Mar 31, 2023
35. Contingent liabilities
The Company is involved in a number of appellate, judicial and arbitration proceedings (including those described below) concerning matters arising in the course of conduct of the Company''s businesses. Some of these proceedings in respect of matters under litigation are in early stages, and in some other cases, the claims are indeterminate. A summary of claims asserted on the Group in respect of these cases have been summarised below.
Amounts in respect of claims asserted by various revenue authorities on the Company, in respect of taxes, which are in dispute, have been tabulated below:
As at March 31, 2023 |
As at March 31, 2022 |
|
Disputed Income-Tax Liability (excluding interest) |
25 |
26 |
Disputed Excise Duty / Service Tax liability (excluding interest) |
181 |
182 |
Disputed Sales Tax/ GST liability |
58 |
52 |
Disputed Custom Duty liability |
22 |
22 |
Disputed Fiscal Penalty for cancellation of licenses |
33 |
33 |
Claims against the Company not acknowledged as debts |
1 |
1 |
The management believes that the claims made are untenable and is contesting them. As of the reporting date, the management is unable to determine the ultimate outcome of above matters. However, in the event the revenue authorities succeed with enforcement of their assessments, the Company may be required to pay some or all of the asserted claims and the consequential interest and penalties, which would reduce net income and could have a material adverse effect on net income in the respective reported period.
Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above, including where:
i. plaintiffs / parties have not claimed an amount of money damages, unless management can otherwise determine an appropriate amount;
ii. the proceedings are in early stages;
iii. there is uncertainty as to the outcome of pending appeals or motions or negotiations;
iv. there are significant factual issues to be resolved; and/or
v. there are novel legal issues presented.
However, in respect of the above matters, management does not believe, based on currently available information, that the outcomes of the litigation, will have a material adverse effect on the Company''s standalone financial condition, though the outcomes could be material to the Group''s operating results for any particular period, depending, in part, upon the operating results for such period.
Pursuant to the judgment of the Supreme Court of India on February 28, 2019 regarding the allowances to be considered for computing Provident Fund liability, certain components of compensation hitherto excluded from PF need to be included. There are interpretative challenges in application of the judgment retrospectively and the Company has been legally advised that the judgment would be applicable prospectively.
1. The remuneration of key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends. The above figures do not include provisions for gratuity and compensated absence as separate actuarial valuation are not available.
2. Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
38. Hedging activities and derivatives
Derivatives not designated as hedging instruments
The Company uses full currency interest rate swap and foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions.
39. Category-wise classification of financial instruments (Contd.)
Valuation techniques and significant unobservable inputs:
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 following methods and assumptions were used to estimate the fair values:
- The fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other noncurrent financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
- The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.
- The fair value of mutual funds are based on NAV at the reporting date
- The fair values of the remaining FVTOCI financial assets are derived from quoted market prices in active markets.
- The fair values of the Company''s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period. The own nonperformance risk as at March 31, 2023 was assessed to be insignificant.
- The discount for lack of marketability represents the amounts that the Company has determined that market participants would take into account when pricing the investments.
The carrying amount of financial assets and financial liability measured at amortized cost in the standalone financial statements are a reasonable approximation of their fair value since the Company does not anticipate that the carrying amounts would be significantly different from the value that would eventually be received or settled.
The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.
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 a balanced portfolio of fixed and variable rate loans and borrowings.
41. Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to its subsidiaries to support its operations. The Company''s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
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: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI investments and derivative financial instruments.
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
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.
The Company hedges its exposure to fluctuations on the foreign currency loan by using foreign currency swaps and forwards.
At March 31, 2022, the Company''s hedge position is stated in Note 38. This foreign currency risk is hedged by using foreign currency forward contracts and full currency interest rate swaps.
The following tables demonstrate the sensitivity to a reasonably possible change in USD and EUR 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.
The movement in the pre-tax effect is a result of a change in the fair value of monetary assets and liabilities denominated in US dollars, where the functional currency of the entity is a currency other than US dollars. Although the derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur.
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 investment in listed and unlisted equity securities are not significant.
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) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. The Company assesses impairment based on expected credit losses (ECL) model. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.
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.
The Company''s maximum exposure to credit risk for the components of the balance sheet at March 31,2023 and March 31, 2022 is the carrying amounts as illustrated in Note 10 except for financial guarantees and derivative financial instruments.
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.
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 maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
Capital includes equity attributable to the equity holders 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 capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended March 31, 2023 and March 31,2022.
have been challenged before the appropriate authorities. The Company has been advised by legal counsel that they have strong grounds to succeed in the above matters.
45. Amalgamation with Advanta Limited
The Hon''ble High Court of Gujarat vide its order dated June 23, 2016 had sanctioned the Scheme of Amalgamation of Advanta Limited with the Company with an appointed date of April 1, 2015. In accordance with the provisions of the scheme and as approved by the High Court, the amalgamation was accounted for under the purchase method specified in Accounting Standard 14 - ''Accounting for Amalgamations'' which is different from Ind AS 103 ''Business Combinations''. As per the Court approval the goodwill arising on amalgamation is being amortised over a period of ten years from the appointed date, which is not amortised under Ind AS 103 but only tested for impairment.
If the Company had the accounting treatment prescribed under Ind AS 103 been followed, general reserves at 31st March 2023 and 31st March 2022 would have been lower by I 870 and I 1,115 crores respectively with consequential impact on profit after tax reported for the year ended 31st March 2023 and 31st March 2022 would have been higher by I 246 crores and I 370 crores respectively. Subsequently the said goodwill has been transferred to Advanta Enterprises Limited as part of the Business Transfer Agreement with effect from 30th November 2022.
In order to achieve this overall objective, 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 borrowings in the current period.
* There is no net debt outstanding as at March 31, 2023 so this ratio is not applicable for the year ended March 31, 2023.
Pursuant to a fire incident on 6th May 2022, in a portion of one of the manufacturing plant in Ankleshwar Unit 1, certain property, plant and equipment, inventory and other assets were damaged. During the year, the Company has written off net book value of assets damaged and inventory, and recognized provision for employee compensation aggregating I 31 crores. Basis valid insurance contracts with respect to the said loss, an insurance claim of I 19 crores was recognised and received during the year and balance I 12 crores booked as expenses under exceptional items.
Pursuant to the search operations conducted by the Income Tax authorities in the prior year, block assessment u/s 153A of the Income Tax Act 1961 (''the Act'') has been completed for the Assessment Years (''AY'') 2014-15 to 2020-21 for corporate tax and transfer pricing in the previous quarter. The Company has evaluated these orders and considering the proposed rectification applications to the assessment orders, adequate tax provisions has already been made in the books of accounts in prior years. Furthermore, based on the legal advice, the Company has also challenged the assessment orders before the appropriate authority. Further, in case of certain overseas subsidiaries of the Company, the Indian income tax authorities have invoked provisions of ''Place of Effective Management in India'' for AY 2017-18 to AY 2020-21, and the provisions related to ''control and management wholly in India'' for AY 2014-15 to AY 2016-17 and have started tax proceedings against these companies in India during the year. Based on legal advice, the entire proceedings
Disaster Relief, Education, Skilling, Employment, Entrepreneurship, Health, Wellness and Water, Sanitation and Hygiene, Heritage
The consolidated financial statements of the Company contain segment information as per Ind AS 108-Operating Segments accordingly separate segment information is not included in the Standalone financial statement.
Qualitative Note: Nature of the lessee''s leasing activities.
The discount rate reflect management''s estimate of risk specific to each CGU. The cashflow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on Management''s estimate of the long term compound annual EBITDA growth rate, consistent with the assumptions that a market participant would make.
The Company has conducted an analysis of the sensitivity of the impairment test to changes in the key assumptions used to determine the recoverable amount of CGU to which goodwill is allocated. The management believe that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the related CGU.
51. Code on Social Security, 2020
The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified and the rules for quantifying the financial impact are yet to be framed. The Company is in the process of carrying out the evaluation and will give appropriate impact in the standalone financial statements in the period in which the Code becomes effective and the related rules to determine the financial impact are published.
53. Other Statutory Information
(i) 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
(ii) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property
(iii) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(iv) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the Companies Restriction on number of Layers) Rules, 2017.
(v) There are no charge or satisfaction yet to be registered with Registrar of Company beyond the statutory period.
(vi) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
Pursuant to approval of lenders'', shareholders'', and Competition Commissioner of India the Company completed the
reorganisation of below divisions on slump sale basis -
a. The Company''s Seeds business is consolidated under ''Advanta Enterprises Limited'', a subsidiary of the Company in India. On 30 November 2022, the Company transferred net assets to Advanta Enterprises Limited (''AEL'') for a consideration of I 667 crores as part of seeds business consolidation. Private equity investor Kohlberg Kravis Roberts & Co (KKR) has invested I 2,474 Crores for minority stake of 13.63% in Advanta Enterprises Limited.
b. I n India, a new ''Integrated Agtech Platform'' is created under UPL Sustainable Agri Solutions Limited (''UPL SAS''), a subsidiary of the Company which includes crop protection business of the Company and its subsidiary, SWAL Corporation Limited, farm services business of the Company and its subsidiary, Nurture Agtech Private Limited(''NAPL''). On 31 December 2022, the Company has transferred net assets to UPL SAS and Nurture Agtech Private Limited of I 1,460 crores and I 301 crores respectively. Private equity investors - TPG, ADIA and Brookfield have invested 1,580 Crores for minority stake of 9.09% in UPL Sustainable Agri Solutions Limited.
56. Event After Reporting Period
There are no subsequent events that require adjustment to the assumptions and disclosures in the standalone financial statements.
Mar 31, 2022
Retained earnings - The amounts represent profits that can be distributed by the Company as dividends to its equity shareholders
Securities Premium - Where the Company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to "Securities Premium Reserve". The Company may issue fully paid-up bonus shares to its members out of the securities premium reserve and the Company can use this reserve for buy-back of shares.
Capital Reserve - The Company recognizes profit or loss on purchase, sale, issue or cancellation of the Company''s own equity instruments to capital reserve.
Debenture Redemption Reserve (DRR)- The Company has issued redeemable non-convertible debentures. Accordingly, the Companies (Share capital and Debentures) Rules, 2014 (as amended), require the company to create DRR out of profits of the Company available for payment of dividend. DRR has been created for an amount which is equal to 25% of the value of debentures issued.
General Reserve - General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the statement of profit and loss. The Company can use this reserve for payment of dividend subject to compliance with declaration of dividend out of reserve rules and issue of fully paid-up and not paid-up bonus shares.
Equity Instruments through Other Comprehensive Income (OCI) - Equity Instruments through OCI includes remeasurements of defined benefit liability / asset comprises of actuarial gain and losses and return on plan assets (excluding interest income)
a. Unsecured Redeemable Non-Convertible Debentures (NCD''s)
i) The current maturities of long term borrowings include ''9 crores (March 31, 2021: ''32 crores) pertaining to interest accrued but not due on account of recognition of debentures at amortised cost as per EIR method.
ii) NCDs of face value amounting to ''150 crores (March 31, 2021: ''150 crores) have been issued and are redeemable at par at the end of 10th year i.e June, 2022 from the date of allotment. Out of the above, NCDs amounting to ''90 crores have already been bought back by the Company
iii) NCDs of face value aggregating to ''75 crores (March 31, 2021: ''75 crores) are redeemable at par at the end of 12th year i.e. October 2022 from the date of allotment.
iv) NCDs of face value aggregating to ''Nil (March 31, 2021: ''75 crores) redeemable at par at the end of 11th year i.e. October 2021. This NCDs have been fully repaid during the year
v) NCDs of face value amounting to ''Nil (March 31, 2021: ''250 crores) redeemable at par at the end of 15th year i.e July 2026 from the date of allotment The NCDs had a call option at the end of 10th year from the date of allotment, during the year the Company has exercised the call options and repaid the NCDs.
vi) NCDs mentioned above carry a coupon rate ranging from 10.40% to 10.47%.
b. Secured Loan repayable on demand from Banks
Outstanding loan is secured by hypothecation of inventories, trade receivables and all movable assets of the
Company both present and future, wherever situated
14. BORROWINGS (CONTD.)
c. Unsecured loans repayable on demands
Unsecured loans repayable on demands outstanding as of ''493 crores for the current year (March 31, 2021: ''252 crores)
d. Unsecured Commercial papers from Banks and others
Commercial paper outstanding of ''725 crores for the current year (March 31, 2021: ''150 crores
e. Bank returns / stock statements filed by the Company with its bankers are in agreement with books of account.
f. Funds raised on short term basis have not been utilised for long term purposes and spent for the purpose it were obtained.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Given that the Company does not have any intention to dispose investments in subsidiaries and associates in the foreseeable future, deferred tax asset on indexation benefit in relation to such investments has not been recognised. Similarly, the Company does not have any intention to dispose of its free hold and lease hold land in the foreseeable future, therefore, deferred tax asset on indexation benefit in relation to these assets has not been recognised.
- Discount rate is based on yields (as on valuation date) of Government Bonds with a tenure similar to the expected working lifetime of the employees.
- The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets held, assessed risks of asset management, historical results of the return on plan assets and the Company''s policy for plan asset management.
- Annual increase in Salary costs is based on inflation, seniority, promotion and other relevant factors such as demand and supply in the employment market.
The Company issues multiple discount schemes to its customers in order to capture market share. The Company makes accruals for the discount it expects to give to its customers based on the terms of the schemes. Revenue is adjusted for the expected value of discount to be given
Sales returnsThe Company accrues based on the previous history of sales return. Revenue is adjusted for the expected value of return.
a. The management determines that the segment information reported under Note 47 Segment reporting is sufficient to meet the disclosure objective with respect to disaggregation of revenue under Ind AS 115 Revenue from contract with Customers. Hence, no separate disclosures of disaggregated revenues are reported.
b. The Company''s performance obligation are satisfied upon shipment and payment is generally due by 45 to 270 days.
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age.
The following tables summarise the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plans:
35. CONTINGENT LIABILITIES
The Company is involved in a number of appellate, judicial and arbitration proceedings (including those described below) concerning matters arising in the course of conduct of the Company''s businesses. Some of these proceedings in respect of matters under litigation are in early stages, and in some other cases, the claims are indeterminate. A summary of claims asserted on the Group in respect of these cases have been summarised below.
Amounts in respect of claims asserted by various revenue authorities on the Company, in respect of taxes, which are in dispute, have been tabulated below:
'' in Crores |
||
As at |
As at |
|
March 31,2022 |
March 31, 2021 |
|
Disputed Income-Tax Liability (excluding interest) |
26 |
33 |
Disputed Excise Duty / Service Tax liability (excluding interest) |
182 |
186 |
Disputed Sales Tax/ GST liability |
20 |
25 |
Disputed Custom Duty liability |
22 |
22 |
Disputed Fiscal Penalty for cancellation of licenses |
33 |
33 |
Claims against the Company not acknowledged as debts |
1 |
4 |
⢠Discount rate is based on yields (as on valuation date) of Government Bonds with a tenure similar to the expected working lifetime of the employees.
⢠The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets held, assessed risks of asset management, historical results of the return on plan assets and the Company''s policy for plan asset management.
⢠Annual increase in Salary costs is based on inflation, seniority, promotion and other relevant factors such as demand and supply in the employment market.
The management believes that the claims made are untenable and is contesting them. As of the reporting date, the management is unable to determine the ultimate outcome of above matters. However, in the event the revenue authorities succeed with enforcement of their assessments, the Company may be required to pay some or all of the asserted claims and the consequential interest and penalties, which would reduce net income and could have a material adverse effect on net income in the respective reported period.
Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above, including where:
i. plaintiffs / parties have not claimed an amount of money damages, unless management can otherwise determine an appropriate amount;
ii. the proceedings are in early stages;
iii. there is uncertainty as to the outcome of pending appeals or motions or negotiations;
iv. there are significant factual issues to be resolved; and/or
v. there are novel legal issues presented.
However, in respect of the above matters, management does not believe, based on currently available information, that the outcomes of the litigation, will have a material adverse effect on the Company''s standalone financial condition, though the outcomes could be material to the Group''s operating results for any particular period, depending, in part, upon the operating results for such period.
Pursuant to the judgment of the Supreme Court of India on February 28, 2019 regarding the allowances to be considered for computing Provident Fund liability, certain components of compensation hitherto excluded from PF need to be included. There are interpretative challenges in application of the judgment retrospectively and the Company has been legally advised that the judgment would be applicable prospectively. The standalone financial statements disclose a contingent liability in this regard. No provision has been made for the year ended March 31, 2022 and March 31, 2021.
38. HEDGING ACTIVITIES AND DERIVATIVES
Derivatives not designated as hedging instruments
The Company uses full currency interest rate swap and foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions.
The Company enters into foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchases, These contracts are not designated in hedge relationships and are measured at fair value through profit or loss.
(B) Measurement of fair value:
Valuation techniques and significant unobservable inputs:
(i) Financial instruments measured at fair value
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 following methods and assumptions were used to estimate the fair values:
⢠The fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
⢠The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.
⢠The fair value of mutual funds are based on NAV at the reporting date
⢠The fair values of the remaining FVTOCI financial assets are derived from quoted market prices in active markets.
⢠The fair values of the Company''s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period. The own non-performance risk as at March 31, 2022 was assessed to be insignificant.
The discount for lack of marketability represents the amounts that the Company has determined that market participants would take into account when pricing the investments.
(ii) Financial instrument measured at amortized cost:
The carrying amount of financial assets and financial liability measured at amortized cost in the standalone financial statements are a reasonable approximation of their fair value since the Company does not anticipate that the carrying amounts would be significantly different from the value that would eventually be received or settled.
40. FAIR VALUE HIERARCHY
The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.
41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to its subsidiaries to support its operations. The Company''s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
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: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI investments and derivative financial instruments.
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 a balanced portfolio of fixed and variable rate loans and borrowings.
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.
The Company hedges its exposure to fluctuations on the foreign currency loan by using foreign currency swaps and forwards.
At March 31, 2022, the Company''s hedge position is stated in Note 38. This foreign currency risk is hedged by using foreign currency forward contracts and full currency interest rate swaps.
The following tables demonstrate the sensitivity to a reasonably possible change in USD and EUR 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.
The movement in the pre-tax effect is a result of a change in the fair value of monetary assets and liabilities denominated in US dollars, where the functional currency of the entity is a currency other than US dollars. Although the derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur.
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 investment in listed and unlisted equity securities are not significant.
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) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Trade receivables and contract assets
Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. The Company assesses impairment based on expected credit losses (ECL) model. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.
Financial instruments and cash deposits
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.
The Company''s maximum exposure to credit risk for the components of the balance sheet at March 31,2022 and March 31, 2021 is the carrying amounts as illustrated in Note 10 except for financial guarantees and derivative financial instruments.
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.
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 maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
42. CAPITAL MANAGEMENT
Capital includes equity attributable to the equity holders 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 capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended March 31, 2022 and March 31,2021.
The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. Net debt is calculated as loans and borrowings less cash and cash equivalents.
(i) Losses due fire at factory- Jhagadia
Pursuant to a fire incident on February 23, 2021 at Unit-5, Jhagadia in Gujarat, certain property, plant and equipment, inventory and other assets were damaged. During the year ended March 31,2021, the Company had written off net book value of assets damaged and inventory and recognized provision for employee compensation aggregating ''194 crores. Basis valid insurance contracts with respect to the said loss, a minimum insurance claim receivable of ''179 crores was recognized related to damage caused property, plant and equipment and inventory as at March 31, 2021. During the year, the claim related to property, plant and equipment was settled and the Company received the total claim amount of ''138 crores as final settlement from the insurance company. The claim amount includes ''6 crores net of escalation received, amount disallowed / other adjustments which is shown as exceptional cost.
44. INCOME TAX
Pursuant to the search operations conducted by the Income Tax authorities in the prior year, block assessment u/s 153A of the Income Tax Act 1961 (''the Act'') has been completed for the Assessment Years (''AY'') 2014-15 to 2020-21 for corporate tax and transfer pricing in the previous quarter. The Company has evaluated these orders and considering the proposed rectification applications to the assessment orders, adequate tax provisions has already been made in the books of accounts in prior years. Furthermore, based on the legal advice, the Company has also challenged the assessment orders before the appropriate authority. Further, in case of certain overseas subsidiaries of the Company, the Indian income tax authorities have invoked provisions of ''Place of Effective Management in India'' for AY 2017-18 to AY 2020-21, and the provisions related to ''control and management wholly in India'' for AY 2014-15 to AY 2016-17 and have started tax proceedings against these companies in India during the year. Based on legal advice, the entire proceedings have been challenged before the appropriate authorities. The Company has been advised by legal counsel that they have strong grounds to succeed in the above matters.
45. AMALGAMATION WITH ADVANTA LIMITED
The Hon''ble High Court of Gujarat vide its order dated June 23, 2016 had sanctioned the Scheme of Amalgamation of Advanta Limited with the Company with an appointed date of April 1, 2015. In accordance with the provisions of the scheme and as approved by the High Court, the amalgamation was accounted for under the purchase method specified in Accounting Standard 14 - ''Accounting for Amalgamations'' which is different from Ind AS 103 ''Business Combinations''. As per the Court approval the goodwill arising on amalgamation is being amortised over a period of ten years from the appointed date, which is not amortised under Ind AS 103 but only tested for impairment.
If the Company had accounted for amalgamation as per Ind AS 103, profit for the year March 31, 2022 and March 31, 2021 would have been higher by ''370 crores respectively and equity as at March 31,2022 and March 31, 2021 would have been lower by ''1,115 crores and ''1,485 crores respectively with consequential impact on goodwill.
In order to achieve this overall objective, 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 borrowings in the current period.
(i) The business of the Company is divided into two business segments. These segments are the basis for management control and hence form the basis for reporting. The business of each segment comprises of:
a) Agro activity - This is the main area of the Company''s operation and includes the manufacture and marketing of conventional agrochemical products, seeds and other agricultural related products.
b) Non-agro activity - Non agro activities includes manufacture and marketing of industrial chemical and other non agricultural related products.
(ii) Segment revenue in the above segments includes sales of products net of taxes.
(iii) Inter segment revenue is taken as comparable third party average selling price for the year.
(iv) Segment revenue in the geographical segments considered for disclosure are as follows:
a) Revenue within India includes sales to customers located within India.
b) Revenue outside India includes sales to end customers located outside India
(v) Segment revenue, results, assets and liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.
(vi) The Company does not have any customer (other than following related parties), with whom revenue from transactions is more than 10% of Company''s total revenue.
The discount rate reflect management''s estimate of risk specific to each CGU. The cashflow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on Management''s estimate of the long term compound annual EBITDA growth rate, consistent with the assumptions that a market participant would make.
The Company has conducted an analysis of the sensitivity of the impairment test to changes in the key assumptions used to determine the recoverable amount of CGU to which goodwill is allocated. The management believe that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the related CGU.
51. CODE ON SOCIAL SECURITY, 2020
The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified and the rules for quantifying the financial impact are yet to be framed. The Company is in the process of carrying out the evaluation and will give appropriate impact in the standalone financial statements in the period in which the Code becomes effective and the related rules to determine the financial impact are published.
53. OTHER STATUTORY INFORMATION
(i) 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
(ii) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property
(iii) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(iv) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the Companies Restriction on number of Layers) Rules, 2017.
(v) There are no charge or satisfaction yet to be registered with Registrar of Company beyond the statutory period.
Note 1- Debt equity ratio has increased due to increase in borrowings during the year ended March 31,2022 as compared to March 31, 2021
Note 2- Long term Debt to Working Capital/Debt Service Coverage/Interest Service Coverage ratio has changed due to repayment of long term borrowings during the year ended March 31, 2022
Note 3- Variance is due to increase in profits during the year ended March 31, 2022 as compared to the year ended March 31, 2021
Note 4- Variance is mainly due to increase in profits on account of higher sales volumes and dividend income received during the year ended March 31, 2022 as compared to the year ended March 31, 2021
55. EVENT AFTER REPORTING PERIOD
On May 6, 2022 an unfortunate incidence of fire occurred in a portion of one of the manufacturing plants in Ankleshwar Unit 1. The written down value of the property plant and equipment''s was ''32 crores and inventories was ''5 crores as on March 31, 2022. Management has taken all relevant steps of informing insurance company about this incident and the company is assessing the damage value. Management believes that the damages are covered by the insurance policies.
56. REGROUPING
The figures for the previous periods have been regrouped/ rearranged wherever necessary to confirm to the current period classification in order to comply with the requirements of the amended Schedule III to the Companies Act, 2013.
Mar 31, 2021
Terms/rights attached to equity shares
The Company has one class of equity shares having par value of '' 2 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the 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.
During the year ended March, 2021, the amount of per share dividend proposed as distributions to equity shareholders is '' 10 (March, 2020: '' 6).
Equity shares movement during the 5 years preceding March 31, 2021.A. Equity shares allotted as bonus shares, for consideration without cash pursuant to contract and shares bought back during the 5 years preceding March 31, 2021.Equity shares issued as bonus
The Company allotted 254,671,335 equity shares as fully paid-up bonus shares on July 4, 2019 by utilising capital redemption reserve amounting to ''38 crore and Securities premium amounting to ''13 crore, pursuant to an ordinary resolution passed after taking the consent of shareholders.
B. Conversion of Compulsory convertible preference share (CCPS) and optionally convertible preference share (OCPS).
During the year ended March 31,2018, the Company has allotted 2,224,287 on conversion of Compulsory convertible preference share (CCPS) and optionally convertible preference share (OCPS).
As per the records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
As on March 31, 2021, there were 63,181,408 outstanding GDRs (March 31, 2020: 63,439,593) under two different programmes out of which 63155908 GDRs are listed on Singapore Stock Exchange Ltd. During the year, the Company has terminated 2,58,180 (0.03379%) unlisted GDRs out of 2,83,680 (0.03713%) unlisted GDRs representing equal number of equity shares effective from May 14, 2020. 25,500 GDRs are unlisted in Luxembourg and under termination process.
Retained earnings - The amounts represent profits that can be distributed by the Company as dividends to its equity shareholders.
Securities Premium - Where the Company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to "Securities Premium Reserve". The Company may issue fully paid-up bonus shares to its members out of the securities premium reserve and the Company can use this reserve for buy-back of shares.
Capital Redemption Reserve - Capital Redemption Reserve was created for buy-back of shares and can be utilised for issuance of fully paid-up bonus shares.
Capital Reserve - The Company recognises profit or loss on purchase, sale, issue or cancellation of the Company''s own equity instruments to capital reserve.
Debenture Redemption Reserve (DRR) - The Company has issued redeemable non-convertible debentures. Accordingly, the Companies (Share capital and Debentures) Rules, 2014 (as amended), require the Company to create DRR out of profits of the Company available for payment of dividend. DRR has been created for an amount which is equal to 25% of the value of debentures issued.
Share Based Payment Reserve - The Company has an employee stock option scheme under which the option to subscribe for the companies share have been granted to the key employees and directors. The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to the key employees as part of their remuneration. Refer to note 34 for further details of the scheme.
General Reserve - General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the statement of profit and loss. The Company can use this reserve for payment of dividend subject to compliance with declaration of dividend out of reserve rules and issue of fully paid-up and not paid-up bonus shares.
Equity Instruments through Other Comprehensive Income (OCI) - Equity Instruments through OCI includes remeasurements of defined benefit liability/asset comprises of actuarial gain and losses and return on plan assets (excluding interest income).
a) Unsecured Redeemable Non-convertible Debentures (NCD''s)
i) The current maturities of long term borrowings include ''32 crore (March 31, 2020: '' 33 crore) pertaining to interest accrued but not due on account of recognition of debentures at amortised cost as per EIR method.
ii) NCDs of face value amounting to '' 150 crore (March 31, 2020: '' 150 crore) have been issued and are redeemable at par at the end of 10th year '' 150 crore i.e. June, 2022 from the date of allotment. Out of the above, NCDs amounting to '' 90 crore have been bought back by the Company.
iii) NCDs of face value amounting to '' 250 crore (March 31, 2020: '' 250 crore) are redeemable at par at the end of 15th year i.e. July 2026 from the date of allotment. The NCDs carry a call option at the end of 10th year from the date of allotment.
iv) NCDs of face value aggregating to '' 150 crore (March 31, 2020: '' 150 crore) have been issued under three series. These redeemable at par ''75 crore each at the end of 12th year and 11th year i.e. October 2022 and October 2021 respectively from the date of allotment.
v) NCDs mentioned above carry a coupon rate ranging from 10.40% to 10.70%.
b) Secured Loan repayable on demand from Banks
Outstanding loan is secured by hypothecation of inventories, bills receivables, book debts and all movable assets of the Company both present and future, wherever situated.
c) Unsecured loans repayable on demands
Unsecured loans repayable on demands outstanding as of ''252 crore for the current year (March 31, 2020: '' 288 crore).
d) Unsecured Commercial papers from Banks and others
Commercial paper outstanding of ''150 crore for the current year (March 31, 2020: '' Nil).
On December 12, 2019, vide The Taxation Laws (Amendment) Act, 2019 (''the Act''), the Government of India inserted Section 115BAA in the Income Tax Act, 1961 which provides domestic companies a non-reversible option to pay corporate tax at reduced rates effective April 1, 2019, subject to certain conditions. The Company has evaluated the impact the Ordinance will have on its current and future taxable income till with financial year 2026-27. Basis the said evaluation, the Company has decided not to avail the choice of the reduced tax rate in the foreseeable future.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Given that the Company does not have any intention to dispose investments in subsidiaries and associates in the foreseeable future, deferred tax asset on indexation benefit in relation to such investments has not been recognised. Similarly, the Company does not have any intention to dispose of its free hold and lease hold land in the foreseeable future, therefore, deferred tax asset on indexation benefit in relation to these assets has not been recognised.
Discount rate is based on yields (as on valuation date) of Government Bonds with a tenure similar to the expected working lifetime of the employees.
The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets held, assessed risks of asset management, historical results of the return on plan assets and the Company''s policy for plan asset management.
Annual increase in Salary costs is based on inflation, seniority, promotion and other relevant factors such as demand and supply in the employment market.
c) (i) It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above
pending resolution of the respective proceedings as it is determinable only on receipt of judgements/decisions pending with various forums/authorities.
(ii) The Company does not expect any reimbursements in respect of the above contingent liabilities.
(iii) The Company''s pending litigations comprise of proceedings pending with various direct tax, indirect tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its standalone financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its standalone financial statements.
d) A competitor had filed a litigation against the Company and a subsidiary of the Company for misappropriation of trade secrets, tortious interference, infringement of patent, loss of profits and unjust enrichment. On October 11, 2019 a jury in the federal district court rendered a verdict against the subsidiary for an aggregate amount of approximately '' 233 crore. While the Company sought to remedy the adverse decision of the jury through the posttrial motions, this amount was provided for in the previous year as an exceptional item in the statement of profit and loss of the consolidated financial statements. The Company received a final court order reducing the damages from approximately '' 233 crore to approximately '' 95 crore plus interest. Accordingly, an amount of '' 117 crore was written back to exceptional item in the consolidated statement of profit and loss. In March 2021 the Company has reached a settlement with the competitor whereby this and all other pending litigation between them were settled without any additional compensation to either parties.
e) Pursuant to the judgement of the Supreme Court of India on February 28, 2019 regarding the allowances to be considered for computing Provident Fund liability, certain components of compensation hitherto excluded from PF need to be included. There are interpretative challenges in application of the judgement retrospectively and the Company has been legally advised that the judgement would be applicable prospectively. The standalone financial statements disclose a contingent liability in this regard. No provision has been made for the year ended March 31, 2021 and March 31, 2020.
1. The remuneration of key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends. The above figures do not include provisions for gratuity and compensated absence as separate actuarial valuation are not available.
2. Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
37. CAPITALISATION OF EXPENDITURE
During the year, the Company has capitalised the following expenses of revenue nature to the cost of property, plant and equipment/capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalised by the Company.
38. HEDGING ACTIVITIES AND DERIVATIVES Derivatives not designated as hedging instruments
The Company uses full currency interest rate swap and foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions.
The Company enters into foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchases, These contracts are not designated in hedge relationships and are measured at fair value through profit or loss.
Valuation techniques and significant unobservable inputs:
(i) Financial instruments measured at fair valueThe 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 following methods and assumptions were used to estimate the fair values:
- The fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other noncurrent financial liabilities is estimated by discounting future cash flows us ing rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
39. CATEGORY-WISE CLASSIFICATION OF FINANCIAL INSTRUMENTS (CONTD.)
- The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.
- The fair values of the remaining FVTOCI financial assets are derived from quoted market prices in active markets.
- The fair values of the Company''s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period. The own non-performance risk as at March 31, 2021 was assessed to be insignificant.
The discount for lack of marketability represents the amounts that the Company has determined that market participants would take into account when pricing the investments.
(ii) Financial instrument measured at amortised cost:
The carrying amount of financial assets and financial liability measured at amortised cost in the financial statements are a reasonable approximation of their fair value since the Company does not anticipate that the carrying amounts would be significantly different from the value that would eventually be received or settled.
The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.
41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to its subsidiaries to support its operations. The Company''s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
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: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI investments and derivative financial instruments.
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 a balanced portfolio of fixed and variable rate loans and borrowings. Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company''s profit before tax is affected through the impact on floating rate borrowings, as follows:
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
Foreign currency riskForeign 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.
41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD.)
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.
The Company hedges its exposure to fluctuations on the foreign currency loan by using foreign currency swaps and forwards.
At March 31, 2021, the Company''s hedge position is stated in Note 38. This foreign currency risk is hedged by using foreign currency forward contracts and full currency interest rate swaps.
The following tables demonstrate the sensitivity to a reasonably possible change in USD and EUR 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.
The movement in the pre-tax effect is a result of a change in the fair value of monetary assets and liabilities denominated in US dollars, where the functional currency of the entity is a currency other than US dollars. Although the derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur.
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 investment in listed and unlisted equity securities are not significant.
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) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Trade receivables and contract assets
Customser credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. The Company assesses impairment based on expected credit losses (ECL) model. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.
Set out below is the information about the credit risk exposure on the Company''s trade receivables and contract assets using a provision matrix:
Financial instruments and cash deposits
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.
The Company''s maximum exposure to credit risk for the components of the balance sheet at March 31, 2021, March 31, 2020 is the carrying amounts as illustrated in Note 10 except for financial guarantees and derivative financial instruments.
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.
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 maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
42. CAPITAL MANAGEMENT
Capital includes equity attributable to the equity holders 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 capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended March 31, 2021 and March 31, 2020.
The disclosures regarding details of specified bank notes held and transacted during November 8, 2016 to December 30, 2016 has not been made in these financial statements since the requirement does not pertain to financial year ended March 31, 2021.
45. AMALGAMATION WITH ADVANTA LIMITED
The Hon''ble High Court of Gujarat vide its order dated June 23, 2016 had sanctioned the Scheme of Amalgamation of Advanta Limited with the Company with an appointed date of April 1, 2015. In accordance with the provisions of the scheme and as approved by the High Court, the amalgamation was accounted for under the purchase method specified in Accounting Standard 14 - ''Accounting for Amalgamations'' which is different from Ind AS 103 ''Business Combinations''. As per the Court approval the goodwill arising on amalgamation is being amortised over a period of ten years from the appointed date, which is not amortised under Ind AS 103 but only tested for impairment.
If the Company had accounted for amalgamation as per Ind AS 103, profit for the years ended March 31, 2021 and March 31, 2020 would have been higher by ''370 crore respectively and goodwill and equity as at March 31, 2021 and March 31, 2020 would have been higher '' 2,212 crore and ''1,842 crore respectively.
(i) Losses due fire at factory
On February 23, 2021 there was a fire at Unit-5, Jhagadia in Gujarat. In this incident certain property, plant and equipment, inventory and other assets were damaged. The Company lodged an initial estimate of loss with the insurance companies and the survey is currently ongoing. During the year ended March 31, 2021, the Company has written off net book value of assets damaged and employee compensation aggregating '' 194 crore and recognised, basis valid insurance contracts with respect to the said loss, a minimum insurance claim receivable of '' 179 crore. During the year the Company has received an interim relief by way of on account payments from the insurance companies towards assets and inventories aggregating of '' 31crore and the same has been adjusted against the claims receivable.
(ii) Compensation to Gujarat Pollution Control Board
Exceptional items for the year ended March 31, 2020 pertain to amount paid by the Company for towards compensation to Gujarat Pollution Control Board.
For the purpose of impairment testing, goodwill has been allocated to the Company''s CGU of ''1,485 crore.
The recoverable amount of the CGUs have been determined based on the value in use, determining by discounting the future cash flows to be generated from the continuing use of the CGU. Discount rates reflect Management''s estimate of risk specific to each CGU. The key assumptions used in the estimation of the recoverable amount are set out below.
The discount rate reflect management''s estimate of risk specific to each CGU. The cashflow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on Management''s estimate of the long term compound annual EBITDA growth rate, consistent with the assumptions that a market participant would make.
The Company has conducted an analysis of the sensitivity of the impairment test to changes in the key assumptions used to determine the recoverable amount of CGU to which goodwill is allocated. The management believe that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the related CGU.
On January 22, 2020, the Income Tax Department conducted searches at the premises of the Company. Subsequently, the Company received notices under the Income Tax Act for filing the Income Tax Returns/revised returns for past years. In compliance to said notices, Company has filed its return of Income. Further, the Income Tax Department has issued notices to the Company calling for certain preliminary information. The Company is in the process of responding to the above notices and does not expect any significant financial or reporting implications to emerge out of this matter.
51. CODE ON SOCIAL SECURITY, 2020
The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified and the rules for quantifying the financial impact are yet to be framed. The Company is in the process of carrying out the evaluation and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules to determine the financial impact are published.
Mar 31, 2018
* The Competition Commission of India (CCI) had levied a penalty of RS,252 crores on the Company for alleged violation of section 3(3) (b) and 3(3) (d) of the Competition Act 2002. The order of the CCI was challenged before the Competition Appellate Tribunal (COMPAT) which by its order dated 29th October, 2013 has reduced the penalty to RS,7 crores and the same has been confirmed by the Hon''ble Supreme Court in its order. During the year ended 31 March 2018, the Company had received notice from CCI to deposit the interest of RS,4.17 crores for delay of 40 months in payment as per Regulation 5 of CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011. The Company had filed their reply to the above notice on 24 October 2017. The Company does not expect the outcome of the proceedings to have a materially adverse impact on standalone financial statements.
36. Related party transactions
(a) Names of the related parties where control exists irrespective of whether transactions have occurred or not
(i) Name of the Subsidiary Companies:
Shroffs United Chemicals Limited SWAL Corporation Limited United Phosphorus (India) LLP United Phosphorus Global LLP Optima Farm Solutions Limited UPL Europe Limited UPL Deutschland GmbH UPL Polska Sp z.o.o.
UPL Benelux B.V.
Cerexagri B.V.
Blue Star B.V.
United Phosphorus Holdings Cooperatief U.A.
United Phosphorus Holdings B.V.
Decco Worldwide Post-Harvest Holdings Cooperatief U.A.
Decco Worldwide Post-Harvest Holdings B.V.
United Phosphorus Holding, Brazil B.V.
UPL Italia S.R.L.
UPL Iberia, S.A.
Decco Iberica Postcosecha, S.A.U.
Transterra Invest, S. L. U.
Cerexagri S.A.S.
Neo-Fog S.A.
UPL France
United Phosphorus Switzerland Limited Agrodan, ApS Decco Italia SRL
Limited Liability Company "UPL"
Decco Portugal Post Harvest, Unipessoal LDA (formerly known as UPL Portugal Unipessoal LDA)
United Phosphorus Inc.
UPI Finance LLC Cerexagri, Inc. (PA)
UPL Delaware, Inc.
Canegrass LLC
Decco US Post-Harvest Inc
Rice Co LLC
Riceco International, Inc.
UPL Corporation Limited
UPL Limited (merged in UPL Corporation Limited, Mauritius)
UPL Management DMCC
UPL Limited
UPL Agro S.A. de C.V.
Decco Jifkins Mexico Sapi
United Phosphorus do Brasil Ltd
Uniphos Industria e Comercio de Produtos Quimicos Ltd.
Upl do Brasil Industria e Comercio de Insumos Agropecuarios S.A. UPL Costa Rica S.A.
UPL Bolivia S.R.L UPL Paraguay S.A.
Icona Sanluis S.A.
DVA Technology Argentina S.A.
UPL Argentina S A
Decco Chile SpA
UPL Colombia SAS
United Phosphorus Cayman Limited
UP Aviation Limited
UPL Australia Limited
UPL New Zealand Limited
UPL Shanghai Limited
UPL Limited (Korea)
PT.UPL Indonesia PT Catur Agrodaya Mandiri UPL Limited UPL Philippines Inc.
UPL Vietnam Co. Limited UPL Limited, Japan
Anning Decco Fine Chemical Co. Limited
UPL Ziraat Ve Kimya Sanayi Ve Ticaret Limited Sirketi
UPL Agromed Tarim Ilaclari ve Tohumculuk Sanayi ve Ticaret A.S.
Safepack Products Limited
Citrashine (Pty) Ltd
UPL Africa SARL (divested during the year)
Prolong Limited Perrey Participates S.A Agrinet Solutions Limited Advanta Netherlands Holding B.V.
Advanta Semillas SAIC Advanta Holdings B.V.
Advanta Seeds International
Pacific Seeds Holdings (Thailand) Limited
Pacific Seeds (Thai) Limited
Advanta Seeds Pty Ltd
Advanta US Inc.
Advanta Comercio De Sementes LTDA.
PT Advanta Seeds Indonesia Advanta Seeds DMCC Essentiv LCC
UPL Agro Limited Mauritius (acquired during the year)
UPL Jiangsu Limited (formed during the year)
Riceco International Bangladesh Ltd (acquired during the year)
Uniphos Malaysia Sdn Bhd (acquired during the year)
Advanta Seeds Ukraine LLC
(b) Names of the other related parties with whom transactions have taken place during the year
(i) Name of Associate Companies:
Chemisynth (Vapi) Limited
Weather Risk Management Services Private Ltd Ingen Technologies Private Limited
(ii) Joint Venture Companies:
United Phosphorus (Bangladesh) Limited (upto 22nd September, 2016)
(iii) Enterprises over which key management personnel and their relatives have significant influence: Bharuch Enviro Infrastructure Limited
Bloom Packaging Private Limited Bloom Seal Containers Private Limited Daman Ganga Pulp and Papers Private Limited Demuric Holdings Private Limited Enviro Technology Limited
Gharpure Engineering and Construction Private Limited Uniphos Envirotronic Private Limited Jai Trust Pot Plants
Sanguine Holdings Private Limited
Tatva Global Environment Private Limited (formerly Tatva Global Environment Limited)
Tatva Global Environment (Deonar) Limited Ultima Search
Uniphos International Limited Uniphos Enterprises Limited UPL Environmental Engineers Limited Vikram Farm
(iv) Key Management Personnel and their relatives :
Directors and their relatives Mr. Rajnikant.D. Shroff Mrs. Sandra R. Shroff *
Mr. Kalyan Banerjee Mr. Jaidev R. Shroff *
Mr. Arun C. Ashar Mr. Vikram R. Shroff *
Mrs. Asha Ashar *
Mr. Navin Ashar *
Mr. Hardeep Singh Mr. Vasant Gandhi Mr. Pradeep Goyal Mr. Vinod Sethi Dr. Reena Ramchandran Mr. Pradip Madhavji
Mr. Anand K Vora - Chief Financial Officer Mr. Mukul B Trivedi - Company Secretary
* Relatives of Key management personnel.
Notes:
1. This includes short term employee benefits and key management personnel who are under the employment of the Company are entitled to post employment benefits and other long term employee benefits recognized as per Ind AS19- Employee Benefits in the standalone financial statements. As these employee benefits are lumpsum such amounts provided on the basis of actuarial valuation, the same is not included above.
2. Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
37. Capitalization of expenditure
During the year, the Company has capitalized the following expenses of revenue nature to the cost of property, plant and equipment / capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalized by the Company.
38. Hedging activities and derivatives Derivatives not designated as hedging instruments
The Company uses full currency interest rate swap and foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions.
The Company enters into foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchases, these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.
Note:
Hedging against the underlying INR borrowings by which:
- Company will receive principal in INR and pay in foreign currency
- Company will receive fixed interest in INR and pay fixed / floating interest in foreign currency
(B) Measurement of fair value:
Valuation techniques and significant unobservable inputs:
(i) Financial instruments measured at fair value
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 following methods and assumptions were used to estimate the fair values:
- The fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
-The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.
- The fair values of the remaining FVTOCI financial assets are derived from quoted market prices in active markets.
- The fair values of the Company''s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 March 2018 was assessed to be insignificant.
The discount for lack of marketability represents the amounts that the Company has determined that market participants would take into account when pricing the investments.
(ii) Financial instrument measured at amortized cost:
The carrying amount of financial assets and financial liability measured at amortized cost in the financial statements are a reasonable approximation of their fair value since the Company does not anticipate that the carrying amounts would be significantly different from the value that would eventually be received or settled.
41. Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to its subsidiaries to support its operations. The Company''s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions.
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: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI investments and derivative financial instruments.
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 a balanced portfolio of fixed and variable rate loans and borrowings.
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
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.
The Company hedges its exposure to fluctuations on the foreign currency loan by using foreign currency swaps and forwards.
At March 31, 2018, the Company''s hedge position is stated in Note 38. This foreign currency risk is hedged by using foreign currency forward contracts and full currency interest rate swaps.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in USD and EUR 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.
The movement in the pre-tax effect is a result of a change in the fair value of of monetary assets and liabilities denominated in US dollars, where the functional currency of the entity is a currency other than US dollars. Although the derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur.
Equity price risk
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 investment in listed and unlisted equity securities are not significant.
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) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Financial instruments and cash deposits
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 minimize the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
The Company''s maximum exposure to credit risk for the components of the balance sheet at March 31, 2018, 31 March 2017 is the carrying amounts as illustrated in Note 10 except for financial guarantees and derivative financial instruments.
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.
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 summarizes the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
42. Capital management
Capital includes equity attributable to the equity holders to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximize 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 capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended March 31, 2018 and March 31, 2017.
The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. Net debt is calculated as loans and borrowings less cash and cash equivalents.
In order to achieve this overall objective, 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.
44. Foreign Exchange Management Act
In January 2013, the Company had received a show cause notice from the Directorate of Enforcement, alleging that the Company had contravened certain provisions of Foreign Exchange Management Act, 1999 with regard to foreign direct investment made and utilization of proceeds of FCCB / ECB. The Company had replied to the show cause notice and had personal hearings to represent their matter and filed written submissions on the basis of which Directorate of Enforcement vide order dated 28th February, 2018 has dropped all the charges levied against the Company.
45. Amalgamation with Advanta Limited
The Hon''ble High Court of Gujarat vide its order dated 23rd June, 2016 has sanctioned the Scheme of Amalgamation of Advanta Limited, a subsidiary as per Ind AS, with the Company with an appointed date of 1st April, 2015. The Scheme has become effective on 20th July, 2016, pursuant to its filing with Registrar of Companies.
In accordance with the provisions of the aforesaid scheme the Company had in prior year accounted for the amalgamation under the "Purchase Method" as prescribed by the Accounting Standard 14 - Accounting for Amalgamations, which is different from Ind AS 103 " Business Combinations". Accordingly the accounting treatment had been given as under:
a. The amalgamation has been accounted under the "Purchase Method" as prescribed by Accounting Standard 14 - Accounting for Amalgamations which is different from Ind AS 103 "Business Combinations". Accordingly, the accounting treatment has been given as under:-
(i) The assets and liabilities of Advanta Limited as at 1 April 2015 have been incorporated at their book values in the financial statements of the Company.
(ii) All inter-corporate balances and obligations (including investments held by the Company in Advanta Limited, deposits, loans and advances, outstanding balances or other obligations) between the Company and Advanta Limited stands cancelled.
b. The excess of fair value of equity shares and preference shares over the book value of assets and liabilities transferred and cancellation of Investments in Advanta held by the Company amounting to H3,697 crores has been recorded as goodwill arising on amalgamation.
c. Consideration for amalgamation discharged by way of issuance of new Equity Shares has been recorded at fair value and Preference Shares has been recorded at face value. As the shares have been allotted subsequent to the March 31, 2016, the same has been disclosed under Share Capital Suspense account till the date of allotment.
d. In accordance with scheme, the goodwill recorded on amalgamation has been amortized and the Company has estimated its useful life of 10 years. Accordingly, amortization for the year amounting to H370 crores (31 March, 2016: H370 Crores) has been recognized in the statement of profit and loss.
3. Notes
(i) The business of the Company is divided into two business segments. These segments are the basis for management control and hence form the basis for reporting. The business of each segment comprises of:
a) Agro activity - This is the main area of the Company''s operation and includes the manufacture and marketing of conventional agrochemical products, seeds and other agricultural related products.
b) Non-agro activity - Non agro activities includes manufacture and marketing of industrial chemical and other non agricultural related products.
(ii) Segment Revenue in the above segments includes sales of products net of taxes.
(iii) Inter Segment Revenue is taken as comparable third party average selling price for the year.
(iv) Segment Revenue in the geographical segments considered for disclosure are as follows:
a) Revenue within India includes sales to customers located within India.
b) Revenue outside India includes sales to customers located outside India
(v) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.
(vi) The Company does not have any customer (other than related parties), with whom revenue from transactions is more than 10% of Company''s total revenue.
(vii) Based on the "management approach" defined in Ind AS 108 - Operating Segments, the Chief Operating Decision Maker evaluates the company''s performance and allocate resources based on an analysis of various performance indicators by business segments. Accordingly information has been presented along these segments.
Note: The information has been given in respect of such vendors to the extent they could be identified as Micro, and Small enterprises on the basis of information available with the Company.
Mar 31, 2017
1 B. Share Capital Suspense
During the year, the Company has alloted Equity Shares, Compulsorily Convertible Preference Shares and Optionally Convertible Preference Shares to the share holders of erstwhile Advanta Limited, pursuant to Scheme of Amalgamation as described in detail in Note 45. Accordingly during the year, the balance lying in Share Capital Suspense Account has been transferred to respective Equity / Liability Account.
2. Other equity (contd )
Securities Premium Reserve - Where the Company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to "Securities Premium Reserve". The Company may issue fully paid-up bonus shares to its members out of the securities premium reserve and the Company can use this reserve for buy-back of shares.
Share Based Payment Reserve - Pursuant to merger of Advanta Limited with effect from April 1, 2015 the company has taken over share based payments obligation towards its employees as per the original terms and conditions. The share-based payment reserve is used to recognize the value of equity-settled share-based payments provided to the key employees as part of their remuneration. Refer to Note 54 for further details of the scheme.
Capital Redemption Reserve - Capital Redemption Reserve was created for buy-back of shares.
General Reserve - General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the statement of profit and loss. The Company can use this reserve for payment of dividend and issue of fully paid-up and not paid-up bonus shares.
Capital Reserve - The Company recognizes profit or loss on purchase, sale, issue or cancellation of the Company''s own equity instruments to capital reserve.
Debenture Redemption Reserve (DRR) - The Company has issued redeemable non-convertible debentures. Accordingly, the Companies (Share capital and Debentures) Rules, 2014 (as amended), require the company to create DRR out of profits of the Company available for payment of dividend. DRR is required to be created for an amount which is equal to 25% of the value of debentures issued.
3. Borrowings (contd.)
NCDs of face value amounting to Rs,250 crores (31 March, 2016: Rs,250 crores; 1 April, 2015: Rs,250 crores) are redeemable at par at the end of 15th year i.e July 2026 from the date of allotment. The NCDs carry a call option at the end of 10th year from the date of allotment.
NCDs of face value aggregating to Rs,300 crores (31 March, 2016:Rs,300 crores; 1 April, 2015: Rs,300 crores) have been issued under four series and are redeemable at par of Rs,75 crores each at the end of 12th year, 11th year, 9th year and 8th year
i.e. October 2022, October 2021, October 2019 and October 2018 respectively from the date of allotment.
NCDs of face value aggregating to Rs, Nil (31 March, 2016:Rs,150 crores; 1 April, 2015: Rs,300 crores) are redeemable at par at the end of 10th year i.e., April, 2020 from the date of allotment. The NCDs carry a call option at the end of 10th year i.e., April, 2016 from the date of allotment.
NCD''s mentioned above carry a coupon rate ranging from 9.95% to 10.70%
b. Secured Loan repayable on demand from Banks
Outstanding loan is secured by hypothecation of inventories, bills receivables, book debts and all movable assets of the Company both present and future, wherever situated.
Terms and conditions of the above financial liabilities:
Trade payables are non-interest bearing and are normally settled on 90-360 days terms For terms and conditions with related parties, refer note 36
For explanations on the Company''s credit risk management processes, refer note 41
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age.
The following tables summaries the components of net benefit expense recognized in the statement of profit or loss and the funded status and amounts recognized in the balance sheet for the respective plans:
The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.
Note 4: Share based payment
Pursuant to merger of Advanta Limited with effect from April 1, 2015 the company has taken over share based payments obligation towards its employees as per the original terms and conditions. Accordingly during the year ended March 31, 2017, the following employee stock option plan (ESOPs) were in existence. The relevant details of the scheme and the grant are as follows:
a Employees stock option and share plan 2006
The Company instituted an Employees Stock Option Scheme ("ESOPs") for certain employees as approved by the shareholders on September 20, 2006 which provides for a grant of 840,000 options (each option convertible into share) to employees.
* The Competition Commission of India (CCI) had levied a penalty of Rs,252 crores on the Company for alleged violation of section 3(3) (b) and 3(3) (d) of the Competition Act 2002. The order of the CCI was challenged before the Competition Appellate Tribunal (COMPAT) which by its order dated 29th October, 2013 has reduced the penalty to Rs,7 crores. The Company and CCI have challenged the order of COMPAT before the hon''ble Supreme Court
5. Related party transactions
(a) Relationship:
(i) Name of the Subsidiary Companies:
Shroffs United Chemicals Limited SWAL Corporation Limited United Phosphorus (India) LLP United Phosphorus Global LLP Optima Farm Solutions Ltd
UPL Europe Limited (formerly known as United Phosphorus Limited, U.K.)
UPL Deutschland GmbH (formerly known as United Phosphorus GMBH, Germany)
United Phosphorus Polska Sp.z o.o - Poland UPL Benelux B.V.(formerly known as AgriChem B.V.)
Cerexagri B.V., Netherlands Blue Star B.V.
United Phosphorus Holdings Cooperatief U.A.
United Phosphorus Holdings B.V. , Netherlands
Decco Worldwide Post-Harvest Holdings Cooperatief U.A.
Decco Worldwide Post-Harvest Holdings B.V.
United Phosphorus Holding, Brazil B.V.
UPL Italia S.R.L. (formerly known as Cerexagri Italia S.R.L.)
UPL Iberia, Sociedad Anonima (formerly know asCompania Espanola Industrial Quimica de Productos Agricolas Y Domesticos, S.A.U.,Spain)
Decco Iberica Postcosecha, S.A.U., Spain (formerly Cerexagri Iberica)
Transterra Invest, S. L. U., Spain Cerexagri S.A.S., France Neo-Fog S.A.
UPL France (formerly known as Aspen SAS)
United Phosphorus Switzerland Limited Agrodan, ApS Decco Italia SRL, Italy
DECCO PORTUGAL POST HARVEST, UNIPESSOAL LDA( FormerlyUPL Portugal Unipessoal LDA)
United Phosphorus Inc.,U.S.A UPI Finance LLC Cerexagri, Inc. (PA)
UPL Delaware, Inc.,USA
6. Related party transaction: (contd.)
Canegrass LLC, U.S.A
Decco US Post-Harvest Inc, U.S.A
LLC "UPL" (formerly CJSC United Phosphorus Limited, Russia)
Essentiv LLC RiceCo LLC,USA
Riceco International, Inc., Bahamas
UPL Corporation Limited (Formerly known as Bio-win Corporation Limited, Mauritius)
UPL Limited, Mauritius (Formerly known as Uniphos Limited, Mauritius)
United Phosphorus Limited,Gibraltar (upto 30th March 2017)
UPL Limited, (formerly known as Uniphos Limited), Gibraltar UPL Management DMCC
UPL Agro S.A. de C.V.(formerly known as United Phosphorus de Mexico, S.A. de C.V.)
Decco Jifkins Mexico Sapi, Mexico Perrey Participates S.A United Phosphorus do Brasil Ltda
Uniphos Industria e Comercio de Produtos Quimicos Ltda., Brazil Upl do Brasil Industria e Comercio de Insumos Agropecuarios S.A.
DVA Technology Argentina S.A.
UPL Costa Rica S.A (formerly known as Cerexagri Costa Rica, S.A.)
UPL Bolivia S.A
Icona Sanluis S A , Argentina
UPL Argentina S A (formerly known as Icona S A Argentina)
Decco Chile SpA UPL Colombia SAS UPL Paraguay S.A.
United Phosphorus Cayman Limited UP Aviation Limited,Cayman Island
UPL Australia Limited (formerly known as United Phosphorus Limited)
UPL New Zealand Limited (formerly known as United Phosphorus Limited)
UPL Shanghai Limited (formerly known as United Phosphorus (Shanghai) Company Limited) UPL Limited (Korea) (formerly known as United Phosphorus (Korea) Limited)
PT.UPL Indonesia (formerly known as PT. United Phosphorus Indonesia)
PT Catur Agrodaya Mandiri, Indonesia
UPL Limited, Honkong (formerly known as United Phosphorus Limited)
UPL Philippines Inc.(formerly known as United Phosphorus Corp., Philippines)
UPL Vietnam Co. Limited (formerly known as United Phosphorus Vietnam Co., Limited)
UPL Limited, Japan(formerly known as United Phosphorus Limited, Japan)
Anning Decco Fine Chemical Co. Limited, China UPL Ziraat Ve Kimya Sanayi Ve Ticaret Limited Sirketi
(formerly known as Cerexagri Ziraat Ve Kimya Sanayi Ve Ticaret Limited Sirketi, Turkey)
UPL Agromed Tarim llaclari ve Tohumculuk Sanayi ve Ticaret A.S.
Safepack Products Limited, Israel
Citrashine (Pty) Ltd., South Africa
UPL Africa SARL
Pro Long Limited
Agrinet Solutions Limited
Advanta Holdings BV, Netherlands
Advanta Netherlands Holdings BV,Netherlands
Advanta US Inc,USA
Advanta Seeds International, Mauritius
Advanta Seeds DMCC Formerly Advanta Seeds JLT], UAE
Advanta Commercio De Sementes Ltda,Brazil
Advanta Semillas SAIC, Argentina
Advanta Seeds Pty Ltd,Australia
Pacific Seeds (Thai) Ltd, Thailand
Pacific Seeds Holdings (Thai) Ltd Thailand
Pt. Advanta Seeds Indonesia
Advanta Ukraine LLC, Ukraine
Advanta (B.V.I) Limited, British Virgin Island (upto 02 May 2016)
(ii) Name of Associate Companies:
Polycoat Technologies 2010 Limited 3SB Proclutos Agricolas S.A.
Sinagro Proclutos Agropecuarios S.A.
Chemisynth (Vapi) Limited
Universal Pestochem (Industries Limited
Seara Comercial Agricola Ltda.
Serra Bonita Sementes S.A.
Bioplanta Nutricao Vegetal, Industria e Comercio S.A.
Weather Risk Management Services Private Limited (w.e.f 28th June, 2016)
Kerala Enviro Infrastructure Limited Ingen Technologies (P) Ltd.
(iii) Joint Venture Companies:
United Phosphorus (Bangladesh) Limited (upto 22nd September, 2016)
Hodogaya UPL Co. Limited, Japan
Longreach Plant Breeders Managements pty Limited, Australia
(iv) Enterprises over which key management personnel and their relatives have significant influence:
Bharuch Enviro Infrastructure Limited Bloom Packaging Private Limited Bloom Seal Containers Private Limited Daman Ganga Pulp and Papers Private Limited Demuric Holdings Private Limited Enviro Technology Limited
Gharpure Engineering and Construction Private Limited Uniphos Envirotronic Private Limited Jai Trust Pot Plants
Sanguine Holdings Private Limited
Tatva Global Environment Private Limited (formerly Tatva Global Environment Limited)
Tatva Global Environment (Deonar) Limited Ultima Search
Uniphos International Limited Uniphos Enterprises Limited UPL Environmental Engineers Limited UPL Investment Private Limited Vikram Farm
(v) Key Management Personnel and their relatives :
Directors and their relatives Mr. Rajnikant.D. Shroff Mrs. Sandra R. Shroff *
Mr. Kalyan Banerjee Mr. Jaidev R. Shroff *
Mr. Arun C. Ashar Mr. Vikram R. Shroff *
Mrs. Asha Ashar *
Mr. Navin Ashar *
Mr. Hardeep Singh Mr. Vasant Gandhi Mr. Pradeep Goyal Mr. Vi nod Sethi Dr. Reena Ramchandran Mr. Pradip Madhavji
Mr. P.V. Krishna (upto 30th September, 2015)
Mr. Anand K Vora - Chief Financial Officer Mr. Mukul B Trivedi - Company Secretary
* Relatives of Key management personnel.
7. Hedging activities and derivatives Derivatives not designated as hedging instruments
The Company uses fuel currency interest rate swap and foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions.
The Company enters into foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchases, these contracts are not designated in hedge relationships and are measured at fair value through profit or loss.
The management assessed that cash and cash equivalents, trade receivables, trade payables, other financial assets and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
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 following methods and assumptions were used to estimate the fair values:
The fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. In addition to being sensitive to a reasonably possible change in the forecast cash flows or the discount rate, the fair value of the equity instruments is also sensitive to a reasonably possible change in the growth rates. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management''s estimate of fair value for these unquoted equity investments.
The fair values of the remaining FVTOCI financial assets are derived from quoted market prices in active markets.
The fair values of the Company''s interest-bearing borrowings and loans are determined by using DCF method using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 March 2017 was assessed to be insignificant.
The discount for lack of marketability represents the amounts that the Company has determined that market participants would take into account when pricing the investments.
8. Financial risk management objectives and policies
The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to its subsidiaries to support its operations. The Company''s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.
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: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTOCI investments and derivative financial instruments.
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 a balanced portfolio of fixed and variable rate loans and borrowings. Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company''s profit before tax is affected through the impact on floating rate borrowings, as follows:
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
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.
The Company hedges its exposure to fluctuations on the foreign currency loan by using foreign currency swaps and forwards.
At 31 March 2017, the Company''s hedge position is stated in Note 38. This foreign currency risk is hedged by using foreign currency forward contracts and full currency interest rate swaps.
The movement in the pre-tax effect is a result of a change in the fair value of monetary assets and liabilities denominated in US dollars, where the functional currency of the entity is a currency other than US dollars. Although the derivatives have not been designated in a hedge relationship, they act as an economic hedge and will offset the underlying transactions when they occur.
Equity price risk
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 investment in listed and unlisted equity securities are not significant.
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) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Financial instruments and cash deposits
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 minimize the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.
The Company''s maximum exposure to credit risk for the components of the balance sheet at 31 March 2017, 31 March 2016 and 01 April 2015 is the carrying amounts as illustrated in Note 10 except for financial guarantees and derivative financial instruments.
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.
9. Capital management
Capital includes equity attributable to the equity holders to ensure that it maintains an efficient capital structure and healthy capital ratios in order to support its business and maximize 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 capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended March 31, 2017 and March 31, 2016.
The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. Net debt is calculated as loans and borrowings less cash and cash equivalents.
10. Foreign Exchange Management Act
in January 2013, the Company has received a show cause notice from the Directorate of Enforcement, alleging that the Company has contravened certain provisions of Foreign Exchange Management Act, 1999 with regard to foreign direct investment made and utilization of proceeds of FCCB / ECB.
The management has replied to the show cause notice and has had personal hearings to represent their matter and has filed written submissions. The matter is pending before the authority and based on internal assessment, the management believes that no liability would arise in respect of the aforesaid matter.
11. Amalgamation with Advanta Limited
The Hon''ble High Court of Gujarat vide its order dated 23rd June, 2016 has sanctioned the Scheme of Amalgamation of Advanta Limited, a subsidiary as per Ind AS, with the Company with an appointed date of 1st April, 2015. The Scheme has become effective on 20th July, 2016,pursuant to its filing with Registrar of Companies.
In accordance with the provisions of the aforesaid scheme -
a. The approved share swap ratio for 1 equity share of Advanta of the face value of Rs,2 each fully paid up held by the shareholders on the Record date following shares shall be allotted:
12. Amalgamation with Advanta Limited (contd.)
(i) 1 equity share of the Company of the face value of Rs,2 each fully paid up; and
(ii) 3 preference shares of the Company of Rs,10 each fully paid up, issued in the following manner:
(a) In case of shareholder is a person resident outside India, 3 compulsorily convertible preference shares of the Company of Rs,10 each fully paid up, subject to terms specified in the scheme.
(b) In case of shareholder is a person resident in India, 3 optionally convertible preference shares of the Company of Rs,10 each fully paid up, subject to terms specified in the scheme.
(iii) In case of global depository receipts (GDRs) for eveny 100 GDRs held would be entitled to 106 Company''s new GDRs.
b. In accordance with the scheme, the amalgamation has been accounted under the "Purchase Method" as prescribed by Accounting Standard 14 - Accounting for Amalgamations which is different from Ind AS 103 "Business Combinations". Accordingly, the accounting treatment has been given as under:-
(i) The assets and liabilities of Advanta Limited as at 1 April 2015 have been incorporated at their book values in the financial statements of the Company.
(ii) All inter-corporate balances and obligations (including investments held by the Company in Advanta Limited, deposits, loans and advances, outstanding balances or other obligations) between the Company and Advanta Limited stands cancelled.
c. The excess of fair value of equity shares and preference shares over the book value of assists and liabilities transferred and cancellation of Investments in Advanta held by the Company amounting to Rs,3,697 crores has been recorded as goodwill arising on amalgamation.
d. Consideration for amalgamation discharged by way of issuance of new Equity Shares has been recorded at fair value and Preference Shares has been recorded at face value. As the shares have been allotted subsequent to the March 31, 2016, the same has been disclosed under Share Capital Suspense account till the date of allotment.
e. In the month of September 2016, the Company has issued and allotted fresh 78,313,422 equity shares of Rs,2 each and 108,628,440 preference shares of Rs,10 each to the shareholders of erstwhile Advanta Limited pursuant to approved share swap ratio.
13. First-time adoption of Ind AS
These financial statements, for the year ended 31 March 2017, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP) and subsequent amendments thereafter.
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2017, together with the comparative period data as at and for the year ended 31 March 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''s opening balance sheet was prepared as at 1 April 2015, the Company''s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2015 and the financial statements as at and for the year ended 31 March 2016.
Exemptions applied
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
Certain items of plant and equipment have been measured at fair value at the date of transition to Ind AS. Other items of property, plant and equipment are carried at cost measured in accordance with Ind AS 16.
Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangements for embedded leases based on conditions in place as at the date of transition.
Estimates
The estimates at 1 April 2015 and at 31 March 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:
Impairment of financial assets based on expected credit loss model
The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2015, the date of transition to Ind AS and as of 31 March 2016.
Footnotes to the reconciliation of equity as at April 1, 2015 and March 31, 2016 and statement of profit and loss for the year ended March 31, 2016.
14. Property, Plant and Equipment
Company has elected to measure certain items of property, plant and equipment at fair value at the date of transition to Ind AS. Hence at the transition date, a decrease of Rs,53 crores was recognized in property, plant and equipment. This amount has been recognized against retained earnings. Accordingly, the Company has also reversed depreciation of Rs,5 crores excess recorded under Indian GAAP for the Year ended March 31, 2016.
15 Government Grant
The Company imports capital goods without payment of duty under Export Promotion on Capital Goods (EPCG) scheme and assumes an export obligation to be fulfilled over a period of 6 - 8 years which is treated as asset related government grant as per Ind AS 20 - Accounting for Government Grants and disclosure of government assistance. Such grants outstanding on the date of transition and received during the year ended March 31, 2016, are fair valued and treated as deferred income with the corresponding adjustments to property, plant and equipment''s amounting to Rs,4 crores net of depreciation respectively.
Grant set up as deferred income has been recognized in the statement of profit and loss account for the year ended March 31, 2016 amounting to Rs,0.22 crores on a systematic basis over the useful life of the asset.
16. FVTOCI financial assets
Under Indian GAAP, UPL recognized long-term investments in equity shares at cost less provision for diminution in the value of investments. Under Ind AS, the Company has designated such investments as FVTOCI and measured them at fair value through Other comprehensive income. On the transition date, an increase of Rs,0.44 crores between the instruments'' fair value and Indian GAAP carrying amount has been recognized in Other Comprehensive Income. Further for the year ended March 31, 2016 an additional gain of Rs,1 crores has been recorded in Other Comprehensive income.
17. FVTPL financial assets
Under Indian GAAP, Company recognized long-term investments in convertible debt securities at cost less provision for diminution in the value of investments. Under Ind AS, Company recognized such convertible debt investments as at FVTPL and measured them at fair value through profit or loss. On the transition date, an increase of Rs,5 crores between the instruments fair value and amortized cost has been recognized in retained earnings. Further for the year ended March 31, 2016 an increase of Rs,8 crores between the instruments fair value and amortized cost has been recognized in the statement of profit and loss.
18 Corporate guarantee obligations
Company has issued corporate guarantees to banks on behalf of its subsidiaries which, under Indian GAAP, was disclosed as contingent liabilities. Under Ind AS, financial guarantee contracts are financial liabilities measured at fair value on initial recognition. Subsequently, guarantee commission income is recognized in profit or loss over the tenure of the loan for which guarantee was provided. At the transition date, an increase of Rs,18 crores was recognized in retained earnings. Further for the year ended March 31, 2016 unwinding of corporate guarantee obligations recognized in statement of profit and loss is Rs,4 crores.
19. Amortized Cost financial assets
Under Indian GAAP, Company accounted for interest free deposits paid at cost i.e. the amount actually paid. Under Ind AS, such deposits are recognized at fair value on initial recognition and at amortized costs on subsequent measurement. Accordingly, on the date of transition, a decrease of Rs,2 crores between the deposits'' carrying amount and amortized cost has been recognized in retained earnings.
20. Trade receivables
Under Indian GAAP, Company has recognized specific amount towards impairment of Trade receivables on the basis of incurred losses. Under Ind AS, impairment allowance has been recognized based on Expected Credit Loss basis (ECL). Accordingly, additional allowance for impairment amounting to Rs,9 crores has been recognized with the corresponding adjustment to retained earnings.
21. First-time adoption of Ind AS (contd.)
Under Indian GAAP, Debtors discounting with the recourse to the Company was derecognized and treated as a contingent liability, however under Ind AS such arrangement does not qualify for derecognition and considered as borrowings. Accordingly, Rs,8 crores and Rs,1 crores has been recognized as borrowings with corresponding increase in trade receivables as on April 01, 2015 and March 51, 2016 respectively.
22. Amortized cost financial liabilities
Non-convertible debentures (''NCDs'') issued by the Company are carried at the outstanding principal amount under Indian GAAP and debenture issue expenses were adjusted against securities premium. Under Ind AS, NCDs are to be measured at amortized cost by applying the effective interest rate method which adjusts the effective interest rate for the debenture issue expenses. Accordingly, the borrowings are restated as per Ind AS and the transition cost amounting to Rs,11 Crs earlier debited to the Securities premium has now been reversed. The amount of transition cost debited to retained earnings on date of transition is Rs,4 Crs.
23. Dividends
In Indian GAAP, dividend payable is recorded as a liability in the period to which it relates. Under Ind AS, dividend to holders of equity instruments is recognized as a liability in the period in which the obligation to pay is established. Accordingly, proposed dividends and the related tax have increased the retained earnings by Rs,258 Crs, at the transition date and as on March 51, 2016.
24. Net Present Value of Trade Payables
In Indian GAAP, discounting of long term trade payables was not allowed. However, under Ind AS, discounting of long term trade payables with extended credit period is mandatory if the impact of discounting is material. Accordingly the Company has discounted trade payables with extended credit period and accordingly reduced trade payables by Rs,19 crores as on the transition date with corresponding increase in retained earnings.
25. Deferred tax
Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base.
In addition, the various transitional adjustments has led to temporary differences. Accordingly, Company has accounted for deferred tax on such differences in retained earnings at the transition date, thereby reducing deferred tax liabilities by Rs,15 crores and increasing retained earnings by the same amount.
26. Sale of goods
Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise duty on sale of goods is separately presented on the face of statement of profit and loss. Thus sale of goods under Ind AS has increased by Rs,296 crores with a corresponding increase in other expense. Cash discount was accounted under Finance Cost under Indian GAAP, however, under Ind AS, the same shall be reduced from Sale of goods.
27 Other comprehensive income
Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.
28. Amalgamation with Advanta Limited
Pursuant to scheme of amalgamation of Advanta Limited (Advanta) with the Company [Refer Note 45], the balance sheet as at March 51, 2016 includes impact of assets acquired and liabilities takenover of Advanta along with Goodwill generated on amalgamtaion, accordingly the profit and loss statement includes impact of income and expenses of Advanta for the year ended on March 51, 2016 along with amortization of goodwill of Rs,5697 crores over the useful life of 10 years. The adjustments also give effect to elimination of intercompany transactions and balances.
29 Statement of cash flows
The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.
30. Notes
(1) The business of the Company is divided into two business segments. These segments are the basis for management control and hence form the basis for reporting. The business of each segment comprises of:
a) Agro activity - This is the main area of the Company''s operation and includes the manufacture and marketing of conventional agrochemical products, seeds and other agricultural related products.
b) Non-agro activity - Non agro activities includes manufacture and marketing of industrial chemical and other non agricultural related products.
(2) Segment Revenue in the above segments includes sales of products net of taxes.
(3) Inter Segment Revenue is taken as comparable third party average selling price for the year.
(4) Segment Revenue in the geographical segments considered for disclosure are as follows:
a) Revenue within India includes sales to customers located within India.
b) Revenue outside India includes sales to customers located outside India
(5) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.
(6) The Company does not have any customer (other than related parties), with whom revenue from transactions is more than 10% of Company''s total revenue.
(7) Based on the "management approach" defined in Ind AS 108 - Operating Segments, the Chief Operating Decision Maker evaluates the company''s performance and allocate resources based on an analysis of various performance indicators by business segments. Accordingly information has been presented along these segments.
Mar 31, 2014
1 Corporate information
UPL Limited (formerly known as United Phosphorus Limited (the Company))
is a public Company domiciled in India and incorporated under the
provisions of the Companies Act, 1956. Its shares are listed on two
stock exchanges in India. The Company is engaged in the business of
agrochemicals, industrial chemicals, chemical intermediates and
speciality chemicals.
2 Basis of preparation
These financial statements have been prepared to comply in all material
aspects with applicable accounting principles in India, the applicable
Accounting Standards notifed under section 211(3C) of Companies Act,
1956, section 133 of the Companies Act, 2013 read with general circular
dated 12th September, 2013 and the relevant provisions thereof.
All assets and liabilities have been classifed as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act,1956.
Based on the nature of products and the time between acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current/ noncurrent classifcation of assets
and liabilities.
3 Retirement benefits:
Gratuity benefit is payable to employees on retirement or resignation or
death. The amount of gratuity payable is based on the past service and
salary at the time of exit as per Payment of Gratuity Act, 1972. There
is a vesting period of five years on the benefit.
4 A Scheme of Arrangement between the Company and SWAL Corporation
Ltd. and their respective Shareholders'' under Sections 391 to 394 read
with Section 78 and Sections 100 to 103 of the Companies Act, 1956 with
the Appointed Date of 1st April 2007, was sanctioned by the Hon''ble
Bombay High Court on 29th February 2008 and High Court of Judicature at
Gujarat on 16th April 2008 and became effective from 30th April 2008.
As per the said Scheme, reduction of Capital under Sections 100 to 103
of the Companies Act, 1956 was sanctioned and accordingly the debit
balance aggregating to Rs. 56,212 lacs in respect of Product
Registrations and Product Acquisitions appearing as on 31st March 2007,
has been debited to the Securities Premium Account and the General
Reserve after adjusting for Deferred Tax arising on account of these
assets amounting to Rs. 2,525 lacs on that date.
As per the ICAI announcement, expense adjusted directly to reserve is
net of its tax effect. As per the Court order and legal advice
obtained, the Company has taken a consistent view that the tax benefit
available is not to be adjusted in respect of amortization of the
product registrations and product acquisitions adjusted to the
Reserves. The difference in provision for taxation for the year due to
this is Rs.738 lacs (Previous Year: Rs 939 lacs) though overall, there
is no impact on the aggregate of Reserves and Surplus of the Company.
5 Commitments
(b) Arrangement with Advanta Limited
The Company has entered into a Licence Agreement effective from 2nd
April 2012 with Advanta Limited to obtain technical know-how for
commercial exploitation, development, use and sale of the Licenced
Products and use of brands. In consideration thereof, the Company will
pay a royalty at the rate of 7 % of net sales revenue of the Licenced
Products subject to a minimum royalty of Rs 700 lacs p.a. Further,
Advanta Limited shall carry out research and development activity, as
agreed, in connection with the Licenced Products and the Company will
pay an amount as may be agreed between both the parties at the
commencement of each year.
(c) The Company has undertaken an export obligation of 6 to 8 times the
duty saved on CIF machinery imported by the Company to be fulfilled over
a period of 6 to 8 years. The obligation outstanding as on the date of
the balance sheet is Rs.5,820 lacs (Previous Year: Rs. 5,899 lacs)
6 Operating leases
Lease rent debited to statement of profit and loss is Rs. 4,161 lacs
(Previous Year: Rs. 3,740 lacs)
There is no contingent rent recognised in the statement of profit and
loss.
General description of the leasing arrangement:
The Company has entered into operating lease arrangements for its
vehicles, machinery, office premises, storage locations and residential
premises. There are no non-cancellable lease.
7 Dividend Distribution Tax
During the year ended March 31, 2013, the Company had made provision
for dividend distribution tax (DDT) amounting to Rs.1,881 Lacs. During
the current year, the Company has received dividend from its foreign
subsidiary company which is eligible to be set off while calculating
dividend distribution tax on payment of dividend by the Company. After
this set off, no DDT is payable by the company and accordingly the
aforesaid provision of DDT of Rs.1,881 Lacs has been written back to
surplus in the statement of profit & loss.
8 Foreign Exchange Management Act
In January 2013, the Company has received a show cause notice from the
Directorate of Enforcement, alleging that the Company has contravened
certain provisions of Foreign Exchange Management Act, 1999 with regard
to foreign direct investment made and utilisation of proceeds of FCCB /
ECB.
The management has replied to the show cause notice and has had
personal hearings to represent their matter and has fled written
submissions. The matter is pending before the authority and based on
internal assessment, the management believes that no liability would
arise in respect of the aforesaid matter.
9 Previous year figures
Previous year''s figures have been regrouped/rearranged wherever
necessary.
Mar 31, 2013
1 CORPORATE INFORMATION
United Phosphorus Limited (the Company) is a public Company domiciled
in India and incorporated under the provisions of the Companies Act,
1956. Its shares are listed on two stock exchanges in India. United
Phosphorus Limited is engaged in the business of agrochemicals,
industrial chemicals, chemical intermediates and speciality chemicals.
2 BASIS OF PREPARATION
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The financial statements have been prepared to comply in
all material respects with the accounting standards notified by
Companies (Accounting Standards) Rules, 2006, as amended, and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis. The accounting policies have been consistently
applied and are consistent with those used in the previous year.
3 RETIREMENT BENEFITS:
Gratuity benefit is payable to employees on retirement or resignation
or death. The amount of gratuity payable is based on the past service
and salary at the time of exit as per payment of Gratuity Act, 1972.
There is a vesting period of five years on the benefit.
Disclosure as required by Accounting Standard (AS) - 15 (Revised 2005)
"Employee Benefits" notified by the Companies (Accounting Standards)
Rules, 2006 as amended are given below:
4 CAPITALIZATION OF EXPENDITURE
During the year, the Company has capitalized the following expenses of
revenue nature to the cost of fixed asset/ capital work- in-progress
(CWIP). Consequently, expenses disclosed under the respective notes are
net of amounts capitalized by the Company.
5 INTEREST IN A JOINT VENTURE
The Company has 50% ownership interest in United Phosphorus
(Bangladesh) Limited, a jointly controlled entity incorporated in
Bangladesh. The proportionate interest of the Company in the said
entity as per the latest available audited Balance Sheet as at 31st
March, 2012 is as under:
6 A Scheme of Arrangement between the Company and SWAL Corporation
Ltd. and their respective Shareholders under Sections 391 to 394 read
with Section 78 and Sections 100 to 103 of the Companies Act, 1956 with
the Appointed Date of 1st April 2007, was sanctioned by the Hon''ble
Bombay High Court on 29th February 2008 and High Court of Judicature at
Gujarat on 16th April 2008 and became effective from 30th April 2008.
As per the said scheme, reduction of Capital under Sections 100 to 103
of the Companies Act, 1956 was sanctioned and accordingly the debit
balance aggregating to Rs. 56,212 lacs in respect of Product
Registrations and Product Acquisitions appearing as on 31st March 2007,
has been debited to the Securities Premium Account and the General
Reserve after adjusting for Deferred Tax arising on account of these
assets amounting to Rs. 2,525 lacs on that date.
As per the ICAI announcement, expense adjusted directly to reserve is
net of its tax effect. As per the Court order and legal advice
obtained, the Company has taken a consistent view that the tax benefit
available is not to be adjusted in respect of amortization of the
product registrations and product acquisitions adjusted to the
Reserves. The difference in provision for taxation for the year due to
this is Rs. 939 lacs (Previous Year: Rs 1,252 lacs) though overall,
there is no impact on the aggregate of Reserves and Surplus of the
Company.
7 DETAILS OF DUES TO MICRO AND SMALL ENTERPRISES AS DEFINED UNDER THE
MSMED ACT, 2006
The identification of Micro, Small and Medium enterprises is based on
the management''s knowledge of their status. The Company has not
received any intimation from suppliers regarding their status under
"The Micro, Small and Medium Enterprises Development Act, 2006".
8 OPERATING LEASES
Lease rent debited to statement of profit and loss is Rs. 3,740 lacs
(Previous Year: Rs. 2,457 lacs)
There is no contingent rent recognised in the statement of profit and
loss.
General description of the leasing arrangement:
The Company has entered into operating lease arrangements for its
vehicles, machinery, office premises, storage locations and residential
premises.
9 BUY BACK OF SHARES
During the year, the Company has completed the process of the buy back
and has accepted a total of 1,92,00,000 equity shares at a total
consideration of Rs. 22,349 lacs (excluding brokerage, taxes and other
charges). Accordingly, the face value of shares bought back amounting
to Rs. 384 lacs has been adjusted against share capital and the balance
amount of Rs. 21,964 lacs and related expenses amounting to Rs. 109
lacs have been adjusted in securities premium.
10 PREVIOUS YEAR FIGURES
Previous year''s figures have been regrouped/rearranged wherever
necessary.
Mar 31, 2012
1. CORPORATE INFORMATION
United Phosphorus Limited (the Company) is a public Company domiciled
in India and incorporated under the provisions of the Companies Act,
1956. Its shares are listed on two stock exchanges in India. United
Phosphorus Limited is engaged in the business of agrochemicals,
industrial chemicals, chemical intermediates and specialty chemicals.
2. BASIS 0F PREPARATION
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The financial statements have been prepared to comply in
all material respects with the accounting standards notified by
Companies (Accounting Standards) Rules, 2006, as amended, and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis. The accounting policies have been consistently
applied and are consistent with those used in the previous year.
2.1 Am3lgamation of United Phosphorus Limited, Mauritius:
Pursuant to the Scheme of Amalgamation ("the Scheme") under Sections
391 to 394 of the Companies Act, 1956, the Hon'ble High Court of
Gujarat has pronounced an order on January 13, 2012 sanctioning the
Scheme of amalgamation of United Phosphorus Limited, Mauritius (UPL
Mauritius), a wholly owned step down subsidiary of the Company with the
Company from the appointed date viz July 1, 2011. The Scheme became
effective on January 19, 2012 upon filing of the said order with the
Registrar of Companies, Gujarat. Consequently, all the assets and
liabilities of UPL Mauritius have been transferred to and vested in the
Company with effect from July 01, 2011. The Scheme has accordingly been
given effect to in these accounts.
The amalgamation has been accounted for under the "pooling of interest"
method referred to in Accounting Standard 14- Accounting for
Amalgamation, as prescribed by the Scheme. Accordingly, all the assets,
liabilities and other reserves of UPL Mauritius as on July 1, 2011 have
been aggregated at their respective book values (after converting the
book values using the applicable exchange rate at the close of business
of the day immediately preceding the appointment date).
The Company was indirectly holding the entire paid-up capital of UPL
Mauritius and hence no consideration has been issued for the aforesaid
amalgamation. Further, the share capital of UPL Mauritius has been
cancelled and the corresponding amount of Rs. 3 lacs has been credited
to the Capital Reserve.
b) Terms/ rights attached to equity shares:
The Company has one class of equity shares having par value of Rs. 2
per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividends in Indian rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive the 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.
As per records of the Company, including its register of shareholders/
members and other declarations received from shareholders regarding
beneficial interest, the above shareholding represents both legal and
beneficial ownerships of shares.
Notes:
a. Rs. Nit (Previous Year: Rs. 17,000 lacs) 12.20 % Non convertible
Debentures (NCDs) referred above are redeemable at par in three equal
installments from January 2014 and had a call option at the end of 3rd
year i.e. 27 January 2012. These debentures were secured by way of
pledge of 65,29,500 equity shares of Advanta India Limited.
b. Unsecured Redeemable Non-Convertible Debentures
i) NCDs amounting to Rs 25,000 lacs (Previous Year: Rs Nil) are
redeemable at par at the end of 15th year i.e July 2026 from the date
of allotment. The NCDs carry a call option at the end of 10th year from
the date of allotment.
ii) NCDs aggregating to Rs 30,000 lacs (Previous Year: Rs 30,000 lacs)
are redeemable at par at the end of 12th year (Rs. 7,500 lacs), llth
year (Rs. 7,500 lacs), 9th year (Rs. 7,500 lacs) and 8th year (Rs.
7,500 lacs) i.e. October 2022, October, 2021, October 2019 and October
2018 respectively from the date of allotment.
iii) NCDs aggregating to Rs. 30,000 lacs (Previous Year: Rs. 30,000
lacs) are redeemable at par at the end of 10th year (Rs. 15,000 lacs)
i.e. April 2020 and at the end of 7th year (Rs. 15,000 lacs) i.e. April
2017 from the date of allotment. The NCDs carry a call option at the
end of 6th year i.e. April 2016 and 5th year i.e. April 2015
respectively from the date of allotment.
iv) NCDs amounting to Rs 25,000 lacs (Previous Year: Rs 25,000 lacs)
are redeemable at par at the end of 5th year i.e January, 2015 from the
date of allotment.
v) NCDs amounting to Rs 13,500 lacs (Previous Year: Rs 13,500 lacs) are
redeemable at par at the end of 3.5 year (Rs. 10,500 lacs) i.e.
February, 2013 and 3 years (Rs. 3,000 lacs) i.e. August, 2012 from the
date of allotment.
vi) NCDs mentioned above carry a coupon rate ranging from 8.75% to
10.70%.
c. Term Loans of Rs Nil (Previous Year: Rs 17,500 lacs) from banks
were carrying interest rate ranging from 8.5% to 10% and repayable in
June 2011, August 2011 and September 2011.
d. External Commercial Borrowing from Banks amounting to Rs - Nil
(Previous Year: Rs. 81,850 lacs) were carrying interest rate at Libor
plus 130 basis points. The loan was due for repayment in October 2011.
e External Commercial Borrowing from a Multilateral Financial
Institution amounting to Rs. 712 lacs (Previous Year: Rs 1,873 lacs) is
secured by pari-passu first charge by way of hypothecation of specific
movable assets, present and future, situated at Jhagadia Unit of the
Company and carries Interest rate at Libor plus 210 basis points. The
outstanding loan is due for payment in June 2012.
Note:
a. Outstanding loans carry an interest rate of Base Rate/Libor plus
margin ranging from 175 bps to 400 bps
b. Outstanding loan is secured by hypothecation of inventories, bills
receivables, book debts and all movables assets of the Company both
present and future, wherever situated.
c. Short term buyers credit are unsecured and the outstanding loan
carry an interest rate ranging from Libor plus 125 bps to 225 bps.
d. Unsecured short term demand loan carrying interest at the rate of
10%.
3. RETIREMENT BENEFITS
Gratuity benefit is payable to employees on retirement or resignation
or death. The amount of gratuity payable is based on the past service
and salary at the time of exit as per payment of Gratuity Act, 1972.
There is a vesting period of five years on the benefit.
A Scheme of Arrangement between the Company and SWAL Corporation Ltd.
and their respective Shareholders' under Sections 391 to 394 read with
Section 78 and Sections 100 to 103 of the Companies Act, 1956 with the
Appointed Date of 1st April 2007, was sanctioned by the Hon'ble Bombay
High Court on 29th February 2008 and High Court of Judicature at
Gujarat on 16th April 2008 and became effective from 30th April 2008.
As per the said scheme, reduction of Capital under Sections 100 to 103
of the Companies Act, 1956 was sanctioned and accordingly the debit
balance aggregating to Rs. 56,212 lacs in respect of Product
Registrations and Product Acquisitions appearing as on 31st March 2007,
has been debited to the Securities Premium Account and the General
Reserve after adjusting for Deferred Tax arising on account of these
assets amounting to Rs. 2,525 lacs on that date.
As per the ICAI announcement, expense adjusted directly to reserve is
net of its tax effect. As per the Court order and legal advice
obtained, the Company has taken a consistent view that the tax benefit
available is not to be adjusted in respect of amortization of the
product registrations and product acquisitions adjusted to the
Reserves. The difference in provision for taxation for the year due to
this is Rs 1,252 lacs (Previous Year: Rs 1,709 lacs) though overall,
there is no impact on the aggregate of Reserves and Surplus of the
Company.
4. Notes
1) The Company is organized into three main business segments namely :
a) Agro Chemicals - comprising of Agrochemicals Technical's and
Formulations.
b) Industrial Chemicals - comprising of Industrial Chemicals and
Specialty Chemicals.
c) Others - primarily comprising of Traded Products.
2) Segment Revenue in the above segments includes sales of products net
of taxes.
3) Inter Segment Revenue is taken as comparable third party average
selling price for the year.
4) Segment Revenue in the geographical segments considered for
disclosure are as follows:
a) Revenue within India includes sales to customers located within
India.
b) Revenue outside India includes sales to customers located outside
India
5) Segment Revenue, Results, Assets and Liabilities include the
respective amounts identifiable to each of the segments and amounts
allocated on a reasonable basis.
5. CONTINGENT LIABILITIES
(Rs. in Lacs)
Particulars As at As at
31 March 2012 31 March 2011
(a) Disputed Income-Tax
Liability (excluding
interest) 151 69
(b) Disputed Excise Duty /
Service Tax liability
(excluding interest) 10,373 7,123
(c) Disputed Sales Tax
liability 2,417 1,157
(d) Disputed Custom
Duty liability 2,331 2,331
(e) Disputed Fiscal Penalty
for cancellation of licences 3,348 3,348
(f) Disputed penalty levied
by Competition Commission of 25,244 -
India
for Cartelization of prices
(g) Disputed penalty on Water
Tax 161 161
(h) Bills discounted under
Letter of Credit and remaining
unpaid 816 361
at the date of the balance sheet
(i) Guarantees given by Company's
bankers on behalf of
the Company to
third parties 4,129 11,253
(j) Corporate guarantees
given on behalf of
subsidiary companies:
(i) United Phosphorus
Limited, U.K. 17,936 15,760
(ii) United Phosphorus
Limited, Hong Kong 4,324 3,791
(iii) United Phosphorus
Inc. USA 6,219 5,452
(iv) United Phosphorus
Inc. USA/Cerexagri Inc (PA) 1,272 1,115
(v) Evofarms SA - Columbia 1,272 1,115
(vi) United Phosphorus
Limited, Columbia 763 669
(vii) United Phosphorus
Limited, Australia 1,781 1,561
(viii) Bio-Win Corporation
Limited, Mauritius 132,676 7,581
(ix) Cerexagri Italia,
SRL, Italy 8,149 7,605
(x) Ceraxagri SAS.,
France 13,582 12,676
(xi) Ceraxagri B.V.,
Netherlands 14,261 13,309
(xii) Icona S.A.
Argentina - 4,460
(xiii) Uniphos Columbia
Plant Limited, Columbia - 6,689
(k) Claims
against the Company not
acknowledged as debts 532 424
(c) Arrangement with Advanta India Limited
The Company has entered into a Licence Agreement effective from 2nd
April 2012 with Advanta India Limited (AIL) to obtain technical
know-how for commercial exploitation, development, use and sale of the
Licenced Products and use of brands. In consideration thereof, the
Company will pay a royalty at the rate of 7 % of net sales revenue of
the Licensed Products subject to a minimum royalty of Rs 700 lacs p.a.
Further, AIL shall carry out research and development activity, as
agreed, in connection with the Licensed Products and the Company will
pay an amount as may be agreed between both the parties at the
commencement of each year.
6.DETAILS OF DUES TO MICRO AND SMALL ENTERPRISES AS DEFINED UNDER THE
MSMED ACT, 2006
The identification of Micro, Small and Medium enterprises is based on
the management's knowledge of their status. The Company has not
received any intimation from suppliers regarding their status under
"The Micro, Small and Medium Enterprises Development Act, 2006".
7. OPERATING LEASES
Lease rent debited to profit and loss account is Rs. 2,457 lacs
(Previous Year: Rs. 1,487 lacs)
There is no contingent rent recognised in the statement of profit and
loss.
General description of the leasing arrangement:
The Company has entered into operating lease arrangements for its
vehicles, machinery, office premises, storage locations and residential
premises.
8. PREVIOUS YEAR FIGURES
Till the year ended 31st March 2011, the Company was using pre-revised
Schedule VI to the Companies Act 1956, for the preparation and
presentation of its financial statements. During the year ended 31st
March 2012, the revised Schedule VI notified under the Companies Act
1956, has become applicable to the Company. The Company has
re-classified previous year figures to conform to this year's
classification. The adoption of revised Schedule VI does not impact
recognition and measurement principles followed for preparation of
financial statements. However, it significantly impacts presentation
and disclosures made in the financial statements, particularly
presentation of the balance sheet.
Further, in view of amalgamation of United Phosphorus Limited,
Mauritius with the Company (refer note 2.2), the current year figures
are not comparable with those of the previous year.
Mar 31, 2010
1.NATURE OF OPERATIONS
United Phosphorus Limited is engaged in the business of agrochemicals,
industrial chemicals, chemical intermediates and specialty chemicals.
As at 31st As at 31st
March, 2010 March, 2009
Rs. in lacs Rs. in lacs
2. CONTINGENT LIABILITIES NOT
PROVIDED FOR:
(a) Disputed Income-tax Liability
(excluding interest) 90 89
(b) Disputed Excise Duty/Service
Tax Liability (excluding interest) 5,470 4,354
(c) Disputed Sales-tax Liability 800 806
(d) Disputed Custom Duty liability 2,331 2,331
(e) Disputed Fiscal Penalty for
cancellation of licences 3,348 2,459
(f) Disputed Penalty on water tax 161 161
(g) Bills/Cheques purchased/discounted
with the banks and remaining unpaid
as at the date of the Balance Sheet - 6,298
(h) Bills discounted under Letter of
Credit and remaining unpaid at the date
of the Balance Sheet 858 1,670
(i) Guarantees given by Companys Bankers
on behalf of the Company to third parties 1,736 4,225
Notes: 1. Audit Fees includes fees forauditing consolidated financial
statements amounting to Rs. 15.00 lacs (Previous Year: Rs.12.50 lacs)
and Rs. 4.50 lacs (Previous Year: Rs. 3.90 lacs)- forquarterly limited
reviews. 2. The auditors remuneration, as disclosed above, exclude
audit fees of Rs. 43 lacs charged for audit of a wholjy owned
subsidiary of the Company for which the Company has been reimbursed by
the said subsidiary.
Note:
Deferred Tax Asset on account of unabsorbed depreciation/business loss
has been recognised, as the Company has timing difference on account of
depreciation, the reversal of which will result in sufficient taxable
income.
3. A Scheme of Arrangement between the Company and SWAL Corporation
Ltd. and their respective Shareholders under Sections 391 to 394 read
with Section 78 and Sections 100 to 103 of the Companies Act, 1956 with
the Appointed Date of 1st April 2007, was sanctioned by the Honble
Bombay High Court on 29th February 2008 and High Court of Judicature at
Gujarat on 16th April 2008 and became effective from 30th April 2008.
As per the said scheme, reduction of Capital under Sections 100 to 103
of the Companies Act, 1956 was sanctioned and accordingly the debit
balance aggregating to Rs. 56,212 lacs in respect of Product
Registrations and Product Acquisitions appearing as on 31st March 2007,
has been debited to the Securities Premium Account and the General
Reserve after adjusting for Deferred Tax arising on account of these
assets amounting to Rs. 2,525 lacs on that date.
As per the ICAI announcement, expense adjusted directly to reserve is
net of its tax effect. As per the Court order and legal advice
obtained, the Company has taken a consistent view that the tax benefit
available is not to be adjusted in respect of amortization of the
product registrations and product acquisitions adjusted to the
Reserves. The difference in provision for taxation for the year due to
this is Rs. 2,332, lacs (Previous Year: Rs 3,110 lacs) though overall,
there is no impact on the aggregate of Reserves and Surplus of the
Company.
Notes:
1. Licensed and Installed Capacities are as certified by a Director on
which the Auditors have relied, being a technical matter.
2. Licensed capacity represents registered capacity with Directorate
General of Technical Development (D.C.T.D.), capacity intimated to
D.G.T.D. under Industrial Licensing Policy and/or capacity intimated to
Secretary for Industrial Approvals.
3. Production includes quantities produced for captive consumption.
4. During the year, the Company has produced 1,31,18,838 Litres
(Previous Year: 1,02,40,233 Litres), 2,52,88,625 Kilograms (Previous
Year: 2,26,39,925 Kilograms) and 27,68,165 numbers (Previous Year:
33,32,160 numbers) of formulations out of Technical Grade Products
manufactured/purchased by the Company
5. Production includes 3,302 Tonnes (Previous Year: 2,200 Tonnes)
produced on Job-Work basis for outside parties.
3. Notes
(1) The Company is organised into three main business segments namely :
a) Agro Chemicals - comprising of Agrochemicals Technicals and
Formulations.
b) Industrial Chemicals - comprising of Industrial Chemicals and
Speciality Chemicals.
c) Others - primarily comprising of Traded Products.
(2) Segment Revenue in the above segments includes sales, processing
charges, rental income and export incentives.
(3) Inter Segment Revenue is taken as comparable third party average
selling price for the year.
(4) Segment Revenue in the geographical segments considered for
disclosure are as follows:
a) Revenue within India includes sales to customers located within
India.
b) Revenue outside India includes sales to customers located outside
india
(5) Segment Revenue, Results, Assets and Liabilities include the
respective amounts identifiable to each of the segments and amounts
allocated on a reasonable basis.
23. Related party disclosure as required by Accounting Standard (AS)
-18 "Related Party Disclosures" notified by the Companies (Accounting
Standards) Rules, 2006 are given below:
(a) Relationship:
(i) Name of related parties where control exists: Subsidiary Companies:
United Phosphorus (Korea) Limited
United Phosphorus (Shanghai) Company Limited
United Phosphorus (Taiwan) Limited
United Phosphorus de Mexico, S.A. de C.V.
United Phosphorus do Brazil Ltda
United Phosphorus GMBH - Germany
United Phosphorus Holdings B.V., Netherlands
United Phosphorus Holdings Cooperatief U.A.
United Phosphorus Inc., U.S.A.
United Phosphorus Italy S.R.L.
United Phosphorus Limited, Australia
United Phosphorus Limited, Belgium S P R L
United Phosphorus Limited, Colombia
United Phosphorus Limited, Gibraltar
United Phosphorus Limited, Hongkong
United Phosphorus Limited, Japan
United Phosphorus Limited, New Zealand
United Phosphorus Limited, U.K.
United Phosphorus Limited, Zambia
United Phosphorus Polska Sp.z o.o - Poland
United Phosphorus Sole Partner Limited, Greece
United Phosphorus Switzerland Limited.
United Phosphorus Vietnam Co., Limited
Agri pack Zambia Limited
Agrindustrial, S.A., Spain
Agrodan, ApS
Anning Decco Fine Chemical Co. Limited, China
Bio-win Corporation Limited, Mauritius
Canegrass LLC, USA
Cerexagri B.V. - Netherlands
Cerexagri Costa Rica, S.A.
Cerexagri Delaware, Inc.,USA
Cerexagri Italia S.R.L.
Cerexagri S.A.S., France
Cerexagri Ziraat Ve Kimya Sanayi Ve Ticaret Limited Sirketi, Turkey
Cerexagri, Inc. (PA)
Citrashine (Pty) Ltd, South Africa
Compania Espanola Industrial Quimica de Productos Agricolas Y
Domesticos, S.A.U.,Spain
Cropserve Zambia Limited
Decco Iberica Postcosecha, S.A.U., Spain (formerly Cerexagri Iberica)
Decco Italia SRL,ltaly
Decco US Post-Harvest Inc (US)
Decco Worldwide Post-Harvest Holdings B.V.
Decco Worldwide Post-Harvest Holdings Cooperatief U.A.
Desarrollo Quimico Industrial, S.A., Spain
Eddyville Consultants Group, Inc. Panama
Evofarms Colombia SA
Evofarms S.A. - Colombia
Friedshelf 1114 (Pty) Limited
Global Chem Trade Corp., Panama
Icona S A - Argentina
IconaSanluis S A-Argentina
Jiangsu Kaznam Chemical Group.,Panama
JSC United Phosphorus Limited, Russia
Phosfonia, S.L.,Spain
Prime Agri Centre Zambia Limited
PT Catur Agrodaya Mandiri, Indonesia PT. United Phosphorus Indonesia
Reposo S.A.I.C., Argentina Safepack Products Limited Samma
International S.R.L.,ltaly Samrod Chemicals (Pty) Limited Shroffs
United Chemicals Limited SWAL Corporation Limited Transterra Invest, S.
L. U., Spain
(ii) Name of other related parties with whom transactions have taken
place during the year
a) Associate Companies:
Advanta India Limited
Advanta Seed International, Mauritius
Advanta Semilas SAIC, Argentina
Agrinet Solutions Limited
Chemisynth (Vapi) Limited
Kerala Enviro Infrastructure Limited
Pacific Seeds Pty Limited, Australia
Unicorn Seeds Private Limited
b) Joint Venture Companies:
United Phosphorus (Bangladesh) Limited. Hodogaya UPL Co. Limited,
Japan Nisso TM LLC
c) Enterprises over which key management personnel and their relatives
have significant influence:
Bharuch Enviro Infrastructure Limited
Bloom Packaging Private Limited
Bloom Seal Containers Private Limited.
Coimbatore-Integrated Waste Management Co. Private Limited
Daman Canga Pulp and Papers Private Limited
Demuric Holdings Private Limited
Entrust Environment Limited
Enviro Technology Limited
Cabo Products Private Limited
Charpure Engineering and Construction Private Limited
Jai Research Foundation
Jai Trust
JRF Biogenomics Limited
Nerka Chemicals Private Limited
Pot Plants
Sanguine Holdings Private Limited
Tatva Global Environment Limited
Ultima Search
Uniphos Agro Industries Limited
Uniphos Enterprises Limited
UPL Environmental Engineers Limited
Vapi Waste & Effluent Management Co. Limited
Vikram Farm
UPL Global Ecn Investment Holdings Private Limited
d) Key Management Personnel and their relatives :
Whole Time Directors and their relatives
Mr. Rajnikant.D. Shroff
Mrs. Sandra R. Shroff
Mr. Kalyan Banerjee
Mr. Jaidev R. Shroff
Mr. Arun C. Ashar
Mr. Vikram R. Shroff
Mrs. Shilpa Sagar
Mrs. Asha Ashar
Mr. Navin Ashar
The estimates of future salary increases, considered in actuarial
valuation, takes account of inflation, seniority, promotion and other
relevant factors such as supply and demand in the employment market.
4. "Foreign Currency Convertible Bonds"Series B Bonds due 2009"
50 Series B Foreign Currency Convertible Bonds of USD 10,000 each have
been redeemed on maturity date of November 6, 2009 at 122 percent of
its principal amount. The premium paid on redemption amounting to Rs.52
lacs has been adjusted against Securities Premium Account.
Series B Bonds due 2011:
674 (Previous Year: 674) Series B Foreign Currency Convertible Bonds of
USD 1,00,000 each are:
(a) Convertible by the holders at any time on or before December 7,
2010. Each bond will be converted into fully paid up equity share with
par value of Rs. 2 per share at a fixed price of Rs. 136.03 per share.
(b) Redeemable, in whole but not in part, at the option of the Company
at any time on or after February 1, 2007 and prior to December 7, 2010,
subject to the fulfillment of certain terms and obtaining requisite
approvals.
(c) Redeemable on maturity date of January 7,.2011 at 130.87 percent of
its principal amount, if not redeemed or converted earlier.
The Bonds are considered as monetary liability. The bonds are
redeemable only if there is no conversion of the bonds earlier. Hence
the payment of premium on redemption is contingent in nature, the
outcome of which is dependent on uncertain future events. Hence, no
provision is considered necessary nor has been made in the accounts in
respect of such premium. Further, the Company has sufficient balance in
the securities premium account which can be utilized for premium on
redemption of the aforesaid Foreign Currency Convertible Bonds.
5. The Company had issued Preferential Convertible Warrants to a
promoter group company during the financial year 2007 - 08 and received
an amount of Rs. 10,598 lacs being 10% of the total value. Out of this,
an amount of Rs. 2,070 lacs was adjusted towards allotment of 60,87,100
shares in the year 2007- 08. During the current year, the Company has
forfeited the balance amount of Rs. 8,528 lacs as the balance of 90%
amount has not been paid by the warrant holders within the stipulated
time and has been transferred to capital reserve.
6. Previous Years figures have been regrouped/rearranged wherever
necessary.