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Notes to Accounts of Mangalore Chemicals & Fertilizers Ltd.

Mar 31, 2023

(a) Trade receivables include concession/subsidy receivable from the Government of India of INR 63,358.47 Lakhs (March 31, 2022: INR 57,679.74 Lakhs).

(b) No debts are due from directors or other officers of the Company or any of them either severally or jointly with any other person. Also, no debts are due from firms or private companies, respectively, in which any director is a partner or a director or a member.

(c) Trade receivables from dealers (other than related parties) are non-interest bearing during normal credit period and are generally on terms of 15 to 120 days. Management is of the view that there are no receivables included above which have significant increase in credit risk other than that already impaired as per management assessment.

(d) For terms and conditions relating to related party receivables, refer Note 38.

(e) Trade receivables Ageing Schedule

(b) Terms/rights attached to equity shares

The Company has only one class of equity shares issued and paid-up having a par value of INR 10 per share. Each holder of equity share is eligible for one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

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

Indian currency term loans

Term loan from a bank of INR 1,997.46 Lakhs (including current maturities of INR 1,997.46 Lakhs) [March 31, 2022: INR 3,988.61 Lakhs (including current maturities of INR 1,996.37 Lakhs)] carries interest in the range of 8.00% p.a. [March 31, 2022 :8.00% p.a. to 11.50% p.a.] The loan is repayable in 20 equal quarterly installments starting from June 2019 with the last instalment due on March 2024. The loan is secured by first pari-passu charge on all movable and immovable fixed assets (alongwith working capital lenders), other than fixed assets exclusively charged to other lenders.

Term loan from a bank of INR 1,495.80 Lakhs (including current maturities of INR 1,495.80 Lakhs) [March 31, 2022: INR 2,486.83 Lakhs (including current maturities of INR 996.31 Lakhs)] carries interest in the range of 9.30% p.a. to 10.80% p.a. [March 31, 2022 : 9.30% p.a. to 9.35% p.a.] The loan is repayable in 20 quarterly installments starting from June 2019 with the last instalment due on March 2024. The loan is secured by first pari-passu charge on all movable and immovable fixed assets, both present and future (other than fixed assets exclusively charged to other lenders) and second pari-passu charge on all current assets, both present and future.

Term loan from a bank of INR Nil (including current maturities of INR Nil Lakhs) [March 31, 2022: INR 5,921.78 Lakhs (including current maturities of INR 3,196.08 Lakhs)] carries interest in the range of 6.96% p.a. to 9.70% p.a. [March 31, 2022 : 6.26% p.a. to 6.96% p.a.] The loan is repayable in 15 quarterly installments starting from December 2019 with the last instalment due on February 2024. The loan is secured by first pari-passu first charge over all movable and immovable fixed assets including plant and machinery of the Company (excluding assets exclusively charged to other banks) and first pari-passu with any other security provided to any other lenders including working capital lenders.

Term loan from a bank of INR 16,962.30 Lakhs (including current maturities of INR 1,212.02 Lakhs) [March 31, 2022: INR 5,316.21 Lakhs (including current maturities of INR Nil)] carries interest in the range of 9.95% p.a. to 10.30% p.a. [March 31, 2022 : 9.95% p.a.] The loan is repayable in 28 quarterly installments starting from November 2023 with the last instalment due on August 2030. The loan is secured by first pari-passu first charge on movable fixed assets to be created from proceeds of the facility for improvement in Energy Efficiency Project of the urea plant, with other participating lenders and first pari-passu charge over all movable and immovable fixed assets of the Company excluding those exclusively charged to other term lenders.

Term loan from a bank of INR 7,103.09 Lakhs (including current maturities of INR 1,057.60 Lakhs) [March 31, 2022: INR 3,408.12 Lakhs (including current maturities of INR 267.86 Lakhs)] carries interest in the range of 10.00% p.a. to 10.95% p.a. [March 31, 2022 : 10.00% p.a.] The loan is repayable in 28 quarterly installments starting from March 2023 with the last instalment due on December 2029. The loan is secured by first pari-passu first charge on all fixed assets to be created out of the proposed EIP project, with other participating lenders and first pari-passu charge over all movable and immovable fixed assets of the Company excluding the fixed assets charged specifically to the term lenders.

Term loan from a bank of INR 3,283.08 Lakhs (including current maturities of INR 118.61 Lakhs) [March 31, 2022: INR 3,242.40 Lakhs (including current maturities of INR Nil)] carries interest in the range of 9.50% p.a. to 10.35% p.a. [March 31, 2022 : 9.50% p.a.] The loan is repayable in 28 quarterly installments starting from January 2024 with the last instalment due on October 2030. The loan is secured by first pari-passu first charge on movable fixed assets to be created from proceeds of the facility for improvement in Energy Efficiency Project of the urea plant, with other participating lenders and first pari-passu charge over movable and immovable fixed assets of the Company excluding those exclusively charged to other term lenders.

Term loan from a bank of INR 3,931.39 Lakhs (including current maturities of INR 657.49 Lakhs) [March 31, 2022: INR 3,907.80 Lakhs (including current maturities of INR Nil)] carries interest in the range of 8.65% p.a. to 9.70% p.a. [March 31, 2022: 8.65% p.a.] The loan is repayable in 18 quarterly installments starting from August 2023 with the last instalment due on November 2027. The loan is secured by first pari-passu first charge over movable and immovable fixed assets of the Company, excluding those exclusively charged to other term lenders (including long term loans availed for the energy efficiency capital expenditure).

Term loan from a bank of INR 4,926.43 Lakhs (including current maturities of INR Nil) [March 31, 2022: INR Nil (including current maturities of INR Nil)] carries interest rate of 8.95% p.a. [March 31, 2022 : Nil % p.a.] The loan is repayable in 10 quarterly installments starting from April 2024 with the last instalment due on July 2026. The loan is secured by first pari-passu first charge over movable and immovable fixed assets of the Company, excluding those exclusively charged to other term lenders (including long term loans availed for the energy efficiency capital expenditure).

Term loan from a bank of INR 2,470.52 Lakhs (including current maturities of INR Nil) [March 31, 2022: INR Nil (including current maturities of INR Nil)] carries interest rate of 9.25% p.a. [March 31, 2022 : Nil % p.a.] The loan is repayable in 15 quarterly installments starting from September 2024 with the last instalment due on March 2028. The loan is secured by first pari-passu first charge over movable and immovable fixed assets of the Company, excluding those exclusively charged to other term lenders (including long term loans availed for the energy efficiency capital expenditure).

Term loan from a bank of INR 2,717.41 Lakhs (including current maturities of INR 2,717.41 Lakhs) [March 31, 2022: INR Nil (including current maturities of INR Nil)] carries interest rate of 9.00% p.a. [March 31, 2022 : Nil % p.a.] The loan is repayable in monthly installments starting from April 2023 with the last instalment due on February 2024. The loan is secured by first pari-passu first charge over movable and immovable fixed assets of the Company both present and future, excluding those exclusively charged to other term lenders.

Indian currency vehicle loans

Vehicle loans from a bank of INR 51.28 Lakhs (including current maturities of INR 14.84 Lakhs) [March 31, 2022: INR 3.16 Lakhs (including current maturities of INR 3.16 Lakhs)] carry interest at 8.36% p.a. to 9.35% p.a. [March 31, 2022 : 8.36% p.a.] The loan is repayable in 36 to 48 monthly installments starting from July 2018 with the last instalment due on September 2026 and is secured by first pari-passu charge on fixed assets financed by the said term loans.

Unsecured borrowings

Foreign currency term loans

Term loan from a bank of INR Nil (including current maturities of INR Nil) [March 31, 2022: INR 332.97 Lakhs (including current maturities of INR 332.97 Lakhs)] carries fixed interest of 1.40% p.a. [March 31, 2022 : 1.40% p.a.] The loan is repayable in 14 equal installments starting from August 2016 with the last installment due on February 2023. The loan is secured by guarantee issued by Eksport Kredit Fonden plc (EKF), the state owned export credit agency of Denmark.

The facilities are secured by first pari-passu charge on all current assets (both present and future) and property, plant and equipment of the Company, excluding assets which are exclusively charged to other lenders. These facilities are repayable within 12 months period. The interest carried on these facilities are - buyers/suppliers credits: 0.37% to 5.58% p.a. [March 31, 2022 : 0.32% to 2.36% p.a.], bills discounted: 4.40% to 7.50% p.a. [March 31, 2022 :4.40% to 6.10% p.a.], cash credit: 8.75% to 11.45% p.a. [March 31, 2022 : 8.75% to 10.25% p.a.]

Unsecured borrowings

The short-term loans are repayable over a maturity period of 45 to 90 days and carry floating interest rate of 8.50% to 9.00% p.a. [March 31, 2022 : 7.50% to 8.50% p.a.]

The quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts.

(d) Performance obligation

The Company recognises revenue from sale of goods at the point in time when control of the goods is transferred to the customer, generally on delivery of the goods. The performance obligation is satisfied upon delivery of the goods and payment is generally due within 15 to 120 days from delivery.

The Direct Benefit Transfer (DBT) Scheme entails 100% payment of subsidy to the Company on the basis of actual sales by the retailer to the beneficiary, however, the performance obligation of the Company is satisfied upon delivery of the goods.

(e) Sales of products include government concession/subsidies amounting to INR 2,68,770.17 Lakhs (Previous year: INR 1,96,363.31 Lakhs). The urea concession has been estimated and accounted as per the Government of India notification dated June 17, 2015 and the subsidy on phosphatic and complex fertilisers has been accounted based on estimates and on the rates announced by the Government of India under Nutrient Based Subsidy Policy, as applicable.

(f) Government of India has notified the pooling of Gas in Fertiliser (Urea) sector effective from June 2015. As per the notification, domestic Gas is pooled with Regasified Liquefied Natural Gas (RLNG) to provide natural Gas at uniform delivered price to all Natural Gas Grid connected Urea manufacturing plants.

(g) The Company had during the year ended March 31, 2021 recognised urea subsidy income of INR 2,914 Lakhs without benchmarking its cost of production using naphtha with that of gas-based urea manufacturing units recently converted to natural gas, as notified by the Department of Fertilizers [DoF] for subsidy income computation, against which the Company had filed a writ petition against the DoF before the Hon''ble High Court of Delhi [DHC]. Pending finalization of writ petition before the DHC, the management, based on legal opinion and considering the fact that the energy cost is always a pass through in subsidy computation, believes that artificial benchmarking is arbitrary and discriminatory and is confident of realisation of the aforesaid subsidy income.

(i) The Code on Social Security, 2020 (''Code'') relating to employee benefits received Presidential assent in September 2020. However, effective date and the final rules/interpretation have not yet been notified/issued. The Company will assess the impact of the Code and recognize the same, if any, once the Code comes into effect.

(ii) The Company operates defined benefit plan i.e., gratuity for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure at 15 days of last drawn salary for each completed year of service. The fund has the form of a trust and it is governed by the Board of Trustees who is responsible for the administration of the plan assets and for the definition of the investment strategy.

33. Leases

The Company as a lessee

The Company has lease contracts for land, buildings and tanks. The leases for land generally have lease terms between 1 to 30 years, while others generally have lease terms between 1 to 6 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and sub-leasing the leased assets. There are several lease contracts that include extension and termination options, which are further discussed below.

The Company also has certain leases with lease terms of 12 months or less and leases with low value. The Company applies the ''short-term lease'' and ''lease of low-value assets'' recognition exemptions for these leases.

Refer Note 3B for details of carrying amounts of right-of-use assets recognised and the movements during the year. Set out below are the carrying amounts of lease liabilities (included under interest-bearing borrowings) and the movements during the year:

The Company had total cash outflows for leases of INR 714.07 Lakhs (Previous year: INR 795.86 Lakhs). The Company also had non-cash additions to right-of-use assets and lease liabilities of INR Nil (Previous year: 15.89 Lakhs).

The Company has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Company''s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised.

The effective interest rate for lease liabilities is 10%, with maturity between 2023-2042

The Company as a lessor

The Company has entered into cancellable operating leases in respect of a portion of its land and building. These leases have terms of between 10 years and above. The leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. The total rents recognised as income during the period is INR 112.36 Lakhs (Previous year: INR 109.27 Lakhs).

The income tax matters under appeal include certain deductions claimed by the Company for financial years 2012-13 and 2013-14 which have resulted in tax losses, on which deferred tax assets have been recognized and utilized against taxable profits of following years, which have been disallowed by the income tax authorities and the differential tax liability (deferred tax / regular tax) that may arise is estimated to be INR 3,315 Lakhs and interest thereon. The Company is contesting aforesaid disallowances and the management, based on independent tax opinions, believes that its position will likely be upheld in the appellate process and accordingly no expense has been accrued in this regard.

The Company is contesting aforesaid demands and the management, based on advise of its advisors, believes that its position will likely be upheld in the appellate process. No expense has been accrued in the financial statements for these demands raised. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company''s financial position and results of operations. The Company does not expect any reimbursements in respect of the above contingent liabilities.

In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company''s management reasonably does not expect that these legal actions, when ultimately concluded and determined, will have any material effect on the Company''s results of operations or financial condition.

Terms and conditions of transactions with related parties

The transactions for sale and purchases with related parties are made on terms equivalent to those prevailing in arm''s length transactions. The outstanding receivable/payable balances are generally unsecured and interest is charged as per terms agreed with the related parties. There have been no guarantees provided or received for any related party receivables or payables.

39. Segment information

The Company is engaged in the manufacture, sale and trading of fertilizers which the management has considered as single business operating segment. Further, the Company operates in India and caters to the needs of only domestic market. Accordingly, no further disclosures are required.

Revenue from single customer i.e. Government of India amounted to INR 2,68,770.17 Lakhs (Previous period: INR 1,96,363.31 Lakhs) arising from the concession/subsidy on fertilizers.

40. Financial instruments fair value measurement

All assets and liabilities for which fair value is measured or disclosed in the Ind AS financial statements are categorised within the fair value hierarchy, as below, based on the lowest level input that is significant to the fair value measurement as a whole:

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

Level 2 : Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 : Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

There has been no transfers between levels during the year. The fair values of derivatives are based on derived mark-to-market values. The management has assessed that the carrying values of financial assets and financial liabilities for which fair values are disclosed, reasonably approximate their fair values because these instruments have short-term maturities.

Borrowings include Indian currency and Foreign currency long-term loans wherein interest rates are linked to benchmark rates (Marginal Cost of Lending Rates/Prime Lending Rates) of respective lenders. These benchmark rates are determined based on cost of funds of the lenders, as well as, market rates. The benchmark rates are periodically revised by the lenders to reflect prevalent market conditions. Accordingly, effective cost of debt for borrowings at any point of time is in line with the prevalent market rates. Due to these reasons, management is of the opinion that they can achieve refinancing, if required, at similar cost of debt, as current effective interest rates. Hence, the discounting rate for calculating the fair value of Borrowings has been taken in line with the current cost of debt.

41. Financial risk management objectives and policies

The Company''s principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include investments, trade and other receivables, cash and cash equivalents, bank balances, security deposits and derivatives that are out of regular business operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. The Company''s risk management is carried out by a treasury department under policies approved by the Board of Directors. The Board of Directors provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument that will fluctuate because of changes in market prices. Market risk comprises three types of risk i.e. interest rate risk, currency risk and other price risk, such as commodity risk. Financial instruments affected by market risk include borrowings, derivatives financial instruments and trade payables.

The Company''s operating activities require the ongoing purchase of natural gas. Natural gas being international commodity is subject to price fluctuation on account of the change in the crude oil prices, demand supply pattern and exchange rate fluctuations. The Company is not affected by the price volatility of the natural gas as under the Urea pricing formula the cost of natural gas is pass through if the consumption of natural gas is within the permissible norm for manufacturing of Urea.

The Company deals in purchase of imported fertilizers (i.e., DAP and MOP), which are imported by the Company and sold in the domestic market. The import prices of these goods are governed by the international prices. There is a price and material availability risk, which may not be in line to meet the domestic market requirement. The risk is also with domestic manufacturers whose costing is based on majorly imported raw materials and small value-add. However, a dynamic alignment of procurement to sales and constant review of market conditions and competitors costing help in mitigating the impact.

The Company also deals in purchase of imported raw materials (i.e. P2O5, Ammonia and Urea) which are imported by the Company and used in the manufacturing of NP. The import prices of these materials are governed by international prices. There is a price and material availability risk.

(b) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments if a counterparty default on its obligations. The Company''s exposure to credit risk arises majorly from trade and other receivables. Other financial assets like security deposits and bank deposits are mostly with government authorities and scheduled banks and hence, the Company does not expect any credit risk with respect to these financial assets.

Trade Receivables

The Trade receivables can be classified into two categories, from the customers and from the Government in the form of subsidy/concession. The concession/subsidy receivable classified under trade receivables amounting to INR 63,358.47 Lakhs (March 31, 2022: INR 57,679.74 Lakhs) is receivable from the Government of India in the form of subsidy and being of sovereign nature credit risk is not perceived. The receivables from customers also include INR 8,284.41 Lakhs (March 31, 2022: INR 7,983.23 Lakhs) receivable from related party on which management does not expect any challenge in realisation. Further, as per terms agreed with related parties, interest is also charged on the overdue balances.

From market receivables from customers, the Company extends credit to customers in the normal course of business. The Company considers factors such as credit track record in the market and past dealings for extending credit to customers. The Company monitors the track record of the payments by the customers and the receivables are regularly monitored. The Company evaluates the concentration of risk with respect to trade receivables as low, since the customer base is large and located in several jurisdictions and operate in largely independent markets. The Company has also taken security deposits from its customers, which mitigate the credit risk to some extent. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 9. The Company holds collateral as security for many of its customers. At March 31, 2023, 35.75% (31 March 2022: 45.47%) of the Company''s trade receivables from customers are covered by collateral security.

An impairment analysis is performed at the reporting date using a provision matrix to measure expected credit losses ("ECL"). The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (i.e., by geographical region, product type, customer type and rating). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.

The Company''s objective is to maintain optimum levels of liquidity to meet its cash and collateral requirements at all times. The Company relies on a mix of borrowings and excess operating cash flows to meet its needs for funds. The current committed lines of credit are sufficient to meet its short to medium/long term expansion needs. The Company monitors rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.

(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(v) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

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

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

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

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(vii) The Company has not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

44. Capital management

For the purpose of the Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity shareholders. The primary objective of the Company''s capital management is to ensure that it maintains a strong credit rating and capital ratios in order to support its business and maximise shareholder value.

In order to achieve this overall objective, the Company''s capital management, amongst other things, also ensures that it meets financial covenants attached to the interest-bearing borrowings that define capital structure requirements.

No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2023 and March 31, 2022.

45. Previous year figures have been regrouped/re-classified wherever necessary, to conform to current period''s classification.

Mar 31, 2018

1. Corporate information

Mangalore Chemicals and Fertilizers Limited ("MCF" or "the Company") is a public limited company domiciled in India and incorporated under the provisions of the Indian Companies Act. Its shares are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The registered office of the Company is located at Level 11, UB Tower, UB city, 24, Vittal Mallya Road, Bengaluru 560001, Karnataka, India. The Company is primarily engaged in the manufacture, purchase and sale of fertilisers. The Company has manufacturing facility in India. Information on related party relationships of the Company is provided in Note 38.

The Ind AS financial statements were approved by the Board of Directors of the Company in their meeting held on May 24, 2018.

2. Basis of preparation of Ind AS financial statements

The Ind AS financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time. The Ind AS financial statements have been prepared on a historical cost basis, except for assets and liabilities which have been measured at fair value. The Ind AS financial statements are presented in Indian Rupees ("INR") and all values are rounded to the nearest lakhs (INR 00,000), except when otherwise indicated.

The accounting policies adopted for preparation and presentation of these Ind AS financial statement have been applied consistently, except for the changes in accounting policy for amendments to the standard that were issued effective for annual period beginning from on or after April 1, 2017 relating to additional disclosure of changes in liabilities arising from financing activities on account of non-cash transactions in the cash flow statement.

*Includes concession/subsidy receivable from Government of India of Rs. 81,772.11 Lakhs (March 31, 2017: Rs. 67,915.99 Lakhs).

No debts are due from directors or other officers of the Company or any of them either severally or jointly with any other person. Also, no debts are due from firms or private companies, respectively, in which any director is a partner or a director or a member.

Trade receivables from dealers (other than related parties) are non-interest bearing during normal credit period and are generally on terms of 15 to 120 days.

b) Terms/rights attached to equity shares

The Company has only one class of equity shares issued and paid-up having a par value of Rs. 10 per share. Each holder of equity share is eligible for one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

Secured borrowings

Foreign currency term loan

Term loan from a bank of Rs. 9,958.29 Lakhs (March 31, 2017: Rs. 2,383.06 Lakhs) carries interest of 11.55% p.a. The loan is repayable in 20 equal quarterly installments starting from the end of moratorium period which is 2 years from the date of disbursement. The loan is secured by first pari-pasu charge on all movable and immovable fixed assets (alongwith working capital lenders), other than fixed assets exclusively charged to other lenders.

Indian currency term loans

Term loan from a bank of Rs. 2,143.46 Lakhs (March 31, 2017: Rs. 3,415.72 Lakhs) carries interest of 13.75% p.a. The loan is repayable in 84 equal monthly installments commencing on December 8, 2012. The loan is secured by first charge on fixed assets funded through the term loan and first pari-pasu charge on all fixed assets including all immovable and movable properties, both present and future (other than fixed assets exclusively charged to other lenders), with other participating working capital lenders.

Term loan from a bank of Rs. 580.12 Lakhs (March 31, 2017: Rs. 1,169.41 Lakhs) carries interest of 11.50% p.a. The loan is repayable in 52 monthly installments commencing on December 2014. The loan is secured by exclusive first charge on the fixed assets of the project (financed by the term loan) and pari-passu first charge on the entire fixed assets of the Company barring fixed assets financed by term loans from State Bank of India and ING N.V. (Netherland) and fixed assets exclusively charged to other lenders.

Term loan from a bank of Rs. 4,925.64 Lakhs (March 31, 2017: Rs. Nil Lakhs) carries interest at 10.35% p.a. The loan is repayable in 20 quarterly installments starting from the end of moratorium period 15 months from the date of first disbursement. The loan is secured by first pari-pasu charge on all movable and immovable fixed assets, both present and future (other than fixed assets exclusively charged to other lenders) and second pari-passu charge on all current assets, both present and future.

Indian currency vehicle loans

Vehicle loans from a bank of Rs. 103.00 Lakhs (March 31, 2017: Rs. Nil Lakhs) carry interest at 8.36% p.a. The loan is repayable in 30 to 48 monthly installments and is secured by first pari-pasu charge on fixed assets financed by the said term loans.

Unsecured borrowings

Foreign currency term loans

Term loan from a bank of Rs. 4,113.62 Lakhs (March 31, 2017: Rs. 4,391.36 Lakhs) carries interest of 11.24% p.a. The loan is repayable in 14 equal installments on April and October of each year. The loan is secured by guarantee issued by Finnvera, the state owned export credit agency of Finland.

Term loan from a bank of Rs. 1,582.71 Lakhs (March 31, 2017: Rs. 1,621.20 Lakhs) carries interest of 11.80% p.a. The loan is repayable in 14 equal installments on August and February of each year. The loan is secured by guarantee issued by Eksport Kredit Fonden plc (EKF), the state owned export credit agency of Denmark.

Indian currency term loans

Term loan from a bank of Rs. Nil Lakhs (March 31, 2017: Rs. 1,104.66 Lakhs) carried interest of 10.50% p.a. and was secured by pledge of shares by the shareholders. The loan was repayable as per repayment schedule from October 2012 to July 2017 and has been fully repaid during the year.

Secured borrowings

The facilities are secured by first pari-passu charge on all current assets (both present and future) and property, plant and equipment of the Company, excluding assets which are exclusively charged to other lenders. These facilities are repayable within 12 months period. The interest carried on these facilities are - buyer''s credits: 2% to 3.1% p.a., bills discounted: 7.05% to 7.90% p.a., cash credit: 9.50% to 13.15% p.a.

The short-term loan from bank carries interest at the rate of 8% p.a. (including 6.25% paid directly by Government of India to the bank) and is secured by subsidy receivable of equal amount from the Government of India, Ministry of Chemicals and Fertilizer under Special Banking Arrangement.

Unsecured borrowings

Indian currency bills discounted with banks are repayable within six months period and carry interest in the range of 7.05% to 7.90% p.a.. The short-term loans are repayable on demand and carries interest in the range of 9.23% to 9.35% p.a.

(a) Sales of products include government concession / subsidies. The urea concession has been estimated and accounted as per the Government of India notification dated June 17, 2015. The subsidy on phosphatic and complex Fertilizers has been accounted based on the rates announced by the Government of India under Nutrient Based Subsidy Policy, from time to time.

(b) The Company recognises Urea concession income from the Government of India (GOI) based on estimates and changes, if any, are recognised in the year of finalisation of the prices by the GOI under the scheme. Accordingly, sales of products for the year include differential urea concession income of Rs. 2,068.68 Lakhs (Previous year: Rs. 2,309.77 Lakhs) relating to immediately preceding financial year recognised on finalisation of escalation/de-escalation claim.

3. Operating lease

The Company as a lessee

The Company has entered into operating lease arrangements for storage, warehouse and office premises. These leases are for a period of upto 72 months with options of renewal and premature termination with notice period, except in certain leases with lock-in period of 36 to 72 months. There are no restrictions placed upon the Company by entering into these leases. There are no sub-leases. The total lease rentals expense for the year is Rs. 962.69 Lakhs (Previous year: Rs. 1,248.38 Lakhs). Future minimum rentals payable under non-cancellable operating leases are as follows:

*The income tax demands under appeal may also have impact on unabsorbed losses as per the income tax returns. The Company is contesting these demands and the management, based on advise of its advisors, believes that its position will likely be upheld in the appellate process. No expense has been accrued in the financial statements for these demands raised. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company''s financial position and results of operations. The Company does not expect any reimbursements in respect of the above contingent liabilities.

In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company''s management reasonably does not expect that these legal actions, when ultimately concluded and determined, will have material effect on the Company''s results of operations or financial condition.

4. The Company had engaged an independent firm to carry out forensic review of certain transactions relating to investment in preference shares of Bangalore Beverages Limited and advances to United Breweries (Holdings) Limited, which indicated that these transactions may have involved irregularities. These investment and advances aggregating to Rs. 21,668.20 Lakhs were fully provided for during the year ended March 31, 2016.

Zuari Fertilizers and Chemicals Limited, the holding company (now merged with Zuari Agro Chemicals Limited) had filed a petition before the National Company Law Tribunal, Bengaluru ("NCLT") to claim accountability of erstwhile promoter group for the aforesaid irregularities. The matter is currently pending before the NCLT.

5. Segment information

Revenue from single customer i.e. Government of India amounted to Rs. 136,232.40 Lakhs (Previous year: Rs. 111,066.29 Lakhs) arising from the concession/subsidy on Fertilizers.

6. Financial instruments fair value measurement

Level 1 : Quoted (unadjusted) market prices in active markets for identical assets or liabilities

_{Level 2} : Valuation techniques for which the lowest level input that is significant to the fair value measurement is

^{Level 2} directly or indirectly observable

_{Level 3} : Valuation techniques for which the lowest level input that is significant to the fair value measurement is

^{Level 3} unobservable

There has been no transfers between levels during the period. The fair values of derivatives are based on derived mark-to-market values. The management has assessed that the carrying values of financial assets and financial liabilities for which fair values are disclosed, reasonably approximate their fair values because these instruments have short-term maturities.

7. Financial risk management objectives and policies

a) Market risk

i. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Company''s financial instruments will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rate relates primarily to the Company''s borrowings with floating interest rates. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on borrowings affected. With all other variables held constant, the Company''s profit before tax is affected through the impact on floating rate borrowings, without considering impact of derivatives not designated as hedges, as follows: iii. Commodity price risk

The Company''s operating activities require purchase of Naphtha and Furnace Oil. Naphtha and Furnace Oil being international commodities are subject to price fluctuation on account of changes in crude oil prices, demand supply pattern and exchange rate fluctuations. The Company is generally not affected by the price volatility of Naphtha and Furnace Oil due to the extant urea pricing policies.

b) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments if a counterparty default on its obligations. The Company''s exposure to credit risk arises majorly from trade and other receivables. Other financial assets like security deposits and bank deposits are mostly with government authorities and nationalised banks and hence, the Company does not expect any credit risk with respect to these financial assets.

The Company extends credit to customers in the normal course of business. The Company considers factors such as credit track record in the market and past dealings for extending credit to customers. The Company monitors the track record of the payments by the customers and the receivables are regularly monitored. The Company evaluates the concentration of risk with respect to trade receivables as low, since the customer base is large and located in several jurisdictions and operate in largely independent markets. The Company has also taken security deposits from its customers, which mitigate the credit risk to some extent. The concession receivable classified under trade receivables is receivable from the Government of India in the form of subsidy and being of sovereign nature credit risk is not perceived.

c) Liquidity risk

The Company''s objective is to maintain optimum levels of liquidity to meet its cash and collateral requirements at all times. The Company relies on a mix of borrowings and excess operating cash flows to meet its needs for funds. The current committed lines of credit are sufficient to meet its short to medium/ long term expansion needs. The Company monitors rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. The table below summarises the maturity profile of the Company''s financial liabilities:

8. Capital management

The Company monitors capital using a gearing ratio, which is net debt divided by total capital. The Company includes within net debt, all non-current and current borrowings reduced by cash and cash equivalents and other bank balances.

In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing borrowings that define capital structure requirements. The breaches in meeting the financial covenants would permit the bank to immediately call borrowings. There have been no breaches in the financial covenants of any interest-bearing borrowings in the current year.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.

9. Standards issued but not yet effective Ind AS 115 - Revenue from Contract with Customers

Ind AS 115 was issued on March 28, 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede virtually all current revenue recognition requirements under Ind AS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after April 1, 2018.

The Company plans to adopt the new standard on the required effective date and is currently assessing the adoption method and the potential impact, the adoption of this standard will have on its financial statements and disclosures.

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration

On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company is evaluating the impact of this amendment on its financial statements.

10. Previous year figures

Previous year figures have been regrouped / reclassified, where necessary, to conform to this year''s classification. Revenue from operations for the year ended March 31, 2018 is not comparable with the corresponding previous year figure, since revenue in current year is net of Goods and Service Tax (GST) effective July 1, 2017 whereas Excise duty formed part of expenses in the previous year.

Mar 31, 2016

B. Defined Benefit Plan

(i) Gratuity (funded)

The employeesâ gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method.

The estimates of rate of escalation in salary considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors. The above information is certified by the actuary.

(ii) Compensated Leave (unfunded)

Defined benefit obligation of compensated absence in respect of the employees of the Company is arrived on the basis of actuarial valuation conducted as on 31.03.2016 which works out to Rs, 6,95.14 lakhs. (previous year Rs, 6,82.31 lakhs). Increase in the obligation towards compensated leave has been charged to Profit and loss Statement of Rs, 12.83 lakhs (previous year Rs, 59.43 lakhs).

1 The amount due to Micro, Small and Medium Enterprises as on 31.3.2016 is Nil (Nil).

2 Segment Reporting

The Companyâs business comprises of manufacture, purchase and sale of fertilizers and related products constituting a single segment. The sales of these products are predominantly made in India. Hence, the segment information as per âAccounting Standard 17 - Segment Reportingâ is not required to be disclosed.

3 Related Party Disclosures

a) List of related parties:

Holding Company

Zuari Agro Chemicals Limited (Ultimate Holding Company)

Zuari Fertilisers & Chemicals Limited¹

Key Management Personnel

Deepak Anand, Managing Director²

N. Suresh Krishnan, Managing Director**

K. Prabhakar Rao, Whole-time Director

b) General Description of Lease terms:

i) Lease rentals are charged on the basis of agreed terms.

ii) Assets are taken on lease over a period of 3/5 years.

4 Accounting for taxes on Income

In accordance with the âAccounting Standard 22 - Accounting for Taxes on Incomeâ, issued by the Institute of Chartered Accountants of India, the Company has recognized Rs, 6,84.54 lakhs as deferred tax credit (net) for the current year.

5 Foreign Currency Exposures

Outstanding Forward Exchange Contracts entered into by the Company

6 Exceptional & Extraordinary item

During the year, the Audit Committee had directed expeditious investigation in relation to all the transactions with United Breweries Holdings Ltd [UBHL] and its group companies [UB Group] referred in paragraphs (a) & (b) below. Pursuant to the directions of the Audit Committee, M/s. Ernst & Young LLP were engaged to carry out the forensic investigation as required and the presentation made by them, at the meeting of the Audit Committee and Board of Directors held on 06 May 2016, stated that during the earlier financial years, the transactions involved in investment in the preference shares of the Bangalore Beverages Limited [BBL], a UB Group entity and advances to UBHL, may have involved irregularities and elements of mismanagement in the Company.

The Company is taking necessary legal advice in connection with the findings of M/s. Ernst & Young LLP

(a) Exceptional Item

During the financial years 2010-11 & 2011-12, payments of Rs, 5200 lakhs were made to UBHL which was adjusted over a periods towards certain amounts payable to UBHL. The outstanding dues of Rs, 1668 lakhs as at 31 March 2016 from UBHL is provided as exceptional item in view of the uncertainty of recoverability.

(b) Extraordinary Item

During the earlier financial years, funds were invested as subscription to optionally convertible Redeemable Cumulative Preference Shares of Rs, l00/-each with a coupon rate of 0.001% repayable after 20 years in BBL during 2012-13 for Rs, 20,000 lakhs. The said investment in the preference share capital of BBL was redeemed by fresh issue and subscription of 2,00,000 Redeemable Cumulative Preference Shares of Rs, 1/- each with a coupon rate of 10% repayable after 20 years at a premium of Rs, 9,999/- per share during 2013-14. In June 2015, an attempt was made for early redemption by mutual consent as per the terms of issue of the said preference shares which was futile. Accordingly, in view of the developing circumstances, a provision for the investment in the preference share capital of Rs, 20000 lakhs in BBL is made.

7 As per the practice consistently followed by the Company, the concession rate for Urea has been recognized based on latest notification rates under NPS-III and further adjusted with input price escalation/(de-escalation) aggregating ( Rs, 767,85.15 lakhs) for the year 2015-16 as estimated by Management [previous year (^ 176,56.36 lakhs)].

Mar 31, 2015

1. The amount due to Micro, Small and Medium Enterprises as on 31.3.2015 is Nil (Nil).

2. Segment Reporting

The Company's business comprises of manufacture, purchase and sale of fertilizers and related products constituting a single segment. The sales of these products are predominantly made in India. Hence, the segment information as per "Accounting Standard 17 - Segment Reporting" is not required to be disclosed.

32 Related Party Disclosures a) List of related parties:

Key Management Personnel

Deepak Anand, Managing Director

K. Prabhakar Rao, Whole-time Director

K. Raghuveeran, Company Secretary*

T. M. Muralidharan, Chief Financial Officer*

b) General Description of Lease terms:

i) Lease rentals are charged on the basis of agreed terms.

ii) Assets are taken on lease over a period of 3/5 years.

3. Accounting for taxes on Income

In accordance with the "Accounting Standard 22 - Accounting for Taxes on Income", issued by the Institute of Chartered Accountants of India, the Company has recognised Rs. 20,39.62 lakhs as deferred tax credit (net) for the current year which includes Rs. 1,13.75 lakhs adjusted in the retained earnings.

4. As per the practice consistently followed by the Company, the concession rate for Urea has been recognised based on latest notification rates under NPS-III and further adjusted with input price escalation/(de-escalation) aggregating ( Rs. 176,56.36 lakhs) for the year 2014-15 as estimated by Management (previous year Rs. 24,10.50 lakhs).

5. In accordance with the Companies Act, 2013, the Company has during the current financial year revised the useful life of its fixed assets to comply with the useful life as per Schedule II to the Companies Act, 2013. As per the transition provision, the Company has adjusted Rs. 2,20.92 lakhs (net of deferred tax of Rs.1,13.75 Lakhs) with the opening balances of the retained earnings and has also adjusted Rs. 2,44.55 Lakhs with the opening balance of the Revaluation Reserve. Had the Company continued to follow the earlier useful life of its fixed assets, the depreciation expense for the year ended 31st March 2015 would be higher by Rs. 8,82.03 Lakhs and the Profit before Tax for the year ended 31 st March 2015 would have been lower by Rs. 8,82.03 Lakhs.

6. Certain line items which are specified in the prescribed format of the schedule III, wherever amount is nil for current and previous year are not shown.

7. Previous year's figures have been reworked, regrouped, rearranged and reclassified wherever necessary.

Mar 31, 2014

SHARE CAPITAL

. The rights, preferences and restrictions attached to shares The Company has only one class of shares issued and paid up referred to as equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their holdings.

Contingent Liabilities (Rs. in Lakhs) 2013-14 2012-13

a) Outstanding Bank Guarantees 6,84.18 15,62.42

b) Claims against the Company not acknowledged as debt.

i) Disputed customs duty liability under appeal by Company before CESTAT 90.60 90.60

ii) Disputed Income-tax liability for Assessment Year 2008-09 (Assessment Year 2009-10) 4,27.77 6,92.87

Segment Reporting

The Company''s business comprises of manufacture, purchase and sale of fertilizers and related products constituting a single segment. The sales of these products are predominantly made in India. Hence, the segment information as per "Accounting Standard 17 - Segment Reporting" is not required to be disclosed.

As per the practice consistently followed by the Company, the concession rate for Urea for the year 20I3-I4 has been recognised based on latest notification rates under NPS-III and further adjusted with input price escalation aggregating '' 24,I0.50 lakhs (previous year ( Rs. 28,40.00) lakhs) as estimated by Management.

Mar 31, 2013

1 Contingent Liabilities

a) Outstanding Bank Guarantees 15,62.42 16,53.92

b) Claims against the Company not acknowledged as debt.

i) Disputed customs duty liability under appeal by Company beforeCESTAT 90.60

ii) Disputed arrears of electricity charges, under appeal by Company / KPTCL 2,38.58

c) Disputed Income-tax liability for assessment year 2009-10 6,92.87 7,92.87

2 The amount due to Micro, Small and Medium Enterprises as on 31.3.2013 is Nil (Nil).

3 Segment Reporting

The Company''s business comprises of manufacture, purchase and sale of fertilizers and related products constituting a single segment. The sales of these products are predominantly made in India. Hence, the segment information as per "Accounting Standard 17 - Segment Reporting" is not required to be disclosed.

4 Accounting for taxes on Income

In accordance with th e "Accounting Standard 22 - Accounting for Taxes on Income", issued by the Institute of Chartered Accountants of India, the Company has provided Rs. 1,91.26 lakhs as deferred tax Liability (net) for the current year.

5 As per the practice consistently followed by the Company, the concession rate for Urea for the year 2012-13 has been recognised based on latest notification rates under NPS-III and further adjusted with input price escalation aggregating Rs. (28,40.00) lakhs (previous year escalation Rs. (3,50.00) lakhs) as estimated by Management.

6 Certain line items which are specified in the prescribed format of the revised schedule VI, wherever amount are nil for current and previous year are not shown.

7 Previous year''s figures have been reworked, regrouped, rearranged and reclassified wherever necessary.

Mar 31, 2012

1 Contingent Liabilities

a) Outstanding Bank Guarantees 16,53.92 15,93.61

b) Claims against the Company not acknowledged as debt.

Disputed arrears of electricity charges, under appeal by Company / KPTCL 2,38.58 2,38.58

c) Disputed Income-tax liability for assessment year 2009-10 7,92.87 -

2 The amount due to Micro, Small and Medium Enterprises as on 31.3.2012 is Nil (Nil).

3 Segment Reporting

The Company's business comprises of manufacture, purchase and sale of fertilizers and related products constituting a single segment. The sales of these products are predominantly made in India. Hence, the segment information as per "Accounting Standard 17 - Segment Reporting" is not required to be disclosed.

b) General Description of Lease terms:

i) Lease rentals are charged on the basis of agreed terms.

ii) Assets are taken on lease over a period of 3/ 5 years.

4 Accounting for taxes on Income

In accordance with the "Accounting Standard 22 - Accounting for Taxes on Income", issued by the Institute of Chartered Accountants of India, the Company has provided Rs.1,01.87 lakhs as deferred tax Liability (net) for the current year.

5 As per the practice consistently followed by the Company, the concession rate for Urea for the year 2011-12 has been recognised based on latest notification rates under NPS - III and further adjusted with input price escalation aggregating Rs. (3,50.00) lakhs as estimated by Management.

6 Certain line items which are specified in the prescribed format of the revised schedule VI, wherever amount are nil for current and previous year are not shown.

7 Previous year's figures have been reworked, regrouped, rearranged and reclassified wherever necessary.

Mar 31, 2011

1. Amalgamation of MCF International Limited with the Company

- Pursuant to the Scheme of Amalgamation ('the Scheme') of the erstwhile MCF International Limited (MCFIL) as approved by the Hon'ble High Court of Karnataka on July 8, 2011, the entire business and undertaking of MCFIL including all assets, liabilities, duties and obligations have been transferred to and vested in the Company with effect from April 1, 2010.

- The Amalgamation has been accounted for under the 'Pooling of interests' method as prescribed by Accounting Standard 14, "Accounting for Amalgamations", notified under Sec 211 (3C) of the Companies Act 1956.

- In accordance with the Scheme, 50,000 Equity Shares of Rs. 10/- each held by the Company in the equity share capital of MCFIL stand cancelled. The difference of Rs. 3,27.24 lakhs between assets, liabilities, statutory reserves of MCFIL and the carrying value of investments being cancelled, has been adjusted against balance in Profit and Loss Account.

- In view of the accounting for amalgamation with effect from April 1, 2010, the fgures of the current year are not strictly comparable with those of the previous year.

(Rs. in Lakhs)

2010-2011 2009-2010

2. Contingent Liabilities

a. Outstanding Bank Guarantees 15,93.61 3,58.37

b. Claims against the Company not acknowledged as debt.

Disputed arrears of electricity charges, under appeal by Company / KPTCL 2,38.58 2,38.58

3. Secured and Unsecured loans

a) Term loan from Banks: Rs. 19,72.22 lakhs (previous year Rs. 15,74.31 lakhs) is secured by First charge on the project assets, and second charge on all of the Company's fixed assets including all movable and immovable properties both present and future.

b) Working Capital facilities of Rs. 167,89.18 lakhs (previous year Rs. 81,50.65 lakhs) from banks are secured by a frst pari passu charge on present and future plant and machinery, stock of fertilizers including work-in-process and raw materials, book debts, outstanding monies, receivables, claims, bills, contracts, engagements, securities, investments, rights and assets of the Company (except property effectively otherwise hypothecated / charged or mortgaged to the banks).

c) Loans from others is lease liability secured by hypothecation of assets acquired under the facility.

4. Leasehold land of Rs. 3.04 lakhs is towards 3.041 acres taken on lease from the New Mangalore Port Trust.

5. Depreciation includes Rs. 7,09.09 lakhs (previous year Nil) towards accelerated depreciation of D G sets to be replaced.

6 As per the practice consistently followed by the Company, the concession rate for Urea for the year 2010-11 has been recognised based on latest notified rates under NPS-III and further adjusted with input price escalation aggregating Rs. 6,60.00 lakhs, as estimated by Management.

The concession rate for Phosphatic and Potassic fertilizers for April 2010 to March 2011 has been based on the notified price and a provision of Rs. 19,65.00 lakhs has been made, as estimated by Management, for any price variation.

(ii) Compensated Leave (Unfunded)

Defined benefit obligation of compensated absence in respect of the employees of the Company is arrived on the basis of actuarial valuation conducted as on 31.3.2011 which works out to Rs. 4,20.40 lakhs (previous year Rs. 3,71.96 lakhs). Increase in the obligation towards compensated leave has been charged to Profit and Loss Account Rs. 48.44 lakhs (previous year Rs. 12.36 lakhs).

7. Segment Reporting

The Company's business comprises of manufacture, purchase and sale of fertilizers and related products constituting a single segment. The sales of these products are predominantly made in India. Hence, the segment information as per "Accounting Standard 17 - Segment Reporting" is not required to be disclosed.

8. Related Party Disclosures a) List of related parties:

i) Associates

United Breweries (Holdings) Limited

ii) Subsidiary *

MCF International Limited

iii) Key Management Personnel

Deepak Anand, Managing Director K. Prabhakar Rao, Wholetime Director

b) General Description of Lease terms:

i) Lease rentals are charged on the basis of agreed terms.

ii) Assets are taken on lease over a period of 3/5 years.

9. Accounting for taxes on Income

In accordance with the "Accounting Standard 22 - Accounting for Taxes on Income", issued by the Institute of Chartered Accountants of ndia, the Company has recognised Rs. 1,52.85 lakhs as deferred tax Asset (net) for the current year.

10. The previous year's fgures have been reworked, regrouped, rearranged and reclassified wherever necessary.

Mar 31, 2010

1. Contingent Liabilities (Rs.in Lakhs)

2009-2010 2008-2009

a) Outstanding Bank Guarantees 3,58.37 4,88.07

b) Outstanding Corporate Guarantee given to bank for loans taken by subsidiary 2,47.86 1,24.56

c) Claims against the Company not acknowledged as debt.

i) Disputed arrears of electricity charges, under appeal by Company / KPTCL 2,38.58 2,38.58

ii) Despite settlement of all crystallised dues under one-time settlement approved by the BIFR, Syndicate Bank had made a claim which was disputed by the Company. This has been settled during the year. - 7,73.04

2. Secured and Unsecured loans

a) Term loan from Banks of Rs.15,74.31 lakhs (previous year Rs.14,18.03 lakhs) is secured by exclusive charge on the specific assets, and second charge on all of the Companys fixed assets including all movable and immovable properties both present and future.

b) Working Capital facilities from banks are secured by a first pari passu charge on present and future plant and machinery, stock of fertilizers including work-in-process and raw materials, book debts, outstanding monies, receivables, claims, bills, contracts, engagements, securities, investments, rights and assets of the Company (except property effectively otherwise hypothecated / charged or mortgaged to the banks).

c) Loans from others is lease liability secured by hypothecation of assets acquired under the facility

3. Leasehold land of Rs. 3.04 lakhs is towards 3.041 acres taken on lease from the New Mangalore Port Trust

4. The amount due to Micro, Small and Medium Enterprises as on 31-3-2010 is Nil (Nil)

5. Interest & Finance Charges includes an amount of Rs. 6 crores paid to Syndicate Bank towards full and final settlement of their claim

6. As per the practice consistently followed by the Company, the concession rate for Urea for the year 2009-10 has been recognised based on the latest notified rates under NPS-III and further adjusted with input price escalation aggregating Rs. 5,80.58 lakhs, as estimated by Management.

The concession rate for Phosphatic and Potassic fertilizers for April to June 2009 has been recognised based on the notified price and from July 2009 to March 2010 has been accounted based on notified base rate and estimated de-escalation aggregating Rs.30,34 lakhs, as estimated by Management.

Review of such estimates by the Management, with the actual rates of concession notified by GOI from time to time, has established that these are conservative and fairly aligned.

7. Segment Reporting

The Companys business comprises of manufacture, purchase and sale of fertilizers and related products constituting a single segment. The sales of these products are predominantly made in India. Hence, the segment information as per Accounting Standard 17 Segment Reporting is not required to be disclosed.

8. The previous years figures have been reworked, regrouped, rearranged and reclassified wherever necessary.

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