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NOTES TO ACCOUNTS

Adani Gas Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 16568.64 Cr. P/BV 15.04 Book Value (₹) 10.02
52 Week High/Low (₹) 184/84 FV/ML 1/1 P/E(X) 72.45
Bookclosure 06/08/2019 EPS (₹) 2.08 Div Yield (%) 0.17
Year End :2019-03 

1. FINANCIAL INSTRUMENTS AND RISK REVIEW

a) Accounting Classification and Fair Value Hierarchy Financial Assets and Liabilities

The Company's principal financial assets include loans and trade receivables, cash and cash equivalents and other receivables. The Company's principal financial liabilities comprise of borrowings, provisions, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations and projects.

Fair Value Hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level-1 : Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level-2 : Inputs are other than quoted prices included within 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on the assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

The following tables summarizes carrying amounts of financial instruments by their categories and their levels in fair value hierarchy for each year end presented.

Notes :

(a) Investments exclude Investment in Joint Venture.

(b) Carrying amounts of current financial assets and liabilities as at the end of the each year presented approximate the fair value because of their short term nature. Difference between carrying amounts and fair values of other noncurrent financial assets and liabilities subsequently measured at amortized cost is not significant in each of the year presented.

b) Financial Risk Management Objective and Policies :

The Company's risk management activities are subject to the management direction and control under the framework of Risk Management Policy as approved by the Board of Directors of the Company. The Management ensures appropriate risk governance framework for the Company through appropriate policies and procedures and that risks are identified, measured and managed in accordance with the Company's policies and risk objectives., the Company is mainly exposed to risks resulting from interest rate risk, credit risk and liquidity risk.

Interest rate risk

The Company is exposed to changes in interest rates due to its financing, investing and cash management activities. The risks arising from interest rate movements arise from borrowings with variable interest rates. The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

The Company's risk management activities are subject to the management, direction and control of Central Treasury Team of the Adani Group under the framework of Risk Management Policy for interest rate risk. The Group's central treasury team ensures appropriate financial risk governance framework for the Company through appropriate policies and procedures and that financial risks are identified, measured and mitigated in accordance with the Group's policies and risk objectives.

Credit risk

Credit risk refers to the risk that a counterparty or customer will default on its contractual obligations resulting in a loss to the Company. Financial instruments that are subject to credit risk principally consist of Loans, Trade and Other Receivables, Cash & Cash Equivalents, Investments and Other Financial Assets. The carrying amounts of financial assets represent the maximum credit risk exposure.

Credit risk encompasses both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of counter parties on continuous basis with appropriate approval mechanism for sanction of credit limits. Credit risk from balances with banks, financial institutions and investments is managed by the Company's treasury team in accordance with the Company's risk management policy. Cash and cash equivalents and Bank deposits are placed with banks having good reputation, good past track record and high quality credit rating.

Liquidity risk

The Company monitors its risk of shortage of funds using cash flow forecasting models. These models consider the maturity of its financial investments, committed funding and projected cash flows from operations. The Company's objective is to provide financial resources to meet its business objectives in a timely, cost effective and reliable manner and to manage its capital structure. A balance between continuity of funding and flexibility is maintained through the use of various types of borrowings.

Maturity profile of financial liabilities :

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

c) Capital Management

For the purpose of the Company's capital management, capital includes issued capital and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value.

The Company monitors capital using gearing ratio, which is net debt divided by total capital plus debt.

Management monitors the return on capital, as well as the level of dividends to equity shareholders. The Company is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the years ended 31st March, 2019 and 31st March, 2018.

C) The Hon'ble Supreme Court (SC) has passed a judgment dated 28 th February 2019, relating to components of salary structure to be included while computing the contribution to provident fund under the Employees Provident Fund Act, 1952. The Company's Management is of the view that there is considerable uncertainty around the timing, manner and extent in which the judgment will be interpreted and applied by the regulatory authorities. The Company will continue to assess any further developments in this matter for the implications on financial statements, if any. Currently, the Company has not considered any impact in these financial statements.

2. OPERATING LEASES

Disclosure as required by the Ind AS 17, "Leases” as prescribed under Companies (Indian Accounting Standard) Rules, 2015

(as amended) are given below:

a) The aggregate lease rentals payable are charged to the Statement of Profit and Loss as Rent in Note 33

b) The leasing arrangements which are cancellable at any time on month to month basis and in some cases between 11 months to 5 years are usually renewable by mutual consent on mutually agreeable terms. Under these arrangements, generally interest free refundable deposits have been given.

c) Disclosure in respect of leasing arrangements which are non cancellable for a period exceeding 5 years is as under :

Note :

Since business combination under the Scheme of Arrangement has been accounted for as a common control transaction (refer note 18 & 43) and the financial information in respect of previous periods have been restated, number of equity shares have also been restated for the purpose of EPS calculation to ensure comparability.

40 CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, a Corporate Social Responsibility (CSR) committee has been formed by the Company. The CSR activities of the Company are generally being carried out through Adani Foundation a Charitable Trust set up by the Group, whereby funds are allocated from the Company. The Charitable Trust carries out the CSR activities as specified in Schedule VII to the Companies Act, 2013 on behalf of the Company. During the year, Company was required to spend CSR expense of Rs,3.73 Crores (31st March, 2018 : Rs,2.83 Crores) as per requirement of Section 135 of Companies Act, 2013 and had spent Rs,3.73 Crores (31st March, 2018 : Rs,2.83 Crores) for the year. , r -

3. The Company has made provision in the accounts for Gratuity based on actuarial valuation. The particulars under the Ind AS 19 "Employee Benefits" furnished below are those which are relevant and available to the Company for this year.

(b) Defined Benefit Obligations :

The Company provides for gratuity for eligible employees in India as per the Payment of Gratuity Act, 1972, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. Liability in respect of Gratuity is determined based on actuarial valuation done by actuary as at the balance sheet date. Disclosures in respect of the defined benefit obligation (i.e. Gratuity) are as follows.

viii) Effect of Plan on Entity's Future Cash Flows

a) Funding Arrangement

The Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.

b) Expected Contribution during the next annual reporting period

The Company's best estimate of contribution during the next year is Rs,3.59 Crores

c) Maturity Profile of Defined Benefit Obligation

The average duration of the defined benefit plan obligation at the end of the reporting period is 13 years (31 March 2018: 12 years). The expected maturity analysis of gratuity benefits is as follows :

ix) Risk Exposure and Asset Liability Matching

Through its defined benefit plan of Gratuity, the Company is exposed to its number of risks, viz. asset volatility, changes in return on assets, inflation risks and life expectancy. The Company has purchased insurance policy, which is a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The Insurance Company, as part of the policy rules, makes payment of all gratuity outgoes happening during the year (subject to sufficiency of funds under the policy). The policy, thus, mitigates the liquidity risk

(c) Other Long Term Employee Benefits :

Other long term employee benefits comprise of compensated absences/leaves, which are recognized based on actuarial valuation. The actuarial liability for compensated absences as at the year ended 31st March, 2019 is Rs,3.87 Crores (31st March 2018: Rs,3.12 Crores).

4. RELATED PARTY TRANSACTIONS

Dclosure of transactions with Related Parties, as required by Ind AS 24 "Related Party Disclosures” has been set below. Related parties as defined under clause 9 of the Ind AS 24 have been identified on the basis of representations made by the management and information available with the Company.

i) Name of related parties & description of relationship

a) Ultimate Holding Entity

S. B. Adani Family Trust (SBAFT) (w.e.f. 29.08.2018)

Adani Enterprises Limited (up to 28.08.2018)

b) Holding Entity

Adani Gas Holding Limited (up to 10.08.2018)

c) Joint Venture IndianOil-Adani Gas Private Limited

d) Entities on which one or more KMP have a significant influence/control with whom transaction done during the year:

Adani Enterprises Limited (w.e.f. 29.08.2018)

Adani Power Limited

Adani Power (Mundra) Limited

Adani Foundation

Karnavati Aviation Private Limited

Adani Township & Real Estate Company Private Limited

Shantikrupa Estates Private Limited

Belvedere Golf and Country Club Private Limited

Adani Ports and Special Economic Zone Limited

e) Key Managerial Personnel

Mr. Gautam S. Adani (w.e.f. 22.10.2018)

Mr. Rajesh S. Adani (up to 22.10.2018)

Mr. Pranav V. Adani, Director

Mr. Rajeev Sharma, Whole-time Director (up to 22.10.2018)

Mr. Suresh P Manglani, Executive Director (w.e.f. 22.10.2018)

Mr. Naresh Poddar, CFO (up to 31.01.2019)

Mr. Hardik Sanghvi, Company Secretary (up to 08.08.2018)

Mr. Gunjan Taunk, Company Secretary (w.e.f. 26.08.2018)

f) Non Executive Directors

Mr Maheshwar Sahu (w.e.f. 22.10.2018)

Mrs Chandra Iyengar (w.e.f. 22.10.2018)

Mr Naresh Kumar Nayyar (w.e.f. 22.10.2018)

Terms and conditions of transactions with related parties

(1) The Company is dealing in the CNG & PNG sales to the domestic, industrial and commercial consumers. The above related party transaction do not include the transactions of CNG & PNG Gas sales to the related parties in ordinary course of business, as all such transactions are done at Arm's Length Price only. As per Para 11(c)(iii) of Ind AS-24 "Related Party Disclosures", normal dealings of Company with related parties by virtue of public utilities are excluded from the purview of Related Party Disclosures.

(2) Remuneration to Key Managerial Personnel does not include provision for Leave Encashment and Gratuity as it is provided in the books of account on the basis of actuarial valuation for the Company as a whole and hence individual figures cannot be identified

(3) All above figures are net of taxes wherever applicable.

5.BUSINESS COMBINATION

A) The Board of Directors of Adani Enterprises Limited (hereinafter referred as "AEL'), the Board of Directors of Adani Gas Holdings Limited (hereinafter referred as "AGHL') and the Board of Directors of the Company had approved the Composite Scheme of Arrangement ("the Scheme") among AEL, AGHL and the Company and their respective shareholders and creditors. The Scheme was approved by National Company Law Tribunal ("NCLT") bench at Ahmadabad vide its order dated 3rd August, 2018. Pursuant to the sanction of the Scheme, AGHL has been amalgamated with the Company with the appointed date of 10 th August, 2018 and the Gas Sourcing and Distribution business of AEL has been demerged to the Company with the appointed date of 28 th August, 2018.

Since the above transactions qualify as common control business combinations under Ind AS 103 - "Business Combinations", the previous period comparative figures have been restated as if the business combination had occurred with effect from 1st April, 2017 and accordingly, Goodwill / Capital reserve is calculated based on the net assets as on 1st April, 2017. Total income and net profit after tax for the year ended 31st March, 2018 have been restated by Rs,144.13 Crs and ' 8.32 Crs respectively.

Also, as per the Scheme, following effects have also been considered in the books of accounts of the Company.

i) Existing 25,67,42,040 equity shares of Rs,10/- each held by AGHL in the Company stands cancelled, and are ultimately replaced by 109,98,10,083 equity shares of Rs,1/- each, issued to the shareholders of AEL in swap ratio of 1 equity share of the Company for each equity share held by shareholders of AEL.

ii) The transfer and vesting of Gas Sourcing and Distribution business qualifies as a common control transaction as per Ind AS 103 "Business Combinations" and is accordingly accounted for using the "Pooling of Interest Method".

iii) The excess of value from cancellation of existing share capital and the book value of assets and liabilities transferred over the value of fresh equity shares allotted has been recorded as Capital Reserve.

B) As per Ind AS 103, previous period figures have been restated and following is the impact on Balance Sheet, Statement of Profit and Loss and Cash Flow Statement of the Company due to this restatement.

C) Also, as per Ind AS 103, Statement of Profit and Loss for the year ended 31st March, 2019 has been restated to include effect of transactions prior to respective appointment dates, when AGHL and the Gas Undertaking of AEL were operating as separate legal entity or unit. Excluding effect of such restatement, the Statement of Profit and Loss for the current year would appear as below.

6. Pursuant to Para B14 of Ind AS 112, Disclosure of Interest in Other Entities, following is the disclosure relating to Joint Venture of the entity:

The Company has a Joint Venture interest in IndianOil-Adani Gas Private Limited, a Company incorporated under the Companies Act, 2013. As at 31st March, 2019, the Company has invested a sum of Rs,185.50 Crores(31st March, 2018: Rs,124.00 Crores)

7. RECENT INDIAN ACCOUNTING STANDARDS (IND AS)

a) Transition to Ind AS 115 'Revenue from Contracts with Customers'

As mentioned in note 2(II)(d) on Accounting Policies, the Company has adopted new Ind AS 115 using the cumulative effect method and has not restated comparative information. It has credited net impact of Rs.4.45 Crs in Retained Earnings for the revenue on account of outstanding contracts that existed as at 1st April, 2018.

b) Standards issued but not yet effective

The Ministry of Corporate Affairs ("MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, 2019 has notified the following new and amendments to existing standards. These amendments are effective for annual periods beginning from 1st April, 2019. The Company will adopt these new standards and amendments to existing standards once it become effective and are applicable to it.

Ind AS 116 - Leases

Ind AS 116 'Leases' replaces existing lease accounting guidance i.e. Ind AS 17 Leases. It sets out principles for the recognition, measurement, presentation and disclosure of leases and requires lessee to account for all leases, except short-term leases and leases for low-value items, under a single on-balance sheet lease accounting model. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The accounting from Lessor perspective largely remain unchanged from the existing standard - i.e. lessor will continue to classify the leases as finance or operating leases.

Amendments to existing Ind AS:

The MCA has carried amendments to the following existing standards which will be effective from 1st April, 2019. The Company is not expecting any significant impact in the financial statements from these amendments. The quantitative impacts would be finalized based on a detailed assessment which has been initiated to identify the key impacts along with evaluation of appropriate transition options.

1. Ind AS 12 - Income Taxes

2. Ind AS 19 - Employee Benefits

8. OTHER DISCLOSURES

a) The information on Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding as at the Balance Sheet date, has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

b) In the opinion of the Management and to the best of their knowledge and belief, the classification under the head of Current and Non-Current Assets (other than Property, Plant and Equipment and Non-Current Investments), are approximately of the value stated, if realized in the ordinary course of business, except unless stated otherwise. The provision for all the known liabilities is adequate and not in excess of amount considered reasonably necessary.

c) Item of expenditure in Statement of Profit & Loss includes reimbursement to and by the Company, as agreed upon between group Companies.

d) The Company has constructed building and facilities for processing and distribution of natural gas on plots allotted on long term lease by Ahmadabad Municipal Corporation and has paid rent accordingly.

e) An amount of Rs,6.87 Crores (P.Y. Rs,6.87 Crores) is standing as CENVAT credit receivable being the difference between the amount of CENVAT credit availed in the books of account on Input, Capital Goods and Input Services and the credit claimed under statutory returns. Out of this, the Company has made application to the Excise & Service Tax department for availing this credit of '6.87 Crores in statutory returns.

The Fixed Assets/ Expenses of the Company is understated to the extent of the CENVAT credit taken by the Company and the same will be charged to respective assets / revenue if, the claim of the Company for CENVAT credit is not accepted by the department.

f) Security Deposit include amount of Rs,2.09 Crore and interest due thereon of Rs,1.97 Crore are outstanding for a substantial period of time. The Company has been actively negotiating for recovery, periodic confirmation of balances are taken and the management is reasonably confident of recovery against the same.

8 Details of Loans given, Investments made and Guarantee given or security provided covered u/s 186 (4) of the Companies Act, 2013 are given under respective heads (refer notes 5 and 42).

9 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

The Company evaluates events and transactions that occur subsequent to the balance sheet date but prior to approval of the financial statements to determine the necessity for recognition and/or reporting of any of these events and transactions in the financial statements. As of 27th May, 2019, there are no subsequent events to be recognized or reported that are not already disclosed

10 The Board of Directors at its meeting held on 27th May, 2019 have recommended the payment of final dividend of Rs,0.25 per equity share of the face valye of Rs,1 each for the financial year 2018-19. This proposed dividend is subject to approval of shareholders in the ensuing annual general meeting.

11 APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved for issue by the board of directors on 27th May, 2019.

12 PREVIOUS YEAR COMPARATIVES

Previous year's figures have been recast, regrouped and rearranged, wherever necessary to bring conformity to this year's classification. Further the figures have been rounded off to the nearest rupee in crores up to two decimals.

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