Accounting Policies of Shree Renuka Sugars Ltd. Company
Mar 31, 2023
1. Corporate information
Shree Renuka Sugars Limited (âSRSL" or âthe Company") is a public company incorporated and domiciled in India. The Company''s shares are listed on the BSE Ltd and National Stock Exchange of India Ltd. The registered office of the Company is located at 2nd and 3rd Floor, Kanakashree Arcade, CTS No. 10634, JNMC Road, Nehru Nagar, Belagavi- 590010, Karnataka. The CIN number of the Company is L01542KA1995PLC019046.
The Company is principally engaged in the manufacturing and refining of sugar, ethyl alcohol, ethanol, generation and sale of power.
The financial statements for the year ended 31st March 2023 were authorised for issue by the Board of Directors of the Company on 26th May 2023.
1.1 Significant accounting policies
I. Basis of Preparation:
The financial statements of the Company has 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 financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value or revalued amount:
- Land, buildings and plant and machinery classified as property, plant and equipment.
- Certain financial assets and liabilities measured at fair value (refer note 2.1(II)(o) financial instruments).
The financial statements are prepared in INR and all values are rounded off to the nearest millions except when stated otherwise.
Going concern
As at 31st March 2023 the current liabilities of the Company exceed its current assets by INR 9,494.49 million. The Board of Directors of Wilmar Sugar Holdings Pte. Ltd.,(Holding Company) have provided letter of support to the Company, to meet shortfall in its normal trade related working capital requirements up to period ending 31st May 2024. Also, term loans
and working capital loans availed by the Company from Banks are secured by corporate guarantee provided by the ultimate Promoter Company (Wilmar International Limited).
Further, for the year ended 31st March 2023 the Company has loss before tax of INR 1,227.13 million and has positive net worth of INR 4,126.49 million as at 31st March 2023.
Accordingly, the Company management believes it will be able to meet all its financial obligations, on a timely basis and hence, the Company has prepared the financial results on going concern basis.
II. Summary of significant accounting policies: a. Current versus non-current classification
The Company presents assets and liabilities
in the balance sheet based on current/ noncurrent classification. An asset is treated as
current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is treated as current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The company has identified twelve months as its operating cycle.
b. Foreign currencies
The Company''s financial statements are presented in INR, which is also the Company''s functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss, are also recognised in OCI or profit or loss, respectively).
c. Fair value measurement
The Company measures financial instruments, such as derivatives, at fair value at each balance
sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
- Disclosures for valuation methods, significant estimates and assumptions (note 2.2 and 43)
- Quantitative disclosures of fair value measurement hierarchy (note 43)
- Investment in unquoted equity shares (note 5)
- Property, plant and equipment under revaluation model (note 3)
- Financial instruments (including those carried at amortised cost) (note 43)
d. Revenue recognition
Revenue from contract with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, i.e., at transaction price. The Company has concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before
transferring them to the customer.
Revenue from sale of goods is recognised at the point in time when control of the goods is transferred to the customer, on delivery of the goods. Revenue from sale of services (sale of power) is recognised on a basis as per the contract terms based on actual services provided for the year. The normal credit term is 7 to 60 days upon delivery. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods and services, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods and services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Contract balances
Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section (o) Financial instruments - initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is
recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividends
Revenue is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
e. Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of nonmonetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments. When loans or similar assistance are provided by governments or related institutions, with an interest rate below the
current applicable market rate, the effect of this favourable interest is regarded as a government grant. The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.
f. Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to
set off current tax assets against current tax liabilities.
g. Property, plant and equipment
Freehold land, buildings and plant, machinery and equipment, are carried in the balance sheet on the basis of revaluation model. The revaluation of these assets is conducted every three years by the Company.
Furniture and fixtures and vehicles are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Capitalised costs include cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria are met. Capital work in progress is stated at cost, net of accumulated impairment, if any.
Land, buildings and plant and machinery are measured at fair value less accumulated depreciation on buildings and impairment losses recognised at the date of revaluation. Valuations are performed with sufficient frequency to ensure that the carrying amount of a revalued asset does not differ materially from its fair value.
A revaluation surplus is recorded in OCI and credited to the asset revaluation reserve in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit and loss. A revaluation deficit is recognised in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.
An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset''s original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred directly to retained earnings.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
|
Category |
Useful life |
|
Buildings |
5 - 60 Years |
|
Plant and Equipment''s |
1 - 40 Years |
|
Furniture and Fixtures |
1 - 10 Years |
|
Vehicles |
7 - 8 Years |
The Company, based on technical assessment made by experts and based on management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
h. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
i. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
j. Leases
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-
value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Leasehold land is carried in the balance sheet based on revaluation model. Other right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.
Amortisation is calculated on a straight-line basis over the lease period of the assets is as follows:
|
Category |
Useful life |
|
Lease hold land |
24 - 78 Years |
|
Buildings |
2 - 3 Years |
|
Plant and Equipment |
12 -20 Years |
Lease Liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straightline basis over the lease term.
k. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials: cost includes cost of purchase and other costs incurred in
bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- Finished goods, intermediate goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Cost is determined on weighted average basis.
- Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- By-products and scraps are valued at net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
l. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cashgenerating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be
identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit and loss, except for properties previously revalued with the revaluation surplus taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation surplus.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit
or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
m. Provisions and contingencies General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingencies
Contingent liabilities exist when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company, or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required or the amount cannot be reliably estimated. Contingent liabilities are appropriately disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.
n. Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund.
The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the standalone statement of profit and loss:
- Service costs comprising current service costs, past-service costs; and
- Net interest expense or income
Compensated absences are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability
at the present value of the defined benefit obligation at the balance sheet date.
Termination benefits
Termination benefits are recognised as an expense in the period in which they are incurred.
o. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(a) Financial assets
Initial recognition and measurement
All financial assets (except trade receivables not containing any significant financing component) are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Trade receivables not containing any significant financing component are measured at transaction price.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortised cost.
- Debt instruments at fair value through other comprehensive income (FVTOCI).
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL).
- Equity instruments measured at fair value through other comprehensive income (FVTOCI).
Financial asset at amortised cost (debt instruments)
A âdebt instrument'' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables and loans given to subsidiaries.
Financial asset at Fair Value through OCI (FVTOCI) (debt instruments)
A âdebt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However,
the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit and loss.
The Company has not designated any debt instrument as at FVTOCI.
Financial asset at Fair Value through profit and loss
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatch''). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
Financial asset designated at Fair Value through OCI (equity instruments)
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to profit and loss,
even on sale of investment. Dividends are recognised as other income in the statement of profit and loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-through'' arrangements and either (a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a. Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, trade receivables and bank balance
b. Financial assets that are debt instruments and are measured as at FVTOCI
c. Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 (referred to as âTrade receivables'')
d. Loan commitments which are not measured as at FVTPL
e. Financial guarantee contracts which are not measured as at FVTPL
The Company follows âsimplified approach'' for recognition of impairment loss allowance on:
- Trade receivables or contract revenue receivables; and
- Loans and other financial assets
The application of simplified approach does not require the company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime Expected Credit Loss(ECL) at each reporting date, right from its initial recognition.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as expense (or income) in the statement of profit and loss. This amount is reflected under the head âother expenses'' in the profit and loss. The balance sheet presentation for various financial instruments is described below:
- Financial assets measured as at amortised cost and contractual revenue receivables: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
- Loan commitments and financial guarantee contracts: ECL is presented as a provision in the balance sheet, i.e. as a liability.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i.e., financial assets which are credit impaired on purchase/ origination.
(b) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts, derivative financial instruments, lease liabilities and other financial liabilities.
Subsequent measurement
The measurement of financial liabilities
depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the profit or loss
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Loans and borrowings
This is the category most relevant to the Company. After initial recognition, interestbearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of
the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
This category generally applies to borrowings. For more information refer note 18.
Other financial liabilities
The Company enters into deferred payment arrangements (letter of credit acceptances) whereby lenders such as banks and other financial institutions make payments to supplier''s banks for purchase of materials. The banks and financial institutions are subsequently repaid by the Company at a later date providing working capital benefits. These arrangements are in the nature of credit extended in normal operating cycle and these arrangements are recognized as acceptances under trade payables. Interest borne by the company on such arrangements is accounted as finance cost. Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
(c) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
p. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
q. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss attributable to equity holder of the company (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period, attributable to equity shareholders of the Company and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r. Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments, such as foreign currency forward contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as cash flow hedges (hedging the exposure to variability in cash flows that is attributable to foreign currency risk associated with External Commercial Borrowings).
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the Company will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
- There is âan economic relationship'' between the hedged item and the hedging instrument.
- The effect of credit risk does not âdominate the value changes'' that result from that economic relationship.
- The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Company actually hedges and the quantity of the hedging instrument that the Company actually uses to hedge that quantity of hedged item.
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the Effective portion of cash flow hedges, while any ineffective portion is recognised immediately in the statement of profit and loss. The Effective portion of cash flow hedges is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
The Company uses foreign currency forward contracts as hedges of its exposure to foreign currency risk in respect of principal portion of the External Commercial Borrowings.
The Company designates only the spot element of a forward contract as a hedging instrument. The forward element is recognised in OCI.
For any other cash flow hedges, the amount accumulated in OCI is reclassified to profit or loss as reclassification adjustment in the same period or periods during which the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must be accounted for depending on the nature of the underlying transaction as described above.
1.2 Significant accounting judgments estimates and assumptions
The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
1. Revaluation of property, plant and equipment
The Company measures land, buildings, plant and machinery classified as property, plant and equipment at revalued amounts with changes in fair value being recognised in OCI. The Company had engaged an independent valuation specialist to assess fair value as at 31st March 2022 for revaluation of land, buildings, plant and equipment. Fair value of land was determined by using the market approach, fair value of
Mar 31, 2022
1. Corporate information
Shree Renuka Sugars Limited (âSRSL" or âthe Company") is a public company incorporated and domiciled in India. The Company''s shares are listed on the BSE Ltd and National Stock Exchange of India Ltd. The registered office of the Company is located at 2nd and 3rd Floor, Kanakashree Arcade, CTS No. 10634, JNMC Road, Nehru Nagar, Belagavi- 590010, Karnataka. The CIN number of the Company is L01542KA1995PLC019046.
The Company is principally engaged in the manufacturing and refining of sugar, ethyl alcohol, ethanol, generation and sale of power.
The financial statements for the year ended 31st March 2022 were authorised for issue by the Board of Directors of the Company on 24th May 2022.
2.1 Significant accounting policies I. Basis of Preparation:
The financial statements of the Company has 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 financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value or revalued amount:
- Land, buildings and plant and machinery classified as property, plant and equipment.
- Certain financial assets and liabilities measured at fair value (refer note 2.1(II)(o) financial instruments).
The financial statements are prepared in INR and all values are rounded off to the nearest millions except when stated otherwise.
Going concern
As at 31st March 2022 the current liabilities of the Company exceed its current assets by INR 9,655.85 million. The Board of Directors of Wilmar Sugar Holdings Pte. Ltd.,(Holding Company) have provided letter of support to the Company, to meet shortfall in its normal trade related working capital requirements up to period ending 31st May 2023. Also, term loans and working capital loans availed by the Company from Banks are secured by corporate guarantee provided by the ultimate Promoter Company (Wilmar International Limited).
Further, for the year ended 31st March 2022 the Company has profit before tax of INR 1,214.52 million and has positive net worth of INR 5,469.84 million as at 31st March 2022.
Accordingly, the Company management believes it will be able to meet all its financial obligations, on a timely basis and hence, the Company has prepared the financial results on going concern basis.
II. Summary of significant accounting policies:
a. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ noncurrent classification. An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as noncurrent.
A liability is treated as current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The company has identified twelve months as its operating cycle.
b. Foreign currencies
The Company''s financial statements are presented in INR, which is also the Company''s functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss, are also recognised in OCI or profit or loss, respectively).
c. Fair value measurement
The Company measures financial instruments, such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a nonfinancial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
- Level 3 â Valuation techniques
for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
- Disclosures for valuation methods, significant estimates and assumptions (note 2.2 and 43)
- Quantitative disclosures of fair value measurement hierarchy (note 43)
- Investment in unquoted equity shares (note 5)
- Property, plant and equipment under revaluation model (note 3)
- Financial instruments (including those carried at amortised cost) (note 43)
d. Revenue recognition
Revenue from contract with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer.
Revenue from sale of goods is recognised at the point in time when control of the goods is transferred to the customer, on delivery of the goods. Revenue from sale of services (sale of power) is recognised on a basis as per the contract terms based on actual services provided for the year. The normal credit term is 7 to 60 days upon delivery. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods and services, the Company considers the effects of variable consideration, the existence of significant financing components, noncash
consideration, and consideration payable to the customer (if any).
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods and services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Contract balances Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section (o) Financial instruments - initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual
terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividends
Revenue is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
e. Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of nonmonetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments. When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant. The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.
The Government announced Maximum Allowable Export Quota (MAEQ) for season year 2019-20 and 2020-21 to boost exports of sugar. Under these schemes, the Company can export sugar under its own quota and the quota of the third parties. The Company has availed benefits under both the schemes for exports made by the Company under its own quota.
As the company has complied with the relevant conditions of MAEQ subsidy schemes notified by the Ministry of Consumer Affairs, Food and Public Distribution, it has recognised eligible assistance as Income from incentives to sugar mills.
f. Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities.
g. Property, plant and equipment
Freehold land, buildings and plant, machinery and equipment, are carried in the balance sheet on the basis of revaluation model. The revaluation of these assets is conducted every three years by the Company.
Furniture and fixtures and vehicles are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Capitalised costs include cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria are met. Capital work in progress is stated at cost, net of accumulated impairment, if any.
Land, buildings and plant and machinery are measured at fair value less accumulated depreciation on buildings and impairment losses recognised at the date of revaluation. Valuations are performed with sufficient frequency to ensure that the carrying amount of a revalued asset does not differ materially from its fair value.
A revaluation surplus is recorded in OCI and credited to the asset revaluation reserve in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit and loss. A revaluation deficit is recognised in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.
An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset''s original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred directly to retained earnings.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
|
Category |
Useful life |
|
Buildings |
5 - 60 Years |
|
Plant and Equipment''s |
1 - 40 Years |
|
Furniture and Fixtures |
1 - 10 Years |
|
Vehicles |
7 - 8 Years |
The Company, based on technical assessment made by experts and based on management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
h. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
i. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
j. Leases
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Leasehold land is carried in the balance sheet based on revaluation model. Other right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.
Amortisation is calculated on a straight-line basis over the lease period of the assets is as follows:
|
Category |
Useful life |
|
Lease hold land |
24 - 78 Years |
|
Buildings |
2 - 3 Years |
|
Plant and Equipment |
12 -20 Years |
Lease Liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its shortterm leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
k. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- Finished goods, intermediate goods
and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Cost is determined on weighted average basis.
- Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- By-products and scraps are valued at net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
l. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit and loss, except for properties previously revalued with the revaluation surplus taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation surplus.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
m. Provisions and contingencies
General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingencies
Contingent liabilities exist when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company, or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required or the amount cannot be reliably estimated. Contingent liabilities are appropriately disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.
n. Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the standalone statement of profit and loss:
- Service costs comprising current service costs, past-service costs; and
- Net interest expense or income
Long term employee benefits:
Compensated absences are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation at the balance sheet date.
Termination benefits
Termination benefits are recognised as an expense in the period in which they are incurred.
o. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(a) Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortised cost.
- Debt instruments at fair value through other comprehensive income (FVTOCI).
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL).
- Equity instruments measured at fair value through other comprehensive income (FVTOCI).
Financial asset at amortised cost (debt instruments)
A ''debt instrument'' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables and loans given to subsidiaries.
Financial asset at Fair Value through OCI (FVTOCI) (debt instruments)
A ''debt instrument'' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit and loss.
The Company has not designated any debt instrument as at FVTOCI.
Financial asset at Fair Value through profit and loss
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch''). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.
Financial asset designated at Fair Value through OCI (equity instruments)
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to profit and loss, even on sale of investment. Dividends are recognised as other income in the statement of profit and loss when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''passthrough'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability.
The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a. Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, trade receivables and bank balance
b. Financial assets that are debt instruments and are measured as at FVTOCI
c. Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 (referred to as ''Trade receivables'')
d. Loan commitments which are not measured as at FVTPL
e. Financial guarantee contracts which are not measured as at FVTPL
The Company follows ''simplified approach'' for recognition of impairment loss allowance on:
- Trade receivables or contract revenue receivables; and
- Loans and other financial assets
The application of simplified approach does not require the company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime Expected Credit Loss(ECL) at each reporting date, right
from its initial recognition.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as expense (or income) in the statement of profit and loss. This amount is reflected under the head ''other expenses'' in the profit and loss. The balance sheet presentation for various financial instruments is described below:
- Financial assets measured as at amortised cost and contractual revenue receivables: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
- Loan commitments and financial guarantee contracts: ECL is presented as a provision in the balance sheet, i.e. as a liability.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i.e., financial assets which are credit impaired on purchase/ origination.
(b) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts, derivative financial instruments, lease liabilities and other financial liabilities.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the profit or loss
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Loans and borrowings
This is the category most relevant to the Company. After initial recognition,
interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
This category generally applies to borrowings. For more information refer note 18.
Other financial liabilities
The Company enters into deferred payment arrangements (letter of credit acceptances) whereby lenders such as banks and other financial institutions make payments to supplier''s banks for purchase of materials. The banks and financial institutions are subsequently repaid by the Company at a later date providing working capital benefits. These arrangements are in the nature of credit extended in normal operating cycle and these arrangements are recognized as acceptances under trade payables. Interest borne by the company on such arrangements is accounted as finance cost. Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS
109 and the amount recognised less cumulative amortisation.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
(c) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
p. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
q. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss attributable to equity holder of the company (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period, attributable to equity shareholders of the Company and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r. Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments, such as foreign currency forward contracts, to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as cash flow hedges (hedging the exposure to variability in cash flows that is attributable to foreign currency risk associated with External Commercial Borrowings).
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the Company will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
- There is ''an economic relationship'' between the hedged item and the hedging instrument.
- The effect of credit risk does not ''dominate the value changes'' that result from that economic relationship.
- The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Company actually hedges and the quantity of the hedging instrument that the Company actually uses to hedge that quantity of hedged item.
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the Effective portion of cash flow hedges, while any ineffective portion is recognised immediately in the statement of profit and loss. The Effective portion of cash flow hedges is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
The Company uses foreign currency forward contracts as hedges of its exposure to foreign currency risk in respect of principal portion of the External Commercial Borrowings.
The Company designates only the spot element of a forward contract as a hedging instrument. The forward element is recognised in OCI.
For any other cash flow hedges, the amount accumulated in OCI is reclassified to profit or loss as reclassification adjustment in the same period or periods during which the hedged cash flows affect profit or loss.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must be accounted for depending on the nature of the underlying transaction as described above.
2.2 Significant accounting judgments estimates and assumptions
The preparation of the Company''s financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
1. Revaluation of property, plant and equipment
The Company measures land, buildings, plant and machinery classified as property, plant and equipment at revalued amounts with changes in fair value being recognised in OCI. The Company had engaged an independent valuation specialist to assess fair value as at 31st March 2022 for revaluation of land, buildings, plant and equipment. Fair value of land was determined by using the market approach, fair value of building was determined by using depreciated replacement cost (DRC) and
Mar 31, 2018
a. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
o Expected to be realised or intended to be sold or consumed in normal operating cycle
o Held primarily for the purpose of trading
o Expected to be realised within twelve months after the reporting period, or
o Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
o I t is expected to be settled in normal operating cycle
o It is held primarily for the purpose of trading
o I t is due to be settled within twelve months after the reporting period, or
o There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The company has identified twelve months as its operating cycle.
b. Foreign currencies
The Companyâs financial statements are presented in INR, which is also the Companyâs functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).
c. Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
o In the principal market for the asset or liability, or
o I n the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
o Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
o Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
o Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
o Disclosures for valuation methods, significant estimates and assumptions (note 2.2 and 42)
o Quantitative disclosures of fair value measurement hierarchy (note 42)
o Investment in unquoted equity shares (note 5)
o Property, plant and equipment under revaluation model (note 3)
o Financial instruments (including those carried at amortised cost) (note 42)
d. Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Based on the Educational Material on Ind AS 18 issued by the ICAI, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty
However, sales tax/ value added tax (VAT) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognised,
Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods, Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates,
Revenue from sale of power is recognised when the units generated are transmitted to the pooling station, in accordance with the terms and conditions of the power purchase agreement entered into by the Company with the purchasing parties,
Rendering of services
Income from services is recognised as they are rendered (based on agreement/arrangement with the concerned customers),
interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR), EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability, When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses,
Dividends
Revenue is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend,
e. Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with, When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed, When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset,
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i,e, by equal annual instalments, When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant, The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received, The loan is subsequently measured as per the accounting policy applicable to financial liabilities,
The Company has chosen to present grants related to an expense item as other income in the statement of profit and loss,
f. Taxes Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income,
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity), Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate,
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date,
Deferred tax liabilities are recognised for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future,
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority
Sales/ value added taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the amount of sales/ value added taxes paid, except:
o When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable.
o When receivables and payables are stated with the amount of tax included.
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
g. Property, plant and equipment
Freehold land, buildings and plant and machinery (property), other than investment property, were carried in the balance sheet on the basis of fair valuations performed as at September 2015. The Company has also determined that fair value as at 31 March 2018 does not differ materially from the carrying value of assets. Accordingly, the Company has not revalued the property at 31 March 2018.
Capital work in progress, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Land, buildings and plant and machinery are measured at fair value less accumulated depreciation on buildings and impairment losses recognised at the date of revaluation. Valuations are performed with sufficient frequency to ensure that the carrying amount of a revalued asset does not differ materially from its fair value.
A revaluation surplus is recorded in OCI and credited to the asset revaluation surplus in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit and loss. A revaluation deficit is recognised in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.
An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the assetâs original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred directly to retained earnings.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
The Company, based on technical assessment made by management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
h. intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
I ntangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
i. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
j. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on the borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.
k. inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
o Raw materials: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition, Cost is determined on weighted average basis,
o Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs, Cost is determined on weighted average basis,
o Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition, Cost is determined on weighted average basis,
0 By-products and scraps are valued at net realisable value,
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale,
l. impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired, If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount, An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use, Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount, In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset, In determining fair value less costs of disposal, recent market transactions are taken into account, If no such transactions can be identified, an appropriate valuation model is used, These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators,
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companyâs CGUs to which the individual assets are allocated, These budgets and forecast calculations generally cover a period of five years, For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year, To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified, In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used,
I mpairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit and loss, except for properties previously revalued with the revaluation surplus taken to OCI, For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation surplus,
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased, If such indication exists, the Company estimates the assetâs or CGUâs recoverable amount, A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognised, The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years, Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase,
m. Provisions General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation, When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain, The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement,
I f the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
n. Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur,
Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the consolidated statement of profit and loss:
o Service costs comprising current service costs, past-service costs; and
o Net interest expense or income
Long term employee benefits:
Compensated absences are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation at the balance sheet date.
Termination benefits
Termination benefits are recognised as an expense in the period in which they are incurred.
o. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity
(a) Financial assets initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
o Debt instruments at amortised cost.
o Debt instruments at fair value through other comprehensive income (FVTOCI).
o Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL).
o Equity instruments measured at fair value through other comprehensive income (FVTOCI).
Debt instruments at amortised cost
A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables. For more information on receivables, refer to Note 11.
Debt instrument at FVTOCI
A âdebt instrumentâ is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The assetâs contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
The Company has not designated any debt instrument as at FVTOCI.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity
de-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
o The rights to receive cash flows from the asset have expired, or
o The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangements and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership, When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement, In that case, the Company also recognises an associated liability, The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained,
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay,
impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a, Financial assets that are debt instruments, and are measured at amortised cost e,g,, loans, debt securities, deposits, trade receivables and bank balance
b, Financial assets that are debt instruments and are measured as at FVTOCI
c, Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18 (referred to as âcontractual revenue receivablesâ in these illustrative financial statements)
d, Loan commitments which are not measured as at FVTPL
e, Financial guarantee contracts which are not measured as at FVTPL
The Company follows âsimplified approachâ for recognition of impairment loss allowance on:
o Trade receivables or contract revenue receivables; and
The application of simplified approach does not require the company to track changes in credit risk, Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition,
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables, The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates, At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed,
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L), This amount is reflected under the head âother expensesâ in the P&L, The balance sheet presentation for various financial instruments is described below:
o Financial assets measured as at amortised cost and contractual revenue receivables: ECL is presented as an allowance, i,e,, as an integral part of the measurement of those assets in the balance sheet, The allowance reduces the net carrying amount, Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount,
o Loan commitments and financial guarantee contracts: ECL is presented as a provision in the balance sheet, i,e, as a liability
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis,
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i,e,, financial assets which are credit impaired on purchase/ origination,
(b) Financial liabilities initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.
Loans and borrowings
This is the category most relevant to the Company After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
This category generally applies to borrowings. For more information refer Note 17
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
(c) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously
p. Derivative financial instruments and hedge accounting initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, to hedge its foreign currency risks, Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value, Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative,
The purchase contracts that meet the definition of a derivative under Ind AS 109 are recognised in the statement of profit and loss, Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability,
q. Convertible preference shares
Convertible preference shares are separated into liability and equity components based on the terms of the contract,
On issuance of the convertible preference shares, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument, This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption,
The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity since conversion option meets Ind AS 32 criteria for fixed to fixed classification, Transaction costs are deducted from equity, net of associated income tax, The carrying amount of the conversion option is not remeasured in subsequent years,
Transaction costs are apportioned between the liability and equity components of the convertible preference shares based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised,
r. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value,
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management,
s. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss attributable to equity holder of the company (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period, Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period, The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources,
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders of the company and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares,
Mar 31, 2017
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES:
All amounts in millions Indian Rupees, unless otherwise stated.
a. BASIS OF PRESENTATION:
The accompanying financial statements have been presented for the year ended 31st March, 2017 along with comparative information for the year ended 31st March, 2016. These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) on going concern basis under the historical cost convention on the accrual basis of accounting and the relevant provisions prescribed in the Companies Act 2013, besides the pronouncements/guidelines of the Institute of Chartered Accountants of India and of the Securities and Exchange Board of India. The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies(Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. The accounting policies have been consistently applied by the Company except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
The Company has adopted all the Ind AS standards and the adoption was carried out in accordance with Ind AS 101, First Time Adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP.
b. USE OF ESTIMATES:
In preparing the Company''s financial statements in conformity with Ind AS, the Company''s management is required to make estimates, judgments and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period, the actual results could differ from those estimates.
Difference between actual results and estimates are recognized in the period in which the results are known or materialize and if material, their effects are disclosed in the notes to the financial statements.
c. PROPERTY, PLANT AND EQUIPMENT:
i. Property, plant and equipment (Tangible and Intangible) are stated at cost less accumulated depreciation. Cost comprises the purchase price and any cost attributable to bringing the asset to the location and condition necessary for its intended use. Expenditure incurred during construction period has been added to the cost of the assets. These expenses have been allocated to the sugar, power generation and ethanol units on a reasonable basis. Subsidy received from the Government has been recognized as deferred income and recognized in the profit and loss on a systematic basis over the useful life of assets.
ii. Land, Building and Plant and Machinery are carried at revalued amount and the surplus on revaluation is credited to Revaluation Reserve account. The useful lives of the depreciable assets remain to be the same as that of prior to revaluation.
d. BORROWING COSTS:
Interest and other costs in connection with the borrowings of funds to the extent attributable to the acquisition or construction of qualifying assets or capitalized as part of the cost of such asset till such time the asset is ready for its intended use.
All other borrowings costs are recognized in the statement of profit and loss in the period in which they are incurred.
e. DEPRECIATION:
i. Depreciation is provided in the manner prescribed in Schedule II of the Companies Act, 2013. The Carrying Value of Fixed assets are depreciated over the revised remaining useful lives. Fixed assets having nil useful life has been charged to the opening balance of retained earnings as per the transitional provision prescribed in note 7 (b) of Schedule
II of the Companies Act, 2013.
ii. Depreciation on the value of Revaluation is reduced from revaluation Reserve.
f. LEASES:
A. Lease Rentals: Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term. In case of long- term leases, the expenditure to the statement of profit and loss is recognized on the basis of equated lease rentals arrived at by allocating the total outflow of lease rentals on the entire contractual period over the period of the lease.
B. Lease Income: Lease income is recognized on accrual basis.
g. INVESTMENTS:
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as Non-Current investments. Current investments are carried at lower of cost or fair value/ market value, determined on an individual investment basis. Non-Current Investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments. Profit/ loss on sale of investments is computed with reference to their average cost.
h. INVENTORIES:
Inventories are valued as follows:
Raw materials, stores and spares, Material in transit and packing materials
Valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a Moving Weighted Average basis.
Finished goods
Valued at lower of cost and net realizable value. Cost includes direct materials, labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods excludes excise duty.
Excise duty is generally provided on manufacture of goods, which are not exempt from the payment of duty. However, since the Company''s finished goods are not segregated at the time of production into those for sale in domestic markets and those for sale in export markets, the Company is unable to determine the exact liability towards excise duty on finished goods. Accordingly, excise duty is provided/ paid only at the time of clearance of the goods from the factory.
Work-in-process
Valued at lower of cost up to estimated stage of process and net realizable value. Cost includes direct materials, labour and a proportion of manufacturing overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
By-products
By-products are valued at cost. Inter-unit transfers of by- products also include the cost of transportation, duties, etc.
i. REVENUE RECOGNITION:
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods are transferred to the customer and is stated net of trade discounts, excise duty, sales returns.
Based on Ind AS 18, the Group has assumed that recovery of excise duty flows to the group on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the group on its own account, revenue includes excise duty.
However, sales tax/ value added tax (VAT) is not received by the group on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
Revenue from sale of power is recognized when the units generated are transmitted to the pooling station, in accordance with the terms and conditions of the power purchase agreement entered into by the Company with the purchasing parties.
Income from services is recognized as they are rendered (based on agreement/arrangement with the concerned customers).
Dividend income on investments is accounted for as and when the right to receive the payments is established.
Income against claims of the company, viz., export incentives, insurance claims, etc., is recognized on accrual/right to receive basis.
j. FOREIGN CURRENCY TRANSACTIONS: INITIAL RECOGNITION
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate at the date of the Balance Sheet. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and investments in foreign companies are recorded at the exchange rates prevailing on the date of making the investments.
Exchange Differences
Exchange Differences is charged to the statement of profit and loss except arising on account of such conversion related to the purchase of fixed assets is adjusted therewith , and other long term monetary items is adjusted in the Foreign Currency Monetary Item Translation Difference Account.
Forward Exchange Contracts not intended for trading or speculation purposes
The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the period.
k. DERIVATIVE FINANCIAL INSTRUMENTS
The Company holds derivative financial instruments such as foreign exchange forward and options contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
This category has derivative financial assets or liabilities which are not designated as hedges. Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the Statement of Profit and Loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets / liabilities in this category are presented as current assets / current liabilities if they are either held for trading or are expected to be realized within 12 months after the Balance Sheet date.
Transactions in financial derivatives and commodity futures are accounted based on the mode of final settlement. Transactions, which are ultimately settled net, without taking delivery, are recorded net with the gains/losses being recognized as income/expenses in the financial statements. Transactions, which stipulate physical delivery of the goods and where the company intends to take delivery, are recorded at gross, as purchases and sales as a part of the company''s sugar manufacturing activities.
l. EMPLOYEE BENEFITS:
Short-term employee benefits are recognized as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered.
The eligible employees of the Company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both the employees and the Company make monthly contributions at a specified percentage of the covered employees'' salary (currently 12% of employees'' salary). The contributions as specified under the law are paid to "The Regional Provident Fund Commissioner and the Central Provident Fund under the Pension Scheme". The Company recognizes such contributions as expense of the year in which the liability is incurred.
The Company has an obligation towards Gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The plan is managed by a trust and the fund is invested with Life Insurance Corporation of India under its Group Gratuity Scheme. The Company makes annual contributions to Gratuity Fund and the Company recognizes the liability for Gratuity benefits payable in future based on an independent actuarial valuation.
The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave for a ailment as well as encashment subject to the rules. As per the regular past practice followed by the employees, it is not expected that the entire accumulated leave shall be encased or availed by the employees during the next twelve months and accordingly the benefit is treated as long-term defined benefit. The liability is provided for based on the number of days of unutilized leave at the Balance Sheet date on the basis of an independent actuarial valuation.
m. INCOME TAX:
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961
Deferred income tax reflects the impact of current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier periods. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.
MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the Minimum Alternate tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date.
n. GOVERNMENT GRANTS:
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.
o. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:
Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if
- The Company has a present obligation as a result of a past event
- A probable outflow of resources is expected to settle the obligation and
- The amount of the obligation can be easily estimated.
Contingent Liability is disclosed in the case of
- A present obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle the obligation.
- A possible obligation, unless the probability of outflow of resources is remote.
Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are disclosed as contingent liabilities. In respect of statutory matters, contingent liabilities are disclosed only for those demand(s) that are contested by the Company.
Contingent Assets are neither recognized nor disclosed.
p. EARNINGS PER SHARE:
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average numbers of equity shares outstanding during the period are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
q. SEGMENT REPORTING:
The accounting policies adopted for segment reporting are in line with the accounting policies adopted by the Company, with the following additional policies for segment reporting:
(i) Inter segment revenue has been accounted for based on the transaction price agreed to between segments which is primarily market led.
(ii) Revenue, Expenses, Assets and Liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
(iii) Gains/losses from transactions in commodity futures, which are ultimately settled net, with/without taking delivery, are recorded as ''Other revenues'' under the Sugar segment.
(iv) Revenue, Expenses, Assets and Liabilities, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocated".
r. IMPAIRMENT OF ASSETS:
As at each balance sheet date, the carrying amount of assets is tested for impairment so as to determine,
a. The provision for impairment loss, if any, required or
b. The reversal, if any, required of impairment loss recognized in previous periods.
Impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount.
s. CLASSIFICATION OF ASSETS AND LIABILITIES AS CURRENT AND NONCURRENT:
All assets and liabilities are classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, 12 months has been considered by the Company for the purpose of current, non-current classification of assets and liabilities.
d) The Company has only one class of equity shares . The company declares and pays dividend in Indian rupees . The holders of equity shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share .
e) 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 dues . The distribution will be in proportion to the number of equity shares held by the shareholders.
f) Details of Shareholders holding more than 5% shares in the Equity Share Capital of the company:
A) NON-CONVERTIBLE DEBENTURES:
(i) 1500 Redeemable Non-Convertible Debentures (11.70%) of '' 1,000,000 each, secured by first pari-passu charge on movable and immovable assets of the company and are redeemable at par in installment and last installment is due on 31/03/2024.
(ii) 1000 Redeemable Non-Convertible Debentures (11.30%) of '' 1,000,000 each , secured by first pari-passu charge on movable and immovable assets of the company and are redeemable at par in installment and last installment is due on 31/03/2024.
B) TERM-LOANS
Rupee Term Loan availed from Indian Renewable Energy Development Authority (IREDA) are secured by first and exclusive charge on the movable and immovable assets of the companies Co-Generation units located at Panchganga and Ajinkyatara.
Term loan from other banks and financial institutions are secured by first pari-passu charge on movable and immovable assets of the company.
FROM OTHERS:
SDF Loans amounting to '' 507.54 Mn @ 4% p.a., are secured by exclusive second charge on movable and immovable assets of the company.
SDF Loans amounting to '' 312.82 Mn @ 7% p.a., are secured by pari-passu first charge on movable and immovable assets of the company.
Interest Accrued but not due represents interest on certain long-term borrowings, where the payment of interest has also been deferred for a period of time and is therefore considered to be in nature of borrowings and included as a part of secured loans under Long term borrowings.
Mar 31, 2015
A. Basis of presentation:
The accompanying financial statements have been presented for the year
ended 31st March, 2015 along with comparative information for the year
ended 31st March, 2014. The accompanying financial statements have been
prepared on going concern basis under the historical cost convention on
the accrual basis of accounting in conformity with accounting
principles generally accepted in India ("Indian GAAP") and the relevant
provisions prescribed in the Companies Act 2013, besides the
pronouncements/guidelines of the Institute of Chartered Accountants of
India and of the Securities and Exchange Board of India. The accounting
policies have been consistently applied by the Company and are
consistent with those used in the previous year, except as stated
hereunder.
b. Use of estimates:
In preparing the Company's financial statements in conformity with
accounting principles generally accepted in India, the Company's
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period, the actual results could differ from those estimates.
Difference between actual results and estimates are recognized in the
period in which the results are known or materialize.
c. Fixed assets:
Fixed assets (Tangible and Intangible) are stated at cost less
accumulated depreciation. Cost comprises the purchase price and any
cost attributable to bringing the asset to its working condition for
its intended use. Expenditure incurred during construction period has
been added to the cost of the assets. These expenses have been
allocated to the sugar, power generation and ethanol units on a
reasonable basis. Subsidy received from the Government has been reduced
from value of the respective assets.
d. Borrowing costs:
Interest and other costs in connection with the borrowings of funds to
the extent attributable to the acquisition or construction of
qualifying assets or capitalized as part of the cost of such asset till
such time the asset is ready for its intended use.
All other borrowings costs are recognized in the statement of profit and
loss in the period in which they are incurred.
e. Depreciation:
Depreciation is provided in the manner prescribed in Schedule II of the
Companies Act, 2013. The Carrying Value of Fixed assets are depreciated
over the revised remaining useful lives. Fixed assets having nil useful
life has been charged to the opening balance of retained earnings as
per the transitional provision prescribed in note 7 (b) of Schedule II
of the Companies Act 2013.
f. Leases:
A. Lease Rentals: Operating lease payments are recognized as an
expense in the statement of profit and loss on a straight-line basis
over the lease term. In case of long- term leases, the expenditure to
the statement of profit and loss is recognized on the basis of equated
lease rentals arrived at by allocating the total outfow of lease
rentals on the entire contractual period over the period of the lease.
B. Lease Income: Lease income is recognized on accrual basis.
g. Investments:
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as Non-Current investments. Current
investments are carried at lower of cost or fair value/ market value,
determined on an individual investment basis. Non-Current Investments
are carried at cost. However, provision for diminution in value is made
to recognize a decline other than temporary in the value of the
investments. Profit/loss on sale of investments is computed with
reference to their average cost.
h. Amalgamation:
Accounting for Amalgamation is as per AS-14 of the Indian Accounting
Standards as prescribed by The Institute of Chartered Accountants of
India. The Goodwill arising on Amalgamation is amortized on the basis
over its useful life but shall not exceed five years.
i. Inventories:
Inventories are valued as follows:
Raw materials, stores and spares and packing materials Lower of cost
and net realizable value. However, materials and other items held for
use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected to
be sold at or above cost. Cost is determined on a First in First out
('FIFO') basis.
Finished goods
Lower of cost and net realizable value. Cost includes direct materials,
labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods excludes excise duty.
Excise duty is generally provided on manufacture of goods, which are
not exempt from the payment of duty. However, since the Company's
finished goods are not segregated at the time of production into those
for sale in domestic markets and those for sale in export markets, the
Company is unable to determine the exact liability towards excise duty
on finished goods. Accordingly, excise duty is provided/ paid only at
the time of clearance of the goods from the factory.
Work-in-process
Lower of cost up to estimated stage of process and net realizable
value. Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
By- products
By-products are valued at cost. Inter-unit transfers of by- products
also include the cost of transportation, duties, etc.
j. Revenue recognition:
Revenue is recognized to the extent it is probable that the economic
benefits will fow to the Company and the revenue can be reliably
measured. Revenue from sale of goods is recognized when the significant
risks and rewards of ownership of the goods are transferred to the
customer and is stated net of trade discounts, excise duty, sales
returns.
Revenue from sale of power is recognized when the units generated are
transmitted to the pooling station, in accordance with the terms and
conditions of the power purchase agreement entered into by the Company
with the purchasing parties.
Income from services is recognized as they are rendered (based on
agreement/arrangement with the concerned customers).
Dividend income on investments is accounted for as and when the right
to receive the payments is established.
Income against claims of the company, viz., export incentives,
insurance claims, etc., is recognized on accrual/right to receive
basis.
k. Foreign currency transactions:
Initial Recognition
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate at
the date of the Balance Sheet. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction and investments
in foreign companies are recorded at the exchange rates prevailing on
the date of making the investments.
Exchange Differences
Exchange Differences is charged to the statement of profit and loss
except arising on account of such conversion related to the purchase of
fixed assets is adjusted therewith , and other long term monetary items
is adjusted in the Foreign Currency Monetary Item Translation Difference
Account.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of forward
exchange contract is recognized as income or as expense for the period.
l. Derivative transactions:
Pursuant to the announcement on accounting for derivatives issued by
the Institute of Chartered Accountants of India, the Company, in
accordance with the principle of prudence as enunciated in AS-1,
"Disclosure of Accounting Policies", provides for losses in respect of
all outstanding derivative contracts at the Balance sheet date by
marking them to market. Any net unrealized gains arising on such mark
to market are not recognized as income.
m. Employee benefts:
Short-term employee benefits are recognized as an expense at the
undiscounted amount in the statement of profit and loss of the year in
which the related service is rendered.
The eligible employees of the Company are entitled to receive benefits
under the Provident Fund, a defined contribution plan in which both the
employees and the Company make monthly contributions at a specified
percentage of the covered employees' salary (currently 12% of
employees' salary). The contributions as specified under the law are
paid to " The Regional Provident Fund Commissioner and the Central
Provident Fund under the Pension Scheme". The Company recognizes such
contributions as expense of the year in which the liability is
incurred.
The Company has an obligation towards Gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for a
lump sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service. Vesting
occurs upon completion of five years of service. The plan is managed by
a trust and the fund is invested with Life Insurance Corporation of
India under its Group Gratuity Scheme. The Company makes annual
contributions to Gratuity Fund and the Company recognizes the liability
for Gratuity benefits payable in future based on an independent
actuarial valuation.
The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave for a ailment as well as encashment subject to the rules. As per
the regular past practice followed by the employees, it is not expected
that the entire accumulated leave shall be encashed or availed by the
employees during the next twelve months and accordingly the benefit is
treated as long-term defined benefit. The liability is provided for
based on the number of days of unutilized leave at the Balance Sheet
date on the basis of an independent actuarial valuation.
n. Income tax:
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income Tax Act, 1961
Deferred income tax reflects the impact of current period timing
differences between taxable income and accounting income for the period
and reversal of timing differences of earlier periods. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognized only to the extent that there is virtual certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.
MAT credit is recognized as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specifed period. In the year in which the Minimum Alternate
tax (MAT) credit becomes eligible to be recognized as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of Profit and Loss and shown
as MAT Credit Entitlement. The Company reviews the same at each Balance
Sheet date.
o. Miscellaneous expenditure:
Preliminary expenses are written-off over a period of five years from the
year of commencement of commercial production.
The Deferred Revenue Expenditure comprises of debenture issue expenses
and expenses towards Increase in Authorized Capital which is written of
over a period of 5 years & expenses incurred on the lease units up to
the date of production which is written off in proportion to the period
of lease unexpired or 1/5th in case of long lease period.
p. Government grants:
Government grants in the nature of promoter's contribution are credited
to capital reserve and treated as a part of Shareholder's funds. Other
Government grants/ subsidy have been reduced from value of the
respective assets.
q. Financial derivatives and commodity futures:
Transactions in financial derivatives and commodity futures are
accounted based on the mode of final settlement. Transactions, which
are ultimately settled net, without taking delivery, are recorded net
with the gains/losses being recognized as income/expenses in the
financial statements. Transactions, which stipulate physical delivery of
the goods and where the company intends to take delivery, are recorded
at gross, as purchases and sales as a part of the company's sugar
manufacturing activities.
r. Provisions, contingent liabilities and contingent assets:
Provisions are recognized for liabilities that can be measured only by
using a substantial degree of estimation, if
The Company has a present obligation as a result of a past event
A probable outflow of resources is expected to settle the obligation
and
The amount of the obligation can be easily estimated.
Contingent Liability is disclosed in the case of A present obligation
arising from a past event, when it is not probable that an outflow of
resources will be required to settle the obligation.
A possible obligation, unless the probability of outflow of resources
is remote.
Depending on facts of each case and after due evaluation of relevant
legal aspects, claims against the Company not acknowledged as debts are
disclosed as contingent liabilities. In respect of statutory matters,
contingent liabilities are disclosed only for those demand(s) that are
contested by the Company.
Contingent Assets are neither recognized nor disclosed.
s. Earnings per share:
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average numbers of equity shares outstanding during the period
are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
t. Segment reporting:
The accounting policies adopted for segment reporting are in line with
the accounting policies adopted by the Company, with the following
additional policies for segment reporting:
(i) Inter segment revenue has been accounted for based on the
transaction price agreed to between segments which is primarily market
led.
(ii) Revenue, Expenses, Assets and Liabilities have been identified to
segments on the basis of their relationship to the operating activities
of the segment.
(iii) Gains/losses from transactions in commodity futures, which are
ultimately settled net, with/without taking delivery, are recorded as
'Other revenues' under the Sugar segment.
(iv) Revenue, Expenses, Assets and Liabilities, which relate to the
enterprise as a whole and are not allocable to segments on a reasonable
basis, have been included under "Unallocated".
u. Impairment of assets:
As at each balance sheet date, the carrying amount of assets is tested
for impairment so as to determine,
a. The provision for impairment loss, if any, required or
b. The reversal, if any, required of impairment loss recognized in
previous periods.
Impairment loss is recognized when the carrying amount of an asset
exceeds its recoverable amount.
v. Classification of Assets and Liabilities as Current and Non-Current:
All assets and liabilities are classified as current or non-current as
per the Company's normal operating cycle and other criteria set out in
Schedule III to the Companies Act, 2013. Based on the nature of
products and the time between the acquisition of assets for processing
and their realization in cash and cash equivalents, 12 months has been
considered by the Company for the purpose of current, non-current
classification of assets and liabilities.
Mar 31, 2014
A. Basis of presentation:
The accompanying financial statements have been presented for the year
ended 31st March, 2014 along with comparative information for the year
ended 31st March, 2013. The accompanying financial statements have been
prepared on going concern basis under the historical cost convention on
the accrual basis of accounting in conformity with accounting
principles generally accepted in India ("Indian GAAP") and the relevant
provisions prescribed in the Companies Act 1956, besides the
pronouncements/guidelines of the Institute of Chartered Accountants of
India and of the Securities and Exchange Board of India. The accounting
policies have been consistently applied by the Company and are
consistent with those used in the previous year, except as stated
hereunder.
b. Use of estimates:
In preparing the Company''s financial statements in conformity with
accounting principles generally accepted in India, the Company''s
management is required to make estimates and assumptions that afect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period, the actual results could difer from those estimates.
Diference between actual results and estimates are recognised in the
period in which the results are known or materialise.
c. Fixed assets:
Fixed assets (Tangible and Intangible) are stated at cost less
accumulated depreciation. Cost comprises the purchase price and any
cost attributable to bringing the asset to its working condition for
its intended use. Expenditure incurred during construction period has
been added to the cost of the assets. These expenses have been
allocated to the sugar, power generation and ethanol units on a
reasonable basis. Subsidy received from the Government has been reduced
from value of the respective assets.
d. Borrowing costs:
Interest and other costs in connection with the borrowings of funds to
the extent attributable to the acquisition or construction of
qualifying assets or capitalized as part of the cost of such asset till
such time the asset is ready for its intended use.
All other borrowings costs are recognised in the statement of profit and
loss in the period in which they are incurred.
e. Depreciation:
Depreciation is provided at the rates and in the manner prescribed in
Schedule XIV of the Companies Act, 1956. The Companies assets are
depreciated using the straight line method. As per estimates of the
management, these rates are representative of the economic useful life
of these assets. No depreciation is provided on assets held for sale.
f. Leases:
A. Lease Rentals: Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term. In case of long- term leases, the expenditure to the
statement of profit and loss is recognized on the basis of equated lease
rentals arrived at by allocating the total outflow of lease rentals on
the entire contractual period over the period of the lease.
B. Lease Income: Lease income is recognized on accrual basis.
g. Investments:
Investments that are readily realisable and intended to be held for not
more than a year are classifed as current investments. All other
investments are classifed as Non-Current investments. Current
investments are carried at lower of cost or fair value/ market value,
determined on an individual investment basis. Non-Current Investments
are carried at cost. However, provision for diminution in value is made
to recognize a decline other than temporary in the value of the
investments. profit/loss on sale of investments is computed with
reference to their average cost.
h. Amalgamation:
Accounting for Amalgamation is as per AS-14 of the Indian Accounting
Standards as prescribed by The Institute of Chartered Accountants of
India. The Goodwill arising on Amalgamation is amortised on the basis
over its useful life but shall not exceed five years.
i. Inventories:
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost and net realisable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the fnished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a First in First out (''FIFO'') basis.
Finished goods
Lower of cost and net realizable value. Cost includes direct materials,
labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of fnished goods excludes excise duty.
Excise duty is generally provided on manufacture of goods, which are
not exempt from the payment of duty. However, since the Company''s
fnished goods are not segregated at the time of production into those
for sale in domestic markets and those for sale in export markets, the
Company is unable to determine the exact liability towards excise duty
on fnished goods. Accordingly, excise duty is provided/ paid only at
the time of clearance of the goods from the factory.
Work-in-process
Lower of cost up to estimated stage of process and net realisable
value. Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
By- products
By-products are valued at cost. Inter-unit transfers of by- products
also include the cost of transportation, duties, etc.
j. Revenue recognition:
Revenue is recognised to the extent it is probable that the economic
benefits will fow to the Company and the revenue can be reliably
measured. Revenue from sale of goods is recognised when the signifcant
risks and rewards of ownership of the goods are transferred to the
customer and is stated net of trade discounts, excise duty, sales
returns.
Revenue from sale of power is recognised when the units generated are
transmitted to the pooling station, in accordance with the terms and
conditions of the power purchase agreement entered into by the Company
with the purchasing parties.
Income from services is recognised as they are rendered (based on
agreement/arrangement with the concerned customers).
Dividend income on investments is accounted for as and when the right
to receive the payments is established.
Income against claims of the company, viz., export incentives,
insurance claims, etc., is recognised on accrual/right to receive
basis.
k. Foreign currency transactions:
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate at
the date of the Balance Sheet. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction and investments
in foreign companies are recorded at the exchange rates prevailing on
the date of making the investments.
Exchange Diferences
Exchange Diferences is charged to the revenue account except arising on
account of such conversion related to the purchase of fixed assets is
adjusted therewith , and other long term monetary items is adjusted in
the Foreign Currency Monetary Item Translation Diference Account.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange diferences on such contracts are recognised in the
profit and loss account in the period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of forward
exchange contract is recognised as income or as expense for the period.
l. Employee benefits:
Short-term employee benefits are recognised as an expense at the
undiscounted amount in the Statement of profit and loss of the year in
which the related service is rendered.
The eligible employees of the Company are entitled to receive benefits
under the Provident Fund, a defined contribution plan in which both the
employees and the Company make monthly contributions at a specified
percentage of the covered employees'' salary (currently 12% of
employees'' salary). The contributions as specified under the law are
paid to "The Regional Provident Fund Commissioner and the Central
Provident Fund under the Pension Scheme". The Company recognises such
contributions as expense of the year in which the liability is
incurred.
The Company has an obligation towards Gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for a
lump sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service. Vesting
occurs upon completion of five years of service. The plan is managed by
a trust and the fund is invested with Life Insurance Corporation of
India under its Group Gratuity Scheme. The Company makes annual
contributions to Gratuity Fund and the Company recognises the liability
for Gratuity benefits payable in future based on an independent
actuarial valuation.
The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave for availment as well as encashment subject to the rules. As per
the regular past practice followed by the employees, it is not expected
that the entire accumulated leave shall be encashed or availed by the
employees during the next twelve months and accordingly the benefit is
treated as long-term defined benefit. The liability is provided for
based on the number of days of unutilised leave at the Balance Sheet
date on the basis of an independent actuarial valuation.
m. Income tax:
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income Tax Act, 1961
Deferred income tax refects the impact of current period timing
diferences between taxable income and accounting income for the period
and reversal of timing diferences of earlier periods. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised only to the extent that there is reasonable certainty
that sufcient future taxable income will be available against which
such deferred tax assets can be realised.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specifed period. In the year in which the Minimum Alternate
tax (MAT) credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the
said asset is created by way of a credit to the Statement of profit and
Loss and shown as MAT Credit Entitlement. The Company reviews the same
at each Balance Sheet date.
n. Miscellaneous expenditure:
Preliminary expenses are written-of over a period of five years from the
year of commencement of commercial production.
The Deferred Revenue Expenditure comprises of debenture issue expenses
and expenses towards Increase in Authorised Capital, which is written
of over a period of 5 years & expenses incurred on the lease units upto
the date of production which is written of in proportion to the period
of lease unexpired or 1/5th in case of long lease period.
o. Government grants:
Government grants in the nature of promoter''s contribution are credited
to capital reserve and treated as a part of Shareholder''s funds. Other
Government grants/ subsidy have been reduced from value of the
respective assets.
p. Financial derivatives and commodity futures:
Transactions in financial derivatives and commodity futures are
accounted based on the mode of fnal settlement. Transactions, which are
ultimately settled net, without taking delivery, are recorded net with
the gains/losses being recognised as income/expenses in the financial
statements. Transactions, which stipulate physical delivery of the
goods and where the company intends to take delivery, are recorded at
gross, as purchases and sales as a part of the company''s sugar
manufacturing activities.
q. Provisions, contingent liabilities and contingent assets:
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if
The Company has a present obligation as a result of a past event
A probable outflow of resources is expected to settle the obligation and
The amount of the obligation can be easily estimated.
Contingent Liability is disclosed in the case of
A present obligation arising from a past event, when it is not probable
that an outflow of resources will be required to settle the obligation.
A possible obligation, unless the probability of outflow of resources is
remote.
Depending on facts of each case and after due evaluation of relevant
legal aspects, claims against the Company not acknowledged as debts are
disclosed as contingent liabilities. In respect of statutory matters,
contingent liabilities are disclosed only for those demand(s) that are
contested by the Company.
Contingent Assets are neither recognised nor disclosed.
r. Earnings per share:
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average numbers of equity shares outstanding during the period
are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the efects of all dilutive potential equity shares.
s. Segment reporting:
The accounting policies adopted for segment reporting are in line with
the accounting policies adopted by the Company, with the following
additional policies for segment reporting:
(i) Inter segment revenue has been accounted for based on the
transaction price agreed to between segments which is primarily market
led.
(ii) Revenue, Expenses, Assets and Liabilities have been identifed to
segments on the basis of their relationship to the operating activities
of the segment.
(iii) Gains/losses from transactions in commodity futures, which are
ultimately settled net, with/without taking delivery, are recorded as
''Other revenues'' under the Sugar segment.
(iv) Revenue, Expenses, Assets and Liabilities, which relate to the
enterprise as a whole and are not allocable to segments on a reasonable
basis, have been included under "Unallocated".
t. Impairment of assets:
As at each balance sheet date, the carrying amount of assets is tested
for impairment so as to determine,
a. The provision for impairment loss, if any, required or
b. The reversal, if any, required of impairment loss recognised in
previous periods. Impairment loss is recognised when the carrying
amount of an asset exceeds its recoverable amount.
u. Classifcation of Assets and Liabilities as Current and Non-Current:
All assets and liabilities are classifed as current or non-current as
per the Company''s normal operating cycle and other criteria set out in
Revised Schedule VI to the Companies Act, 1956. Based on the nature of
products and the time between the acquisition of assets for processing
and their realisation in cash and cash equivalents, 12 months has been
considered by the Company for the purpose of current, non-current
classifcation of assets and liabilities.
d) The Company has only one class of equity shares . The company
declares and pays dividend in Indian rupees . The holders of equity
shares are entitled to receive dividends as declared from time to time
and are entitled to one vote per share .
e) 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 dues . The distribution will be
in proportion to the number of equity shares held by the shareholders .
h) The Company has reserved the Equity share capital of the Company
against Options for eligible employees of the Company under Employee
Stock Option Scheme/ plan. Options which are vested can be exercised at
any point of time. Option which are yet to be vested can be exercised
after the vesting date. Details are given in the below table
i) General reserve is primarily created to comply with the requirements
of section 205(2A) of the Companies Act, 1956 . This is a free
reserve and can be utilised for any general purpose like issue of bonus
shares , payment of dividend , buy back of shares etc.
ii) Capital Reserve consist of Subsidy received from Government of
Karnataka for commissioning of Co-Generation plant located at Munoli
Unit, for supply of excess power to the State grid.
iii) Foreign Currency Monetary Item Translation Diference Account
represents unamortised foreign currency fuctuation loss on External
commercial borrowings of US $20 Mn utilised for purchase of shares of
overseas subsidiary. The company has excercised the option available in
AS11 para 46A (which was inserted by Ministry of corporate afairs vide
its notifcation dated 29th Dec, 2011).
iv) Debenture Redemption Reserve is created to the extent of 25% of the
Non Convertible Debentures (privately placed) equally over the period
till maturity of the debentures, as prescribed by the department of
Companies Afairs (now Ministry of Corporate Afairs) vide its general
circular 9/2002 dated 18th April, 2002. During the year the company has
reversed Debenture Redemption Reserve created in the earlier years of
Rs.791.41 Mn on redemption of Rs.3500 Mn Non Convertible Debentures and
created Rs.180 Mn of debenture redemption reserve on outstanding amount
of Non Convertible Debentures.
Nature of Security
a) Non-Convertible Debentures:
i) 600 Redeemable Non-Convertible Debentures (11.95%) of Rs.1,000,000
each , secured by frst pari-passu charge on movable and immovable
assets of the company and are redeemable at par on August 03, 2014
( i i ) 500 (Previous year 4,000) Redeemable Non-Convertible Debentures
of Rs.1,000,000 each , secured by frst pari-passu charge on
& movable and immovable assets of the company and are redeemable in
equal installments at par .
(iii)
(iv) 1,500 Redeemable Non-Convertible Debentures of Rs.1,000,000 each,
secured by frst pari-passu charge on movable and
immovable assets of the company and are redeemable at par on April 02,
2017. (v) 1,000 Redeemable Non-Convertible Debentures of Rs.1,000,000
each , secured by frst pari-passu charge on movable and
immovable assets of the company and are redeemable at par on Dec 24,
2017.
b) Term-Loans
Rupee Term Loan availed from Indian Renewable Energy Development Agency
Ltd. (IREDA) are secured by frst and exclusive charge on the movable
and immovable assets of the company''s Co-Generation units located at
Panchganga and Ajinkyatara.
Term Loan from Other Banks and financial Institutions are secured by
frst pari-passu charge on movable and immovable assets of the company.
From Others:
SDF Loans amounting to Rs. 1,008.02 Mn @ 4% p.a., are secured by
exclusive second charge on movable and immovable assets of
the company.
SDF Loan amounting to Rs. 312.82 Mn @ 7% p.a., is secured by frst pari
passu charge on movable and immovable assets of the
company.
Interest Accrued but not due represents interest on certain long-term
borrowings, where the payment of interest has also been
deferred for a period of time and is therefore considered to be in the
nature of borrowings and included as a part of secured loans
under Long term borrowings.
Note 5 : Deferred Tax Liabilities (Net)
Considering improved business outlook unabsorbed business losses have
been recognised as deferred tax asset as there is virtual certainty
that such deferred tax assets can be realised against taxable profits in
the coming financial years.
Nature of Security :
i) Working Capital facilities from banks are secured by hypothecation
of stocks , book debts and other current assets and third charge on
movable and immovable fixed assets of the company .
* There is no principal amount and interest overdue to the Micro and
Small Enterprises. During the year no interest has been paid to such
parties.
This information have been determined to the extent such parties have
been identifed on the basis of information available with the company.
Notes
1. Market value of the quoted investments* 53.01
* (The Dimunition in the value of Quoted Investments is not permanent
in nature, hence no provision has been considered .) 2) 18,36,000
Shares of NCDEX Ltd. are under lock-in period till Dec-2015.
Mar 31, 2013
A. Basis of presentation:
The accompanying financial statements have been presented for the year
ended 31st March, 2013 along with comparative information forthe
Eighteen months period ended 31stMarch,2012.Theaccompanying financial
statements have been prepared on going concern basis under the
historical cost convention on the accrual basis of accounting in
conformity with accounting principles generally accepted in India
("Indian GAAP") and the relevant provisions prescribed in the Companies
Act, 1956, besides the pronouncements/ guidelines of the Institute of
Chartered Accountants of India and of the Securities and Exchange Board
of India. The accounting policies have been consistently applied by the
Company and are consistent with those used in the previous year, except
as stated hereunder.
b. Use of estimates:
In preparing the Company''s financial statements in conformity with
accounting principles generally accepted in India, the Company''s
management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period, the actual results could differ from those estimates.
Difference between actual results and estimates are recognised in the
period in which the results are known or materialise.
c. Fixed assets:
Fixed assets (Tangible and Intangible) are stated at cost less
accumulated depreciation. Cost comprises the purchase price and any
cost attributable to bringing the asset to its working condition for
its intended use. Expenditure incurred during construction period has
been added to the cost of the assets. These expenses have been
allocated to the sugar, power generation and ethanol units on a
reasonable basis. Subsidy received from the Government has been reduced
from value of the respective assets.
d. Borrowing costs:
Interest and other costs in connection with the borrowings of funds to
the extent attributable to the acquisition or construction of
qualifying assets or capitalized as part of the cost of such asset till
such time the asset is ready for its intended use.
All other borrowings costs are recognised in the statement of profit
and loss in the period in which they are incurred .
e. Depreciation:
Depreciation is provided at the rates and in the manner prescribed in
Schedule XIV of the Companies Act, 1956. The Companies assets are
depreciated using the straight line method. As per estimates of the
management, these rates are representative of the economic useful life
of these assets. No depreciation is provided on assets held for sale.
f. Leases:
Operating lease payments are recognized as an expense in the profit and
loss account on a straight-line basis over the lease term. In case of
long- term leases, the expenditure to the profit and loss account is
recognized on the basis of equated lease rentals arrived at by
allocating the total outflow of lease rentals on the entire contractual
period over the period of the lease.
g. Investments:
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as Non-Current investments. Current
investments are carried at lower of cost or fair value/ market value,
determined on an individual investment basis. Non-Current Investments
are carried at cost. However, provision for diminution in value is made
to recognize a decline other than temporary in the value of the
investments. Profit/loss on sale of investments is computed with
reference to their average cost.
h. Amalgamation:
Accounting for Amalgamation is as per AS-14 of the Indian Accounting
Standards as prescribed by The Institute of Chartered Accountants of
India. The Goodwill arising on Amalgamation is amortised on the basis
over its useful life but shall not exceed five years.
i. Inventories:
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost and net realisable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a First in First out (''FIFO'') basis.
Finished goods
Lower of cost and net realizable value. Cost includes direct materials,
labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods excludes excise duty.
Work-in-process
Lower of cost up to estimated stage of process and net realisable
value. Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
By-products
By-products are valued at cost. Inter-unit transfers of by- products
also include the cost of transportation, duties, etc.
j. Revenue recognition:
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured. Revenue from sale of goods is recognised when the significant
risks and rewards of ownership of the goods are transferred to the
customer and is stated net of trade discounts, excise duty, sales
returns.
Revenue from sale of power is recognised when the units generated are
transmitted to the pooling station, in accordance with the terms and
conditions of the power purchase agreement entered into by the Company
with the purchasing parties.
Income from services is recognised as they are rendered (based on
agreement/arrangement with the concerned customers).
Dividend income on investments is accounted for as and when the right
to receive the payments is established.
Income against claims of the company, viz., export incentives,
insurance claims, etc., is recognised on accrual/right to receive
basis.
k. Foreign currency transactions:
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate at
the date of the Balance Sheet. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction and investments
in foreign companies are recorded at the exchange rates prevailing on
the date of making the investments.
Exchange Differences
Exchange Differences is charged to the revenue account except arising
on account of such conversion related to the purchase of fixed assets
is adjusted therewith, and other long term monetary items is adjusted
in the Foreign Currency Monetary Item Translation Difference Account.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
profit and loss account in the period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
period.
I. Derivative transactions:
Pursuant to the announcement on accounting for derivatives issued by
the Institute of Chartered Accountants of India, the Company, in
accordance with the principle of prudence as enunciated in AS -1
"Disclosure of Accounting Policies", provides for losses in respect of
all outstanding derivative contracts at the Balance Sheet date by
marking them to market. Any net unrealized gains arising on such mark
to marketare not recognized as income.
m. Employee benefits:
- Short-term employee benefits are recognised as an expense at the
undiscounted amount in the Statement of profit and loss of the year in
which the related service is rendered.
- The eligible employees of the Company are entitled to receive
benefits under the Provident Fund, a defined contribution plan in which
both the employees and the Company make monthly contributions at a
specified percentage of the covered employees'' salary (currently 12% of
employees'' salary). The contributions as specified under the law are
paid to "The Regional Provident Fund Commissionerand the Central
Provident Fund underthe Pension Scheme".The Company recognises such
contributions as expense of the year in which the liability is
incurred.
- The Company has an obligation towards Gratuity.a defined benefit
retirement plan covering eligible employees.The plan provides for a
lump sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service. Vesting
occurs upon completion of five years of service. The plan is managed by
a trust and the fund is invested with Life Insurance Corporation of
India under its Group Gratuity Scheme. The Company makes annual
contributions to Gratuity Fund and the Company recognises the liability
for Gratuity benefits payable in future based on an independent
actuarial valuation.
- The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave for availment as well as encashment subject to the rules. As per
the regular past practice followed by the employees, it is not expected
that the entire accumulated leave shall be encashed or availed by the
employees during the next twelve months and accordingly the benefit is
treated as long-term defined benefit. The liability is provided for
based on the number of days of unutilised leave at the Balance Sheet
date on the basis of an independent actuarial valuation.
n. Income tax:
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income Tax Act, 1961.
Deferred income tax reflects the impact of current period timing
differences between taxable income and accounting income for the period
and reversal of timing differences of earlier periods. Deferred taxis
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realised.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specified period. In the year in which the Minimum Alternate
tax (MAT) credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of Profit and Loss and
shown as MAT Credit Entitlement. The Company reviews the same at each
Balance Sheet date.
o. Miscellaneous expenditure:
Preliminary expenses are written-off over a period of five years from
the year of commencement of commercial production.
The Deferred Revenue Expenditure comprises of debenture issue expenses
which is written off over a period of 5 years & expenses incurred on
the lease units upto the date of production which is written off in
proportion to the period of lease unexpired or 1/5* in case of long
lease period.
p. Government grants:
Government grants in the nature of promoter''s contribution are credited
to capital reserve and treated as a part of Shareholders'' funds. Other
Government grants/subsidy have been reduced from value of the
respective assets.
q. Financial derivatives and commodity futures:
Transactions in financial derivatives and commodity futures are
accounted based on the mode of final settlement. Transactions, which
are ultimately settled net, without taking delivery, are recorded net
with the gains/losses being recognised as income/expenses in the
financial statements. Transactions, which stipulate physical delivery
of the goods and where the company intends to take delivery, are
recorded at gross, as purchases and sales as a part of the company''s
sugar manufacturing activities.
r. Provisions, contingent liabilities and contingent assets:
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if
- The Company has a present obligation as a result of a past event
- A probable outflow of resources is expected to settle the obligation
and
- The amount of the obligation can be easily estimated. Contingent
Liability is disclosed in the case of
- A present obligation arising from a past event, when it is not
probable that an outflow of resources will be required to settle the
obligation.
- A possible obligation, unless the probability of outflow of resources
is remote.
Depending on facts of each case and after due evaluation of relevant
legal aspects, claims against the Company not acknowledged as debts are
disclosed as contingent liabilities. In respect of statutory matters,
contingent liabilities are disclosed only for those demand(s) that are
contested by the Company.
Contingent Assets are neither recognised nor disclosed.
s. Earnings per share:
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average numbers of equity shares outstanding during the period
are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
t. Segment reporting:
The accounting policies adopted for segment reporting are in line with
the accounting policies adopted by the Company, with the following
additional policies for segment reporting:
(i) Inter segment revenue has been accounted for based on the
transaction price agreed to between segments which is primarily market
led.
(ii) Revenue, Expenses, Assets and Liabilities have been identified to
segments on the basis of their relationship to the operating activities
of the segment.
(iii) Gains/losses from transactions in commodity futures, which a re
ultimately settled net, with/without taking delivery, a re recorded
as''Other revenues''under the Sugar segment.
(iv) Revenue, Expenses, Assets and Liabilities, which relate to the
enterprise as a whole and are not allocable to segments on a reasonable
basis, have been included under"Unallocated"
u. Impairment of assets:
As at each balance sheet date, the carrying amount of assets is tested
for impairment so as to determine,
a. The provision for impairment loss, if any, required or
b. The reversal, if any, required of impairment loss recognised in
previous periods.
Impairment loss is recognised when the carrying amount of an asset
exceeds its recoverable amount.
v. Classification of Assets and Liabilities as Current and
Non-Current:
All assets and liabilities are classified as current or non-current as
per the Company''s normal operating cycle and other criteria set out in
Revised Schedule VI to the Companies Act, 1956. Based on the nature of
products and the time between the acquisition of assets for processing
and their realisation in cash and cash equivalents, 12 months has been
considered by the Company for the purpose of current, non-current
classification of assets and liabilities.
Mar 31, 2012
A. Basis of presentation
The accompanying financial statements have been presented for the
period ended March 31, 2012 along with comparative information for the
year ended September 30, 2010. The accompanying financial statements
have been prepared on a going concern basis under the historical cost
convention on the accrual basis of accounting in conformity with
accounting principles generally accepted in India ("Indian GAAP").
The accounting policies have been consistently applied by the Company
and are consistent with those used in the previous year, except as
stated hereunder.
b. Use of estimates
In preparing the Company's financial statements in conformity with
accounting principles generally accepted in India, the Company's
management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period, the actual results could differ from those estimates.
c. Fixed assets
Fixed assets are stated at cost less accumulated depreciation. Cost
comprises the purchase price and any cost attributable to bringing the
asset to its working condition for its intended use. Expenditure
incurred during construction period has been added to the cost of the
assets. These expenses have been allocated to the sugar, power
generation and ethanol units on a reasonable basis. Subsidy received
from the Government have been reduced from value of the respective
assets.
d. Borrowing costs
Financing cost incurred up to the date of completion of construction or
installation of qualifying assets, on funds borrowed are capitalized as
a part of the cost of the asset.
e. Depreciation
Depreciation is provided at the rates and in the manner prescribed in
Schedule XIV of the Indian Companies Act, 1956. The Companies assets
are depreciated using the straight line method. As per estimates of the
management, these rates are representative of the economic useful life
of these assets. No depreciation is provided on assets held for sale.
f. Leases
Operating lease payments are recognized as an expense in the profit and
loss account on a straight-line basis over the lease term. In case of
long term leases, the expenditure to the profit and loss account is
recognized on the basis of equated lease rentals arrived at by
allocating the total outflow of lease rentals on the entire contractual
period over the period of the lease.
g. Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost or fair value/ market value,
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of the
investments. Profit/Loss on sale of investments is computed with
reference to their average cost.
h. Amalgamation
Accounting for Amalgamation is as per AS-14 of the Indian Accounting
Standards as prescribed by The Institute of Chartered Accountants of
India. The Goodwill arising on Amalgamation is amortised on the basis
over its useful life but shall not exceed five years.
i. Inventories
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a First in First out ('FIFO') basis.
Finished goods
Lower of cost and net realizable value. Cost includes direct materials,
labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods excludes excise duty.
Work-in-process
Lower of cost up to estimated stage of process and net realizable
value. Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
By-products
By-products are valued at cost. Inter-unit transfers of by products
also include the cost of transportation, duties, etc. j. Revenue
recognition
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured. Revenue from sale of goods is recognized when the significant
risks and rewards of ownership of the goods are transferred to the
customer and is stated net of trade discounts, excise duty, sales
returns.
Revenue from sale of power is recognized when the units generated are
transmitted to the pooling station, in accordance with the terms and
conditions of the power purchase agreement entered into by the Company
with the purchasing parties.
k. Foreign currency transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate at
the date of the Balance Sheet. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction and investments
in foreign companies are recorded at the exchange rates prevailing on
the date of making the investments.
Exchange Differences
Exchange Differences is charged to the revenue account except arising
on account of such conversion related to the purchase of fixed assets
is adjusted therewith, and other long term monetary items is adjusted
in the Foreign Currency Monetary Item Translation Difference.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
profit and loss account in the period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
period.
l. Employee benefits
Contributions in respect of provident fund and gratuity are made to the
appropriate authorities/trust set up by the Company for the purpose and
charged to profit and loss account. Provisions for liabilities in
respect of leave encashment benefits are made based on actuarial
valuation made by an independent actuary as at the balance sheet date.
m. Income tax
Tax expenses comprise both current and deferred taxes.
Deferred income tax reflects the impact of current period timing
differences between taxable income and accounting income for the period
and reversal of timing differences of earlier periods. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognized only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realized. n. Miscellaneous expenditure
Preliminary expenses are written-off over a period of five years from
the year of commencement of commercial production.
The Deferred Revenue Expenditure comprises of debenture issue expenses
which is written off over a period of 5 years & expenses incurred on
the lease units upto the date of production which is written off in
proportion to the period of lease unexpired or 1/5th in case of long
lease period.
o. Government grants
Government grants in the nature of promoter's contribution are credited
to capital reserve and treated as a part of Shareholder's funds. Other
Government grants/ subsidy have been reduced from value of the
respective assets.
p. Financial derivatives and commodity futures
Transactions in financial derivatives and commodity futures are
accounted based on the mode of final settlement. Transactions, which
are ultimately settled net, without taking delivery, are recorded net
with the gains/losses being recognized as income/expenses in the
financial statements. Transactions, which stipulate physical delivery
of the goods and where the company intends to take delivery, are
recorded at gross, as purchases and sales as a part of the company's
sugar manufacturing activities.
q. Provisions, contingent liabilities and contingent assets
Provisions are recognized for liabilities that can be measured only by
using a substantial degree of estimation, if :
- The Company has a present obligation as a result of a past event
- A probable outflow of resources is expected to settle the
obligation and
- The amount of the obligation can be easily estimated.
Contingent Liability is disclosed in the case of
- A present obligation arising from a past event, when it is not
probable that an outflow of resources will be required to settle the
obligation.
- A possible obligation, unless the probability of outflow of
resources is remote.
Depending on facts of each case and after due evaluation of relevant
legal aspects, claims against the Company not acknowledged as debts are
disclosed as contingent liabilities. In respect of statutory matters,
contingent liabilities are disclosed only for those demand(s) that are
contested by the Company.
Contingent Assets are neither recognized nor disclosed.
r. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average numbers of equity shares outstanding during the period
are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
s. Segment reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company, with the following additional
policies for segment reporting:
(i) Inter segment revenue has been accounted for based on the
transaction price agreed to between segments which is primarily market
led.
(ii) Revenue and expenses have been identified to segments on the basis
of their relationship to the operating activities of the segment.
(iii) Gains/losses from transactions in commodity futures, which are
ultimately settled net, with/without taking delivery, are recorded as
'Other revenues' under the Sugar segment.
(iv) Revenue and expenses, which relate to the enterprise as a whole
and are not allocable to segments on a reasonable basis, have been
included under "Unallocated Corporate Expenses".
t. Impairment of assets
As at each balance sheet date, the carrying amount of assets is tested
for impairment so as to determine :
a. The provision for impairment loss, if any, required or
b. The reversal, if any, required of impairment loss recognized in
previous periods.
Impairment loss is recognized when the carrying amount of an asset
exceeds its recoverable amount.
Sep 30, 2010
A. Basis of presentation
The accompanying financial statements have been presented for the year
ended September 30, 2010 along with comparative information for the
year ended September 30, 2009. The accompanying financial statements
have been prepared on a going concern basis under the historical cost
convention on the accrual basis of accounting in conformity with
accounting principles generally accepted in India ("Indian GAAP"). The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year, except as stated
hereunder.
b. Use of estimates
In preparing the Companys financial statements in conformity with
accounting principles generally accepted in India, the Companys
management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period, the actual results could differ from those estimates.
c. Fixed assets
Fixed assets are stated at cost less accumulated depreciation. Cost
comprises the purchase price and any cost attributable to bringing the
asset to its working condition for its intended use. Expenditure
incurred during construction period has been added to the cost of the
assets. These expenses have been allocated to the sugar, power
generation and ethanol units on a reasonable basis.
d. Borrowing costs
Financing cost incurred upto the date of completion of construction or
installation of qualifying assets, on funds borrowed are capitalised as
a part of the cost of the asset.
e. Depreciation
Depreciation is provided at the rates and in the manner prescribed in
Schedule XIV of the Indian Companies Act, 1956. The Companies assets
are depreciated using the straight-line method. As per estimates of the
management, these rates are representative of the economic useful life
of these assets. No depreciation is provided on assets held for sale.
f. Leases
Operating lease payments are recognised as an expense in the profit and
loss account on a straight-line basis over the lease term. In case of
long term leases, the expenditure to the profit and loss account is
recognised on the basis of equated lease rentals arrived at by
allocating the total outflow of lease rentals on the entire contractual
period over the period of the lease.
g. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classifed as current investments. All other
investments are classifed as long-term investments. Current investments
are carried at lower of cost or fair value/ market value, determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of the investments.
profit/loss on sale of investments is computed with reference to their
average cost.
h. Amalgamation
Accounting for Amalgamation is as per AS-14 of the Indian Accounting
Standards as prescribed by The Institute of Chartered Accountants of
India. The Goodwill arising on Amalgamation is amortised on the basis
over its useful life but shall not exceed fve years.
i. Inventories
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost or net realisable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the fnished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a First In First Out (ÃFIFO) basis.
Finished goods
Lower of cost or net realisable value. Cost includes direct materials,
labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of fnished goods excludes excise duty.
Work-in-process
Lower of cost upto estimated stage of process or net realisable value.
Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
By-products
By-products are valued at cost. Inter-unit transfers of by-products
also include the cost of transportation, duties, etc.
Inter-segment
The inter-segment transfers of inventories are valued at cost.
j. Revenue recognition
Revenue is recognised to the extent it is probable that the economic
benefits will fow to the Company and the revenue can be reliably
measured. Revenue from sale of goods is recognised when the significant
risks and rewards of ownership of the goods are transferred to the
customer and is stated net of trade discounts, excise duty, sales
returns.
Revenue from sale of power is recognised when the units generated are
transmitted to the pooling station, in accordance with the terms and
conditions of the power purchase agreement entered into by the Company
with the purchasing parties.
k. Foreign currency transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate at
the date of the Balance Sheet. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction and investments
in foreign companies are recorded at the exchange rates prevailing on
the date of making the investments.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting companys monetary items at rates different from those at
which they were initially recorded during the period or reported in
previous financial statements, are recognised as income or as expenses
in the period in which they arise, except for loans denominated in
foreign currencies utilised for acquisition of fixed assets until the
date of capitalisation where the exchange gains/losses are adjusted to
the cost of such assets.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
profit and loss account in the period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
period.
l. Retirement benefits
Contributions in respect of provident fund and gratuity are made to the
appropriate authorities/trust set up by the Company for the purpose and
charged to profit and loss account. Provisions for liabilities in
respect of leave encashment benefits are made based on actuarial
valuation made by an independent actuary as at the balance sheet date.
m. Income tax
Tax expenses comprise both current and deferred taxes.
Deferred income tax refects the impact of current period timing
differences between taxable income and accounting income for the period
and reversal of timing differences of earlier periods. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised only to the extent that there is reasonable certainty
that suffcient future taxable income will be available against which
such deferred tax assets can be realised.
n. Miscellaneous expenditure
Preliminary expenses are written-off over a period of fve years from
the year of commencement of commercial production.
The Deferred Revenue Expenditure comprises of debenture issue expenses
which is written off over a period of fve years & expenses incurred on
the lease units upto the date of production which is written off in
proportion to the period of lease unexpired or 1/5th in case of long
lease period.
o. Government grants
Government grants in the nature of promoters contribution are credited
to capital reserve and treated as a part of Shareholders funds.
p. Financial derivatives and commodity futures
Transactions in financial derivatives and commodity futures are
accounted based on the mode of fnal settlement. Transactions, which are
ultimately settled net, without taking delivery, are recorded net with
the gains/losses being recognised as income/ expenses in the financial
statements. Transactions, which stipulate physical delivery of the
goods and where the company intends to take delivery, are recorded at
gross, as purchases and sales as a part of the Companys sugar
manufacturing activities.
q. Provisions, contingent liabilities and contingent assets
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if
- The Company has a present obligation as a result of a past event
- A probable outflow of resources is expected to settle the obligation
and
- The amount of the obligation can be easily estimated
Contingent Liability is disclosed in the case of
- A present obligation arising from a past event, when it is not
probable that an outflow of resources will be required to settle the
obligation
- A possible obligation, unless the probability of outflow of resources
is remote
Depending on facts of each case and after due evaluation of relevant
legal aspects, claims against the Company not acknowledged as debts are
disclosed as contingent liabilities. In respect of statutory matters,
contingent liabilities are disclosed only for those demand(s) that are
contested by the Company.
Contingent Assets are neither recognised nor disclosed.
r. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average numbers of equity shares outstanding during the period
are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
s. Segment reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company, with the following additional
policies for segment reporting:
(i) Inter-segment revenue has been accounted for based on the
transaction price agreed to between segments which is primarily market
led.
(ii) Revenue and expenses have been identifed to segments on the basis
of their relationship to the operating activities of the segment.
(iii) Gains/losses from transactions in commodity futures, which are
ultimately settled net, with/without taking delivery, are recorded as
Other revenues under the Sugar segment.
(iv) Revenue and expenses, which relate to the enterprise as a whole
and are not allocable to segments on a reasonable basis, have been
included under "Unallocated Corporate Expenses".
t. Impairment of assets
As at each balance sheet date, the carrying amount of assets is tested
for impairment so as to determine,
a. The provision for impairment loss, if any, required or
b. The reversal, if any, required of impairment loss recognised in
previous periods. Impairment loss is recognised when the carrying
amount of an asset exceeds its recoverable amount.
Sep 30, 2009
A. Basis of presentation
The accompanying financial statements have been presented for the year
ended September 30, 2009 along with comparative information for the
year ended September 30, 2008. The accompanying financial statements
have been prepared on a going concern basis under the historical cost
convention on the accrual basis of accounting in conformity with
accounting principles generally accepted in India (ÃIndian GAAPÃ). The
accounting policies have been consistently applied by the Company and
are consistent with those used in the previous year, except as stated
hereunder.
b. Use of estimates
In preparing the CompanyÃs financial statements in conformity with
accounting principles generally accepted in India, the CompanyÃs
management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period, the actual results could differ from those estimates.
c. Fixed assets
Fixed assets are stated at cost less accumulated depreciation. Cost
comprises the purchase price and any cost attributable to bringing the
asset to its working condition for its intended use. Expenditure
incurred during construction period has been added to the cost of the
assets. These expenses have been allocated to the sugar, power
generation and ethanol units on a reasonable basis.
d. Borrowing costs
Financing cost incurred up to the date of completion of construction or
installation of qualifying assets, on funds borrowed are capitalised as
a part of the cost of the asset.
e. Depreciation
Depreciation is provided at the rates and in the manner prescribed in
Schedule XIV of the Indian Companies Act, 1956. The sugar manufacturing
units, the distillery, the cogeneration and the bio-fertiliser units
are depreciated using the straight line method. As per estimates of the
management, these rates are representative of the economic useful life
of these assets. No depreciation is provided on assets held for sale.
f. Leases
Operating lease payments are recognised as an expense in the profit and
loss account on a straight-line basis over the lease term. In case of
long term leases, the expenditure to the profit and loss account is
recognised on the basis of equated lease rentals arrived at by
allocating the total outflow of lease rentals on the entire contractual
period over the period of the lease.
g. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost or fair value/ market value,
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognise a decline other than temporary in the value of the
investments. Profit/loss on sale of investments is computed with
reference to their average cost.
h. Inventories
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost or net realisable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a First In First Out (ÃFIFOÃ) basis.
Finished goods
Lower of cost or net realisable value. Cost includes direct materials,
labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods excludes excise duty.
Work-in-process
Lower of cost upto estimated stage of process or net realisable value.
Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
By products
By products are valued at cost. Inter-unit transfers of by products
also include the cost of transportation, duties, etc.
Inter-segment
The inter-segment transfers of inventories are valued at cost.
i. Revenue recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured. Revenue from sale of goods is recognised when the significant
risks and rewards of ownership of the goods are transferred to the
customer and is stated net of trade discounts, excise duty, sales
returns.
Revenue from sale of power is recognised when the units generated are
transmitted to the pooling station, in accordance with the terms and
conditions of the power purchase agreement entered into by the Company
with the purchasing parties.
j. Foreign currency transactions Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate at
the date of the Balance Sheet. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency are reported
using the exchange rate at the date of the transaction and investments
in foreign companies are recorded at the exchange rates prevailing on
the date of making the investments.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting companys monetary items at rates different from those at
which they were initially recorded during the period or reported in
previous financial statements, are recognised as income or as expenses
in the period in which they arise, except for loans denominated in
foreign currencies utilised for acquisition of fixed assets until the
date of capitalisation where the exchange gains/losses are adjusted to
the cost of such assets.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
profit and loss account in the period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
period.
k. Retirement benefits
Contributions in respect of provident fund and gratuity are made to the
appropriate authorities/trust set up by the Company for the purpose and
charged to profit and loss account. Provisions for liabilities in
respect of leave encashment benefits are made based on actuarial
valuation made by an independent actuary as at the balance sheet date.
l. Income tax
Tax expenses comprise both current and deferred taxes.
Deferred income tax reflects the impact of current period timing
differences between taxable income and accounting income for the period
and reversal of timing differences of earlier periods. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognised only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realised.
m. Miscellaneous expenditure
Preliminary expenses are written-off over a period of five years from
the year of commencement of commercial production.
Deferred revenue expenditure comprising of Voluntary Retirement Scheme
expenses are written-off over a period of five years and expenses
incurred on the leased units before the starting of operation are
treated as deferred revenue expenses and written off over the lease
period.
n. Government grants
Government grants in the nature of promoters contribution are credited
to capital reserve and treated as a part of Shareholdersà funds.
o. Financial derivatives and commodity futures
Transactions in financial derivatives and commodity futures are
accounted based on the mode of final settlement.
Transactions, which are ultimately settled net, without taking
delivery, are recorded net with the gains/losses being recognised as
income/expenses in the financial statements. Transactions, which
stipulate physical delivery of the goods and where the company intends
to take delivery, are recorded at gross, as purchases and sales as a
part of the companyÃs sugar manufacturing activities.
p. Provisions, contingent liabilities and contingent assets
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if
à The Company has a present obligation as a result of a past event
à A probable outflow of resources is expected to settle the obligation
and
à The amount of the obligation can be easily estimated.
Contingent Liability is disclosed in the case of
à A present obligation arising from a past event, when it is not
probable that an outflow of resources will be required to settle the
obligation.
à A possible obligation, unless the probability of outflow of resources
is remote.
Depending on facts of each case and after due evaluation of relevant
legal aspects, claims against the Company not acknowledged as debts are
disclosed as contingent liabilities. In respect of statutory matters,
contingent liabilities are disclosed only for those demand(s) that are
contested by the Company.
Contingent Assets are neither recognised nor disclosed.
q. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average numbers of equity shares outstanding during the period
are adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
r. Segment reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company, with the following additional
policies for segment reporting:
i) Inter segment revenue has been accounted for based on the
transaction price agreed to between segments which is primarily market
led.
ii) Revenue and expenses have been identified to segments on the basis
of their relationship to the operating activities of the segment.
iii) Gains/losses from transactions in commodity futures, which are
ultimately settled net, with/without taking delivery, are recorded as
ÃOther revenuesà under the Sugar segment.
iv) Revenue and expenses, which relate to the enterprise as a whole and
are not allocable to segments on a reasonable basis, have been included
under "Unallocated Corporate Expenses".
s. Impairment of assets
As at each balance sheet date, the carrying amount of assets is tested
for impairment so as to determine,
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