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Notes to Accounts of Epigral Ltd.
Mar 31, 2025
The Company had entered into Share Subscription and Shareholdersâ Agreement (SSSA) with ReNew Green (GJS three) Private Limited (âRGPLâ) whereby the Company had invested Rs. 20.54 Crore for 26% equity share capital of RGPL. RGPL is in the business of operating 18.34 MW wind-solar hybrid power plant in Gujarat. Based on âEnergy Supply Agreement(ESA) with RGPL the Company has exclusive right to purchase the energy produced by RGPL for a period of 25 years. RGPL started its operation in Juneâ23 quarter.
Loans to Employees are interest free and generally given for tenure of 6 to 12 months
Since all the above loans given by the Company are unsecured and considered good, the bifurcation of loan in other categories as required by Schedule III of Companies Act 2013 via: a) Secured, b) Loans which have significant increase in credit risk and c) Credit Impaired is not applicable.
There are no Loans and Advances due by Directors or other Officers of the Company or any of them either severally or jointly with any other person or amounts due by firms or private companies respectively in which any Director is a Partner or a Director or a Member.
(i) The Company will be receiving financial assets at the time of realisation, accordingly the same has been classified as other current financial assets.
(ii) Government Grants pertains to SGST refund receivable for the applications made by the Company under Scheme for Incentive to Industries.
(iii) Other Receivables as at March 31, 2025 majorly pertains to inventory generated in trial run the same will be sold in due course. And balance March 31, 2024 pertains to power credit receivable from UGVCL the same is received in current financial year.
(i) Company expects to utilize the export licences for payment of duties, accordingly the same has been classified as other current assets.
(ii) Balance with Government Authorities include VAT / Cenvat / Goods and Service Tax credit Receivable, net of liabilities.
(i) Equity Share:
The Company has only one class of Equity Shares with par value of H10 per share. Each Equity Shareholder is entitled to one vote per share. All Equity Shareholders have equal dividend rights. In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity shares held by the shareholders.
(ii) During the year, the Company basis approval of Fund Raising Committee in their meeting dated October 24, 2024 has issued 15,91,180 Equity Shares of face value of H10 each in a Qualified Institutional Placement (QIP) pursuant to Chapter VI of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended, at an issue price of H2,093.13 per Equity Share (including securities premium of H2,083.13 per Equity Share) aggregating to H333.05 Crore . The Company has received listing and trading approval for the shares issued from BSE Limited and National Stock Exchange of India Limited on October 25, 2024 and October 28, 2024 respectively.
Pursuant to allotment of above mentioned Equity Shares, the paid up share capital of the Company increased from H41.55 Crore comprising 4,15,50,158 Equity Shares to H43.14 Crore comprising 4,31,41,338 Equity Shares. In accordance with Ind AS 32,the transaction costs amounting H8.33 Crore in relation to QIP has been accounted for as deduction from Equity under Securities Premium.
During the year ended March 31, 2025, the Company has utilised the proceeds for repayment of existing debt of the Company amounting to H250.00 Crore, for funding capital expenditure amounting to H30.00 Crore and for General Corporate Purpose (including share issue expenses) amounting to H53.05 Crore.
Securities Premium
Securities Premium pertains to issue of Equity Shares during the year in a Qualified Institutional Placement (QIP) (refer note 16).
Securities Premium is used to record the premium on issue of shares. The Reserve can be utilised only for limited purposes such as issuance of Bonus Shares, Buy Back of Shares in accordance with the provisions of the Companies Act, 2013.
Capital Reserve
The balance in Capital Reserve represents difference between consideration paid and net asset acquired under common control business combination transactions and cancellation of shares pursuant to Scheme of Arrangement. The Reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
Retained Earnings
Retained earnings are the profits that the Company has earned till date, less any transfer to General Reserve, Dividend paid to Shareholders. It also includes Re-measurement gain/(loss) on defined benefit plans that will not be re-classified to the Statement of Profit and Loss.
Details of Security and Repayment Terms :
i) The Company has availed following Rupee Term Loan facilities:
1) Term Loan amounting H150.00 Crore from HDFC Bank Limited is for capital expenditure towards setting up of new Caustic Soda Lye Plant with new 36 MW Captive Power Plant. Outstanding balance for this facility is H NIL as the term loan has been paid in full during the year (31st March 2024: H33.33 Crore). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus NIL spread (to be set every year) payable on monthly rest. The Term Loan was repayable in 18 quarterly instalments of H8.33 Crore each starting from 1st November, 2020.
2) Term Loan amounting H125.00 Crore from Federal Bank Limited is for capital expenditure towards setting up of new Hydrogen Peroxide Plant. Outstanding balance for this facility is H NIL as the term loan has been paid in full during the year (31st March 2024: H26.32 Crore). The borrowing carried interest @ 12 month T-bill rate (benchmark as published by RBI - to be reset every year) plus spread (fixed @ 0.94%) payable on monthly rest. The Term Loan was repayable in 19 quarterly instalments of H6.58 Crore each starting from 29th September, 2020.
3) Term Loan amounting H350.00 Crore from Axis Bank Limited is for capital expenditure towards setting up of new Chloro toluene and its Value Chain Plant and expansion of Chloro Polyvinyl Chloride, the outstanding balance for the facility is H350.00 Crore as at Balance Sheet date (31st March 2024: H213.00 Crore). The borrowing carries interest @ Repo Rate plus spread (fixed@ 1.65%) payable on monthly rest. The Term Laon is repayable in 24 quarterly installment of H14.58 Crore each starting from December 2025
4) Term Loan amounting H190.00 Crore from State Bank of India is for capital expenditure towards setting up of new Epichlorhydrin Plant. Outstanding balance for this facility is H NIL as the term loan has been paid in full during the year (31st March 2024: H131.95 Crore) . The borrowing carried interest at 6 month MCLR (Benchmark rate) plus spread of 0.10% (to be reset every half year) payable on monthly rest. The Term Loan was repayable in 20 quarterly instalments of H9.50 Crore each starting from 31st December. 2022.
5) Term Loan amounting H284.75 Crore from HDFC Bank Limited is for capital expenditure towards setting up of new Chloro Polyvinyl Chloride Plant and expansion of Caustic capacity with 36 MW Captive Power Plant. Outstanding balance for the facility is H185.09 Crore as at the Balance Sheet date (31st March 2024: H242.04 Crore). The borrowing carries interest at 6 month MCLR (Benchmark rate) NIL Spread resets half yearly. The Term Loan is repayable in 20 quarterly instalments of H14.24 Crore each starting from September 2023.
The Company has entered into a cross currency swap (âCCS") transaction on the said Rupee Term loan facility whereby outstanding Rupee Term loan of H256.27 Crore has been swapped with notional principal of EUR 2.83 Crore. As per the terms of CCS agreement, the Company receives interest at 9.15% p.a. on notional principal outstanding in INR and pays interest at 5.18% p.a. on notional principal of EUR at monthly rest. The notional principal will be settled in EURO by the Company in exchange of INR on quarterly basis starting from financial year 2024-25.
6) The Term Loan facilities are secured by first pari passu mortgage charge of all immovable properties of the Company and first pari passu hypothecation charge over all the movable assets of the Company.
ii) The Company has executed an Indenture of Mortgage with Lenders of above term loans (Secured Parties) by creating mortgages on Immovable Properties of the Company by creating a charge by way of registered mortgage. According to the indenture, all the Secured Parties will share pari passu charge with first ranking and priority over the Immovable Properties of the Company, both present and future.
iii) Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio of Total Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
iv) Redeemable Preference Shares NIL (31 March 2024 : 9,50,00,000 ) of Rs 10 each is cumulative and carry coupon/dividend rate of 8.00% p.a. with redeemable tenure of 20 Years from the date of allotment. The Company has the right to exercise the option of early redemption, considering which Company has redeemed H95.00 Crore (31st March 2024 : H55.00 Crore) during the year. Redemption is done at face value. The Company has accrued dividend at the rate of 8% on Redeemable Preference Shares for the year eneded March 31,2025 and March 31,2024.
v) The Company has not defaulted for any repayment of Borrowings and Interest during the year.
The Company has availed Working Capital Facility of H600.00 Crore (31st March 2024: H400.00 Crore) as sanctioned limit from consortium comprising of ICICI Bank Limited H140.00 Crore, Standard Chartered Bank H110.00 Crore, HDFC Bank Ltd. H80.00 Crore, State Bank of India H100.00 Crore, Axis Bank H50.00 Crore and Kotak Mahindra Bank H120.00 Crore.
Rate of interest stipulated by ICICI Bank Limited is 6 Month MCLR Nil spread on the principal amount remains outstanding each day.
Rate of interest stipulated by Standard Chartered Bank is monthly MCLR .
Rate of interest stipulated by HDFC Bank Limited is as per prevailing 6 Month MCLR Nil Spread Rate of interest stipulated by Kotak Mahindra Bank is 6 month MCLR NIL Spread.
Rate of interest stipulated by Axis Bank is 6 month MCLR NIL Spread.
Rate of interest stipulated by State Bank of India is 6 month MCLR NIL Spread.
The Company has executed hypothecation deed on 10th June 2024 creating first pari passu charge on the current asset of the Company in favor the consortium.
The Company has not defaulted for any repayment of Borrowings and Interest during the year.
The Company submits quarterly statements of assets mortgaged and the same are in agreement with the books.
Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service Coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio of Total Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
27.4 Performance Obligation
All sales are made at a point in time and revenue recognised upon satisfaction of the performance obligations which is typically upon dispatch/ delivery. The Company does not have any remaining performance obligation for sale of goods or services which remains unsatisfied as at March 31, 2025 or March 31, 2024. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognised corresponds directly with the value to the customer of the entityâs performance completed to date
27.5 Information about Major Customers
No single Customer represents 10% or more of the Companyâs total Revenue during the year ended 31st March 2025 and 31st March 2024.
37. Gratuity and Other Employment Benefit Plans (a) Retirement Benefits
The Gratuity Plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and salary at retirement age. The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the respective plans:
(c) Defined Contribution Plans
The Company makes Provident Fund contributions to Defined Contribution Plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of payroll costs to fund the benefits. The Company has recognised Provident Fund contribution of H2.40 Crore (31st March 2024: H2.12 Crore) and contribution to labour welfare of H0.00 Crore (31st March 2024: H0.00 Crore) as expense in Note 31 under the head âContributions to Provident and Other Fundsâ
38. Transaction with Related Parties (Contd.)
Terms and Conditions of transactions with related parties:
(1) Sales to Related Parties and Concerned balances For terms of transaction
Sales are made to related parties on the same terms as applicable to third parties in an armâs length transaction and in the ordinary course of business. The Company mutually negotiates and agrees sales price, discount and payment terms with the related parties by benchmarking the same to transactions with non-related parties, who purchase goods and services of the Company in similar quantities. Such sales generally include payment terms requiring related party to make payment within 90 to 180 days from the date of invoice.
For terms of balance
Trade Receivables outstanding balances are unsecured, interest free and require settlement in cash. No guarantee or other security has been received against these receivables. The amounts are recoverable within 90 to 180 days from the reporting date (31 March 2024: 90 to 180 days from the reporting date). For the year ended 31 March 2025, the Company has not recorded any impairment on receivables due from related parties (31 March 2024: Nil).
(2) Purchases of Goods and Related Balances For terms of transaction
Purchases are made from related parties on the same terms as applicable to third parties in an armâs length transaction and in the ordinary course of business. The Company mutually negotiates and agrees purchase price and payment terms with the related parties by benchmarking the same to sale transactions with non-related parties entered into by the counter-party and similar purchase transactions entered into by the Company with the other non-related parties. Such purchases generally include payment terms requiring the Company to make payment within 90 to 180 days from the date of invoice.
For terms of balance
Trade payables outstanding balances are unsecured, interest free and require settlement in cash. No guarantee or other security has been given against these payables. The amounts are payable within 90 to 180 days from the reporting date (31 March 2024: 90 to 180 days from the reporting date).
(3) Services received from Related Parties
During the year 2024-25, the company has obtained renting services of its office premises over which one of the Directors exercises significant influence. The amount billed for this service was INR 1.47 crores (2023-24: 1.48 crores) and it was agreed based on mutual negotiation between parties. The service agreement included payment terms requiring the Company to make upfront payment at the time of receipt of invoice.
(4) Compensation to KMP of the Company
The amounts disclosed in the table are the amounts recognised as an expense during the financial year related to KMP. The amounts do not include expense, if any, recognised toward post-employment benefits and other long-term benefits of key managerial personnel. Such expenses are measured based on an actuarial valuation done for each Company as a whole. Hence, amounts attributable to KMPs are not separately determinable.
(5) The Companyâs transactions with Related Parties are at armâs length. Management believes that the Companyâs domestic transactions with related parties post 31st March 2025 continue to be at armâs length and that the transfer pricing legislation will not have any impact on the Financial Statements particularly on the amount of the tax expense for the year and the amount of the provision for taxation at the period end. Transactions with related parties are disclosed including applicable taxes.
(6) The Company has issued Redeemable Preference Shares of H10 each is cumulative and carry coupon/ dividend rate of 8.00% p.a. with redeemable tenure of 20 Years from the date of allotment. The Company has the right to exercise the option of early redemption, considering which Company has redeemed H95.00 Crore (31st March 2024 : H55.00 Crore) during the year. Redemption is done at face value. The company has
accrued dividend at the rate of 8% on Redeemable Preference Shares for the year ended March 31,2025 and March 31,2024.
The Companyâs Chief Operating Decision Maker (CODM) examines the Companyâs performance from business and geographic perspective. In accordance with Ind AS-108 - Operating Segments, evaluation by the CODM and based on the nature of activities performed by the Company, which primarily relate to manufacturing of Chloro Alkali & its Derivatives, the Company does not operate in more than one business segment.
Analysis By Geographical Segment
Segment Revenue is analysed based on the location of Customers regardless of where the goods are produced. The following provides an analysis of the Sales by Geographical Markets.
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40. Contingent Liabilities & Commitments A. Claim against the Company not acknowledged as Debts (excluding Interest and Penalty) (H in Crores) |
||
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Particulars |
As at March 31, 2025 |
As at March 31, 2024 |
|
Income Tax Liability1 |
16.63 |
16.63 |
|
Service Tax Liability2 |
0.25 |
0.54 |
|
Custom Duty Liability3 |
6.22 |
6.22 |
|
Other Claims4 (In respect of the above matters, future cash outflows in respect of contingent liabilities are determinable only on receipt of judgements pending at various Forums / Authorities. The Company has assessed that it is only possible but not probable, the outflow of economic resources will be required) |
44.22 |
2.34 |
**Service tax demand comprise demand from Service tax Authorities for payment of additional tax of H0.25 Crore (31 March 2024: H0.54 Crore), upon completion of their tax review for the financial year 2012-13 and 2014-15. The tax demands are on account of service tax on sales commission. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
***Customs duty demand comprise demand from Custom Authorities for payment of additional duty of H6.22. Crore (31 March 2024: H6.22. Crore), upon completion of their tax review for the financial year 2012-13. The tax demands are on account of classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
****Other claims / litigations comprise demand on account of litigations for alleged non-fulfilment of obligations as per the terms of agreement by the counter party to H44.22 Crore (31 March 2024: H2.34 Crore). The matters are pending at various stages in judicial authorities.
The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be in favour of Company in the appellate process and no tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the companyâs financial position and results of operations.
B. Capital Commitment
The Estimated amount of Contract to be executed on Capital Account of H186.87 Crore (31st March 2024 H28.78 Crore) and not provided for (Net of Advances).
C. Other Commitment
The Company has imported capital good for the various expansion projects under the EPCG Scheme at Nil rate of custom duty by undertaking obligation to export. Future outstanding export obligation under the scheme is H25.02 Crore (31st March 2024: H1.68 Crore).
The export obligation need to be completed by September 2030.
41 Disclosures as Per MSMED Act, 2006
The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26th August, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its Customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the âMicro, Small and Medium Enterprises Development Act, 2006â (âthe MSMED Actâ).
Accordingly, the disclosure in respect of the amounts payable to such Enterprises as at 31st March, 2025 has been made in the Financial Statements based on information received and available with the Company. The Company has not received any claim for interest from any Supplier as at the Balance-Sheet date.
Above information has been determined to the extent such parties have been identified on the basis intimation received from the suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006.
The Company has lease contracts for office premise and storage facilities. Leases are having lease terms of 2 to 3 years. The Companyâs obligations under its leases are secured by the lessorâs title to the leased assets. The Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain premises in good state. The lease contract include extension and termination options. The Company also has certain premises and assets with lease terms of 12 months or less. The Company applies the âshort-term leaseâ recognition exemptions for these leases.
For the purpose of the Companyâs capital management, capital includes issued Equity Capital, Securities Premium and all other Equity Reserves attributable to the equity holders of the Company. The primary objective of the Companyâs capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company includes within Net debt, Interest Bearing Borrowings, Lease liabilities, less Cash and Cash Equivalents. There were no changes in the objectives, policies or processes during the year ended March 31, 2025 and March 31, 2024.
44. Financial Instruments - Fair Values and Risk Management
The Material Accounting Policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of Financial Asset, Financial Liability and Equity Instrument are disclosed in Note 2 to the Financial Statements.
B. Measurement of Fair values and Sensitivity analysis Fair Value Hierarchy:
The fair value of the Financial Assets and Liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical Assets or Liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the Asset or Liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
(iii) Level 3: inputs for the Asset or Liability that are not based on observable market data (unobservable inputs).
In determining fair value measurement, the impact of potential climate related matters which may affect this fair value measurement of assets and liabilities in the financial statements have been considered.
Financial Instrument measured at Amortised Cost
The carrying amount of Financial Assets and Financial Liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
Reconciliation of level 1 Fair Values
There have been no transfers between level 1, level 2 and level 3 during the year ended March 31, 2025 and March 31, 2024.
Description of significant unobservable inputs to valuation:
The significant unobservable inputs used in the fair value measurement categorised within Level 2 of the fair value hierarchy is based on the Fair value as ascertained and provided by the banks.
Financial Risk Management Framework
The Companyâs Board of Directors have overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Company manages market risk through treasury operations, which evaluates and exercises independent control over the entire process of market risk management. The finance team recommends risk management objectives and policies. The activities of this operations include management of cash resources, hedging of foreign currency exposure, credit control and ensuring compliance with market risk limits and policies.
The Companyâs principal Financial Liabilities, other than Derivatives, comprises of Long Term and Short Term Borrowings, Trade and Other Payables, and Financial Liabilities. The main purpose of these Financial Liabilities is to finance the Companyâs operations. The Companyâs principal Financial Assets include Loans, Trade and other Receivables, Cash and Cash Equivalents, other Bank Balances and Other Financial Assets that derive directly from its Operations.
The Company has an effective risk management framework to monitor the risks controls in key business processes. In order to minimise any adverse effects on the bottom line, the Company takes various mitigation measures such as credit control, foreign exchange forward contracts to hedge foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The Company has exposure to the following risks arising from Financial Instruments
¦ Credit Risk ;
¦ Liquidity Risk ; and
¦ Market Risk
i. Credit Risk
Credit Risk is the risk that counter party will not meet its obligation leading to a financial loss. The Company is exposed to credit risk arising from its operating activities primarily from Trade Receivables and from financing activities primarily relating to parking of surplus funds as Deposits with Banks. The Company considers probability of default upon initial recognition of Assets and whether there has been a significant increase in credit risk on an ongoing basis throughout the reporting period.
The carrying amount of following Financial Assets represents the maximum credit exposure:
Financial Instruments and Cash Deposit:
Credit Risk from Balances with Banks and Financial Institutions is managed by the Companyâs Treasury Department. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterpartyâs potential failure to make payments.
Trade Receivables
Trade Receivables consist of a large number of customers. The Company has credit evaluation policy for each customer and based on the evaluation credit limit of each customer is defined. The exposure in credit risk arising out of major customers is generally backed either by bank guarantee, letter of credit or security deposits. The Companyâs exposure and wherever appropriate the credit ratings of its counterparties are continuously monitored and spread amongst various counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management of the Company.
The Company does not have higher concentration of credit risks. Total Trade Receivable as on March 31, 2025 is H232.32 Crore (March 31, 2024 - H178.75 Crore).
Refer Note 10 for ageing of trade receivables.
The Company measures the expected credit loss of Trade Receivables and Loan from individual Customers based on historical trend, industry practices and the business environment in which the Entity operates.Loss rates are based on actual credit loss experience and past trends.
Expected credit loss assessment
For Trade Receivables, as a practical expedient, the Company compute credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates. At each reporting date, the historically observed default rates and changes in the forward-looking estimates are updated. Accordingly, loss allowances on trade receivables are measured using provision matrix at an amount equal to life time expected losses i.e. expected cash shortfall. There is no history of bad debts and accordingly ECL is Nil for year ended March 31, 2025 and March 31,2024.
Credit Impaired
For expected credit loss as at each reporting date the Company assesses position for the assets for which credit risk has not significantly increased from initial recognition, assets for which credit risk has increased significantly but are not credit impaired and for assets for which credit risk has increased significantly and are credit impaired. The Company assesses detrimental impacts on the estimated future cash flows of the financial asset including loans, receivables and other assets. Based on the assessment of the observable data relating to significant financial difficulty and creditworthiness of the counterparties, the management believes that there are no financial assets which are credit impaired except as disclosed in the notes to the financial statements.
ii. Liquidity Risk
Liquidity Risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Companyâs approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companyâs reputation.
Exposure to Liquidity Risk
The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and Actual Cash flows and matching the maturity profiles of the Financial Assets and Liabilities. The table below summarises the remaining contractual maturities of Financial Liabilities at the reporting
The table has been drawn up based on the undiscounted contractual maturities of the financial liabilities including interest that will be paid on those liabilities upto the maturity of the instruments. The gross inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement.
Excessive Risk Concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Companyâs performance to developments affecting a particular Industry
In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Company to manage risk concentrations at both the relationship and industry levels
iii. Market Risk
Market Risk is the risk that the fair value of future Cash Flows of a Financial Instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: Currency Risk, Interest Rate Risk, and Other Price Risk such as Equity Price Risk. Financial Instruments affected by market risk include Loans and Borrowings, Deposits, FVTOCI and Amortised Cost Investments and Derivative Financial Instruments.
Foreign Currency Risk
Foreign Currency Risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency).
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 12-month period for hedges of actual sales and purchases and 12-month period for foreign currency loans. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.
Exposure to Currency Risk
The Currency profile of Financial Assets and Financial Liabilities as at 31st March, 2025 and 31st March , 2024 are as below:
The Companyâs exposure to Foreign Currency Risk at the end of the reporting period expressed in H, are as follows
The Company has entered into a cross currency swap (âCCS") transaction for Rupee Term loan of H256.27 Crore swapped with notional principal of EUR 2.83 Crore (refer note 18)
Sensitivity Analysis
A reasonably possible strengthening (weakening) of the Indian Rupee against Foreign Currency at March 31 would have affected the measurement of financial instruments denominated in foreign currency and affected Equity and Profit or Loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.
Interest Rate Risk
Interest Rate Risk is the risk that the fair value or future Cash Flows of a Financial Instrument will fluctuate because of changes in market interest rates. The Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs Long-Term Debt obligations with floating interest rates. The Company manages its Interest Rate Risk by having balanced portfolio of fixed and variable rate Loans and Borrowings.
Exposure to Interest Rate Risk
The Companyâs Interest Rate Risk arises from Borrowings obligations. Borrowings is exposed to fair value interest rate risk. The interest rate profile of the Companyâs interest-bearing Financial Instruments as reported to the management of the Company is as follows.
Cash Flow Sensitivity Analysis for Variable-Rate Instruments
A reasonably possible change of 100 basis points in Interest Rates at the reporting date would have increased (decreased) Equity and Profit or Loss by the amounts shown below. This analysis assumes that all other variables, in particular Foreign Currency Exchange Rates, remain constant.
46. Events occurred after the Balance Sheet date
The Company evaluates events and transactions that occur subsequent to the Balance Sheet date but prior to approval of Financial Statement to determine the necessity for recognition and/or reporting of any of these events and transactions in the Financial Statements. As of 05th May 2025 there were no material subsequent events to be recognized or reported that are not already disclosed.
47. Other Statutory Information for the year ended March 31,2025 and March 31,2024
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.
(ii) The Company do not have any transactions or balance with companies struck off under Section 248 of Companies Act, 2013 or Section 560 of Companies Act, 1956.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,
(iv) The Company has not traded or invested in Crypto currency or Virtual currency during the financial year and in previous financial year.
(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(vi) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(vii) The Company does not have transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
(viii) The Company has not been declared as wilful defaulter by any bank or financial institution or other lender.
48. The Company uses an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the accounting software, except that audit trail feature is not enabled for certain changes made using privileged access rights to the SAP application and the underlying HANA database. Further, no instance of audit trail feature being tampered with was noted in respect of the accounting software. Additionally, the audit trail of prior year(s) has been preserved by the Company as per the statutory requirements for record retention to the extent it was enabled and recorded in the respective years.
Income tax demand comprise demand from the Indian Income Tax authorities for payment of additional tax of
H16.63 Crore (31 March 2024: H16.63 Crore). The tax demands are mainly on account of adjustment pertaining to
80 IA benefits claimed for captive power plant against sale of steam and power. During FY 2024-25, the Holding
Company has received a favourable Order amounting to H11.08 Crore from ITAT for AY 2016-17 and AY 2017-18, however the department has further filed an appeal in High Court against the ITAT Order. Further, the Holding Company also received favourable order pertaining to AY 2011-12 from CIT(Appeal).
Mar 31, 2024
The name of the Company was changed from Meghmani Finechem Limited to Epigral Limited during the year with effect from August 04, 2023. Accordingly, the Company is in the process of changing the title deeds of immovable properties viz: free hold land, building and leasehold land and building in its updated name.
Capital Work in Progress ?48,284.27 Lakhs as at 31st March 2024 comprises expenditure for Expansion Project of Chloro Polyvinyl Chloride, Chlorotoluene and other Projects which are in the course of construction..
The amount of borrowing costs added to cost of capital work-in-progress during the year ended 31a March 2024 is?683.60 Lakhs (31st March 2023: ?911.75 Lakhs). The rate used to determine the amount of borrowing costs eligible for capitalisation is 8.15%, which is the effective interest rate of the specific borrowings taken for above mentioned Projects. Refer note 41 for Right of Use assets details.
As on 31a March, 2024 other than mentioned above there are no Projects whose completion are overdue or exceed its cost as compare to plan, also there is no suspended Projects as on 3 la March,2024.
For Property Plant & Equipment and Intangible Assets existing as on 1 April 2015 i.e. the date of transition to Ind AS, the Company has used Indian GAAP carrying value as deemed cost as permitted by Ind AS 101 âFirst Time Adoption of Indian Accounting Standardâ. Accordingly, the net WDV as per Indian GAAP as on 1 April 2015 has been considered as Gross block under Ind AS. The accumulated depreciation is netted off as on 1 April 2015.
During the Current Year exchange gain of ?. Nil (31 March 2022: Nil) arising on reporting of long term foreign currency monetary item related to Property, Plant and Equipment has been added/deducted to cost of Property, Plant and Equipment and the unamortised balance carried as part of tangible asset as at theyear end aggregate to ?345.87 Lakhs (31st March 2022: ?375.41 Lakhs ), in view of option given in para D13AA of IND-AS 101 on first time adoption of IND-AS.
Capital Work in Progress ?15,810.25 Lakhs as at 31a March 2023 comprises expenditure for Expansion Project of Chloro Polyvinyl Chloride and Chlorotoluene and Research & Development center which are in the course of construction.
The amount of borrowing costs added to cost of capital work-in-progress during the year ended 31a March 2023 is ?911.75 Lakhs (31a March 2022: ?1,645.65 Lakhs). The rate used to determine the amount of borrowing costs eligible for capitalisation ranges between 7.05% to 7.70%, which is the effective interest rate of the specific borrowings taken for above mentioned Projects.
As on 3 la March, 2023 there is no Projects whose completion is overdue or exceed its cost as compare to plan, also there is no suspended Projects as on 31a March,2023 For Property Plant & Equipment existing as on 1 April 2015 i.e. the date of transition to Ind AS, the Company has used Indian GAAP carrying value as deemed cost as permitted by Ind AS 101 âFirst Time Adoption of Indian Accounting Standardâ. Accordingly, the net WDV as per Indian GAAP as on 1 April 2015 has been considered as Gross block under Ind AS. The accumulated depreciation is netted off as on 1 April 2015.
The Company has entered into Share Subscription and Shareholdersâ Agreement (SSSA) with ReNew Green (GJS three) Private Limited (ââRGPLââ) whereby the Company has invested H2,054.08 Lakhs for 26% equity share capital of RGPL. RGPL is in the business of developing and operating 18.34 MW wind-solar hybrid power plant in Gujarat. Based on â"Energy Supply Agreement(ESA) with RGPL the company will have exclusive right to purchase the energy produced by RGPL for a period of 25 years. RGPL has started its operation during first quarter of the Year.
Margin Money Deposits amounting H46.08 Lakh (31 March 2023: H43.81 Lakh ) are given as Security Deposit against Bank Guarantee with bank. These deposits are made for varying periods of between 1 year to 10 years and earn interest ranging between 5.40% to 7.25%.
Trade Receivable are secured to the extent of deposit received from the Customers.
Trade Receivables are non interest bearing and generally have credit period of 30-90 days.
For amount due and terms and conditions relating to related party, please refer note no 37.
No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.
For information about Credit Risk and Market Risk related to Trade Receivables, please refer note no 43.
(i) Equity Share:
The Company has only one class of Equity Shares with par value of H10 per share. Each equity shareholder is entitled to one vote per share. All Equity Shareholders have equal dividend rights. In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity shares held by the shareholders.
As per records of the Company, including its register of shareholder / members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
Capital Reserve
The balance in Capital Reserve represents difference between consideration paid and net asset acquired under common control business combination transactions and cancellation of shares pursuant to scheme of arrangement
Retained Earnings
Retained earnings are the profits that the Company has earned till date, less any transfer to General Reserve, Dividend paid to Shareholders. It also includes Re-measurement gain/(loss) on defined benefit plans that will not be re-classified to the Statement of Profit and Loss.
Details of Security and Repayment Terms :
i) The Company has availed following Rupee
Term Loan facilities:
1) Term loan amounting H15,000 Lakhs from HDFC Bank Limited is for capital expenditure towards setting up of new Caustic Soda Lye Plant with new 36 MW Captive Power Plant. Outstanding balance for this facility is H3,333 Lakhs (31st March 2023: H6,667 Lakhs). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus NIL spread (to be set every year) payable on monthly rest. The term loan is repayable in 18 quarterly instalments of H833.33 Lakhs each starting from 1st November, 2020.
2) Term loan amounting H12,500 Lakhs from Federal Bank Limited is for capital expenditure towards setting up of new Hydrogen Peroxide Plant. Outstanding balance for this facility is H2,632 Lakhs (31st March 2023: H5,263 Lakhs). The borrowing carries interest @ 12 month T-bill rate (benchmark as published by RBI - to be reset every year) plus spread (fixed @ 0.94%) payable on monthly rest. The Term Loan is repayable in 19 quarterly instalments of H657.89 Lakhs each starting from 29th September, 2020.
3) Term Loan amounting H35,000 lakhs from Axis Bank Limited is for capital expenditure towards setting up of new Chloro Tolune and its Value Chain Plant and expansion of Chloro Polyvinly Chloride, the Company has drawn down H21,300 Lakhs during the year. The borrowing carries interest @ Repo Rate plus spread (fixed@ 1.65%) payable on monthly rest. The Term Loan is repayable in 24 quarterly installment of H1,458.33 Lakhs each starting from December 2025
4) Term loan amounting H19,000 lakhs from State Bank of India is for capital expenditure towards setting up of new Epichlorhydrin Plant. Outstanding balance for this facility is H13,195 Lakhs (31st March 2023: H17,095 Lakhs) . The borrowing carries interest at 6 month MCLR (Benchmark rate) plus spread of 0.10% (to be reset every half year) payable on monthly rest. The Term Loan is repayable in 20 quarterly instalments of H950.00 Lakhs each starting from 31st December. 2022.
5) Term loan amounting H28,475 lakhs from HDFC Bank Limited is for capital expenditure towards setting up of new Chloro Polyvinyl Chloride Plant and expansion of Caustic capacity with 36 MW Captive Power Plant. Outstanding balance for the facility is H24,204 Lakhs (31st March 2023: H28,475 Lakhs). The borrowing carries interest at 6 month MCLR (Benchmark rate) NIL Spread resets half yearly. The Term Loan is repayable in 20 quarterly instalments of H1,423.75 Lakhs each starting from September 2023.
6) The Term Loan facilities are secured by first pari passu mortgage charge of all immovable properties of the Company and first pari passu hypothecation charge over all the movable assets of the Company. However, the security creation for Term Loan of H35,000 Lakhs from Axis Bank Limited is under process as on 31st March 2024.
ii) The Company has executed an Indenture of Mortgage with Lenders of these term loans (Secured Parties) by creating mortgages on Immovable Properties of the Company by creating a charge by way of registered mortgage. According to the indenture, all the Secured Parties will share pari passu charge with first ranking and priority over the Immovable Properties of the Company, both present and future.
iii) Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio of Total Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
iv) 9,50,00,000 Redeemable Preference Shares (31 March 2023 : 15,00,00,000 ) of H10 each is cumulative and carry coupon/dividend rate of 8.00% p.a. with redeemable tenure of 20 Years from the date of allotment. The Company has the right to exercise the option of early redemption, considering which Company has redeemed H5,500 Lakhs (31st March 2023 : H6,091.99 Lakhs) during the year. Redemption is done at face value.
The Company has availed Working Capital Facility of H40,000 Lakhs (31st March 2023: H40,000 Lakhs) as sanctioned limit from consortium comprising of ICICI Bank Limited H9,000 Lakhs, Standard Chartered Bank H8,000 Lakhs and HDFC Bank Ltd. H8,000 Lakhs, State Bank of India H10,000 Lakhs and Kotak Mahindra Bank H5,000 Lakhs.
Rate of interest stipulated by ICICI Bank Limited is 6 Month MCLR Nil spread on the principal amount remains outstanding each day.
Rate of interest stipulated by Standard Chartered Bank is monthly MCLR .
Rate of interest stipulated by HDFC Bank Limited is as per prevailing 6 Month MCLR NIL Spread.
Rate of interest stipulated by Kotak Mahindra Bank is 6 month MCLR NIL Spread.
Rate of interest stipulated by State Bank of India is 6 month MCLR NIL Spread.
The Company has executed hypothication deed on 16th August 2023 creating first pari passu charge on the current asset of the Company in favor the consortium.
Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service Coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio of Total Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
Trade Receivables are non interest bearing and generally have credit period of 30-90 days. Trade Receivable are secured to the extent of deposits received from the Customers.
Contract Liabilities includes Short Term Advance received from Customers towards Sale of Products.
26.4 Performance Obligation
The performance obligation is satisfied upon dispatch of Goods from the Companyâs premises / delivery of Goods to the Customer in accordance with the terms of contract with Customer and payment is generally due within 30 to 90 days from date of dispatch/delivery of Goods.
26.5 Information about Major Customers
No single Customer represents 10% or more of the Companyâs total Revenue during the year ended 31st March 2024 and 31st March 2023.
Nature of CSR Activities
(i) Eradicating hunger, poverty and mal nutrition, promoting health care including preventive health and sanitation.
(ii) Promoting education including special education and employment enhancing vocation skills in educational institutes.
(iii) Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.
36 GRATUITY AND OTHER EMPLOYMENT BENEFIT PLANS (a) Retirement Benefits
The Gratuity Plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and salary at retirement age. The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the respective plans:
(b) Defined Contribution Plans
The Company makes Provident Fund contributions to Defined Contribution Plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of payroll costs to fund the benefits. The Company has recognised Provident Fund contribution of H213.12 Lakhs (31st March 2023: H185.77 Lakhs) and contribution to labour welfare of H0.23 lakhs (31st March 2023: H0.21 Lakhs) as expense in Note 30 under the head âContributions to Provident and Other Fundsâ
The Companyâs Chief Operating Decision Maker (CODM) examines the Companyâs performance from business and geographic perspective. In accordance with Ind AS-108 - Operating Segments, evaluation by the CODM and based on the nature of activities performed by the Company, which primarily relate to manufacturing of Chloro Alkali & its Derivatives, the Company does not operate in more than one business segment.
Analysis By Geographical Segment
Segment Revenue is analysed based on the location of Customers regardless of where the goods are produced. The following provides an analysis of the Sales by Geographical Markets.
* Income tax demand comprise demand from the Indian Income Tax authorities for payment of additional tax of H1,662.83 Lakhs (31 March 2023: H1,662.83 Lakhs), upon completion of their tax review for the assessment year 2016-17, 2017-18 and 2018-19. The tax demands are mainly on account of adjustment pertaining to 80 IA benefits claimed for captive power plant against sale of steam and power. Till FY 202223, the matter was pending before CIT(A) and Income Tax Appellate Tribunal (ITAT). During FY 2023-24, the Company has received favourable ITAT Order from Ahmedabad pertaining to AY 2016-17 and AY 2017-18 against which the Department has filed appeal before Gujarat High Court.
** Service tax demand comprise demand from Service tax Authorities for payment of additional tax of H53.69 Lakhs (31 March 2023: H53.69 Lakhs), upon completion of their tax review for the financial year 2012-13 and 2014-15. The tax demands are on account of service tax on sales commission and classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
*** Customs Duty demand comprise demand from Custom Authorities for payment of additional duty of H621.83 Lakhs (31 March 2023: H621.83 Lakhs), upon completion of their tax review for the financial year 2012-13. The tax demands are on account of classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
**** Other Legal demand comprise demand on account of civil litigation for payment to Aggrived party amounting to H234.16 Lakhs (31 March 2023: Nil) .The legal dispute is majorly on account of non fulfilment of obligation by creditors and corresponding deductions. The matter is pending before High Court.
The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be in favour of Company in the appellate process and no tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the companyâs financial position and results of operations.
B. Capital Commitment
The Estimated amount of Contract to be executed on Capital Account of H2,878.43 Lakhs (31st March 2023 H24,965.66 Lakhs) and not provided for (Net of Advances).
C. Other Commitment
The Company has imported capital good for the various expansion projects under the EPCG Scheme at nil rate of custom duty by undertaking obligation to export. Future outstanding export obligation under the scheme is H168.04 Lakhs (31st March 2023: H Nil Lakhs).
40 DISCLOSURES AS PER MSMED ACT, 2006
The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26th August, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its Customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the âMicro, Small and Medium Enterprises Development Act, 2006â (âthe MSMED Actâ).
Accordingly, the disclosure in respect of the amounts payable to such Enterprises as at 31st March, 2024 has been made in the Financial Statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any,that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any Supplier as at the Balance-Sheet date.
On the basis of information and records available with the Company, the above disclosures are made in respect of amount due to the Micro, Small and Medium Enterprises, which have been registered with the relevant competent Authorities. This has been relied upon by the Auditors.
The Company has lease contracts for office premise. Leases of office premise is having lease terms of 3 to 9 years. The Companyâs obligations under its leases are secured by the lessorâs title to the leased assets. The Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain premises in good state. The lease contract include extension and termination options. The Company also has certain premises and assets with lease terms of 12 months or less. The Company applies the âshort-term leaseâ recognition exemptions for these leases.
Terms of Cancellation and Escalation
The Leases are cancellable by giving one month notice by either parties and these does not carries any escalation.
Capital includes only Equity attributable to the Equity Shareholders to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximise shareholder value. The Company manages its Capital Structure and makes adjustments to it, in light of changes in economic conditions or its business requirements. To maintain or adjust the Capital Structure, the Company may adjust the dividend payment to Shareholders, return on capital to Shareholders or issue new Shares. No changes were made in the objectives, policies or processes during the year ended 31 March 2024 and 31 March 2023. .
The Company monitors capital using a ratio of âAdjusted Net Debtâ to âAdjusted Equityâ. For this purpose, adjusted net Debt is defined as Total Liabilities, comprising Interest-Bearing Loans and Borrowings, less Cash and Cash Equivalents. Adjusted Equity comprises all components of Equity.
43 Financial Instruments - Fair Values and Risk Management
The Significant Accounting Policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of Financial Asset, Financial Liability and Equity Instrument are disclosed in Note 2 to the Financial Statements.
B. Measurement of Fair values and Sensitivity analysis Fair Value Hierarchy:
The fair value of the Financial Assets and Liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical Assets or Liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the Asset or Liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
(iii) Level 3: inputs for the Asset or Liability that are not based on observable market data (unobservable inputs).
Financial Instrument measured at Amortised Cost
The carrying amount of Financial Assets and Financial Liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
Reconciliation of level 1 Fair Values
There have been no transfers between level 1, level 2 and level 3 during the year ended March 31, 2024. Financial Risk Management Framework
The Companyâs Board of Directors have overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Company manages market risk through treasury operations, which evaluates and exercises independent control over the entire process of market risk management. The finance team recommends risk management objectives and policies. The activities of this operations include management of cash resources, hedging of foreign currency exposure, credit control and ensuring compliance with market risk limits and policies.
The Companyâs principal Financial Liabilities, other than Derivatives, comprises of Long Term and Short Term Borrowings, Trade and Other Payables, and Financial Liabilities. The main purpose of these Financial Liabilities is to finance the Companyâs operations. The Companyâs principal Financial Assets include Loans, Trade and other Receivables, Cash and Cash Equivalents, other Bank Balances and Other Financial Assets that derive directly from its Operations.
The Company has an effective risk management framework to monitor the risks controls in key business processes. In order to minimise any adverse effects on the bottom line, the Company takes various mitigation measures such as credit control, foreign exchange forward contracts to hedge foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The Company has exposure to the following risks arising from Financial Instruments
> Credit Risk ;
> Liquidity Risk ; and
> Market Risk
i. Credit Risk
Credit Risk is the risk that counter party will not meet its obligation leading to a financial loss. The Company is exposed to credit risk arising from its operating activities primarily from Trade Receivables and from financing activities primarily relating to parking of surplus funds as Deposits with Banks. The Company considers probability of default upon initial recognition of Assets and whether there has been a significant increase in credit risk on an ongoing basis throughout the reporting period.
The carrying amount of following Financial Assets represents the maximum credit exposure:
Financial Instruments and Cash Deposit:
Credit Risk from Balances with Banks and Financial Institutions is managed by the Companyâs Treasury Department. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterpartyâs potential failure to make payments.
Trade Receivables
The Sales Department has established a Credit Policy under which each new Customer is analysed individually for creditworthiness before the Companyâs standard payment and delivery terms and conditions are offered. The Companyâs review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each Customer and reviewed periodically. Any sales exceeding those limits requires further approval.
Trade Receivables of the Company are typically unsecured ,except to the extent of the security deposits received from the Customers or Financial Guarantees provided by the market organizers in the business. Credit risk is managed through credit approvals and periodic monitoring of the creditworthiness of Customers to which Company grants credit terms in the normal course of business. The Company performs ongoing credit evaluations of its Customersâ financial condition and monitors the creditworthiness of its Customers to which it grants credit terms in the normal course of business. The allowance for impairment of Trade Receivables is created to the extent and as and when required, based upon the expected collectability of Accounts Receivables.The Company evaluates the concentration of risk with respect to
Trade Receivables as low, as its Customers are located in several jurisdictions and industries and operate in largely independent markets.
The Company measures the expected credit loss of Trade Receivables and Loan from individual Customers based on historical trend, industry practices and the business environment in which the Entity operates. Loss rates are based on actual credit loss experience and past trends.
Management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of Customer Credit Risk, including underlying Customersâ Credit Ratings if they are available.
Management estimates that the amount of provision of H Nil (31st March 2023 : NIL) is appropriate
ii. Liquidity Risk
Liquidity Risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Companyâs approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companyâs reputation.
Exposure to Liquidity Risk
The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and Actual Cash flows and matching the maturity profiles of the Financial Assets and Liabilities. The table below summarises the remaining contractual maturities of Financial Liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.
Excessive Risk Concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Companyâs performance to developments affecting a particular Industry
In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Company to manage risk concentrations at both the relationship and industry levels
iii. Market Risk
Market Risk is the risk that the fair value of future Cash Flows of a Financial Instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: Currency Risk, Interest Rate Risk, and Other Price Risk such as Equity Price Risk. Financial Instruments affected by market risk include Loans and Borrowings, Deposits, FVTOCI and Amortised Cost Investments and Derivative Financial Instruments.
Foreign Currency Risk
Foreign Currency Risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency).
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 12-month period for hedges of actual sales and purchases and 12-month period for foreign currency loans. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency. .
Exposure to Currency Risk
The Currency profile of Financial Assets and Financial Liabilities as at 31st March, 2024 and 31st March , 2023 are as below:
Sensitivity Analysis
A reasonably possible strengthening (weakening) of the Indian Rupee against Foreign Currency at March 31 would have affected the measurement of financial instruments denominated in foreign currency and affected Equity and Profit or Loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.
Interest Rate Risk
Interest Rate Risk is the risk that the fair value or future Cash Flows of a Financial Instrument will fluctuate because of changes in market interest rates. The Companyâs exposure to the risk of changes in market interest rates relates primarily to the Companyâs Long-Term Debt obligations with floating interest rates. The Company manages its Interest Rate Risk by having balanced portfolio of fixed and variable rate Loans and Borrowings.
Exposure to Interest Rate Risk
The Companyâs Interest Rate Risk arises from Borrowings obligations. Borrowings is exposed to fair value interest rate risk. The interest rate profile of the Companyâs interest-bearing Financial Instruments as reported to the management of the Company is as follows.
45 Events occurred after the Balance Sheet date
The Company evaluates events and transactions that occur subsequent to the Balance Sheet date but prior to approval of Financial Statement to determine the necessity for recognition and/or reporting of any of these events and transactions in the Financial Statements. As of 22nd April 2024 there were no material subsequent events to be recognized or reported that are not already disclosed.
46.Other Statutory Information
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.
(ii) The Company do not have any transactions or balance with companies struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(vi) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(vii) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961
47 The Company uses an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the accounting software, except that audit trail feature is not enabled for certain direct changes to the data for users with the certain privileged access rights to the SAP application and the underlying HANA database. Further no instance of audit trail feature being tampered which was noted in respect of the accounting software.
Presently, the log has been activated at the application and the privileged access to HANA database continues to be restricted to limited set of users who necessarily require this access for maintenance and administration of the database.
48 Previous years figures have been regrouped and reclassified wherever necessary to make them comparable with those of the current year.
Mar 31, 2023
Details of Security and Repayment Terms :
(i) The Company has taken External Commercial Borrowing of Euro 180.00 lakhs equivalent to H 14,400.00 lakhs from Standard Chartered Bank to finance its capital expenditure plans. Outstanding balance for this borrowing is Euro 48.00 lakhs equivalent to H4,293.24 lakhs (3151 Mach 2022: H8,085.00 lakhs). The borrowing is secured by first pari passu mortgage charge on all immovable properties, first pari passu hypothecation charge over all the moveable assets.The borrowing carries interest @ Euribor 1.6% p.a. payable on quarterly rests. The Company has entered into Interest Rate Swap (''IRS'') agreement with the bank for a fixed interest @ 1.85% p.a. and hedging ofthe foreign exchange rate whereby the Company will pay additional interest @ 4.95% p.a. The effective interest rate after considering basic interest rate and interest for hedging is 6.80%.The borrowing is repayable in 15 quarterly instalments of Euro 12 Lakhs each, starting from July 3, 2020.
ii) The Company has availed following Rupee Term Loan facilities:
1) Term loan amounting H 11,000 Lakhs from HDFC Bank Limited for capital expenditure toward setting up of new Chloromethane Plant. Outstanding balance for this facility is H 1,650 lakhs (31st March 2022: H3,850 lakhs). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus Nil spread. The interest rate for the current year ranges between 7.20% to 7.85% (31st March 2022: 7.20%). The Term Loan is repayable in 20 quarterly instalments of H550.00 Lakhs each and repayment started from 9th March 2019.
2) Term loan amounting H 15,000 Lakhs from HDFC Bank Limited for capital expenditure toward setting up of new Caustic Soda Lye Plant with new 36 MW Captive Power Plant. Outstanding balance for this facility is
H6,667 Lakhs (31st March 2022: H 10,000 Lakhs). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus NIL spread (to be set every year) payable on monthly rest.The effective interest rate ranges between 7.20% to 8.85%. (31st March 2022: 7.25%) The term loan is repayable in 18 quarterly instalments of H833.33 Lakhs each starting from 1st November; 2020.
3) Term loan amounting H 12,500 lakhs from Federal Bank Limited for capital expenditure toward setting up of new Hydrogen Peroxide Plant. Outstanding balance for this facility is H5,263 Lakhs (31st March 2022: H7,895 Lakhs).The borrowing carries interest @ 12 month T-bill rate (benchmark as published by RBI - to be reset every year) plus spread (fixed @ 0.94%) payable on monthly rest. The effective interest rate remained 7.90% (31st March 2022: 6.64%). The Term Loan is repayable in 19 quarterly instalments of H657.89 lakhs each starting from 29th September, 2020.
4) Term loan amounting H 19,000 lakhs from State Bank of India for capital expenditure toward setting up of new Epichlorhydrin Plant. Outstanding balance for this facility is H 17,095 Lakhs as at the Balance Sheet date (31st March 2022: H 19,000 Lakhs) . The borrowing carries interest at 6 month MCLR (Benchmark rate) plus spread of 0.10% (to be reset every half year) payable on monthly rest. The effective interest rate ranges between 7.05% to 8.15% (31st March 2022 : 7.05%). The Term Loan is repayable in 20 quarterly instalments of H950.00 lakhs each starting from 31st December 2022.
5) Term loan amounting H28,475 lakhs from HDFC Bank Limited for capital expenditure toward setting up of new Chloro Polyvinyl Chloride Plant and expansion of Caustic capacity with 36 MW Captive Power Plant. Outstanding balance for the facility is H28,475 Lakhs as
at the Balance Sheet date (31st March 2022: H2I,000 Lakhs), the company has drawn down H7,475 lakhs during the year The borrowing carries interest at 6 month MCLR (Benchmark rate) plus Nil spread payable on monthly rest. The effective interest rate ranges between 7.05% to 8.45% (31st March 2022 : 7.05%). The Term Loan is repayable in 20 quarterly instalments of H 1,423.75 lakhs each starting from September 2023.
6) The Term Loan facilities are secured by first pari passu mortgage charge of all immovable properties of the Company and first pari passu hypothecation charge over all the movable assets of the Company â
iii) The Company has executed an Indenture of Mortgage with Lenders of these term loans (Secured Parties) by creating mortgages on Immovable Properties of the Company by creating a charge by way of registered mortgage. According to the indenture, all the Secured Parties will share pari passu charge with first ranking and priority over the Immovable Properties of the Company both present and future.
iv) Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service Coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio ofTotal Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms ofthe loan agreements.
v) 15,00,00,000 Redeemable Preference Shares (31 March 2022 : 21,09,19,871 ) of H10 each is cumulative and carry coupon/dividend rate of 8.00% p.a. with redeemable tenure of 20Years from the date of allotment, The Company has the right to exercise the option of early redemption, considering which Company has redeemed H6,09l.99 lakhs during the year: Redemption is done at face value.
Note:
The Company has availed Working Capital Facility of H40,000 Lakhs (31st March 2022: H25,000 Lakhs) as sanctioned limit from consortium comprising of ICICI Bank Limited H9,000 Lakhs, Standard Chartered Bank H8,000 Lakhs and HDFC Bank Ltd. H8,000 Lakhs, State Bank of India H 10,000 Lakhs and Kotak Mahindra Bank H5,000 Lakhs.
Rate of interest stipulated by ICICI Bank Limited is 6 Month MCLR Nil spread on the principal amount remains outstanding each day Interest rate for the year ranges between 4.90% - 8.35% (31st March 2022: 4.90% - 7.25%).
Rate of interest stipulated by Standard Chartered Bank is monthly MCLR . Interest rate for the year ranges between 5.10% - 7.10% (31st March 2022: 5.00% - 6.75%).
Rate of interest stipulated by HDFC Bank Limited is as per prevailing 6 month MCLR Nil margin.
Interest rate for this ranges between @ 5.00% -8.00% (31st March 2022: 4.90% - 7.20%)."
The Company has availed Working Capital Facility of H5,000 Lakhs (31st March 2022: H NIL) from Kotak Mahindra Bank. The rate of interest stipulated by Kotak Mahindra Bank is 6 month MCLR NIL Spread Interest rate for the year ranges from 5.00% to 7.70% (31st March 2022: Nil).
The Company has availed Working Capital Facility of H 10,000 Lakhs (31st March 2022: H NIL Lakhs) from State Bank of India . The rate of interest stipulated by State Bank of India is 6 month MCLR NIL Spread Interest rate for the year ranges from 6.40% to 7.85% (31st March 2022: Nil).
Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service Coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio ofTotal Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
(b) Defined Contribution Plans
The Company makes Provident Fund contributions to Defined Contribution Plans for qualifying Employees. Under the schemes, the Company is required to contribute a specified percentage of payroll costs to fund the benefits. The Company has recognised Provident Fund contribution of H 185.77 Lakhs (31st March 2022: H 155.21 Lakhs)and contribution to labour welfare of H0.2I lakhs (31st March 2022: H0.I9 lakhs)as expense in Note 30 under the head ''Contributions to Provident and Other Funds''.
38 Segment Reporting
The Company''s Chief Operating Decision Maker (CODM) examines the Company''s performance from business and geographic perspective. In accordance with Ind AS-108 - Operating Segments, evaluation by the CODM and based on the nature of activities performed by the Company which primarily relate to manufacturing of Chloro Alkali & its Derivatives, the Company does not operate in more than one business segment.
* Income tax demand comprise demand from the Indian Income Tax authorities for payment of additional tax of H 1,662.83 lakhs (31 March 2022: H892.09 lakhs), upon completion of their tax review for the assessment year 2016-17, 2017-18 and 2018-19.The tax demands are mainly on account of adjustment pertaining to 80 IA benefits claimed for captive power plant against sale of steam and power: The matter is pending before CIT (A) and Income Tax Appellate Tribunal (ITAT).
** Service tax demand comprise demand from Service tax Authorities for payment of additional tax of H53.69 lakhs (31 March 2022: H53.69 lakhs), upon completion of their tax review for the financial year 2012-13 and 2014-15. The tax demands are on account of service tax on sales commission and classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
*** Customs tax demand comprise demand from Custom Authorities for payment of additional tax of H62I.83 lakhs (31 March 2022: H62I.83 lakhs), upon completion of their tax review for the financial year 2012-13. The tax demands are on account of classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be in favour of Company in the appellate process and no tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the company''s financial position and results of operations.
The Estimated amount of Contract to be executed on Capital Account of 24,965.66 Lakhs ( 3151 March 2022 H4,795.40 Lakhs) and not provided for (Net of Advances).
The Company has imported capital good for the various expansion projects under the EPCG Scheme at Nil rate of Custom Duty by undertaking obligation to export. Future outstanding export obligation under the scheme is H NIL (3151 March 2022: H8,164.49 lakhs).
40 DISCLOSURES AS PER MSMED ACT, 2006
The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26th August, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its Customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the ''Micro, Small and Medium Enterprises Development Act, 2006'' (''the MSMED Act'').
Accordingly the disclosure in respect of the amounts payable to such Enterprises as at 31st March, 2023 has been made in the Financial Statements based on information received and available with the Company Further in view of the Management, the impact of interest, if any that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any Supplier as at the Balance-Sheet date.
On the basis of information and records available with the Company the above disclosures are made in respect of amount due to the Micro, Small and Medium Enterprises, which have been registered with the relevant competent Authorities. This has been relied upon by the Auditors.
41 Leases
The Company has lease contracts for office premise. Leases of office premise is having lease terms of 3 to 9 years.The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain premises in good state. The lease contract include extension and termination options. The Company also has certain premises and assets with lease terms of 12 months or less. The Company applies the ''short-term lease''recognition exemptions for these leases.
42. Capital Management
Capital includes only Equity attributable to the Equity Shareholders to ensure that it maintains an efficient Capital Structure and healthy capital ratios in order to support its business and maximise shareholder value. The Company manages its Capital Structure and makes adjustments to it, in light of changes in economic conditions or its business requirements. To maintain or adjust the Capital Structure, the Company may adjust the dividend payment to Shareholders, Return on Capital to Shareholders or issue new Shares. No changes were made in the objectives, policies or processes during the year ended 31 March 2023 and 31 March 2022.
43 Financial Instruments - Fair Values and Risk Management
The Significant Accounting Policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of Financial Asset, Financial Liability and Equity Instrument are disclosed in Note 2 to the Financial Statements.
B. Measurement of Fair values and Sensitivity analysis Fair Value Hierarchy:
The fair value of the Financial Assets and Liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical Assets or Liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the Asset or Liability either directly (i.e., as prices) or indirectly (i.e., derived from prices).
Financial Instrument measured at Amortised Cost
The carrying amount of Financial Assets and Financial Liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
Reconciliation of level 1 Fair Values
There have been no transfers between level 1, level 2 and level 3 during the year ended March 31,2023.
Financial Risk Management Framework
The Company''s Board of Directors have overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company manages market risk through treasury operations, which evaluates and exercises independent control over the entire process of market risk management. The finance team recommends risk management objectives and policies. The activities of this operations include management of cash resources, hedging of foreign currency exposure, credit control and ensuring compliance with market risk limits and policies.
The Company''s principal Financial Liabilities, other than Derivatives, comprises of LongTerm and Short Term Borrowings, Trade and Other Payables, and Financial Liabilities. The main purpose of these Financial Liabilities is to finance the Company''s Operations. The Company''s principal Financial Assets include Loans, Trade and other Receivables, Cash and Cash Equivalents, Other Bank Balances and Other Financial Assets that derive directly from its Operations.
The Company has an effective risk management framework to monitor the risks controls in key business processes. In order to minimise any adverse effects on the bottom line, the Company takes various mitigation measures such as credit control, foreign exchange forward contracts to hedge foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The Company has exposure to the following risks arising from Financial Instruments
> Credit Risk ;
> Liquidity Risk ; and
> Market Riskâ
i. Credit Risk
Credit Risk is the risk that counter party will not meet its obligation leading to a financial loss. The Company is exposed to credit risk arising from its operating activities primarily from Trade Receivables and from financing activities primarily relating to parking of surplus funds as Deposits with Banks. The Company considers probability of default upon initial recognition of Assets and whether there has been a significant increase in credit risk on an ongoing basis throughout the reporting period.
The carrying amount of following Financial Assets represents the maximum credit exposure:
Financial Instruments and Cash Deposit:
Credit Risk from Balances with Banks and Financial Institutions is managed by the Company''s Treasury Department. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
Trade Receivables
The Sales Department has established a Credit Policy under which each new Customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each Customer and reviewed periodically Any sales exceeding those limits requires further approval.
Trade Receivables of the Company are typically unsecured ,except to the extent of the security deposits received from the Customers or Financial Guarantees provided by the market organizers in the business.Credit risk is managed through credit approvals and periodic monitoring of the creditworthiness of Customers to which Company grants credit terms in the normal course of business. The Company performs ongoing credit evaluations of its Customers'' financial condition and monitors the creditworthiness of its Customers to which it grants credit terms in the normal course of business. The allowance for impairment of Trade Receivables is created to the extent and as and when required, based upon the expected collectability of Accounts Receivables.The Company evaluates the concentration of risk with respect to Trade Receivables as low, as its Customers are located in several jurisdictions and industries and operate in largely independent markets.
The Company measures the expected credit loss ofTrade Receivables and Loan from individual Customers based on historical trend, industry practices and the business environment in which the Entity operates. Loss rates are based on actual credit loss experience and past trends.
Management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of Customer Credit Risk, including underlying Customers'' Credit Ratings if they are available.
Management estimates that the amount of provision of H Nil Lakh (31st March 2022 : NIL) is appropriate
ii. Liquidity Risk
Liquidity Risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
Exposure to Liquidity Risk
The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual Cash Flows and matching the maturity profiles of the Financial Assets and Liabilities. The table below summarises the remaining contractual maturities of Financial Liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.
Excessive Risk Concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular Industry
In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly Selective hedging is used within the Company to manage risk concentrations at both the relationship and industry levels
iii. Market Risk
Market Risk is the risk that the fair value of future Cash Flows of a Financial Instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: Currency Risk, Interest Rate Risk, and Other Price Risk such as Equity Price Risk. Financial Instruments affected by market risk include Loans and Borrowings, Deposits, FVTOCI and Amortised Cost Investments and Derivative Financial Instruments.
Foreign Currency Risk
Foreign Currency Risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates.The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency).
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 12-month period for hedges of actual sales and purchases and 12-month period for foreign currency loans. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency
Interest Rate Risk
Interest Rate Risk is the risk that the fair value or future Cash Flows of a Financial Instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s Long-Term Debt obligations with floating interest rates. The Company manages its Interest Rate Risk by having balanced portfolio of fixed and variable rate Loans and Borrowings.
45 Composite Scheme of Arrangement
The NCLT Ahmedabad Bench vide its Order dated 03 May 2021 (the âOrderâ), approved the Composite Scheme of Arrangement (âthe Schemeâ) to merge Meghmani Organics Limited (MOL) with the Company along with its Trading Division and Equity Investment in the Company Pursuant to the Scheme, the Company filed Information Memorandum with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and further filed the same with SEBI for the approval. The Company has received final approval on August 16, 2021, pursuant to which the Company was listed with NSE and BSE on August 18,2021.
Further, as per the Order, Optionally Convertible Redeemable Preference Shares (OCRPS) issued by the Company to Meghmani Organics Limited is converted into equal number of Redeemable Preference Shares (RPS) with same terms and conditions and tenure. Accordingly the RPS has been reclassified from Instruments entirely Equity in nature to Non Current Borrowings.
46 Events occurred after the Balance Sheet date
The Company evaluates events and transactions that occur subsequent to the Balance Sheet date but prior to approval of Financial Statement to determine the necessity for recognition and/or reporting of any of these events and transactions in the Financial Statements. As of 25th April 2023 there were no material subsequent events to be recognized or reported that are not already disclosed.
47. Other Statutory Information
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder
(ii) The Company do not have any transactions or balance with companies struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year
(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(vi) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(vii) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961
48 Previous years figures have been regrouped, restated and reclassified wherever necessary to make them comparable with those of the current year.
Mar 31, 2022
Equity Share:
The Company has one class of Equity Shares par value of H10 per share. Each Equity Shareholder is entitled to one vote per share. ALL Equity Shareholders have equal dividend rights. In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts. The distribution wiLL be in proportion to the number of Equity Shares heLd by the SharehoLders.
Optionally Convertible Redeemable Preference Share (''OCRPS'')
Each Optionally Convertible Redeemable Preference Share has par value of H10 per share and is convertible at the option of the Company. In case, redemption does not happen within 20 years, it will be compulsorily converted into 10 Equity Shares for every 125 OCRPS. The Preference Shares carry a dividend of 8% per annum, payable subject to approval of Board of Directors of the Company. The dividend rights are non-cumulative.Considering all the rights of conversion / redemption and dividend declaration are in the hands of Company, same is classified as Equity in nature and disclosed as ''Instrument entirely Equity in nature'' as at March 31,2021. The Preference Shares rank ahead of the Equity Shares in the event of a liquidation.
Conversion of Optionally Convertible Redeemable Preference Shares (OCRPS) to Compulsory Redeemable Preference Shares (RPS):
As per the Order, NCLT OCRPS issued by the Company is transferred to Meghmani Organics Limited (Formerly known as Meghmani Organochem Limited) as per the Scheme. Further, the OCRPS have been converted into equal number of RPS with same terms and conditions and tenure from May 3, 2021 i.e. the date of the Order and effective date. Accordingly, OCRPS is classified as debt instrument from the date of Order.
Shares cancelled pursuant to Scheme of Arrangement:
Pursuant to the Scheme, Shareholders of MOL were allotted 94 Equity Shares of H10 each of the Company for every 1,000 Equity Shares of Re. 1 of MOL. Accordingly, 2,507 Equity Shares of the Company were cancelled on account of rounding off adjustment basis share swap ratio.
Details of Security and Repayment Terms :
(i) The Company has taken External Commercial Borrowing of Euro 180.00 Lakhs equivalent to H14.400.00 Lakhs from Standard Chartered Bank to finance its capital expenditure plans. Outstanding balance for this borrowing is Euro 96.00 Lakhs equivalent to H8,085.12 Lakhs (31st Mach 2021: H.12,348.00 Lakhs). The borrowing is secured by first pari passu mortgage charge on all immovable properties, first pari passu hypothecation charge over all the moveable assets. The borrowing carries interest @ Euribor 1.6% p.a. payable on quarterly rests. The Company has entered into Interest Rate Swap (''IRS'') agreement with the bank for a fixed interest @ 1.85% p.a. and hedging of the foreign exchange rate whereby the Company will pay additional interest @ 4.95% p.a. The effective interest rate after considering basic interest rate and interest for hedging is 6.80%. The borrowing is repayable in 15 quarterly instalments of Euro 12 Lakhs each, starting from July 3, 2020.
ii) The Company has availed following Rupee Term Loan facilities:
1) Term loan amounting H11,000 Lakhs from HDFC Bank Limited for capital expenditure toward setting up of Chloromethane Plant. Outstanding balance for this facility is H3,850 Lakhs (31st March 2021: H6,050 Lakhs). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus NIL spread (to be set every year) payable on monthly rest. The interest rate for the current year remained @ 7.20%. (31st March 2021: 7.65%). The Term Loan is repayable in 20 quarterly instalments of H550.00 Lakhs each and repayment started from 9th March 2019.
2) Term loan amounting H15,000 Lakhs from HDFC Bank Limited for capital expenditure toward setting up of Caustic Soda Lye Plant with new 36 MW Power Plant. Outstanding balance for this facility is H10,000 Lakhs (31st March 2021: H13,333 Lakhs). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus NIL spread (to be set every year) payable on monthly rest. The effective interest rate is 7.25%. (31st March 2021: 7.25%) The term loan is repayable in 18 quarterly instalments of H833.33 Lakhs each starting from 1st November, 2020.
3) Term loan amounting H12,500 Lakhs from Federal Bank Limited for capital expenditure toward setting up of Hydrogen Peroxide Plant. Outstanding balance for this facility is H7,895 Lakhs (31st March 2021: H.10,526 Lakhs). The borrowing carries interest @ 12 month T-bill rate (benchmark as published by RBI - to be reset every year) plus spread (fixed @ 0.94%) payable on monthly rest. The effective interest rate is 6.64% (31st March 2021: 6.64%). The Term Loan is repayable in 19 quarterly instalments of H657.89 Lakhs each starting from 29th September, 2020.
4) Term loan amounting H19,000 Lakhs from State Bank of India for capital expenditure toward setting up of new Epichlorhydrin Plant. The Company has drawn down H19,000 Lakhs as at the Balance Sheet date (31st March 2021: H4,070 Lakhs) . The borrowing carries interest at 6 month MCLR (Benchmark rate) plus spread of 0.10% (to be reset every half year) payable on monthly rest. The effective interest rate is 7.05 % (31st March 2021 : 7.05%). The Term Loan is repayable in 20 quarterly instalments of H950.00 Lakhs each starting from 31st December. 2022.
5) Term loan amounting H28,475 Lakhs from HDFC Bank Limited for capital expenditure toward setting up of new Chloro Polyvinyl Chloride Plant and expansion of Caustic capacity with 36 MW Captive Power Plant. The Company has drawn down H21,000 Lakhs as at the Balance Sheet date (31st March 2021: HNIL Lakhs) . The borrowing carries interest at 6 month MCLR (Benchmark rate) plus NIL spread (to be reset every half year) payable on monthly rest. The effective interest rate is 7.05% (31st March 2021 : Nil). The Term Loan is repayable in 20 quarterly instalments of H1,423.75 Lakhs each starting from September 2023.
6) The Term Loan facilities are secured by first pari passu mortgage charge of all immovable properties of the Company,first pari passu hypothecation charge over all the movable assets of the Company.
iii) The Company has executed an Indenture of Mortgage with Lenders of these term loans (Secured Parties) by creating mortgages on Immovable Properties of the Company by creating a charge by way of registered mortgage. According to the indenture, all the Secured Parties will share pari passu charge with first ranking and priority over the immovable properties of the Company, both present and future.
iv) Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio of Total Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
v) 21,09,19,871 Redeemable Preference Shares of H10 each which were earlier classified as OCRPS (refer note 14) is cumulative and carry coupon/dividend rate of 8.00% p.a. with redeemable tenure of 20 years from the date of allotment, The Company have the right to exercise the option of early redemption. Redemption will be at face value. Dividend is accrued for the year from the effective date of conversion of OCRPS to RPS i.e 3rd May 2021.
The Company has availed Working Capital Facility of H25,000 Lakhs (31st March 2021: H18,000 Lakhs) as sanctioned limit from consortium comprising of ICICI Bank Limited H9,000 Lakhs, Standard Chartered Bank H8,000 Lakhs and HDFC Bank Ltd. H8,000 Lakhs.
Rate of interest stipulated by ICICI Bank Limited is 6 Month MCLR Nil spread on the principal amount remains outstanding each day.Interest rate for the year ranges between 4.90% - 7.25% (31st March 2021: 7.25% - 8.70%).
Rate of interest stipulated by Standard Chartered Bank is monthly MCLR . Interest rate for the year ranges between 5.00% - 6.75% (31st March 2021: 6.60% - 8.85%).
Rate of interest stipulated by HDFC Bank Limited is as per prevailing 1 year MCLR applicable margin. Interest rate for this ranges between @ 4.90% -7.20% (31st March 2021: 7.20% - 8.00%).
The Company has availed Working Capital Facility of H5,000 Lakhs (31st March 2021: HNIL Lakhs) from Kotak Mahindra Bank. The rate of interest stipulated by Kotak Mahindra Bankis 6 month MCLR NIL Spread Interest rate for this ranges between 4.65% - 5.00%.
The Company is in process of filing the requisite from with Ministry of Corporate Affairs for creating of first pari passu hypothecation charge over all the Current Assets for additional faciliites sanctioned during the year
Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service Coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio of Total Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
31 DISCLOSURE OF EARNING PER SHARE (EPS)
Basic EPS amounts are calculated by dividing the profit for the year attributable to Equity Shareholders by the weighted average number of Equity Shares outstanding during the year, including effect of shares issued pursuant to Scheme of Arrangement.
Diluted EPS amounts are calculated by dividing the profit for the year attributable to Equity Shareholders by the weighted average number of Equity Shares outstanding during the year after adjusting effects of OCRPS which are Dilutive Potential Equity Shares.
33 GRATUITY AND OTHER EMPLOYMENT BENEFIT PLANS (a) Retirement Benefits
The Gratuity Plan is governed by the Payment of Gratuity Act, 1972. Under the Act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age. The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the respective plans:
The Company''s Chief Operating Decision Maker (CODM) examines the Company''s performance from business and geographic perspective. In accordance with Ind AS-108 - Operating Segments, evaluation by the CODM and based on the nature of activities performed by the Company, which primarily relate to manufacturing of Chloro Alkali & its Derivatives, the Company does not operate in more than one business segment.
*Income Tax demand comprise demand from the Indian Income Tax authorities for payment of additional tax of H892.09 (31 March 2021: Nil), upon completion of their tax review for the assessment year 2016-17 and 2018-19The tax demands are mainly on account of adjustment pertaining to 80 IA benefits claimed for captive power plant against sale of steam and power. The matter is pending before CIT (A).
**Service Tax demand comprise demand from Service tax Authorities for payment of additional tax of H52.69 Lakhs (31 March 2021: H108.37 Lakhs), upon completion of their tax review for the financial year 2012-13 and 2014-15. The tax demands are on account of service tax on sales commission and classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
***Customs Duty demand comprise demand from Custom Authorities for payment of additional tax of H621.83 Lakhs (31 March 2021: H621.83 Lakhs), upon completion of their tax review for the financial year 2012-13. The tax demands are on account of classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be in favour of Company in the appellate process and no tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the company''s financial position and results of operations.
The Estimated amount of Contract to be executed on Capital Account of H4,795.40 Lakhs ( 31st March 2021 H36,282.83 Lakhs) and not provided for (Net of Advances).
The Company has imported capital good for the various expansion projects under the EPCG Scheme at NIL rate of custom duty by undertaking obligation to export. Future outstanding export obligation under the scheme is H8,164.49 Lakhs (31st March 2021: H. 3,070.20 Lakhs) which is equivalent to 6 times of duty saved of H1,767.53 Lakhs (31st March 2021: H. 696.28 Lakhs )The export obligation against respective EPCG licences has to be completed between 2023-24 to 2027-28.
37 DISCLOSURES AS PER MSMED ACT, 2006
The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26th August, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its Customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the ''Micro, Small and Medium Enterprises Development Act, 2006'' (''the MSMED Act'').
Accordingly, the disclosure in respect of the amounts payable to such Enterprises as at 31st March, 2022 has been made in the Financial Statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any,that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any Supplier as at the Balance-Sheet date.
The Company has lease contracts for office premises. Leases of office premises is having lease terms of 3 to 9 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. The Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain premises in good state. The lease contract include extension and termination options. The Company also has a Sales Office with lease terms of 12 months or less. The Company applies the ''short-term lease''recognition exemptions for this lease.
Capital as on 31st March 2021 includes Equity and OCRPS attributable to the Equity and OCRPS holders and only Equity as on 31st March 2022 attributable to the Equity Shareholders to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximise shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions or its business requirements. To maintain or adjust the Capital Structure, the Company may adjust the dividend payment to Shareholders, Return on Capital to Shareholders or issue new Shares. No changes were made in the objectives, policies or processes during the year ended 31 March 2022 and 31 March 2021.
The Company monitors capital using a ratio of ''Adjusted Net Debt'' to ''Adjusted Equity''. For this purpose, adjusted net Debt is defined as Total Liabilities, comprising Interest-Bearing Loans and Borrowings, less Cash and Cash Equivalents. Adjusted Equity comprises all components of Equity.
40 Financial Instruments - Fair Values and Risk Management
The Significant Accounting Policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of Financial Asset, Financial Liability and Equity Instrument are disclosed in Note 2 to the Financial Statements.
B. Measurement of Fair values and Sensitivity analysis Fair Value Hierarchy:
The fair value of the Financial Assets and Liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical Assets or Liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the Asset or Liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
Financial Instrument measured at Amortised Cost
The carrying amount of Financial Assets and Financial Liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
Reconciliation of level 1 Fair Values
There have been no transfers between level 1, level 2 and level 3 during the year ended March 31, 2022.
Financial Risk Management Framework
The Company''s Board of Directors have overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company manages market risk through treasury operations, which evaluates and exercises independent control over the entire process of market risk management. The finance team recommends risk management objectives and policies. The activities of this operations include management of cash resources, hedging of foreign currency exposure, credit control and ensuring compliance with market risk limits and policies. The Company''s principal Financial Liabilities, other than Derivatives, comprises of Long Term and Short Term Borrowings, Trade and Other Payables, and Financial Liabilities. The main purpose of these Financial Liabilities is to finance the Company''s operations. The Company''s principal Financial Assets include Loans, Trade and Other Receivables, Cash and Cash Equivalents, Other Bank Balances and Other Financial Assets that derive directly from its Operations. The Company has an effective risk management framework to monitor the risks controls in key business processes. In order to minimise any adverse effects on the bottom line, the Company takes various mitigation measures such as credit control, foreign exchange forward contracts to hedge foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments. The Company has exposure to the following risks arising from Financial Instruments
⢠Credit Risk
⢠Liquidity Risk ;and
⢠Market Risk
Credit Risk is the risk that counter party will not meet its obligation leading to a financial loss. The Company is exposed to credit risk arising from its operating activities primarily from Trade Receivables and from financing activities primarily relating to parking of surplus funds as Deposits with Banks. The Company considers probability of default upon initial recognition of Assets and whether there has been a significant increase in credit risk on an ongoing basis throughout the reporting period.
The carrying amount of following Financial Assets represents the maximum credit exposure:
Financial Instruments and Cash Deposit:
Credit Risk from Balances with Banks and Financial Institutions is managed by the Company''s Treasury Department. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
Trade Receivables
The Sales Department has established a Credit Policy under which each new Customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each Customer and reviewed periodically. Any sales exceeding those limits requires further approval.
Trade Receivables of the Company are typically unsecured ,except to the extent of the security deposits received from the Customers or Financial Guarantees provided by the market organizers in the business.Credit risk is managed through credit approvals and periodic monitoring of the creditworthiness of Customers to which Company grants credit terms in the normal course of business. The Company performs ongoing credit evaluations of its Customers'' financial condition and monitors the creditworthiness of its Customers to which it grants credit terms in the normal course of business. The allowance for impairment of Trade Receivables is created to the extent and as and when required, based upon the expected collectability of Accounts ReceivablesThe Company evaluates the concentration of risk with respect to Trade Receivables as low, as its Customers are located in several jurisdictions and industries and operate in largely independent markets.
The Company measures the expected credit loss of Trade Receivables and Loan from individual Customers based on historical trend, industry practices and the business environment in which the Entity operates.Loss rates are based on actual credit loss experience and past trends.
Management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of Customer Credit Risk, including underlying Customers'' Credit Ratings if they are available.
Management estimates that the amount of provision of HNil (31st March 2021 : 18.38 Lakhs) is appropriate
Liquidity Risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.
The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of the Financial Assets and Liabilities. The table below summarises the remaining contractual maturities of Financial Liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular Industry
In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Company to manage risk concentrations at both the relationship and industry levels
Market Risk is the risk that the fair value of future Cash Flows of a Financial Instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: Currency Risk, Interest Rate Risk, and Other Price Risk such as Equity Price Risk. Financial Instruments affected by market risk include Loans and Borrowings, Deposits, FVTOCI and Amortised Cost Investments and Derivative Financial Instruments.
Foreign Currency Risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency).
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 12-month period for hedges of actual sales and purchases and 12-month period for foreign currency loans. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.
Interest Rate Risk is the risk that the fair value or future Cash Flows of a Financial Instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s Long-Term Debt obligations with floating interest rates. The Company manages its Interest Rate Risk by having balanced portfolio of fixed and variable rate Loans and Borrowings.
41 Composite Scheme of Arrangement
The NCLT Ahmedabad Bench vide its Order dated 03 May 2021 (the "Order"), approved the Composite Scheme of Arrangement ("the Scheme") to merge Meghmani Organics Limited (MOL) with the Company along with its Trading Division and Equity Investment in the Company. Pursuant to the Scheme, the Company filed Information Memorandum with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and further filed the same with SEBI for the approval. The company has received final approval on August 16, 2021, pursuant to which the Company was listed with NSE and BSE on August 18,2021.
Further, as per the Order, Optionally Convertible Redeemable Preference Shares (OCRPS) issued by the Company to Meghmani Organics Limited is converted into equal number of Redeemable Preference Shares (RPS) with same terms and conditions and tenure. Accordingly, the RPS has been reclassified from Instruments entirely Equity in nature to Non Current Borrowings.
The Company has evaluated the impact Covid 19 pandemic on its business operations, liquidity, assets and financial position and based on management''s review of current indicators and economic conditions there is no material impact and adjustments required on its financial results. However, the impact assessment of COVlD-19 is a continuous process given the uncertainties associated with its nature and duration and accordingly the impact may be different from that estimated as at the date of approval of these financial results. The Company will continue to monitor for material changes to future economic conditions and its impact, if any.
44 Events occurred after the Balance Sheet date
The Company evaluates events and transactions that occur subsequent to the Balance Sheet date but prior to approval of Financial Statement to determine the necessity for recognition and/or reporting of any of these events and transactions in the Financial Statements. As of 25th April 2022 there were no material subsequent events to be recognized or reported that are not already disclosed.
45 Previous years figures have been regrouped, restated and reclassified wherever necessary to make them comparable with those of the current year.
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