1 Company overview
Goa Carbon Limited is a public limited company incorporated and domiciled in India and has its registered office at Panaji-Goa, India.
The Company is in the business of manufacture and sale of Calcined Petroleum Coke from its manufacturing facilities at Goa, Paradeep and Bilaspur.
2 Basis of preparation of financial statements
a. Basis of preparation and compliance with Ind AS
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the Act’) and other relevant provisions of the Act.
The financial statements were authorized for issue by the Company’s Board of Directors on 22nd April 2019.
Details of the Company’s significant accounting policies are included in Note 3.
b. Basis of measurement
The financial statements have been prepared on a going concern basis using historical cost convention and on an accrual method of accounting, except for certain financial instruments and defined benefit plans which have been measured at fair value as required by the relevant Ind AS. Refer note 3(d) and 3(h) below.
c. Functional and presentation currency
The financial statements are prepared in Indian Rupees, which is the Company’s functional and presentation currency. All financial information presented in Indian Rupees has been rounded to the nearest Lacs with two decimals.
d. Current and non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification.
An asset is classified as current when it satisfies any of the following criteria:
- it is expected to be realized in, or is intended for sale or consumption in, the Company’s normal operating cycle.
- it is held primarily for the purpose of being traded;
- it is expected to be realized within 12 months after the reporting date; or
- it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
A liability is classified as current when it satisfies any of the following criteria:
- it is expected to be settled in the Company’s normal operating cycle;
- it is held primarily for the purpose of being traded;
- it is due to be settled within 12 months after the reporting date; or
- the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Current assets/liabilities include current portion of non-current financial assets/liabilities respectively. All other assets/liabilities are classified as non-current. Deferred tax liabilities are classified as non-current liabilities.
Operating cycle:
Based on the nature of the operations and the time between the acquisition of assets for processing and their realization in cash or cash equivalents, the Company has ascertained its operating cycle less than twelve months for the purpose of current non-current classification of assets and liabilities.
Trade receivables with a carrying value of Rs.6,198.29 lacs and Rs.5,620.96 lacs have been given as collateral towards borrowings as at 31st March 2019 and 31st March 2018 respectively (refer note 19 on borrowings).
The credit period given to customers ranges from 7 days to 45 days. For the existing customers based on their past records, the Company fixes the credit limit as well as credit period. For new customers, Company generally supplies the goods against advances.
Of the trade receivables balance as at 31st March 2019, Rs.5,450.56 lacs (31st March 2018: Rs.5,182.84 lacs) is due from Aluminum Smelters in India. Hence, the credit risk concentration is limited to the large Aluminum Smelters in India.
In accordance with Ind-AS 109, the Company applies expected credit loss (“ECL”) model for measurement and recognition of impairment loss. The Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivables. 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.
E Terms/rights attached to equity shares: The Company has only one class of issued equity shares having a face value of Rs.10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
3 Other equity*
Nature and purpose of other reserves General reserve
Under the erstwhile Companies Act, 1956, a general reserve was created through an annual transfer on net income at a specified percentage in accordance with the applicable regulations. Consequent to introduction of the Companies Act, 2013, the requirement to mandatorily transfer a specified percentage of net profit to general reserve has been withdrawn. The balances in the general reserve as determined in accordance with applicable regulations is Rs.1,803.05 lacs as at 31st March 2018 and 31st March 2019.
Equity instruments through other comprehensive income
The Company has elected to recognise changes in the fair value of certain investment in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments within equity. The Company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.
Securities premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provision of the Act.
* Refer Statement of Changes in Equity
Significant estimate
The ultimate utilisation of the carry forward business loss is dependent upon the generation of future taxable income as per the provisions of Income Tax Act, 1961, before the expiry of period over which the said carry forward business loss can be utilised. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the historical details of the taxable income, book profit and projections of future taxable income over the periods in which the carry forward business loss is available for utilisation, Management believes that the Company will be able to realise/utilise the carry forward business loss. However, the utilisation could be reduced in the near term if the future taxable income undergoes any change as compared to the estimates made by the management as at reporting date.
Notes: 1) The cash credit and buyer’s credit facilities are secured by first and equitable mortgage on pari-passu basis of all immovable properties and by hypothecation of all movable properties, plant and equipments, inventories, trade receivables and other receivables of the Company.
2) Cash credit facilities availed from banks is payable on demand and carries interest rate ranging between 9.35% p.a. to 11.30% p.a. (31st March 2018:12% p.a. to 12.50% p.a., computed on a daily basis on the actual amount utilised. Buyer’s credit availed during FY 2017-18 was repaid during the year with interest rate ranging between LIBOR 25 bps to LIBOR 30 bps.
* Includes payable due to credit extended by suppliers amounting to Rs.19,918.73 lacs (31st March 2018: Nil).
Trade Payables are normally settled within 7 to 180 days. The Company’s imports of raw materials are based on the letter of credit issued/suppliers credit availed.
The company’s exposure to currency and liquidity risk related to trade payables is disclosed in note 35.
The amounts mentioned against (i) above are based on the notice of demand or the assessment orders issued by the relevant authorities, as the case may be. The Company is contesting these demands with the relevant appellate authorities. Outflows, if any, arising out of these demands would depend on the outcome of the decisions of the appellate authorities and the Company’s rights for future appeals before the Judiciary. However, the Company is hopeful of successful outcome in the appellate proceedings.
iii) There are numerous interpretative issues relating to the Supreme Court (SC) judgement dated 28th February, 2019, relating to components/allowances paid that need to be taken into account while computing an employer’s contribution of provident fund under the Employees’ Provident Funds and Miscellaneous Provident Act, 1952. The Company has also obtained a legal opinion on the matter and basis the same there is no material impact on the financial statements as at 31st March 2019. The Company would record any further effect on its financial statements, on receiving additional clarity on the subject.
4 Leases
The company has taken the corporate office on lease under operating lease. The lease typically run for a period of 5 years with an option to renew the lease after that period. The future minimum lease payments to be made under non cancellable operating lease as on 31st March 2019 are as under.
The Company aim to eliminate any deficit in gratuity plan. Funding levels are assessed by LIC and ICICI on annual basis and the company makes contribution as per the instructions received from them. The Company compares the expected contribution to the plan as provided by actuary with the instruction from LIC and ICICI and assesses whether any additional contribution may be required. The Company considers the future expected contribution will not be significantly increased as compared to actual contribution.
The estimates of future salary increases considered in the actuarial valuation, take into account inflation, seniority, promotions, increments and other related factors such as supply and demand in the employment market.
ii) Risk analysis
Company is exposed to a number of risks in the defined benefit plan. Most significant risks pertaining to defined benefits plan and management estimation of the impact of these risks are as follows:
a. Investment risk
The gratuity plan is funded with Life Insurance Corporation of India (LIC) and ICICI Prudential Life (ICICI). Company does not have any liberty to manage the fund provided to LIC and ICICI prudential.
The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to Government of India bonds. If the return on plan asset is below this rate, it will create a plan deficit.
b. Interest risk
A decrease in the interest rate on plan assets will increase the plan liability.
c. Longevity risk/Life expectancy
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and at the end of the employment. An increase in the life expectancy of the plan participants will increase the plan liability.
d. Salary growth risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan liability.
b) Defined contribution plans:
A sum ofRs.105.46 lacs (Previous year Rs.103.18 lacs) has been charged to the Statement of Profit and Loss in respect of Company’s contribution to superannuation fund, provident and pension fund.
5 Financial instruments - Fair value and risk management
i Financial risk management objective and policies
This section gives an overview of the significance of financial instruments for the Company and provides additional information on the balance sheet. Details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in Note 3d.
ii Accounting classification and fair value
* Financial assets and liabilities such as trade receivables, cash and cash equivalents, bank balance other than cash and cash equivalents, loans, advances, borrowings, trade payables, interest accrued but not due on borrowings, unclaimed dividends, security deposits and others are largely short term in nature. The fair value of these financial assets and liabilities approximate there carrying amount due to the short term nature of such assets and liabilities.
iii) Valuation techniques used to determine fair value
a) The fair value of forward exchange contract is determined using forward exchange rate at the balance sheet date. The fair value of equity shares in ICICI Bank Limited is determined basis the quoted market price.
b) The finance department of the Company performs the valuation of financial assets and liabilities required for financial reporting purposes. The finance department reports directly to the Chief Financial Officer (CFO). Discussions of valuation processes and results are held between the CFO and the finance department at least once every three months, in line with the Company’s quarterly reporting periods.
iv) Fair value hierarchy
The table shown below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined below:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: 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)
Level 3: inputs forthe asset or liability that are not based on observable market data (unobservable inputs)
v) Risk management framework
a. Risk management
The Company’s business is subject to several risks and uncertainties including financial risks. The Company’s documented risk management policies act as an effective tool in mitigating the various financial risks to which the business is exposed to in the course of their daily operations. The risk management policies cover areas such as liquidity risk, commodity price risk, foreign exchange risk, interest rate risk, counterparty and concentration of credit risk and capital management. Risks are identified through a formal risk management programme with active involvement of senior management personnel and business managers at both the corporate and plant level. Each significant risk has a designated ‘owner’ within the Company at an appropriate senior level. The potential financial impact of the risk and its likelihood of a negative outcome are regularly updated.
The risk management process is co-ordinated by the Management Assurance functions and is regularly reviewed by the Company’s Audit Committee. The Audit Committee meets regularly to review risks as well as the progress against the planned actions. Key business decisions are also discussed at the periodic meetings of the Audit committee and the Board of Directors. The overall internal control environment and risk management programme including financial risk management is reviewed by the Audit Committee and the Board.
The risk management framework aims to: improve financial risk awareness and risk transparency identify, control and monitor key risks identify risk accumulations provide management with reliable information on the Company’s risk situation improve financial returns
b. Treasury management
The Company’s treasury function provides services to the business, co-ordinates access to domestic financial markets, monitors and manages the financial risks relating to the operations of the Company through internal reports which analyses exposures by degree and magnitude of risks. These risks include market risk (currency risk, interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
The Company uses derivative instruments (forward contracts) as part of its management of exposure to fluctuations in foreign currency exchange rates. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes.
c. Price risk on raw materials and finished goods i.e. RPC and CPC
The Company imports raw material only based on the confirmed orders in hand and indicated orders placed by the reputed aluminum smelters. The Company enters into contract with the major aluminum smelters forthe supply of CPC on quarterly basis with the agreed selling price.
d. Financial risk
The Company avails credit from overseas suppliers for a period of 180 days. The Company collects dues from the customers within a period of 30 days. The Company places fixed deposits with the Company Bankers and the Company’s liquid assets like trade receivables, finished goods and raw material which has been procured based on the confirmed orders/indicated orders will be sufficient enough to repay the outstanding payables. The management regularly monitors the liquid assets value vis-a-vis outstanding balance of payables.
e. Liquidity risk
The Company remains committed to maintaining a healthy liquidity, gearing ratio, deleveraging and strengthening its balance sheet. The maturity profile of the Company’s financial liabilities based on the remaining period from the date of balance sheet to the contractual maturity date is given in the table below. The figures reflect the contractual undiscounted cash obligation of the company.
The Company has pledged its trade receivables and cash and cash equivalents in order to fulfill the collateral requirements for the financial facilities in place. There are no other significant terms and conditions associated with the use of collaterals.
f. Foreign exchange risk
The Company’s business activities include import of raw materials like Raw Petroleum Coke, which are linked to international price in dollar terms. As a result the Company is exposed to exchange rate fluctuation on its imports.
g. Interest rate risk
Erstwhile the Company used to avail foreign currency loan in the form of Buyers credit facilities with overseas banks with tenure of 180 days at an interest rate of 6 months LIBOR with certain agreed additional basis points. Since the rate was fixed and agreed well in advance, the Company was not exposed to interest-rate risk due to adverse movement in interest rates. In the current period, the Company has availed credit upto 180 days from its overseas suppliers. The cost for extending credit is fixed with suppliers upfront and hence the Company is not exposed to interest rate risk.
h. Derivative financial instruments
The Company enters into forward contracts which are not intended for trading or speculative purposes, but for hedging.
6 Capital management
The Company’s objectives when managing capital is to safeguard continuity, maintain a strong credit rating and healthy capital ratios in order to support its business and provide adequate return to shareholders through continuing growth. The Company’s overall strategy remains unchanged from previous year.
The Company sets the amount of capital required on the basis of annual business and long-term operating plans which include capital and other strategic investments.
The funding requirements are met through a mixture of equity, internal fund generation and other non-current borrowings. The Company’s policy is to use current and non-current borrowings to meet anticipated funding requirements.
The Company monitors capital on the basis of the net debt to equity ratio. The Company is not subject to any externally imposed capital requirements.
Net debt are non-current and current debts as reduced by cash and cash equivalents, other bank balances and current investments. Equity comprises all components excluding other components of equity (which comprise non-current financial investments measured through OCI).
7 Segment reporting
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the Company’s other components and for which discrete financial information is available. All operating segments’ operating results are reviewed regularly by the Company’s Executive Director (ED) to make decisions about resources to be allocated to the segments and assess their performance.
The principle business of the Company is manufacture and sale of Calcined Petroleum Coke. The chief operating decision maker of the Company monitors the operating results of the Company’s business as a single segment. Accordingly in context of Ind AS 108 “Operating Segments”, the principle business of the Company constitutes a single reportable segment and all the revenue is generated from external customers. As per Management’s perspective, the risk and returns from its sales do not materially vary geographically. Accordingly there are no other business/geographical segments to be reported under Ind AS 108.
8 The Hon’ble Supreme Court of India vide order dated 26.07.2018 had banned the import of petroleum coke if used as a fuel. Since the company uses petroleum coke only as “Feedstock” for producing calcined petroleum coke, the Company had filed an application with the Hon’ble Supreme Court of India representing that the Company uses raw petroleum Coke (RPC) as “Feedstock” and hence Calcination Industries should be allowed to import RPC.
Based on the recommendations of Ministry of Environment/Forest and Climate Change (MOE&CC) and Environment Pollution Control Authority (EPCA), the Hon’ble Supreme Court has passed the order dated 9.10.2018 by permitting the import of RPC up to 1.40 million metric tonnes per annum for the calcination industry as a whole for feedstock.
On the basis of Court order dated 09.10.2018, the Director General of Foreign Trade (DGFT) vide Public Notice No. 50/2015-20 notified additional procedures for applying for quota and for granting the import license and further amended the import policy in this respect. Based on Company’s application, DGFT allocated the quota for import of RPC and also granted the license to import RPC for the period from October 2018 to March 2019. The quota for the F.Y. 2019-20 is expected to be announced by DGFT during April 2019.
9 Disclosures in respect of Related Parties pursuant to Ind AS 18
i) List of related parties:
Names of the related parties and nature of relationship
a Holding Company:
V. S. Dempo Holdings Private Limited
b Fellow Subsidiaries (with whom transactions have taken place during the year):
Dempo Industries Pvt. Ltd.
Dempo Travels Pvt. Ltd.
Dempo Sports Club Pvt. Ltd.
c Individual who is able to exercise significant influence:
Mr. Shrinivas V. Dempo (Chairman)
d Enterprises over which Mr. Shrinivas V. Dempo is able to exercise significant influence (with whom transactions have taken place during the year):
Vasantrao Dempo Education and Research Foundation
Vassudeva Dempo Family Private Trust
Matruchhaya Trust
e Key Management Personnel:
Mr. Shrinivas V. Dempo (Chairman)
Mr. Dara P. Mehta (Independent Director) (till 31st March 2019)
Mr. Keki M. Elavia (Independent Director)
Mr. Raman Madhok (Independent Director)
Ms. Kiran Dhingra (Independent Director)
Mr. Rajesh S. Dempo (Non-Executive Director)
Mr. Jagmohan J. Chhabra (Executive Director)
Mr. P. S. Mantri (Company Secretary) - (up to 06.01.2018)
Mr. Pravin Satardekar (Company Secretary) -(from 07.01.2018)
Mr. K. Balaraman (Chief Financial Officer)
Performance obligations
The Company satisfies its performance obligations pertaining to the sale of calcined products 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 subject to refund due to shortages during the mode of transportation and do not contain any financing component. The payment is generally due within 7-45 days. The Company is obliged for refunds due to shortages during the mode of transportation. There are no other significant obligations attached in the contract with customer.
Transaction price
There is no remaining performance obligation for any contract for which revenue has been recognised till period end. Further, the Company has not applied the practical expedient as specified in para 121 of Ind AS 115 as the Company do not have any performance obligations that has an original expected duration of one year or less or any revenue stream in which consideration from a customer corresponds directly with the value to the customer of the entity’s performance completed to date.
Determining the timing of satisfaction of performance obligations
There is no significant judgements involved in ascertaining the timing of satisfaction of performance obligations, in evaluating when a customer obtains control of promised goods, transaction price and allocation of it to the performance obligations.
Determining the transaction price and the amounts allocated to performance obligations
The transaction price ascertained for the only performance obligation of the Company (i.e. Sale of goods) is agreed in the contract with the customer. There is no variable consideration involved in the transaction price except for refund due to shortages which is adjusted with revenue.
Cost to obtain contract or fulfil a contract
There is no cost incurred for obtaining or fulfilling a contract and there is no closing assets recognised from the costs incurred to obtain or fulfil a contract with a customer.
10 Changes in accounting policies Impact on the financial statements
Effective April 1, 2018, the Company has adopted Ind AS 115 “Revenue from Contracts with Customers” using the cumulative effect method. The standard is applied retrospectively only to contracts that are not completed as at the date of initial application and the comparative information is not restated in the financial statements. The adoption of the standard did not have any material impact to the financial statements of the Company.
11 There are no amounts due and payable to Investor Education and Protection Fund as on Balance Sheet date.
12 The disclosures regarding details of specified bank notes held and transacted during 8th November 2016 to 30th December 2016 has not been made in these financial statements since the requirement does not pertain to financial year ended.
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