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Balrampur Chini Mills Ltd.

Notes to Accounts

NSE: BALRAMCHINEQ BSE: 500038ISIN: INE119A01028INDUSTRY: Sugar

BSE   Rs 361.60   Open: 361.80   Today's Range 358.95
364.05
 
NSE
Rs 361.95
-0.20 ( -0.06 %)
-0.25 ( -0.07 %) Prev Close: 361.85 52 Week Range 343.45
485.80
You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 7302.31 Cr. P/BV 2.52 Book Value (Rs.) 143.52
52 Week High/Low (Rs.) 486/344 FV/ML 1/1 P/E(X) 25.70
Bookclosure 20/11/2023 EPS (Rs.) 14.09 Div Yield (%) 0.69
Year End :2023-03 

The Company has only one class of equity shares. The Company declares and pays dividend in Indian rupees. The holders of equity shares are entitled to receive dividend as declared from time to time and are entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential dues. The distribution will be in proportion to the number of equity shares held by the shareholders.

i) Capital reserve comprise of reserve arising consequent to business combination in earlier years, in accordance with applicable accounting standard and in terms of the relevant schemes sanctioned by the Court.

ii) Capital redemption reserve has been created consequent to redemption of preference share and buy-back of equity shares. This reserve shall be utilised in accordance with the provisions of the Act.

iii) The general reserve represents amount transferred out of the profits of the Company and reserve aggregating to H4224.23 Lakhs (Previous year: H4224.23 Lakhs) arising consequent to business combination in earlier years, in accordance with applicable accounting standard and in terms of the relevant schemes sanctioned by the Court. It is not earmarked for any specific purpose.

iv) The storage fund for molasses has been created to meet the cost of construction of molasses storage tank as required under Uttar Pradesh Sheera Niyantran (Sansodhan) Adesh, 1974. During the year ended 31st March, 2023, H33.44 Lakhs was utilised from the fund and credited to the Statement of Profit and Loss. The said storage fund is represented by investment in the form of fixed deposits with banks amounting to H140.80 Lakhs (Previous year: H104.68 Lakhs),

v) Retained earnings represents the undistributed profit/ amount of accumulated earnings of the Company.

vi) Other comprehensive income (OCI) represents the balance related to re-measurement gains and losses resulting from experience adjustments and changes in actuarial assumptions. These gains and losses are recognised directly in OCI during the period in which they occur and are subsequently transferred to Retained earnings.

a) Nature of securities for the aforesaid borrowings including current maturities of long term debt [Refer note

no. 18(ii)] and deferred income [Refer note no. 21]:

i) Senior, Unlisted, Rated, Redeemable, Non-convertible Debentures subscribed by debenture holder amounting to H14000.00 Lakhs (Previous year: H Nil) is secured by first exclusive charge, by way of hypothecation of movable fixed assets (PPE), both present and future, pertaining to two sugar units of the Company viz. Balrampur and Babhnan.

ii) Rupee Term Loan from HDFC amounting to H13600.00 Lakhs (Previous year: H Nil) under the Scheme for Extending Financial Assistance to project proponents for enhancement of ethanol capacity, is secured by pari passu first charge, by way of hypothecation of all the movable fixed assets (PPE), both present and future, pertaining to Balrampur distillery unit of the Company.

iii) Rupee Term Loan from HDFC amounting to H3510.50 Lakhs (Previous year: H5516.50 Lakhs) under the Scheme for Extending Financial Assistance to Sugar Mills for enhancement and augmentation of ethanol capacity, is secured by pari passu first charge, by way of hypothecation of all the movable fixed assets (PPE), both present and future, pertaining to Gularia distillery unit of the Company.

iv) Rupee Term Loan from ICICI amounting to H2500.00 Lakhs (Previous year: H3750.00 Lakhs) under the Scheme for Extending Financial Assistance to Sugar Mills for enhancement and augmentation of ethanol capacity, is secured by pari passu first charge, by way of hypothecation of all the movable fixed assets (PPE), both present and future, pertaining to Gularia distillery unit of the Company.

v) Rupee Term Loan from SBI amounting to H19000.00 Lakhs (Previous year: H Nil) under the Scheme for Extending Financial Assistance to project proponents for enhancement of ethanol capacity, is secured by first charge, by way of hypothecation of all the movable fixed assets (PPE), both present and future, pertaining to Maizapur distillery unit of the Company.

vi) Rupee Term Loan from ICICI (Acting as an agent on behalf of Government of Uttar Pradesh) amounting to H8807.36 Lakhs (Previous year: H16428.65 Lakhs) under the Scheme for Extending Financial Assistance to Sugar Undertakings, 2018, of Uttar Pradesh Government is secured by pari passu first charge, by way of hypothecation of movable fixed assets (PPE), both present and future, pertaining to seven cogen units of the Company viz. Balrampur, Babhnan, Haidergarh, Akbarpur, Mankapur, Kumbhi and Gularia.

Nature of securities :

Working capital loans from banks (viz: SBI, HDFC, ICICI and KOTAK) are secured by way of hypothecation of entire stock of sugar, sugar in process, mill stores, bagasse, molasses and other current assets including book debts, both present and future, of all the ten sugar units of the Company on pari passu basis with each of them.

The ultimate realisation of deferred tax assets, carried forward tax losses/unabsorbed depreciation and unused tax credits is dependent upon the generation of future taxable income. Deferred tax assets including MAT credit entitlement is recognised on management's assessment of reasonable certainty for reversal/ utilisation thereof against future taxable income.

Based on the assessment of the possible impact of the new tax regime, the Company has decided to continue with existing normal tax structure till certain deductions are available and accumulated Minimum Alternate Tax (MAT) credit is substantially exhausted and thereafter, to opt for the concessional rate under new tax regime.

1. Contingent liabilities and commitments (to the extent not provided for)

(a) Contingent liabilities :

(H in Lakhs)

Sl.

No.

Particulars

As at

31st March, 2023

As at

31st March, 2022

(i)

Claims against the Company not acknowledged as debts :

- Sales tax and entry tax (including interest and other claims) -under appeal/litigation

51.46

92.69

- Others - under appeal/ litigation

154.00

151.48

205.46

244.17

(ii)

Claims for acquisition of 1.99 acres of land for the Distillery unit at Balrampur and compensation there against is under dispute as the matter is subjudice

Amount

not ascertainable

Amount

not ascertainable

Ý The amounts shown in (i) above represent the best possible estimates arrived at, on the basis of available information. The uncertainties and timing of the cash flows are dependent on the outcome of different legal processes which have been invoked by the Company or the claimants, as the case may be and, therefore, cannot be estimated accurately. The Company does not expect any reimbursement in respect of above contingent liabilities.

In the opinion of the management, no provision is considered necessary for the disputes mentioned above on the ground that there are fair chances of successful outcome of the appeals/ litigations.

Ý Refer note no. 36(3) (b) for availment of remission of taxes and levies pending final decision with the Hon'ble Supreme Court on the matter.

(b) Commitments :

Estimated amount of contracts remaining to be executed on capital account and not provided for

(H in Lakhs)

Sl.

Particulars

As at

As at

No.

31st March, 2023

31st March, 2022

(i)

Estimated amount of contracts remaining to be executed on capital account and not provided for

9098.39

50019.88

(ii)

Advance paid against above

828.87

8295.99

It is not possible to estimate the timing/ uncertainties relating to utilisation/ reversal of the provision for contingencies. Future cash outflow in respect of the above is determinable only upon Court decision/ out of Court settlement/ disposal of appeals. The Company does not expect any reimbursement in respect of above provision.

(b) Contingent assets

During the normal course of business, several unresolved claims are currently outstanding. The inflow of economic benefits, in respect of such claims cannot be measured due to uncertainties that surround the related events and circumstances. Also Refer note no. 36(3)(a) and 36(3)(c) in this respect.

3(a) The Hon'ble High Court at Allahabad, Lucknow Bench, vide its order dated 12th February, 2019 ("Order") had quashed the G.O. dated 4th June, 2007, vide which the Sugar Industry Promotion Policy 2004 ("SIPP") was withdrawn, and held that the petitioner companies were entitled to all the benefits for the entire period of the validity of SIPP Consequent to this, the Company in respect of its capital projects and expansions during the period from 2004 to 2008 is entitled to the capital subsidy, reimbursement of certain expenses, remission of certain taxes and levies under the provision of the said policy.

The State Government of Uttar Pradesh and others have filed Special Leave Petitions challenging the said Order before the Hon'ble Supreme Court of India and the cases are pending for hearing as on 31st March, 2023. Pending this, the Company's claim for reimbursement of H33654.94 Lakhs (Previous year: H33654.94 Lakhs ) and capital subsidy of H13137.77 Lakhs (Previous year: H13137.77 Lakhs) pursuant to SIPP being contingent in nature, has not been recognised.

(b) I n terms of SIPP, the Company availed remission of taxes and levies, namely, Entry Tax on Sugar, Trade Tax on Molasses and Cane Purchase Tax, Stamp duty and registration charges on purchase of land aggregating to H11278.45 Lakhs in earlier years. These remissions were availed pursuant to protection earlier provided by the Hon'ble High Court at Allahabad, which has been confirmed pursuant to the Order of the said court as given in Note No. 36(3)(a) above.

In the assessment of Entry Tax on Sugar and Trade Tax on Molasses relating to four sugar units, namely, Akbarpur, Mankapur, Kumbhi and Gularia aggregating to H6300.63 Lakhs has been assessed, though these units are also eligible for the remission under the SIPP. However, no demand has been raised and pursued against the Company in view of the protection by the Hon'ble High Court as aforesaid. Since these units are eligible for incentive under SIPP and no demand has yet been raised against the Company, the aforesaid amount of H6300.63 Lakhs has not been considered as contingent liability.

(c) Uttar Pradesh Electricity Regulatory Commission vide notification dated 25th July, 2019 reduced the power purchase rates of bagasse-based power plants w.e.f. 1st April, 2019 and revenue in this respect has accordingly been recognised at such reduced rates. The Uttar Pradesh Cogen Association has filed a writ petition, challenging the reduction in power rates before Hon'ble High Court at Allahabad which has been admitted. Next hearing date is yet to be announced.

(d) Uttar Pradesh Excise Authorities had imposed payment of H20/- per quintal on molasses transferred, sold, or supplied for captive consumption with effect from 24th December 2021 as "Regulatory Fee" under amended Section 8(4) of Uttar Pradesh Sheera Niyantran Adhiniyam, 1964.

The Uttar Pradesh Sugar Mills Association and Others have filed a writ petition against the aforesaid levy before Lucknow Bench of Hon'ble Allahabad High Court. The said Court vide its Interim Order dated 25th February 2022, have deferred the realisation thereof pending final decision on the matter. Next hearing date is yet to be announced.

Up to 31st March, 2022, the Company deposited H449.44 Lakhs " under protest" which was clubbed and shown with "Duties and taxes paid under protest"" under Note No. 9, Other non-current assets.

During the year ended 31st March, 2023, the Company has continued to deposit the amount under protest, however, decided to expense out the Regulatory Fees to the Statement of Profit and Loss, including H449.44 Lakhs deposited in previous year.

4 (a)At its meeting on 9th November, 2022, the Board of Directors approved a buy-back of equity shares not exceeding H14544.00 Lakhs ("Maximum Buyback Size"), (excluding transaction costs and tax on buy-back), at a price not exceeding H360/- per equity share ("Maximum Buyback Price").

At the Maximum Buyback Price and Maximum Buyback Size, the indicative maximum number of equity shares to be bought back was 4040000 equity shares (Maximum Buyback Shares), representing approximately 1.98% of the paid-up share capital of the Company as of 31st March, 2022. The buy-back was offered to all eligible equity shareholders of the Company (excluding the Promoters, the Promoter Group, and Persons in Control of the Company) under the open market route through the stock exchanges. The buy-back of equity shares began on 16th November, 2022.

During the year ended 31st March, 2023, the Company bought-back and extinguished a total of 2290755 equity shares at a volume-weighted average price of H357.31 per equity share, aggregating to H8185.14 Lakhs, (excluding transaction costs and tax on buy-back), comprising approximately 1.12% of the pre-buyback paid-up equity share capital of the Company.

Consequently, the equity share capital has been reduced by H22.91 Lakhs, and an amount equivalent to the face value of equity shares bought back has been transferred from Retained earnings to Capital redemption reserve. The differential amount of H8162.23 Lakhs with respect to the aggregate consideration in excess of the face value of the equity shares bought back has been adjusted from Retained Earnings. Further, various costs aggregating to H74.31 Lakhs (net of tax of H39.92 Lakhs), incurred for the same and the taxation on buy-back amounting to H1893.47 Lakhs, have also been adjusted from Retained earnings.

As of 31st March, 2023, out of the funds set aside and earmarked for above buy-back, the balance amount remain invested in mutual funds of H6125.06 Lakhs and fixed deposits of H363.60 Lakhs. No shares have additionally been bought back during the period from 1st April, 2023 to 10th May, 2023. The Company's offer for buy-back, as scheduled, is open till 15th May, 2023.

4(b) The shareholders have approved the "BCML Employees Stock Appreciation Rights Plan 2023" ("ESAR 2023"/ "Plan") through Postal Ballot on 23rd April, 2023. Under the Plan, the Company would grant Employees Stock Appreciation Rights ("ESAR") to such employees who are in permanent employment of the Company within the meaning of the Plan, including any director, whether whole-time or otherwise (other than promoters of the Company, or member of the promoter group, independent directors and directors holding directly or indirectly more than 10% of the outstanding equity shares of the Company), entitling the employees eligible for ESAR to receive in aggregate not more than 4000000 equity shares of face value of t 1/- each, based on such eligibility criteria and terms and conditions as may be decided by the Nomination & Remuneration Committee of the Board of Directors.

5. Based on the information/documents available with the Company, information as per the requirement of section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 with respect to trade payables and payable to suppliers of capital goods are as follows:

(i) The total export entitlement utilized and physical export done through merchant exporter by the Company during the year ended 31st March, 2022 aggregated to 121270 MT against the quota allocated for the sugar season 202021. The financial assistance earned against such exports @ H6000 per MT amounting to H7276.20 Lakhs was clubbed with export incentive and assistance.

(ii) Notification No. S.O. 3523 (E) dated 19th July, 2018 and subsequent notifications issued from time to time issued by the Central Government for "extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity" with a view to increase production of ethanol and its supply under Ethanol Blended with Petrol (EBP) Programme, and thereby to improve the liquidity position of the sugar mills enabling them to clear cane price arrears of the farmers for which interest subvention @ 6% p.a. or 50% of rate of interest charged by banks (whichever is lower) would be borne by the Central Government for a tenure of 5 years from the date of disbursement of the loan.

Under the said scheme, HDFC Bank and ICICI Bank disbursed rupee loan aggregating to H8024.00 Lakhs and H5000.00 Lakhs respectively, during the year ended 31st March, 2020 which was utilised for setting up of 160 KLPD distillery at Gularia unit.

Further, State Bank of India disbursed Rupee Loans aggregating to H19000.00 Lakhs (H3000.00 Lakhs is yet to be disbursed by the bank), and HDFC Bank disbursed Rupee Loan of H13600.00 Lakhs during the year ended 31st March 2023, which was utilized for setting up a new distillery of 320 KLPD distillery at Maizapur unit and expansion of the distillery unit at Balrampur with an additional capacity of 170 KLPD, respectively.

Accordingly, H954.47 Lakhs (Previous Year: H416.37 Lakhs) has been adjusted with interest on long-term borrowings for the year ended 31st March 2023. Further, a sum of H216.59 Lakhs (Previous Year: H Nil) has been adjusted with interest on long-term borrowings capitalized.

(iii) The Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) Plan Scheme was designed to incentivise employers for generation of new employment, where Government of India paid 8.33% Employee Pension Scheme contribution of the employer for the new employment. Accordingly H Nil (Previous Year: H0.32 Lakhs) have been deducted from

Contribution to provident, gratuity and other funds under Employee benefits expense, for the year ended 31st March, 2023.

(iv) The Government of Uttar Pradesh vide its Order No. - 12/2018/1698 / 46-3-18-3 (36-A) / 2018 dated 28th September, 2018 notified a scheme for assistance to sugar mills under the Scheme for Extending Financial Assistance to Sugar Undertakings - 2018 of Uttar Pradesh Government, for the purpose of clearance of sugarcane price for sugar season 2016-17 and 2017-18 as per the State Advised Price of sugarcane fixed by the State Government.

Under the said scheme, during the year ended 31st March 2019, the State Government extended Rupee term loan to the Company through ICICI Bank @ 5% p.a. interest for a period of 5 years aggregating to H36508.11 Lakhs which was utilised for clearance of sugarcane price for sugar season 2017-18 as per the scheme.

Pursuant to the requirements of Ind AS 20 - "Accounting for Government Grants and Disclosure of Government Assistance" and Ind AS 109 - "Financial Instruments", H4051.19 Lakhs was accounted for during the year ended 31st March, 2019 and included under Note No. 21 - "Deferred income" .

Accordingly, proportionate income amounting to H495.13 Lakhs and H750.15 Lakhs has been adjusted with interest on long term borrowings for the year ended 31st March, 2023 and 31st March, 2022 respectively.

9. Employee benefits :

As per Ind AS - 19 " Employee Benefits", the disclosures of Employee Benefits are as follows:

Gratuity

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the said Act, an employee who has completed five years of continuance service is entitled to the gratuity. The gratuity plan provides a lumpsum payment to employees at retirement, death, incapacitation or termination of employment. The level of benefits depends on the member's length of service and salary at the time of cessation of the employment contract with the Company.

The fund is in the form of a trust and is governed by the Board of Trustees who are responsible for its administration. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy. Each year, the Board of Trustees reviews the asset-liability matching strategy, investment risk management policy. The Board of Trustees decides its contribution based on the results of this annual review.

The Company contributes ascertained liabilities towards gratuity to trust.

(c) Risks related to defined benefit plans:

The main risks to which the Company is exposed in relation to operating defined benefit plans are :

(i) Interest rate risk :

The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.

(ii) Salary inflation risk :

Higher than expected increases in salary will increase the defined benefit obligation.

(iii) Demographic risk :

This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.

(d) Asset - liability management and funding arrangements

The trustees are responsible for determining the investment strategy of plan assets. The overall investment policy and strategy for Company's funded defined benefit plan is guided by the objective of achieving an investment return which, together with the contribution paid is sufficient to maintain reasonable control over various funding risks of the plan.

(e) Other disclosures :

The gratuity and provident fund expenses have been recognised under " Contribution to provident, gratuity and other funds" and Leave encashment clubbed with " Salaries and wages" under Note No. 30 - Employee benefits expense.

11. Revenue

The details of performance obligations in terms of Ind AS 115 - Revenue from contracts with customers are as follows:

(i) Sugar

The Sugar segment of the Company principally generates revenue from the sale of sugar, its by-products, and co-generated power to distribution companies.

Domestic sales of sugar are made on ex-factory terms or agreed terms to wholesale, institutional buyers, or merchant exporters within the country and revenue is recognized when the goods have been shipped or delivered to the buyer's specific location (as per agreed terms). Domestic sugar sales are mainly done on advance payment terms.

Export sales of sugar to merchant exporters are done on ex-factory or delivered basis in terms of the agreement, and revenue is recognized when the goods have been shipped or delivered to the buyer's specific location (as per agreed terms). The sale price and payment terms are fixed as per contracted terms.

Revenue from co-generated power is recognised on power supplies to distribution companies from the Company's facilities in accordance with the sale price, payment terms, and other conditions as per the Power Purchase Agreements ("PPA").

Bagasse and pressmud are generally sold on advance payment terms to customers on an ex-factory basis as per the agreement, and revenue is recognized when the goods have been shipped to the buyer.

(ii) Distillery

The distillery segment of the Company principally generates revenue from the sale of industrial alcohol, which mainly constitutes ethanol sold under contracts with Public and Private Oil Marketing Companies ("OMCs") and other products to institutional buyers, and co-generated power to distribution companies.

Ethanol is sold on a delivered basis as per the agreement, and revenue is recognized when the goods have been delivered to the Public and Private OMC's locations (as per agreed terms), inclusive of all duties, levies, taxes, charges, etc. The sale price is determined based on the Expression of Interest ("EOI") or Tender floated in case of Public OMCs and on agreement in case of Private OMCs. The payment terms in the case of Public and Private OMCs are within 30 days and 15 days respectively after the delivery of the material and submission of original invoices.

Other products like Rectified Spirit, Extra Neutral Alcohol (ENA), Dry Ice, etc., are sold in bulk to institutional buyers on an ex-factory basis as per agreed terms. Revenue is recognized when goods have been shipped to the buyer's specific location as per agreed terms. The payment terms are fixed as per the Company's credit policy, which is up to 45 days.

Revenue from co-generated power is recognised on power supplies to distribution companies from the Company's facilities in accordance with the sale price, payment terms, and other conditions as per the Power Purchase Agreements ("PPA").

(iii) Others

The Other segment principally generates revenue from the sale of agricultural fertilizers such as soil conditioner, granulated potash, etc.

Sale of agricultural fertilizers are done on an ex-factory or delivered basis in terms of the agreement, and revenue is recognized when the goods have been shipped or delivered to the buyer's specific location (as per agreed terms). The sale price and payment terms are fixed as per contracted terms and the Company's credit policy, which is up to 60 days.

12. Segment information

(a) The Chairman and Managing Director has been identified as the Company's Chief Operating Decision Maker (CODM) in terms of Ind AS 108 - "Operating Segments". The CODM evaluates the Company's performance and allocates resources based on an analysis of various performance indicators by Business segments. The CODM of the Company evaluates the segments based on their revenue growth, operating income and return on capital employed.

In addition, revenue and expenses have been allocated to a segment based on the segment's operating activities. Revenue and expenses which relate to enterprise as a whole and are not allocable to a segment on reasonable basis have been disclosed as "Unallocable". Segment assets and segment liabilities represent assets and liabilities of respective segment. Investments, tax related assets/ liabilities and other assets and liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as " Unallocable".

(i) Inter-segment revenues are eliminated upon consolidation and reflected in the 'adjustments/eliminations' column. Finance income and costs, and fair value gains and losses on financial assets are not allocated to individual segments as the underlying instruments are managed at Company level. Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to the segments as they are also managed at Company level.

(ii) Transactions between segments are primarily transferred at cost/ transaction price based on current estimated market prices. Common costs are apportioned on reasonable basis.

(iii) Figures in bracket pertains to previous year.

(e) Information about major customers:

Revenues from one customer of the Company's Sugar segment was H52945.56 Lakhs representing approximately 11.35% of the Company's total revenues for the year ended 31 March 2023.

No single customer contributed 10% or more of the total revenue of the Company for the year ended 31st March, 2022.

13. Disclosure under Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

The Company has neither given any loan nor has advanced any amount either during the year ended 31st March, 2023 or 31st March, 2022. Hence, the requirements under the said Schedule is not applicable to the Company and no information is required to be disclosed.

14. During the year ended 31st March 2022, the Company sold its entire shareholding of 45.00% in its Associate Company viz. Visual Percept Solar Projects Pvt. Ltd. ("VPSPPL") consisting of 7852500 equity shares of H10/- each at an agreed consideration of H7317.71 Lakhs. Accordingly, VPSPPL ceased to be an Associate of the Company w.e.f. 15th February, 2022.

The resultant gain on sale of aforesaid investment aggregating to H5273.75 Lakhs, net of transaction costs amounting to H80.83 Lakhs was recognised and shown as "Exceptional items" during the year ended 31st March 2022.

15. The Board of Directors of the Company at its meeting held on 15th September, 2017 considered and approved cumulative investment of H17500.00 Lakhs in tranches over a period of five years in Auxilo Finserve Private Limited ("AFPL"), an unlisted NBFC based in India and engaged in financing activities in education sector.

The Company has so far acquired 165292000 (Previous Year: 155000000) Equity shares of AFPL having face value H10/- each with total cost of H17499.64 Lakhs (Previous Year: H15750.00 Lakhs) on preferential issue basis constituting 43.93% (Previous Year: 44.36%) as at 31st March, 2023.

B. Fair value hierarchy

The fair value of the financial assets, financial liabilities are included at an amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Fair value of trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents, other current financial assets, short term borrowings from banks and financial institutions, trade and other payables, and other current financial liabilities approximate their carrying amounts due to the short-term maturities of these instruments.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The following table presents the fair value hierarchy of assets measured at fair value on a recurring basis as at 31st March 2023:

17. Financial risk management objectives and policies

The Company's principal financial liabilities includes borrowings, lease liabilities, trade payables, other payables and other financial liabilities. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include investments, trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents and other financial assets that derive mainly from its operations.

The Company is exposed to credit risk, liquidity risk and market risk. The Company's senior management under the supervision of the Board of Directors oversees the management of these risks. The Company's financial risks are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company's policies and risk objectives. It is the Company's policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised as below:

(a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other risks, such as regulatory risk and commodity price risk. Financial instruments affected by market risk include borrowings and investments.

(i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's borrowings obligations.

Sugar is produced over a period of 5 to 6 months and is required to be stored for sale over a period of 12 months, thereby resulting in very high requirement of working capital. Cost of funding depends on the overall fiscal environment in the country as well as the Company's credit worthiness /credit ratings. Failure to maintain credit rating can adversely affect the cost of funds.

17. Financial risk management objectives and policies (contd.)

To mitigate the interest rate risk, the Company maintains an impeccable track record and ensures long term relation with the lenders to raise adequate funds at competitive rates. Company has access to low cost borrowings because of its healthy Balance Sheet. Moreover, Company deals with four banks thereby reducing the risk significantly. In addition, steady revenue from distillery business reduces the overall requirements of working capital.

As at 31st March 2023, the Company has outstanding non-current borrowings, aggregating to H61705.12 Lakhs (Previous Year: H25695.15 Lakhs). Of these, non-current borrowings of H52578.10 Lakhs (Previous Year: H9266.50 Lakhs) are linked to variable interest rates and among them, non-current borrowings of H38610.51 Lakhs(Previous Year: H9266.50 Lakhs) are covered under interest subvention scheme [For details of the Company's long-term and short-term loans and borrowings, including interest rate profiles, Refer note no. 18(i), 18(ii) and footnote (ii) to note no. 36(8)].

Thus, 50 bps increase / decrease in the interest rate will not have a material impact in the Statement of Profit and Loss.

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. To mitigate foreign exchange risk, the Company covers its position through permitted hedging methods. There was no foreign currency exposure as at 31st March, 2023 and 31st March, 2022.

(iii) Commodity price risk

The major segment in which the Company operates, which accounts for around 75% of the Company's total revenue, is Sugar and as such the Company is exposed to commodity price risk.

The Government announces domestic sales quotas on a monthly basis. Moreover, there are not many active platforms in India that allow hedging of domestic sugar sales. Additionally, the Central Government had announced a Minimum Sale Price (MSP) for the sale of sugar in the open market by every sugar mill. Currently set at H31/- per kilogram, this MSP acts as a minimum floor price for the sale of sugar by the sugar mills in India.

Normally, the Company does not physically export sugar. However, the Company has a policy in place to hedge the underlying exposure associated with exports.

The pricing methodology for ethanol remained unchanged. Ethanol prices (excluding ethanol produced from grains) are announced by the Central Government which are based on Fair and Remunerative Price (FRP) of sugarcane, cost of production of sugar and realisation of by-products.

Price of Ethanol produced from grains are announced annually by the Oil Marketing Companies ("OMC").

(iv) Other price risk:

The Board of Directors reviews and approves equity investment decisions. Company's equity risk exposure is limited to cost and these are subject to impairment testing as per the policies followed in this respect. Accordingly, other price risk is not expected to be material.

(b) Credit risk

Credit risk is the risk that the counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including borrowings from banks and financial institutions. The Company's sugar sales are mostly on cash. Co-generated Power is sold to government entities and ethanol is sold under contracts to Public and Private Oil Marketing Companies ("OMCs"). The Company keeps a close watch on the realisation of the outstanding amounts and has not experienced any significant default.

The Company uses judgment in making the assumptions and selecting the inputs for assessing the impairment calculation, based on the Company's past history, existing market conditions, and future estimates at the end of each balance sheet date. Impairment allowance against financial assets is created and subsequently written off when there is no reasonable expectation of recovery. However, the Company continues to recover the receivables. Where recoveries are made, these are recognised in the Standalone Statement of Profit and Loss.

(i) Trade receivables

Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing; Refer note no. 36(11) for credit terms.

An impairment analysis is performed at each balance sheet date on an individual basis for major customers. Large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The maximum exposure to credit risk at the balance sheet date is the carrying value of each financial assets class disclosed under note no. 12.

(ii) Balances with banks

Credit risk for balances with banks is managed in accordance with the Company's policy.

The Company's maximum exposure to credit risk for the components of the Standalone balance sheet as at 31st March, 2023 and 31st March, 2022 is the carrying amounts as stated under note no. 13 and 14 and fixed deposits with banks included under note no. 7(i).

(c) Liquidity risk

The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company's objective is to meet the funding requirement and maintain flexibility in this respect through the use of cash credit facilities, short term loans and commercial papers.

18. Capital Management

(a) Risk management

For the purpose of the Company's capital management, capital includes issued equity capital, and all other equity reserves attributable to the Company's equity shareholders. The Company's objective while managing capital is to safeguard its ability to continue as a going concern and continue to provide returns to shareholders and other stakeholders.

The Company manages its capital structure and makes adjustments in light of changes in the financial condition and the financial covenants' requirements and return of capital to shareholders.

To achieve this overall objective, the Company's capital management, amongst other things, also aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings. The Company has complied with these covenants. There have been no breaches in the financial covenants of any interest-bearing loans and borrowings.

No changes were made in the objectives, policies or processes for managing capital during the year ended 31st March, 2023 and 31st March, 2022.

The Company monitors capital using debt-equity ratio, which is total long-term debt divided by total equity.

(ii) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(iii) For working capital facilities, the Company has submitted Stock statement to banks on monthly basis.

Differences are primarily due to the variation in valuation methodology of inventory for sugar. For Stock Statements submitted to banks, sugar inventory have been valued in terms of sanction letters, whereas in books such inventory are carried at lower of cost or net realisable value as per the accounting policy of the Company.

20. The previous year's figures have been regrouped and rearranged wherever necessary to make them comparable with those of the current year's figures.

 
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