4.15 Provisions and contingencies
a Provisions
» Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
• if the effect of the time value of money is material provisions are discounted using equivalent period government securities interest ra te.
• Unwinding of the discount is recognised in the Statement of Profit and Loss as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.
b Contingencies
• Contingent liabilities are disclosed when Ihere is a possible obligation arising from past events, the existence of which will be confirmed only by Lhe occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the .amount cannot be made. Information on contingent liabilities is disclosed in the Notes to the FinancialStatements.
• Contingent assets are not recognised in the books of the accounts but are disclosed in Board Report. However, when the realisation of income is virtualiy certain, then the related asset is no longer a contingent asset, but it is recognised as an asset and the corresponding income is booked in the Statement of Profit and Loss.
4.16 Taxation
• Income tax expense represents the sum of Current Tax and Deferred tax. Tax is recognised in the Statement of Profit and Loss, except to the extent that it relates to items recognised directly in Equity or Other comprehensive income, in such cases the tax is also recognised directly in equity or in other comprehensive income.
• Current tax provision is computed for Income calculated after considering allowances and exemptions under lhe provisions of the Income Tax Ad 1961. Current tax assets and current tax liabilities are off set and presented as neL
• Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the Balance sheet and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences. Deferred tax assets and liabilities are measured at the applicable tax rates. Deferred lax assets and deferred tax liabilities are off set, and presented as net.
4.17 Cash and cash equivalents
Cash and cash equivalents include cash in hand and at bank, deposits held at call with banks, Fixed Deposits.
For the purpose of the Statement of Cash Flows, cash and cash equivalents consists of cash and short term'deposits, having original maturity less than 3 months
4.18 Financial instruments - initial recognition, subsequent measurement and impairment
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Tire Company recognizes financial assets and financial liabilities when it becomes a party to tire contractual provisions of tire instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
a Financial Assets
• Financial Assets are measured at amortised cost or /air value through Other Comprehensive Income or fair value through Profit or Loss, depending on die judgment of die management for managing those financial assets and the assets' contractual cash flow characteristics.
• Subsequent measurements of financial assets are dependent on initial categorisation. For impairment purposes, financial assets are assessed individually.
De-recognition of financial Asset
A financial asset is primarily derecognised (i.e. removed from the balance sheet) when:
• The rigilts to receive cash flows from the asset have expired, or •'
• The Company has transferred its rights to receive cash flows from Ihe asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Company has transferred substantia dy all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantiady all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from ail asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership.
Impairment of financial assets (other than fair valuel
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
Financial assets that are debt instruments, and are measured at amortised cost e g., loans, debt securities, deposits, trade receivables and bank balance
Trade receivables:
Ý A receivable is classified as a 'trade receivable' if it is in respect to the amount due from customers on account of goods sold or services rendered in the ordinary course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less expected credit loss if any.
• Impairment is made for the expected credit losses. The estimated impairment losses are presented as a deduction from the value of trade receivables and the impairment losses are recognised in the Statement of Profit and Loss under "Other expenses".
Ý Subsequent changes in assessment of impairment are recognised in ECL and the change in impairment losses are recognised in the Statement of Profit and Loss under "Other Expenses".
• Individual receivables which are known to be uncollectible are written off by reducing the carrying amount of trade receivables and the amount of the loss is recognised in the Statement of Profit and Loss under "Other Expenses".
• Subsequent recoveries of amounts previously written off are credited to “Other Income", b Financial liabilities
At initial recognition, all financial liabilities other than those valued at fair value through profit and loss are recognised at fair value less transaction costs that are directly related to the issue of financial liability. Transaction costs of financial liability carried at fair value through profit or loss are expensed in profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading. The Company has not designated any financial Liabilities upon initial measurement recognition at fair value through profit or loss.
Financial liabilities measured at amortised cost
After initial recognition, interest free Security Deposits and other financial liabilities are valued at Amortised cost using Effective Interest Rate method (E1R Method). The EIR amortisation is included in finance costs in the Statement of Profit and Loss. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
Trade and other payables
A payable is classified as 'trade payable' if it is in respect of the amount due on account of goods purchased or services received in the normal course of business. These amounts represent Liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
De-recognition of financial liability
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid is recognised inprofit or loss as "Other Income" or "Finance Expense".
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously
4.19 Assets held for sale
Non-current assets are classified as held for sale if Iheir carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less cost to sell. Any resulting impairment loss is recognized in the Statement of Profit and Loss. On classification as held for sale the assets are no longer depreciated.
4.20 Segment reporting
The Company identifies primary segments based on nature of products and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the managing board in deciding how to allocate resources and in assessing performance.
5 CRITICAL ACCOUNTING ESTIMATES. ASSUMTTIONS AND 1UPGEMENTS
The estimates and judgements used in the preparation of the financial slatements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectation of future events) that the Company believes to be reasonable under the existing circumstances. Differences between actual results and estimates are recognised in the period in which the results are known/materialised.
The said estimates are based on the facts and events that existed as at the reporting date, or that which occured after the date but provide additional evidence about the conditions existing at the reporting date.
a Property, plant and equipment
• Management assesses the remaining useful lives and residual value of property, plant and equipment. Management believes that the assigned useful Eves and residual value are reasonable.
b Income taxes
• Management judgment is required for the calculation of provision for income taxes and deferred tax assets and EabiEties.
♦ The Company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ from actual outcome which could lead to significant adjustment to the amounts reported in the standalone financial slatements.
c Contingencies
* Management judgement is required for estimating the possible outflow of resources, if any, in respect of contingencies/claun/litigadons against the Company as it is not possible lo predict the outcome of pending matters with accuracy.
d Impairment of accounts receivable and advances
• Trade receivables carry interest and are stated at their fair value as reduced by appropriate allowances for expected credit losses. Individual trade receivables are written off when management deems them not to be collectible. Impairment is recognised for the expected credit losses.
e Employee benefit expenses
* Actuarial valuation for gratuity, liability of the Company has been done by actuary on the basis of data provided by the management and assumptions used by the actuary. The data so provided and the assumptions used have been disclosed in the notes to accounts.
f Capital spares
* Only those capital spares whose have a useful life of more than one year and their cost exceeds Rs. 5,000 have been considered for the purpose of capitalization under property, plant & equipment in the books of account. Further, all such spares are assumed to have a useful life of 36 months.
g Discounting of Security deposit, and other long tern liabilities
• For majority of the security deposits received, the timing of outflow, as mentioned in the underlying contracts, is not substantially long enough to discount, The treatment would not provide any meaningful information and would have no material impact on the financial statements.
o *
6 Recent pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. The last prononcement has been announced on March 31,2023 which are as follows, MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from April 1,2023, as below:
Ind AS 1 - Presentation of Financial Statements:
• The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected lo influence decisions of primary users of general purpose financial statements. The Company does not expect this amendment to have any significant impact in its financial statements.
Ind AS 12 - Income Taxes:
Ý The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company does not expect this amendment to have any significant impact in its financial statements.
Ind AS 8 - Accounting Policies. Changes in Accounting Estimates and Errors:
* The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company does not expect this amendment to have any significant impact in its financial statements.
38 FINANCIAL RISK MANAGEMENT
38-1 Financial risk maiugoment ofejwti^Hand policies
T he Company's financial risk management Is an integral part of how io plan and execute its business strategies, Tire Company's financial risk management policy is set by the Managing Board, The Company's senior management reviews the financial risks and Uve Appropriate financial risk governance framework for the Company,
38.2 Financial risk factors
• The Company's principal financial liabilities comprise of trade payables, borrowings and other liabilities. The main purpose of these financial liabilities is to manage finances for the Company's operations and also for purchase of capital assets and ter safeguarding its interests under contracts,
p The Company has trade and Oliver receivables and cash and cash equivalents that arise directly from its operations as a pari of its financial assets.
The Company's activities expose n to a variety of financial risks:
a. Market risk
* Market risk is the risk dial the fair value or future cash flows of a financial inslrvcient will fluctuate because of changes in market price*/ market interest rates,
(i) Interest rate risks
lnteresl rate risk is the risk that the fair value of future cash flow s of the financial instruments w ill fluctuate because of changes in market Interest rates. According lo the Company interest rate risk exposure is only ter floating rate borrowings which it had taken from HOFC bank rest of the borrowing of the company are fixed rate borrowing which are not subject to market risk.
b. Credit risk
• Credit risk is the risk that a counter parly will not meet its obligations under a financial instrument or customer contract, leading to a financial loss,
• The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting lo Rs. 10449.86 lakhs and Rs. 10198.86 lakhs as at March 31,2024 and March 31,
2023 respectively,The Company makes major of its export sales, against a security in the nature of Letter of Credit, and hence the credit risk is minimal with regard to export debtors. However the company makes local sales and it is subject to credit risk. The company manages this risk through credit approvais.eslabilishing credit limits and continuously monitoring the credit worthiness of the customers to which the company grants credit terms in the normal course of business.
c. Liquidity risk
• Liquidity risk is Ihe risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable tosses,
• The Company's objective is to at all times maintain optimum levels ot liquidity to meet its cash requirements. The Company monitors rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs.
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.
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.
The fair values for loans and security deposits were calculated based on cash flows discounted using a current lending rate.
In case of security deposits. Company has used the fixed deposit rate of the year of making advance.
In case of security deposit timelimit is not certain.
They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs Including cmfhter party credit risk.
The fair values of non-current borrowings an? based on carrying amount which are equal to fair value. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk-
For other financial assets and liabilities that are measured at amortised cost, the carrying amounts are equal to the fair values.
The Company uses the following hierarchy Tot determining and disclosing the fair value of financial Instruments by valuation technique:
Level 1: Quoted prices / published NVA (unadjusted) in active markets for identical assets or liabilities. It Includes fair value of financial instruments traded in active markets and are based on quoted market prices at the balance sheet date and financial instruments like mutual funds for which net assets value (N AV) is published mutual fund operators at the balance sheet date.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or Liability, either directly (that is, as prices) or indirectly (that is, derived from prices). It includes fair value of the financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on the company specific estimates. If ail significant inputs required to fair value an instrument are observable then instrument is included in level 2,
The fallowing table provides the fair value measurement hierarchy of Company's asset and liabilities, grouped into Level 1 to Level 3 as described below a Quoted prices/published NAV (unadjusted) in active markets for identical assets or liabilities (level l). It includes fair value of financial instruments traded in active markets and ace based on quoted market prices at the balance sheet date.
b Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is. derived from prices) (level 2). It includes fair value of the financial instruments that are not traded in an active market (for example, interest free security deposits) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on the company specific estimates. If all significant inputs required to lair value an instrument are observable then instrument is included in level 2.
c Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). If (jne or more of the significant inputs is not based, on observable market data, the instrument is included in level 3.
41 CAPITAL RISK MANAGEMENT Objective
Tlie primary objective of the Company’s capital management is to maximize the shareholder value, i.e. to provide maximum returns to tire shareholders. The Company's primary objective when managing capital is to ensure that it maintains an efficient capital structure and healthy capital ratios and safeguard the Company's ability to continue as a going concern in order to support its business and provide maximum returns to the shareholders. The Company ^also proposes to maintain an optimal capital structure to reduce the cost of capital. No changes were made in the objectives, policies or processes during the year ended March. 31, 2024 and March 31, 2023.
Policy
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the rules and regulations framed by the Government
Process
Tlie Company manage its capital by maintaining sound/optimal capital structure financial ratios, such as net debt-to-equity ratio on a monthly basis and implements capital structure improvement plan when necessary. Debt-to-equity ratio as of March 31,2024, March 31, 2023 is as follows:
47 SHORT - TERM EMPLOYEE BENEFITS:-
At! employee benefits payable wholly within twelve months of rendering the service are classified as shorhtertn employee benefits and they are recognised in the period fn which the employee renders the related services
The Company recognises the undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered as a liability after deducting any amount already paid-
POST RETIREMENT BENEFIT PLANS
Defined Contribution Plan:
Contribution to superannuation fund is recognised as an expense in the Statement of Profit <fe Loss as it is incurred. There are no other obligations other than the contribution payable to the respective trust. Eligible employees receive benefits from a provident fund which is a defined contribution plan. Both the eligible employees and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee's salary.
i
Defined Benefits Plan 0") Gratuity
The Company provides for gratuity for employees in tndia as per the Payment of Grahilty Act 1972. Employees who are In continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employ ees last drawn basic salary per month computed proportionately for 15 days salary’ multiplied by the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India.
The number of shares used in computing basic EPS is the weighted average number of shares outstanding during the year.
The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effects of potential dilutive equity.
51 INVESTMENT PROPERTY
The company has given on rent a portion of its factory building situated at_SP-43, Keshwana, Kotputli, Jaipur-303108, however the portion given on rent is insignificant and major portion of the factory is used in manufacturing activities hence the company has not recognised seperatly such poriton as an investment property by taking of the view given in para 10 of IND AS 40 "Investment Property"
53 Financial and Derivatives Instruments
The Company uses derivative Instruments to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments on forecasted as transactions as approved by Board of Directors. The Company does not use derivative instruments for speculation purpose.
* The previous period / year figures are reclassified / re-arranged I regrouped, wherever necessary to make them comparable.
•The figures have been rounded off in nearest Lakhs upto two decimal points except otherwise stated.
In terms of our separate Audit Report of even date For & on behalf of the Board of Directors
FOR R SOGANI & ASSOCIATES OF KG PETROCHEM LIMITED
Chartered Accountants / _ _ [ill
) /a/ \C/k\ VfA (G. S. KANDOI) (MANISH SENGHAL)V
( —rg Chairman Cum Wholetime Director Managing Director
DIN: 00120330 DIN: 00120232
(BHARAT SONKHIYA^dA^^; //< jL.^— ,-s 1
Partner ' ‘ Y%YlU^
M. No. 403023 t™J)fi^G0ALi (ANAND SINGH)
Wholetime Director cum CFO Company Secretary
DIN: 02664482 M.No. A69726
Place: JAIPUR Date: 24.05.2024
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