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NOTES TO ACCOUNTS

Bodal Chemicals Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 900.96 Cr. P/BV 1.09 Book Value (₹) 67.80
52 Week High/Low (₹) 132/64 FV/ML 2/1 P/E(X) 6.29
Bookclosure 20/09/2019 EPS (₹) 11.71 Div Yield (%) 1.09
Year End :2018-03 

1. Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

2. Business combinations

Ind AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, or of interests in associates and joint ventures and transactions which are considered businesses for Ind AS, that occurred before 1stApril, 2016. The carrying amounts of assets and liabilities in accordance with Previous GAAP are considered as their deemed cost at the date of acquisition. After the date of the acquisition, measurement is in accordance with Ind AS.

3. Deemed cost for property, plant and equipment and intangible assets

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for decommissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Asset.

Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

4. Fair value measurement of financial assets or financial liabilities

First-time adopters may apply Ind AS 109 to day one gain or loss provisions prospectively to transactions occurring on or after the date of transition to Ind AS. Therefore, unless a first-time adopter elects to apply Ind AS 109 retrospectively to day one gain or loss transactions, transactions that occurred prior to the date of transition to Ind AS do not need to be retrospectively restated.

5. Investment in Subsidiaries, Associates & Joint Ventures

The carrying amounts of the Company's investments in its subsidiary and associate companies as per the financial statements of the Company prepared under Previous GAAP, are considered as deemed cost for measuring such investments in the opening Ind AS Balance Sheet

Transition to Ind AS - Reconciliations

Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from IGAAP to Ind AS.

The presentation requirements under IGAAP differs from Ind AS and hence the IGAAP information has been reclassified for ease of reconciliation with Ind AS. The reclassified IGAAP information is derived based on the audited financial statements of the Company for the year ended March 31, 2016 and March 31, 2017.

The following reconciliations provide the explanations and quantification of the differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:

I. Reconciliation of Equity as at 1st April, 2016 and as at 31st March, 2017

II. Reconciliation of Statement of Profit and Loss for the year ended 31st March, 2017

III. Adjustments to Statement of Cash Flows for the year ended 31st March, 2017

Previous GAAP figures have been reclassified/regrouped wherever necessary to conform with the financial statements prepared under Ind AS.

* As required under Paragraph (10C) of Ind AS 101, the Company has reclassified items that it recognised in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Ind ASs.

III. Adjustments to Statement of Cash Flows for the year ended 31st March, 2017

There were no material differences between the Statement of Cash Flows presented under Ind AS and the Previous GAAP

Notes to the Reconciliations 1: Investments

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

- Quoted Equity Shares - At fair value through profit and loss (FVTPL)

- Quoted Mutual Fund - At fair value through profit and loss (FVTPL)

- Unquoted Equity Shares - At cost

- Equity shares of subsidiary and associate companies - At cost

- Preference shares of associate company - At cost

Ind AS requires the above investments to be recognised 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 Investments as per Ind AS and their corresponding carrying amount as per financial statements prepared under Previous GAAP has resulted in a decrease in the carrying amount of these investments by Rs. 0.89 million which has been recognised directly in retained earnings (Equity).

As at 31st March, 2017, the difference between the fair value of Investments as per Ind AS and their corresponding carrying amount as per financial statements prepared under Previous GAAP has resulted in an increase in the carrying amount of these investments by Rs. 48.69 million. On such fair valuation, net gain amounting to 49.58 million has been recognised in other income in the Statement of Profit and Loss.

The above transition has resulted in decrease in equity by Rs. 0.89 million as at date of transition to Ind AS and increase by Rs. 48.69 million as at 31st March, 2017.

2 : Trade Receivables

On the date of transition to Ind AS, the provision for expected credit loss on trade receivables has resulted in a decrease in the carrying amount of these receivables by Rs. 2.85 million which has been recognised directly in retained earnings (Equity). Deferred Tax Liability of Rs.0.99 million has been recognized on such provision.

As at 31st March, 2017, the provision for expected credit loss on trade receivables has resulted in a decrease in the carrying amount of these receivables by Rs. 2.42 million. On such provision, net gain amounting to Rs. 0.43 million has been recognised in other income in the Statement of Profit and Loss. Deferred Tax Liability of Rs.0.15 lakhs has been recognized on such gain.

The above transition has resulted in decrease in equity by Rs. 1.86 million as at date of transition to Ind AS and increase by Rs. 0.28 million as at 31st March, 2017.

3 : Other Financial Assets / Liabilities

Under Ind AS, foreign exchange forward contracts are mark-to-market as at each Balance Sheet date and unrealised net gain or loss is recognised. Derivative assets and derivative liabilities are presented on gross basis. Under previous GAAP in case of forward contracts covered under AS 11, difference between forward rate and spot rate was recognised in profit or loss over the term of contract. This difference has resulted in decrease in equity under Ind AS Rs. 20.42 million as at March 31, 2017 and deferred tax of Rs. 7.07 million on such provision has been recognised (decrease of Rs. 7.34 million as at April 1, 2016 and Deferred Tax Liability of Rs. 2.54 million has been recognized on such provision) and decrease of profit by Rs. 13.08 million for the year ended March 31, 2017 and deferred tax of Rs. 0.45 million has been recognized on such gain.

4 : Remeasurements of Net Defined Benefit Plans

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

For the year ended 31st March, 2017, remeasurement of gratuity liability resulted in a net cost of Rs. 2.87 million which has now been removed from employee benefits expense in the Statement of Profit and Loss and recognised separately in OCI. This has resulted in decrease in employee benefits expense by Rs. 2.87 million and loss in OCI by Rs. 2.87 million for the year ended 31st March, 2017. Consequently, tax effect of the same amounting to Rs. 0.99 million is also recognized separately in OCI.

5: Deferred Tax

Under Previous GAAP, deferred taxes were recognised for the tax effect of timing differences between accounting profit and taxable profit for the year using the income statement approach. Under Ind AS, deferred taxes are recognised using the balance sheet for future tax consequences of temporary differences between the carrying value of assets and liabilities and their respective tax bases. The above difference, together with the consequential tax impact of the other Ind AS transitional adjustments lead to temporary differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or through other comprehensive income.

The above changes have resulted in creation of deferred tax liabilities (net) amounting to Rs. 3.52 million as at date of transition to Ind AS and Rs. 7.90 million as at 31st March, 2017. For the year ended 31st March, 2017, it has resulted in

an increase in deferred tax expense by Rs. 3.38 million in the Statement of Profit and Loss and recognition of deferred tax benefit by Rs. 0.99 million in OCI.

6: Other comprehensive income

Under IGAAP, actuarial gains and losses were recognised in profit or loss. Under Ind AS, the actuarial gains and losses form part of re-measurement of the net defined benefit liability / asset which is recognised in other comprehensive income. Consequently, the tax effect of the same has also been recognised in other comprehensive income under Ind AS instead of profit or loss. The actuarial losses for the year ended March 31, 2017 were Rs. 2.87 million and the tax effect thereon Rs. 0.99 million. This change does not affect total other equity, but there is a increase in profit before tax of Rs.

2.87 million, and in total profit of Rs. 1.87 million for the year ended March 31, 2017.

29.1 Revenue from operations for period up to 30th June, 2017 included Excise duty, which is discontinued from 1st July, 2017 on implementation of Goods and Service tax (GST) in India. In accordance with Ind AS 18 - Revenue, GST, is not included in revenue from operations. In view of the aforesaid restructuring of Indirect taxes, revenue from operations for the year ended on 31st March, 2018 is not comparable with previous year.

36.1 During the year, the Company has changed its method of providing depreciation on fixed assets from Written Down Value Method (WDV) to Straight Line Method (SLM) with effect from 1st April, 2017.

Due to the change in the method of depreciation, the amount of depreciation has been lower by Rs.149.27 million for the year ended on 31st March, 2018 and hence the said figures are not comparable with the figures of the corresponding year.

If the Company would have continued to provide depreciation on earlier method (WDV) on its assets, the profit after tax would have been Rs.1178.41 million instead of Rs.1275.44 million for the year ended 31st March, 2018.

The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade receivables, loans, other financial assets, borrowings, trade payables and other financial liabilities at carrying value because their carrying amounts are a reasonable approximation of the fair values due to their short term nature.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Valuation technique used to determine fair value:

Specific valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date

- The fair value of investments in Mutual Fund Units is based on Net Asset Value ("NAV”) as stated by the issuers of these mutual fund units in the published statements as at the Balance Sheet Date. NAV represents the price at which the issuer will issue further units of Mutual Fund and the price at which issuers will redeem such units from investors.

7. Financial Risk Management

The Company's activities expose it to market risk, liquidity risk and credit risk. In order to minimize any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.

This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the impact of hedge accounting in the financial statements

(B) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability at all times.

Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows. In addition, the Company's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

(A) Credit Risk Management

Credit risk refers to risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investment in mutual funds, derivative financial instruments, other balances with banks, loans and other receivables.

Credit risk arising from investment in mutual funds, derivative financial instruments and other balances with banks is limited and there is no collateral held against these because the counterparties are banks and recognised financial institutions with high credit ratings assigned by the international credit rating agencies.

The Company is making provision on trade receivables based on Expected Credit Loss Model (ECL).

(C) Market Risk Management

i) Foreign Currency Risk

The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US$ and EUR. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company's functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows.

ii) Cash flow and fair value interest rate risk

The Company's main interest rate risk arises from borrowings with variable rates, which expose the Company to cash flow interest rate risk. During 31 March 2018 and 31 March 2017, the Company's borrowings at variable rate were mainly denominated in INR & USD.

The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.

iii) Security Price Risk

The Company's exposure to securities price risk arises from investments held by the Company and classified in the balance sheet at fair value through profit or loss.

To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

8. Capital Management

The Company's objectives when managing capital are to

- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

- Maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:

Notes:-

(i) Bodal Agrotech Ltd is amalgamated with Bodal Chemicals Ltd w.e.f 1st, April, 2016 and in previous year loan was given for acquisition of assets and other business purposes and has been utilized for the same.

(ii) No amounts pertaining to related parties have been provided for as doubtful debts. Also no amounts have been written off or written back during the year.

Defined Benefits Plan

Gratuity: The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with Life Insurance Corporation of India in the form of qualifying insurance policy.

The following table sets out the funded status of the gratuity plan and the amounts recognised in the Company's financial statements based on actuarial valuations being carried out as at 31st March 2018.

9. Brief Description of exceptional items:

During the previous year 2016-17, the Company had sold out Unit-5 located at Ankleswar- GIDC, Bharuch, Gujarat. The Company has gained Rs. 48.55 million out of sale of whole unit and the same is disclosed under "Exceptional items” in the statement of Profit and loss.

48. Disclosure under the Micro, Small and Medium Enterprises Development Act, 2006 are provided as under for the year 2017-18, to the extent the Company has received intimation from the "Suppliers” regarding their status under the Act.

10 Corporate Social Responsibility Expenses

A. Gross amount required to be spent by the Company during the year 2017-18 Rs. 31.07 million (Previous year - Rs. 21.50 million)

50. Share Based Payments

a) The Company initiated the "ESOP 2017” for all eligible employees in pursuance of the special resolution approved by the Shareholders in the Annual General Meeting held on 23rd September, 2017. The Scheme covers eligible employees (except promoters or those belonging to the promoters' group, independent directors and directors who either by himself or through his relatives or through any body-corporate, directly or indirectly holds more than 10% of the outstanding Shares of the Company). Under the Scheme, the Nomination and Remuneration Committee of directors of the Company, administers the Scheme and grants stock options to eligible directors or employees of the Company. The Committee determines the employees eligible for receiving the options and the number of options to be granted subject to overall limit of 1,000,000 options.

c) Fair Value on the grant date

The fair value on the grant date is determined using "Black Scholes Model”, which takes into account exercise price, term of the option, share price at grant date and expected price volatility of the underlying shares, expected dividend yield and risk free interest rate for the term of the option.

The model inputs for options granted during the year ended 31st March, 2018 included as mentioned below.

a) Weighted average exercise price Rs. 50/-

b) Grant date: 13/01/2018

c) Vesting Period: 13/01/2018 to 12/01/2019

d) Share Price at grant date: Rs. 168.70

e) Expected price volatility of Company's share: 31%

f) Expected dividend yield: 0.19%

g) Risk free interest rate: 7.45 %

The expected price volatility is based on the historic volatility (based on remaining life of the options).

11. The Ind AS financial Statements of the Company for the year ended 31st March, 2017, were audited by M/s. Mayank Shah & Associates, Chartered Accountants, the predecessor statutory auditors.

12. Previous year's figures have been rearranged and reclassified wherever necessary to correspond with the current year.

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