Rights of Equity Shareholders
1. The Company has one class of equity shares having a par value of ' 5 per share. Each shareholder is eligible for one vote per share held.
2. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
3. In the event of liquidation of the Company, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
B. Nature and purpose of reserves
a) Capital Reserve on Amalgmation : During business combination, the excess of net assets taken over the cost of consideration paid is treated as capital reserve.
b) General Reserve : The General reserve is created by way of transfer of profits from retained earnings for appropriation purposes. This reserve is utilised in accordance with the provisions of the Act
c) Retained Earnings : Retained earnings are the profits that the Company has earned till date, less any transfer to general reserve, dividends or other distribution paid to shareholder.
d) Items of other Comprehensive income : Difference between the interest income on plan assets and the return actually achieved, and any changes in the liabilities over the year due to changes in acturial assumtions or experience adjustment within the plans, are recognised in 'Other Comprehensive income' and subsequently not reclassified to the Statement of Profit and Loss.
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Contingent liabilities and commitments (to the extent not provided for)
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INR (In Lakh)
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Particulars
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2021-22
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2020-21
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Contingent Liabilities
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|
|
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Claims against the Company not acknowledged as debts in respect of:-
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|
|
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- Disputed Labour Claims
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9.96
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9.96
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Where Company is in appeal
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|
|
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- Disputed Excise Duty Matters
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13.78
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13.78
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- Disputed Income Tax Matters
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429.35
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609.16
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Where Department is in appeal
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|
|
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- Disputed Sales Tax Matters
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459.65
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459.65
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- Disputed Income Tax Matters
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54.83
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54.83
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Total
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967.57
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1,147.38
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The Company's pending litigations comprise of claims against the Company and proceedings pending with Tax and other Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements the Company does not reasonably expect the outcome of these proceedings to have a material impact on its financial statements.
37 Commitments
A. Capital expenditure contracted for at the end of the reporting period but not recognized as liabilities is as follows:
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INR (In Lakh)
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Particulars
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As on 31-Mar-2022
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As on 31-Mar-2021
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Property, plant and equipment
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1,315.16
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1,000.32
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Less: Capital advances
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(345.71)
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(57.73)
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Net Capital commitments
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969.45
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942.59
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39 Financial risk management objectives and policies
The Company's financial risk management is an integral part of how to plan and execute its business strategies. The Company's financial risk management policy is set by the Managing Board.
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits , foreign currency receivables, payables and loans and borrowings.
The Company's market risk is manage by Senior Management, who evaluates and exercises independent control over the entire process of market risk management. The Senior Management recommend risk management objectives and policies, which are approved by the Audit Committee. The activities of Senior Management include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowing strategies and ensuring compliance with market risk limits and policies.
i. Market Risk- Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Company's position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
ii. Market Risk- Foreign currency risk.
The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas and purchases from overseas suppliers in various foreign currencies. Foreign currency exchange rate exposure is partly balanced by purchasing of goods, commodities and services in the respective currencies.
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty's ability to meet its obligations,
iv) Significant increase in credit risk on other financial instruments of the same counterparty,
v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements .
Financial assets are written off when there is no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in profit or loss.
iii. Credit risk
Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assess financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business,
ii) Actual or expected significant changes in the operating results of the counterparty,
Concentration Risk Disclosure
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment
The Company had three (P.Y. three) customers whose revenue individually represented 10% or more of the Company's total revenue, or whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:
40 Fair Value measurement
Financial Instrument by category and hierarchy
The fair values of the financial assets and liabilities are 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.
iv. Liquidity Risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the companies short - term, medium term and long term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and by maturing the profiles of assets and liabilities.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to short term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.
The fair values for loans, security deposits were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counter party credit risk.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
v. Impact of COVID-19
The Company has considered the possible impact of COVID-19, inter-alia, readability of inventories and recoverability of Trade receivables, in preparation of the financial statement. The impact of the global health pandemic may be different from that estimated as at the date of approval of financial statement. Considering the continuing uncertainties, the Company will continue to closely monitor any material changes to future economic conditions.
42 LEASES
Under Ind AS 116, the nature of expenses in respect of operating leases has changed from “lease rent” to “depreciation cost” and ‘'finance cost'' for the right-to-use assets and for interest accrued on lease liability respectively
The weighted average lessee's incremental borrowing rate applied to the lease liabilities is 9%.
The sensitivity analysis above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.
47 Operating segment
The Company is engaged in the business of manufacture of Fine Chemicals, considering its business activities primarily operated within India and reviewed by the Chairman and Managing Director to make decisions about resources to be allocated to the segment and assess its Performance. Accordingly, the Company has only one business segment.
II. COMPENSATED ABSENCES:
The Company permits encashment of compensated absence accumulated by their employees on retirement, separation and during the course of service. The liability in respect of the Company, for outstanding balance of leave at the balance sheet date is determined and provided on the basis of actuarial valuation as at the balance sheet date performed by an independent actuary. The Company doesn't maintain any plan assets to fund its obligation towards compensated absences. Compensented absences write back for the year is ' 18.22 lakhs and charged to the statement of profit and loss for the prevoius year is ' 94.30 lakhs.
44 Capital risk management
The Company's objectives when managing capital are to
> safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
> maintain an optimal capital structure to reduce the cost of capital
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt
The Company's strategy is to maintain a minimum gearing ratio. The gearing ratios were as follows:
48 Impairment testing of Goodwill on Amalgamation
Goodwill on amalgamation of ' 4497.72 Lakh is relating to the merged business of its fragrance and flavours division (‘CGU'). Goodwill is not amortised, instead it is tested for impairment annually or more frequently if indicators of impairment exist. The recoverable amount is determined based on value-in-use calculation which require the use of certain assumptions. The calculation use cash flow projections based on management approved cash flow projections for the 3-5 years period. Cash flow post that is extrapolated using the estimated growth rates.
As a result of impairment test for the year ended 31st March 2022, no goodwill impairment was identified as the fair value of the CGU to whom goodwill is relating to exceed their respective carrying amount. An analysis of the sensitivity of the changes in key parameters (cash flows, Discount rate and Long term average growth rate), based on reasonable probable assumptions, did not result in any probable scenario in which the recoverable amount of the CGU would decrease below the carrying amount.
Key assumption used as at March 31, 2022 and March 31, 2021
Discount rate - 11.5% (P.Y. 11.5%)
Terminal Growth rate - 5% (P.Y. 5%)"
50 Fire Insurance Claim
Other non-operative Income for year ended March 31, 2022, includes ' 190.56 lakhs being the amount of insurance claim in respect of fire at Bareilly plant in 2019.
51 Relationship with Struck Off companies
The Company has not entered into transaction with struck off companies under Section 248 of the Companies Act, 2013.
52 a) No proceeding has been initiated or pending against the Company for holding any Benami property under the Benami Transactions
(Prohibition) Act, 1988, as amended, and rules made thereunder.
b) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
c) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
d) There were no transactions relating to previously unrecorded income that have been surrendered and disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
e) The Company has not advanced or loaned to or invested in funds to any other person(s) or entity(is), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(i) directly or indirectly lend to or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
f) The Company has not received any fund from any person(s) or entity(is), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(i) directly or indirectly lend to or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
g) The Company has not been declared wilful defaulter by any bank or financial Institution or other lender.
53 The Board of Directors has not recommended any further Dividend on equity Shares for the Financial Year 2021-22. The Interim Dividend of ' 2.50 per equity share declared and paid ( ' 841.47 lakh) shall be considered as Final Dividend for the Financial Year 2021-22.
54 The Standalone Financial Statements have been approved by the Board of Directors in its meeting held on 10th May, 2022.
55 The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and post-employment benefits has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company will assess the impact of the Code and recognise the same when the Code becomes effective.
56 The previous year's figures have been re-grouped / re-classified wherever required to conform to current year's classification. All figures of financials has been rounded off to nearest lakh rupees.
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