xxiii) Provisions
A provision is recognized when the Company has a present obligation (legal or constructive) as a result of 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 of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
In case of seeds division, the Company makes an estimation of probable sales return out of the sales booked during the financial year, considering the terms and condition of the sale and past tendency of such sales return. A provision is made for loss on account of such estimated sales return which is approximate to the amount of profit originally booked on such sale.
xxiv) Segment Reporting Policies
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. Chief Operating Decision Maker review the performance of the Company according to the nature of products manufactured, traded and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the locations of customers.
Segment accounting policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting standalone financial statements of the Company as a whole.
.B. Significant accounting judgements, estimates and assumptions
The preparation of the Company's standalone financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, the accompanying disclosures and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
a) Determining the lease term of contracts with renewal and termination options- Company as lessee
The Company determines the lease term as the non-
cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).
b) Defined benefit plans
The cost of the defined benefit gratuity plan, postemployment medical benefits and other defined benefit plans and the present value of the obligation of defined benefit plans 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 for defined benefit plans, the management considers the interest rates of government bonds.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases are based on the expected future inflation rates. Further details about the defined benefit obligations are given in Note 35.
c) 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 DCF model. The inputs to these models are taken from observable markets wherever possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements 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. Refer Note 40 for further disclosures.
d) Provision for expected credit losses of trade receivables
The Company uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by geography, product type, customer type and coverage by deposits or others instruments).
The provision matrix is initially based on the Company's historical observed default rates. The Company will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults in the manufacturing sector, the historical default rates are adjusted. 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 historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs 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. The information about the ECLs on the Company's trade receivables is disclosed in Note 41.
e) Useful life of Property, plant and equipment
The management estimates the useful life and residual value of property, plant and equipment based on technical evaluation. These assumptions are reviewed at each reporting date.
f) Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm's length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow (DCF) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill recognised by the Company.
g) Revenue from contracts with customers
The Company applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers:
Determining method to estimate variable consideration and assessing the constraint
Certain contracts for the sale of goods include a right of return and volume rebates that give rise to variable consideration. In estimating the variable consideration, the Company is required to use either the expected value method or the most likely amount method based on which method better predicts the amount of consideration to which it will be entitled.
The Company determined that the expected value method is the appropriate method to use in estimating the variable consideration for the sale of goods with rights of return, given the large number of customer contracts that have similar characteristics. In estimating the variable consideration for the sale of goods with volume rebates, the Company determined that using a combination of the most likely amount method and expected value method is appropriate. The selected method that better predicts the amount of variable consideration was primarily driven by the number of volume thresholds contained in the contract. The most likely amount method is used for those contracts with a single volume threshold, while the expected value method is used for contracts with more than one volume threshold.
Before including any amount of variable consideration in the transaction price, the Company considers whether the amount of variable consideration is constrained. The Company determined that the estimates of variable consideration are not constrained based on its historical experience, business forecast and the current economic conditions. In addition, the uncertainty on the variable consideration will be resolved within a short time frame.
Estimating variable consideration for returns and volume rebates
The Company estimates variable considerations to be included in the transaction price for the sale of goods with rights of return and volume rebates.
The Company developed a statistical model for forecasting sales returns. The model used the historical return data of each product to come up with expected
return percentages. These percentages are applied to determine the expected value of the variable consideration. Any significant changes in experience as compared to historical return pattern will impact the expected return percentages estimated by the Company.
The Company's expected volume rebates are analysed on a per customer basis for contracts that are subject to a single volume threshold. Determining whether a customer will be likely entitled to rebate will depend on the customer's historical rebates entitlement and accumulated purchases to date.
The Company applied a statistical model for estimating expected volume rebates for contracts with more than one volume threshold. The model uses the historical purchasing patterns and rebates entitlement of customers to determine the expected rebate percentages and the expected value of the variable consideration. Any significant changes in experience as compared to historical purchasing patterns and rebate entitlements of customers will impact the expected rebate percentages estimated by the Company.
The Company updates its assessment of expected returns and volume rebates quarterly and the refund liabilities are adjusted accordingly. Estimates of expected returns and volume rebates are sensitive to changes in circumstances and the Company's past experience regarding returns and rebate entitlements may not be representative of customers' actual returns and rebate entitlements in the future.
h) Taxes
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
i) Leases - Estimating the incremental borrowing rate
The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company 'would have to pay', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR
using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.
2.C. Standards issued but not yet effective
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 March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
(a) The Board of Directors of the Company at its meeting held on March 31, 2023 has approved the liquidation and winding up of Adventz Trading DMCC ('DMCC'), a wholly owned subsidiary of the Company subject to the approval of Reserve Bank of India and other Regulatory Authorities as DMCC was not conducting any business since May, 2021. Further, the Company does not envisage any viable business in the near future as well. The Board of DMCC at its meeting held on March 31, 2023 has also approved the liquidation and winding up of DMCC.To give effect to the above, the Company has created an impairment provision of 100% of carrying value of its investment in the subsidiary
(b) During the year March 31, 2023, Zuari Farmhub Limited (ZFL), a subsidiary of the Company had applied for a scheme of capital reduction of ZFL under Section 66 of the Companies Act, 2013 for reduction of ZFL's issued, subscribed and paid-up capital from INR 785,57,00,000 consisting of 78,55,70,000 equity shares of INR 10 each to INR 86,60,26,000 consisting of 8,66,02,600 equity shares of INR 10 each by cancellation and extinguishment of 69,89,67,400 equity shares of INR 10 each held by the Company in ZFL by writing off/adjustment of negative balance in the capital reserve account of ZFL in accordance with the terms of the scheme of capital reduction, subject to the approval of National Company Law Tribunal ("NCLT") and such other approvals.
NCLT, Mumbai Bench, vide its order dated 4th May, 2023, has approved the Scheme of capital reduction of ZFL ("Scheme"), under Section 66 of the Companies Act, 2013 and the Scheme has become effective from the appointed date i.e.1st July, 2022.
Pursuant to Sanction of scheme by NCLT, 69,89,67,400 equity shares held by the Company in ZFL are cancelled w.e.f 1st July, 2022.
To give effect to the capital reduction, ZFL has cancelled and extinguished in their books such no of shares held by ZACL. Accordingly, the Company has reduced its carrying value of investment in ZFL by INR 69,896.74 lakhs and impairment loss arising on the same has been disclosed under exceptional items in profit and loss statement.
(c) 3,34,75,907 (31 March 2023: 4,58,94,217) number of shares of Mangalore Chemicals and Fertilisers Limited are pledged as security for long term loan taken from bank (Refer Note 13)
(d) Following the impairment testing principles of Ind AS 36 "Impairment of Assets", the Company has assessed the recoverable amount of the investment in the subsidiaries i.e. Mangalore Chemicals and Fertiliser Limited. The recoverable amount is higher of fair value less cost to sale and value in use. The investment made by the Company in the subsidiaries are strategic investments and the Company has control over the subsidiary companies. Basis of the Stock price of the MCFL as at 31 March 2024, there is no indication of impairment i.e the current investment value is higher than the purchase value. Accordingly third party valuation has not been obtained.
(e) The management has assessed fair value of the investment in unquoted share of Indian Potash Limited based on valuation report of an independent valuer. For details of method and assumptions used for the valuation refer Note 39.
(f) Investments at fair value through OCI (fully paid) reflect investment in quoted and unquoted equity securities. These equity shares are designated as fair value through other comprehensive income (FVTOCI) as they are not held for trading purpose. Thus, disclosing their fair value fluctuation in profit and loss will not reflect the purpose of holding. The Company has not transferred any gain or loss within equity in the current or previous period. Refer Note 39 for determination of their fair values.
Assets pledged as security for borrowings: Refer Note 13 for information on loans pledged as security against borrowing.
Nature and purpose of reserves Business Restructuring Reserve
In the Finance Year 2012-13, pursuant to the Scheme of Arrangement and Demerger ("The Scheme") between Zuari Industries Limited (Formely Zuari Global Limited) and Zuari Holdings Limited (now known as Zuari Agro Chemicals Limited, the Company) approved by the Hon'ble High Court of Bombay at Goa, on 2 March 2012, all the assets and liabilities pertaining to Fertiliser Undertaking as on 1 July 2011 of Zuari Industries Limited (Formely Zuari Global Limited) had been transferred to the Company at their book values and accordingly the surplus of assets over the liabilities of the Fertiliser undertaking so demerged, resulted in creation of Business Restructuring Reserve of INR 65,404.84 lakhs in terms of the Order of the Hon'ble High Court of Bombay at Goa which was filed with the Registrar of Company on 21 March 2012. The said reserve be treated as free reserve and be restricted and not utilized for declaration of dividend by the Company.
General Reserve
Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013.
Surplus / (deficit) in the statement of profit and loss
Surplus / (deficit) in the statement of profit and loss represents the profits / (losses) generated by the Company that are not distributed to the shareholder and are re-invested in the Company.
Equity instruments through Other Comprehensive Income
The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
1 (a). Indian rupee loan of INR Nil lakhs from a financial institution (31 March 2023: INR 1,536.60 lakhs) carries interest rate of ranging
from 8.38%-10.65% p.a. (31 March 2023: 8.38%-10.65%). The loan is repayable in 12 equal quarterly instalments starting from May 2020 with the last instalment being paid on May 2023. The loan was secured by first pari passu charge by way of equitable mortgage of specific immovable assets of the Company with a minimum fixed asset cover of 1.25 times (unencumbered land parcel at Goa), pledge of shares of its subsidiary, Mangalore Chemicals and Fertilisers Limited ("MCFL"), with a minimum share security cover of 1.00 time.
1 (b). Indian rupee term loan from a financial institution of INR 7463.41 lakhs (including current maturities of INR Nil)carries interest
rate of 12% p.a (31 March 2023: INR Nil lakhs (including current maturities of INR Nil lakhs ) carries interest rate of 12.00% p.a. The loan is repayable on December 2026. The loan is secured by exclusive charge over land (including structures) with minimum cover of 1.2 times and pledge of shares of its subsidiary, Mangalore Chemicals and Fertilisers Limited ("MCFL"), with a minimum share security cover of 1.10 times.
2 (a). Non-Convertible Debentures of INR Nil Lakhs (including current maturities of INR Nil lakhs) [31 March 2023: INR 12,500 (including
current maturity of INR 12,500)] carries coupon rate of 11.50% p.a. are secured by exclusive charge by way of mortgage of specific immovable assets of the Company with a minimum value of assets to be INR 5,000 Lakhs (unencumbered land parcel at Goa), pledge of shares of its subsidiary, Mangalore Chemicals and Fertilisers Limited ("MCFL"), with a minimum share security cover of 2.00 time. The debentures were redeemed in full during the financial year 2023-24.
2 (b). Non-Convertible Debentures of INR 4,898.63 Lakhs (including current maturities of INR Nil lakhs) [31 March 2023: INR Nil lakhs
(including current maturity of INR Nil lakhs)] carries coupon rate of 11.65% p.a. are secured by pledge of shares of its subsidiary, Mangalore Chemicals and Fertilisers Limited ("MCFL"), with a minimum share security cover of 2.00 time. The debentures are redeemable in October 2025.
3. Inter-corporate deposit of INR 1,000.00 lakhs (31 March 2023: INR 39,350.00 lakhs) carries interest rate of 15.00% (31 March 2023: 15.00% p.a). The loan is repayable after 12 months from the date of disbursement.
The Company has not filed any quarterly returns or statement of current assets with banks or financial institutions as there is no working capital loan availed during the period.
a) Gratuity
Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement/termination/resignation. The Gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member's length of service and salary at retirement/termination/resignation. The Gratuity plan for the Company is a defined benefit scheme where annual contributions as demanded by the insurer are deposited to a Gratuity Trust Fund established to provide gratuity benefits. The Trust has taken an insurance policy, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/liability in the books of account on the basis of actuarial valuation carried out by an independent actuary.
b) Provident Fund
As per Ind-AS 19, Employee Benefits, provident funds setup by employers, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan. Actuarial valuation of Provident Fund was carried out in accordance with the guidance note issued by Actuary Society of India.
38. Segment Information
Information regarding primary segment reporting as per Ind AS-108
The Company is engaged in the business of manufacturing, trading and marketing of chemical fertilizers and fertilizer products which according to the management, is considered as the only business segment.
Accordingly, no separate segmental information has been provided herein.
Geographical segments
The Company operates in India and therefore caters to the needs of the domestic market. Therefore, there is only one geographical segment and hence, geographical segment information is not required to be disclosed.
Revenue from single customer i.e. subsidy income from Government of India amounted to INR 2,934.92 lakhs (31 March 2023 : INR 27,412.64 lakhs) arising from sales in the fertilizers segment, including discontinued operations of INR Nil (31 March 2023 : INR 20,662.36 lakhs (Refer Note 31)).
39. Fair Values#
Set out below, is a comparison by class of the carrying amounts and fair value of the Company's financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:
interest rates are linked to benchmark rates (Marginal Cost of Lending Rates/ Prime Lending Rates) of respective lenders. These benchmark rates are determined based on cost of funds of the lenders, as well as, market rates. The benchmark rates are periodically revised by the lenders to reflect prevalent market conditions. Accordingly, effective cost of debt for Borrowings at any point of time is in line with the prevalent market rates. Due to these reasons, management is of the opinion that they can achieve refinancing, if required, at similar cost of debt, as current effective interest rates. Hence, the discounting rate for calculating the fair value of Borrowings has been taken in line with the current cost of debt.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
The following methods and assumptions were used to estimate the fair values:
(i) Security deposits / Employee loans - The fair value of security deposits / employee loans approximates the carrying value and hence, the valuation technique and inputs have not been given.
(ii) The fair values of the unquoted equity shares have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management's estimate of fair value for these unquoted equity investments.
(iii) The fair values of the remaining FVTOCI financial assets are derived from quoted market prices in active markets.
41. Financial risk management objectives and policies #
The Company's principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds investments and enters into derivative transactions. The Company is exposed to market risk, credit risk and liquidity risk. The Company's senior management oversees the management of these risks. The Company's risk management is carried out by a treasury department under policies approved by the Board of directors of the Company. The treasury department identifies, evaluates and hedges financial risks in close co-operation with the Company's operating units. The Board of directors (Committee of directors for Banking and Finance) provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
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 price risk, such as commodity risk. Financial instruments affected by market risk include borrowings, investments and derivative financial instruments. The sensitivity analysis in the following sections relate to the position as at 31 March 2024 and 31 March 2023 .
The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant.
The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post retirement obligations, provisions, and other non-financial assets.
The following assumptions have been made in calculating the sensitivity analysis:
-The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 March 2024 and 31 March 2023.
a) 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.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company's profit before tax is affected through the impact on floating rate borrowings, as follows:
b) 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. The Company uses foreign exchange forward contracts to manage its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally from one to 7 months.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in exchange rates of various currencies with INR, with all other variables held constant. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives.
c) Commodity price risk
The Company also deals in purchase of imported raw materials (i.e. P2O5), imported by third party, which are procured by the Company on an high sea sale arrangement and used in the manufacturing of fertiliser. The import prices of these materials are governed by international prices. There is a price and material availability risk.
Equity price risk
The Company's listed and non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company's senior management on a regular basis. The Company's Board of Directors reviews and approves all equity investment decisions.
At the reporting date, the exposure to unlisted equity securities at fair value was INR 6526.08 lakhs (31 March 2023 : INR 5,537.00 lakhs). Sensitivity analyses of these investments have been provided in Note 39.
At the reporting date, the exposure to listed equity securities at fair value was INR Nil (31 March 2023 : INR 455.72 lakhs). A decrease of 5% on the BSE market price could have an impact of approximately INR Nil (31 March 2023 : INR 22.79 lakhs) on the OCI or equity attributable to the Company. An increase of 5% in the value of the listed securities would also impact OCI and equity. These changes would not have an effect on profit or loss.
Credit risk
Credit risk is the risk that 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 deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
a) Trade receivables
The Company receivables can be classified into two categories, one is from the customers into the market and second one is from the Government in the form of subsidy. As far as Government portion of receivables are concerned, credit risk is nil. For market receivables from the customers, the Company extends credit to customers in normal course of business. The Company considers factors such as credit track record in the market and past dealings for extension of credit to customer. The Company monitors the payment track record of the customer. Outstanding customer receivables are regularly monitored. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets. The Company has also taken security deposits from its customers, which mitigate the credit risk to some extent. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 9. The Company holds collateral as security for many of its customers. At 31 March 2024, 8.06% (31 March 2023 : 2.61%) of the Company's trade receivables are covered by collateral security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several geographical areas and are having long term business relationship with the Company.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The Company adjusts the receipts from customer on first in first out basis. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (i.e., by geographical region, product type, customer type and rating, and coverage by letters of credit or other forms of credit insurance). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than five years and are not subject to enforcement activity. Security collaterals obtained by the Company resulted in a decrease in the ECL of INR 3.63 lakhs as at 31 March 2024 (31 March 2023 : INR 2.98 lakhs). During the year ended 31 March 2024 , the Company had performed certain key steps for recoverability of trade receivables including but not limited to reconciliation with its customers, filing of legal cases with customers, recoverability assessment of aged receivables and etc. Basis these steps taken by the management, the Company is carrying provision of INR 38.19 lakhs (31 March 2023 : INR 40.48 lakhs) based on their best estimate.
The Company's objective is to maintain optimum levels of liquidity to meet its cash and collateral requirements at all times. The Company relies on a mix of borrowings and excess operating cash flows to meet its needs for funds. The current committed lines of credit are sufficient to meet its short to medium/ long term expansion needs. The Company monitors rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.
The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments.
43. Capital management #
For the purpose of the Company's capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents.
44. Disclosure required under Section 186 (4) of the Companies Act, 2013
The Board of Directors of the Company at its meeting held on 31st March, 2023 has approved the liquidation and winding up of Adventz Trading DMCC ('DMCC'), a wholly owned subsidiary of the Company subject to the approval of Reserve Bank of India and other Regulatory Authorities as DMCC was not conducting any business since May, 2021. Further, the Company does not envisage any viable business in the near future as well. The Board of DMCC at its meeting held on 31st March, 2023 has also approved the liquidation and winding up of DMCC.
To give effect to the above, the Company has written off 100% of carrying value of its investment also written off the loans given to Adventz DMCC of INR 230.88 lakhs and interest receivable thereon of INR 113.11 lakhs.
(ii) Details of Investments made are given under Note 6A.
45. During the financial year 2013-14, the Company had sold part of freehold land to Zuari Industries Limited (formerly, Zuari Global Limited) at a consideration of INR 16,359.32 lakhs. The possession of the said parcel of land was handed over on 28 March 2014; however the transfer of title of some of the land parcels is under progress. The Company had received full consideration from the buyer in the financial year 2013-14.
46. In terms of demerger of fertilizer undertaking from Zuari Industries Limited (formerly, Zuari Global Limited) in an earlier year, the land records of some of the land parcels are in the process of being mutated in the name of the Company.
47. Zuari Industries Limited (formerly, Zuari Global Limited) had demerged its fertilizer undertaking to the Company with effect from 1 July 2011. ZIL has during an earlier year, based on Hon'ble High Court order on demerger of fertilizer undertaking, identified amount of income tax paid under protest pertaining to fertilizer undertaking demerged into the Company.
The Company has exchanged letter of mutual understanding with ZIL wherein the Company has paid such amount of income tax paid under protest. During the financial year ended on 31 March 2017, the Company had paid INR 2,533.85 lakhs to ZGL on this account pending completion of final assessment/litigation in respect of such financial years, out of which, for the year ended 31 March 2019, ZGL has received a favourable order of INR 825.50 lakhs in respect of fertilizer undertaking for the assessment year 2008-09, 2009-10, 2010-11 and 2011-12. During the financial year ended on 31 March 2021, consequent to receipt of favourable order for assessment year 2012-13, claim of fertiliser undertaking of INR 1,186.20 lakhs was no more recoverable from ZGL. The Company is hopeful to realize the above entire amount of INR 522.15 lakhs (31 March 2023: INR 522.15 lakhs).
48. During the previous years ended 31 March 2017, 31 March 2018 and 31 March 2019, the Company had written off an amount of INR 3885.12 lakhs in books of accounts towards irrecoverable/un-utilisable balance of GST credit on services. During the year ended 31 March 2024, the Company has recovered INR 667.36 lakhs (31 March 2023: INR 54.92 lakhs)through refund claim of GST paid on Ocean freight and the same has been considered as other income (Refer Other Income Note no. 22).
49. At the 14th Annual General Meeting held on 27th September 2023, the shareholders of the Company, have approved the waiver of recovery of excess remuneration of ' 81 Lakh paid to Mr. Sunil Sethy, Ex-Managing Director during the financial year 2019-20. The Company has filed an application under Section 454 read with Section 441 of the Companies Act, 2013 for adjudication of penalties/ compounding of offence under Section 197 of the Companies Act, 2013.
50. During the year the Company has considered and approved the proposed transfer of 3,92,06,000 (Three Crores Ninety Two Lakhs Six Thousand) equity shares having face value of INR 10/- (Indian Rupees Ten) each of Mangalore Chemicals and Fertilisers Limited ("MCFL"), representing 33.08% of the paid-up equity share capital of MCFL, held by the Company to Zuari Maroc Phosphates Private Limited, pursuant to and as set out in the composite scheme of arrangement by and amongst MCFL, Paradeep Phosphates Limited and their respective shareholders and creditors, subject to the approval of the shareholders of the Company, as may be required under applicable law. Post implementation of the proposed scheme of arrangement, MCFL will be amalgamated with and into Paradeep Phosphates Limited and MCFL will stand dissolved without winding up.
The transfer of the Identified Shares from the Company to Zuari Maroc Phosphates Private Limited is proposed to take place as per the Scheme, at a price of INR 144 (Indian Rupees One Hundred and Forty Four) per Identified Share, and Zuari Maroc Phosphates Private Limited is to pay an aggregate cash consideration of INR 56,456.64 lakhs for such transfer of the Identified Shares, subject to any Taxes that need to be deducted at source, if any.
The proposed transfer of the Identified Shares by the Company to Zuari Maroc Phosphates Private Limited may be considered a 'related party transaction' under the SEBI LODR Regulations.The transfer of the Identified Shares by the Company to Zuari Maroc Phosphates Private Limited is proposed to take place pursuant to and in accordance with the price as set out in the Scheme, and will be undertaken on an arm's length basis.
(iii) The Company does not have any charges or satisfaction pending registration with ROC beyond the statutory period except E-Form CHG-9 for modification of charges bearing charge ID 100574422 vide SRN F17273277 dated 27th July 2022. The same was filed by the Company to secure the Non-Convertible Debentures (NCDs) worth ' 125 Crore by way of land in addition to earlier charge created by pledge over the equity shares of Mangalore Chemicals & Fertilizers Limited and hypothecation of escrow account. The said form was sent for resubmission by MCA on 3rd August 2022 and again on 15th August 2022. Due to transition from V2 to V3 MCA portal from 15th August 2022 to 30th August 2022, the Company could not resubmit the E-form CHG-9 on the V3 portal. Further, the said E-Form CHG-9 was not made available for resubmission on V3 portal till February 2023. The Company had raised various complaints to MCA and submitted various letters to Registrar of Companies, Goa, Diu and Daman, in this behalf. However, the issue could not resolved and the E-Form CHG-9 remained pending in the time prescribed for resubmission. The Company, thereafter, redeemed the NCDs worth ' 25 Crore on 30th June 2023 and ' 21 Crore on 17th January 2024 and relevant E-Forms CHG-9 for modification of charge from ' 125 Crore to ' 100 Crore and from ' 100 Crore to ' 79 Crore, respectively, were filed by the Company. Further, the Company redeemed the remaining NCDs amounting to ' 79 Crore, for which E-Form CHG-4 for satisfaction of charge was filed vide SRN No. AA7138991 on 4th April 2024. Hence, the Company has fully complied with the relevant provisions of the Companies Act, 2013, in this behalf.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) 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.
(vi) 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.
(vii) The Company does not have any such 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.
(viii) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (restriction on number of layers) Rules, 2017.
(ix) The Company has neither declared nor paid any interim dividend or final dividend during the year.
(x) The Company was not required to spend for CSR under under section 135 of Companies Act, 2013 for the Financial Year 2023-24. 53. Previous period/year figures have been regrouped/ re-classified wherever necessary.
As per our report of even date For and on behalf of the Board of Directors of Zuari Agro Chemicals Limited
For K.P.Rao & Co Nitin M. Kantak Athar Shahab
Chartered Accountants Executive Director Director
ICAI Firm Registration number: 003135S DIN: 08029847 DIN: 01824891
Prashanth.S Manish Malik Manoj Dere
Partner Chief Financial Officer Company Secretary
Membership Number: 228407 Membership Number: FCS7652
Place: Bengaluru
Date: 25 May 2024 Date: 25 May 2024
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