I) Rupee term loan and foreign currency loan from banks are secured as under:
a) Details of security:
The rupees term loan from Kotak Mahindra Bank is secured by charge first charge on property located at Jharsuguda and Lapanga (Movable & Immovable Fixed Assets)
The Foreign Currency Term Loan from State Bank of India, Tokyo is secured by way of a first charge on movable and immovable fixed assets of the company by way of Hypothecation/Equitable Mortgage of Khatalwad Unit and Office Building (Building No. 4 Corporate park, Chembur). Minimum Fixed Assets Coverage Ratio(FACR) of 1.25 to be maintained during the entire tenor of the loan.
b) Terms of repayment and interest rate of term loan :
In respect of Rupee Term Loan from Kotak Bank, it has a moratorium period of 18 months and loan will be repaid in 10 half yearly installments. The repayment has started from 08 September 2019 onwards, first 2 installments of H 7.50 crore each, next 2 installment of H 8.50 crore each, subsequent next 2 installment of H 10.00 crore each and last 4 installments of H 12.00 crore each. The interest is payable at 8.30% p.a.
In respect of foreign currency term loan from State Bank of India, Tokyo, it has a moratorium period of 18 months and loan will be repaid in 20 quarterly installments. The repayment has started from 05 September 2021 onwards, next installments of H 3.79 crore will be paid in Jun 2022, thereafter next 5 installment of H 5.69 crore each, next 1 installment of H 7.57 crore, next 5 installment of H 13.26 crore each, subsequent 2 installment of H 15.16 crore each and last 3 installments of H 18.95 crore each. The interest is payable at 3 months Libor 1.70% on quarterly basis.
The Company does not have any continuing default as on the Balance Sheet date in respect of repayment of principle and interest.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered.
(i) Defined Contribution Plans:
The Company makes contributions towards provident fund, superannuation fund and other retirement benefits to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.
The Company recognised H 2.1 crore (previous year H 1.94 crore) for superannuation contribution and other retirement benefit contributions in the Statement of Profit and Loss.
The Company recognised H 6.47 crore (previous year H 5.13 crore) for provident fund contributions in the Statement of Profit and Loss.
The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
(ii) Defined Benefit Plan:
The Employees' Gratuity Fund Scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit seperately to build up the final obligation.
The obligation for leave encashment is recognised in the same manner as gratuity. The Company provides for leave encashment liabiltiy as per the acturial valuation carried out as at March 31, 2023. The Company has recognised H 1.27 crore (previous year H 3.44 crore) for leave encashment liability in the Statement of Profit and Loss.
As at March 31, 2023, actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company's financial statements as at reporting date:
Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not proved to be true on different count. This only signifies the change in the liability if the difference between assumed and the actual is not following the parameters of the sensitivity analysis.
These plan typically exposes the Company to actuarial risks such as salary risk, investment risk, interest yield risk, logentivity risk etc.
Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company's financial statements as at balance sheet date:
The Company has exposure to the following risks arising from financial instruments:
(A) Credit risk ;
(B) Liquidity risk ; and
(C) Market risk
Risk management framework
The Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company's risk management policies. The committee reports to the board of directors.
The Company's risk management policies are established to identify and analyse 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, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
(A) Credit risk
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. It arises principally from amounts receivables from customers and loans and advances. The Company's export receivables are covered under ECGC credit insurance policy. The Company also takes credit insurance for its domestic receivables. The carrying amount of the following financial assets represent the maximum credit exposure:
At March 31, the maximum exposure (age wise) to credit risk for trade receivables is as follows.
Management believes that the unimpaired amounts which are past due are fully recoverable / receivable.
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on trade receivables and other advances.
The Company follows 'simplified approach' for recognition of impairment loss on these financial assets. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
The entity has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a division wise provision matrix. The provision matrix takes into account historical credit loss experience, delay in receipt of payments and adjusted for forward-looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. The provision matrix at the end of the reporting period is as follows :
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 affecting Company's reputation.
Maturity profile of financial liabilities
TThe following are the remaining contractual maturities of financial liabilities at the reporting date..
Other non-current financial assets
Other non-current financial assets includes earnest money deposit, security deposits to customers. These advances and deposits were made in continuation of business related activities and are made after review as per company's policy.
Cash and cash equivalents
The Company holds cash and cash equivalents of H 407.68 Crore (Previous year H 242.65 Crore). The cash and cash equivalents are held with the bank and financial institutions having good credit ratings.
Derivatives
Derivatives are entered with counterparties who have good credit ratings.
The gross inflows/(outflows) disclosed in the above table represent the contractual cash flows relating to the financial liabilities which are not usually closed out before contractual maturity.
Contractual outflow of other non current financial liabilities amounting to H 5.09 crores (Previous year H 3.13 crores) has not been included above as the amount cannot be ascertained on reporting date.
Market risk is the risk that changes in market prices — such as foreign exchange rates, interest rates and equity prices — will affect the Company's income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt.
The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and market value of investments. Thus, an exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in the foreign currency.
Commodity risk
The Company is affected by the price volatility of certain commodities viz. Aluminum, Copper and Oil. Its operating activities require the ongoing purchase and manufacture of the conductors, cables and oil and thus requires continuous supply of these commodities. Due to the increase in volatility of the price of the commodities namely aluminum and copper, the Company has entered into forward contracts (for which there is an active market).
Currency risk
The Company is exposed to currency risk on account of its borrowings and other payables in foreign currency. The functional currency of the Company is Indian Rupee (H). 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.
Strenghtening of foreign currency as against H will reduce the net profit while weakning of foreign cyrrency as agaisnst H will increase net profit. Sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
Interest rate risk
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing borrowings because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.
The objective of hedge accounting is to represent, in the Company's financial statements, the effect of the Company's use of financial instruments to manage exposures arising from particular risks that could affect profit or loss.
Currency risk-
The Company's risk management policy is to hedge its estimated foreign currency exposure in respect of highly forecasted sales. The Company uses forward exchange contracts to hedge its currency risk. Such contracts are generally designated as fair value hedges. Company's policy is to match the critical terms of the forward exchange contracts with that of the hedged item.
Commodity risk
The Company's risk management policy is to mitigate the impact of fluctuations in the aluminium/copper prices on highly forecast purchase transactions. The Company uses fowards contract to hedge its commodity risk. Such contracts are generally designated as cash flow hedges.
Interest rate
The Company's risk management policy is to mitigate its interest rate risk exposure on floating rate borrowings by entering into fixed-rate instruments like interest rate swaps to eliminate the variability of cash flows attributable to movements in interest rates. Such hedges are designated as cash flow hedges.
For derivative contracts designated as hedge, the Company documents at inception the economic relationship between the hedging instrument and the hedged item, the hedge ratio, the risk management objective for undertaking the hedge and the methods used to assess the hedge effectiveness. The hedging book consists of transactions to hedge balance sheet assets or liabilities. The tenor of hedging instrument may be less than or equal to the tenor of underlying hedged asset or liability.
Financial contracts designated as hedges are accounted for in accordance with the requirements of Ind AS 109 depending upon the type of hedge.
Hedge effectiveness is ascertained at the time of inception of the hedge and periodically thereafter. The Company assesses hedge effectiveness both on prospective and retrospective basis. The prospective hedge effectiveness test is a forward looking evaluation of whether or not the changes in the fair value or cash flows of the hedging position are expected to be highly effective on offsetting the changes in the fair value or cash flows of the hedged position over the term of the relationship.
On the other hand, the retrospective hedge effectiveness test is a backward-looking evaluation of whether the changes in the fair value or cash flows of the hedging position have been highly effective in offsetting changes in the fair value or cash flows of the hedged position since the date of designation of the hedge. Hedge effectiveness is assessed through the application of critical terms match method/Dollar offset method. Any ineffectiveness in a hedging relationship is accounted for in the statement of profit and loss
The Company, inter alia, takes into account the following criteria for constructing a hedge structure as part of its hedging strategy:
(a) The hedge is undertaken to reduce the variability in the profit & loss i.e the profit or loss arising from the hedge structure should be lesser than the profit & loss on the standalone underlying exposure. In case of cash flow hedge for covering interest rate risk the hedge shall be only undertaken to convert floating cash flows to fixed cash flows i.e. the underlying has to be a floating rate asset or liability.
(b) At any point in time the outstanding notional value of the derivative deal(s) undertaken for the purpose of hedging shall not exceed the underlying portfolio notional. The hedge ratio therefore does not exceed 100% at the time of establishing the hedging relationship.
(c) At any point in time the maturity of each underlying forming a part of the cluster/portfolio hedged shall be higher than the maturity of the derivative hedging instrument.
For the purpose of the Company's capital management, capital includes issued capital and other reserves forming part of other equity except cash flow hedge reserve . The primary objective of the Company's capital management is to maximise shareholders value. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants.
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Note 44 Contingent Liabilities A) Contingent liabilities not provided for:
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(H crore)
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S.r' Particulars No.
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As at
March 31, 2023
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As at
March 31, 2022
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a) Claims against the Company not acknowledged as debts (Refer Note 1)
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i) Demand/ Show cause-cum-demand notices received and contested by the Company with the relevant appellate authorities:
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Excise duty
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8.26
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7.08
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GST
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-
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15.39
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Customs duty
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2.08
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2.40
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Sales tax
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12.06
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12.99
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Income tax
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20.28
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10.74
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ii) Arbitration award regarding dispute of alleged contractual nonperformance by the Company, against which the Company is in appeal before Bombay High Court.
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13.84
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15.00
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iii) Labour matters
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0.05
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0.05
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iv) Others
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7.33
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17.13
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b) Corporate Guarantees (Refer Note 2)
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i) Guarantee given by the Company for credit facilities enjoyed by Petroleum Specialities Pte Ltd.,a wholly-owned subsidiary
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-
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3.79
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ii) Guarantee given by the Company for term loan facilities enjoyed by Petroleum Specialities FZE, a downstream subsidiary company
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811.43
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450.97
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B) Capital commitments
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(H crore)
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S.r. Particulars No.
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As at
March 31, 2023
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As at
March 31, 2022
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a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances)
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139.78
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39.63
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Notes:
1 It is not practicable for the Company to estimate the timing of the cash outflows, if any, in respect of the matters in note a (i) to a
(iv) mentioned in A, pending resolution of the arbitration/appallate proceedings. The liability mentioned as aforesaid includes interest except in cases where the Company has determined that the possibility of such levy is very remote.
2 The cash outflows in respect of Corporate Guarantees mentioned in note b of A, could generally occur upto the period over which the validity of such guarantees extends or it could occur any time during the subsistence of the borrowing to which the guarantees relate.
3 The Company does not expect any reimbursements in respect of the above contingent liabilities.
ii Disaggregated revenue
The chief operating decision maker monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on Profit or Loss and is measured consistently with profit or loss in the financial statements. Operating segments have been identified on the basis of nature of products / services.
The Company enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreement. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding in same currency are aggregated into a single net amount that is payable by one party to other.
In certain circumstances e.g. when a credit event such as default occurs all outstanding transactions under the agreement are terminated, the termination value is assessed and only a net amount is payable in the settlement of all transactions.
The ISDA master netting agreement do not meet the criteria for offsetting in the balance sheet. This is because the Company does not have currently legally enforceable right to offset recognized amounts, because the right to offset is enforceable only on default.
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the company for holding any Benami property.
(ii) The Company did not have any material transactions with companies struck off under section 248 of the Companies Act, 2013 or Section 560 of the Companies Act, 1956 during the financial year.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) The Company has not traded or invested in crypto currency or virtual currency during the period/year.
(v) The Company has not advanced or loaned or invested funds to any other person / persons or entity / entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) 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
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(vi) The Company has not received any funds from any person / persons or entity / entities, including foreign entities (funding party) with the understanding (whether recorded in writing or otherwise) that the company shall:
(a) 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
(b) provide any guarantee, security or the like on behalf of the ultimate beneficiaries,
vii) The Company has no transaction which is not recorded in the books of accounts 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).
viii) The Company is not declared as wilful defaulter by any bank or financial institution or other lender.
ix) During the year company has not entered into any scheme of arrangement.
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