39 ADDITIONAL REGULATORY INFORMATION AS REQUIRED BY NOTIFICATION ISSUED BY MINISTRY OF
CORPORATE AFFAIRS DATED 24th MARCH, 2021 ON AMENDMENTS ON SCHEDULE III.
(a) The title deeds of all the immovable properties are held in the name of the Company.
(b) The Company has not revalued its Property, Plant and Equipment or Intangible Assets during financial year ended 31st March 2022 and 31st March 2021
(c) There are no Loans or Advances in the nature of loans are granted to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013,) either severally or jointly with any other person.
(d) The Company does not hold any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder.
(e) The Company is not a declared wilful defaulter by any bank or financial institution or other lender in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India. The Company has been paying the due installments on time and has not defaulted on any installments.
(f) The Company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
(g) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.
(h) There is no such transaction which is not recorded in the books of accounts and 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).
(i) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(j) (A) The Company has not advanced or loaned or invested funds to any persons or entities, including foreign entities
(Intermediaries) with the understanding that the Intermediary shall:
i) 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
ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(B) The Company has not received any fund from any persons or entities, including foreign entities (Funding Party)
with the understanding (whether recorded in writing or otherwise) that the Company shall:
i) 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
ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
42 RISK MANAGEMENT AND CAPITAL MANAGEMENTA Financial instruments risk management objectives and policies
The Company's principal financial liabilities, comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations and to support its operations. The Company's principal financial assets include investments, trade and other receivables, deposits and cash and cash equivalents that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company's senior management oversees the management of these risks. The Company's senior management is supported by an Enterprise Risk Management (ERM) team that advises on financial risks and the appropriate financial risk governance framework for the Company. The ERM team provides assurance to the Company's senior management that the Company's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company's policies and risk objectives. The ERM process seeks to provide greater confidence to the decision maker and thus enhance achievement of objectives. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
(a) 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: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include borrowings, deposits, investments, other receivable, payables and derivative financial instruments. The sensitivity analyses in the following sections relate to the position as at 31st March 2022 and 31st March 2021.
The Company uses derivatives (forward contract, interest rate swap) or non-derivative or a combination of both to hedge its exposure of forex / interest rate related risk. These instruments are either used to lock in a lower purchase price or / and a higher sales prices / fixed interest rate The gain or loss on hedging instrument are aligned and effectively an offset compared with hedged item.
The economic relationship between hedged item and hedged instrument is established to ensure that both are moving in the opposite direction because of the same hedged risk.
The credit risk associated with the hedge relationship is negligible due to the highly rated counterparties
The Company's hedging policy only allows for effective hedge relationships. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between hedged item and hedging instrument. The Company enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If the critical terms of the hedged item do not match exactly with the critical terms of the hedging instrument, the Company uses the quantitative analysis to assess effectiveness.
Ineffectiveness is recognised on a cash flow hedge where the cumulative change in the designated component value of the hedging instrument exceeds, on an absolute basis, the change in value of the hedged item that attributes to the hedged risk. This may arise if there is any change in the timing of the underlying hedged item or if the critical terms of the hedging instrument and the hedged item do not match exactly
The following are the principal amounts of outstanding non derivative contracts (Foreign Currency Loans) entered into by the Company which have been designated as Cash Flow Hedges:
In addition to the historical pattern of credit loss, the Company has considered the likelihood of increased credit risk considering emerging situations due to the COVID-19 pandemic. This assessment is based on the likelihood of the recoveries from the customers in the present situation. The Company closely monitors its customers who are going through financial stress and assesses actions such as change in payment terms, recognition of revenue on collection basis etc., depending on severity of each case. Basis this assessment, the allowance for doubtful trade receivables is considered adequate.
In addition, financial instruments that are subject to concentration of credit risk include loans, cash and cash equivalents, other balances with banks and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk. Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.
B Capital management
For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of capital management is to ensure that it maintains a strong credit rating 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 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 monitors capital using a gearing ratio, which is debt divided by total equity.
43 OPERATING SEGMENTS
The disclosures under Ind AS 108 - Operating Segments have been included in the Consolidated Financial Statements and accordingly, not included in these Financial Statements. Refer note 42 of the Consolidated Financial Statements.
44 Exceptional ITEMs
Gain on reversal of impairment of Investment in RIECo Industries Limited
The Company has investments in subsidiaries. These investments are accounted for at cost less any provision for impairment. Management assesses the operations of the subsidiaries / entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments recorded in the books of accounts and, accordingly no additional provision is required to be made, other than the amounts already provided for in the books of accounts. The Company assessed its investment in RIECO Industries Limited and consequently provided for impairment amounting to ' 1,072.8 lakhs for the year ended 31st March 2019.
During the previous year, the Company performed a formal impairment test for its investment in RIECO Industries Limited. Due to the improvement in the long term business prospects of RIECO Industries Limited and based on a valuation performed by a subject matter specialist, the impairment provision of ' 1,072.8 lakhs recognised in the year ended 31st March 2019 has been reversed in the previous year.
The financial projections considered in 31st March 2022 and future cash flows basis which investments have been tested for impairment consider the increase in economic uncertainties due to the COVID-19 pandemic, reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
The management assessed that the fair value of cash and cash equivalent, trade receivables, trade payables, and other current
financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
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 following method and assumptions were used to estimate the fair value:
(i) Long-term fixed-rate and variable-rate receivables / borrowings are evaluated by the Company based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.
(ii) The fair value of unquoted instruments, loans from banks, related parties and other financial liabilities as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
(iii) The Company enters into derivative financial instruments with financial institutions and banks with investment grade credit ratings. Foreign exchange Forward Contracts and Interest Rate Swap are valued using valuation techniques, which employ the use of market observable inputs. The most frequently applied valuation techniques include forward pricing models, using present value calculations. The model incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying commodity.
(iv) The fair values of the Company's interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer's borrowing rate as at the end of the reporting period. The own non-performance risk was assessed to be insignificant.
Money realised by exercise of option during the year is ' nil (previous year ' nil).
The options outstanding at 31st March 2022 have an exercise price of ' 349.35 (31st March 2021: ' 349.35) and a weighted average remaining contractual life of 8.2 years (31st March 2021: 9.2 years)
Weighted average share price at the date of the exercise of share options exercised in 2021-22 is not disclosed as no shares were exercised during this year and previous year.
Expense recognised in statement of Profit and Loss
The Company has followed the fair value method to account for the grant of stock options, profit and loss impact for the year ended 31st March 2022 is ' 102.7 lakhs (previous year: ' 126.1 lakhs)
The receivable is net of provision for expected credit losses as recognised in accordance with the provisions of Ind AS 109 amounting to ' 971.4 lakhs (Previous year ' 901.7 lakhs).
Since the products of the Company are sold in such manner that the entire revenue is delivery at a point in time, and there are no contract assets and liabilities, the movements in the contracts assets and liabilities disclosure is not applicable
(d) Performance Obligation and Revenue Recognition Policies-
The Company satisfies its performance obligations pertaining to the sale of pigments at point in time when the control of goods is actually transferred to the customers. No significant judgment is involved in evaluating when a customer obtains control of promised goods. The contract is a fixed price contract and does not contain any financing component. The payment is generally due within 45-90 days. There are no other significant obligations attached in the contract with customer.
50 FAIR vALUE HIERARcHY
The following table provides the fair value measurement hierarchy of the Company's assets and liabilities
Quoted prices in an active market (level 1):This level of hierarchy includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities. This category consists of mutual fund investments.
valuation techniques with observable inputs (level 2): This level of hierarchy includes financial assets and liabilities, measured using 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). This level of hierarchy include Company's over-the- counter (OTC) derivative contracts.
Valuation techniques with significant unobservable inputs (Level 3): This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on a recurring basis as at 31st March 2022 and 31st March, 2021.
51 The previous years numbers have been regrouped wherever necessary to meet current year classification.
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