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NOTES TO ACCOUNTS

Modi Naturals Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 625.47 Cr. P/BV 5.92 Book Value (₹) 79.42
52 Week High/Low (₹) 667/240 FV/ML 10/1 P/E(X) 20.16
Bookclosure 30/09/2024 EPS (₹) 23.32 Div Yield (%) 0.00
Year End :2024-03 

2.22 Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and are liable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Contingent Liabilities are not recognized but are disclosed, while Contingent Assets are neither recognized nor disclosed, in the financial statements.

2.23 Critical accounting estimates and judgments

In the course of applying the policies outlined above, the Company is required to make judgments, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future periods.

i. Critical Judgments

In the process of applying the Company's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the standalone financial statements:

Leases

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgment in assessing the lease term (including anticipated renewals) and the applicable discount rate.

The Company determines the lease term as the noncancellable period of a lease, together with periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the noncancellable period of a lease

The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.

Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgment in making assumption and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward estimate at the end of each reporting period.

Income taxes

Management judgment is required for the calculation of provision for income taxes and deferred tax assets and liabilities. The Company reviews at each balance sheet date the carrying amount of deferred tax assets. The amount of tax payable in respect of any period is dependent upon the interpretation of the relevant tax rules. The factors used in estimates may differ from actual outcome which could lead to significant adjustment to the amounts reported in the financial statements.

Defined benefit Plan

The cost of the defined benefit plan and other postemployment benefits and the present value of such obligation are determined using actuarial valuations. A n actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary increases, mortality rates and attrition rate. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Insurance claims and other Miscellaneous Revenues

Insurance claims and other miscellaneous revenues are recognized when the Company has reasonable certainty of recovery. Subsequently any change in recoverability is provided for.

Contingences and commitments

In the normal course of business, contingent liabilities may arise from litigations and other claims against the Company. Where the potential liabilities have a low probability of crystallizing or are very difficult to quantify reliably, we treat them as contingent liabilities. Such liabilities are disclosed in the notes but are not provided for in the standalone financial statements. Although there can be no assurance regarding the final outcome of the legal proceedings, we do not expect them to have a materially adverse impact on our financial position or profitability.

ii. Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Allowances for doubtful debts

The Company makes allowances for doubtful debts based on an assessment of the recoverability of trade and other receivables. The identification of doubtful debts requires use of judgments and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of the trade and other receivables and doubtful debts expenses in the period in which such estimate has been changed.

Allowances for inventories

Management reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realizable value. The purpose is to ascertain whether an allowance is required to be made in the standalone financial statements for any obsolete and slow moving items. Management is satisfied that adequate allowance for obsolete and slow moving inventories has been made in the standalone financial statements.

Liability for sales return

In making judgment for liability for sales return, the management considered the detailed criteria for the recognition of revenue from the sale of goods set out in Ind AS 115 and in particular, whether the Company had transferred to the buyer the significant risk and rewards of ownership of the goods. Following the detailed quantification of the Company's liability towards sales return, the management is satisfied that significant risk and rewards have been transferred and that recognition of the revenue in the current year is appropriate, in conjunction with the recognition of an appropriate liability for sales return.

Accruals for estimated product returns, which are based on historical experience of actual sales returns and adjustment on account of current market scenario is considered by Company to be reliable estimate of future sales returns.

Employee benefit obligations

Employee benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments. These include the estimation of the appropriate discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, the employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Provisions and contingencies

From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being subject to uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount can be reasonably estimated.

Significant judgment is required when evaluating the provision including, the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances. Contingent liabilities are disclosed in the notes forming part of the standalone financial statements. Contingent assets are not disclosed in the standalone financial statements unless an inflow of economic benefits is probable.

Deferred income tax assets and liabilities

Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.

The amount of total deferred tax assets could change if management estimates of projected future taxable income or if tax regulations undergo a change.

Impairment of Financial assets

The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. In respect of trade receivables, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised upon initial recognition of the receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12 months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.

The Company reviews its carrying value of investment in subsidiaries and goodwill carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the standalone statement of profit and loss.

Impairment of PPE, CWIP and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss if (any)

Recoverable amount is the higher of fair value less costs to sell and value in use. Value in use is usually determined on the basis of discounted estimated future cash flows. This involves management estimates on anticipated commodity prices, market demand and supply, economic and regulatory environment, discount rates and other factors. Any subsequent changes to cash flow due to changes in the abovementioned factors could impact the carrying value of assets.

Impairment of Inventories

Inventories are valued at lower of cost (on weighted average basis) and net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to their present location and condition, including other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, taxes and duties. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Impairment of investments in associate/subsidiaries

Determining whether the investment in associate/subsidiary is impaired requires an estimate in the value in use of investment. In considering the value in use, the management has anticipated future business orders, operating margins and other factors of the underlying businesses / operations of the investee company. Any subsequent changes to the cash flows due to changes in the abovementioned factors could impact the carrying value of investment.

Estimation of uncertainties relating to the global health pandemic from COVID19:

The COVID19 pandemic is an evolving human tragedy declared a global pandemic by the World Health Organisation with adverse impact on economy and business. Supply Chain disruptions in India as a result of the outbreak started with restrictions on movement of goods, closure of borders etc.

In light of these circumstances, the Company has considered the possible effects that may result from COVID19 on the carrying amounts of financials assets, inventory, receivables, property plant and equipment, Intangibles etc., as well as liabilities accrued. In developing the assumptions relating to the possible future uncertainties in the economic conditions because of this pandemic, the Company has used internal and external information such as our current contract terms, financial strength of partners, investment profile, future volume estimates from the business etc.

See accompanying notes to Ind AS Financial Statements 1 - 44

As per our report of even date attached

for Doogar & Associates New Delhi, 30th May 2024

Chartered Accountants FRNo. 00561N

for and on behalf of the Board

Sd/-

Sd/- Anil Modi DIN:00187078 Chairman & Managing Director

(Mukesh Goyal) Akshay Modi DIN:03341142 Jt. Managing Director

MaNr r08i8i0 Pradeep Kapoor PAN:ATEPK2474R Chief Financial Officer

M N°.' 081810 A"kit A3arwal M.Mo.:A23445. Company Secretary

Based on legal advice, discussions with the solicitors, etc., the management believes that there is fair chance of decisions in the company's favour in respect of all the items listed at (i) to (vii) above and hence no provision is considered necessary against the same. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the company's financial position and results of operations.

32. On May 18, 2022, the Board of Directors of the Company had, pursuant to special resolution passed by the Members at its extraordinary general meeting held on May 04, 2022 in terms of SEBI (ICDR) Regulations, 2018, allotted 6,50,000 convertible warrants carrying a right exercisable by the warrant holder to subscribe to one fully paid up equity share per warrant at a price of ?207/ (“Issue Price”) [including premium of Rs. 197/] per equity share on preferential basis to promoter category. The Warrants may be converted into equivalent number of fully paid up equity shares on payment of balance amount at any time, not exceeding 18 (eighteen) months from the date of allotment of such warrants.

During the current year, upon request from the holders of aforesaid Warrants, the Board in its meeting held on 20.10.2023, 30.10.2023 and 17.11.2023 approved the conversion of 650000 warrants into equivalent number of fully paid-up Equity Shares of face value of Rs. 10/- each as under:

33. The Company incorporated a wholly owned subsidiary Modi Biotech Private Limited in the State of National Capital Territory of Delhi, on April 27, 2021. In line with the Ethanol Blended Petrol (EBP) program, the Company has diversified into ethanol manufacturing, with a state-of-the art greenfield Ethanol Plant being established in the state of Chhattisgarh under its wholly owned subsidiary Modi Biotech Private Limited (MBPL). MBPL has received in-principle approval for a 210 KLD distillery for the manufacture of ethanol from the Central Government, along with signing an MOU with the Chhattisgarh Government for the same. The company has also received environment clearance (EC) for the project from the Ministry of Environment, Forest and Climate change (MoEF & CC). The Company has invested in its wholly owned subsidiary Rs. 35,00,00,000/- (Previous Year : Rs. 27,00,00,000/-) by way of 1,75,00,000 (Previous Year 90,00,000) fully paid-up equity shares having a face value of Rs.10/- each aggregating Rs. 17,50,00,000/- (Previous Year : Rs. 9,00,00,000/-) and 17,50,000 (Previous Year : 18,00,000) fully paid up optionally convertible debentures having face value of Rs. 100/- each aggregating Rs 17,50,00,000/- (Previous Year: Rs. 18,00,00,000/-).

34. There was a fire in the Vegetable Oil Refinery in December 2021, resulting in complete closure of the plant for 13 days and thereafter running on reduced capacity for about one month. The company had filed an insurance claim for the losses sustained and the claim is still under process. The Company has adjusted the loss incurred on stock against the insurance claim filed. The loss incurred on fixed asset has been adjusted to the extent of written down value of the asset. The actual profit /loss due to fire would be adjusted at the time of settlement of the claim.

35. Employee Benefits

A Defined Benefit plans

Gratuity Recognised in financial statements as per Actuarial Valuations as on March 31, 2023

Sensitivities due to mortality and withdrawals are not material & hence impact of change not calculated.

Sensitivities as to rate of inflation, rate of increase of pensions in payment, rate of increase of pensions before retirement & life expectancy are not applicable being a lump sum benefit on retirement.

The estimates of future salary increase considered in actuarial valuation, take account of inflation, seniority, promotion, and other relevant factors. The above information is certified by the actuary and relied upon by the auditors.

The employer's best estimate of contribution expected to be paid during the next year is Rs. 55.55 lakhs.

B. Defined Benefit plans - Leave Encashment

Liability in respect of leave encashment is not applicable since the company pays leave encashment to employees every year.

C. Defined Contribution plans - Provident Fund and ESI

The Company has recognized Rs. 103.99 lakhs (As on 31 March,2023: Rs. 103.33 lakhs) in statement of profit and loss as Company’s contribution to provident fund and ESI.

36. RELATED PARTY DISCLOSURE

I.Names of the related parties with whom transactions have taken place during the year:

A. Key Management Personnel

Mr. Anil Modi, Managing Director

Mr. Akshay Modi, Joint Managing Director

B. Relatives of Key Management Personnel.

Mrs. Nita Modi Mrs. Aditi Gupta Mrs. Neha Agarwal

C. Subsidiary.

Modi Biotech Private Limited

D. Enterprises over which key Management personnel, or his relative, has significant influence. NA

Note: Related parties are as identified by the company and relied upon by the Auditors.

Valuation techniques used to determine fair value

Fair value of cash and cash equivalents, loans and advances, receivables, payables, and other current financial assets and liabilities measured at amortized cost is approximate to their carrying amounts largely due to the shortterm maturities of these instruments. The fair value of other noncurrent financial assets (Loans and advances) carried at amortized cost is approximately equal to fair value. Hence carrying value and fair value is taken same.

B. Financial risk management

The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board of directors is responsible for developing and monitoring the Company’s risk management policies.

The Company’s risk management policies are established to identify and analyze the risk faced by the Company, to set appropriate risks limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in the market condition and Company’s Activities.

The Company's Board of Directors oversee how management monitors compliances with the company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to risks faced by the Company.

Financial risk factors

The Company’s activities expose it to a variety of financial risks which includes market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company’s focus is to ensure liquidity which is sufficient to meet the Company’s operational requirements. The Company monitors and manages key financial risks so as to minimize potential adverse effects on its financial performance. The Company has a risk management policy which covers the risks associated with the financial assets and liabilities. The details for managing each of these risks are summarized ahead.

i. Market Risk:

Market risk is the risk that the expected cash flows or fair value of a financial instrument could change owing to changes in market prices. The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and commodity prices. The objective of the market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the returns.

(ii) Credit risk management

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. The Company’s exposure to credit risk primary arises from trade receivables, which are typically unsecured. A part from this, the Company is exposed to credit risk from its financing activities including deposit with banks and security deposits.

The credit risk on bank balances is limited because the counter parties are banks with good credit ratings.

Financial assets are written off when there is no reasonable expectation of recovery. Where the loans and receivables were written off and subsequently recoveries are made, these are recognised as an income in the financial statements.

Trade Receivables

Credit risk is managed through credit approvals, establishing credit limits, continuous monitoring of creditworthiness of customers to which the company grants credit terms in the normal course of business. The Company also assesses the financial reliability of customers taking into account the financial condition, current economic trends and historical bad debts and ageing of accounts receivables.

Cash & Cash Equivalents

With respect to credit risk arising from financial assets which comprise of cash and cash equivalents, the Company s risk exposure arises from the default of the counter party, with a maximum exposure equal to the carrying amount of these financial assets at the reporting date. Since the counter party involved is a bank, Company considers the risks of nonperformance by the counter party as nonmaterial.

iii) Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company’s treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company’s net liquidity position through rolling forecasts on the basis of expected cash flows.

Maturity profile of financial liabilities

The table below provides details regarding the remaining contractual maturities of financial liabilities at the reporting date based on contractual undiscounted payments.

38. Capital Management

The company manages its capital to ensure that it will be able to continue as going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the company consists of net debt and total equity.

The company determines the amount of capital required on the basis of annual as well as long term operating plans and other strategic investment plans. The funding requirements are met through longterm /shortterm borrowings. The company monitors the capital structure on the basis of total debt to equity ratio and maturity profile of the overall debt portfolio.

In order to achieve this overall objective, the Group'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 call loans and borrowings or charge some penal interest. There have been no breaches in the financial covenants of any interest bearing loans and borrowing in the current period.

No changes were made in the objectives, policies or processes for managing capital during the current years and previous year.

39. Operating Segment

In accordance with the Indian Accounting Standard -Ind AS 108 'Operating Segment, the Company has organised the business into two segments viz. Branded Business and Bulk Business. The Branded business includes consumer oil and food business. The Bulk business includes bulk oil business. Summarised segment information for the years ended March 31, 2024 and 2023, is as follows:

43. Additional Regulatory Information as required by Schedule III of Companies Act, 2013

a. There are no proceedings which have been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988.

b. Title deeds of immovable properties are held in the name of the company.

c. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

d. The Company has not been declared willful defaulter by any bank or financial institution or government or any government authority.

e. The company has used the borrowings from banks and financial institutions for the purpose for which it was taken at the balance sheet date.

f. There are no transactions not recorded in the books of accounts that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.

g. There are no Loans or Advances in the nature of Loans granted to promoters, directors, KMPs and the related parties, either severally or jointly with any other person, that are repayable on demand or without specifying any terms or period of repayment.

h. The company has borrowings from bank on the basis of security of current assets, and quarterly returns or statements of current assets filed by the Company with banks or financial institutions are generally in agreement with the books of accounts.

i. The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

b. provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

j. The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

i. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

ii. provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

k. The Company does not have any transactions with companies struck off.The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

l. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year

m. The Company has complied with the number of layers for its holdings in downstream companies prescribed under clause 87 of section 1 of the Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017.

44. Approval of financial statements

The financial statements for the year ended 31st March 2024 were approved by the Board of Directors and authorize for issue on 30th May 2024.

As per our report of even date attached

See accompanying notes to Ind AS Financial Statements 1 - 44

As per our report of even date attached for Doogar & Associates Chartered Accountants FRNo. 00561N

for and on behalf of the Board

Sd/-

Sd/- Anil Modi DIN:00187078 Chairman & Managing Director

(Mukeshyal) Akshay Modi DIN:03341142 Jt. Managing Director

Partner Pradeep Kapoor PAN:ATEPK2474R Chief Financial Officer

M No.: 081810 Ankit Agarwal M.No.:A23445. Company Secretary

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