y. Provisions, Contingent Liabilities and Contingent Assets
The Company recognizes a provision, when there is a present legal or constructive obligation as a result of past events,
the settlement of which is likely to result in an outflow of resources and a reliable estimate can be made of the amount of
obligation.
Contingent Liabilities are disclosed by way of a note to the financial statements after careful evaluation by the Company
of the facts and legal aspects of the matters involved.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made. Provisions are reviewed at each Balance sheet date and adjusted to reflect the
current best estimate.
2. Critical Judgments, Estimates and Assumptions
The preparation of financial statements requires the Company to make estimates, assumptions and judgments that affect the
reported balances of assets and liabilities and disclosures as at the date of the financial statements and the reported amounts
of income and expenses for the period presented.
The estimates and the associated assumptions are based on historical experience and the other factors that are considered to
be relevant. Actual results may differ from the estimates under different assumptions and conditions.
Estimates and the underlying assumptions are reviewed on an ongoing basis. Impact on account of revisions to accounting
estimates are recognized in the period in which the estimates are revised and future periods are affected.
The estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and
liabilities within the next financial year are discussed below.
(i) Judgments:
In the process of applying the Company’s accounting policies, the Company has made the following judgments, which
have the most significant effect on the amounts recognized in the financial statements:
a. Segment Reporting
Ind AS 108 - Operating Segments, requires the Company to determine the reportable segments for the purpose of
disclosure in financial statements, based on the internal reporting reviewed by the Board of Directors, to assess the
performance and allocate resources. The standard also requires the Company to make judgments with respect to
aggregation of certain operating segments into one or more reportable segments.
Operating segments, used to present segment information, are identified based on the internal reports used and are
reviewed to assess performance and allocate resources. The Company has determined that some of the segments exhibit
similar economic characteristics and meet other aggregation criteria and are accordingly aggregated into one primary
reportable segment i.e. ‘Speciality Chemicals.
b. Stores and Spares Inventories
The Company’s manufacturing process is continuous and highly technical, with a wide range of different types of plants
and machineries. The Company keeps stores and spares as a standby, to run the operations without any disruption.
Considering the wide range of stores and spares and long lead times for their procurement, and based on criticality
of the spares, the Company believes that their net realizable value would be more than their cost.
c. Income Taxes
The Company in making judgement for the resolution of the uncertainty over income tax treatments as per Appendix
C to Ind AS 12 ‘Income Taxes’, The Company has considered; (a) how it prepares its income tax filings and supports
tax treatments; or (b) how the entity expects the taxation authority to make its examination and resolve issues that
might arise from that examination. The Company determined, based on its tax compliance, that it is probable that its
tax treatments will be accepted by the taxation authorities. Thus, the said Appendix does not have a material impact
on the financial statements of the Company.
d. Contingent Liability Judgment
Note-35a describes claims against the Company not acknowledged as debt. It includes certain penalties and charges
payable to a Government agency, although as per the contracts, the Company, based on past experience, believes that
the penalties and charges are not certain, and, accordingly, are not considered as an obligation as at the Balance Sheet
date and are disclosed as Contingent Liabilities.
(ii) Estimates and Assumptions:
The Company based its assumptions and estimates on parameters available when the financial statements were prepared.
Existing circumstances and assumptions about future developments, however, may change due to market changes or
circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when
they occur.
a. Defined Benefit Plans (Gratuity Benefits)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial
valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in
the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to
the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive
to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject
to change is the discount rate. In determining the appropriate discount rate, the management considers the interest
rates of government bonds. The mortality rate is based on Indian Assured Lives Mortality 2012-14 (Urban). Those
mortality tables tend to change only at intervals in response to demographic changes. Future salary increases and
gratuity increases are based on expected future inflation rates.
Further details about gratuity obligations are given in Note 37a.
b. Fair Value Measurement of Financial Instruments
When the fair values of Financial Assets and Financial Liabilities recorded in the Balance Sheet cannot be measured
based on quoted prices in active markets, their fair value is measured using valuation techniques, including the
Discounted Cash Flow model. The inputs to these models are taken from observable markets where possible; but where
this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of
inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the
reported fair value of financial instruments. Please refer note 48 for further disclosures.
c. Useful Life of Property, Plant and Equipment and Others
The Company reviews the estimated useful lives and residual values of Property, Plant and Equipment (PPE) and
Intangible Assets as at the end of each reporting year. The factors, such as changes in the expected level of usage,
technological developments, units of production and product life cycle, could significantly impact the economic useful
lives and the residual values of assets. Consequently, future depreciation and amortization charge could be revised
and thereby could have an impact on the profit of the future years.
The useful life of a Catalyst is estimated from the date of its activation, which is considered as the date of from which
it is available for use as per IND AS 16 - Property Plant and Equipment.
d. Litigations
From time to time, the Company is subjected to legal proceedings, the ultimate outcome of each being always subject
to many uncertainties inherent in litigations. A provision is made when it is considered probable that payment will be
made and the amount of the loss can be reasonably estimated. Significant judgment is made when evaluating, among
other factors, the probability of unfavourable outcome and the ability to make a reasonable estimate of the amount of
potential loss. Litigation provisions are reviewed at each accounting year and revisions made for changes in facts and
circumstances.
e. Cash Flow Hedge Reserve
The Cash Flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in
fair value of designated portion of hedging instruments entered into for cash flow hedges. It will be reclassified to
the Statement of Profit and Loss only when the hedged transaction affects the profit or loss or included as a basis
adjustment to the non-financial hedged item.
f. Provision for Expected Credit Losses (ECL) of trade receivables
The Company uses a provision matrix to calculate ECL for trade receivables. The provision matrix is based on the
Company’s historical observed default rates which are negligible over the years. The Company calibrates the matrix
to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical
observed default rates are updated and changes in the forward-looking estimates are analysed.
The assessment of the correlation between historically observed default rates, forecast economic conditions and ECL is
a significant estimate. The amount of ECL is sensitive to changes in circumstances and of forecast economic conditions.
The Company’s historical credit loss experience and forecast of economic conditions may also not be representative of
customer’s actual default in the future. However, based on the information about the historical data, and the forecast
by the management, ECL on the Company’s trade receivables is considered as Nil.
g. Government Grant
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will
be received, and the Company will comply with all attached conditions.
In assessing the recognition of Government Grants, the Company is dependent upon the generation of future revenue
as per the condition specified in the Export Promotion Capital Goods (EPCG) license. Management considers projected
future income planning strategies in making this assessment. Based on the level of historical revenue and projections
for future revenue over the periods, in which the conditions are satisfied, the Management believes that the Company
will able to fulfil the conditions. The amount of Government Grant considered realizable could, however, be reduced
in the near term, if estimates of future export revenue during the subsequent period are reduced.
With respect to grants receivable from the government on account of capital expenditure incurred by the Company,
the Company is recognising such grants as deferred income and will be recognized as income on a systematic and
rational basis over the useful life / remaining useful life of the respective asset.
For calculation of grant pertaining to one of the plants, the company has estimated an annual increase of 5% Y-O-Y in
the revenue.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.
Level 2: The fair value of financial instruments that are not traded in an active market 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 determine fair value of an instrument are observable, the instrument is included in
Level2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in
level 3.
ii) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
The fair value of forward foreign exchange contracts is determined using forward exchange rates received from the bank
at the Balance Sheet date.
iii) Valuation process
The finance department of the Company includes a team that performs the valuations of assets and liabilities required for
financial reporting purposes, including level 3 fair values.
iv) Fair value of financial assets and liabilities measured at amortized cost
The carrying amounts of trade receivables, deposits, loans, cash and cash equivalents, other financial assets, trade payables,
borrowings and other financial liabilities are considered to be the same as their fair values, due to their short-term nature.
48.3 Financial Risk Management
Policies and Objectives
The Company, in the course of its business, is exposed to a variety of financial risks, viz. market risk, credit risk and liquidity
risk, which can adversely impact its financial performance. It is the Company’s endeavour to foresee the unpredictability
of financial markets and seek to minimize potential adverse effects on its financial performance. The Company has a risk
management policy that not only covers the foreign exchange risk but also other risks such as interest rate risk and credit risk
which are associated with financial assets and liabilities. The risk management policy of the Company is approved by its board
of directors. The risk management framework focuses on actively securing the Company’s short to medium term cash flows by
minimizing the exposure to financial markets.
Presented below is a description of our risks (market risk, credit risk and liquidity risk) together with a sensitivity analysis,
performed annually, of each of these risks, based on selected changes in market rates and prices. These analyses reflect the
management’s view of changes which are reasonably possible to occur over a one year period. In the event of crisis caused
due to external factors, the management assesses the recoverability of its assets, maturity of its liabilities to factor it in the
cash flow forecast to ensure that there is enough liquidity in the system through internal and external source of funds. These
forecasts and assumptions are reviewed by the board of directors.
Market risk
Market risk is the risk of any loss in future earnings, in realizable fair values or in future cash flows that may result from a
change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the
interest rates, foreign currency exchange rates, equity price fluctuations, liquidity and other market changes. Future specific
market movements cannot be normally predicted with reasonable accuracy.
The objective of market Risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return.
Foreign currency exchange rate risk:
The fluctuation in foreign currency exchange rates may have a potential impact on the Statement of Profit and Loss and Equity.
This arises from transactions entered into in foreign currency and assets/liabilities which are denominated in a currency other
than the functional currency of the Company.
A majority of the Company’s foreign currency transactions are denominated in US Dollars (USD). Other foreign currency
transactions entered into by the Company are in EURO. However, the size of these transactions is relatively small in comparison
to the US dollar transactions. Thus, the foreign currency sensitivity analysis has only been performed in relation to the US
Dollar (USD).
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. Further,
in accordance with its risk management policy, the Company hedges its risks to the extent of atleast 80% by using derivative
financial instruments. The use of these instruments facilitates the management of transactional exposures to exchange rate
fluctuations because the gains or losses incurred on the derivative instruments will offset, in whole or in part, losses or gains
on the underlying foreign currency exposure.
Financial instruments that are subject to concentration of credit risk, principally consist of Trade Receivables and Loans.
The Company continuously monitors defaults of customers and other counterparties and incorporates this information into
its credit risk controls. The Company’s policy is to deal only with creditworthy counterparties. The Company’s management
considers that all the Financial Assets are of good credit quality, including those that are past due.
A majority of the customers have been transacting with the Company over a long period of time and none of these customers’
balances have been written off or credit impaired at the reporting date.
In respect of receivables other than Trade Receivables, the Company’s exposure to any significant credit risk exposure to any
single counter party or any groups of counter parties having similar characteristics is considered to be negligible. The credit
risk for liquid funds and other short-term Financial Assets is considered negligible, since the counter parties are reputed banks
with high quality external credit ratings.
The derivatives contracts are entered into with reputed banks with high quality credit ratings.
The Company’s exposure to credit risk is limited to the carrying amount of Financial Assets recognized at the Balance Sheet
date.
The Company evaluates the concentration of risk with respect to trade receivable as low, as its customer are located in several
jurisdictions and industries and operate in a largely independent market.
The maximum exposure to credit risk for trade and other receivables by geographic region is as given below:
Expected Credit Loss Assessment
Based on the industry practices and the business environment in which the entity operates, management considers that the
trade receivables and loans are in default (credit impaired) if the payments are more than 365 days past due. However as per
the history of the Company, none of the customers fell in the aforesaid category during the year ending March 31st 2025 and
year ending March 31st 2024.
Liquidity risk
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management
is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.
The Company has obtained fund and non-fund based working capital lines from various banks. The Company invests its surplus
funds in bank fixed deposits which carry no mark to market risk.
The following tables detail the remaining contractual maturities at the end of the reporting period of the Company, which are
based on contractual and undiscounted cash flows and the earliest date the Company can be required to pay. The Company
manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The Company also monitors the level of expected cash inflows on trade and other receivables together with expected cash
outflows on trade and other payables.
This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Collateral
The Company has pledged part of its trade receivables, Inventories, Cash & Bank Balance and Current Assets in order to fulfil
certain collateral requirements for the banking facilities extended to the Company. There is obligation to return the securities
to the Company once these banking facilities are surrendered (Refer note 3.2)
49 The Company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or
section 560 of the Companies Act, 1956.
50 There is no income surrendered or disclosed as income during the current or previous year in the tax assesments under the
Income Tax Act, 1961, that has been recorded in the books of accounts.
51 The Company does not have any benami property, where any proceeding has been initiated or pending against the Company
for holding any benami property.
52 The Company does not have any transaction which is not recorded in the books of accounts that has been surrendered or
disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any
other relevant provisions of the Income Tax Act, 1961).
53 The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both
during the current or previous year.
54 The Company has not traded or invested in crypto currency or virtual currency during the current year or previous year.
55 The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities
(Intermediaries) with the understanding that the Intermediary shall:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the
company (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
56 The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the
understanding (whether recorded in writing or otherwise) that the Company shall:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the
Funding Party (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
57 The Company has borrowings from banks and financial institutions on the basis of security of current assets. The quarterly
returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the
books of accounts.
58 The Company has not been declared wilful defaulter by any bank or financial institution or government or any government
authority.
59 The Company has not entered into any scheme of arrangement which has an accounting impact on the current year or the
previous financial year.
60 Subsequent Event
The Company has received an eligibility certificate dated April 7, 2025 granting capital subsidy under scheme for capital
subsidy to large industries and thrust sector amounting to ' 468 Lakhs. In accordance with Ind AS 10, as the same constitutes
adjusting event occurring after the balance sheet date, the Company has given the necessary effect of the same in its Financial
Statements for the year ended March 31, 2025.
61 The Code on Social Security 2020 (‘Code’) has been notified in the Official Gazette on September 29, 2020, it has not yet become
effective as the related rules are yet to be notified. The Company will assess the impact and its evaluation once the subject
rules are notified and will give appropriate impact in its financial statements in the period in which the Code becomes effective
and the related rules to determine the financial impact are published.
62 The Company’s Financial Statements were approved and authorized for issue by its Board of Directors on May 9, 2025.
63 Previous year’s figures, wherever necessary, have been regrouped/ reclassified to conform to the current year’s presentation.
Figures in brackets, unless specified, represent previous year’s figures.
As per our Report of even date attached For and on behalf of the Board of Directors
For N. M. RAIJI & CO. YOGESH M. KOTHARI
Chartered Accountants Chairman and Managing Director
Firm Registration No. 108296W
VINAY D. BALSE KANCHAN A. SHINDE CHINTAMANI D. THATTE KIRAT M. PATEL
Partner Chief Financial Officer General Manager (Legal) Executive Director
Membership No. 039434 and Company Secretary
Place : Mumbai Place : Mumbai
Dated : May 9, 2025 Dated : May 9, 2025
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