NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2016. NOTE 1 1] Corporate Information Subrme Petrochem Ltd (The Company) a public limited company incorporated under the Companies Act, 1956 is engaged in the manufacture of Polystyrene (PS), Expandable Polystyrene (EPS), Speciality Polymers & Compounds and Extruded Polystyrene (XPS) with manufacturing facilities at Nagothane Dist Raigad, Maharashtra and Ammulavoyil Village, Manali New Township, Chennai, Tamil Nadu. The Company also has a captive gas power plant at Nagothane. SIGNIFICANT ACCOUNTING POLICIES 2] Basis of Preparation The financial statements of the Company are consistently brpared and brsented under historical cost convention on an accrual basis in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has brpared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act, 2013, read together with rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. In accordance with first proviso to section 129(1) of the Companies Act, 2013 (the Act), and clause 6 of the General Instructions given in Schedule III to the Act the items contained in the enclosed financial statements are in accordance with the Accounting Standards as referred to herein. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year. All the assets and liabilities have been classified as current or non-current as per the normal operating cycle of the Company and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within 12 months for the purpose of current and non-current classification of assets and liabilities. 3] Use of Estimates The brparation of financial statements in conformity with Indian generally accepted accounting principles (GAAP) requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosures relating to contingent liabilities as at the date of financial statements and reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, actual results could differ from these estimates. Differences on account of revision of estimates, actual results and existing estimates are recognised in periods in which the results are known/ materialised in accordance with the requirements of the respective accounting standard, as may be applicable. 4] Revenue Recognition [a] Income and Expenditure Income and expenditure are accounted on accrual basis and is recognised when it is reasonably certain of the ultimate collection. [b] Sale of Goods Domestic sales are accounted on passing of risks and rewards attached to the goods to customers. Export sales are accounted on date of bill of lading. Gross Sales include Excise duty but excludes Value Added Tax/ Central Sales Tax and are net of trade discounts. [c] Dividend Income Dividend income is recognised for when the right to receive is established. [d] Interest Income Interest income is accounted on accrual basis. [e] Export Incentives Benefits on account of entitlement to import duty-free raw materials under the Advance Authorization Scheme is accounted for in the year of export calculated on the basis of rate of exchange and import duty brvailing at the date of the Balance sheet. This is included under the head "Other Operating Income." 5] Fixed Assets, Capital Work-in-progress, Debrciation and Amortization: Fixed Assets [a] Tangible Assets Tangible assets are stated at cost net of recoverable taxes, trade discounts and rebates and include amounts added on revaluation, less accumulated debrciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets, and any cost directly attributable to bringing the asset to its working condition for its intended use. Subsequent expenditures related to any item of tangible assets are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance. [b] Capital Work-in-progress Projects under which assets are not ready for their intended use are shown as Capital Work-in-Progress. [c] Intangible Assets Intangible Assets are recognised only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets and any cost directly attributable to bringing the asset to its working condition for the intended use. [d] Debrciation and Amortization Debrciation is provided on a straight-line basis over the useful life as brscribed in Schedule II to the Companies Act, 2013, unless otherwise specified. When significant parts of the fixed assets are required to be replaced at interval, the Company debrciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in the Statement of Profit or Loss as incurred. Debrciable amount for assets is the cost of an asset less its estimated residual value. In case of certain assets, based on the technical evaluation, the Company uses different useful life than those brscribed in Schedule II to the Companies Act, 2013. Such class of assets and their estimated useful lives are as under: Assets:Plant and Machinery Useful Life :15 to 25 Years Intangible assets are amortized over the estimated period of future economic benefit of the asset or a period of six years, whichever is lower. 6] Impairment of Assets The carrying amounts of tangible and intangible assets are tested for impairment at each Balance Sheet date to determine if there is any indication of impairment, based on internal / external factors. If any such indication exists, an estimate of the recoverable amount of the asset / cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset's or cash generating unit's net selling price and its value in use. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the Balance Sheet date there is an indication that if a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the assets are reflected at the recoverable amount. 7] Inventories Inventories are valued as under : [a] Raw materials, packing material, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a moving weighted average basis. [b] Stock in process is valued at lower of cost (on a moving weighted average basis) and net realizable value. [c] Finished goods (including in transit) are valued at cost (on a moving weighted average basis) or net realizable value whichever is lower. Cost for this purpose includes direct materials, direct labour and appropriate overheads and debrciation. 8] Cash and Cash Equivalents Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank, cash / cheques in hand, demand deposits with banks and other short-term investments with an original maturity of three months or less. 9] Foreign exchange transactions and forward contracts Foreign currency transactions are accounted for at the exchange rate brvailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates brvailing at the date of the balance sheet. All exchange differences other than in relation to acquisition of fixed assets and other long term foreign currency monetary liabilities are dealt with in the Statement of Profit and Loss. Foreign exchange differences on long term foreign currency monetary items relating to acquisition of debrciable assets are adjusted to the carrying cost of the assets and in other cases, if any, accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of loan. In respect of Foreign Exchange contracts entered into to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract. Option contracts entered into to hedge foreign currency hedge are marked to market at the date of balance sheet. The difference between brmium paid and the current market value of the option is taken to the statement of Profit and Loss account. Gains if any, are ignored. Profit or loss on cancellations/ renewals of forward contracts and options are recognized as income or expense during the year. 10] Cenvat Credit Cenvat credit on Raw Materials and Capital Goods has been accounted for by reducing the purchase cost of Raw Materials and Capital Goods respectively. 11] Employee Benefits [a] Short Term Employee Benefits Short Term Employee Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered. [b] Post-employment Benefits [i] Provident and Family Pension Fund The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension funds, in which both the employees and the Company make monthly contributions at a specified percentage of the employees eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which are charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as Defined Benefit Plan in accordance with the Guidance on implementing Accounting Standard (AS) 15 (Revised) on Employee Benefits. Contributions towards employees pension scheme is deposited with Regional Provident Fund Commissioner. [ii] Gratuity The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC. The Company accounts for gratuity benefits payable in future based on an independent external actuarial valuation carried out at the end of the year using the Projected Unit Cost Method, Actuarial gains and losses are recognized in the Statement of Profit and Loss. [iii] Superannuation The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Company's Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employees' salary subject to the contribution not exceeding Rs.1,00,000/- p.a. except in the case of Manager where the upper limit of Rs.1,00,000/- is not applicable. The contribution is made to the Life Insurance Corporation of India (LIC). Superannuation is classified as Defined Contribution Plan as the Company has no further obligations beyond making the contribution. The Company's contribution is charged to the Statement of Profit and Loss as incurred. [iv] Other Long-Term Employee Benefits - Compensated Absences The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/ availment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at the end of the year. Actuarial gains and losses are recognized in the Statement of Profit and Loss. 12] Segment Reporting Styrenics is the primary business segment of the Company. There are no separate segments within the Company as defined by AS 17 (Segment Reporting) notified under section 133 of the Companies Act, 2013, read together with rule 7 of the Companies (Accounts) Rules, 2014 except Geographical segment as reportable segment. 13] Taxation [a] The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to it. Foreign exchange differences on long term foreign currency monetary items relating to acquisition of debrciable assets are adjusted to the carrying cost of the assets and in other cases, if any, accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of loan. In respect of Foreign Exchange contracts entered into to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract. Option contracts entered into to hedge foreign currency hedge are marked to market at the date of balance sheet. The difference between brmium paid and the current market value of the option is taken to the statement of Profit and Loss account. Gains if any, are ignored. Profit or loss on cancellations/ renewals of forward contracts and options are recognized as income or expense during the year. 10] Cenvat Credit Cenvat credit on Raw Materials and Capital Goods has been accounted for by reducing the purchase cost of Raw Materials and Capital Goods respectively. 11] Employee Benefits [a] Short Term Employee Benefits Short Term Employee Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered. [b] Post-employment Benefits [i] Provident and Family Pension Fund The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension funds, in which both the employees and the Company make monthly contributions at a specified percentage of the employees eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which are charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as Defined Benefit Plan in accordance with the Guidance on implementing Accounting Standard (AS) 15 (Revised) on Employee Benefits. Contributions towards employees pension scheme is deposited with Regional Provident Fund Commissioner. [ii] Gratuity The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC. The Company accounts for gratuity benefits payable in future based on an independent external actuarial valuation carried out at the end of the year using the Projected Unit Cost Method, Actuarial gains and losses are recognized in the Statement of Profit and Loss. [iii] Superannuation The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Company's Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employees' salary subject to the contribution not exceeding Rs.1,00,000/- p.a. except in the case of Manager where the upper limit of Rs.1,00,000/- is not applicable. The contribution is made to the Life Insurance Corporation of India (LIC). Superannuation is classified as Defined Contribution Plan as the Company has no further obligations beyond making the contribution. The Company's contribution is charged to the Statement of Profit and Loss as incurred. [iv] Other Long-Term Employee Benefits - Compensated Absences The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/ availment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at the end of the year. Actuarial gains and losses are recognized in the Statement of Profit and Loss. 12] Segment Reporting Styrenics is the primary business segment of the Company. There are no separate segments within the Company as defined by AS 17 (Segment Reporting) notified under section 133 of the Companies Act, 2013, read together with rule 7 of the Companies (Accounts) Rules, 2014 except Geographical segment as reportable segment. 13] Taxation [a] The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to it. [b] Deferred Tax Asset or Liability is recognised for timing differences between the profit as per financial statements and the profit offered for Income tax, based on tax rates that have been enacted or substantively enacted at the Balance Sheet date and is recognized on timing differences that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized on carry forward of unabsorbed debrciation and tax losses only if there is virtual certainty that sufficient future taxable income will be available against which such deferred tax asset can be realized. Other deferred tax assets are recognised only to the extent there is a reasonable certainty of realization in future. The effect on deferred tax assets and liabilities of change in tax rates is recognized in the Statement of Profit and Loss in the period of enactment of the change. Minimum Alternate Tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period. Deferred Tax Assets on carry forward of unabsorbed debrciation and tax losses are recognised only if there is reasonable certainty that sufficient future taxable income will be available, against which they can be realized. 14] Contingent Liabilities All known liabilities are provided for in the accounts except liabilities of a contingent nature, which are disclosed at their estimated value in the notes on accounts. a) Contingent liabilities are disclosed separately by way of note to financial statements after careful evaluation by the management of the facts and legal aspects of the matter involved in the case of i. probable obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation. ii. possible obligation, unless the probability of out flow of resources is remote. b) Contingent Assets are neither recognised nor disclosed. A Contingent Liability is disclosed, unless the possibility of an outflow of resources embodying the economic benefit is remote. 15] Provision A provision is recognized when an enterprise has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on management's estimate for the amount required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current estimates of the management. 16] Investments Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. Long - term investments are carried at cost. Diminution, if any, other than temporary, is provided for. Current investments are carried at lower of cost or fair value. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss. 17] Leases Leases where the lessor effectively retains substantially all the rights and benefits of ownership of the leased assets are classified as operating leases. Lease payments under operating leases are recognised as an expense in the Statement of Profit and Loss. 18] Borrowing Costs Borrowing costs that are directly attributable to the acquisition or production of qualifying assets are capitalised as the cost of the respective assets. Other borrowing costs are charged to the Statement of Profit and Loss in the year in which they are incurred. 19] Earnings Per Share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, share split, etc., if any that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. NOTE 2 Working Capital facilities (including letters of credit) from banks are secured by hypothecation of company's stock and trade receivables and by second charge by way of mortgage of the company's immoveable properties (including plant and machinery) situated at the Maharashtra & Tamil Nadu plant. NOTE 3 The heavy rains and consequent floods in Chennai in the month of December, 2015, disrupted the operations of the Company at its EPS plant in Manali, Chennai. Certain items of fixed assets and parts of inventory of raw materials, finished goods and stores and spares got lost/ destroyed/ damaged. The Insurance company has appointed surveyor and his work is in progress. Based on the recommendations of Surveyor, the Insurance Company has approved an interim claim of Rs. 449.81 lacs. Since the Company has adequate insurance cover on reinstatement basis for fixed assets and on cost basis for raw materials and stores and on market price basis for finished goods, the management does not expect any financial loss on account of the same and accordingly, the receivables from the Insurance Company is recognized to the extent of amount incurred towards repairs and replacement of fixed assets and book value of inventory lost/destroyed/damaged. The Company is also insured for "Loss of Profit:" during the period the plant operations were shut. NOTE 4 In the opinion of the Board the current assets and loans and advances are stated at value not less than its realizable value in the ordinary course of business. The provisions for all the known liabilities and debrciation are adequate and not in excess of the amount reasonably required. NOTE 5 Prior period adjustments include expenses for the period of Rs. 15.84 lacs (Previous year Rs. 23.43 lacs) and income for the period of Rs. Nil (Previous year Rs. 8.01 lacs). NOTE 6 Current period's figures are for the period from July 1, 2015 to March 31, 2016 and that of brvious year are for the period from July 1, 2014 to June 30, 2015. Therefore, the figures for the current period are not comparable with those of the brvious year. Pervious year's figures have been regrouped and rearranged wherever necessary to conform to this period's classification. As per our report of even date. For G M Kapadia & Co Chartered Accountants ICAI Firm's Reg.No.104767W Rajen Ashar Partner Membership No.048243 For and on behalf of the Board Rakesh Nayyar Executive Director (Finance & Corporate Affairs) Chief Financial Officer Ravi V Kuddyady Company Secretary M P Taparia Chairperson Rajan B Raheja Directors B L Taparia Directors S J Taparia Directors M S Ramachandran Directors R Kannan Directors Nihalchand Chauhan Directors Ameeta Parpia Directors Mumbai Date: April 20, 2016 |