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NOTES TO ACCOUNTS

Camlin Fine Sciences Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 905.16 Cr. P/BV 2.62 Book Value (₹) 28.47
52 Week High/Low (₹) 76/39 FV/ML 1/1 P/E(X) 1,568.28
Bookclosure 02/08/2019 EPS (₹) 0.05 Div Yield (%) 0.00
Year End :2018-03 

Note 1:

A. Corporate Information

Camlin Fine Sciences Limited (“the Company”) is a public company incorporated under the provisions of the Companies Act, 1956 and domiciled in India having its registered office at WICEL, Plot No. F/11-12, WICEL, Opposite SEEPZ Main Gate, Central Road, Andheri (East), Mumbai - 400 093. Its shares are listed on BSE Limited (BSE) and the National Stock Exchange in India (NSE). The Company is engaged in research, development, manufacturing and marketing of speciality chemicals which are used as antioxidants, industrial chemicals and aroma products.

B. Basis of Preparation of Financial Statements

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 to be read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (Indian Accounting Standards) Amendment Rules, 2016. The Company’s Financial Statements for the year ended March 31, 2018 comprises of the Balance Sheet, Statement of Profit and Loss, Statement of Cash Flows, Statement of Changes in Equity and Notes to Financial Statements.

For all periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with Indian Generally Accepted Accounting Practices (IGAAP), including Accounting Standards (ASs) specified under Section 133 of the Companies Act, 2013 read with rule 7 of Companies (Accounts) Rules, 2014, as amended, to the extent applicable.

The Financial Statements of the Company for the year ended March 31, 2018 are approved by the Board of Directors on May 24, 2018. These financial statements are the Company’s first Ind AS financial statements and are covered by Ind AS 101, First-time adoption of Indian Accounting Standards. An explanation of how the transition to Ind AS has affected the Company’s equity, financial position, financial performance and its cash flows is provided in Note 51

Current versus non-current classification:

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time taken between acquisition of assets for processing and their realization in cash and cash equivalent, the Company has ascertained its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and non-current.

Functional and Presentation Currency

The financial statements are presented in Indian rupee, which is the functional currency of the Company. All financial information has been rounded to the nearest lakhs, unless otherwise indicated.

Basis of Measurement

The Ind AS Financial Statements have been prepared on a going concern basis using historical cost convention and on accrual method of accounting, except for certain financial assets and liabilities, including financial instruments which have been measured at fair value as described below and defined benefit plans which have been measured on the basis of actuarial valuation as required by relevant Ind ASs.

Key Accounting Estimates and Judgements:

The preparation of financial statements requires management to make judgments, estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Continuous evaluation is done on the estimation and judgments based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Revisions to accounting estimates are recognised prospectively. Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities, are included in the following notes:

(i) Determination of the estimated useful lives of property, plant and equipment and intangible assets.

(ii) Recognition and measurement of defined benefit obligations, key actuarial assumptions.

(iii) Fair valuation of employee share options, key assumptions made with respect to expected volatility and dividend yield.

(iv) Recognition and measurement of provisions and contingencies, key assumptions about the likelihood and magnitude of an outflow of resources.

(v) Recognition of deferred tax assets.

(vi) Fair value of financial instruments.

(vii) Applicable discount rate.

Measurement of fair values

The Company’s accounting policies and disclosures require the financial instruments to be measured at fair values.

The Company has an established control framework with respect to measurement of fair values. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The management regularly reviews significant unobservable inputs and valuation adjustments. If third party information such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusions that such valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which such valuations should be classified.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

C. Recent Accounting Developments

Standards issued but not yet effective

In March 2018, the Ministry of Corporate Affairs (MCA) issued the Companies (Indian Accounting Standards) Amendment Rules, 2018, notifying Ind AS 115, Revenue from Contract with Customers, Appendix B to Ind AS 21, Foreign currency transactions and advance consideration and amendments to certain other standards. These amendments are in line with recent amendments made by International Accounting Standards Board (IASB). These amendments are applicable to the Company from 1st April, 2018. The Company will be adopting the amendments from their effective date.

a. Ind AS 115 - Revenue from Contract with Customers:

As per notification dated March 28, 2018, the Ministry of Corporate Affairs amended the Companies (Indian Accounting Standards) Amendments Rules, 2018, notifying “Ind AS-115 relating to Revenue from Contracts with Customers” and related amendments to other standards on account of notification of Ind AS 115. Ind AS 115 supersedes Ind AS 18, Revenue. The effective date of adoption of this standard is annual periods beginning on or after April 1, 2018 onwards. The Company is currently evaluating the effect of the above amendments.

b. Appendix B to Ind AS 21 - Foreign Currency transactions and advance consideration:

The appendix clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the asset, expense or income (or part of it) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration towards such asset, expense or income. If there are multiple payments or receipts in advance, then an entity must determine transaction date for each payment or receipts of advance consideration. The Group is currently evaluating the effect of the above amendments.

D. First time adoption of Ind AS

The Company has prepared the opening Balance Sheet as per Ind AS as of April 1, 2016 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets and liabilities which are not permitted by Ind AS, by reclassifying items from IGAAP to Ind AS as required by Ind AS and applying Ind AS in measurement of recognised assets and liabilities. However, this principle is subject to certain exceptions and certain optional exemptions availed by the Company. The significant items are as follows:

a. Deemed cost for Property, Plant and Equipment, Investment Property and Intangible Assets:

The Company has elected to measure all its property, plant and equipment and intangible assets at the IGAAP carrying amount as its deemed cost on the date of transition to Ind AS.

b. Deemed cost of Investment in subsidiaries and associate:

The Company has elected to measure investments in subsidiaries and associate at the IGAAP carrying amount as its deemed cost on the date of transition to Ind AS i.e, April 1, 2016.

c. Share based payment:

The Company has elected not to apply Ind AS 102, ‘Share-Based Payment’ to grants that vested prior to the date of transition to Ind AS. Accordingly, the Company has measured only unvested stock options on the date of transition as per Ind AS 102.

2.A.1 Capital Work-in-Progress includes INR 54.88 lakhs (Previous Year March 31, 2017: INR 24.11 lakhs; April 1, 2016: INR Nil), as borrowing costs capitalised during the year. The average capitalisation rate for borrowing cost is 11.26% (Previous Year March 31, 2017: 11.59%; April 1, 2016: Nil).

2.A.2 Refer Note 44(H) for disclosure of contractual commitments for the acquisition of Property, Plant and Equipment.

3.1 The Company has availed the deemed cost exemption in relation to Investment Property on the date of transition and hence the net carrying amount has been considered as the gross carrying amount on that date. The gross carrying amount and net carrying amount as at April 1, 2016 under IGAAP was INR 207.19 lakhs.

3.2 Refer Note 21 and 24 for information on investment property pledged as security for borrowings.

3.3 Fair Value Hierarchy

The fair value of investment property has been determined by external independent property valuers, having appropriate recognised professional qualification and experience in the location and category of the property being valued.

The fair value measurement for investment property has been categorised as Level 3 based on inputs to the valuation technique used.

3.4 Description of valuation technique used.

The Company obtains independent valuation of its investment property as at each year end. The fair value of the investment property has been derived using ‘Selling Price Method’. Under this approach, enquiries are made with local architects, builders, local real estate consultants and other related agencies about the current market rates in area and on that basis, fair market value of the property is ascertained. This approach leads to reasonable estimation of the prevailing market value.

4.1 The Company has availed the deemed cost exemption in relation to Intangible Assets on the date of transition and hence the net carrying amount has been considered as the gross carrying amount on that date. Refer Note 4.2 below for the gross carrying amount and the accumulated depreciation on April 1, 2016 under IGAAP.

5.1 The Company has availed the deemed cost exemption under Ind AS 101 in relation to investments in subsidiaries and associate on the date of transition and hence the net carrying amount has been considered as the deemed cost on that date.

5.2 132,000 (Previous Year March 31, 2017: 132,000; April 1, 2016 : 132,000) Equity Shares pledged in respect of term loan availed by the Company.

5.3 The Company has invested INR 56.01 lakhs (Previous Year March 31, 2017: INR 56.01 lakhs; April 1, 2016: INR 56.01 lakhs) in the share capital of Solentus North America Inc., its wholly owned subsidiary company (“the subsidiary”) and given a loans and advances of INR 211.86 lakhs (Previous Year: March 31, 2017: INR 199.66 lakhs; April 1, 2016 INR 160.33 lakhs). The subsidiary has negative net worth as at 31 March 2018 and is dependent upon the Company to enable it to meet its obligations as they become due. Based on the proposed plans for the subsidiary, Management believes the loan to be fully recoverable and further believes that there is no diminution other than temporary in its investment in the share capital of the subsidiary.

5.4 On February 2, 2016, the Company had entered into Share Purchase Agreement with the shareholders of Dresen Quimica S.A.P.I de. C.V (‘Dresen Quimica’), a company registered and situated in Mexico having its five wholly owned subsidiaries in Mexico, Peru, Guatemala, Columbia and Dominican Republic, to acquire 65% of the share capital of Dresen Quimica. Dresen Quimica and its subsidiaries are engaged in the manufacturing and marketing of wide range of antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitors. Accordingly, on May 4, 2016, Company has invested a sum of INR 1,303.15 lakhs equivalent to US$ 1.95 million in its intermediate wholly owned subsidiary CFS Antioxidantes De Mexico S.A.de C.V. (“CFS de Mexico”) which is registered in Mexico. For the purpose of this acquisition, CFS de Mexico has borrowed US$ 5.85 million as a loan from EXIM Bank. Company has provided a corporate guarantee against the payment of interest and principal on the aforesaid loan amounting to US$ 6.435 million. 34,343 Equity Shares (Previous Year: March 31, 2017: 34,343 Equity Shares; April 1, 2016: Nil) pledged in respect of the said term loan availed by CFS de Mexico.

5.5 It includes INR 78.08 lakhs (Previous Year March 31, 2017: INR 78.08 lakhs; April 1, 2016: INR Nil) towards adjustment on account of fair value of financial guarantees issued to a Bank in relation to loan availed by CFS de Mexico.

5.6 INR 125.33 lakhs (Previous Year March 31, 2017: INR Nil; April 1, 2016: INR Nil) towards adjustment on account of fair value of financial guarantees issued to a Bank in relation to loan availed by CFS Europe S.p.A.

5.7 INR 111.61 lakhs (Previous Year March 31, 2017: INR 83.66 lakhs; April 1, 2016: INR Nil) towards adjustment on account of fair value of employee stock options given to an employee of Industrias Petrotec de Mexico S.A. de C.V.

5.8 On March 22, 2017, Company had been allotted 6,267,003 Equity Shares of Chemolutions Chemicals Limited (CCL) of INR 10 each at a premium of INR 5 per Equity Share on conversion of Inter Corporate Deposit of INR 940.05 lakhs. Pursuant to the allotment, CCL has become a subsidiary of the Company with effect from March 22, 2017.

5.9 On April 15, 2016, the Company had incorporated a subsidiary in the free trade zone of China, namely CFS International Trading (Shanghai) Limited. The Company had subscribed US$ 75,000 (April 1, 2016: Nil) as capital.

5.10 The Company had entered into share purchase agreement on December 23, 2016 with Ningbo Wanglong Technology Limited, a company registered in People’s Republic of China (PRC) for acquisition of 51% equity stake in CFS Wanglong Flavours (Ningbo) Co. Ltd. (erstwhile Ningbo Wanglong Flavors & Fragrances Co. Ltd.) for its Vanillin manufacturing facility by the Company or its subsidiaries, for a consideration of US$ 6.28 million. The acquisition was completed in current financial year on completion of certain conditions by the counter party. As per the terms of share purchase agreement, the first tranche of consideration of US$ 0.628 million equivalent to INR 419.38 lakhs, being 10% of the consideration was transferred to an Escrow Account on February 28, 2017.

5.11 The provision for impairment in the value of investments represents the provision in respect of investments in Fine Renewable Energy Limited and Fine Lifestyle Brand Limited.

6.1 The loans to subsidiaries have been made for general corporate purposes of each subsidiary. These loans are given at rates comparable to the average commercial rate of interest.

7.1 The Company had entered into share purchase agreement on December 23, 2016 with Ningbo Wanglong Technology Limited, a company registered in People’s Republic of China (PRC) for acquisition of 51% equity stake in CFS Wanglong Flavours (Ningbo) Co. Ltd. (erstwhile Ningbo Wanglong Flavors & Fragrances Co. Ltd.) for its Vanillin manufacturing facility by the Company or its subsidiaries, for a consideration of US$ 6.28 million. The acquisition was completed in current financial year on completion of certain conditions by the counter party. As per the terms of share purchase agreement, the first tranche of consideration of US$ 0.628 million equivalent to INR 419.38 lakhs, being 10% of the consideration was transferred to an Escrow Account on February 28, 2017.

8.1 Capital Advances include INR 352.20 lakhs (Previous Year March 31, 2017: INR 352.20 lakhs; April 1, 2016 INR Nil) towards Related Parties.

9.1 No trade or other receivable are due from Directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

9.2 Details of allowance for doubtful debts

The Company has used practical expedient by computing expected credit loss allowance for trade receivable by taking into consideration historical credit loss experience and adjusted for forward looking information. The expected credit loss is based on ageing of the days the receivables are due and the expected credit loss rate. The Company is still pursuing the recovery of the receivables for which allowance is made for doubtful debts.

9.3 The carrying amount of trade receivables include receivables discounted with banks, which are with re-course to the Company. Accordingly, the Company continues to recognise the transferred receivables in its Balance Sheet. The carrying amount of these receivables is INR 1,896.03 lakhs (Previous Year March 31, 2017: INR 912.48 lakhs; April 1, 2016 INR 5,109.82 lakhs). The corresponding carrying amount of associated liabilities are recognised as short term borrowings - (Refer Note 24.2 (b))

10.1 Earmarked balances with banks refers to balance carried in designated bank account towards unclaimed dividend.

11.1 The l oans to subsidiaries have been made for general corporate purposes of each subsidiary. These loans are given at rates comparable to the average commercial rate of interest.

a) During the year, the Company has issued 278,422 Equity Shares (Previous Year March 31, 2017: 524,240 Equity Shares; April 1, 2016: 777,700 Equity Shares) under the Employee Stock Option Scheme, 2014.

b) Rights, preferences and restrictions attached to Equity Shares

The Company has only one class of shares having par value of INR 1 per share. Each holder of Equity Shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of Equity Shares are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

c) Equity Shares Reserved for Issue Under Options

The Company has 583,988 (Previous Year March 31, 2017: 903,760; As at April 1, 2016: 1,513,500) Equity Shares reserved for issue under Employee Stock Option Scheme as at March 31, 2018 (Refer Note 34.2 (a))

d) Utilisation of the proceeds of Qualified Institutions Placement (QIP)

i. On July 5, 2016, the Company had allotted 6,519,500 Equity Shares of INR 1 each at a premium of INR 84.40 per share amounting to share proceeds of INR 5,567.65 lakhs pursuant to a Qualified Institutions Placement (QIP) under Securities And Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

ii On November 23, 2017, the Company has allotted 17,241,379 Equity Shares of INR 1 each at a premium of INR 86 per share amounting to share proceeds of INR 15,000 lakhs pursuant to a Qualified Institutions Placement (QIP) under Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

The Company has utilized the proceeds as per the object of the issue as follows:

Nature and Purpose of Reserves:

12.1 Capital Reserve

Pursuant to preferential issue to promoter group during financial year ended March 31, 2008, promoters and entities belonging to ‘Promoter Group’ were issued 1,550,000 warrants, to be converted to one ordinary share of the Company against payment of cash. These warrants were exercisable at INR 52 each. As per SEBI Guidelines, an amount equivalent to 10% of the price that is INR 5.20 per warrant had been received from the concerned individuals / entities on allotment of these warrants. The Applicants had not exercised the option on these warrants within the stipulated period and hence the options had lapsed. As per the SEBI Guidelines and terms of issue, the advance received against these warrants of INR 80.60 lakhs was forfeited by the Company and transferred to Capital Reserve.

12.2 Securities Premium

The Securities premium account has been created to record the premium on issue of Equity Shares. This reserve is utilised in writing off the expenses incurred towards Qualified Institutions Placement accordance with Section 52 of the provisions of the Companies Act, 2013.

12.3 Employee Stock Option Outstanding

The Company has Employee Stock Option Scheme under which options to subscribe to the Company’s shares have been given to certain employees of the Company. This reserve is used to recognise the value of equity settled share based payments provided to the employees, including Key Management Personnel, as a part of their remuneration.

12.4General Reserve

General Reserve is created from time to time by way of transfer of profits from Retained Earnings.

12.5 Money received against Preferential Share Warrants

At the EOGM held on December 26, 2017, the shareholders have approved an issue of 9,000,000 warrants at a price of INR 92.69 each on a preferential basis to certain proposed allottees aggregating to INR 8,342.10 lakhs. 25% of the price was to be subscribed initially and the balance 75% of the consideration shall be paid at the time of allotment of Equity Shares pursuant to exercise of option against each such warrant by the proposed allottees. Each warrant will be converted into 1 equity share at the face value of INR 1 and premium of INR 91.69 on or before the end of 18 months from the date of allotment of warrants. Accordingly, the initial 25% of the warrant price amounting to INR 2,085.53 lakhs was received on February 8, 2018 and warrants were issued to the proposed allottees on February 9, 2018.

13.1 Term Loans from Banks in Foreign Currency

INR Nil (Previous Year March 31, 2017: INR Nil; April 1, 2016: INR 147.67 lakhs) secured by first pari passu charge on all movable and immovable assets of the Company, both present and future. Further secured by second pari passu charge on current assets of the Company, both present and future.

13.2 Term Loans from Banks in Rupees

(a) INR 695.17 lakhs (Previous Year March 31, 2017: INR Nil; April 1, 2016: INR Nil) secured by first pari passu charge on all movable and immovable assets of the Company, both present and future other than assets which are exclusively charged to other lenders. Further, secured by second pari passu charge on current assets of the Company, both present and future to be shared with other lenders. The loan is repayable in 72 monthly instalments starting from 24th month from the date of first disbursement of term loan. The current interest rate is 12.35%.

(b) INR 750.00 lakhs (Previous Year March 31, 2017: INR 1,083.33 lakhs; April 1, 2016: INR 1,416.67 lakhs) secured by a first pari passu charge on entire fixed assets of the Company, both present and future other than assets which are exclusively charged to other lenders. Further secured by second pari passu Charge on the entire current assets of the Company, both present and future. The loan is repayable in 21 equal quarterly instalments commencing after a moratorium period of two years from the date of first disbursement. The current interest rate is 10.80%.

(c) INR Nil (Previous Year March 31, 2017: INR Nil; April 1, 2016, INR 414.30 lakhs) secured by first pari passu charge on all the fixed assets of the Company, both present and future. Further secured by second pari passu Charge on the entire Current assets of the Company.

(d) INR 4.69 lakhs (Previous Year March 31, 2017: INR 21.92 lakhs; April 1, 2016: INR 21.74 lakhs) secured by hypothecation of vehicles. The loan is repayable in tenure of five to seven years. The current interest rate ranges from 11.50% to 12.50%.

14.1 Loans repayable on demand - Secured

INR 16,364.75 lakhs (Previous Year March 31, 2017: INR 19,259.89 lakhs; April 1, 2016: INR 10,968.46 lakhs) on account of cash credit availed from banks and are secured by first pari passu charge over Company’s current assets, both present and future. Further, secured by second pari passu charge on all movable and immovable fixed assets of the Company, both present and future. The current interest rates range from 10.50% to 11.80%.

14.2 Other Short Term Borrowings - Secured

(a) INR 1,768.66 lakhs (Previous Year March 31, 2017: INR 2,103.23 lakhs; April 1, 2016, INR 1,607.46 lakhs) towards External Commercial Borrowings (ECB) availed from banks and is secured by security stated against Note 24.1. The current interest rates range from 3.81% to 4.81%

(b) INR 1,896.03 lakhs (Previous Year March 31 2017: INR 912.48 lakhs; April 1, 2016: INR 5,109.82 lakhs) towards Export Bill Discounting (EBD) availed from banks and is secured by security stated against Note 24.1. The current interest rates range from 3.25%.

15.1 There are no amounts due to be credited to Investor Education and Protection Fund in accordance with Section 125 of the Companies Act, 2013 as at the year end.

15.2 The unclaimed fixed deposits of INR 4.10 lakhs outstanding at March 31, 2018 (Previous Year March 31, 2017: INR 5.35 lakhs; April 1, 2016, INR 5.35 lakhs) represent deposits taken under the Companies Act, 1956. The Company has been unable to repay these deposits as certain cheques issued for repayment of the deposits have not been presented to the bank for payment and certain deposit holders have not submitted to the Company the original deposit receipts for repayment.

16.1 Consequent to the introduction of Goods and Services Tax (GST) with effect from July 1, 2017, Central Excise and Value Added Tax (VAT) have been subsumed into GST. In accordance with Indian Accounting Standard 18 on Revenue and Schedule III of the Companies Act, 2013 unlike excise duty, GST and VAT are not part of revenue. Accordingly, the figures for the year ended March 31, 2018, is not strictly relatable to the previous year. The following additional information is provided to facilitate such understanding:

17.1 Income from Investment measured at FVTPL includes fair valuation impact of INR 166.75 lakhs (Previous Year March 31, 2017: INR 54.65 lakhs)

17.2 Board of Directors of the Company had approved conversion of advance amounting to INR.940.05 lakhs into equity share capital of Chemolutions Chemicals Limited (CCL). Pursuant to this capitalisation CCL had issued 62,67,003 equity shares of INR 10 each at a share premium of INR 5 per equity share amounting to INR 940.05 lakhs. Accordingly, Company had reinstated the advance to CCL written off in earlier years aggregating INR 867.80 lakhs.

18.1 Employee Benefit Plans

(a) Other long term employment benefits

Leave encashment is payable to the employees of the Company due to death, retirement, superannuation or resignation. Employees are entitled to encash leave while serving in the Company. The leave encashment benefit is payable to all the eligible employees of the Company at the rate of daily salary as per current accumulation of leave days.

The Privilege leave encashment liability and amount charged to Statement of Profit and Loss determined on actuarial valuation using basis projected unit credit method are as under:.

(b) Defined Contribution Plans:

The contributions to the Provident Fund of certain employees are made to a Government administered Provident Fund and there are no further obligations beyond making such contribution. Under the plan, the Company has contributed INR 118.04 lakhs (Previous Year March 31, 2017: INR 123.94 lakhs).

(c) Defined Benefit Plans:

The Company makes contributions to the Group Gratuity cum Life Assurance Schemes administered by the Life Insurance Corporation of India, a funded defined benefit plan for qualifying employees. The Scheme provides for payment as under:

(i) On normal retirement / early retirement / resignation:

As per the provisions of the Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

(ii) On death in service:

As per the provisions of the Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and present value of defined benefit obligation of gratuity was carried out as at March 31, 2018. The present value of defined benefit obligations and the related current service cost and past service cost were measured using the Projected Unit Credit Method. The following table summaries the net benefit expense recognised in the Statement of Profit & Loss, the details of the defined benefit obligation and the funded status of the Company’s gratuity plan:

The sensitivity analysis have been determined based on reasonably possible changes in the respective assumptions occurring at the end of the reporting year, holding all other variables constant. The sensitivity analysis presented above may not be representative of the actual change in the Projected 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 Projected Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting year, which is the same method as applied in calculating the projected benefit obligation as recognised in the Balance Sheet.

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

18.2 Employee Stock Option Scheme

The Company has granted options on December 30, 2014 and February 12, 2016 to its eligible employees of Group under “Camlin Fine Sciences Employees Stock Option Scheme, 2014” (ESOS 2014) approved by the Board of Directors, Shareholders and Remuneration Committee. The options granted under these schemes are equity settled. The details of the scheme are summarised below:

19 Corporate Social Responsibility

The Company has spent INR 45.50 lakhs during the financial year (Previous Year March 31, 2017: INR 72.15 lakhs) as per the provisions of Section 135 of the Companies Act, 2013 read with Schedule VII thereof, towards Corporate Social Responsibility (CSR) activities.

a) Gross amount required to be spent by the Company during the year - INR 45.50 lakhs (Previous Year March 31, 2017: INR 72.15 lakhs)

b) Amount spent during the year on:

20 Research and Development Expenses

Total revenue expenditure on Research and Development (R&D) eligible for weighted deduction under section 35(2AB) of the Income Tax Act, 1961 aggregates to INR 188.15 lakhs (Previous Year March 31, 2017: INR 255.59 lakhs). The details are as below:

21 Earnings Per Share

a) Basic Earnings Per Share

The calculation of basic earnings per share is based on the loss attributable to ordinary shareholders and weighted average number of ordinary shares outstanding.

i) Loss attributable to ordinary shareholders (Basic)

b) Diluted Earnings Per Share

The calculation of diluted earnings per share is based on the loss attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.

22 Leases

Assets taken on operating lease:

The Company’s significant leasing arrangements are in respect of operating leases for premises (Commercial, Residential, Warehouses, etc). Lease expenditure for operating leases is recognised on a straight line basis over the period of lease. The leasing arrangements range between 11 months to five years and are generally renewable by mutual consent or mutually agreeable terms. Under these arrangements, refundable interest free security deposits have been given. The particulars of the premises taken on operating lease are as under:

23 Segment Reporting

As per the requirements of Ind AS 108 on “Operating Segments”, segment information has been provided under the Notes to Consolidated Financial Statements.

#The information in respect of commitment has been given only in respect of capital commitment in order to avoid providing excess details that may not assist user of financial statements.

24 Details of dues to Micro and Small Enterprises as defined under Micro, Small And Medium Enterprises Development Act, 2006

The amount due to Micro and Small Enterprises as defined in the “The Micro, Small and Medium Enterprises Development Act, 2006” has been determined to the extent such parties have been identified on the basis of collected by the Management. This has been relied upon by the auditors. The credit period varies as per the contractual terms with suppliers. No interest is generally charged by the suppliers. The disclosure relating to Micro and Small Enterprises is as under:

25 Related Party disclosures I List of Related Parties as required by Ind AS 24,”Related Party Disclosures”, are given below: i Related parties where control exists Subsidiaries

CFCL Mauritius Private Limited

CFS Do Brasil Industria, Comercio, Importacao De Exportacao De Aditivos Alimenticios LTDA (herein after referred as “CFS do Brazil”)

Solentus North America Inc

CFS North America LLC

CFS Antioxidantes S.A. De.C.V.

CFS International Trading (Shanghai) Limited (since April 15, 2016)

Chemolutions Chemicals Limited (Since March 22, 2017)

CFS Wanglong Flavors (Ningbo) Company Ltd.(Since July 12, 2017)

Step down subsidiaries

CFS Europe S.P.A.

Dresen Quimica S.A.P.I. De.C.V. (Since May 4, 2016)

Industrias Petrotec de Mexico S.A.De.C.V. (Since May 4, 2016)

Britec S.A. (Since May 4, 2016)

Inovel S.A.S (Since May 4, 2016)

Nuvel S.A.C (Since May 4, 2016)

Grinel S.R.L (Since May 4, 2016)

ii Associate

Fine Lifestyle Brands Limited

iii Key Management Personnel (KMP)

Mr. Dilip D. Dandekar - Non Executive Director (Chairman)

Mr. Ashish S. Dandekar - Managing Director

Ms. Leena Dandekar - Executive Director (upto April 5, 2017)

Ms. Anagha Dandekar - Additional Director (from August 28, 2017)

Mr. Nirmal V. Momaya - Non Executive Director

Mr. Ajit S. Deshmukh - Non Executive Director

Mr. Sharad M. Kulkarni - Non Executive Director (Independent)

Mr. Pramod M. Sapre - Non Executive Director (Independent)

Mr. Abeezar E, Faizullabhoy - Non Executive Director (Independent)

Mr. Bhargav A. Patel - Non Executive Director (Independent)

Mr. Atul R. Pradhan - Non Executive Director (Independent)

Mr. Nicola A. Paglietti - Non Executive Director (Independent)

Mr. Dattatraya Puranik - Executive Director & CFO till February 9, 2017 and thereafter Executive Director till May 19, 2017 Mr. Santosh Parab - Chief Financial Officer (from February 10, 2017)

Mr. Rahul Sawale - Company Secretary

iv Relatives of Key Management Personnel

Mr. Subhash D. Dandekar - Management Consultant / Relative of Managing Director Mrs. Rajani S. Dandekar - Management Consultant / Relative of Managing Director

v Entities where control / significant influence by KMPs and their relatives exist and with whom transactions have taken place

Fine Lifestyle Solutions Limited

Focussed Event Management Private Limited

Vibha Agencies Private Limited

Abana Medisys Private Limited

Pagoda Advisors Private Limited

HSA Advocates

Hardware Renaissance, USA w.e.f August 28, 2017 MK Falcon Agrotech Private Limited Pillar Properties Private Limited V R Momaya & Associates

vi Post-employment benefit plan

Camlin Fine Sciences Limited Group Gratuity Scheme

b) Fair value hierarchy

The fair value of financial instruments as referred to in note (a) above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

The categories used are as follows:

Level 1 - Quoted prices (unadjusted) for identical assets and liabilities in an active markets.

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

c) Measurement of Fair Value

The fair values of financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent in all the years. The following methods and assumptions were used to estimate the fair values:

(i) The fair values of investments in mutual fund units is based on the net asset value (‘NAV’) as stated by the issuers of mutual funds. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

(ii) The Management assesses that fair values of trade receivables, cash and cash equivalents, other bank balances, loans, trade payables, current borrowings, other current liabilities and other financial liabilities (current), approximate to their carrying amounts largely due to the short-term maturities of these instruments.

(iii) 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 amount would be significantly different from the values that would eventually be received or settled.

d) Risk Management Framework

The Company’s business activities expose it to a variety of financial risks, namely credit risk, liquidity risk and market risks. Market risks comprise currency risk and interest rate risk. The Company’s Senior Management and Key Management Personnel have the ultimate responsibility for managing these risks. The Management has a process to identify and analyse the risks faced by the Company, to set appropriate risk limits and to control and to monitor risks and adherence to these limits. Risk Management policies and systems are reviewed regularly to reflect changes in market conditions and Company’s activities. Further, Audit Committee undertakes regular reviews of Risk Management Controls and Procedures.

(i) Credit risk

Credit risk is the risk that a customer or counterparty fails to meet its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from its operating activities (trade receivables) and from its financing activities including investments in mutual funds, deposits with banks and financial institutions and financial instruments.

Trade Receivables

Credit risk from trade receivables is managed by establishing credit limits, credit approvals and monitoring creditworthiness of the customers. Outstanding customer receivables are regularly monitored. The Company has computed credit loss allowances based on Expected Credit Loss Model, which excludes transactions with subsidiaries.

The ageing of trade receivables is as follows:

Investments in Mutual Funds, Term Deposits and Bank Balances

The Company’s exposure in term deposits with banks and investments in Mutual Funds is limited, as the counterparties are highly rated banks and financial institutions.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses.

The following tables detailed the Company’s remaining contractual maturities of financial liabilities as at the reporting date with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.

The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.

(iii) Currency Risk

The Company’s operations result in it being exposed to foreign currency risk on account of trade receivables, trade payables, borrowings and lendings. The foreign currency risk may affect the Company’s income and expenses, or its financial position and cash flows. The objective of the Company’s Management of foreign currency risk is to maintain these risk within acceptable parameters, while optimising returns.

The Company’s exposure to foreign currency risk denominated monetary assets and liabilities at the end of the reporting period expressed in INR (in lakhs), is as follows:

Sensitivity for above exposures

A fluctuation in the exchange rates of 5% with other conditions remaining unchanged would have the following effect on Company’s profit or loss before tax and equity as at 31st March 2018 and 31st March 2017:

(iv) 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. The Company’s exposure to risk of change in market interest rates relates primarily to its borrowings. The Company’s borrowings are at floating rates and its future cash flows will fluctuate because of changes in market interest rates.

The interest rate profile of the Company’s interest bearing financial instruments at the end of the reporting period is as follows:

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 100 basis points in interest rate would have resulted in variation in the interest expense for the Company by the amounts indicated in the table below. This calculation assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The year end balances are not necessarily representative of the average debt outstanding during the period.

26 Capital Management

The primary objective of the Company’s capital management is to maintain an efficient capital structure and to maximise shareholder’s value. The Management seeks to maintain a balance between higher returns that is achieved by raising funds through equity and the advantages by a sound capital position.

The Company monitors capital using a ratio of ‘Net Debt to Equity’. For this purpose, Capital includes issued capital and all other equity reserves. Net Debt is defined as total borrowings less cash & bank balances and other current investments.

The Company’s Net Debt to Equity ratios are as follows:

27 Disclosures u/s 186(4) of the Companies Act, 2013

a Details of investments made are disclosed under Note 5.

b Details of Loans given to subsidiaries, associates, firms/companies in which directors are interested are disclosed in Note:16.1, 16.2 and 16.3. c Details of Guarantee given on behalf are disclosed in Note: 44(I)(c) and (d).

28 Disclosures made in terms of Schedule V of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015

The disclosure for Loans, Investments and Guarantees refer note 49. Further, there are no advances given by the company.

Notes to the Reconciliations:

1 Capitalisation of borrowing costs on qualifying asset

Borrowing costs incurred towards qualifying asset have been capitalised to capital Work-in-Progress.

2 Recognition of investment property

Under Indian GAAP, there was no requirement to present investment property separately and the same was included under property, plant and equipment. Under Ind AS, investment property is required to be presented separately in the balance sheet. Accordingly, the carrying value of investment property as at April 1, 2016 and March 31, 2017 under Indian GAAP has been reclassified to a separate line item in Balance Sheet.

3 Discounting of Financial Assets

Under IGAAP, interest free rent deposits given was carried at cost. Under Ind AS, such interest free deposit are measured at fair value . Difference between fair value and deposit amount is recognised as “Deferred Lease Expense” at initial recognition and amortised over the period of lease on straight line basis. Deposit is measured at amortised cost subsequently by recognising interest income.

4 Fair valuation of Investments

Under IGAAP, current investments were measured at lower of cost or NRV (Net Realisable Value). Under Ind AS, these financial assets have been classified as FVTPL investments. Ind AS requires such investments to be measured at fair value.

5 Bills of exchange discounted with banks

Under IGAAP, trade receivables derecognised by way of bills of exchange were shown as contingent liability since there is a recourse clause. Under Ind AS, the trade receivables have been restated with corresponding recognition of short term borrowings.

6 Impairment of Trade Receivables

Under IGAAP, the Company has created provision for impairment of receivables based on provision matrix. Under Ind AS, the impairment allowance has been determined based on Expected Credit Loss (ECL) model.

7 Proposed Dividend

Under IGAAP, proposed dividends including Dividend Distribution Tax (DDT) are recognised as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, proposed dividend is recognised as a liability in the period in which it is declared by the Company (usually when approved by shareholders in a general meeting) or paid.

8 Revenue

Under IGAAP, revenue from sale of products was presented excluding excise duty. Under Ind AS, revenue from sale of products is presented inclusive of excise duty. Excise duty is presented in the Statement of Profit and Loss as part of expenses.

9 Re-measurement of Employee Defined Benefit Plans

Under IGAAP, re-measurement of defined benefit plans (gratuity), arising primarily due to change in actuarial assumptions was recognised as employee benefit expenses in the Statement of Profit and Loss. Under Ind AS, such re-measurement of defined benefit plans, along with related tax effects are recognised in Other Comprehensive Income (OCI).

10 Employee Stock Option Plan (ESOP)

Under IGAAP, intrinsic value of employee stock option plan was recognised as expense over the vesting period. Under Ind AS, the compensation cost of employee stock option plan is recognised based on the fair value of options determined using an appropriate pricing model at the date of grant. Further, employee stock options granted to employees of subsidiary have also been recognised as an investment based on the fair value of options granted to them.

11 Impact on Cash Flow

The transition from Previous GAAP to Ind AS has no material impact on the statement of cash flow except bank overdraft which has been considered as part of cash and cash equivalents.

12 Deferred Taxes on Ind AS adjustments

IGAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of the balance sheet approach has resulted in recognition of deferred tax on new temporary differences which was not required under IGAAP. In addition, various transitional adjustments led to temporary differences. The Company has accounted for such differences.

13 Financial guarantees

Under Ind AS, the Company has recognised fair value of financial guarantees provided to its subsidiary companies. The fair value of such financial guarantee has been recognised as additional investment in subsidiaries. The financial guarantee to subsidiaries are amortised over the tenure of loan. The impact of amortisation of fair value of financial guarantee has been recognised under Other Income in the Statement of Profit and Loss.

29 Previous years’ figures have been regrouped / restated wherever necessary to conform to current year’s classification.

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