1. CORPORATE INFORMATION Manali Petrochemicals Limited (the 'Company') is a Public Company incorporated on June 11, 1986 in the State of Tamilnadu, India. The Company is engaged in the manufacture and sale of Propylene Oxide (PO), Propylene Glycol (PG) and Polyols (PY), which are used as industrial raw materials. 2. BASIS OF brPARATION OF FINANCIAL STATEMENTS The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956 Act"), as applicable. The financial statements have been brpared on accrual basis under the historical cost convention except for categories of fixed assets acquired before 1 April, 2014, that are carried at revalued amounts. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year. 2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. USE OF ESTIMATES The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise. b. INVENTORIES a) Raw materials and stores and spares are valued at lower of cost and the net realizable value after providing for obsolescence and other losses, where considered necessary. Cost is determined on moving weighted average basis and includes freight, taxes and duties net of CENVAT/VAT credit wherever applicable. Customs duty payable on material in bond is added to cost. b) Finished goods and work-in-process are valued at lower of cost (weighted average basis) and net realisable value after providing for losses arising on quality, based on technical evaluation. Cost includes direct materials and labour and a proportion of overheads based on normal operating capacity. Cost of finished goods include excise duty and is determined. c. CASH AND CASH EQUIVALENTS Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. d. CASH FLOW STATEMENT Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. e. DEbrCIATION AND AMORTISATION Debrciable amount for assets is the cost of an asset less its estimated residual value. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of asset: Development on Leasehold land is amortised over the period of the lease. Intangible asset - software is amortised over the estimated useful life of 3 years. The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any. f. REVENUE RECOGNITION Sale of goods Sales are recognised, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of goods to customers. Sales include excise duty but exclude sales tax and value added tax. Dividend Dividend Income is recognised when the Company's right to receive the dividend is established by the reporting date. Interest Interest income is accounted on accrual basis. g. FIXED ASSETS, INTANGIBLE ASSETS AND CAPITAL WORK IN PROGRESS Fixed assets are stated at cost less accumulated debrciation and impairment losses, if any. The cost of fixed assets comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use and other incidental expenses. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. These are recorded at the consideration paid for acquisition Capital work-in-progress: Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest. h. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS Initial recognition Transactions in foreign currencies entered into by the Company are accounted at the exchange rates brvailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. Measurement at the balance sheet date Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost. Treatment of exchange differences Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss. Accounting for forward contracts Premium / discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts if such contracts relate to monetary items as at the balance sheet date. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense in the period in which such cancellation or renewal is made. i. GOVERNMENT GRANTS Government grants are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire capital assets are brsented by deducting them from the carrying value of assets. The grant is recognised as income over the life of a debrciable asset by way of a reduced debrciation charge. Government grants, in the nature of investment grants, received after the asset is put to use and / or the carrying value of asset is less than the grants received and where no repayment is ordinarily expected in respect thereof, are treated as capital reserve. j. INVESTMENTS Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees, duties etc. k. EMPLOYEE BENEFITS I. Short-term employee benefits All employee benefits falling due wholly within twelve months of rendering service are classified as short-term employee benefits. The benefits like salaries, wages, short term compensated absences and the expected cost of bonus and exgratia are recognised as expense in the Statement of Profit and Loss in the period in which the employee renders the related service on an undiscounted basis. Liability for short term compensated absences are determined as per Company's policy / scheme and are recognized as expense in the Statement of Profit and Loss based on expected obligation on an undiscounted basis. II. Long-term employee benefits i. Defined Contribution Plan a) Provident Fund Fixed contributions made to the Provident Fund are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees b) Superannuation This plan covers officers and the staff of the Plant I and II and is administered by the Life Insurance Corporation of India. Contributions are made monthly at a brdetermined rate to the Trust and debited to the Statement of Profit & Loss on an accrual basis. ii. Defined Benefit Plan a) Gratuity The company has an arrangement with the Life Insurance Corporation of India (LIC) to administer its Gratuity fund for Plant II employees and Trust established by the Company to administer its Gratuity fund for Plant I employees. Premium paid/payable is determined based on an actuarial valuation carried out by LIC for Plant II and by an independent valuer for Plant I using the projected unit credit method as on the Balance Sheet date and debited to the Statement of Profit and Loss on accrual basis. Actuarial gain or loss is recognized in the statement of Profit and Loss as income or expense. b) Superannuation Liability for superannuation to the staff of Plant I who are covered under the defined benefit plan is determined on the basis of actuarial valuation using Projected Unit Credit method as on the balance sheet date and is funded with the trust established by the Company. The contribution thereof paid / payable is charged to the Statement of profit and loss. Further, in respect of specific employees, additional accruals are made based on the scheme of the Company. c) Long tem compensated absences Liability towards long term compensated absence is accrued based on an actuarial valuation at the balance sheet date based on the projected unit credit method and is not funded. l. SEGMENT REPORTING The Company is engaged in the business of manufacture of Petrochemicals, which is the only segment in the context of reporting business segment in accordance with Accounting Standard 17 on Segment Reporting issued by the Institute of Chartered Accountant of India. The Company does not dislcose multiple geographical segments since its operations are primarily carried out in India. m. LEASES Assets leased by the Company in its capacity as lessee where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. Such leases are capitalised at the inception of the lease at the lower of the fair value and the brsent value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year. Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. n. EARNINGS PER SHARE Basic earnings per share is computed by dividing the net profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or (loss) (including the post tax effect of extraordinary items, if any) for the year attributable to equity share holders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e., average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period brsented. o. TAXES ON INCOME Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates under provisions of Income Tax Act 1961 and other applicable tax laws. Deferred tax is recognized on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or subsequent periods and are quantified using the substantively enacted tax rate as on the Balance Sheet date. Deferred Tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed debrciation or carry forward tax losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits. At each Balance Sheet date, the Company reassesses unrecognized deferred tax assets. It recognises unrecognized deferred tax asset to the extent that it has become virtually certain that sufficient future taxable income will be available against which such deferred tax assets can be realized Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability is considered as an asset if there is convincing evidence that the company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance sheet when it is highly probable that the future economic benefit associated with it will flow to the company. p. RESEARCH AND DEVELOPMENT EXPENSES Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss unless a product's technological feasibility has been established, in which case such expenditure is capitalised. The amount capitalised comprises expenditure that can be directly attributed or allocated on a reasonable and consistent basis to creating, producing and making the asset ready for its intended use. Fixed assets utilised for research and development are capitalised and debrciated in accordance with the policies stated for Tangible Fixed Assets and Intangible Assets. q. IMPAIRMENT OF FIXED ASSETS The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired: (a) an intangible asset that is not yet available for use; and (b) an intangible asset that is amortised over a period exceeding ten years from the date when the asset is available for use. If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their brsent value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was brviously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognised. r. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS Provisions are recognised only when a) The company has a brsent obligation as a result of past events b) a probable outflow of resources is expected to settle the obligation and c) the amount of obligation can be reliably estimated Provisions are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the notes for i) Present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made ii) Possible obligation arising from past events which will be confirmed only by future events not wholly within the control of the Company Contingent assets are neither recognised nor disclosed in the financial statements. s. INSURANCE CLAIMS Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect ultimate collection. t. SERVICE TAX INPUT CREDIT Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilising the credits. u. OPERATING CYCLE Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. 1 Schedule III has been followed and brvious year's figures have regrouped/reclassified wherever necessary to correspond with the current year's classification/disclosure. For Deloitte Haskins & Sells Chartered Accountants Geetha Suryanarayanan Partner (M.No. 29519) For and on behalf of the Board of Directors Ashwin C Muthiah DIN : 00255679 Chairman Anis Tyebali Hyderi Chief Financial Officer R Kothandaraman Company Secretary |