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Ponni Sugars (Erode) Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 129.45 Cr. P/BV 0.44 Book Value (₹) 340.39
52 Week High/Low (₹) 182/94 FV/ML 10/1 P/E(X) 15.36
Bookclosure 23/07/2019 EPS (₹) 9.80 Div Yield (%) 1.33
Year End :2019-03 

1. Company Overview

Ponni Sugars (Erode) Limited is a public limited company, incorporated under the Companies Act, 1956 and domiciled in India. It is an associate of Seshasayee Paper and Boards Limited. Its registered office is at ‘Esvin House’, No. 13, Old Mahabalipuram Road, Seevaram Village, Perungudi, Chennai - 600 096. It has a sugar factory at Erode having a capacity to crush 3500 tonnes of sugarcane per day and generate 19 MW of power. The Company’s shares are listed on BSE Ltd and National Stock Exchange.

a) Reconciliation of shares outstanding at the beginning and at the end of the year

No change during the period

b) Rights, preferences and restrictions attached to equity shares

The Equity shares of the company having par value of Rs. 10 per share rank pari passu in all respects including voting rights, dividend entitlement and repayment of capital.

d) Management of Capital:

The company pursues a policy of conservative capital structure that seeks to provide adequate capital to its business for growth and create sustainable stakeholder value. Low gearing levels empower the company to navigate cyclical stresses in business. The company funds its operations through internal accruals and lays emphasis on prepayment of debts during up-swing in business cycles.

Proposed Dividend

The Board of directors at their meeting held on 24th May 2019 have recommended payment of dividend of Rs. 2.00 (PY Rs. 1.00) per equity share of face value of Rs. 10 each for the Financial Year ended 31st March 2019. This amounts to Rs. 207 Lakhs including Dividend Distribution Tax of Rs. 35 Lakhs.

The above is subject to approval at the ensuing Annual General Meeting of the company and hence not recognized as a liability.

Changes during the year in respect of each of the line item above are disclosed in the Statement of changes in Equity for the year ended 31st March 2019.

2.1 Description of nature and purpose of Reserve:

(i) Capital Reserve represents gain of a capital nature and is not available for dividend declaration.

(ii) Securities Premium records the premium component on issue of shares and can be utilised only in accordance with the provisions of Companies Act, 2013.

(iii) General Reserve is created by transferring part of Retained Earnings from time to time. It is transfer from one component of equity to another and it is not an item of Other Comprehensive Income. It is a free reserve created to strengthen the net worth of the Company.

Working capital loan is Secured by

(i) first charge on Inventories, book debts and specific movables; and

(ii) second charge on immovables.

Revenue till 30th June 2017 was inclusive of excise duty while GST from 1st July 2017 is not included in Revenue in accordance with ‘Ind AS 115’. For comparability, Revenue for the previous year excluding excise duty is Rs. 19464 Lakhs.

1. The fair value of investment in quoted equity shares measured at quoted price on the reporting date.

2. In case of trade receivables, cash and cash equivalents, trade payables, short term borrowings and other financial assets and liabilities it is assessed that the fair values approximate their carrying amounts largely due to the short-term maturities of these instruments.

3. The fair values of the financial assets and financial liabilities included above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.

(ii) Financial Instrument measured at Amortised Cost :

The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

3(A). Financial Risk Management - Objectives and Policies:

The Company’s financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company’s financial assets comprise mainly of investments, cash and cash equivalents, other balances with banks, security deposits, trade receivables and other receivables.

The Company is exposed to Market risk, Credit risk and Liquidity risk. The Board of Directors (‘Board’) oversee the management of these financial risks in its regular meetings. Risk Management guidelines as discussed in the Audit Committee and approved by the Board, states the Company’s approach to address uncertainties in its endeavour to achieve its stated and implicit objectives. It prescribes the roles and responsibilities of the Company’s management, the structure for managing risks and the framework for risk management. The framework seeks to identify, assess and mitigate financial risks in order to minimize potential adverse effects on the Company’s financial performance.

The following disclosures summarize the Company’s exposure to financial risks and information regarding use of derivatives employed to manage exposures to such risks.

1. Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks interest rate risk, currency risk and other price risk. Financial instruments affected by market risk includes borrowings, investments, trade payables, trade receivables, loans and derivative financial instruments.

(i) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Since the Company has insignificant interest bearing borrowings, the exposure to risk of changes in market interest rates is minimal.

(ii) Foreign Currency Risk

The fluctuation in foreign currency exchange rates may have lower impact on the income statement and equity.

The Company, as per its forex policy, uses foreign exchange and other derivative instruments primarily to hedge foreign exchange and interest rate exposure.

The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in accordance with its forex policy.

No foreign currency exposure at end of the reporting period.

(iii) Equity Price Risk

Equity price Risk is related to the change in market reference price of the investments in equity securities.

The majority of the Company’s investments are in the shares of group companies held for strategic rather than trading purposes.

2. Credit Risk

Credit Risk is the risk of financial loss arising from counter party default on its contractual obligations resulting in financial loss to the company. Credit risk encompasses both the direct risk of default and the risk of deterioration of credit worthiness as well as concentration risks.

Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, loans and advances and derivative financial instruments. None of the financial instruments of the Company result material concentrations of credit risks.

Exposure to Credit Risk - The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to Credit risk was Rs. 4185 lakhs as at 31st March 2019, and Rs. 1917 lakhs as at 31st March 2018 being the total of the carrying amount of balances with banks, short term deposits with banks, trade receivables and other financial assets excluding equity investments.

3. Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.

The company has obtained fund and non-fund based working capital loans from consortium banks. The Company invests its surplus funds in bank fixed deposit and liquid and liquid plus schemes of mutual funds, which carry no / low mark to market risks.

4. The Company has filed Writ Petitions in the High Court of Madras in respect of the disallowance of depreciation claim on the transfer value of assets in terms of Scheme of Arrangement by treating the same as Demerger within the meaning of Income Tax Act, 1961 and obtained interim stay for consequent demand of Rs. 1308 lakhs. The Company has been legally advised that probability of outflow of resources arising out of aforesaid legal issues would be remote. Accordingly, no provision or disclosure of contingent liability is required for same in terms of Ind AS 37.

5. (a) The Tamil Nadu Electricity Regulatory Commission by its order dated 4th Jan 2019 has held that Parallel Operation Charges are payable by Cogenerating plants from 7th May 2014. Consequently, the estimated liability is recognised in these financial statements and the amount of Rs. 31 lakhs pertaining to the past periods is considered under ‘exceptional items’.

(b) The Assistant Commissioner of GST & Central Excise by order dated 18th Jan 2018 held that the company being the successor of Ponni Sugars and Chemicals Ltd is liable for the excise duty and service tax liabilities of that company. The Commissioner of GST & Central Excise (Appeals) by order dated 24th Jan 2019 has confirmed the same. While the company is contesting same on appeal, it has recognized the tax amount of Rs.102 lakhs involved in these financial statements under ‘exceptional items’.

6. As against CSR obligation of Rs. 19 lakhs for the year under Sec.135(5) of the Companies Act, 2013, the Company has incurred Rs. 29 lakhs towards CSR activities as under:

(a) Construction/ acquisition of any asset: Nil

7. Employee Benefits:

(i) Defined Contribution Plans:

The Company makes Provident Fund and Superannuation Fund contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of eligible pay to fund the benefits. The Company has recognised Rs. 81 Lakhs (previous year Rs. 85 Lakhs) for Provident Fund contributions and Rs. 24 Lakhs (previous year Rs. 24Lakhs) for Superannuation Fund contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

(ii) Defined Benefit Plans (a) Gratuity

In respect of Gratuity plan, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as of March 31, 2019. The present value of the defined benefit obligation and the related current service cost and past service cost, were measured using the projected unit cost method. The following table sets forth the status of the Gratuity Plan of the Company and the amount recognised in the Balance Sheet and Statement of Profit and Loss. The Company provides the gratuity benefit through annual contributions to the funds managed by the ICICI Prudential Life Insurance Company Ltd.

The Company pays contribution under the Group Gratuity Scheme to ICICI Prudential Life Insurance Company Ltd., that is invested by the insurer in the plan assets in Government Securities, Debt Funds, Equity shares, Mutual Funds and Money Market Instruments. The expected rate of return on plan assets is based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligation. Significant actuarial assumptions for the determination of the defined benefit obligation are as discussed above.

The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis are given below:

Sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

There was no change in the methods of assumptions used in preparing the sensitivity analysis from prior years.

8. Approval of Financial Statements

The financial statements have been approved for issue by the Board of Directors on 24th May 2019.

9. Figures for the previous year have been regrouped, wherever necessary.

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