assets
2. Debt equity ratio - Total debt divided by Total equity
Total debt = Long term borrowings Short term borrowings Current maturities of long term debts
* Commercial taxes department had issued demand notices amounting to Rs. 893.1 million (excluding interest and penalty) for the periods April 2006 to March 2010 by treating 100% of the stock transfers as interstate sales to unregistered dealers. The Company had filed appeals against the aforesaid demand notices with the Honorable Karnataka Appellate Tribunal which set aside and remanded back the impugned reassessment orders for the above referred periods for fresh assessment to lower authorities. In view of this outcome, currently there are no demand notices against the Company and thus, the contingent liability on this account is Rs. Nil (Previous Year Rs. Nil). In fact, the Company was aggrieved by certain observations and inferences of the Honorable Karnataka Appellate Tribunal and thus, had filed the relevant appeals with the Honorable Central Sales Tax Appellate Authority (CSTAA), New Delhi.
The Honorable CSTAA has already granted stay for the period July 2006 to March 2007, July 2007 to March 2008 and April 2008 to March 2010 against the de-novo reassessment proceedings considering the pendency of the appeals at CSTAA. The Honorable CSTAA is yet to hear the stay application for the periods April 2006 to June 2006 and April 2007 to June 2007.
The amount in respect of other periods, if any, are currently not determinable.
The Company, on the basis of legal opinions, does not consider these stock transfer as interstate sales.
3. Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided (net of advances) for Rs. 313.2 million (Previous Year Rs. 336.8 million).
4. Operating lease
The Company has taken vehicles and office facilities under operating leases.
a) Total minimum lease payments in respect of non-cancellable leases are as follows:
b) Lease rent of Rs. 812.9 million (Previous Year Rs. 762.5 million) towards cancellable and non cancellable leases has been included under âRentâ in Note 29 to the Financial Statements.
5. Micro, Small and Medium Enterprises Development Act, 2006
On the basis of information and records available with the Management, the following disclosure pursuant to the Micro, Small and Medium Enterprises Development Act, 2006 (âMSMED Actâ) are made for the amounts due to the Micro and Small enterprises, who have registered with the competent authorities:
Trade receivables
The Company gives rebates / discounts for certain business units. Under the terms of contract, the amounts payable by the Company are offset against receivables from customers and only the net amount is settled. The relevant amounts have therefore been presented net in the Balance Sheet.
Other provisions represents provisions for certain income tax, indirect taxes and other legal matters, the outflow of which would depend on settlement / conclusion of these matters with the relevant authorities or cessation of the respective events.
6. Corporate Social Responsibility (âCSRâ)
As per Section 135 of the Companies Act, 2013 (âthe Actâ) a Company meeting the applicability threshold, needs to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. The major areas for CSR activities are promoting education facilities, sanitation and making available safe drinking water. A CSR committee has been formed by the Company as per the Act.
(a) Gross amount required to be spent by the Company during the year: Rs. Nil (Previous Year Rs. Nil)
(b) The areas of CSR activities and contributions made thereto are as follows:
7. Employee Benefits
Defined contribution plans:
The Companyâs contribution to defined contribution funds comprising of Superannuation fund and Employeesâ state insurance schemes amounting to Rs. 49.6 million (Previous year Rs. 50.1 million) (net of recoveries) has been charged to the Statement of Profit and Loss.
Defined benefit plans and other Long term employee benefits:
Gratuity is payable to all eligible employees of the Company on retirement, death, permanent disablement and resignation in terms of provisions of the Payment of Gratuity Act, 1972, or as per the Companyâs scheme whichever is more beneficial. The Company irrevocably contributes funds to a separate Gratuity Trust which is recognised by Income Tax authorities.
Eligible employees can carry forward and encash leave on superannuation, death, permanent disablement and resignation as per Companyâs policy.
Long Service Awards are payable to employees on completion of specified years of service.
The expected rate of return on assets is based on the expectation of the average long term rate of return on investment of the fund, during the estimated term of obligation.
The obligations are measured at the present value of estimated future cash flows by using a discount rate that is determined with reference to the market yields at the Balance Sheet date on Government Bonds which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
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 defined benefit obligation calculated with projected unit credit method at the end of reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet.
The method and type of assumptions used in preparing the sensitivity analysis for current year are in line with previous year.
The contribution expected to be made by the Company during the financial year 2018-2019 is Rs 80.4 million (Previous Year Rs. 68.0 million)
Risk exposure
The fund assets are maintained by BASF trust fund, a legally independent funded plan, which is financed by contribution of employees and the employer as well as the return on plan asset.
Following risk-mitigating strategies are adopted for the Funds:
Being managed passively, the debt segments of the portfolios are predominantly exposed to Credit Risk and Reinvestment Risk. These risks are managed in the following manner:
Reinvestment risk: Reinvestment risk is minimized by spreading maturities of debt investments across various years. Here a balance is struck between minimizing reinvestment risk and maximizing yield given the term structure of interest rates, issuance pattern of debt instruments and their liquidity.
Owing to the investment regulation, the Funds have also invested in Equity Mutual Funds which are exposed to Market Risk.
Market risk: Market risk is minimized by (a) ensuring that schemes selected for investment have high-raking by independent agencies (b) large-cap orientation and (c) have a track record of superior down-side management. Further, volatilities in returns of these schemes are minimized by staggering deployment in the schemes across months which bring in cost-averaging. Performance of the schemes is monitored on a monthly basis. Corrective action, if required, is recommended for schemes that underperform their peers and the benchmark consistently.
Credit risk: Credit risk is minimized by spreading exposure to multiple debt issuers, i.e. by not allowing exposure to an individual debt issuer to exceed by 15% of the total portfolio at any time. Further, investments are made only in high grade bonds of up to AA rating. Rating migrations in the instruments held in the portfolios are tracked regularly and are reported to the Trustees in case of downgrades. Corrective action on downgrades is suggested, if deemed necessary.
Provident Fund
The Company has an obligation to fund any shortfall on the yield of the Companyâs Trust investments over the administered interest rates on an annual basis. These administered rates are notified by the Government annually. The Actuarial Society of India has issued the final guidance for measurement of provident fund liabilities. The actuary has accordingly provided a valuation based on the below provided assumptions and there is no shortfall as at March 31, 2018.
The details of fund and plan assets position as at year end is given below:
During the year ended March 31, 2018, amount recognised in the Statement of Profit and Loss for Employee provident fund (net of recoveries) is Rs. 105.8 million (Previous year Rs. 95.3 million).
Share-based payments
The Ultimate Holding Company (âBASF SEâ) offers Share Price based compensation program (âOption Programâ) for senior executives of BASF group. Participation in this program is voluntary.
The option program starts every year on July 1. After the two-year vesting period, the options can be exercised for a period of six years. Options that have not been exercised by the end of the exercise period of the respective program are forfeited, without any subsequent payment obligations toward the bearer.
The model used in the valuation of the option plans are based on the arbitrage-free valuation model according to Black-Scholes. The fair values of the options are determined using the binomial model.
The Company has recognized these share based payment transactions of BASF SE as equity settled share based payment transaction in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options.
8. Operating Segments
The Company has following business segments for reporting purpose. The divisons are allocated to the segments based on their business models
Details of type of products included in each segment:
â Agricultural Solution - The Agricultural Solutions segment consists of the Crop Protection division. Agricultural Solution is seasonal in nature.
â Performance Products - The Performance Products segment consists of the Dispersions & Pigments, Leather Chemicals, Care Chemicals, Nutrition & Health and Performance Chemicals divisions, Speciality Chemicals and high-value fine chemicals for the food, pharmaceuticals, animal feed and cosmetics industries. Speciality chemicals include additives, water treatment and paper treatment, home and fabric care chemicals.
â Chemicals - The Chemicals segment consists of the Petrochemicals, Monomers and Intermediates divisions.
â Functional Materials & Solutions - The Functional Materials & Solutions segment comprises the Catalysts, Construction Chemicals, Coatings and Performance Materials divisions.
â Others - Includes technical and service charges other than those specifically identifiable to above segments.
Un-allocable Corporate Assets mainly includes Current tax assets (net), Deferred tax assets (net), Cash and cash equivalents and other un-allocable assets.
Un-allocable Corporate Liabilities mainly includes current borrowings and other un-allocable liabilities.
i) Terms and conditions
a) All outstanding balances are unsecured and are repayable as per terms of credit and settlement occurs in cash.
b) All related party transactions entered during the year were in ordinary course of business and on arms length basis.
c) The Company has not recorded any impairment of receivables related to amounts owed by related parties (Previous Year Rs. Nil).
9. As per Indian Accounting Standard 18 on Revenue and Schedule III of the Companies Act, 2013, Revenue from Operations for the period July 1, 2017 to March 31, 2018 does not include Goods and Service Tax (GST), however Revenue from Operations till the period ended June 30, 2017 and for the year ended March 31, 2017 includes Excise Duty. In view of the aforesaid restructuring of indirect taxes, Revenue from Operations for the year ended March 31, 2018 are not comparable with previous year. The below table reflects details of Revenue from Operations net of Excise Duty.
10. Pursuant to the global agreement between BASF SE (Germany) and Solenis (USA), the Board of Directors of the Company have approved, at their Meeting held on May 3, 2018, the proposal to transfer the paper wet-end and water chemicals business of the Company to Solenis in India, subject to such approvals, as may be necessary. The sales from the paper wet-end and water chemicals business is approximately Rs. 1,400 million p.a and it forms part of the Performance Products segment. The transaction is anticipated to close by the end of 2018 at the earliest. The financial effects of this proposed transfer have not been considered in these financial statements.
11. Previous year figures have been regrouped / reclassified, wherever necessary to conform to current year classification.
Mar 31, 2017
1. Fair value measurement
Financial instruments
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 accounting standard Ind AS 113.
Explanation of each
Level 1: Determination of the fair value based on quoted, unadjusted prices on active markets.
Level 2: Determination of fair value based on parameters for which directly or indirectly quoted prices on active market are available.
Level 3: Determination of fair value based on parameters for which there is no observable market data.
Fair values for financial assets and liabilities (other than those disclosed below) approximates the carrying amount.
The Company has exposure to following risks and how these risks are mitigated:
(i) Foreign currency risk
The Company is exposed to foreign-currency risks during the normal course of business. These risks are hedged through a determined strategy employing derivative instruments. Hedging is only employed for underlying items from the operating business. The risks from the underlying transactions and the derivatives are constantly monitored. Where the derivatives have a positive value, the Company is exposed to credit risks from the derivative transactions in the event of non-performance of the other party. To minimise the default risk on derivatives with the positive market values, transactions are exclusively conducted with credit worthy banks and partners and are subject to predefined credit limits. The contracting and execution of derivative financial instruments for hedging purposes are conducted according to internal guidelines and subject to strict control mechanism.
The sensitivity analysis is conducted by simulating a 10% appreciation/depreciation of the functional currency against respective other currencies.
(a) Foreign currency risk exposure:
The Companyâs exposure to foreign currency risk at the end of the reporting period is as follows:
(b) Sensitivity
The sensitivity of profit or loss to changes in exchange rates by 10%4 arises mainly from foreign currency denominated financial instruments
(ii) Interest rate risk
Interest rate risk results from changes in prevailing market interest rates, which can cause a change in the fair value of fixed-rate instruments and changes in the interest payments of the variable-rate instruments. To hedge interest rate risk mix of variable and fixed instruments is judiciously applied for financing companyâs requirement.
(a) Interest rate risk exposure
The exposure of Companyâs borrowing to interest rate changes at the end of the year are as follows:
(b) Sensitivity
The sensitivity of profit or loss to changes in exchange rates arises mainly from changes in interest rates:
Holding all variables constant
(iii) Liquidity risk
The Company recognises any risk from cash flow fluctuations as a part of liquidity planning. The Company has access to sufficient liquidity from unutilised credit lines from banks, ongoing commercial paper programme, debentures.
(a) Financing arrangements
The Company has access to undrawn borrowing facilities from banks for Rs. 9,447 million (Previous Year Rs. 8,178 million), Debentures for Rs. 200 million (Previous Year Rs. 200 million) as on 31 March 2017.
(b) Maturities of financial liabilities
The interest and principal payments as well as other payments for derivative financial instruments are relevant for the presentation of the maturities of the contractual cash flows from financial liabilities. Future cash flows are not discounted here. Derivatives are included using their net cash flow, provided they have a negative fair value and therefore represent a liability. Derivatives with positive fair values are assets and are therefore not considered. Trade accounts payable are generally interest-free and due within one year. Therefore, the carrying amount of trade accounts payable equals the sum of future cash flows.
(iv) Credit risk
Credit risk arise when counterparties do not fulfill their contractual obligations. The Company regularly analyses the credit worthiness of relevant customers and grant credit limits on the basis of this analysis. Due to the diversified customer structure of the Company, there is no significant concentration of default risk. The carrying amount of all receivables, loans plus the nominal value of other financial obligations subject to expected credit loss and default risk represents the maximum default risk for the Company.
(a) Provision for expected credit loss
- For trade receivables under life time expected credit loss model (simplified approach)
Significant estimates and judgements Impairment of financial assets
The impairment provision for the financial assets disclosed above are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history, existing market conditions as well as forward looking estimates at the end of each reporting year.
2. Capital management
(a) Risk management
The aim of capital structure management is to maintain the financial flexibility needed to further develop the Companyâs business portfolio and take advantage of strategic opportunities. The objective of the Companyâs financing policy are to secure solvency, limit financial risks and optimise the cost of capital.
The Companyâs capital structure is managed using equity and debt ratios as part of the Companyâs financial planning.
Generally a mix of commercial paper programme and bank loans is used for short term financing while group loans are used for financing funding requirements.
The goal is to optimise the Companyâs capital cost financing conditions.
The Company monitors capital on the basis of the following ratios:
1. Equity ratio - Total equity divided by Total assets
2. Debt equity ratio - Total debt divided by Total equity
Total debt = Long term borrowings Short term borrowings Current maturities of long term debts
3. Contingent liabilities
* Commercial taxes department had issued demand notices amounting to Rs. 956.9 million (excludes interest and penalty) for the periods April 2006 - March 2010 and periods February 2011 to March 2011 by treating 100% of the stock transfers as interstate sales to unregistered dealers. The Company had filed appeals against the aforesaid demand notices with the Honorable Karnataka Appellate Tribunal which set aside and remanded back the impugned reassessment orders for the above referred periods for fresh assessment to lower authorities. In view of this outcome, currently there are no demand notices against the Company and thus the contingent liability on this account is Nil (Previous Year Rs. Nil). Infact, the Company was aggrieved by certain observations & inferences of the Honorable Karnataka Appellate Tribunal and thus had filed the relevant appeals with the Honorable Central Sales Tax Appellate Authority (CSTAA), New Delhi.
Under the de-novo re-assessment proceedings, the Commercial taxes department has issued proposition notices amounting to Rs. 748.8 million (excludes interest and penalty) for the periods April 2006 - March 2010. However, the Company has requested to the tax authorities to keep these proceedings in abeyance during the pendency of the above referred appeals at CSTAA.
The Company, on the basis of legal opinions, does not consider these stock transfers as interstate sales.
4. Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided (net of advances) for Rs. 336.8 million (Previous Year Rs. 536.7 million).
5. Operating lease
The Company has taken vehicles and office facilities under operating leases.
a) Total minimum lease payments in respect of non-cancellable leases are as follows:
b) Lease rent of Rs. 762.5 million (Previous Year Rs. 814.9 million) towards cancellable and non cancellable leases has been included under âRentâ in the Statement of Profit and Loss.
6. Micro, Small and Medium Enterprises Development Act, 2006
On the basis of information and records available with the Management, the following disclosure pursuant to the above Act are made for the amounts due to the Micro and Small enterprises, who have registered with the competent authorities:
Trade receivables
The Company gives rebates/discounts for certain business units. Under the terms of contract, the amounts payable by the Company are offset against receivable and only the net amount is settled.
Other provisions represents provisions for certain tax related items, the outflow of which would depend on the cessation of the respective events.
7. Corporate Social Responsibility (âCSRâ)
As per Section 135 of the Act, a Company meeting the applicability threshold, needs to spend atleast 2% of its average net profit for the immediately preceding three financial years on CSR activities. The major areas for CSR activities are promoting education facilities, sanitation and making available safe drinking water. A CSR committee has been formed by the Company as per the Act.
(a) Gross amount required to be spent by the Company during the year: Rs. Nil (Previous Year Rs. 18 million)
(b) The areas of CSR activities and contributions made thereto are as follows:
8. Employee Benefits
Defined contribution plans:
Companyâs contribution to defined contribution funds amounting to Rs. 49.8 million (Previous Year Rs. 53.1 million) has been charged to the Statement of Profit and Loss.
Defined benefit plans and other Long term employee benefits:
Gratuity is payable to all eligible employees of the Company on superannuation, death, permanent disablement and resignation in terms of provisions of the Payment of Gratuity Act, 1972, or as per the Companyâs scheme whichever is more beneficial. The Company irrevocably contributes funds to a separate Gratuity Trust which is recognised by Income Tax authorities.
Eligible employees can carry forward and encash leave on superannuation, death, permanent disablement and resignation as per Companyâs policy.
Long Service Awards are payable to employees on completion of specified years of service.
The expected rate of return on assets is based on the expectation of the average long term rate of return on investment of the fund, during the estimated term of obligation.
The obligations are measured at the present value of estimated future cash flows by using a discount rate that is determined with reference to the market yields at the Balance Sheet date on Government Bonds which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
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 defined benefit obligation calculated with projected unit credit method at the end of reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet.
The contribution expected to be made by the Company during the financial year 2017-2018 is Rs. 68.0 million (Previous Year Rs. 64.2 million)
Risk exposure
The fund assets are maintained by BASF trust fund, a legally independent funded plan, which is financed by contribution of employees and the employer as well as the return on plan asset.
Following risk-mitigating strategies are adopted for the Funds:
Being managed passively, the debt segments of the portfolios are predominantly exposed to Credit Risk and Reinvestment Risk. These risks are managed in the following manner:
Reinvestment risk: Reinvestment risk is minimized by spreading maturities of debt investments across various years. Here a balance is struck between minimizing reinvestment risk and maximizing yield given the term structure of interest rates, issuance pattern of debt instruments and their liquidity.
Owing to the investment regulation, the Funds have also invested in Equity Mutual Funds which are exposed to Market Risk.
Market risk: Market risk is minimized by (a) ensuring that schemes selected for investment have high-raking by independent agencies (b) large-cap orientation and (c) have a track record of superior down-side management. Further, volatilities in returns of these schemes are minimized by staggering deployment in the schemes across months which bring in cost-averaging. Performance of the schemes is monitored on a monthly basis. Corrective action, if required, is recommended for schemes that underperform their peers and the benchmark consistently.
Credit risk: Credit risk is minimized by spreading exposure to multiple debt issuers, i.e. by not allowing exposure to an individual debt issuer to exceed by 15% of the total portfolio at any time. Further, investments are made only in high grade bonds of up to AA rating. Rating migrations in the instruments held in the portfolios are tracked regularly and are reported to the Trustees in case of downgrades. Corrective action on downgrades is suggested, if deemed necessary.
Provident Fund
The Company has an obligation to fund any shortfall on the yield of the Companyâs Trust investments over the administered interest rates on an annual basis. These administered rates are notified by the Government annually. The Actuarial Society of India has issued the final guidance for measurement of provident fund liabilities. The actuary has accordingly provided a valuation based on the below provided assumptions and there is no shortfall as at March 31, 2017.
The details of fund and plan assets position as at 31 March is given below:
During the year ended 31st March, 2017, amount recognised in the Statement of Profit and Loss for Employee provident fund is Rs. 118.8 million (Previous Year Rs. 121.1 million).
Share-based payments
The Ultimate Holding Company (âBASF SEâ) offers Share Price based compensation program (âOption Programâ) for senior executives of BASF group. Participation in this program is voluntary.
The option program starts every year on July 1. After the two-year vesting period, the options can be exercised for a period of six years. Options that have not been exercised by the end of the exercise period of the respective program are forfeit, without any subsequent payment obligations toward the bearer.
The model used in the valuation of the option plans are based on the arbitrage-free valuation model according to Black-Scholes. The fair values of the options are determined using the binomial model.
The Company has recognized these share based payment transactions of BASF SE as equity settled share based payment transaction in accordance with the requirements of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options.
9. Operating Segments
The Company has following business segments for reporting purpose.
Details of type of products included in each segment:
â Agricultural Solution - The Agricultural Solutions segment consists of the Crop Protection division. Agricultural Solution is seasonal in nature.
â Performance Products - The Performance Products segment consists of the Dispersions & Pigments, Care Chemicals, Nutrition & Health and Performance Chemicals divisions.
â Speciality Chemicals and high-value fine chemicals for the food, pharmaceuticals, animal feed and cosmetics industries. Speciality chemicals include additives, water treatment and paper treatment, home and fabric care chemicals.
â Chemicals - The Chemicals segment consists of the Petrochemicals, Monomers and Intermediates divisions.
â Functional Materials & Solutions - The Functional Materials & Solutions segment comprises the Catalysts, Construction Chemicals, Coatings and Performance Materials divisions.
â Others - Includes technical and service charges other than those specifically identifiable to above segments.
Un-allocable Corporate Assets mainly includes Current tax assets (net), Deferred tax assets (net), Cash and cash equivalents and other un-allocable assets.
Un-allocable Corporate Liabilities mainly includes current borrowings and other un-allocable liabilities.
Notes:
1 Segment related financial disclosures of Chemical & Functional Materials & Solutions are strictly not comparable on account of an internal transfer of certain manufacturing assets from Chemicals segment to Functional Materials & Solutions segment with effect from 1st April, 2016.
2 Revenue from major customer:
The Company is not reliant on revenues from transactions with any single customer and does not receive 10% or more of its revenue from transactions with any single external customers.
10. First-time adoption of Ind AS
For the purposes of reporting as set out in Note 1 (a) (i), these are the Companyâs first financial statements prepared in accordance with Ind AS. For the year ended March 31, 2016 the Company had prepared its financial statements in accordance with Companies (Accounting Standard) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act (âPrevious GAAPâ).
The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended March 31, 2017 including the comparative information for the year ended March 31, 2016 and the opening Ind AS Balance Sheet on the date of transition i.e. April 1, 2015.
In preparing its opening Ind AS Balance Sheet as at April 1, 2015 and in presenting the comparative information for the year ended March 31, 2016, the Company has adjusted amounts reported in financial statements prepared in accordance with Previous GAAP. An explanation of how the transition from Previous GAAP to Ind AS has affected the financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables.
A. Optional exemptions availed and mandatory exceptions A.1 Ind AS optional exemptions A.1.1 Deemed cost Ind AS 101 permits a first time adopter to elect to continue with the carrying value for all its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.
Accordingly the Company has elected to measure all its property, plant and equipment and intangible assets at their previous GAAP carrying value.
A.1.2 Business combination
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.
A.2 Ind AS mandatory exceptions A.2.1 Estimates
Ind AS estimates as at April 1, 2015 are consistent with the estimates as at the same date in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Impairment of financial assets based on expected credit loss model.
- Fair value of financial instruments carried at fair value through profit and loss.
A.2.2 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification of financial asset on the basis of facts and the circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances as existing at the date of transition if retrospective application is impracticable. Accordingly, the company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.
B. Reconciliations between previous GAAP and Ind AS
Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flow for prior periods. The following tables represents the reconciliations from previous GAAP to Ind AS.
Reconciliation of equity as at the date of transition (April 1, 2015)
C. Notes to first-time adoption
1. Proposed dividend
Under the previous GAAP, dividend proposed by the board of directors after the balance sheet date but before the approval of the financial statement were considered to be adjusting events and accordingly recognised (alongwith related dividend distribution tax) as a liability. Under Ind AS, such dividend are recognised when it is approved by the shareholders in the general meeting. Accordingly, provision for proposed dividend and dividend distribution tax of Rs. 52.1 million as at March 31, 2016 and (as at April 1, 2015 Rs. 208.4 million) recognised under previous GAAP has been reversed.
2. Excise duty
Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty is presented on the face of the Statement of Profit and Loss as a part of expense. This change has resulted in an increase in total revenue from operation and total expenses for the year ended March 31, 2016 Rs. 4,096.1 million. There is no impact on the total equity and Total Comprehensive Income for the year ended March 31, 2016.
3. Lease arrangement
Under previous GAAP, arrangement that did not take legal form of lease were accounted for based on the legal form of such arrangements example tolling arrangement. Under Ind AS any arrangement (even if not legally structured as lease) which conveys a right to use an asset in return for a payment or a series of payments are identified as lease provided certain conditions are met. In case such arrangements are determined to be in the nature of lease, such arrangements are required to be classified into finance or operating leases as per the requirement of Ind AS 17, Leases. The Company has entered into certain tolling arrangements which have been identified to be in the nature of lease and have been classified as operating lease arrangements. This change has resulted in reduction in cost of materials consumed of Rs. 234.6 million with a corresponding increase in other expenses. There is no impact on the total equity and Total Comprehensive Income for the year ended March 31, 2016.
4. Remeasurement of post-employment benefit obligations
Under Ind AS, remeasurement of defined benefit plans i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined liability are recognised in Other Comprehensive Income instead of Statement of Profit and Loss. Under the previous GAAP, these remeasurement were forming part of the Statement of Profit and Loss for the year. As a result of this change, the profit for the year ended March 31, 2016 decreased by Rs. 13.0 million. There is no impact on the total equity and Total Comprehensive Income as on April 1, 2015 or March 31, 2016.
5. Employee stock option expense
Under Ind AS, the cost of the share based payments offered by Ultimate Holding Company is recognised based on the fair value of the options at grant date. Under the previous GAAP, the cost of such share based payments was not being recognised. As a result of this change, the profit for the year ended March 31, 2016 decreased by Rs. 2.5 million with a corresponding credit in capital reserve. There is no impact on the total equity as on April 1, 2015 or March 31, 2016.
6. Long-term foreign currency monetary items
Under previous GAAP, the Company adopted paragraph 46A of AS 11 the Effects of Changes in Foreign Exchange Rates. Paragraph 46A provided an alternative accounting treatment with respect to capitalisation of amortised premium on forward contracts, which would then 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. The Company has not availed the above exemption.
7. Accounting for forward contracts
Under Ind AS, foreign exchange forward contracts are mark-to-market as at each Balance Sheet date and unrealised net gain or loss is recognised in profit and loss. Derivative assets and derivative liabilities are presented on gross basis. The Company has not opted for hedge accounting and all derivatives outstanding at the end of the period have been fair valued.
7. Accounting for forward contracts (Continued) Long term foreign currency monetary items
As a result of this, the profit for the year ended March 31, 2016 decreased by Rs. 358.6 million. Consequently, the total equity decreased by an equivalent amount.
8. Retained earnings
Retained earnings as at April 1, 2015 has been adjusted consequent to the above Ind AS transition adjustments.
9. Other comprehensive income
Under Ind AS all items of income and expense recognised in a period should be included in Statement of Profit and 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 âOther Comprehensive Incomeâ includes remeasurement of defined benefit plan. The concept of Other Comprehensive Income did not exist under previous GAAP.
Mar 31, 2016
1. Commitments:
Estimated amount of contracts remaining to be executed on capital
account and not provided (net of advances) for Rs. 536.7 million
(Previous Year Rs. 836.0 million).
2. Operating lease:
The Company has taken vehicles and office facilities under operating
leases.
(a) Total minimum lease payments in respect of non cancellable leases
are as follows:
(b) Lease rent of Rs. 580.3 million (Previous Year Rs. 508.2 million)
towards cancellable and non cancellable leases has been included under
"Rent" in the Statement of Profit and Loss.
3. Micro, Small and Medium Enterprises Development Act, 2006:
On the basis of information and records available with the Management,
the following disclosure pursuant to the above Act are made for the
amounts due to the Micro and Small enterprises, who have registered
with the competent authorities:
4. Exceptional item:
During the current year, the Company has sold its non-core assets (i.e.
residential properties) and has recognized profit of Rs. 820.6 million
(Previous Year Rs. 291.9 million) which is being disclosed as an
exceptional item.
During the current year, the Company has divested its textile chemical
business pursuant to global divestment of textile business and has
recognised profit of Rs. 900.5 million (Previous Year Rs. Nil) which is
being disclosed as an exceptional item.
5. Employees benefits:
Defined contribution plans:
Company''s contribution to defined contribution funds amounting to Rs.
53.1 million (Previous year Rs. 98.5 million) has been charged to the
Statement of Profit and Loss.
Defined benefit plans and other long term employee benefits:
Gratuity is payable to all eligible employees of the Company on
superannuation, death, permanent disablement and resignation in terms
of provisions of the Payment of Gratuity Act, 1972, or as per the
Company''s scheme whichever is more beneficial. The Company irrevocably
contributes funds to a separate Gratuity Trust which is recognised by
Income Tax authorities.
Eligible employees can carry forward and encash leave on
superannuation, death, permanent disablement and resignation as per
Company''s policy.
Long Service Awards are payable to employees on completion of specified
years of service.
The expected rate of return on assets is based on the expectation of
the average long term rate of return on investment of the fund, during
the estimated term of obligation.
The obligations are measured at the present value of estimated future
cash flows by using a discount rate that is determined with reference
to the market yields at the Balance Sheet date on Government Bonds
which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial
valuation, takes account of inflation, seniority, promotion and other
relevant factors such as supply and demand in the employment market.
Provident fund
The Company has an obligation to fund any shortfall on the yield of the
Company''s Trust investments over the administered interest rates on an
annual basis. These administered rates are notified by the Government
annually. The Actuarial Society of India has issued the final guidance
for measurement of provident fund liabilities. The actuary has
accordingly provided a valuation based on the below provided
assumptions and there is no shortfall as at 31 March 2016.
6. Segment Information:
(a) PRIMARY SEGMENT INFORMATION (by Business Segments) The previous
year''s figures are given in light type below each item
7. Related Party Disclosure:
(a) Parties where control exists
BASF Societas Europaea (''SE'') Ultimate holding company
(b) Other related parties with whom transactions have taken place
during the year Fellow Subsidiaries
BASF (China) Company Ltd.
BASF PLC
BASF (Malaysia) SDN. BHD.
BASF (Thai) Limited
BASF Advanced Chemicals Co. Ltd. (Formerly known as BASF Auxiliary)
BASF Agro B.V. Arnhem (NL)
BASF Agrochemical Products B.V.
BASF Antwerpen N.V.
BASF Asia-Pacific Service Centre SDN. BHD.
BASF Australia Ltd.
BASF Bangladesh Ltd.
BASF Belgium Coordination Center Comm. V.
BASF Business Services GmbH
BASF Business Services Holding GmbH
BASF Canada Inc.
BASF Care Chemicals (Shanghai) Company Ltd.
BASF Catalysts India Pvt. Ltd.
BASF Chemcat (Thailand) Ltd.
BASF Chemicals & Polymers Pakistan (Private) Ltd.
BASF Chemicals Co. Ltd.
BASF Chemicals India Pvt. Ltd.
BASF Chile SA
BASF Coatings GmbH
BASF Coatings Ltd.
BASF Coatings S.A.
BASF Coatings S.A.S.
BASF Coatings S.P.A.
BASF Company Ltd.
BASF Construction Chemical (China) Co. Ltd.
BASF Construction Chemicals Egypt S
BASF Construction Chemicals Espana S.L.
BASF Construction Chemicals Europe AG
BASF Construction Chemicals GmbH
BASF Construction Polymers GmbH
BASF Construction Solutions GmbH
BASF Construction Systems (China). Co. Ltd.
BASF Hock Mining Chemical (China) Co. Ltd.
BASF Hong Kong Ltd.
BASF Intertrade (Shanghai) Co. Ltd.
BASF Intertrade AG
BASF Italia S.P.A.
BASF Japan Ltd.
BASF Kanoo Gulf FZE
BASF Lanka (Private) Limited
BASF Metals Ltd.
BASF Mexicana S.A. DE C.V.
BASF Nederland B.V.
BASF New Zealand Ltd.
BASF Pakistan (Private) Ltd.
BASF Paper Chemicals (Huizhou) Co. Ltd.
BASF Performance Products Limited
BASF Personal Care and Nutrition GmbH
BASF Petronas Chemicals SDN. BHD.
BASF Pharma (Evionnaz) SA
BASF Philippines Inc.
BASF Plant Science Company GmbH
BASF Poliuretani Italia S.P.A.
BASF Poliurtanos Ltda
BASF Polyurethane Specialties (China) Co. Ltd.
BASF Polyurethanes (China) Co. Ltd.
BASF Polyurethanes GmbH
BASF Polyurethanes Licencing GmbH
BASF Poliuretanos Ltd.
BASF S.A.
BASF Schweiz AG
BASF Schwarzheide GmbH
BASF Shanghai Coatings Co. Ltd.
BASF South Africa (PTY) Ltd.
BASF South East Asia Pte. Ltd.
BASF Taiwan Ltd.
BASF Türk Kimya Sanayi
BASF Vietnam Co. Ltd.
BASF Corporation
BASF East Asia Regional Headquarters Ltd.
BASF Espanola S.L.
BASF France S.A.S.
BASF Grenzach GmbH
P.T. BASF Indonesia
P.T. BASF Care Chemicals Indonesia
Shanghai BASF Polyurethane Co. Ltd.
Shanghai Gaoqiao-BASF
Shanghai MBT & SCG High-tech Construction Chemicals Co. Ltd.
BTC Speciality Chemicals
Cognis IP Management GmbH
Construction Research & Technology GmbH
K S Kali GmbH
PCI Augsburg GmbH
Styrolution India Private Limited (till 17th November 2014)
Styrolution ABS (India) Limited (till 17th November 2014)
Thai Ethoxylate Co. Ltd.
Watson Bowman ACME Corp.
(c) Key management personnel
Chairman & Managing Director
Mr. Raman Ramachandran, Ph.D.
Whole  Time Directors
Mr. Narendranath J. Baliga (w.e.f. 1st January 2015)
Mr. Rajesh Naik (w.e.f. 1st August 2014)
Mr. Thilo Bischoff (till 30th April 2014)
Mr. S. Regunathan (till 31st December 2014)
Dr. G. Ramaseshan (till 31st July 2014)
8. Transfer pricing regulations:
The management is of the opinion that the Company''s international and
domestic transactions are at an arm''s length so that aforesaid
legislation will not have any impact on the financial statements,
particularly on the amount of tax expense and that of provision for
taxation.
9. Corporate Social Responsibility (''CSR''):
As per Section 135 of the Act, a Company meeting the applicability
threshold, needs to spend atleast 2% of its average net profit for the
immediately preceding three financial years on CSR activities. The
major areas for CSR activities are promoting education facilities,
sanitation and making available safe drinking water. A CSR committee
has been formed by the Company as per the Act.
(a) Gross amount required to be spent by the Company during the year:
Rs. 18 million
(b) The areas of CSR activities and contributions made thereto are as
follows:
Mar 31, 2015
The above cash flow statement has been prepared under the "Indirect
Method" as set out in the Accounting Standard-3 on Cash Flow
Statement.
The accompanying notes form an integral part of the financial
statements.
Rs. in million
Nature 2014-15 2013-14
Contingent Liabilities
not Provided for
(a) Claim against the Company not
acknowledged as debt 44.9 38.8
In respect of which the Company has
counterclaim 68.7 68.7
(b) Demand for taxes and duties in
respect of which the company has
preferred appeals with appropriate authority
a. Income Tax 482.6 406.7
b. Customs, Excise, Service
Tax and Sales Tax 1,053.1 240.0
Commercial taxes department has issued demand notices amounting to
Rs. 865.0 Million (excludes interest and penalty) (Previous Year Rs.
91.9 Million) for the periods July 2006 - March 2007, July 2007 - March
2008, FY 08-09, FY 09-10 and periods February 2011 to March 2011 by
treating 100% of the stock transfers as interstate sales to
unregistered dealers.
The Company has filed/ is in the process of filing appeals against the
aforesaid demand notices with the Honorable Karnataka Appellate
Tribunal. The amount in respect of other periods, if any, are currently
not determinable.
The Company, on the basis of legal opinions, does not consider these
stock transfers as interstate sales.
The Honorable Karnataka Appellate Tribunal has set aside and remanded
back the impugned reassessment orders for the period April 2006 to June
2006 and April 2007 to June 2007 aggregating to Rs. 91.9 Million for
fresh assessment to lower authorities.
(b) Lease rent of Rs. 508.2 million (Previous Year Rs. 486.8 million)
towards cancellable and non cancellable leases has been included under
"Rent" in the Statement of Profit and Loss.
2. Micro, Small and Medium Enterprises Development Act, 2006
On the basis of information and records available with the Management,
the following disclosure pursuant to the above Act are made for the
amounts due to the Micro and Small enterprises, who have registered
with the competent authorities:
3. Exceptional item
During the current year, the Company has sold its non-core assets (i.e.
residential properties) and accordingly it has recognized a profit of
Rs. 291.9 million which is being disclosed as an exceptional item.
During the previous year, the Company had declared voluntary retirement
scheme for the Thane site and accordingly compensation aggregating Rs.
104.3 million had been paid and disclosed as an exceptional item.
4. Employees benefits:
Defined contribution plans:
Company's contribution to defined contribution funds amounting to Rs.
98.5 million (Previous year Rs. 113.6 million) has been charged to the
Statement of Profit and Loss.
Defined benefit plans and other long term employee benefits:
Gratuity is payable to all eligible employees of the Company on
superannuation, death, permanent disablement and resignation in terms
of provisions of the Payment of Gratuity Act, 1972, or as per the
Company's scheme whichever is more beneficial. The Company irrevocably
contributes funds to a separate Gratuity Trust which is recognised by
Income Tax authorities.
Eligible employees can carry forward and encash leave on
superannuation, death, permanent disablement and resignation as per
Company's policy.
Long Service Awards are payable to employees on completion of specified
years of service.
The contribution expected to be made by the Company during the
Financial Year 2015-16 is Rs. 61.7 million (2014-15 Rs. 127.1 million).
The plan assets under the Gratuity scheme are deposited under approved
securities. The major categories of plan assets as a percentage of
total plan assets are provided below:
The expected rate of return on assets is based on the expectation of
the average long term rate of return on investment of the fund, during
the estimated term of obligation.
The obligations are measured at the present value of estimated future
cash flows by using a discount rate that is determined with reference
to the market yields at the Balance Sheet date on Government Bonds
which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial
valuation, takes account of inflation, seniority, promotion and other
relevant factors such as supply and demand in the employment market.
Provident fund
The Company has an obligation to fund any shortfall on the yield of the
Company's Trust investments over the administered interest rates on an
annual basis. These administered rates are notified by the Government
annually. The Actuarial Society of India has issued the final guidance
for measurement of provident fund liabilities. The actuary has
accordingly provided a valuation based on the below provided
assumptions and there is no shortfall as at 31 March 2015.
The details of fund and plan assets position as at 31 March is given
below:
During the year ended 31st March 2015, amount recognised in the
statement of profit and loss for Employee provident fund is Rs. 125.1
million (Previous year Rs. 103.7 million).
5. Segment Information
(a) PRIMARY SEGMENT INFORMATION (by Business Segments)
The previous year's figures are given in light type below each item
Notes on Segment Information:
1. Segments have been identified in accordance with the Accounting
Standard on Segment Reporting (AS-17).
Business Segments have been considered as primary segments.
2. Details of type of products included in each segment Â
 Agricultural Solution - includes Agrochemicals. Agricultural
Solution is seasonal in nature.
 Performance Products - includes Tanning agents, Leather Chemicals,
Textile Chemicals, Dispersion Chemicals, Speciality Chemicals and
high-value fine chemicals for the food, pharmaceuticals, animal feed
and cosmetics industries. Speciality chemicals include additives, water
treatment and paper treatment, home and fabric care chemicals.
 Chemicals - includes Monomers, Intermediates and Petrochemicals.
 Functional Materials & Solutions - includes Catalysts, Coatings,
Construction chemicals, Polyurethanes system and Engineering plastics.
 Others - includes technical and service charges other than those
specifically identifiable to above segments.
3. Un-allocable Corporate Assets mainly include advance tax (net of
provisions) and cash and bank balances.
4. Un-allocable Corporate Liabilities mainly include Net deferred tax
liabilities, proposed dividend, short term
loan and other un-allocable liabilities.
6. Related Party Disclosure
(a) Parties where control exists
BASF Societas Europaea ('SE') Ultimate holding company
(b) Other related parties with whom transactions have taken place
during the year Fellow Subsidiaries
BASF Advanced Chemicals Co., Ltd.
(Formerly known as BASF Auxiliary)
BASF Agro B.V Arnhem (NL)
BASF Agrochemical Products B.V.
BASF Antwerpen N.V.
BASF Asia-Pacific Service Centre Sdn. Bhd.
BASF Australia Ltd.
BASF Bangladesh Ltd.
BASF Belgium Coordination Center Comm. V.
BASF Business Services Holding GmbH
BASF Business Services GmbH
BASF Canada Inc.
BASF Care Chemicals (Shanghai) Company Ltd.
BASF Catalysts India Pvt. Ltd.
BASF Chemicals & Polymers Pakistan (Private) Ltd.
BASF Chemicals India Pvt. Ltd. (Earlier known as Cognis Specialty
Chemicals (India) Pvt. Ltd.)
BASF Chemcat (Thailand) Ltd.
BASF (China) Company Ltd.
BASF Coatings GmbH BASF Coatings Ltd.
BASF Coatings S.A.
BASF Coatings S.A.S.
BASF Coatings Spa BASF Company Ltd.
BASF Construction Chemical (China) Co., Ltd.
BASF Construction Chemicals (UK) Ltd.
BASF Construction Chemicals Espana S.L.
BASF Construction Chemicals Europe AG
BASF Construction Chemicals GmbH
BASF Construction Chemicals Italia Spa
BASF Construction Polymers GmbH
BASF Construction Systems (China) Co. Ltd.
BASF Corporation
BASF Construction Solutions GmbH
BASF East Asia Regional Headquarters Ltd.
BASF Espanola S.L.
BASF FRANCE S.A.S.
BASF Grenzach GmbH
BASF Pakistan (Private) Ltd.
BASF Paper Chemicals (Jiangsu) Co., Ltd.
BASF Paper Chemicals (Huizhou)
BASF Performance Products Limited
BASF Personal Care and Nutrition GmbH
BASF Petronas Chemicals Sdn. Bhd.
BASF Pharma (Evionnaz) SA BASF Philippines Inc
BASF Plant Science Company GmbH BASF PLC
BASF Poliuretani Italia SpA
BASF Polyurethane Licensing GmbH
BASF Poliurtanos Ltda
BASF Polyurethane Specialties (China) Co., Ltd.
BASF Polyurethanes (China) Co. Ltd.
BASF Polyurethanes GmbH
BASF Qingdao Pigments Co., Ltd.
BASF S.A.
BASF Schwarzheide GmbH
BASF Schweiz AG
BASF Shanghai Coatings Co. Ltd.
BASF South Africa (PTY) Ltd.
BASF South East Asia Pte. Ltd.
BASF Taiwan Ltd.
BASF (Thai) Limited
BASF Turk Kimya Sanayi BASF UK Ltd.
BASF Vietnam Co. Ltd.
BASF Vitamins Company Limited
BASF Yapi Kimyasallari SAN. A.S.
BASF - YPC Company Limited BTC Europe GmbH
Construction Research & Technology GmbH
Cognis IP Management GMBH
Inge Gmbh
K S Kali GmbH
OOO BASF
BASF Hong Kong Ltd.
BASF Intertrade (Shanghai) Co. Ltd.
BASF Italia Spa BASF Japan Ltd.
BASF Kanoo Gulf FZE
BASF Lanka (Private) Limited BASF LLC
BASF Mexicana S.A. DE C.V.
BASF (MALAYSIA) SDN. BHD.
BASF Nederland B.V.
BASF Oy
P.T. BASF Care Chemicals Indonesia P.T.
BASF Indonesia PCI Augsburg GmbH
Shanghai MBT & SCG High-tech Construction Chemicals Co. Ltd.
Shanghai BASF Polyurethane Co., Ltd.
Shanghai Gaoqiao-BASF
Styrolution India Private Limited
Styrolution South East Asia Pte. Ltd.
Styrolution ABS (India) Limited
Thai Ethoxylate Co., Ltd.
Watson Bowman ACME Corp
BASF Construction Chemicals UAE LLC
(c) Key management personnel
Chairman & Managing Director
Mr. Prasad Chandran (till 30th Sept 2013)
Mr. Raman Ramachandran, Ph.D. (from 1st Oct 2013)
Whole - Time Directors
Mr. S. Regunathan (till 31st December 2014)
Mr. N. Baliga (w.e.f. 1st January 2015)
Dr. G. Ramaseshan (till 31st July 2014)
Mr. R. Naik (w.e.f. 1st August 2014)
Mr. Thilo Bischoff (till 30th April 2014)
The above remuneration excludes provision for gratuity, leave
encashment and long service award which is provided on an overall basis
for the Company.
The Company has paid the above remuneration to the Directors as per the
terms of their respective service contracts with the Company which were
approved by the Board of Directors and shareholders. In view of
inadequacy of profits in the current financial year, pursuant to
provisions of Section 197 read with Section II of Part II of Schedule V
of the Companies Act, 2013, the Company has made an application to the
Central Government for payment of the excess remuneration amounting to
Rs. 19.8 million to the said Directors, which is pending approval.
The terms of appointment of Mr. Narendranath J. Baliga as Wholetime
Director is subject to the approval of the shareholders at the ensuing
Annual General Meeting of the Company and the Central Government.
7. Transfer pricing regulations:
The management is of the opinion that the Company's international and
domestic transactions are at an arms length so that aforesaid
legislation will not have any impact on the financial statements,
particularly on the amount of tax expense and that of provision for
taxation.
8. Foreign currency exposure details:
The Company uses forward exchange contracts for the purposes of
covering its foreign currency exposure:
Mar 31, 2014
1. Contingent Liabilities
Rs. in million
Nature 2013-14 2012-13
Contingent Liabilities not Provided for
(a) Claim against the Company not
acknowledged as debt 38.8 24.1
In respect of which the Company
has counterclaim 68.7 68.7
(b) Demand for taxes and duties in
respect of which the company
has preferred appeals with
appropriate authority
a. Income Tax 406.7 262.8
b. Customs, Excise, Service Tax
and Sales Tax* 240.0 174.8
* Commercial taxes department has issued demand notices amounting to
Rs. 36.0 million and Rs. 55.9 million (excludes interest and penalty)
for the period Apr 06-June 06 and Apr 07-June 07 respectively by
treating 100% of the stock transfers as interstate sales to
unregistered dealer. The amounts in respect of subsequent periods, if
any, are currently not determinable. The Company is in the process of
filing an appeal against the aforesaid demand notices. The Company, on
the basis of a legal opinion, does not consider these stock transfer as
interstate sales.
2. Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided (net of advances) for Rs. 676.7 million
(Previous Year Rs. 3,365.3 million).
3. Operating lease
The Company has taken vehicles and office facilities under operating
leases.
4. Micro, Small and Medium Enterprises Development Act, 2006
On the basis of information and records available with the Management,
the following disclosure pursuant to the above Act are made for the
amounts due to the Micro and Small enterprises, who have registered
with the competent authorities:
5. Exceptional item
The Board of Directors on 18 September 2012 approved the proposal to
shut down the Expandable Polystyrene business forming part of
"Plastics" segment including the Company''s Styropor® production
facility at Thane. The Company has made a provision towards impairment
of Rs. 95.4 million (based on estimated salvage value) in respect of
the net fixed assets (mainly plant and machinery) related to this
business which is forming part of exceptional item in the Statement of
Profit and Loss in the previous year.
During the current year the Company had declared voluntary retirement
scheme for the Thane site and accordingly compensation aggregating Rs.
104.3 million had been paid and disclosed as an exceptional item.
6. Employees benefits:
Defined contribution plans:
Company''s contribution to defined contribution funds amounting to Rs.
113.6 million (Previous Year Rs. 95.8 million) has been charged to the
Statement of Profit and Loss.
Defined benefit plans and other long term employee benefits:
Gratuity is payable to all eligible employees of the Company on
superannuation, death, permanent disablement and resignation in terms
of provisions of the Payment of Gratuity Act, 1972, or as per the
Company''s scheme whichever is more beneficial. The Company irrevocably
contributes funds to a separate Gratuity Trust which is recognised by
Income Tax authorities.
Eligible employees can carry forward and encash leave on
superannuation, death, permanent disablement and resignation as per
Company''s policy.
Long Service Awards are payable to employees on completion of specified
years of service.
The expected rate of return on assets is based on the expectation of
the average long term rate of return on investment of the fund, during
the estimated term of obligation.
The obligations are measured at the present value of estimated future
cash flows by using a discount rate that is determined with reference
to the market yields at the Balance Sheet date on Government Bonds
which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial
valuation, takes account of inflation, seniority, promotion and other
relevant factors such as supply and demand in the employment market.
Provident fund
The Company has an obligation to fund any shortfall on the yield of the
trust''s investments over the administered interest rates on an annual
basis. These administered rates are notified by the Government
annually. The Actuarial Society of India has issued the final guidance
for measurement of provident fund liabilities. The actuary has
accordingly provided a valuation based on the below provided
assumptions and there is no shortfall as at 31 March, 2014.
Notes on Segment Information:
1. The Company had reorganised its segment structure with effect from
1st April, 2013 to better align to market needs. Accordingly, the
Plastic Segment has ceased to exist. Functional Solution Segment has
now been renamed as Functional Materials and Solution. This segment
includes Styropor, part of Engineering Plastics and part of
Polyurethanes which were earlier in Plastic Segment. The remaining part
of the earlier Plastic Segment are now included in the Chemicals
Segment. Previous period segment figures are regrouped in accordance
with revised segment structure.
2. Segments have been identified in accordance with the Accounting
Standard on Segment Reporting (AS-17). Business Segments have been
considered as primary segments.
3. Details of type of products included in each segment Â
 Agricultural Solution - includes Agrochemicals. Agricultural Solution
is seasonal in nature.
 Performance Producte-Tanning agents, Leather Chemicals, Textile
Chemicals, Dispersion Chemicals, Speciality Chemicals and high-value
fine chemicals for the food, pharmaceuticals, animal feed and cosmetics
industries.
 Chemicals - Chemicals includes monomers, intermediates and
petrochemicals.
 Functional Solutions - Functional Solutions includes catalysts,
coatings, construction chemicals, styropor, polyurethanes system and
engineering plastics.
 Others - includes technical and service charges.
4. Un-allocable Corporate Assets includes advance tax (net of
provisions) and cash and bank balances.
5. Un-allocable Corporate Liabilities include Net deferred tax
liabilities, proposed dividend, short term loan and other un-allocable
liabilities.
7. Related Party Disclosure
(a) Parties where control exists
BASF Societas Europaea (''SE'') Ultimate holding company
(b) Other related parties with whom transactions have taken place
during the year Fellow Subsidiaries
BASF A/S
BASF Agro B.V.
BASF Agro B.V. Arnhem (NL)
BASF Agrochemical Products B.V.
BASF Agricultural Specialties Pty Ltd.
BASF Antwerpen N.V.
BASF Asia-Pacific Service Centre Sdn. Bhd.
BASF Australia Ltd.
BASF Auxiliary Chemicals Company Ltd.
BASF Bangladesh Ltd.
BASF Beauty Care Solutions France S.A.S.
BASF Belgium Coordination Center Comm. V.
BASF Business Services Holding GmbH
BASF Canada Inc.
BASF Care Chemicals (Shanghai) Company Ltd.
BASF Catalysts India Pvt. Ltd.
BASF Chemicals & Polymers Pakistan (Private) Ltd
BASF Chemicals Company Ltd.
BASF Chemicals India Pvt. Ltd. (Earlier known as Cognis Specialty
Chemicals Pvt. Ltd.
BASF Chemcat (Thailand) Ltd.
BASF (China) Company Ltd.
BASF Coatings GmbH
BASF Coatings Intl Trade (Shanghai) Co. Ltd.
BASF Coatings Intl Trade Co., Ltd.
BASF Coatings Ltd.
BASF Coatings S.A.
BASF Coatings S.A.S.
BASF Coatings Spa
BASF Color Solutions Germany GmbH
BASF Company Ltd.
BASF Construction Chemical (China) Co., Ltd.
BASF Construction Chemicals (UK) Ltd.
BASF Construction Chemicals Espana S.L.
BASF Construction Chemicals Europe AG
BASF Construction Chemicals France S.A.S.
BASF Construction Chemicals Italia Spa
BASF Mexicana S.A. DE C.V
BASF (MALAYSIA) SDN. BHD.
BASF Nederland B.V.
BASF Oy
BASF Pakistan (Private) Ltd.
BASF Paper Chemicals (Jiangsu) Co., Ltc
BASF Paper Chemicals (Huizhou)
BASF Performance Products pic
BASF Performance Products Limited
BASF Personal Care and Nutrition GmbH
BASF Peruana S.A.
BASF Petronas Chemicals Sdn. Bhd.
BASF Pharma (Evionnaz) SA
BASF Philippines Inc
BASF Plant Science Company GmbH
BASF PLC
BASF Poliuretani Italia SpA
BASF Polyurethane Licensing GmbH
BASF Polyurethane Specialties (China) C
BASF Polyurethanes (China) Co. Ltd
BASF Polyurethanes (Malaysia) Sdn. Bhd
BASF Polyurethanes (Thailand) Ltd.
BASF Polyurethanes GmbH
BASF Qingdao Pigments Co., Ltd.
BASF S.A.
BASF Schwarzheide GmbH
BASF Schweiz AG
BASF Shanghai Coatings Co. Ltd.
BASF Singapore Pte. Ltd.
BASF South Africa (PTY) Ltd.
BASF South East Asia Pte Ltd.
BASF Taiwan Ltd.
BASF (Thai) Limited
BASF UK Ltd.
BASF Vietnam Co. Ltd.
BASF Vitamins Company Limited
BASF Yapi Kimyasallari SAN. A.S.
BASF - YPC Company Limited
BASF Construction Chemicals UAE LLC
BASF Construction Polymers GmbH
BASF Construction Systems (China). Co. Ltd.
BASF Corporation
BASF Construction Solutions GmbH (Formerly known as BASF Construction
Chemicals GmbH)
BASF East Asia Regional Headquarters Ltd.
BASF Espanola S.L.
BASF FZE
BASF Gao-Qiao Performance Chemicals (Shanghai) Co. Ltd.
BASF Grenzach GmbH
BASF Health and Care Products France S.A.S.
BASF Hong Kong Ltd.
BASF INOAC Polyurethanes Ltd.
BASF Intertrade (Shanghai) Co. Ltd.
BASF Iran (PJS) Company
BASF Italia Spa
BASF Japan Ltd.
BASF Kanoo Gulf FZE
BASF Kanoo Polyurethanes LLC
BASF Lanka (Private) Limited
BASF LLC
BTC Europe GmbH
Cognis Australia Pty Ltd.
Cognis Taiwan Ltd.
Construction Research & Technology GmbH
Elastogran Kanoo Polyurethane Systems LLC
Inge Gmbh
K S Aktiengesellschaft
K S Kali GmbH
RT. BASF Care Chemicals Indonesia
RT. BASF Indonesia
PCI Augsburg GmbH
PolyAd Services GmbH
Shanghai MBT & SCG High-tech Constructic Chemicals Co. Ltd.
Shanghai BASF Polyurethane Co., Ltd. Shanghai Gaoqiao-BASF Styrolution
GmbH Styrolution India Private Limited Styrolution South East Asia Pte.
Ltd. Styrolution ABS (India) Limited Watson Bowman ACME Corp
(c) Key management personnel Chairman & Managing Director
Mr. Prasad Chandran (till 30th Sept 2013)
Mr. Raman Ramachandran, Ph.D. (from 1st Oct 2013)
Whole -Time Directors
Mr. S. Regunathan Dr. G. Ramaseshan Mr. Thilo Bischoff
8. Transfer pricing regulations:
The management is of the opinion that the Company''s international and
domestic transactions are at an arms length so that aforesaid
legislation will not have any impact on the financial statements,
particularly on the amount of tax expense and that of provision for
taxation.
Mar 31, 2013
1. Contingent Liabilities
Rs. Mio.
Nature 2012-13 2011-12
Contingent Liabilities not Provided for
(a) Claim against the Company not
acknowledged as debt 24.1 22.2
In respect of which the Company has counterclaim 68.7 68.7
(b) Demand for taxes and duties in respect of
which the company has preferred appeals with
appropriate authority
a. Income Tax 262.8 18.4
b. Customs, Excise, Service Tax and Sales Tax 174.8 175.9
2. Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided (net of advances) for Rs. 3,365.3 million
(Previous Year Rs. 280.0 million).
3. Operating lease
The Company has taken vehicles and office facilities under operating
leases.
(a) Total minimum lease payments in respect of non-cancellable leases
are as follows:
(b) Lease rent of Rs. 418.1 million (Rs. 376.7 million) has been
included under "Rent" in the Statement of Profit and Loss.
4. Micro, Small and Medium Enterprises Development Act, 2006
On the basis of information and records available with the Management,
the following disclosure pursuant to the above Act are made for the
amounts due to the Micro and Small enterprises, who have registered
with the competant authorities:
5. Purchase of specialty chemicals business of BASF Chemicals India
Private Limited (Formerly known as Cognis Specialty Chemicals Private
Limited)
Pursuant to an Agreement entered into between BASF India Limited
(''the Company'') and Cognis Specialty Chemicals Private Limited
(''Cognis''), the specialty chemicals business of Cognis was acquired
from 1st July 2011 for consideration of Rs. 134 Mio. The assets and
liabilities of Cognis have been taken over at fair value as determined
by an independent valuer and the difference between the fair value of
the net assets purchased over the consideration paid aggregating to Rs.
68.8 Mio. has been accounted as Goodwill in the previous year.
6. Exceptional item
The Board of Directors on 18 September 2012 approved the proposal to
shut down the Expandable Polystyrene business forming part of
"Plastics" segment including the Company''s Styropor® production
facility at Thane. The Company has made a provision towards impairment
of Rs. 95.4 million (based on estimated salvage value) in respect of
the net fixed assets (mainly plant and machinery) related to this
business which is forming part of exceptional item in the Statement of
Profit and Loss.
7. Employees benefits:
Defined contribution plans:
Company''s contribution to defined contribution funds amounting to Rs.
95.8 Mio. (Previous year Rs. 82.5 Mio.) has been charged to the
Statement of Profit and Loss.
Defined benefit plans and other long term employee benefits:
Gratuity is payable to all eligible employees of the Company on
superannuation, death, permanent disablement and resignation in terms
of provisions of the Payment of Gratuity Act, 1972, or as per the
Company''s scheme whichever is more beneficial. The Company irrevocably
contributes funds to a separate Gratuity Trust which is recognised by
Income Tax authorities.
Eligible employees can carry forward and encash leave on
superannuation, death, permanent disablement and resignation as per
Company''s policy.
8. Related Party Disclosure
(a) Parties where control exists
BASF Societas Europaea (''SE'') Ultimate holding company
(b) Other related parties with whom transactions have taken place
during the year Fellow Subsidiaries
BASF - YPC Company Limited
BASF (China) Company Ltd.
BASF (Malaysia) Sdn. Bhd.
BASF (Thai) Limited
BASF A/S
BASF Agro B.V.
BASF Agro B.V. Arnhem (NL)
BASF Agrochemical Products B.V.
BASF Antwerpen N.V.
BASF Asia-Pacific Service Centre Sdn. Bhd.
BASF Australia Ltd.
BASF Auxiliary Chemicals Company Ltd.
BASF Bangladesh Ltd.
BASF Beauty Care Solutions France S.A.S.
BASF Belgium Coordination Center Comm. V.
BASF Canada Inc.
BASF Care Chemicals (Shanghai) Company Ltd.
BASF Catalysts India Pvt. Ltd.
BASF Chemicals & Polymers Pakistan (Private) Ltd.
BASF Chemicals Company Ltd.
BASF Chemicals India Pvt. Ltd. (Formerly known as Cognis Specialty
Chemicals Pvt. Ltd.)
BASF Coatings GmbH
BASF Coatings Intl Trade (Shanghai) Co. Ltd.
BASF Coatings Intl Trade Co., Ltd.
BASF Coatings Ltd.
BASF Coatings S.A.
BASF Coatings S.A.S.
BASF Coatings Spa
BASF Kanoo Gulf FZE
BASF Kanoo Polyurethanes LLC
BASF Lanka (Private) Limited
BASF Mexicana S.A. DE C.V.
BASF Nederland B.V.
BASF Oy
BASF Pakistan (Private) Ltd.
BASF Paper Chemicals (Jiangsu) Co., Ltd.
BASF Performance Products plc
BASF Personal Care and Nutrition GmbH
BASF Peruana S.A.
BASF Petronas Chemicals Sdn. Bhd.
BASF Pharma (Evionnaz) SA
BASF Philippines Inc
BASF Plant Science Company GmbH
BASF PLC
BASF Poliuretani Italia SpA
BASF Polyurethane Licensing GmbH
BASF Polyurethane Specialties (China) Co., Ltd.
BASF Polyurethanes (China) Co. Ltd.
BASF Polyurethanes (Malaysia) Sdn. Bhd.
BASF Polyurethanes (Thailand) Ltd.
BASF Polyurethanes GmbH
BASF Qingdao Pigments Co., Ltd.
BASF S.A.
BASF Schweiz AG
BASF Shanghai Coatings Co. Ltd.
BASF Singapore Pte. Ltd.
BASF South Africa (PTY) Ltd.
BASF Color Solutions Germany GmbH
BASF Company Ltd.
BASF Construction Chemical (China) Co., Ltd.
BASF Construction Chemicals (UK) Ltd.
BASF Construction Chemicals Espana S.L.
BASF Construction Chemicals Europe AG
BASF Construction Chemicals France S.A.S.
BASF Construction Chemicals GmbH
BASF Construction Chemicals Italia Spa
BASF Construction Chemicals UAE LLC
BASF Construction Polymers GmbH
BASF Construction Systems (China) Co. Ltd.
BASF Corporation
BASF East Asia Regional Headquarters Ltd.
BASF Espanola S.L.
BASF FZE
BASF Gao-Qiao Performance Chemicals (Shanghai Co Ltd.)
BASF Grenzach GmbH
BASF Health and Care Products France S.A.S.
BASF Hong Kong Ltd.
BASF INOAC Polyurethanes Ltd.
BASF Intertrade (Shanghai) Co. Ltd.
BASF Iran (PJS) Company
BASF IT Services Holding GmbH
BASF Italia Spa
BASF South East Asia Pte Ltd.
BASF Taiwan Ltd.
BASF UK Ltd.
BASF Vietnam Co. Ltd.
BASF Vitamins Company Limited
BASF Yapi Kimyasallari SAN. A.S.
BTC Europe GmbH
BASF Japan Ltd.
Elastogran Kanoo Polyurethane Systems LLC
Cognis Australia Pty. Ltd.
Cognis Taiwan Ltd.
Construction Research & Technology GmbH
K S Aktiengesellschaft
K S Kali GmbH
P.T. BASF Care Chemicals Indonesia
P.T. BASF Indonesia
PCI Augsburg GmbH
PolyAd Services GmbH
Shanghai MBT & SCG High-tech Construction Chemicals Co. Ltd.
Shanghai BASF Polyurethane Co., Ltd.
Styrolution GmbH
Styrolution India Private Limited
Styrolution South East Asia Pte. Ltd.
Watson Bowman ACME Corp
(c) Key Management Personnel
Chairman & Managing Director
Mr. Prasad Chandran
Whole-Time Directors
Mr. S. Regunathan
Dr. G. Ramaseshan
Mr. Thilo Bischoff
9. Transfer pricing regulations:
The management is of the opinion that the Company''s international and
domestic transactions are at an arms length so that aforesaid
legislation will not have any impact on the financial statements,
particularly on the amount of tax expense and that of provision for
taxation.
10. Foreign currency exposure details:
As on 31st March 2013, the Company has 35 forward contracts totaling to
USD 124.9 Mio. (Rs. 6,791.9 Mio.) (Previous Year USD 73.6 Mio. (Rs.
3,671 Mio.)) for the purposes of covering its foreign currency exposure
related to trade receivables, trade payables and borrowings. The
unamortized premium of Rs. 689.4 Mio. (Previous Year Rs. 50.2 Mio.)
pertaining to the same will be recognized subsequently. Foreign
currency exposure that is not covered as at 31st March is as follows:
11. The Previous year figures have been regrouped and rearranged
whereever necessary.
Mar 31, 2012
1. Contingent Liabilities
Rs. Mio.
Nature 2011-12 2010-11
Contingent Liabilities not
Provided for
(a) Claim against the Company not
acknowledged as debt 22.2 31.1
In respect of which the Company has
counterclaim 68.7 67.0
(b) Demand for taxes and duties in
respect of which the company
has preferred appeals with appropriate
authority
a. Income Tax 18.4 32.0
b. Customs, Excise, Service Tax and
Sales Tax 175.9 142.7
2. Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided (net of advances) for Rs. 280.0 million
(Previous Year Rs. 257.2 million).
3. Purchase of specialty chemicals business of Cognis Specialty
Chemicals India Private Limited
Pursuant to an Agreement entered into between BASF India Limited ('the
Company') and Cognis Specialty Chemicals India Private Limited
('Cognis'), the specialty chemicals business of Cognis was acquired
from 1st July, 2011 for consideration of Rs. 134 Mio. The assets and
liabilities of Cognis have been taken over at fair value as determined
by an independent valuer and the difference between the fair value of
the net assets purchased over the consideration paid aggregating to Rs.
68.8 Mio. has been accounted as Goodwill.
4. Amalgamation of BASF Coatings (India) Private Limited (BCIN), BASF
Construction Chemicals (India) Private Limited (BCC) and BASF
Polyurethanes India Limited (BPIL) with BASF India Limited (BIL or the
Company)
Pursuant to the Scheme of Amalgamation ('the scheme') as approved in
the court convened shareholder meeting held on 3rd November, 2010 and
subsequently sanctioned by the Honourable High Court of Bombay vide its
order dated 14th January, 2011, BCIN, BCC, BPIL (wholly owned
subsidiary of the Company) (collectively referred to as the
amalgamating companies) were merged with the Company. The amalgamating
companies were engaged in the business of manufacturing and trading of
resins, thinners and varnishes, building & construction materials &
polyurethane systems house and polyesterols.
As provided in the Scheme of Amalgamation, 619,589 equity shares of BIL
(representing 1.43% of equity share capital as at 31st March, 2011)
were issued against 37,175,399 shares of BCIN (representing 100% of
equity share capital as at 1st April, 2010) and 1,896,064 equity shares
of BIL (representing 4.38% of equity share capital as at 31st March,
2011) were issued against 2,464,885 shares of BCC (representing 100% of
equity share capital as at 1st April, 2010). 9,000,000 equity shares
(representing 100% of equity share capital as at 1st April, 2010 of
BPIL) and BILs investment in such equity shares held by the Company
were cancelled. Accordingly 2,515,653 equity shares of Rs. 10/- each
fully paid up were issued to the equity share holders of the BCIN and
BCC without payment being received in cash.
As per the Scheme of Amalgamation, the 'Appointed Date' is 1st April,
2010. The amalgamation was accounted under the "pooling of
interests" method as prescribed by Accounting Standard 14 on
"Accounting for Amalgamations". Accordingly:
(i) All the assets and liabilities of BCIN, BCC and BPIL were
transferred and vested in the Company at book values with effect from
1st April, 2010. The reserves of the amalgamating companies appear in
the same form in the financial statements of the Company.
(ii) As specified in the scheme of amalgamation, the difference between
the amount recorded as share capital issued (Rs. 25.2 Mio.) and the
amount of share capital of the amalgamating companies (Rs. 396.4 Mio.)
aggregating to Rs. 371.2 Mio. was adjusted in amalgamation reserves.
(iii) The book values of the intercompany balances and holdings were
cancelled.
5. Employees benefits:
Defined contribution plans:
Company's contribution to defined contribution funds amounting to Rs.
82.5 Mio. (Previous year Rs. 63.7 Mio.) has been charged to the
Statement of Profit and Loss.
Defined benefit plans and other long term employee benefits:
Gratuity is payable to all eligible employees of the Company on
superannuation, death, permanent disablement and resignation in terms
of provisions of the Payment of Gratuity Act, 1972, or as per the
Company's scheme whichever is more beneficial. The Company irrevocably
contributes funds to a separate Gratuity Trust which is recognised by
Income Tax authorities.
Eligible employees can carry forward and encash leave on
superannuation, death, permanent disablement and resignation as per
Company's policy.
Long Service Awards are payable to employees on completion of specified
years of service at the rate of 0.5 month to 1.5 months eligible
salary.
The expected rate of return on assets is based on the expectation of
the average long term rate of return on investment of the fund, during
the estimated term of obligation.
The obligations are measured at the present value of estimated future
cash flows by using a discount rate that is determined with reference
to the market yields at the Balance Sheet date on Government Bonds
which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial
valuation, takes account of inflation, seniority, promotion and other
relevant factors such as supply and demand in the employment market.
Provident fund
The Company has an obligation to fund any shortfall on the yield of the
trust's investments over the administered interest rates on an annual
basis. These administered rates are notified by the Government
annually. The Actuarial Society of India has issued the final guidance
for measurement of provident fund liabilities during the year ended
March 31, 2012. The actuary has accordingly provided a valuation based
on the below provided assumptions and there is no shortfall as at March
31, 2012.
Notes on Segment Information:
1. Segments have been identified in accordance with the Accounting
Standard on Segment Reporting (AS-17). Business Segments have been
considered as primary segments.
2. Details of type of products included in each segment Ã
à Agricultural Solution - includes Agrochemicals. Agricultural
Solution is seasonal in nature.
à Performance Products - Tanning agents, Leather Chemicals, Textile
Chemicals, Dispersion Chemicals, Specialty Chemicals and high-value
fine Chemicals for the food, pharmaceuticals, animal feed and cosmetics
industries.
à Plastics - Expandable Polystyrene (EPS), Engineering Plastics and
Polyurethanes.
à Chemicals - Chemicals includes inorganic chemicals, intermediates
and petrochemicals.
à Functional Solution - Functional Solution includes coatings and
construction chemicals.
à Others - includes technical and service charges.
3. Un-allocable Corporate Assets include Net Deferred Tax Assets and
other un-allocable assets.
4. Un-allocable Corporate Liabilities include Proposed Dividend and
other un-allocable liabilities.
6. Transfer pricing regulations:
The management is of the opinion that the Company's international
transactions are at an arms length so that aforesaid legislation will
not have any impact on the financial statements, particularly on the
amount of tax expense and that of provision for taxation.
7. Foreign currency exposure details:
As on 31st March, 2012, the Company has 67 forward contracts totalling
to USD 73.60 Mio. (Rs. 3,671.00 Mio.) for the purposes of hedging its
foreign currency exposure. The unamortized premium of Rs. 50.15 Mio.
pertaining to the same will be recognized subsequently. Foreign
currency exposure that is not hedged as at 31st March is as follows:
8. Previous year figures are regrouped/reclassified pursuant to
adoption of requirements of revised Schedule VI of Companies Act, 1956.
Mar 31, 2011
1. Amalgamation of BASF Coatings (India) Private Limited (BCIN), BASF
Construction Chemicals (India) Private Limited (BCC) and BASF
Polyurethanes India Limited (BPIL) with BASF India Limited (BIL or the
Company)
Pursuant to the Scheme of Amalgamation ('the scheme') as approved in
the court convened shareholder meeting held on 3rd November, 2010 and
subsequently sanctioned by the Honourable High Court of Bombay vide its
order dated 14th January, 2011, BCIN, BCC, BPIL (wholly owned
subsidiary of the Company) (collectively referred to as the
amalgamating companies) have been merged with the Company. The
amalgamating companies were engaged in the business of manufacturing
and trading of resins, thinners and varnishes, building & construction
materials & polyurethane systems house and polyesterols.
As provided in the Scheme of Amalgamation, 619,589 equity shares of BIL
(representing 1.43% of equity share capital as at 31st March, 2011) are
issued against 37,175,399 shares of BCIN (representing 100% of equity
share capital as at 1st April, 2010) and 1,896,064 equity shares of BIL
(representing 4.38% of equity share capital as at 31st March, 2011) are
issued against 2,464,885 shares of BCC (representing 100% of equity
share capital as at 1st April, 2010). 9,000,000 equity shares
(representing 100% of equity share capital as at 1st April, 2010 of
BPIL) and BIL's investment in such equity shares held by the Company
stands cancelled. Accordingly 2,515,653 equity shares of Rs. 10/- each
fully paid up have been issued to the equity share holders of the BCIN
and BCC without payment being received in cash.
As per the Scheme of Amalgamation, the 'Appointed Date' is 1st April,
2010. The amalgamation has been accounted under the "pooling of
interests" method as prescribed by Accounting Standard 14 on
"Accounting for Amalgamations". Accordingly:
(i) All the assets and liabilities of BCIN, BCC and BPIL have been
transferred and vested in the Company at book values with effect from
1st April, 2010. The reserves of the amalgamating companies appear in
the same form in the financial statements of the Company.
(ii) As specified in the scheme of amalgamation, the difference between
the amount recorded as share capital issued (Rs. 25.2 Mio.) and the
amount of share capital of the amalgamating companies (Rs. 396.4 Mio.)
aggregating to Rs. 371.2 mio is adjusted in amalgamation reserves.
(iii) The book values of the intercompany balances and holdings stand
cancelled.
In view of the aforesaid amalgamation with effect from 1st April, 2010,
the figures for the current year are not strictly comparable to those
of the prior year.
2. Amalgamation of Ciba India Limited (CIL), Diamond Dye-Chem Limited
(DDL) and Ciba Research India Private Limited (CRIPL) with the Company
Pursuant to the Scheme of Amalgamation ('the scheme') as approved in
the court convened shareholder meeting held on 16th December, 2009 and
subsequently sanctioned by the Honourable High Court of Bombay vide its
order dated on 26th February, 2010, CIL, DDL (wholly owned subsidiary
of CIL) and CRIPL (collectively referred to as the amalgamating
companies) have been merged with the Company. The amalgamating
companies were engaged in the business of manufacturing and trading of
specialty chemicals and in commoditized products.
As provided in the Scheme of Amalgamation,10,637,927 equity shares of
BIL (representing 26.1% of equity share capital as at 31st March, 2010)
were issued against 13,280,819 shares of CIL (representing 100% of
equity share capital as at 1st February, 2010) and 1,941,912 equity
shares of BIL (representing 4.76% of equity share capital as at 31st
March, 2010) were issued against 10,788,401 shares of CRIPL
(representing 100% of equity share capital as at 1st February, 2010).
Accordingly 12,579,839 equity shares of Rs. 10/- each fully paid up
have been issued to the equity share holders of the CIL, CRIPL whose
names appear in the register of members on record date i.e 18th March,
2010, without payment being received in cash.
As per the Scheme of Amalgamation, the 'Appointed Date' is 1st
February, 2010. The amalgamation has been accounted under the "pooling
of interests" method as prescribed by Accounting Standard 14 on
"Accounting for Amalgamations". Accordingly:
(i) All the assets and liabilities of CIL, DDL and CRIPL have been
transferred and vested in the Company with effect from 1sl February,
2010.
(ii) As specified in the scheme of amalgamation, the difference between
the amount recorded as share capital issued (Rs. 125.7 Mio.) and the
amount of share capital of the amalgamating companies (Rs. 269.7 Mio.)
aggregating to Rs.144.0 Mio. is adjusted in General Reserves.
(iii) The book values of the intercompany balances and holdings stand
cancelled.
3. Contingent Liabilities not provided for:
(a) Claims against the Company not acknowledged as debts: Rs. 31.1 Mio.
(Previous Year Rs. 30.2 Mio.) in respect of which the Company has
counter claims of Rs. 67.0 Mio. (Previous Year Rs. 67.0 Mio.)
(b) Demands for taxes and duties in respect of which the Company has
preferred appeals with appropriate authorities
a. Income tax : Rs. 32.0 Mio. (Previous Year Rs. 66.6 Mio.)
b. Customs, Excise and Sales tax : Rs. 142.7 Mio. (Previous Year Rs.
131.0 Mio.)
4. Estimated amount of contracts remaining to be executed on capital
account and not provided (net of advances) for Rs. 257.2 Mio. (Previous
Year Rs. 70.2 Mio.).
5. The exchange loss of Rs. 220.7 Mio. (Previous Year loss of Rs. 48.1
Mio.) has been included in the Profit and Loss Account for the year.
6. Expenditure on Research and Development charged to Profit and Loss
Account Rs. 104.5 Mio. (Previous Year Rs. 80.0 Mio.).
7. Employees Benefits:
Defined contribution plans:
Company's contribution to defined contribution funds amounting to Rs.
125.7 Mio. (Previous Year Rs. 71.0 Mio.)
has been charged to the Profit & Loss Account.
Defined benefit plans and other Long term employee benefits :
Gratuity is payable to all eligible employees of the Company on
superannuation, death, permanent disablement and resignation in terms
of provisions of the Payment of Gratuity Act, 1972, or as per the
Company's scheme whichever is more beneficial. The Company irrevocably
contributes funds to a separate Gratuity Trust which is recognised by
Income Tax authorities.
Eligible employees can carry forward and encash leave on
superannuation, death, permanent disablement and resignation as per
Company's policy.
Long Service Awards are payable to employees on completion of specified
years of service at the rate of 0.5 month to 1.5 months eligible salary
for every completed year.
8. Related Party Disclosures:
(a) Parties where control exists
BASF SE Holding Company
BASF Polyurethanes India Ltd*. 100% Subsidiary
(b) Other related parties with whom transactions have taken place
during the year Fellow Subsidiaries
BASF PLC
BASF Asia Pacific Service Centre Sdn. Bhd.
BASF CANADA INC
BASF Bangladesh Ltd.
BASF Chemicals Company Ltd.
BASF Chemicals and Polymers Pakistan (Pvt) Ltd.
BASF China Limited
BASF Coatings (India) Private Ltd.*
BASF Company Ltd.
BASF Construction Chemicals (India) Private Ltd.*
BASF Corporation
BASF Curtex S.A.
BASF East Asia Regional Headquarters Limited
BASF Construction Chemicals, Dubai
BASF IT Services Holding GmbH
BASF Construction
BASF Kanoo Gulf FZE
BASF Construction Polymers GmbH
BASF Coatings GmbH
BASF Japan Ltd.
BASF Philippines, Inc.
BASF Chemtrade Gesellschaft Mbh
BASF Coating S.A.
BASF South East Asia Pte. Ltd.
Styrolution India Private Limited (Previously known as BASF Styrenics
Private Limited)
BASF Tuerk Kimya Sanayi Ve Ticaret Ltd.Sti.
BASF Finlay (Private) Limited
BASF Coating S.A.S.
BASF Color Solutions Germany GmbH
BASF Italia SPA
Construction Research & Technology GmbH
P.T. BASF Indonesia
BASF Antwerpen N. V.
BASF Agrochemical Products B.V.
BASF Australia Ltd.
BASF South Africa (Pty) Ltd.
BASF Polyurethane Specialties (China) Company Ltd.
BASF Asia Pacific (India) Pvt. Ltd.
BASF Fine Chemicals Switzerland S.A.
BASF Catalysts India Pvt. Ltd.
Styrolution South East Asia
BASF Construction Systems (China)
BASF Construction Chemicals GmbH
BASF Coatings Japan Ltd.
BASF YPC Company Ltd.
BASF (China) Co. Ltd.
BASF A/S.
BASF Agro B.V.
BASF Agro B.V.Arnhem (NL)
BASF Auxiliary Chemicals
BASF Belgium S.A.
BASF Chemicals & Polymers
BASF Coatings Spa
BASF Construction Chemicals, (Europe) A.G.
BASF Construction Chemicals, (UK) Ltd.
BASF Iran AG
BASF JCIC Neopentylglycol Co. Ltd.
BASF Oy
BASF Paper Chemicals
BASF Performance Products LLC
BASF Performance Products Trading
BASF Petronas Chemicals Sdn. Bhd.
BASF Polyurethane (China) Co. Ltd.
BASF Singapore PTE. Ltd.
BASF Vietnam Co. Ltd.
Elastogran Kanoo Polyurethane Systems LLC
RELIUS Coatings GmbH & Co. KG
BASF FZE
BASF Mexican S.A DE. C.V
BASF Poliurethani Italia SPA
BASF Polyurethane Specialities
BASF Polyurethane (Thailand) Ltd.
BASF Shanghai Coatings Co. Ltd.
PCI Augsburg GmbH
* Merged with the Company w.e.f. 01st April, 2010.
BASF East Asia Regional
BASF Espanola S.L
BASF Schweiz AG
BASF S.A.
BASF Taiwan Ltd.
BASF (Malaysia) Sdn. Bhd.
BASF (Thai) Ltd.
BASF Agro B.V. - Wadenswil
BASF Asia-Pacific Service Center
BASF Auxiliary Chemicals Co. Ltd.
BASF CHEM Trade GmbH
BASF Chemicals & Polymers Pakistan
BASF Coatings International Trade (Shanghai)
BASF Construction Chemicals, (Shanghai) Co. Ltd.
BASF INOAC Polyurethanes Ltd.
BASF Italia Sri
BASF Lanka (Pvt) Ltd.
BASF Pakistan (Private) Ltd.
BASF Paper Chemicals (Jiangsu) Co. Ltd.
BASF Performance Products PLC.
BASF Peruana S.A.
BASF Pharma (Evionnaz) S.A.
BASF Qingdao Pigments Co. Ltd.
BASF Speciality Chemicals
BASF Vitamins Company Limited
Iranian BASF Construction Chemicals
Shanghai BASF Polyurethanes Company Ltd.
BASF Hongkong Ltd.
BASF Netherland B.V.
BASF Polyurethane Licensing GmbH
BASF Polyurethane (Malaysia)
BASF Polyurethane GmbH
BASF YAPI Kimyasallari
Shanghai Gao QIAO
(c) Key Management Personnel
Chairman & Managing Director
Mr. Prasad Chandran
Whole-Time Directors
Mr. S. Regunathan (Alternate to Mr. Hermann Althoff) w.e.f. 16th July,
2010 Mr. R. Y. Vaidya (Alternate to Dr. Rainer Diercks)
Mr. Thilo Bischoff (Alternate to Ms. Saori Dubourg) w.e.f. 20th
October, 2010 Mr. Deepak Thuse (Alternate to Ms. Saori Dubourg) until
20,b October, 2010 Mr. S. Ramnath (Alternate to Mr. Hermann Althoff)
until 16th July, 2010
9. The Previous Year's figures have been regrouped and rearranged
wherever necessary.
Mar 31, 2010
1. Amalgamation of Ciba India Limited (CIL), Diamond Dye-Chem Limited
(DDL) and Ciba Research (India) Private Limited (CRIPL) with the
Company
Pursuant to the Scheme of Amalgamation (the scheme) as approved in
the court convened shareholder meeting held on 16th December, 2009 and
subsequently sanctioned by the Honourable High Court of Bombay vide its
order dated on 26th February, 2010, CIL, DDL (wholly owned subsidiary
of CIL) and CRIPL (collectively referred to as the amalgamating
companies) have been merged with the Company. The amalgamating
companies were engaged in the business of manufacturing and trading of
specialty chemicals and in commoditized products.
As provided in the Scheme of Amalgamation,10,637,927 equity shares of
BIL (representing 26.1% of equity share capital as at 31st March, 2010)
are issued against 13,280,819 shares of CIL (representing 100% of
equity share capital as at 1st February 2010) and 1,941,912 equity
shares of BIL (representing 4.76% of equity share capital as at 31st
March, 2010) are issued against 10,788,401 shares of CRIPL
(representing 100% of equity share capital as at 1st February, 2010).
Accordingly 12,579,839 equity shares of Rs 10/- each fully paid up have
been issued to the equity share holders of the CIL, CRIPL whose names
appear in the register of members on record date i.e. 18,h March,
2010, without payment being received in cash.
As per the Scheme of Amalgamation, the Appointed Date is 1st
February, 2010. The amalgamation has been accounted under the "pooling
of interests" method as prescribed by Accounting Standard 14 on
"Accounting for Amalgamations". Accordingly:
i) All the assets and liabilities of CIL, DDL and CRIPL have been
transferred and vested in the Company with effect from 1st February,
2010.
ii) As specified in the scheme of amalgamation, the difference between
the amount recorded as share capital issued (Rs. 125.7 Mio.) and the
amount of share capital of the amalgamating companies (Rs. 269.7 Mio.)
aggregating to Rs. 144.0 Mio. is adjusted in General Reserves.
iii) The book values of the intercompany balances and holdings stand
cancelled.
In view of the aforesaid amalgamation with effect from 1st February,
2010, the figures for the current year are not strictly comparable to
those of the prior year.
In terms of the settlement agreement arrived at with Syngenta India
Limited (the Lessor) on 28th July, 2009, Ciba India Limited
(amalgamating company) has ceased its manufacturing operation at Santa
Monica, Goa (the Site) and will exit the Site on or before 31s1
December, 2010. The company is in the process of dismantling movable
assets. As per the settlement agreement, the Company will receive a
consideration of Rs. 135 million from the Lessor towards sale of
immovable assets (WDV Rs. 67 million) upon handing over the site and on
the registration of the sale deed.
2. BASF SE, vide agreement dated 1sl July, 2006, has discretion to
acquire the Companys investment in its wholly owned subsidiary BASF
Polyurethanes India Limited (BPIL). BASF SE intends to acquire the
shareholding in BPIL subject to certain conditions. Management is in
the process of assessing the feasibility of these conditions.
3. Contingent Liabilities not provided for:
(a) Claims against the Company not acknowledged as debts: Rs. 30.2 Mio.
(Previous Year Rs. 26 Mio.) in respect of which the Company has counter
claims of Rs. 67.0 Mio. (Previous Year Rs. 67.0 Mio.).
(b) Demands for taxes and duties in respect of which the Company has
preferred appeals with appropriate authorities -
a. Income tax : Rs. 66.6 Mio. (Previous Year Rs. 61.0 Mio.). The
current year figure includes Rs. 5.6 Mio. being Income Tax claims of
the amalgamating companies.
b. Customs and Excise: Rs. 130.1 Mio. for the amalgamating companies
on account of Customs & Excise claims.
c. Others: Rs. 0.9 Mio. (Previous Year Rs. 2.2 Mio.).
4. Estimated amount of contracts remaining to be executed on capital
account and not provided (net of advances) for Rs. 70.2 Mio. (Previous
Year Rs. 83.2 Mio.).
5. The exchange loss of Rs. 48.1 Mio. (Previous Year loss of Rs. 75.0
Mio.) has been included in the Profit and Loss Account for the year.
6. Expenditure on Research and Development charged to Profit and Loss
Account Rs. 80.0 Mio. (Previous Year Rs. 96.1 Mio.).
7. Micro, Small and Medium Enterprises Development Act, 2006 (MSME).
On the basis of the information and records available with the
Management, the following disclosures pursuant to the above Act are
made for the amounts due to the Micro and Small Enterprises, who have
registered with the competent authorities:
8. Employees Benefits:
Defined contribution plans :
Companys contribution to defined contribution funds amounting to Rs.
71.0 Mio. (Previous year Rs. 60.6 Mio.) has been charged to the Profit
and Loss Account.
Defined benefit plans and other Long term employee benefits :
Gratuity is payable to all eligible employees of the Company on
superannuation, death, permanent disablement and resignation in terms
of provisions of the Payment of Gratuity Act, 1972, or as per the
Companys scheme whichever is more beneficial. The Company irrevocably
contributes funds to a separate Gratuity Trust which is recognised by
Income Tax authorities.
Eligible employees can carry forward and encash leave on
superannuation, death, permanent disablement and resignation as per
Companys policy.
Long Service Awards are payable to employees on completion of specified
years of service at the rate of 0.5 month to 1.5 months eligible
salary.
The expected rate of return on assets is based on the expectation of
the average long term rate of return on investment of the fund, during
the estimated term of obligation.
The obligations are measured at the present value of estimated future
cash flows by using a discount rate that is determined with reference
to the market yields at the Balance Sheet date on Government Bonds
which is consistent with the estimated terms of the obligation.
The estimate of future salary increase, considered in the actuarial
valuation, takes account of inflation, seniority, promotion and other
relevant factors such as supply and demand in the employment market.
The Guidance Note on implementing AS 15, Employee Benefits (revised
2005) issued by the Accounting Standards Board (ASB) states that
provident funds set up by employers, which requires interest shortfall
to be met by the employer, needs to be treated as defined benefit plan.
Pending the issuance of the Guidance Note from Actuarial Society of
India, the required information can not be determined /exhibited as
confirmed by the Companys actuary.
9. Managerial Remuneration under Section 198 of the Companies Act,
1956, (excluding provision for contribution to Gratuity Fund, Leave
Encashment, Group Insurance and Long Service Awards) is Rs. 48.4 Mio.
(Previous Year Rs. 41.1 Mio.).
Notes on Segment Information:
1. Segments have been identified in accordance with the Accounting
Standard on Segment Reporting (AS-17). Business Segments have been
considered as primary segments.
2. Details of type of products included in each segment Ã
à Agricultural Solution - Agrochemicals like pesticides and herbicides.
Agricultural Solution is seasonal in nature.
à Performance Products-Tanning agents, Leather Chemicals, Textile
Chemicals, Dispersion Chemicals, Speciality Chemicals and high-value
fine chemicals for the food, pharmaceuticals, animal feed and cosmetics
industries.
* Speciality Chemicals include coating chemicals, additives, water
treatment and paper treatment, home and fabric care chemicals of the
amalgamating companies.
à Plastics - Expandable Polystyrene (EPS) and engineering plastics.
à Chemicals - Chemicals includes inorganic chemicals, intermediates and
petrochemicals.
à Others- Indent Commission income not relating to any of the above
segments, Technical and Service charges.
3. Un-allocable Corporate Assets include Investments, Net Deferred Tax
Assets and other un-allocable assets.
4. Un-allocable Corporate Liabilities include proposed dividend and
other un-allocable liabilities.
(b) The installed capacity has been certified by Technical Management
of the Company and not verified by the Auditors, this being a technical
matter.
(c) The figures of production are excluding captive consumption and the
figures of stocks are after adjustment of shortages/excesses.
(d) The Company has licenses to manufacture 300 M.T. of Expanded
Polystyrene (Thermocole) and 200 M.T. of Dimethoate.
10. The Previous Years figures have been regrouped and rearranged
wherever necessary.
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