1: Consequent to the introduction of Goods and Service Tax (GST) with effect from 1st July 2017, Central Excise, Value Added Tax (VAT) etc. have been subsumed into GST. In accordance with Indian Accounting Standard - 18 on Revenue and Schedule III of the Companies Act, 2013, unlike Excise duties, levies like GST, VAT etc. are not part of Revenue. Accordingly, the figures of Revenue from Operation and Segment Revenue of Alco Chemicals for the Year ended 31st March, 2018 are not comparable with the previous year.
2 : Disclosures as required under Indian Accounting Standard 19 on "Employee Benefits" A. Defined Benefit Plan
The Company has unfunded scheme for payment of gratuity to all eligible employees calculated at specified number of days of last drawn salary depending upon tenure of service for each year of completed service subject to minimum five years of service payable at the time of separation upon superannuation or on exit otherwise.
The following tables summaries the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the Post - retirement benefit plans .
3. Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
4. In respect of Provident Fund in the nature of defined benefit plans contribution amounting to Rs. 2.92 million (Previous year Rs. 2.55 million) and the accrued past service liability of Rs. Nil (Previous year Rs. Nil) as valued by the actuary using Projected Unit Credit Method is recognized as expenses and included in "Employee Benefits Expense".
5. Description of Risk Exposures
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary over time. Thus, the Company is exposed to various risks in providing the above gratuity benefit which are as follows:
Liquidity Risk: This is the risk that the Company is not able to meet the short-term gratuity payouts. This may arise due to non availability of enough cash/cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
Salary Escalation Risk: The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.
Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
Regulatory Risk: Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts.
B. Defined Contribution Plan
The Company contributes 12% of salary for all eligible employees towards Provident Fund managed either by approved trust or by the Central Government and debit the same to statement of Profit and Loss. The provident fund set up by the employers, require interest shortfall to be met by the employers. The fund set up by the Company does not have existing deficit of interest shortfall. The amount debited to Statement of Profit and Loss towards Provident Fund contribution during the year was Rs. 10.19 million (previous year Rs. 8.98 million).
6 : Financial Risk Management - Objectives and Policies
The company’s principal financial liabilities comprise borrowings, trade payables, other financial liabilities and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s financial assets include investments, trade receivables, cash and cash equivalents, other bank balances and loans.
The Company is exposed to market risk and credit risk. The Company has a Risk management policy and its management is supported by a Risk management committee that advises on risks and the appropriate risk governance framework for the Company. The Risk management committee provides assurance to the Company’s management that the Company’s risk activities are governed by appropriate policies and procedures and that risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.
(i) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: currency risk and other price risk, such as commodity price risk and equity price risk. Financial instruments affected by market risk include FVTOCI investments, FVTPL investments, trade payables, trade receivables, etc.
(a) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a foreign currency exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities. The Company monitors the foreign exchange fluctuations on continuous basis and advises the management of any material adverse effect on the Company and for taking risk mitigation measures. The Company enters into forward exchange contracts against its foreign currency exposure relating to underlying liabilities and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes.
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in USD, Euro and SGD exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities. The Company’s exposure to foreign currency changes for all other currencies is not material.
(b) Commodity price risks
The company is affected by the price volatility of methanol, one of its major raw material. Its operating activities require a continuous supply of methanol. The Company monitors price and demand/supply situation on continuous basis and advises the management of any material adverse effect on the Company and for taking risk mitigation measures.
(c) Equity price risks
The Company’s listed and non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the equity price risk through diversification and by placing limits on individual and total equity instruments/mutual funds. Reports on the investment portfolio are submitted to the Company’s management on a regular basis.
Equity price sensitivity
The following table shows the effect of price changes in quoted and unquoted equity shares (other than that in subsidiaries), quoted preference shares, quoted and unquoted equity mutual funds, unquoted alternative investment funds and unquoted equity funds.
(ii) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables).
Trade receivables
An impairment analysis is performed at each reporting date on an individual basis for all the customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on credit losses historical data. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables disclosed as the Company does not hold collateral as security. The Company has evaluated the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries.
(iii) Liquidity risk
Liquidity risk is the risk that Company will encounter difficulty in raising funds to meet commitments associated with financial instruments that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.
The Company has an established liquidity risk management framework for managing its short term, medium term and long term funding and liquidity management requirements. The Company's exposure to liquidity risk arises primarily from mismatches of the maturities of financial asset and liabilities. The Company manages the liquidity risk by maintaining adequate funds in cash and cash equivalents. The Company also has adequate credit facilities agreed with banks to ensure that there is sufficient cash to meet all its normal operating commitments in a timely and cost-effective manner.
The table below analysis financial liabilities of the Company into relevant maturity groupings based on the remaining period from the reporting date to the contractual maturity date. The amount disclosed in the table are the contractual undiscounted cash flow.
7 : Capital Management
The Company's objective when managing capital (defined as net debt and equity) are to safeguard the Company's ability to continue as a going concern in order to provide returns to shareholders and benefit for other stakeholders, while protecting and strengthening the balance sheet through the appropriate balance of debt and equity funding. The Company manages its capital structure and makes adjustments to it, in light of changes to economic conditions and strategic objectives of the Company. The Company's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
8 : Related Party Disclosures:
(i) List of related parties and relatives with whom transaction taken place:
1. Vardhan Limited Ho|ding C°mpany
2. Pipri Limited
3. Kanoria Africa Textiles Plc, Ethiopia
4. APAG Holding AG, Switzerland
5. APAG Elektronik AG, Switzerland
6. APAG Elektronik s.r.o., Czech Republic
7. CoSyst Control Systems GmbH, Germany Subsidiary Companies
8. APAG Elektronik LLC, USA
9. APAG Elektronik S. De R.L. De C.V., Mexico (up to 4th March, 2018)
10. APAG Services S. De R.L. De C.V., Mexico (up to 4th March, 2018)
11. APAG Elektronik Corp., Canada (w.e.f. 13th February, 2018)
12. Mr. R. V. Kanoria - Chairman & Managing Director
13. Mr. S. V. Kanoria - Whole Time Director
14. Mr. Amitav Kothari - Director
15. Mr. H.K. Khaitan - Director
16. Mr. Ravindra Nath - Director
Key Management Personnel (KMP)
17. Mr. G. Parthasarathy - Director
18. Mr. S. L. Rao - Director
19. Mr. A. Vellayan - Director
20. Mrs. M. Kanoria - Director
21. Mr. A. V. Kanoria
Relative of KMP
22. Mrs. V. Kanoria
23. KPL International Limited Enterprise over which KMP exercises significant influence
24. Kanoria Employees' Provident Fund Trust Post Employment Benefit Plan entity
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