1. Corporate information Punjab Chemicals and Crop Protection Limited (hereinafter referred to as "the Company") is engaged in business of manufacturing of agro chemicals, speciality chemicals and bulk drugs and its intermediates. The Company has brsence in both the domestic and international markets. 2. Basis of brparation A) The financial statements of the Company have been brpared in accordance with 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 paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention, except in case of land and building for which revaluation is carried out. The accounting policies adopted in brparation of financial statements are consistent with those of brvious year, except for the change in accounting policy explained below. B) The accumulated losses of the Company as at the close of the financial year exceeded 50% of the Shareholder's Funds (excluding accumulated losses) as at March 31, 2015 and the current liabilities have exceeded current assets by Rs. 12,176 lacs. Based on the strategic long term supply contracts with its customers with minimum commitment of supply of products and the future business plans the management is confident that the Company will be able to generate profits in future years and meet its financial obligation as they arise accordingly, the accompanying financial statements have been brpared on a going concern basis. 2.1 Summary of significant accounting policies a. Use of estimates The brparation of financial statements in conformity with Indian GAAP requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, 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, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amount of assets or liabilities in future periods. b. Fixed assets - Tangible Fixed assets Fixed Assets are stated at cost (or revalued amounts, as the case may be) less accumulated debrciation and amortization, 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 fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Items of fixed assets that are held for disposal are stated at the lower of their book value and net realisable value and are shown separately in the financial statement under Other Current Assets. Any expected loss is recognised immediately in the statement of Profit and Loss. - Intangible assets Intangible assets acquired separately are measured on intial recognition at cost. Following intial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. c. Debrciation and amortization i) Till the year ended 31 March 2014, Schedule XIV to the Companies Act 1956 brscribed requirements concerning debrciation of fixed assets. From the current year, Schedule XIV has been replaced by Schedule II to Companies Act 2013. The applicability of Schedule II has resulted in the following changes related to debrciation of fixed assets. Unless stated otherwise, the impact mentioned for the current year is likely to hold good for future years also. (a) Useful lives / debrciation rates Till the year ended 31 March 2014, debrciation rates brscribed under Schedule XIV were treated as minimum rates and the company was not allowed to charge debrciation at lower rates even if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act 2013 brscribes useful lives for fixed assets which, in many cases, are different from lives brscribed under the erstwhile Schedule XIV. However, Schedule II allows companies to use higher/ lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements. Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets, though these rates in certain cases are different from lives brscribed under Schedule II. Had there not been any change in the useful life of assets, debrciation for the year would have been lower by Rs. 448 Lacs. ii) Debrciation on fixed assets is calculated on a straight line method for buildings, plant & equipments and electrical installations in accordance with section 123 of the Companies Act, 2013 except in respect of the following assets based on technical estimates as per life specified below. Factory building - 28 years Office building- 58 years Reactors, Pumps & Tanks and Piping in plants- 5 to 20 years Electrical Motors & Works- 12 to 20 years Generators and Ejectors- 10 to 15 years In respect of all other Fixed Assets, on written down value basis in accordance with section 123 of the Companies Act, 2013 at the life specified in Schedule II to the Companies Act, 2013. iii) Cost of Computer Software/License is amortized on straight line basis over a period of three years. iv) Product Registration (including testing charges, task force studies and other related expenses) for new market development considered as intangible assets and are amortized from and over the period of registration with a maximum period of 10 years on straight line basis. v) The brmium on leasehold land is amortized on straight line basis over the period of lease. vi) Technical Know how is amortised on a straight line basis over a period of 5 years. d. Impairment of tangible and intangible assets The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal and 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 using a br-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. e. Leases Company is lessee Finance lease i) Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and brsent value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs are capitalized. ii) If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease item, capitalized leased assets are debrciated over the shorter of the estimated useful life of the asset, the lease term and Schedule II as per the Companies Act, 2013. Operating lease Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term. Company is lessor Operating lease Assets subject to operating leases are included in fixed assets. Lease income is treated as revenue and the same is credited to the statement of profit and loss on straight line basis. Costs including debrciation are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage etc are recognized immediately in the statement of profit and loss. f. Investments Investments that are readily realizable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost or fair value determined on an individual investment 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 long-term investments. 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. g. Inventories i) Raw Materials, Stores and Spares and Packing Materials are valued at lower of cost or net realizable value. However, the aforesaid items are not valued below cost if the finished products in which they are to be incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis. ii) Traded Goods are valued at lower of cost or net realizable value. Cost is determined on a weighted average basis. iii) Finished goods and Work-in-Progress are valued at lower of cost or net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis. iv) By Products are valued at net realizable value. v) Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. h. 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. Sale of goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Gross turnover includes excise duty but does not include sales tax / value added tax. Excise duty deducted from revenue from operations (gross) is the amount that is included revenue from operations (gross) and not the entire amount of liability arising during the year. Income from services Income from services rendered is recognized based on the terms of the agreements as and when services are rendered and are net of service tax (wherever applicable). Interest Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividends Dividend income is recognized when the Companies right to receive dividend is established by the balance sheet date. Export benefits Raw Material imported duty free under Advance License are accounted for inclusive of Custom Duty. Benefits are accrued under the Duty Entitlement Pass Book Scheme (DEPB) and Duty Free Import Authorization (DFIA) Scheme has been classified under the head "Export Benefits" in "Other operating revenue". i. Research and development costs Research costs (other than cost of fixed assets acquired) are charged as an expense in the year in which they are incurred and are reflected under the appropriate heads of account. Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate the following: - The technical feasibility of completing the intangible asset so that it will be available for use or sale, - Its intention to complete the asset, - Its ability to use or sell the asset, - How the asset will generate future economic profits, - The availability of adequate resources to complete the development and to use or sell the asset, - The ability to measure reliably the expenditure attributable to the intangible asset during the development. j. Government and other grants i) Grants and subsidies from the government/others are recognized when there is reasonable assurance that the grant/subsidy will be received and all attaching conditions will be complied with. ii) Grants related to Debrciable assets are treated as Deferred Income which is recognized in the statement of profit and loss on a rational basis over the useful life of the Assets. iii) Government grants of the nature of promoters' contribution are credited to capital subsidy and treated as a part of shareholders' funds. k. Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders 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 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. l. Cash and cash equivalents Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. m. Retirement and other employee benefits Long term employee benefits Defined contribution plans The Company has defined contribution plans for post employment benefits in the form of Superannuation Fund (for selected employees) which is recognized by the Income-tax authorities and administered through trustees and/or Life Insurance Corporation of India (LIC). Further the Company also has a defined contribution plan in the form of a Provident Fund scheme for its all employees, which are administered by the Provident Fund Commissioner. All the above mentioned schemes are classified as defined contribution plans as the Company has no further obligation beyond making the contributions. The Company's contributions to Defined Contribution Plans are charged to the statement of profit and loss as incurred. Defined benefit plans The Company has defined benefit plan for post retirement benefit in the form of Gratuity which is administered through trustees and/or LIC (in some units) for all its employees which is recognized by the Income-tax authorities. Liability for Defined Benefit Plans is provided on the basis of valuation, as at the balance sheet date, carried out by an independent actuary. The actuarial valuation method used by independent actuary for measuring the liability is the Projected Unit Credit method. Other long term employee benefit The Company has for all employees other long-term benefits in the form of Leave Encashment as per the policy of the Company. Liabilities for such benefits are provided on the basis of valuation, as at the balance sheet date, carried out by an independent actuary. The actuarial valuation method used by an independent actuary for measuring the liability is the Projected Unit Credit method. For the purpose of brsentation of defined benefit plans and other long term benefits, the allocation between short term and long term provisions has been made as determined by as actuary. The Company brsents the entire compensated absences as short term provisions, since employee's have an unconditional right to avail the leave at any time during the year. Actuarial gains/(losses) Actuarial gains/losses (for defined benefit and other long term benefit) comprise experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in the statement of profit and loss as income or expense. Voluntary retirement scheme Voluntary retirement scheme expenses are fully charged to statement of profit & loss in the year in which they accrue. n. Foreign currency transactions 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. Conversion at the Balance Sheet date Foreign currency monetary items are restated using the closing exchange rate. Non-monetary items are recorded at the exchange rate brvailing on the date of the transaction. Exchange differences Exchange differences arising on the settlement of monetary items or on reporting monetary items of Company at rates different from those at which they were initially recorded during the period, or reported in brvious financial statements, are recognized as income or as expenses in the period in which they arise except those arising from investments in non-integral operations. o. Borrowing costs Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. p. Taxation Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India. Deferred income taxes reflects the impact of current period timing differences between taxable income and accounting income for the period 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 unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become 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. 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. In the period in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the statement of profit and loss and shown as MAT Credit Entitlement. 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. q. Provisions A provision is recognized when the Company has a brsent legal or constructive obligation as a result of past events 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 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. r. 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 and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Inter-segment transfers The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Allocation of common costs Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items Includes general corporate income and expense items which are not allocated to any business segment. Segment policies The Company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the Company as a whole. s. Measurement of EBITDA The company has elected to brsent earnings before interest, tax, debrciation and amortization (EBITDA) as a separate line item on the face of the statement of profit and loss. In its measurement, the company does not include debrciation and amortization expense, finance costs, tax expense and exceptional items. t. Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. 4. Sale of Agro Formulation Division During the brvious year, the Company had entered into business transfer agreement ('the Agreement') for sale of agro formulation division of the Company. As per the terms of the Agreement, the Company has settled its working capital items with the buyer and necessary adjustment has been made in the books of accounts as at closing date. 5. a. One Time Settlement (OTS) with State Bank of India The Company's proposal for One Time Settlement (OTS) with State Bank of India (SBI) has been accepted by the bank. As per the terms of OTS, the Company has to pay Rs. 4,550 lacs and sale proceeds from the 150,000 shares of the Company, pledged exclusively with SBI by one of the promoters against total outstanding dues of Rs. 9,485 lacs (including interest). Out of the said amount, Rs. 1,138 lacs has been paid by the Company before March 31, 2015. The said OTS is subject to fulfilment of conditions. The necessary adjustment in the books of account will be carried out after compliance of all conditions as specified in said OTS. b. Corporate Debt Restructuring In the earlier periods, the Company had obtained an approval for Debt Restructuring (referred to as 'CDR') from the Corporate Debt Restructuting Empowered Group ('CDR EG'). As per the CDR Scheme, the Company was liable to pay working capital demand loan amounting to Rs. 5,000 lacs till September 2012, out of which the Company has repaid Rs. 3,508 lacs (Previous year: Rs. 2,110 lacs) as of March 31, 2015 and further there are other borrowings outstanding as of the balance sheet date for which the Company is in the process of selling non-core assets for repayment of the aforesaid dues. 6. Previous year's figures The company has reclassified brvious year's figures to confirm to current year's classification. As per our report of even date For and on behalf of the Board of Directors of Punjab Chemicals & Crop Protection Limited For S R B C & CO LLP ICAI Firm registration number: 324982E Chartered Accountants per RAVI BANSAL Partner Membership No. 49365 MUKESH D PATEL Vice Chairman SHALIL SHROFF Managing Director VIPUL JOSHI Chief Financial Officer AVTAR SINGH Director (Operations & Business Development) PUNIT K. ABROL Sr. Vice President (Finance) & Company Secretary Place : Mumbai Date : May 28, 2015 |