1. Company Information
AksharChem (India) Limited (the 'Company') is a public limited Company domiciled in India with its registered office at 166/169, Village Indrad, Kadi Kalol Road, Dist. Mehsana, Gujarat -382 715 (India).. The equity shares of the Company are listed on BSE Limited and National Stock Exchange of India Limited and Ahmedabad Stock Exchange Ltd. (ASE).
The Company is principally engaged in the business of manufacturing & export of Dyes and Pigments.
The financial statements as at March 31, 2018 present the financial position of the Company.
The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorized for issue on May 30, 2018.
2. Terms/rights attached to Equity Shares
The Company has issued only one class of equity shares having a par value of H10 per share. Each holder of Equity Shares are entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the Annual General Meeting, except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the realised value of the assets of the Company, remaining after the payment of all preferential dues. The distribution will be in proportion to the number of equity __shares held by the shareholders.
18.5 Shares Reserved for Issued under options & contracts or commitments for the sale of shares or disinvestment, including terms of amounts : NIL
18.6
a. Aggregate number and class of shares allotted as fully paid up pursuant to contracts without payment being received in cash: NIL
b. Aggregate number and class of shares allotted as fully paid by way of Bonus Shares : NIL
c. Aggregate number and class of shares bought back : NIL
18.7 Securities which are convertible into Equity Shares : NIL
18.8 Aggregate Value of Calls unpaid by directors and officers : NIL
Description of nature and purpose of each reserve :
Securities Premium Reserve: The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. The reserve is utilised in accordance with the specific provision of the Companies Act, 2013.
Retained Earnings: Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders. Retained Earnings is a free reserve available to the Company.
Primary Security:
State Bank of India Term Loan: First charge in favour of State Bank of India By way of Equitable Mortgage over entire factory land & building and Hypothecation of Plant & Machinery (created out of bank finance) and situated at survey nos. 167 and 168 Mouje- Indrad Village Kadi-kalol Road, Chhatral, Taluka-kadi, Dist. Mehsana Gujarat State Bank of India Corporate Loan: First charge over P&M/fixed assets created out of praposed corporate loan.
Collateral Security:
State Bank of India Term Loan and Corporate Loan: First charge in favour of State Bank of India, by way of Equitable Mortgage and Hypothecation over land, building, plant & Machinery and other fixed assets situated at Survey Nos. 166 & 169, of Mouje Indrad Village, Kadi-Kalol Road, Chhatral, Taluka Kadi, Dist. Mehsana, Gujarat. Extension of First Charge by way of Equitable Mortgage and Hypothecation over land, building, plant & machinery and other fixed assets situated at Survey Nos. 167 & 168, Mouje Indrad Village, Kadi-Kalol Road, Chhatral, Taluka Kadi, Dist. Mehsana, Gujarat.
- Lien of TDR worth of Rs. 25 Lakhs.
Term of Repayment.
Corporate Loan from State Bank of India amounting to Rs. Nil (Previous Year Rs. 625 Lakhs is repayable by 4 quarterly instalments of Rs.50 Lakhs, 4 quarterly instalments of Rs.75 Lakhs, 2 quarterly instalments of Rs.100 Lakhs and last 1 quarterly instalment of Rs.125 Lakhs.)
There was no default in repayment of loan or interest.
Primary Security:
First charge by way of hypothecation over entire present and future current assets of the company.
Collateral Security:
State Bank of India Working Capital Loan: First charge in favour of State Bank of India, by way of Equitable Mortgage and Hypothecation over land, building, plant & Machinery and other fixed assets situated at Survey Nos. 166 & 169, of Mouje Indrad Village, Kadi-Kalol Road, Chhatral, Talika Kadi, Dist. Mehsana, Gujarat. Extension of First Charge by way of Equitable Mortgage and Hypothecation over land, building, plant & machinery and other fixed assets situated at Survey Nos. 167 & 168, Mouje Indrad Village, Kadi-Kalol Road, Chhatral, Taluka Kadi, Dist. Mehsana, Gujarat.
Lien of TDR worth of Rs. 25 Lakhs.
3. The depreciation on Fixed Assets is to be provided on the basis of useful life of the Assets as per schedule - II of the Companies Act, 2013. During the year, the Company has credited Rs. 214.90 Lakhs to the Retained Earnings Account & Rs. 69.98 Lakhs to the Statement of Profit & Loss of 2016-17, being the excess Depreciation as worked out on the basis of the useful life of the Assets and other requirements of Schedule-II of the Act.
4. Proposed Dividend
The Board of Directors at its meeting held on May 30, 2018 have recommended a payment of final dividend of Rs.3.50 per equity shares of face value of Rs.10/- each for the financial year ended March 31, 2018. The same amounts to Rs.346.10 Lakhs including dividend distribution tax of Rs.59.01 Lakhs .
The above is subject to approval at the ensuing Annual General Meeting of the Company and hence is not recognized as a liability.
vii) Sensitivity Analysis
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and employee turnover. The sensitivity analysis below, have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The result of sensitivity analysis on defined benefit obligation is given below :
5. Disclosure on Corporate Social Responsibility ( CSR ) activities u/s 135 of the Companies Act, 2013 is as under:
a. Gross amount required to be spent by the Company during the year: Rs.47.71 Lakhs (Previous year Rs.60.93 Lakhs.)
b. Amount spent and utilized during the year on:
6. Financial Risk Management - Objectives and Policies
The Company's financial liabilities comprise other than derivatives mainly of borrowings, trade payables and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets, other than derivatives, include trade and other receivables, other balances with banks, loans, investments and cash and cash equivalents that arise directly from its operations.
The Company's activities are exposed to Credit risk, Liquidity Risk and Market risk.
The Board of directors of the Company are overall responsible for the establishment and oversight of the company's risk management framework. The Company's risk management policies are established to identify and analyze the risks faced by the company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the company's activities.
The Company's audit committee oversees how management monitors compliance with the company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.
6.1 Credit Risk Management
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the company's receivables from customers and loans. The carrying amounts of financial assets represent the maximum credit risk exposure.
Trade receivables and loans
The company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base. The company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the company's standard payment and delivery terms and conditions are offered. Sale limits are established for each customer and reviewed quarterly. Any sales exceeding those limits require approval from the management of the company.
The company limits its exposure to credit risk from trade receivables by establishing a maximum payment period of 120 days for customers. More than 85% of the company's customers have been transacting with the company for over four years, and none of these customers' balances are credit-impaired at the reporting date.
Confirmation of balances from Debtors & Loans and Advances have been received and the same is being reconciled.
Cash and cash equivalents
The company holds cash and cash equivalents of Rs.393.19 Lakhs at March 31, 2018 (March 31, 2017: Rs.364.09 Lakhs). The cash and cash equivalents are held with bank and cash on hand.
6.2 Liquidity Risk
Liquidity risk is the risk that the company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company's reputation. The company uses process costing to cost its products, which assists it in monitoring cash flow requirements and optimizing its cash return on investments.
6.3 Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates and interest rates - will affect the company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
6.4 Interest rate risk
Interest rate risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. In order to optimize the company's position with regards to the 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 it total portfolio.
The company is not exposed to significant interest rate risk as at the specified reporting date.
6.5 Foreign currency risk
The company operates internationally and is exposed to currency risk on account of its receivables in foreign currency. The functional currency of the company is Indian Rupee. The company uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date.
The company does not use derivative financial instruments for trading or speculative purposes.
6.6 Price Risk
Investment Price Risk
The company's exposure to price risk arises from investments in equity and mutual fund held by the company and classified in the balance sheet at fair value through profit or loss. To manage its price risk arising from investments, the company diversifies its portfolio.
Sensitivity Analysis
The table below summarises the impact of increase/decrease of the index on the company's equity and profit for the period. The analysis is based on the assumption that the price of the instrument has increased by 3% or decreased by 3% with all other variables held constant.
Commodity Price Risk
Principal Raw Material for company's products is Acetanilide, CPC Blue & Ethylene Oxide. Company sources its raw material requirements from domestic markets. Company effectively manages availability of material as well as price volatility through well planned procurement and inventory strategy and also through appropriate contracts and commitments.
Sensitivity Analysis
The table below summarises the impact of increase/decrease in prices of Acetanilide, CPC Blue & Ethylene Oxide by Rs.1 per kg on profit for the period.
7. Capital management
For the purposes of the Company's capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company's Capital Management is to maximise shareholder value. The company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirement of the financial covenants.
The company monitors capital using gearing ratio, which is net debt divided by total equity plus debt.
In order to achieve this overall objective, the Company's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest bearing loans and borrowing in the current period.
As at March 31, 2018, the Company has only one class of equity shares. No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018 and March 31, 2017.
8. In the opinion of the Board, the current assets, loans and advances are approximately of the value stated in the balance sheet, if realised in the ordinary course of the business. Provision for depreciation and all known liabilities have been made in accounts.
9. In terms of Ind As 36 - Impairment of Assets issued by ICAI, the management has reviewed its fixed assets and arrived at the conclusion that impairment loss which is difference between the carrying amount and recoverable value of assets, was not material and hence no provision is required to be made.
10. Financial Instruments - Fair Values & Risk Management
10.1 Accounting Classifications & Fair Value Measurements
The fair values of the financial assets and liabilities are measured 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.
All financial instruments are initially recognized and subsequently re-measured at fair value as described below :
1. The fair value of investment in quoted equity shares and mutual funds is measured at quoted price or NAV.
2. Fair values 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.
3. 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 the evaluation, allowances are taken to account for the expected losses of these receivables.
4. The fair value of forward foreign exchange contracts and currency swaps is determined using forward exchange rates and yield curves at the balance sheet date.
5. The company uses the following hierarchy for determining and disclosing the fair values of financial instruments by valuation technique:
Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 : Inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
11. First time adoption of IND AS
The Company has prepared financial statements for the year ended March 31, 2018 are the first financial statements prepared by the company in accordance with Ind AS. For periods up to and including the year ended March 31, 2017, the company prepared its financial statements in accordance with accounting standards notified notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of he Companies (Accounts) Rules, 2014 (Previous GAAP).
Accordingly, the company has prepared financial statements which comply with Ind AS applicable for periods ending on or after March 31, 2018, together with the comparative period data as at and for the year ended March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company's opening balance sheet was prepared as at April 1, 2016, the Company's date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1, 2017 and the financial statements as at and for the year ended March 31, 2017. The transition to Ind-AS has resulted in changes in the presentation of the financial statements, disclosures in the notes, accounting policies and principles.
Exemptions availed on first time adoption of Ind-AS 101:
Ind-AS 101 allows certain optional exemptions and mandatory exemptions on first time adoption of Ind-AS from the retrospective application of certain provisions of Ind-AS. The Company has accordingly applied the following exemptions:
A. Ind AS optional exemptions:
Deemed Cost for Property, Plant and Equipment and Intangible Assets
Ind-AS 101 permits, a first time adopter to elect to continue with the carrying values for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind-AS 38 and Investment properties covered by Ind-AS 40. Accordingly, the Company has elected to measure all of its Property, Plant and Equipment, Investment Properties and Intangible Assets at their previous GAAP carrying value.
B. Ind AS mandatory exceptions:
Estimates
An entity's estimates in accordance with Ind-AS at the date of transition to Ind-AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is an objective evidence that those estimates were in error. Ind-AS estimates at April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP.
Classification and measurement of financial assets
Ind-AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind-AS.
12. Previous year's figures have been regrouped/re-arranged/recasted, wherever necessary, so as to make them comparable with current year's figures.
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