(u) Provisions, contingent liabilities and contingent assets
Provisions are recognised at present value when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the Statement of Profit and Loss net off reimbursement, if any.
Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part of the cost of PPE. The cash flows are discounted at a current pre-tax rate that reflects the risk specific to the decommissioning liability. The unwinding of discount is expensed as incurred and recognised in the Statement of Profit and Loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as may be appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.
Progressive mine closure expenses are accounted for as and when incurred.
In respect of lignite mines the annual mine closure cost per hectare is provided as per the mine closure guidelines issued by the Ministry of Coal from time to time. As per these guidelines, such annual cost is modified with reference to Wholesale Price Index (WPI) as mentioned and considered in the mine closure plan submitted / approved for the respective mines. The mine closure provisions are provided in line with the approved / submitted / prepared / draft mine closure plans. In case the mine closure plan has
not been submitted / approved / prepared the annual cost is estimated based on the above referred guidelines.
In respect of mines other than lignite mines, mine closure activities are carried out as per the approved / submitted / prepared / draft mine closure plans. However, in the absence of specific guidelines by Indian Bureau of Mines (IBM) for making provision for the annual mine closure cost per hectare, financial assurance in the form of Bank Guarantee of requisite amount is submitted to IBM. A certificate/confirmation is obtained from our technical division for mine closure activities carried out by the company either departmentally or through outside agencies. Expenses incurred departmentally on mine closure activities are debited to the respective head of expenses of head of expenses and expenses and provision is made for material shortfall therein, if advised by the technical division.
Contingent liabilities are not provided for, If material, are disclosed by way of notes to accounts. Contingent assets are not recognised in the Standalone Financial Statements. However, the same is disclosed, where an inflow of economic benefit is probable.
(v) Cash and Cash Equivalents
Cash and cash equivalents comprise cash and short-term deposits. The Company considers all highly liquid investments with an original maturity of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash on hand, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Balance Sheet.
(w) Statement of Cash Flow
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
(x) Dividends
The Company recognises a liability for dividends to equity holders of the Company when the dividend is authorised, and the dividend is no longer at the discretion of the Company. As per the corporate laws in India, dividend is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
(y) Segment Reporting
The Chief Operational Decision Maker (CODM) monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the Standalone Financial Statements. Operating segments are reported in a manner consistent with the internal reporting provided to the CODM.
Accordingly, the Board of Directors of the company is CODM for the purpose of segment reporting.
(z) Rounding off
All amounts disclosed in the Standalone Financial Statements and notes have been rounded off to the nearest lakh up to two decimal points as per the requirements of Schedule III, unless otherwise stated.
(aa) Events occurring after the Balance Sheet Date.
Adjusting events (that provides evidence of condition that existed at the Balance Sheet date) occurring after the Balance Sheet date are recognised in the Standalone Financial Statements. Material non adjusting events (that are inductive of conditions that arose subsequent to the Balance Sheet date) occurring after the Balance Sheet date that represent material change and commitments affecting the financial position are disclosed in the Board’s Report. Material non adjusting events (that are inductive of conditions that arose subsequent to the Balance Sheet date) occurring after the Balance Sheet date that represent material change and commitments affecting the financial position are disclosed in the Board’s Report.
(bb)Exceptional Items
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the Standalone Financial Statements.
2.39 EVENTS OCCURRING AFTER THE REPORTING PERIOD
The Board has recommended dividend of ' 9.55 per share which is subject to approval of shareholders in the ensuing general meeting.
2.40 In the opinion of Management, any of the assets other than items of property, plant and equipment, investment properties, intangible assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated, unless otherwise stated.
2.41 Balances of trade payables, trade receivables, loans & advances, advances from customers, other non-current / current liabilities, etc. are subject to confirmation and adjustments, if any, in the accounts.
2.42 On periodical basis and as and when required, the company reviews the carrying amounts of its assets.
During the year 2020-21, the company had booked an impairment loss of ' 39,659.49 lakh for Akrimota Thermal Power Station (ATPS). Considering the Plant Load Factor (PLF) of only around 27% , 38% and 22% in the year 2021-22, 2022-23 and 2023-24 respectively as against around 20 % in the year 2020-21, review for possible reversal of impairment in ATPS has not been considered in the current year. However, such review for possible reversal of impairment will be considered after perusal of the financial implication of Power Purchase Agreement (PPA) between the company and GUVNL which is still under approval of Gujarat Electricity Regulatory Commission (GERC).
2.43 SEGMENT INFORMATION
(a) Description of segment and principal activities
The Chief Operational Decision Maker (CODM) monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment, and accordingly, the Company has identified two reportable operating segments viz. Mining and Power. Operating segments have been identified and reported in a manner consistent with the internal reporting provided to the CODM.
(b) Segment revenue and expenses
Revenue and expenses have been identified to a segment on the basis of relationship to operating of the segment. Revenue and expenses which relate to enterprise as a whole and are not allocable to a segment on a reasonable basis have been disclosed as "Unallocated".
(c) Segment assets and liabilities
Segment assets and segment liabilities represent assets and liabilities in respective segments. Investments, tax-related assets and other assets and liabilities that cannot be allocated to a segment on a reasonable basis have been disclosed as "Unallocated".
(d) Secondary segment reporting
The Company does not have geographical distribution of revenue as the operations of the Company are carried out within the country and hence secondary segmental reporting based on geographical locations of its customers is not applicable to the Company.
(e) Information about major customers
Revenue from power segment (which exceeds 10% of total segment revenue) amounting to ' 24,833.03 lakh (2022-23: ' 34,288.09 lakh) is derived from a single customer and revenue from mining segment (which exceeds 10% of total segment revenue) amounting to ' 15,124.68 lakh (2022-23: ' 27,069.63 lakh) is derived from a single customer.
2.44.05 OTHER TRANSACTIONS WITH GOVERNMENT RELATED ENTITIES
Apart from the above transactions, the Company has also entered into other transactions in the ordinary course of business with Government related entities. These are transacted at arm's-length prices based on the agreed contractual terms.
2.44.06 Further, the Company has entered into various long-term material supply and Power Purchase Agreements with the related parties (including Government related entities) where goods/services are to be provided at prices determined based on the contractual terms agreed. Some of the contracts are in the process of being finalised pending the necessary approvals.
Types of inputs are as under:
Input Level I (Directly Observable) which includes quoted prices in active markets for identical assets such as quoted price for an equity security on Security Exchanges.
Input Level II (Indirectly Observable) which includes prices in active markets for similar assets such as quoted price for similar assets in active markets, valuation multiple derived from prices in observed transactions involving similar businesses etc.
Input Level III (Unobservable) which includes management's own assumptions for arriving at a fair value such as projected cash flows used to value a business etc.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
As per the accounting policy of the company on Equity Instruments, all equity instruments in the scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as at Fair Value Through Profit or Loss (FVTPL). For all other equity instruments, the company has the option to make an irrevocable election on initial recognition, on an instrument-by-instrument basis, to present changes in fair value through Other Comprehensive Income(OCI) rather than through profit or loss. The option to present changes in Fair Value Through Other Comprehensive Income (FVTOCI) is available only at the time of initial recognition. Accordingly, the company has elected to measure its equity instruments through FVTOCI.
B. Measurement of fair values
i) Valuation techniques and significant unobservable inputs
The following are the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used. Financial instruments measured at fair value FVTOCI in unquoted equity shares:
Gujarat State Petroleum Corporation Limited
1. Market approach: This approach uses information generated by market transactions of the Company being valued or the transactions of comparable companies. The following market-linked information may be used for determining valuation under this approach.
- Quoted price of the company being valued,
- Past transaction value of the company being valued,
- Listed comparable companies' trading multiples like price to earning ratio, enterprise value to earning before interest, tax, depreciation and amortisation, enterprise value to sales etc.
- Transactions multiples for investment / M & A transaction of comparable companies.
The valuation arrived at based on the market approach reflects the current value of the Company perceived in the active market. However, as the valuation arrived at using market multiples is based on the past/current transaction or traded values of comparable companies / businesses, it may not reflect the possible changes in future trend of cash flows being generated by a business.
2. Income Approach: The income approach reflects present value of future cash flows. For valuing a business, the discounted cash flow (DCF) methodology is used under this approach. This methodology works on the premise that the value of a business is measured in terms of future cash flow streams, discounted to the present time at an appropriate discount rate. This method is used to determine the present value of business on a going concern assumption. The DCF technique recognises the time value of money.
The value of the Arm is arrived at by estimating the Free Cash Flow to Firm (FCFF) and discounting the same at the Weighted Average Cost of Capital (WACC). FCFF is estimated by forecasting free cash flows available to the Arm (which are derived on the basis of the likely future earnings of the company).
3. Cost Approach: The cost approach essentially estimates the cost of replacing the tangible assets of the business. The replacement cost takes into account the market value of various assets or the expenditure required to create the infrastructure exactly similar to that of a company being valued.
Significant unobservable inputs
Highest priority is given to unadjusted quoted price of listed entities and lowest priority to non-market linked inputs such as future cash flows used in income approach.
Inter-relationship between significant unobservable inputs and fair value measurement
The estimated fair value would increase (decrease) if there is a change in significant unobservable inputs used in determination of fair value.
Considering the diverse asset and investment base of the Company with differing risk/return profiles, a sum of the parts approach has been adopted for the valuation. Under this method, the value of each distinct business/asset/investment has been arrived at separately and total value estimate for the Company presented as the sum of all its business/assets/investments.
Gujarat Guardian Limited
Fair value is determined using the ratio of enterprise value to EBIDTA adjusted for the industry average. The industry average has been computed using peer companies. Further, in the absence of latest valuation report of Gujarat Guardian Limited, the fair value is determined based on valuation report as on 31st December, 2023. Once the latest valuation report is available, appropriate changes would be made in the subsequent periods.
Gujarat Industrial And Technical Consultancy Organisation Limited (GITCO) and Gujarat Informatics Limited
In absence of sufficient information for determination of fair value, the Company has determined the same using net worth as reflected in the financial statements as at the each reporting date. Management is of the view that the value so determined are reflective of the fair values.
Further, in the absence of the audited financial statements of GITCO and Gujarat Informatics Limited, the fair value is determined based on unaudited financial statements for the year ended 31st March, 2024 and 31st March, 2022 respectively. Once the audited financials are available, appropriate changes would be made in the subsequent periods.
ii) Transfers between Levels 1 and 2
There have been no transfers between Level 1 and Level 2 during the reporting periods.
iii) Level 3 fair values
Movements in the values of unquoted equity instruments for the period ended 31st March, 2024 and 31st March, 2023:
Sensitivity analysis - Investments in unquoted equity instruments
On account of lack of sufficient information as at the end of reporting period and nature of investments, the management is of the view that it is impracticable to determine the sensitivity of the fair values to changes in the underlying assumptions.
C. Financial risk management
The Company has exposure to the following risks arising from financial instruments:
• Credit risk ;
• Liquidity risk ; and
• Market risk
Risk management framework
The Company has a well-defined risk management framework. The Board of Directors of the Company has adopted a Risk Management Policy. The Company has also set up a Risk Management Committee.
Looking to the profile of the Company, i.e., Mining and Power Operations, the Company has inbuilt risk management practices to address various operational risks. The Company has standard operating processes for various mining operations in order to mitigate procedures and prevent risk arising out of various operations. The Company has no external borrowings. Hence, there is no financial risk that can impact the Company’s Financial Position. The Company primarily deals with natural resources. Hence, policy of the Government may impact the Company’s operational strategy. The Company’s risk management process revolves around following parameters:
1. Risk Identification and Impact Assessment
2. Risk Evaluation
3. Risk Reporting and Disclosure
4. Risk Mitigation (i) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers.
Other financial assets
The Company maintains its Cash and cash equivalents and Bank deposits with banks having good reputation, good past track record and high quality credit rating and also reviews their credit-worthiness on an on-going basis.
Trade and other receivables
Trade receivables of the Company are typically unsecured, except to the extent of advance received against sales for sale of lignite. Credit risk is managed through credit approvals and periodic monitoring of the creditworthiness of customers to which Company
(iii) Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments.
Currency risk
The functional currency of the Company is Indian Rupees.
The Company do not use derivative financial instruments for trading or speculative purposes. As the Company does not engage in foreign exchange transaction, it is not exposed to currency risk.
Interest rate risk
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates. The Company does not have any undrawn or outstanding borrowings and hence does not possess any interest rate risk.
Price Risk
The Company's exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through other comprehensive income (FVTOCI). Some of the equity investments are publicly traded and are included in the NSE Nifty 50 Index.
Sensitivity
The table below summarises the impact of increases/decreases of the index on the Company's equity and other comprehensive income for the period. The analysis is based on the assumption that the index had increased by 20% or decreased by 20% with all other variables held constant, and that the Company's quoted equity instruments moved in line with the index. The % have been determined considering average of the actual movements in quoted prices of equity shares held as investments as at 31st March, 2024.
2.46 CAPITAL MANAGEMENT
The Company's objectives when managing capital are to:
- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
- maintain an optimal capital structure to reduce the cost of capital.
The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘adjusted equity’. For this purpose, adjusted net debt is defined as total non-current liabilities, less cash and bank balances. Adjusted equity comprises all components of equity.
The Company’s adjusted net debt to adjusted equity ratio at 31st March, 2024 and 31st March, 2023 was as follows.
(b) During the year, the company has redrafted the accounting policies for the sake of proper disclosure and better understanding:
(i) In the accounting policy for ‘Intangible Assets’, it is redrafted that it is measured at cost including all directly attributable cost (net of recoverable taxes, if any). It is also stated that cost of mining leases include all directly attributable costs post acquiring mineral rights and same are capitalised as per consistent policy followed by the company.
It is further modified that it includes directly attributable Rehabilitation and Resettlement (R&R) costs as well as fair value of future fixed R&R obligations which company incurs as part of mining land acquisition and directly attributable to the acquisition of the mining rights. Once the asset is ready for its intended use, R&R expenses incurred are charged to profit or loss in the year in which they are incurred.
However, the above redrafting/modification has not resulted in any change in profit or loss and/or asset or liability.
(ii) The accounting policy for ‘Trade receivables’ is redrafted. It is mentioned that in case where trade receivables do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115. For the sake of proper disclosure of recognition of trade receivables, the redrafting in policy has been made.
However, the above redrafting has not resulted in any change in profit or loss and/or asset or liability.
(c) During the year, the company has increased the materiality threshold from ' 0.5 lakh to ' 1 lakh and ' 5 lakh in each case of prepaid items and prior period items respectively. Further the change would amount to change in Accounting Estimate.
(d) With effect from 1st April, 2023, Ministry of Corporate Affairs has made amendments to Ind AS 1, providing guidance to help entities meet the accounting policy disclosure requirements. Accordingly, the existing accounting policies have been reviewed and necessary changes have been proposed therein aa stated above. Further, the heading of ‘Significant Accounting Policies’ has been changed to ‘Material Accounting Policies’.
2.50 RECENT PRONOUNCEMENTS
The Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. During the year ended 31st March, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
As per our report of even date attached For and on behalf of the Board of Directors,
For Dhirubhai Shah & Co LLP Anupma Iyer Roopwant Singh, IAS
Chartered Accountants General Manager (Accounts) & Managing Director
FRN: 102511W/W100298 Chief Financial Officer DIN: 06717937
CA Parth S. Dadawala Joel Evans SB- Dangayach
Part Company Secretary Director
.. .. DIN - 01572754
M. No. 134475
Place: Ahmedabad Place: Ahmedabad
Date: 27th May, 2024 Date: 27th May, 2024
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