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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. (₹) 110.32 Cr. P/BV 0.40 Book Value (₹) 317.35
52 Week High/Low (₹) 189/102 FV/ML 10/1 P/E(X) 33.03
Bookclosure 25/07/2018 EPS (₹) 3.88 Div Yield (%) 0.78
Year End :2018-03 

1. Company Overview

Ponni Sugars (Erode) Limited is a Public Limited Company, incorporated under the Companies Act, 1956 and domiciled in India. Its registered office is located 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.

(i) All the above assets are owned by the company.

(ii) The Company has taken borrowings from banks which carry second charge over the immovable assets of the Company ( Note 17 and 19) towards security.

(iii) Contractual commitments for the acquisition of Property plant and equipment as at 31-03-2018 - NIL (Previous year Nil).

2. Equity Share Capital:

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 creation of sustainable stakeholders 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 Divided

The Board of directors at its meeting held on 25 th May, 2018 have recommended a payment of dividend of Rs. 1.00 (PY '2.50) per equity share of face value of Rs. 10 each for the Financial Year ended 31st March, 2018. The same amounts to Rs. 103 Lakhs including Dividend Distribution Tax of Rs. 17Lakhs)

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 2018.

3. 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 Account records the premium component on issue of shares and can be utilised 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 ranking pari passu with loan under SEFASU .

(i) The classification of the suppliers under Micro, Small and Medium Enterprises Development Act,2006 is made on the basis of information made available to the Company.

Current maturities of the Loan under the Scheme for Extending Financial Assistance to Sugar Undertakings, 2014 (SEFASU) is secured by

(i) second charge on immovables ranking pari passu with working capital loans and

(ii) second charge on movables .

Revenue for the period till 30th June 2017 was inclusive of excise duty. GST imposed from 1st July 2017 is not included in Revenue in accordance with 'Ind AS 18'. For comparability, Revenue excluding excise duty is Rs. 19,464 Lakhs (Previous year Rs. 25,047 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.

4 (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 disclosure 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. 1,918 lakhs as at 31st March 2018, Rs. 2,679 lakhs as at 31st March 2017 and Rs. 3,779 lakhs as at 1st April 2016 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.


For all periods upto and including the year ended 31st March, 2017, the Company had prepared its financial statements in accordance with the accounting standards notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 (“Previous IGAAP”). This note explains the principal adjustments made by the Company in restating its financial statements prepared under Previous GAAP in accordance with Ind AS for the following:

a) Balance Sheet as at 1st April, 2016 (Transition date);

b) Balance Sheet as at 31st March, 2017,

c) Statement of Profit and Loss for the year ended 31st March, 2017; and

d) Statement of Cash flows for the year ended 31st March, 2017.

The mandatory exception and exemption availed on the transition to Ind As disclosed in Note 1.27

* Under the previous GAAP there was no concept of Other Comprehensive Income. Under Ind AS, specified items of income, expense, gains or losses are required to be presented in Other Comprehensive Income.

5.2: Description of adjustments:

a. Non-Current Investments

In the financial statements prepared under Previous GAAP Non-current Investments of the Company were measured at cost less provision for diminution. Under Ind AS, the Company has recognized such investments as follows:

Equity shares - At Fair Value through Other Comprehensive Income (FVTOCI) through an irrevocable option. Ind AS requires the investments to be recognized at fair value (except investments in equity shares of subsidiary and associate companies).

On the date of transition to Ind AS, the difference between the fair value of Non- Current Investments as per Ind AS and their corresponding carrying amount as per financial statements prepared under Previous IGAAP has resulted in an increase in the carrying amount of these investments by ' 2,198 lakhs which has been recognized as Effect of Measuring Investments at fair value under Other Comprehensive Income (OCI).

As at 31st March, 2017, the difference between the fair value of Non-Current Investments as per Ind AS and their corresponding carrying amounts as per financial statements prepared under Previous IGAAP has resulted in an increase in the carrying amount of these investments by Rs. 11,982 lakhs which has been recognized in OCI.

The above has resulted increase in equity by Rs. 2,198 lakhs as at the date of transition to Ind AS and by Rs. 9,784 lakhs as at 31st March, 2017.

b. Proposed Dividend

Till the year ended 31st March, 2016, in the financial statements prepared under Previous IGAAP dividend on equity shares recommended by the Board of Directors after the end of reporting period but before the financial statements were approved for issue, was recognised as a liability in the financial statements in the reporting period relating to which dividend was proposed. Under Ind AS, such dividend is recognised in the reporting period in which the same is approved by the members in a general meeting.

On the date of transition, the above change in accounting treatment of proposed dividend has resulted increase in Equity with a corresponding decrease in Provisions by Rs. 124 lakhs. The dividend is recognized in the year of declaration (ie.year ended 31st March, 2017) in retained earnings. The above change however, does not affect the Profit before tax and Profit after tax for the year ended 31st March, 2017.

c. Fair Valuation for Financial Assets

On the date of transition to Ind AS in accordance with Ind AS-109, the Company has valued its financial assets at fair value. This has resulted in provision for impairment of Rs. 110 lakhs and is recognized in the ‘Retained Earnings’ on the transition date. Consequently, the provisions recognized in the financial statements prepared under IGAAP for the year ended 31st March, 2017 is reversed.

d. Revenue from sales of products

In the financial statements prepared under Previous IGAAP revenue from sale of products was presented net of Excise Duty. However, under Ind AS, revenue from sale of products includes Excise Duty. Excise Duty expense amounting to Rs. 1,207 lakhs is presented separately on the face of the Statement of Profit and Loss for the year ended 31st March, 2017.

e. Re-measurement benefit of defined benefit plans

In the financial statements prepared under Previous IGAAP re-measurement benefit of defined plans (gratuity), arising primarily due to change in actuarial assumptions was recognized as employee benefit expense in the Statement of Profit and Loss. Under Ind AS, such re-measurement benefit relating to defined benefit plans is recognized in OCI as per the requirements of Ind AS 19 - Employee benefits. Consequently, the related tax effect of the same has also been recognized in OCI.

For the year ended 31st March, 2017, re-measurement of gratuity liability resulted in a net benefit of Rs. 54 lakhs which has now been removed from employee benefits expense in the Statement of Profit and Loss and recognized separately in OCI. This has resulted in increase in employee benefits expense by Rs. 54 lakhs and gain in OCI by Rs. 54 lakhs for the year ended 31st March, 2017. Consequently, tax effect of the same amounting to Rs. 19 lakhs is also recognized separately in OCI.

The above changes do not affect Equity as at date of transition to Ind AS and as at 31st March, 2017. However, Profit before tax and profit for the year ended 31st March, 2017 decreased by Rs. 54 lakhs and Rs. 35 lakhs respectively.

f. Deferred tax

In the financial statements prepared under Previous IGAAP deferred tax was accounted as per the Income approach and reconciled as per Balance Sheet approach. Under Ind AS 12 deferred taxes are to be accounted as per Balance Sheet approach. However the change to Balance Sheet approach has no impact. Under the previous IGAAP MAT credit was disclosed as MAT credit receivable under Non current assets. Under Ind AS, the same is disclosed under Deferred Tax assets and accordingly the amounts are reclassified.

g. Statement of Cash Flow for the year ended 31st March, 2017

In the financial statements prepared under Previous IGAAP interest received was grouped under Financing Activity. However, the same is now grouped under Investment activity in line with Ind AS 7 - Statement of Cash Flows.

6. 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.

7. Government of Tamilnadu has announced State Advised Price (SAP) from sugar seasons 2013-14 to 2016-17 that has been challenged by South Indian Sugar Mills Association, Tamil Nadu (in which the Company is a member) in Writ Petition before High Court of Madras. Since the Hon’ble Supreme Court had held in 2014 that SAP is only recommendatory in Tamil Nadu, the Company did not foresee any adverse impact.

The Company has since opted to pay an agreed sum to reach one time settlement with cane farmers and remove future uncertainty. The financial impact of this is fully considered in these financial statements.

8. The Company did not attract the mandatory spend on Corporate Social Responsibility (CSR) for the previous years pursuant to Sec.135 (5) of the Companies Act, 2013. It however continued CSR programs earlier initiated on voluntary basis and incurred CSR expenditure. In the current year the Company attract the mandatory spend on CSR and the gross amount to be spent by the Company during the year towards CSR as per the provision of Sec.135 (5) of the Companies Act, 2013 amounts to Rs. 13 lakhs. As against the above, the Company has spent Rs. 36 lakhs towards CSR Activities as under:

(a) Construction/ acquisition of any asset: Nil

9. 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. 85 Lakhs (previous year Rs. 86 Lakhs) for Provident Fund contributions and Rs. 24 Lakhs (previous year Rs. 21 Lakhs) 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, 2018. 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 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.

10. Approval of Financial Statements:

The financial statements were approved for issue by the Board of Directors on 25th May 2018

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