SIGNIFICANT ACCOUNTING POLICIES: 1. Accounting Convention: 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 under the historical cost convention on an accrual basis except otherwise stated. In the brparation of the financial statements, the accounting policies have been consistently applied with those in the brvious year. Use of estimates: The brparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. 2. Fixed Assets and Capital Work-in-Progress: Fixed assets are stated at cost less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of qualifying fixed assets which take substantial period of time to get ready for their intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Capital work-in-Progress comprises the cost of fixed assets that are not yet ready for their intended use at balance sheet date. Intangible assets are stated at the consideration paid for acquisition less accumulated amortization and impairment losses, if any. In the absence of availability of specific original cost in respect of a part of assets acquired under turnkey contracts, cost of such asset is taken based on estimation arrived on the basis of price schedule forming part of such turnkey contracts and technical advice. 3. Debrciation and Amortization: Debrciation on tangible fixed assets (other than leasehold land) is provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 or shorter useful life assessed based on technical advice and after taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, etc. Leasehold land is amortized at flat rates equally sbrad over the duration of the lease. Acquired Goodwill is amortized over the period of 5 years commencing from the financial year in which the amalgamation is effected and accounted for. Software is amortized over its estimated useful life of six years. License acquired and used along with and directly related to the plant and machinery is amortized at flat rates equally sbrad over useful life of the related plant and machinery. 4. Impairment: The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/ external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value at the rate of risk adjusted weighted average cost of capital. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. A brviously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation if there was no impairment. 5. Research and Development Expense: Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. 6. Leases: Finance Lease: Assets given under a finance lease are recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct costs such as legal costs, brokerage costs etc. are recognized immediately in the Statement of Profit and Loss. Operating Lease: Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including debrciation are recognized as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs etc. are recognized immediately in the Statement of Profit and Loss. 7. Investments: Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on investment category basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments 9. Foreign currency Transactions: a. Initial Recognition: Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. b. Conversion: Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. c. Exchange Differences: The net gain or loss on account of exchange rate differences arising on settlement or restatement of foreign currency transactions for foreign currency monetary items are recognized as income or expenses of the period in which they arise except exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset which are capitalized and debrciated over the remaining useful life of the asset. For this purpose, the Company treats a foreign currency monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its origination. d. Forward Exchange Contracts not intended for trading or speculation purposes: The brmium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts, except the contracts which are long-term foreign currency monetary items, are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is recognized as income or as expense for the year. Any gain/ loss arising on forward contracts which are long-term foreign currency monetary items are recognized in accordance with c. above. 10. Revenue Recognition: Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. a. Sale of goods: Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales, net of sales tax/ VAT and discounts, comprise of sale of goods and services, excise duty and claims brferred on the Government of India for retention price reimbursement on fertilizers and admissible claims for change in retention price on account of variation in the costs. The excise duty collected on sales is shown by way of further deduction from sales. Urea and ANP Product Subsidy: Urea Subsidy under the New Pricing Scheme-III (extension) and ANP Subsidy under Nutrient Based Subsidy (NBS) Scheme w.e.f. 01-04-2010 is allowed by the Government of India (GoI) for the quantity received at the destination, as per the rate brscribed by GoI, at the time of dispatch in case of Urea and at the time of receipt in case of ANP. Urea Subsidy is further adjusted for input price escalation/ de-escalation as estimated by the Management based on the brscribed norms. The Company accounts for the same on sales quantity basis. Urea and ANP Freight Subsidy: Freight Subsidy is recognized for the quantity received at the destination based on the rates approved by the Government of India in case of Urea and on the normative rates approved by the Government of India or the actual freight whichever is lower in case of ANP. b. Sale of Services: Income from services rendered is recognized as and when the services are rendered based on the agreement/ arrangement with the concerned parties. c. Other Income: Interest: Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividends: Revenue is recognized when the right to receive the dividend is established. Other Income: The amounts receivable from various agencies are accounted on accrual basis to the extent it is possible to ascertain the income with reasonable accuracy. Insurance claims: Revenue is recognized on actual receipt basis. 11. Government Grants: Government Grant is recognized when there is reasonable assurance that the conditions attached to them will be complied with. Government Grant received/ receivable related to debrciable assets are treated as deferred income which is recognized in the Statement of Profit and Loss on a systematic and rational basis over the useful life of the related asset. Such allocation to income is made over the period and in proportion in which debrciation on related asset is charged. 12. Borrowing Costs: Interest and other costs in connection with the borrowing of the funds to the extent related/ attributed to the acquisition/ construction of qualifying assets are accumulated and capitalized upto the date when such assets are ready for their intended use. Other borrowing costs are charged to Statement of Profit and Loss. 13. Export Benefits: Export benefits under Duty Exemption Advance License Scheme, Duty Exemption Pass Book Scheme and Duty Drawback Scheme are accounted for in the year of export of goods. 14. Retirement Benefits: a. Retirement benefits in the form of Provident Fund and Pension Fund is a defined contribution scheme and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts. b. Gratuity liability and Post employment Medical Benefit liability are defined benefit obligations and are provided for on the basis of actuarial valuation made at the end of each financial year on project unit credit method. c. Short term compensated absences are provided for on basis on estimates. Long term compensated absences are provided for based on actuarial valuation on project unit credit method. d. Actuarial gains / losses are immediately taken to Statement of Profit and Loss and are not deferred. 15. Taxation: Tax expense comprises of current tax and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets are recognized 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. In situations where the Company has carried forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. Minimum Alternative Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period i.e., the period for which MAT Credit is allowed to be carried forward. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period. 16. Provisions and Contingent Liabilities: A provision is recognized when an enterprise has a brsent obligation as a result of past event; 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 best estimate required to settle the obligation at the balance sheet date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a brsent obligation that may, but probably will not, require outflow of resources. Where there is a possible or a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. 17. Earnings per Share: Basic earnings per share are calculated by dividing the net profit or loss after tax for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. For the purpose of calculating diluted earnings per share, the net profit or loss after tax 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. 18. Cash and Cash Equivalents: Cash and cash equivalents in balance sheet comprise cash at bank and in hand and fixed deposits with banks. 19. Segment Reporting Policies: Identification of segments: The Company's operating businesses are organized and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products. Majority of the Company's products are sold within India and hence geographical segment is not identified. There are no intersegment transfers. Allocation of Common Costs: To the extent the costs can be directly identified, they are allocated to the related segment. Common allocable costs are allocated to each segment according to the relative production tonnage, sales tonnage/ value and other related basis. Unallocated items: Other segment includes Information Technology activity and general corporate income and expense items which are not allocated to any business segment. 2. Capitalization of exchange differences: The Ministry of Corporate Affairs (MCA) has issued an amendment dated 29th December, 2011 to AS 11 'The Effects of Changes in Foreign Exchange Rates', to allow companies deferral/ capitalization of exchange differences arising on long-term foreign currency monetary items. In accordance with the above stated amendment to AS 11, the Company has capitalized exchange difference gain, arising on long-term foreign currency loan and payables, amounting to Rs. 4,204.62 lacs (Previous year: Loss of Rs. 4,196.15 lacs). The Company has also capitalized exchange difference loss, arising on long-term foreign forward contract, undertaken to fully hedge the foreign currency loan, amounting to Rs. 3,870.37 lacs (Previous year: Gain of Rs. 3,362.44 lacs 2. The Scheme of Arrangement and Demerger for transfer of V-SAT/ISP Gateway Business of the Company to ING Satcom Ltd., an unlisted Company against cash consideration of Rs. 6 crore, was sanctioned by Hon'ble High Court of Gujarat vide its Common Oral Order dated June 15, 2012. The "Appointed Date" of the Scheme is 1st April, 2010. Subsequent to the Order passed by the Hon'ble High Court of Gujarat, sanctioning the Scheme of Demerger, two separate applications for transfer of V-SAT and ISP Gateway Licences standing in the name of the Company to the name of Transferee Company viz. ING Satcom Limited were submitted to Department of Telecommunications (DOT) on 31st January, 2013 which are still pending for approval before DOT. As per the legal opinion obtained from Legal Consultant, though the Scheme has been sanctioned by the Hon'ble High Court of Gujarat and has become effective, the Scheme is subject to and conditional upon the approval of the Government Authorities for transfer of Licences from GNFC to ING Satcom Limited. During the year, an Agreement-Cum-Indemnity Bond was executed on 12-042014 between the Company and ING Satcom Limited whereby, pending transfer of Licences, the assets of demerged business (other than Licences) have been handed over to ING Satcom Limited subject to certain terms and conditions, inter alia, including the terms of settling the transaction under different eventualities of rejection of transfer applications / non-transfer of Licences by 31-12-2014. Since disposal of applications for transfer of Licences in the name of ING Satcom Limited by the competent authorities as well as settlement of transaction between the Company and ING Satcom Limited are still pending, no accounting treatment is given in the books of account of the Company for the year ended 31.03.2015. Necessary accounting treatment will be given in the books of account of the Company either on disposal of applications for transfer of Licences in the name of ING Satcom Limited by the competent authorities or on finalization of settlement of transaction with ING Satcom Limited. 3. The Company capitalized its 50,000 MTPA TDI plant at Dahej in March 2014. The TDI plant at Dahej was in-operative for a major part of the year due to the issues of gas emission, subsequent corrective steps and teething problems. As at 31st March, 2015, the Company has in pursuance of Accounting Standard (AS 28) - 'Impairment of Assets', assessed impairment of its TDI Dahej plant, having regard to the above-stated delay in starting operations and the related losses. Based on such assessment, the Company has accounted an impairment loss of Rs. 33,000 lacs in respect of the TDI Dahej plant, which has been recognized as an exceptional item in the statement of profit and loss. The recoverable amount of the relevant assets has been determined on the basis of their value in use. In estimating the future cash flows, management has based on externally available information, made certain assumptions relating to the future raw material prices, future TDI prices, operating parameters and the assets useful life which management believes reasonably reflects the future expectation of these items. However, if these assumptions change consequent to change in future conditions, there could be further adverse / favourable effect on the recoverable amount of the asset. The assumption will be monitored on a periodic basis by the management and adjustments will be made if external conditions relating to the assumptions indicate that such adjustments are appropriate. 4. Confirmations of certain parties and banks for amounts due to them/ amounts due from them as per accounts of the Company are not received. Necessary adjustments, if any, will be made when the confirmations are received, reconciled and settled. 5. Segment Information: Based on the guiding principles given in Accounting Standard on 'Segment Reporting' (AS-17) as notified by Companies (Accounting Standards) Rules, 2006, the Company's primary business segments are Fertilizers, Chemicals and Others (which includes mainly IT Division's activities) which have got their own respective risk and return profiles 6. The brvious year's figures have been regrouped/ reclassified, wherever necessary, to conform to the figures of the current year brsentation. Figures are rounded off to the nearest lacs. For and on behalf of the Board of Directors, R.A. Shah R.B. Panchal Dr. Rajiv Kumar Gupta D.J. Pandian Executive Director & CFO Company Secretary Managing Director Chairman AS PER OUR REPORT OF EVEN DATE For Deloitte Haskins & Sells Chartered Accountants (Firm Registration No. 117365W) Gaurav J. Shah Partner Membership No. : 35701 Date : 28-05-2015 Place : Ahmedabad |