3.12 Provisions, Contingent Liabilities and Contingent Assets:
Provision is recognized when the Company has a present obligation (legal or constructive) as a result of past events and it is probable that the outflow of resources will be required to settle the obligation and in respect of which reliable estimates can be made.
A disclosure for contingent liability is made when there is a possible obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision/ disclosure is made. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Contingent assets are not recognized in the financial statements. Provisions and contingencies are reviewed at each balance sheet date and adjusted to reflect the correct management estimates.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets. Provisions, contingent liabilities, contingent assets and commitments are renewed at each balance sheet date.
3.13 Cash and Cash Equivalents
Cash and cash equivalent comprise cash on hand and demand deposits with banks which are short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
3.14 Exceptional items
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the financial statements.
Note- 51: Financial Risk Management Objectives & Policies:
The Company’s financial risk management is an integral part of how to plan and execute its business strategies. The Company’s financial risk management policy is set by the Managing Board. The Company’s principal financial liabilities, other than derivatives, comprise borrowings and trade & other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to support its operations. The Company’s principal financial assets include Investments, loans given, trade and other receivables and cash & short-term deposits that derive directly from its operations. Risk assessment and management of these policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities.
The Company has exposure to the following risks arising from financial instruments: -
(i) Market Risk
(a) Currency Risk
(b) Interest Rate Risk
(c) Commodity Risk
(d) Equity Risk
(ii) Credit Risk and
(iii) Liquidity Risk
Risk Management Framework
The Company’s activities expose it to variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management is to minimize potential adverse effects of risk on its financial performance. The Company’s risk management assessment policies and processes are established to identify and analyze the risk faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management of these policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s Activity. The Board of Directors and Audit Committee are responsible for overseeing these policies and processes.
In order to minimize any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency exposures. Derivatives are used exclusively for hedging purposes and not as trading/speculative instruments.
(i) Market Risk:-
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices, commodity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables and payables. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the returns.
(a) Currency Risk
The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss of the Company, where any transactions has more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the entity.
Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risk primarily relates to fluctuations in U.S. dollar, GBP and Euro, against the respective functional currencies (Rs.) of Gokul Agro Resources Limited. The Company, as per its risk management policy, uses its foreign exchange and other derivative instruments primarily to hedge foreign exchange and interest rate exposure. The Company does not use derivative financial instruments for trading or speculative purpose. i) Exposure to Currency Risk:-
Refer Note no. 49 for foreign currency exposure as at 31st March, 2024 and 31st March, 2023 respectively.
(b) Interest Rate Risk
Interest rate risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to market risk for changes in interest rates relates to borrowings from financial institutions. In order to optimize the Company’s position with regards to the interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in it total portfolio.
For Company’s total borrowings, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year:
(c) Commodity Risk
The prices of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, government policies, changes in global demand resulting from population growth and changes in standards of living and global production of similar and competitive crops. During its ordinary course of business, the value of the Company’s open sales and purchases commitments and inventory of raw material changes continuously in line with movements in the prices of the underlying commodities. To the extent that its open sales and purchases commitments do not match at the end of each business day, the Company is subjected to price fluctuations in the commodities market.
While the Company is exposed to fluctuations in agricultural commodities prices, its policy is to minimize its risks arising from such fluctuations by hedging its purchase either through direct sales of a similar commodity or through futures contracts on the commodity exchanges.
In the course of hedging its sales either through direct purchases or through futures, the Company may also be exposed to the inherent risk associated with trading activities conducted by its personnel. The Company has in place a risk management system to manage such risk exposure.
(d) Equity Risk
Equity/Mutual Fund price risk is related to change in market reference price of investments in equity/mutual fund securities held by the Company. The fair value of quoted investments held by the Company exposes the Company to equity/mutual fund price risks. These investments are classified as current investments.
The fair value of quoted investments in equity/mutual fund, classified as fair value through profit and Loss as at 31st March, 2024 and 31st March, 2023 was 850.25 Lakhs and 324.88 Lakhs respectively.
A 5% change in market prices of such securities held as at 31st March, 2024 and 31st March, 2023, would result in an impact of 42.51 Lakhs and 16.24 Lakhs respectively on equity/mutual fund investment before considering tax impact.
(ii) Credit Risk
Credit risk arises from the possibility that a customer or counter party may not be able to settle their contractual obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is significant increase in credit risk the Company compares the risk of a default occurring and the asset at the reporting date with the risk of default as the date of initial recognition. It considers reasonable and supportive forwardinglooking information such as:
i. Actual or expected significant adverse changes in business.
ii. Actual or expected significant changes in the operating results of the counterparty.
iii. Financial or economic conditions that are expected to cause a significant change to the counterparty's ability to mere its obligation.
iv. Significant increase in credit risk on other financial instruments of the same counterparty.
v. Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.
A. Trade and Other Receivables: -
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the ordinary course of business.
III. Provision for expected credit losses against "I" and "II" above:
The Company has assets where the counter- parties have sufficient capacity to meet the obligations and where the risk of default is very low. Hence based on historic default rates, the Company believes that, no impairment allowance is necessary in respect of above mentioned financial assets, except otherwise stated above.
B. Cash and cash equivalents
The Company holds cash and cash equivalents with credit worthy banks of Rs.8,442.52 Lakhs as at 31st March, 2024 [31st March, 2023 Rs. 5,743.39 Lakhs]. The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.
C. Derivatives
The derivatives are entered into with credit worthy banks and financial institution on counterparties. The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.
D. Investments
The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties apart from those already given in financials and does not have any significant concentration of exposures to specific industry sectors or specific country risks.
(iii) Liquidity Risk
Liquidity Risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. The Company manages its liquidity risk by ensuring, 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 risk to the Company’s reputation. The Company’s treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company’s net liquidity position through rolling forecast on the basis of expected cash flows.
The Company has obtained fund and non-fund based working capital lines from various banks. The Company also constantly monitors various funding options available in the debt and capital markets with a view to maintaining financial flexibility.
As of 31st March, 2024, the Company has working capital of Rs. 23,516.98 Lakhs [31st March, 2023 Rs. 27,359.60 Lakhs] including cash and cash equivalents of Rs. 8,442.52 Lakhs [31st March, 2023 Rs. 5,743.39 Lakhs] and investments in term deposits (i.e., bank certificates of deposit having maturities of less than 3 months & more than 3 months and less than 12 months) of Rs.20,848.67 Lakhs [31st March, 2023 Rs. 17,111.53 Lakhs].
Capital Management
The purpose of the Company’s capital management is to maximize shareholder value. It includes issued capital and all other equity reserves. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirement of the financial covenants.
Note-53: Approval of Financial Statements
The financial statements of the Company for the year ended 31st March, 2024 have been reviewed by the audit committee and approved by the Board of Directors in its meeting held on 15th May, 2024.
Note:- 54: Additional Regulatory Disclosures As Per Schedule III Of Companies Act, 2013
A) Additional Regulatory Information pursuant to Clause 6L of General Instructions for preparation of Balance Sheet as given in Part I of Division II of Schedule III to the Companies Act, 2013, are given hereunder to the extent relevant and other than those given elsewhere in any other notes to the Financial Statements.
a. The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
b. The Company has Fund-based and Non-fund-based limits of Working Capital from Banks and Financial institutions. For the said facility, the submissions made by the Company to its lead bankers based on closure of books of accounts at the year end, the quarterly returns or statements comprising stock statements, statement of trade receivables and trade payables and ageing analysis of the debtors/other receivables, and other stipulated financial information filed by the Company with such banks or financial institutions are generally in agreement with the unaudited books of account of the Company of the respective quarters and no material discrepancies have been observed except as stated below.
*Multiple banks involved as there is consortium finance by various banks.
Note - The above differences are not considered material with reference to the size and nature of the business operations of the Company.
c. The Company has not been declared as a willful defaulter by any lender who has powers to declare a company as a willful defaulter at any time during the financial year or after the end of reporting period but before the date when the financial statements are approved.
d. The Company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of the Companies Act, 1956.
e. The Company has compiled with the number of layers prescribed under clause (87) of section 2 of the Companies Act 2013 read with Companies (Restrictions on number of Layers) Rules, 2017.
f. Registration of charges or satisfaction with Registrar of Companies (ROC)
- The Company has registered/satisfaction of charges with ROC from time to time.
g. The Company has not advanced or loaned or invested funds to any other person(s) or entity(is), including foreign entities(intermediaries), with the understanding that the intermediary shall;
i. 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
ii. Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
h. The Company has not received any funds 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;
i. 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
ii. Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
i. The Company does not have any transactions which is not recorded in the books of accounts but 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).
|. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
B) Audit Trail :
The Company uses an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the accounting software, except that audit trail feature is not enabled for direct changes to the data for users with the certain privileged access rights to the SAP application and the underlying HANA database. Further no instance of audit trail feature being tampered with was noted in respect of the accounting software.
For and On Behalf of the Board As per our report of even date attached
Kanubhai J. Thakkar Jayesh Thakkar For Surana Maloo & Co.
Chairman & Managing Director Managing Director Chartered Accountants
DIN : 00315616 DIN : 03050068 Firm Reg.No.-112171W
Hitesh T. Thakkar Dhara Chhapia Per. Vidhan Surana
Whole Time Director & Chief Executive Officer Chief Financial Officer Partner
DIN : 01813667 Membership No: 041841
Ankita Parmar
Company Secretary M. No. F12827
Date: 15th May, 2024 Date: 15th May, 2024
Place: Ahmedabad Place: Ahmedabad
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