1. Corporate Information

Khaitan Chemicals and Fertilizers Limited (the Company) is engaged in the manufacturing of Single Super Phosphate Fertilisers (Plain, Zincated and Boronated in powder form and granulated form), Sulphuric Acid and its variants, Trading of NPK Fertilisers, Processing of Oil Seed (mainly Soybean) and crude edible oil, selling of De-Oiled Cake and Crude/Refined Oil & Generation and selling of Wind Power. The Company is a public limited company incorporated and domiciled in India under the provisions of Companies Act, 2013. Its shares are listed on the Bombay Stock Exchange Limited, Mumbai (BSE).

These financial statements were approved and adopted by the Board of Directors of the Company in their meeting held on May 09, 2019.

2. Basis of Preparation of Financial Statements

a) Statement of compliance

The Financial Statements have been prepared in accordance with Indian Accounting Standards (IND AS) as prescribed under Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 and the relevant amendment rules issued thereafter.

b) Basis of preparation of financial statements

Effective April 1, 2017 the company has adopted all the Ind AS standards and adoption was carried out in accordance with Ind AS 101, “First time adoption of Indian Accounting Standard”, with April 1, 2016 as the transition date. The transition was carried out from the Indian Accounting Principles Generally Accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The financial statements are presented in INR and all values are rounded to the nearest INR Lakh (100 Thousand), except when otherwise indicated.

c) Use of Estimates

The preparation of the financial statements in conformity with IND AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Notes.

Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.

d) Classification of Assets and Liabilities as Current and Non-Current

All Assets and Liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of product & activities of the Company and their realisation in cash and cash equivalent, the Company has determined its operating cycle as twelve months for the purpose of current and non-current classification of assets and liabilities. Deferred tax assets and liabilities are classified as non-current assets and liabilities.

Note

a) The Company has only one class of equity shares having a par value of Re.1/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholder in the ensuing annual general meeting. In the event of liquidation, the equity shareholder are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

b) The Company has not allotted any equity shares for consideration other than cash, bonus shares, nor have any shares been bought back during the period of five years immediately preceding the balance sheet date.

c) Reconciliation of the shares outstanding at the beginning and at the end of the reporting year.

i) Rupee Term Loan of Rs.432.31 Lakhs (Previous Year 594.68 Lakhs), (Sanctioned Rs.695.80.00 Lakhs in FY 2016-17) from State Bank of India, is primarily secured by way of first charge on entire immovable assets and moveable fixed assets of the Company, both present and future on pari- passu basis with existing charge holders and repayable in 17 instalments comprising of 16 instalments of Rs 43.00 Lakhs each and balance in last instalments ending on 31st December , 2021.

ii) Rupee Term Loan of Rs. 1594.87 Lakhs (Previous Year 148.80 Lakhs) and Foreign Currency Term Loan of Rs Nil (Previous Year 2081.41 Lakhs) (Sanctioned Rs.3,000.00 Lakhs) from State Bank of India is primarily secured by way of first charge on entire immovable assets and moveable fixed assets of the Company, both present and future on pari- passu basis with existing charge holders and repayable in 22 quarterly instalments comprising of 2 Instalment of Rs.50.00 Lakhs each , 4 Instalments of Rs. 75.00 Laths each , 4 Instalments of Rs 100.00 Lakhs each, 4 Instalments of Rs 150.00 Lakhs each, 4 Instalments of Rs 175.00 Lakhs each, 2 Instalments of Rs. 200.00 Lakhs each, 1 Instalment of Rs. 250.00 Lakhs and balance in last instalment ending on 31.03.2021.

iii) Rupee Term Loan of Rs.425.43 Lakhs (Previous Year 565.97 Lakhs), (Sanctioned Rs.1,000.00 Lakhs ) by IDBI Bank Ltd., is primarily to be secured by way of first charge on entire immovable assets and movable fixed assets of the Company both present and future on pari-passu with existing charge holder and repayable in 28 equal quarterly instalment of Rs.35.71 Lakhs each ending on 1st January, 2022.

iv) All the above loans are collaterally secured through second charge by way of hypothecation on the entire current assets of the company on pari-passu basis with existing charge holder. These loans are irrevocably and unconditionally guaranteed by Chairman & Managing Director, Shri Shailesh Khaitan. Loan of Rs.1,000.00 Lakhs sanctioned in FY 2014-15 by IDBI Bank is collaterally secured by mortgage of two properties of Shradha projects Ltd., situated at Indore and pledge of 12 Lakhs equity shares of the Company . Fresh Corporate loan of Rs 3,000.00 Lakhs sanctioned by State Bank of India in FY 2015-16 is collaterally secured by pledge of 2,82,96,760 fully paid up equity shares of the Company .

v) Rupee Term Loan of Rs 102.71 Lakhs (Previous Year 138.01 Lakhs), (sanctioned Rs 185.98 Lakhs in 2016-17) have been availed from Axis Bank with tenure of 60 months ending 15th Sept , 2021. The Loan is secured by the hypothecation of the car.

vi) Rupee Term Loan of Rs 14.59 Lakhs (Previous Year 24.84 Lakhs),(sanctioned Rs 49.50 Lakhs) have been availed from BMW Financial Services with tenure of 60 months ending 1st June , 2020. The Loan is secured by the hypothecation of the car.

vii) Rupee Term Loan of Rs 13.15 Lakhs (Previous Year Nil) (sanctioned Rs 14.67 Lakhs in 2018-19) have been availed from Yes bank with tenure of 60 months ending 2nd August 2023. The Loan is secured by the hypothecation of the car.

viii) Unsecured Loan & Advances of Rs 1621.00 Lakhs has been procured from related party viz Shradha Projects Ltd , Arati Marketing Private Limited, Accord Infra Properties Private Ltd, Lilac Properties Private Ltd & Shradha Technopack Private Ltd as promoter fund infusion towards SBI Loan . Rs 1621.00 Lakhs are repayable after the maturity of the Loan.

Note:

ii) Cash Credit/Working Capital demand loans & Buyer’s Credit from Banks are secured by first hypothecation charge on the Company’s entire stocks comprising raw materials, stocks in transit, stocks in process, finished goods, consumable stores & spares and receivable on pari-passu basis among consortium bankers. Borrowings are further secured by pledge of 8 lakhs equity shares of the Company with face value of Re. 1/per share held by Chairman & Managing Director, Shri Shailesh Khaitan in favour of all consortium Bankers & 96,98,920 shares of the Company with face value of Re 1/- per share held by M/s. Shradha Project Ltd exclusively in favour of State Bank of India All short term bank borrowings are personally guaranteed by Chairman & Managing Director, Shri Shailesh Khaitan ii) IDBI Vendor Finance loan in the nature of Discounting of Bill of Exchange drawn/accepted by the Corporate of Rs. Nil lakhs (previous year 416.26 lakhs )(sanctioned Rs.500.00 lakhs).

3 The Company is in the process of obtaining confirmations and reconciliation with its trade receivables, trade payables and other dues receivables. The confirmations to the extent received have been reconciled and adjustments, if any, have been made. The others are pending for confirmations, reconciliations and adjustments, if any. However, the management does not expect any significant variations in the existing status.

4 Post the applicability of Goods and Service Tax (GST) with effect from July 01, 2017, revenue from operations are disclosed net of GST. Accordingly, the revenue from operation and excise duty expense for the year ended March 31, 2019 are not comparable with the previous year figures.

5 The Company has not provided for Moping up of subsidy on raw materials of fertilizer as on March 31, 2011 in terms of Office Memorandum No. 23011/1/2010-MPR dated July 11, 2011 issued by the Ministry of Chemicals & Fertilizers, Govt. of India, being reconsidered vide their letter No 23011/1/2010-MPR(Pt) dated August 22, 2012 and decided not to effect recovery till a policy in this regard is formulated. This has strengthened the management’s view for not providing the above liability.

6 THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT (MSMED) ACT

Based on the information available, there are certain vendors who have confirmed that they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. Disclosures as required by section 22 of ‘The Micro, Small and Medium Enterprises Development Act, 2006, are given below:

7 Leases

a. Operating lease

The Company has entered into certain operating lease agreements and an amount of 55.04 lakhs (2018: 54.55 lakhs) paid under such agreements has been charged to the Statement of Profit and Loss. These leases are generally not non-cancellable and are renewable by mutual consent on mutually agreed terms. There are no restrictions imposed by such agreements.

8 Employee benefits

The Company participates in defined contribution and benefit schemes, the assets of which are held (where funded) in separately administered funds. For defined contribution schemes the amount charged to the statements of profit or loss is the total of contributions payable in the year.

a) Defined Contribution Plans-charge to the Profit and Loss Account based on contribution

b) Other long-term benefits

Amount recognized as an expense and included in Note 33 Item “Provision for employee related expenses Rs. 2.28 lakhs (Previous year Rs. 22.18 lakhs) for long term compensated Absences.

c) Defined benefits plans

i) Amount recognized as an expense and included in Note 33 “Contribution to Provident and Other Funds” Rs. 107.44 lakhs (Previous year Rs. 102.13 lakhs) for Provident and other fund

ii) Gratuity Expense Rs. 70.71 lakhs (Previous year Rs.20.64 lakhs) has been recognized in “Provision for employee related expenses” under Note 33. as per Actuarial Valuation

9 Related party disclosures as required by ind AS - 24 (As certified by the management) a. List of Related Parties

i. Entities with joint control of, or significant influence over, the entity

Names Relationship

Shradha Project Limited Significant influence (with 47.18 % holding)

II. Key Management Person Executive directors and their relatives

Names Relationship

i) Shri Shailesh Khaitan Chairman & Managing Director

ii) Smt Swapna Khaitan Managing Director and wife of Chairman

iii) Shri Utsav Khaitan Whole Time Director (Son of Chairman & Managing Director)

iv) Shri Jagdish Lal Jajoo Whole Time Director

v) Shri Harsh Vardhan Agnihotri President & Chief Financial Officer

vi) Shri Kamlesh Joshi Company Secretary & General Manager

vii) Shri Vijay Gupta Non executive/ Independent directors

viii) Shri Balmukund Dakhera Non executive/ Independent directors

ix) Ms. Veena Chadha Non executive/ Independent directors

III. Other related parties

Enterprises which is under significant influence of KMP and / or their Relatives(with whom transaction have taken place)

i) The Majestic Packaging Co Pvt Ltd

ii) Tri-bhuvan Properties Ltd.

Iii) Arati Marketing Private Limited

iv) B O Constructions Private Limited

v) Accord Infra Properties Private Limited

vi) Lilac Properties Private Limited

vii) Shradha Technopack Private Limited

viii) Khaitan Paper & Packaging Pvt Ltd

10 Segment information

The information reported to the Chief Operating Decision Maker (CODM) for the purpose of resource allocation and assessment of segment performance is based on types of goods and services. Accordingly, the Company’s reportable segments under Ind AS 108 are as follows:

I) Fertilizers and Chemicals

ii) Soya / Agro

iii) Others

11 Financial Risk Management objectives and Policies a. Financial risk factors

The Company’s operational activities expose to various financial risks i.e. market risk, credit risk and risk of liquidity. The Company realizes that risks are inherent and integral aspect of any business. The primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk & interest rate risk. The Company calculates and compares the alternative sources of funding by including cost of currency cover also. Whenever, the currency cover costs are such as to neutralize the advantage in foreign currency, loans are hedged so as to not to lose advantage. The Company uses derivative financial instruments to reduce foreign exchange risk exposures.

This note explain the sources of risk which the entity is exposed to and how the entity manages the risk :

i) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of fluctuation in market prices. These comprise three types of risk i.e. currency rate , interest rate and other price related risks. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. 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. Regular interaction with bankers, intermediaries and the market participants help us to mitigate such risk.

Foreign Currency Risk and sensitivity

The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to reduce foreign exchange risk exposures and follows its risk management policies to mitigate the same. After taking cognisance of the natural hedge, the company takes appropriate hedges to mitigate its risk resulting from fluctuations in foreign currency exchange rate(s).

Interest Rate Risk and Sensitivity

The Company’s exposure to the risk of changes in market interest rates relates primarily to long term debt. The Company has entered into various interest rate swap contracts, in which it agrees to exchange, at specific intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed upon principal amount. Borrowings at variable rates expose the Company to cash flow interest rate risk. With all other variables held constant, the following table demonstrates composition of fixed and floating rate borrowing of the company and impact of floating rate borrowings on company’s profitability.

c. Commodity price risk and sensitivity

The Company is exposed to the movement in price of key raw materials in domestic and international markets. The Company has in place policies to manage exposure to fluctuations in the prices of the key raw materials used in operations. The Company manages fluctuations in raw material price through hedging in the form of advance procurement when the prices are perceived to be low and also enters into advance buying contracts as strategic sourcing initiative in order to keep raw material and prices under check cost of material hedged to the extent possible.

II. Credit risk

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs. 6100.28 lakhs and Rs. 9980.76 lakhs as of March 31, 2019 and March 31, 2018, respectively. Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India. Credit risk has always been managed by the company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables. The provision matrix takes into account as per the Company’s historical experience for customers.

Liquidity risk

Liquidity risk arises when the Company will not be able to meet its present and future cash and collateral obligations. The risk management action focuses on the unpredictability of financial markets and tries to minimise adverse effects. The Company uses derivative financial instruments to hedge risk exposures. Risk management is carried out by the Finance department under Forex Policies as adopted and duly approved by the Board. The Company’s approach is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due and company monitors rolling forecasts of its liquidity requirements.

Competition and Price risk

The Company faces competition from local and foreign competitors. Nevertheless, it believes that it has competitive advantage in terms of high quality products and by continuously upgrading its expertise and range of products to meet the needs of its customers.

Capital Risk Management

The Company’s policy is to maintain an adequate capital base so as to maintain creditor and market confidence and to sustain future development. Capital includes issued capital, share premium and all other equity reserves attributable to equity holders. In order to strengthen the capital base, the company may use appropriate means to enhance or reduce capital, as the case may be

12 Fair Value Measurement

I) Some of the financial assets and financial liabilities are measured at fair value at the end of the reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation techniques and inputs used):

13 Derivative financial instruments

The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.

14. Previous year figures have been re-arranged and/or regrouped wherever considered necessary, to confirm current year classification.

15. The financial statements are presented in INR and all value are rounded to the nearest INR lakhs, except when otherwise indicated.