1 Corporate Information
The Dharamsi Morarji Chemical Company Limited is a Public Limited Company domiciled in India. Its equity shares are listed on the BSE Limited (BSE). The registered office of the Company is located at 317/321, Prospect Chambers, Dr. D.N. Road, Fort, Mumbai-400001. The Company is engaged in the business of manufacturing and selling of Commodity Chemicals and Speciality Chemicals.
Information on related party relationships of the Company is provided in Note - 43
The financial statements are authorised for issue in accordance with a resolution of the Board of Directors on 28th May, 2018
# The Company has elected to continue with the carrying value of its investment in Borax Morarji (Europe) GmBH, a wholly owned subsidiary, measured as per previous GAAP and used that carrying value on the transition date 1st April 2016 in terms of Para D15(b) (ii) of Ind AS 101.
Note
Inventories of Dahej Unit in the state of Gujarat amounting to Rs. Nil (Previous Year Rs. 575.63 Lakhs) are offered as security by way of hypothecation of Raw Materials, Finished Goods, Working in process, Packing Materials, Stores, Book Debts and Receivable for working capital facitlity provided by Bank in consortium. Working Capital Facility have since been surrendered by the Compnay.
Receivables of Rs. NIL (Previous year Rs. 609.86 Lakhs) pertaining to Dahej unit in the State of Gujarat are hypothecated as security for working capital facility provided by the Consortium Bank. Working capital facility have since been surrendered by the Company.
Before accepting any new customer, the Company has appropriate levels of control procedures which ensure the potential customer’s credit quality.
Generally, the Company supply as per the order received from its customers. The average Credit period on sale is 30-90 days
*Others include Rs. 500.00 lakhs receivable in respect of sale of Land at Ambernath in earlier years by erstwhile Borax Morarji Ltd. The Company is pursuing the matter for obtaining the necessary approval from the Government of Maharashtra , on receipt of which the Conveyance deed will be executed and registered in due course
Terms and Rights attached to Equity Shares
The Company is having only one class of Equity shares having a nominal value of Rs.10/- per share.
Every holder of the equity share of the Company is entitled to one vote per share held
In the event of liquidation of the Company, the equity shareholders will be entitled to receive remaining assets of the Company after distribution of all preferential amounts. The distribution to the Equity shareholders will be in proportion of the number of shares held by each shareholder
(a) (i) Working Capital Term Loan
Repayable in 60 EMI’s commencing from 17-02-2014. Rate of interest is 10.5%-12%. 50 EMIs have been paid in time, up to 31st March, 2018 and 10 are remaining to be paid as on that date.
Secured against mortgage of all the fixed assets of the Company, both present and future, situated at Roha and mortgage of office premises of the Company, situated at Mumbai.
Out of total outstanding term loan as on 31st March, 2018 of Rs. 76.34 Lakhs, amount due in next twelve months is Rs. 76.34 Lakhs, which is shown as ‘Current maturities of Long Term Debts’ under ‘Other Current Liabilities’.(See Note No. 21 (1)(i) ). The balance Term Loan of Rs. NIL is shown above as Working Capital Term Loan.
(a) (ii) Car Loan from a bank
Loans against vehicles are for a period of three to five years and repayable by way of equated monthly installment, Interest rate ranges between 9.50 to 10.25%
Secured against hypothecation of vehicles.
Out of total outstanding term loan as on 31st March, 2018 of Rs. 56.48 lakhs, amount due in next twelve months is Rs. 15.73 Lachs, which is shown as ‘ Current maturities of Long Term Debts’ under ‘Other Current Liabilities’(See Note No. 21 (1)(ii) ) . The balance Term Loan of Rs. 40.75 Lakhs is shown above as Car loan from a bank.
(a) (iii) Project Loan from bank
Repayable in 36 EMI’s commencing from 27.07.2015. Rate of interest is 10.25% to 12%. 21 EMIs have been paid in time, up to 31st March, 2018 and 3 are remaining to be paid as on that date.
Secured against mortgage of all the fixed assets of the Company, both present and future, situated at Roha and mortgage of office premises of the Company, situated at Mumbai.
Out of total outstanding term loan as on 31st March, 2018 of Rs. 13.03 Lakhs, amount due in next twelve months is Rs.13.03 Lakhs, which is shown as ‘ Current maturities of Long Term Debts’ under ‘Other Current Liabilities’(See Note No. 21 (1)(iii) ) . The balance Term Loan of Rs. Nil is shown above as Project Loan.
(a) (iv) Property Loan from bank
Property loan RS. 158.82 lacs taken on 21.03.2016 from a Bank. Repayable in 36 EMI’s commencing from 21.04.2016. Rate of interest is 10.25%-12%. 24 EMIs have been paid in time, up to 31st March, 2018 and 12 are remaining to be paid as on that date.
Out of total outstanding property loan as on 31 st March 2018 of Rs. 57.23 lakhs, amount due in next twelve months is Rs.57.23 Lakhs, which is shown as ‘ Current maturities of Long Term Debts’ under ‘Other Current Liabilities’(See Note No.21 (1)(iv) ) The balance Term Loan of Rs. NIL is shown as Property Loan as above. Property loan is secured by way equitable mortgage of office premises of the Company situated at Mumbai.
(a) (v) Mortgage Term Loan from Bank:
Repayable in 60 EMI’s will commence from 27.04.2018. Rate of interest is 10.25%,
Secured against mortgage of all the fixed assets of the Company, both present and future, situated at Roha and mortgage of office premises of the Company, situated at Mumbai.
Out of total outstanding mortgage loan as on 31 st March 2018 of Rs. 1100.00 lakhs, amount due in next twelve months is Rs. 177.52 Lakhs, which is shown as ‘ Current maturities of Long Term Debts’ under ‘Other Current Liabilities’(See Note No.21 (1)(v) ) The balance Term Loan of Rs. 922.48 Lakhs is shown as Mortgage Term Loan from Bank as above.
**Interest free Sales Tax Loan from MEDA
Interest free Sales Tax Loan from MEDA is repayable in 30 equal installment startding from May 2010 and ending May 2023
Out of total outstanding Interest free Sales Tax Loan as on 31 st March 2018 of Rs.110.67 lakhs, amount due in next twelve months is Rs.51.37 Lakhs, which is shown as ‘ Current maturities of Long Term Debts’ under ‘Other Current Liabilities’(See Note No. 21 (1)(vi) ) The balance Term Loan of Rs.59.30 Lakhs is shown as Interest free Sales Tax Loan as above.
***Non- Convertible Preference Shares
Long Term Borrowing includes 280000, 2.5% Cumulative redeemable non-convertible Preference Shares of Rs.100/-each aggregating to Rs.280 lakhs which has been classified as Financial Liabilities as per requirements of Ind As 32 “Financial instrument presentation”. These Preference Shares were repayable in 16 equal yearly installment of Rs.17.50 lakhs each commencing from 1st April 2012. However, Company had approach and requested the Preference share holder for further extension of time for the redemption of the said Preference Shares. Preference share holder has agreed for further extension of time for the repayment of the said Preference shares any time upto 31st March 2022.
The Company has Authorised to issue 20,00,000 Cumulative redeemable Preference shares of Rs.100/- each (payable at par) out of which the Company has issued 2,80,000, 2.5% Cumulative redeemable non-convertible Preference Shares of Rs.100/- each fully paid up.
The Dividend as and when declared by the Company shall paid to the shareholder on the record date, which Board may fix from time to time. If in any year, the company has not declared any dividend on the Preference shares, the right to the dividend shall accumulated and the accumulated dividend will be paid out of the profits, if any, of the subsequent financial years including carry forward profit if any of the previous years before any dividend is paid to Equity Share holders.
Consequent to change in classification of 2.5% , Redeemable, cumulative, non-convertible preference shares, liability pertaining to undeclared and unpaid dividend and Dividend Distribution Tax thereon since up to the transition date i.e. up to 01.04.2016 amounting to Rs. 67.73 Lakhs has been reduced from Retained Earnings and included under Other Current Liabilities. Dividend and Dividend Distribution Tax thereon for the year ended 31st March 2018 and 31st March 2017 are accounted for under finance charges.
2.1 Payment towards trade is made as per the terms and condition of the contract/purchase order. Average Credit period is 30-90 days
2.2 (*) There are no Micro, Small and Medium Enterprises, to whom the Company owes dues at the Balance Sheet date, computed on unit wise basis. Further, the Company has not paid any interest to any Micro, Small and Medium Enterprises during the year ended on the Balance Sheet date, nor is any interest payable to any Micro, Small and Medium Enterprises(MSME) on the Balance sheet date. The information on MSME has been determinded to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
3 In view of the “Unabsorbed Depreciation” & “Unabsorbed Business Losses” accruing from the past years, there is no normal tax payable in the year ended 31st March, 2018 and for the year ended 31st March, 2017. In view of book profit in the current year in terms of Section 115JB of the Income Tax Act, 1961, provision has been made for Rs.348.92 Lakhs towards Minimum Alternate Tax(MAT) during the year ended 31.03.2018(Previous year Rs. 443.94 Lakhs)
4 There is only one reportable segment i.e chemicals business of the Company.
5 Corporate Social Responsibility
As per section 135 of the Companies Act, 2013, a Company meeting the applicability threshold needs to spend at least 2% of its average net profits for the immediately preceding three financial years on Corporate Social Responsibility (CSR) activities. Due to the average net profit of the Company is being negative, Company is not required to spend any amounts towards Corporate Social Responsibility activities during the year.
6 First Time Adoption of Ind AS:
These are the Company’s first financial statements prepared in accordance with Ind AS.
The significant accounting policies set out in note 1(2) have been applied in preparing the financial statements for the year ended 31st March, 2018, the comparative information presented in these financial statements for the year ended 31st March, 2017, and in the preparation of an opening Ind AS balance sheet at 1st April, 2016 (the Company’s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies ( Accounting Standards) Rules, 2006 (as amended) and the other relevant provisions of the Act (previous GAAP or Indian GAAP).
Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions applied in the transition from previous GAAP to Ind AS Business Combinations
The Company has elected to apply Ind AS 103 prospectively to business combinations occuring after its transition date. Business Combinations occuring prior to the transition date have not been restated.
The Company has elected not to apply Ind AS 21 retropectively to fair value adjustment and goodwill arising in business combination that occurred prior to the transition date.
Deemed Cost
The Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value as its deemed cost as their fair value on the date of transition i.e. 01.04.2016.
Investments in Subsidiary:
The Company has elected to measure its investment in subsidiary at their previous GAAP carrying value as its cost.
An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.
Designation of previously recognized financial instruments:
The Company has opted to to designate certain equity investment (other than equity investments in Subsidiary Company) as FVTOCI on the date of transition.
Explanations for reconciliation of Balance Sheet as previously reported under IGAAP to IND AS.
A Valuation of Investments at fair Value through Other Comprehensive Income and to be reclassified to the Statement of Profit and Loss subsequently.
B Recognition of of certain financial assets like deposits, initially at Fair Value and subsequently at Amortized Cost and resultant winding/unwinding of interest element as per Ind AS-109
C Reclassification of Preference shares principal amount as Debt.
D Resultant effect of all changes effected in Retained Earnings on the transition to and implementation of Ind AS with effect from the date of transition i.e. 01.04.2016
E Reclassification of Preference shares principal amount as Debt and fair value of MEDA Loan at amortized cost
F Recognition of of certain financial liabilities like loans, deposits etc initially at Fair Value and subsequently at Amortized Cost and resultant winding/unwinding of interest element as per Ind AS-109
G Increase in Finance cost liability on account of provision for Preference shares dividend and tax payable thereon.
6.1 Impact of Ind AS adoption on the statement of cash flow for the year ended 31st March, 2018
The transition from previous GAAP to Ind AS has not affected the cash flows of the Company.
7 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 Company, through three layers of defense namely policies and procedures, review mechanism and assurance aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit committee of the Board with top management oversee the formulation and implementation of the Risk management policies. The risks are identified at business unit level and mitigation plan are identified, deliberated and reviewed at appropriate forums.
A Financial risk management
The Company has exposure to the following risks arising from financial instruments:
- credit risk (see (i));
- liquidity risk (see (ii)); and
- market risk (see (iii)).
i. Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers, loans and investments. The carrying amount of financial assets represents the maximum credit risk exposure.
Trade receivables
The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before the payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and business intelligence. Sale limits are established for each customer and reviewed annually. Any sales exceeding those limits require approval from the appropriate authority as per policy. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a institutional, dealers or end-user customer, their geographic location, industry, trade history with the Company and existence of previous financial difficulties.
Expected credit loss for trade receivables:
The Company based on internal assessment which is driven by the historical experience/ current facts available in relation to default and delays in collection thereof, the credit risk for trade receivables is considered low. The Company estimates its allowance for trade receivable using lifetime expected credit loss and accordingly provision is made for the doubtful debts.
Expected credit loss on financial assets other than trade receivables:
With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from which these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible and accordingly no provision for excepted credit loss has been provided on these financial assets.
ii. Liquidity risk
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 risking damage to the Company’s reputation.
The Company’s finance and accounts department is responsible for managing the short term and long term liquidity requirements. Short term liquidity situation is reviewed daily. Longer term liquidity position is reviewed on a regular basis by the Board of Directors and appropriate decisions are taken according to the situation.
iii. Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates that will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Currency risk
The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of the Company. The currencies in which the Company is exposed to risk are generally uSD and EuR. The Company follows a natural hedge driven currency risk mitigation policy to the extent possible. Any residual risk is evaluated and appropriate risk mitigating steps are taken, including but not limited to, entering into forward contract.
Sensitivity analysis
A reasonably possible strengthening (weakening) of the USD and EUR against all other currencies at 31 March would have affected the measurement of financial exposure denominated in a foreign currency and affected equity and profit or loss by the amounts shown below.
Interest rate risk
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. The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The borrowings of the Company are principally denominated in rupees of fixed rates of interest. The Company has exposure to interest rate risk, arising principally on changes in base lending rate.
B Capital management
For the purpose of Company’s Capital Management, capital includes issued capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s Capital Management is to maximise the share holder value.
The Company manages its capital structure and make adjustment in light of changes in economic conditions and requirements covenants.
8 Segment Reporting :-
a) Primary Business Segment :
The Company is engaged in manufacture of Chemicals. As the Company is engaged only in one business segment.
9 Employee Benefits :
The Company has made provision for following benefit plans as per Accounting Standard 15 (Revised 2005) “ Employee Benefits”. Defined Benefit Plans / Long Term Compensated Absences: As per Actuarial Valuation as on 31.03.2018, the required data is as follows:
10 Figures in respect of the previous year have been regrouped / rearranged wherever necessary.
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