Details of Security and Repayment Terms :
(i) The Company has taken External Commercial Borrowing of Euro 180.00 lakhs equivalent to H 14,400.00 lakhs from Standard Chartered Bank to finance its capital expenditure plans. Outstanding balance for this borrowing is Euro 48.00 lakhs equivalent to H4,293.24 lakhs (3151 Mach 2022: H8,085.00 lakhs). The borrowing is secured by first pari passu mortgage charge on all immovable properties, first pari passu hypothecation charge over all the moveable assets.The borrowing carries interest @ Euribor 1.6% p.a. payable on quarterly rests. The Company has entered into Interest Rate Swap ('IRS') agreement with the bank for a fixed interest @ 1.85% p.a. and hedging ofthe foreign exchange rate whereby the Company will pay additional interest @ 4.95% p.a. The effective interest rate after considering basic interest rate and interest for hedging is 6.80%.The borrowing is repayable in 15 quarterly instalments of Euro 12 Lakhs each, starting from July 3, 2020.
ii) The Company has availed following Rupee Term Loan facilities:
1) Term loan amounting H 11,000 Lakhs from HDFC Bank Limited for capital expenditure toward setting up of new Chloromethane Plant. Outstanding balance for this facility is H 1,650 lakhs (31st March 2022: H3,850 lakhs). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus Nil spread. The interest rate for the current year ranges between 7.20% to 7.85% (31st March 2022: 7.20%). The Term Loan is repayable in 20 quarterly instalments of H550.00 Lakhs each and repayment started from 9th March 2019.
2) Term loan amounting H 15,000 Lakhs from HDFC Bank Limited for capital expenditure toward setting up of new Caustic Soda Lye Plant with new 36 MW Captive Power Plant. Outstanding balance for this facility is
H6,667 Lakhs (31st March 2022: H 10,000 Lakhs). This borrowing carries interest @ 1 year MCLR (Benchmark rate) plus NIL spread (to be set every year) payable on monthly rest.The effective interest rate ranges between 7.20% to 8.85%. (31st March 2022: 7.25%) The term loan is repayable in 18 quarterly instalments of H833.33 Lakhs each starting from 1st November; 2020.
3) Term loan amounting H 12,500 lakhs from Federal Bank Limited for capital expenditure toward setting up of new Hydrogen Peroxide Plant. Outstanding balance for this facility is H5,263 Lakhs (31st March 2022: H7,895 Lakhs).The borrowing carries interest @ 12 month T-bill rate (benchmark as published by RBI - to be reset every year) plus spread (fixed @ 0.94%) payable on monthly rest. The effective interest rate remained 7.90% (31st March 2022: 6.64%). The Term Loan is repayable in 19 quarterly instalments of H657.89 lakhs each starting from 29th September, 2020.
4) Term loan amounting H 19,000 lakhs from State Bank of India for capital expenditure toward setting up of new Epichlorhydrin Plant. Outstanding balance for this facility is H 17,095 Lakhs as at the Balance Sheet date (31st March 2022: H 19,000 Lakhs) . The borrowing carries interest at 6 month MCLR (Benchmark rate) plus spread of 0.10% (to be reset every half year) payable on monthly rest. The effective interest rate ranges between 7.05% to 8.15% (31st March 2022 : 7.05%). The Term Loan is repayable in 20 quarterly instalments of H950.00 lakhs each starting from 31st December 2022.
5) Term loan amounting H28,475 lakhs from HDFC Bank Limited for capital expenditure toward setting up of new Chloro Polyvinyl Chloride Plant and expansion of Caustic capacity with 36 MW Captive Power Plant. Outstanding balance for the facility is H28,475 Lakhs as
at the Balance Sheet date (31st March 2022: H2I,000 Lakhs), the company has drawn down H7,475 lakhs during the year The borrowing carries interest at 6 month MCLR (Benchmark rate) plus Nil spread payable on monthly rest. The effective interest rate ranges between 7.05% to 8.45% (31st March 2022 : 7.05%). The Term Loan is repayable in 20 quarterly instalments of H 1,423.75 lakhs each starting from September 2023.
6) The Term Loan facilities are secured by first pari passu mortgage charge of all immovable properties of the Company and first pari passu hypothecation charge over all the movable assets of the Company “
iii) The Company has executed an Indenture of Mortgage with Lenders of these term loans (Secured Parties) by creating mortgages on Immovable Properties of the Company by creating a charge by way of registered mortgage. According to the indenture, all the Secured Parties will share pari passu charge with first ranking and priority over the Immovable Properties of the Company both present and future.
iv) Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service Coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio ofTotal Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms ofthe loan agreements.
v) 15,00,00,000 Redeemable Preference Shares (31 March 2022 : 21,09,19,871 ) of H10 each is cumulative and carry coupon/dividend rate of 8.00% p.a. with redeemable tenure of 20Years from the date of allotment, The Company has the right to exercise the option of early redemption, considering which Company has redeemed H6,09l.99 lakhs during the year: Redemption is done at face value.
Note:
The Company has availed Working Capital Facility of H40,000 Lakhs (31st March 2022: H25,000 Lakhs) as sanctioned limit from consortium comprising of ICICI Bank Limited H9,000 Lakhs, Standard Chartered Bank H8,000 Lakhs and HDFC Bank Ltd. H8,000 Lakhs, State Bank of India H 10,000 Lakhs and Kotak Mahindra Bank H5,000 Lakhs.
Rate of interest stipulated by ICICI Bank Limited is 6 Month MCLR Nil spread on the principal amount remains outstanding each day Interest rate for the year ranges between 4.90% - 8.35% (31st March 2022: 4.90% - 7.25%).
Rate of interest stipulated by Standard Chartered Bank is monthly MCLR . Interest rate for the year ranges between 5.10% - 7.10% (31st March 2022: 5.00% - 6.75%).
Rate of interest stipulated by HDFC Bank Limited is as per prevailing 6 month MCLR Nil margin.
Interest rate for this ranges between @ 5.00% -8.00% (31st March 2022: 4.90% - 7.20%)."
The Company has availed Working Capital Facility of H5,000 Lakhs (31st March 2022: H NIL) from Kotak Mahindra Bank. The rate of interest stipulated by Kotak Mahindra Bank is 6 month MCLR NIL Spread Interest rate for the year ranges from 5.00% to 7.70% (31st March 2022: Nil).
The Company has availed Working Capital Facility of H 10,000 Lakhs (31st March 2022: H NIL Lakhs) from State Bank of India . The rate of interest stipulated by State Bank of India is 6 month MCLR NIL Spread Interest rate for the year ranges from 6.40% to 7.85% (31st March 2022: Nil).
Bank loans availed by the Company are subject to certain covenants relating to Interest Service Coverage Ratio, Current Ratio, Debt Service Coverage Ratio, Total Outside Liabilities to Total Net Worth, Fixed Assets Coverage Ratio, Ratio ofTotal Term Liabilities to Net Worth and Return on Property, Plant and Equipments. The Company has complied with the covenants as per the terms of the loan agreements.
(b) Defined Contribution Plans
The Company makes Provident Fund contributions to Defined Contribution Plans for qualifying Employees. Under the schemes, the Company is required to contribute a specified percentage of payroll costs to fund the benefits. The Company has recognised Provident Fund contribution of H 185.77 Lakhs (31st March 2022: H 155.21 Lakhs)and contribution to labour welfare of H0.2I lakhs (31st March 2022: H0.I9 lakhs)as expense in Note 30 under the head 'Contributions to Provident and Other Funds'.
38 Segment Reporting
The Company's Chief Operating Decision Maker (CODM) examines the Company's performance from business and geographic perspective. In accordance with Ind AS-108 - Operating Segments, evaluation by the CODM and based on the nature of activities performed by the Company which primarily relate to manufacturing of Chloro Alkali & its Derivatives, the Company does not operate in more than one business segment.
* Income tax demand comprise demand from the Indian Income Tax authorities for payment of additional tax of H 1,662.83 lakhs (31 March 2022: H892.09 lakhs), upon completion of their tax review for the assessment year 2016-17, 2017-18 and 2018-19.The tax demands are mainly on account of adjustment pertaining to 80 IA benefits claimed for captive power plant against sale of steam and power: The matter is pending before CIT (A) and Income Tax Appellate Tribunal (ITAT).
** Service tax demand comprise demand from Service tax Authorities for payment of additional tax of H53.69 lakhs (31 March 2022: H53.69 lakhs), upon completion of their tax review for the financial year 2012-13 and 2014-15. The tax demands are on account of service tax on sales commission and classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
*** Customs tax demand comprise demand from Custom Authorities for payment of additional tax of H62I.83 lakhs (31 March 2022: H62I.83 lakhs), upon completion of their tax review for the financial year 2012-13. The tax demands are on account of classification of coal. The matter is pending before Commissioner of Excise Service Tax Appellate Tribunal (CESTAT).
The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be in favour of Company in the appellate process and no tax expense has been accrued in the financial statements for the tax demand raised. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the company's financial position and results of operations.
B. Capital Commitment
The Estimated amount of Contract to be executed on Capital Account of 24,965.66 Lakhs ( 3151 March 2022 H4,795.40 Lakhs) and not provided for (Net of Advances).
C. Other Commitment
The Company has imported capital good for the various expansion projects under the EPCG Scheme at Nil rate of Custom Duty by undertaking obligation to export. Future outstanding export obligation under the scheme is H NIL (3151 March 2022: H8,164.49 lakhs).
40 DISCLOSURES AS PER MSMED ACT, 2006
The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26th August, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its Customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the 'Micro, Small and Medium Enterprises Development Act, 2006' ('the MSMED Act').
Accordingly the disclosure in respect of the amounts payable to such Enterprises as at 31st March, 2023 has been made in the Financial Statements based on information received and available with the Company Further in view of the Management, the impact of interest, if any that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any Supplier as at the Balance-Sheet date.
On the basis of information and records available with the Company the above disclosures are made in respect of amount due to the Micro, Small and Medium Enterprises, which have been registered with the relevant competent Authorities. This has been relied upon by the Auditors.
41 Leases
The Company has lease contracts for office premise. Leases of office premise is having lease terms of 3 to 9 years.The Company's obligations under its leases are secured by the lessor's title to the leased assets. The Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain premises in good state. The lease contract include extension and termination options. The Company also has certain premises and assets with lease terms of 12 months or less. The Company applies the 'short-term lease'recognition exemptions for these leases.
42. Capital Management
Capital includes only Equity attributable to the Equity Shareholders to ensure that it maintains an efficient Capital Structure and healthy capital ratios in order to support its business and maximise shareholder value. The Company manages its Capital Structure and makes adjustments to it, in light of changes in economic conditions or its business requirements. To maintain or adjust the Capital Structure, the Company may adjust the dividend payment to Shareholders, Return on Capital to Shareholders or issue new Shares. No changes were made in the objectives, policies or processes during the year ended 31 March 2023 and 31 March 2022.
43 Financial Instruments - Fair Values and Risk Management
The 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, Financial Liability and Equity Instrument are disclosed in Note 2 to the Financial Statements.
B. Measurement of Fair values and Sensitivity analysis Fair Value Hierarchy:
The fair value of the Financial Assets and Liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical Assets or Liabilities.
(ii) 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).
Financial Instrument measured at Amortised Cost
The carrying amount of Financial Assets and Financial Liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
Reconciliation of level 1 Fair Values
There have been no transfers between level 1, level 2 and level 3 during the year ended March 31,2023.
Financial Risk Management Framework
The Company's Board of Directors have overall responsibility for the establishment and oversight of the Company's risk management framework. The Company manages market risk through treasury operations, which evaluates and exercises independent control over the entire process of market risk management. The finance team recommends risk management objectives and policies. The activities of this operations include management of cash resources, hedging of foreign currency exposure, credit control and ensuring compliance with market risk limits and policies.
The Company's principal Financial Liabilities, other than Derivatives, comprises of LongTerm and Short Term Borrowings, Trade and Other Payables, and Financial Liabilities. The main purpose of these Financial Liabilities is to finance the Company's Operations. The Company's principal Financial Assets include Loans, Trade and other Receivables, Cash and Cash Equivalents, Other Bank Balances and Other Financial Assets that derive directly from its Operations.
The Company has an effective risk management framework to monitor the risks controls in key business processes. In order to minimise any adverse effects on the bottom line, the Company takes various mitigation measures such as credit control, foreign exchange forward contracts to hedge foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.
The Company has exposure to the following risks arising from Financial Instruments
> Credit Risk ;
> Liquidity Risk ; and
> Market Risk”
i. Credit Risk
Credit Risk is the risk that counter party will not meet its obligation leading to a financial loss. The Company is exposed to credit risk arising from its operating activities primarily from Trade Receivables and from financing activities primarily relating to parking of surplus funds as Deposits with Banks. The Company considers probability of default upon initial recognition of Assets and whether there has been a significant increase in credit risk on an ongoing basis throughout the reporting period.
The carrying amount of following Financial Assets represents the maximum credit exposure:
Financial Instruments and Cash Deposit:
Credit Risk from Balances with Banks and Financial Institutions is managed by the Company's Treasury Department. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty's potential failure to make payments.
Trade Receivables
The Sales Department has established a Credit Policy under which each new Customer is analysed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each Customer and reviewed periodically Any sales exceeding those limits requires further approval.
Trade Receivables of the Company are typically unsecured ,except to the extent of the security deposits received from the Customers or Financial Guarantees provided by the market organizers in the business.Credit risk is managed through credit approvals and periodic monitoring of the creditworthiness of Customers to which Company grants credit terms in the normal course of business. The Company performs ongoing credit evaluations of its Customers' financial condition and monitors the creditworthiness of its Customers to which it grants credit terms in the normal course of business. The allowance for impairment of Trade Receivables is created to the extent and as and when required, based upon the expected collectability of Accounts Receivables.The Company evaluates the concentration of risk with respect to Trade Receivables as low, as its Customers are located in several jurisdictions and industries and operate in largely independent markets.
The Company measures the expected credit loss ofTrade Receivables and Loan from individual Customers based on historical trend, industry practices and the business environment in which the Entity operates. Loss rates are based on actual credit loss experience and past trends.
Management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of Customer Credit Risk, including underlying Customers' Credit Ratings if they are available.
Management estimates that the amount of provision of H Nil Lakh (31st March 2022 : NIL) is appropriate
ii. Liquidity Risk
Liquidity Risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
Exposure to Liquidity Risk
The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual Cash Flows and matching the maturity profiles of the Financial Assets and Liabilities. The table below summarises the remaining contractual maturities of Financial Liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.
Excessive Risk Concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company's performance to developments affecting a particular Industry
In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly Selective hedging is used within the Company to manage risk concentrations at both the relationship and industry levels
iii. 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 three types of risk: Currency Risk, Interest Rate Risk, and Other Price Risk such as Equity Price Risk. Financial Instruments affected by market risk include Loans and Borrowings, Deposits, FVTOCI and Amortised Cost Investments and Derivative Financial Instruments.
Foreign Currency Risk
Foreign Currency Risk is the risk that the fair value or future cash flows of an 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 (when revenue or expense is denominated in a foreign currency).
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 12-month period for hedges of actual sales and purchases and 12-month period for foreign currency loans. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency
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's exposure to the risk of changes in market interest rates relates primarily to the Company's Long-Term Debt obligations with floating interest rates. The Company manages its Interest Rate Risk by having balanced portfolio of fixed and variable rate Loans and Borrowings.
45 Composite Scheme of Arrangement
The NCLT Ahmedabad Bench vide its Order dated 03 May 2021 (the “Order”), approved the Composite Scheme of Arrangement (“the Scheme”) to merge Meghmani Organics Limited (MOL) with the Company along with its Trading Division and Equity Investment in the Company Pursuant to the Scheme, the Company filed Information Memorandum with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and further filed the same with SEBI for the approval. The Company has received final approval on August 16, 2021, pursuant to which the Company was listed with NSE and BSE on August 18,2021.
Further, as per the Order, Optionally Convertible Redeemable Preference Shares (OCRPS) issued by the Company to Meghmani Organics Limited is converted into equal number of Redeemable Preference Shares (RPS) with same terms and conditions and tenure. Accordingly the RPS has been reclassified from Instruments entirely Equity in nature to Non Current Borrowings.
46 Events occurred after the Balance Sheet date
The Company evaluates events and transactions that occur subsequent to the Balance Sheet date but prior to approval of Financial Statement to determine the necessity for recognition and/or reporting of any of these events and transactions in the Financial Statements. As of 25th April 2023 there were no material subsequent events to be recognized or reported that are not already disclosed.
47. Other Statutory Information
(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 under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder
(ii) The Company do not have any transactions or balance with companies struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year
(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), 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 have not received any fund from any person(s) or entity(ies), 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 have not any such 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
48 Previous years figures have been regrouped, restated and reclassified wherever necessary to make them comparable with those of the current year.
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