CORPORATE OVERVIEW
Kothari Petrochemicals Limited (referred to as “KPL” or the “Company”) is the Manufacturer of Poly Iso Butylene. The registered office of the Company is situated at “Kothari Buildings”, No:115, Mahatma Gandhi Salai, Nungambakkam, Chennai - 600 034.
AUTHORIZATION OF FINANCIAL STATEMENTS
The Financial Statements for the year ended 31st March 2024 have been approved for issue by the Board of Directors of the Company on 16th May 2024 and are subject to adoption by the shareholders in the ensuing Annual General Meeting.
MATERIAL ACCOUNTING POLICIES
1. Statement of Compliance :
The financial statements have been prepared in accordance with the Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015.
2. Basis of preparation and presentation :
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Fair value is the price 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these financial statements is determined on such a basis, leasing transactions that are with in the scope of Ind AS 116, and measurements that have some similarities to fairvalue but are not fairvalue, such as net realizable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fairvalue measurements are Categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fairvalue measurements are observable and the significance of the inputs to the fairvalue measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
3. Revenue Recognition :
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
The Company considers indicators for assessing the transfer of control, including :
(a) the entity has a present right to payment for the asset.
(b) the customer has legal title to the asset.
(c) the entity has transferred physical possession of the asset.
(d) the customer has the significant risks and re-wards of ownership of the asset.
(e) the customer has accepted the asset.
Dividend, interest and other income
• Dividend income from investments is recognized when the right to receive payment has been established.
• Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate applicable in line with the effective interest rate method.
• Operating Lease rental income is accounted on straight line basis over the term of the relevant lease.
• Insurance claims are accounted on the basis of claims admitted and to the extent that there is no uncertainty in receiving the claims.
• Export benefits are accounted in the year of exports based on eligibility and when there is no uncertainty in receiving the same.
4. Leases :
Where the company has lessee, Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee or the lease meets other criteria as laid down Ind AS 116. All other leases are classified as operating leases.
In the case of operating leases, Ind AS 116 requires lessees to determine the lease term as the noncancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. Lease term exceeding 12 months are considered under Ind AS 116. Lease rentals having lease term within 12 months are charged or recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
5. Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time the assets are ready for their intended use or sale. Interest income earned on the temporary investments of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in the Statement of Profit and Loss in the period in which they are incurred. Borrowing costs are not included in the value of inventories.
6. Employee Benefits :
(a) Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carriedout at the end of each reporting period. Defined benefit costs are categorized as follows:
• Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
• Net interest expense or income; and
• Re-measurement.
The Company presents the first two components of defined benefit costs in Statement of Profit and Loss in the line item ‘Employee benefits expense’.
Past service cost is recognized in Statement of Profit and Loss in the period of a plan amendment.
Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognized in other comprehensive income in the period in which they occur. Re-measurement recognized in Other Comprehensive Income is reflected immediately in Retained Earnings and is not reclassified to Statement of Profit and Loss.
(b) Short-term and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries in the period the related service is rendered. Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange forthe related service.
7. Earnings per Share :
The Company presents basic and diluted earnings per share (EPS) data for its equity shares.
Basic EPS is calculated by dividing the Profit or Loss attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
Diluted EPS is determined by adjusting the Profit or Loss attributable to equity shareholders and the weighted average number of equity shares outstanding for the effects of all dilutive potential equity shares.
8. Taxation :
Income tax expense represents the sum of the tax currently payable and deferred tax.
Minimum Alternative Tax (“MAT”) credit is recognized as an asset only when and to the extent there is reasonable certainty that the Company will pay normal income tax during the specified period.
(a) Current tax
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income tax Act, 1961 and other applicable tax laws.
(b) Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
(c) Current and deferred tax for the year
Current and deferred tax are recognized in Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.
9. Property, Plant and Equipment :
All Property, Plant and Equipment are measured at cost, less accumulated depreciation and impairment losses, if any.
The cost of asset includes the purchase cost including import duties and non-refundable taxes, and any costs that are directly attributable of bringing an asset to the location and condition of its intended use.
The carrying amount of the replaced parts are derecognized. All other repairs and maintenance costs are recognized in Statement of Profit and Loss as incurred.
Subsequent expenditure related to an item of Property, Plant and Equipment is added to it carrying value only when economic benefits are expected to accrue for a period beyond one year.
Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013
|
Estimated useful lives of the assets are as follows:
|
|
Particulars of Asset
|
Estimated useful lives
|
|
Freehold Land
|
Infinite
|
|
Building
|
3-60 years
|
|
Plant & Equipment
|
5-40 years
|
|
Furniture & Fixtures
|
10 years
|
|
Office Equipment & Computers
|
3-5 years
|
|
Vehicles
|
8 years
|
Assets costing '5,000 and below are depreciated in the year of acquisition.
Assets on leased premises are depreciated on the remaining period of lease or as per the useful life prescribed in Schedule II of the Companies Act, 2013, whichever is earlier.
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value not more than 5% of Cost.
For certain items of plant and machinery, the useful life adopted is based on internal technical evaluation and best represents the period over which the Company expects to use these assets.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Gains / Losses arising on the disposal or retirement of an item of Property, Plant and Equipment are determined as the difference between the sales proceeds or net realizable value and the carrying amount of the asset and is recognized in Statement of Profit and Loss.
The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and impairment is recognized, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value-in-use.Value-in-use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.
When there is indication that an impairment loss recognized for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss.
10. Investment Property :
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost including transactions costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation over useful life of 60 years and impairment losses , if any. Though, the Company measures investment property using cost-based measurement, the fair value of investment property is disclosed in Notes.Fair values are determined based on an annual evaluation performed by a Chartered Engineer.
11. Intangible Assets :
Intangible assets with finite useful lives that are acquired separately are carried at cost, less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Software and licenses are amortized over useful life of not exceeding 5 years.
12. Inventories :
Inventories are stated at the lower of cost and net realizable value. Net realizable value represents the estimated selling price for inventories, less all estimated costs of completion and costs necessary to make the sale.
Cost of inventory comprises of purchase price, cost of conversion and other directly attributable costs that have been incurred in bringing the inventories to their respective present location and condition. The cost of inventories is computed on weighted average basis. Inventories are written down on a case-by-case basis if the anticipated net realizable value declines below the carrying amount of the inventories in the Statement of Profit and Loss.
13. Provisions, contingent liabilities and contingent assets :
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.
Provisions (excluding retirement benefits) are not discounted to their present value except in the cases where time value of money is not material and are determined based on the best estimate required to settle the obligation at the balance sheet date and are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent liabilities in relation to claims against the Company, includes legal, contractual and claims arising from custom. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events. Contingent liabilities are disclosed in the notes. Contingent assets are not recognized in the financial statements.
14. Financial instruments :
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in Statement of Profit and Loss.
15. Financial assets:
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.
All recognized financial assets are subsequently measured in their entirety at amortized cost or fair value, depending on the classification of the financial assets.
(a) Classification offinancial assets
Debt instruments (including Trade receivables, Loans and Other Financial Assets) that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):
• the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
• the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are subsequently measured at fair value.
(b) Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate,transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income or Expense is recognized on an effective interest basis for debt instruments other than those financial liabilities classified as at FVTPL. Interest income or expense is recognized in Statement of Profit and Loss.
(c) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been significant increase in credit risk.
For trade receivables, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected credit losses to be recognized from initial recognition of the receivables.
(d) Derecognition offinancial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire.or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
(e) Derivative financial instruments
The Company uses forward contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss.
16. Financial liabilities :
Borrowings, trade payables and other financial liabilities are initially recognized at the value of the respective contractual obligations.
They are subsequently measured at amortised cost using effective interest method. Any discount or premium on settlement is recognized in the Statement of Profit and Loss as finance cost over the life of the liability using the effective interest method and adjusted to the liability figure disclosed in the Balance Sheet. De recognition offinancial liabilities The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or have expired.
17. Cashflowstatement
Cash flows are reported using the indirect method, where by profit / (loss) before exceptional items and tax is adjusted for the effects of transactions of noncash nature and any deferrals or accruals of past or future cash receipts or payments. The company considers all liquid investments, which are readily convertible into known amounts of cash, that are subject to an insignificant risk of change in value to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal or usage except fixed deposit with original maturity more than 3 months.
18. Functional and presentation currency and Foreign Currency Transactions
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which these entity operate (i.e. the “functional currency”). The financial statements are presented in Indian Rupee, the national currency of India, which is the functional currency of the Company.
In preparing the financial statements of the Company, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of
the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.
Exchange differences on monetary items are recognized in Statement of Profit and Loss in the period in which they arise.
19. Key estimates and assumptions
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Key assumption concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as given below.
(i) Useful life of property, plant, equipment and Investment property & Intangibles Periods.
(ii) Provision for income taxes and deferred taxes.
(iii) Provisions for Defined benefit plan.
Fair value measurement and valuation processes: Some of the Company's assets and liabilities are measured atfairvalue for financial reporting purposes. In estimating the fairvalue of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engages third-party qualified valuers to perform the valuation.
20. Operating Cycle
Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
|