NOTES TO THE STANDALONE FINANCIAL STATEMENTS NOTE - 1 SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF brPARATION OF FINANCIAL STATEMENTS The financial statements have been brpared on accrual basis, unless stated otherwise, under the historical cost convention, in accordance with the generally accepted accounting principles in India and the provisions of the Companies Act, 2013. B. USE OF ESTIMATES The brparation of financial statements requires estimates and assumptions to be made that affect the reported balances of assets and liabilities on the date of the financial statements and reported amount of income and expenses during the year. Difference between the actual results and estimates are recognized in the period in which the results are known / materialized. C. FIXED ASSETS a) Fixed Assets are stated at historical cost less debrciation. Costs include all expenses incurred to bring the assets to its brsent location and condition. b) The constructed/fabricated capital assets are capitalized as and when the same are installed in the plants. c) Machinery spares which are procured for use in connection with particular machinery/equipment and stand by equipments which are identified to a particular item of fixed asset and having irregular use are capitalized and written off over the remaining useful life of the machinery/ equipment. d) In respect of Plant and Machinery, significant expenditure on repairs, renewals and replacement having a separate identity and is capable of being used after the existing assets are disposed off or which are certified by the concerned technical department to have resulted in technical improvement, increased capacity or increased useful life of the assets, is capitalised. The estimated residual value of the replaced parts, determined on technical assessment is charged to Statement of Profit and Loss as loss on scrapping of assets. e) Items of fixed assets that have been retired from active use and are held for disposal are valued at lower of their net book value or net realisable value. D. IMPAIRMENT OF ASSETS The carrying amount of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount. E. DEbrCIATION a) Debrciation is provided during the year at the rates brscribed in Schedule II of the Companies Act, 2013 for all tangible assets. b) Assets are debrciated upto 95% of their cost and balance 5% is carried in the books as residual value except in case of intangible assets. c) Intangible Assets consisting of computer software and SAP license cost are amortised over a period of 5 years on straight line basis from the date of acquisition. d) Assets individually costing less than 7 5000 are fully debrciated in the year of acquisition. e) Lease brmium paid on leasehold land is amortised over the life of lease. F. INVENTORIES a) Inventories are valued at lower of cost and net realizable value except in case of; i) Raw materials are valued at cost on weighted average basis. ii) Stores and spares, which are valued at cost, determined as per weighted average cost method, iii) By-products which are valued at estimated net realizable value, and iv) Intermediate products which are exclusively held for captive consumption are valued at cost. b) For the purpose of valuation of stock-in-process and stock of finished goods pending inspection, the same is converted into equivalent units of finished products held for captive consumption depending upon stage of completion. c) The cost of Catalyst is amortised over their estimated useful lives. Balance unamortised portion has been shown under the head "Stores and Spares". d) Provision for non-moving / obsolete stores and spares are made based on technical assessment. G. SUNDRY DEBTORS Provision for Doubtful debts/Loans/Advances: Full provision is made in the books, in respect of Sundry Debtors outstanding for more than 3 years except for in respect of receivables from Government departments/Companies. In respect of other Debtors, Loans & Advances the provisions are made to the extent considered not recoverable by the management. H. REVENUE RECOGNITION a) The "Sales" are stated on the basis of invoices net of sales tax and trade discounts. b) Revenue from sale of Scrap and obsolete stores is accounted for at the time of disposal. c) Delayed payment charges due from customers other than Government Companies/Departments are accrued as income where Management is certain about its recoverability. d) Interest income is recognized when no significant uncertainty as to its realization exists. e) Benefit of Duty Credit are accounted on accrual basis. I. GOVERNMENT GRANTS The company is following income approach for accounting for the government grants in-respect of the debrciable assets as described in Accounting Standard 12 - 'Accounting for Government Grants'. The grants related to debrciable assets are treated as deferred income which is recognised in the statement of profit and loss on proportionate basis over the useful life of the assets and allocation to income is made in proportion in which the debrciation on related assets is charged. J. FOREIGN CURRENCY TRANSACTIONS Transactions in Foreign currency are recorded in the reporting currency by applying currency rate as at the date of transaction. Receivables and Payables involving foreign currency are translated at the rates of exchange brvalent on the Balance Sheet date. Exchange differences (gains or losses) are treated as Revenue and charged to the statement of profit and loss. K. BOND ISSUE EXPENSES Bond Issue Expenses are being charged off against Securities Premium Account as per the provisions of the Companies Act, 2013. L. RETIREMENT BENEFITS a) Company's contribution to provident fund is accounted for on accrual basis. b) Short term employee benefits are recognized as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered. c) Post employment and other long term employee benefits are recognized as an expense in the statement of profit and loss for the year in which the employee has rendered services. The expense is recognized at the brsent value of the amount payable determined using actuarial valuation techniques. Actuarial gains and loss in respect of post employment and other long term benefits are charged to the statement of profit and loss. d) Bonus is provided under the Payment of Bonus Act, 1965, on the basis of profitability of each Unit. M. INVESTMENTS a) Long term investments are stated at cost less decline, if any, other than temporary in value on individual investment basis. b) Investments intended to be held for not more than one year from the date of acquisition are classified as current investments and are carried at lower of cost or fair value determined on individual investment basis. N. PRIOR PERIOD ADJUSTMENTS Items of income / expenses above 7 10000 in each case relating to brvious years, are accounted as prior period adjustments. O. brPAID EXPENSES Prepaid expenses are accounted for only where the amounts relate into unexpired period exceeds Rs. 10000 in each case. P. PROVISION FOR CURRENT AND DEFERRED TAX Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income-tax Act, 1961. Deferred tax resulting from "timing differences" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a virtual certainty that the asset will be realized in future. Q. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS A provision is recognized when the Company has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognized in the financial statements. A contingent asset is neither recognized nor disclosed in the financial statements. 2 PROVISION FOR EMPLOYEE REMUNERATION RASAYANI PROVISION FOR ARREARS OF WAGES 2 A During the year, the Company has paid an amount of 7 Nil (brvious year 7 40.73 lacs) towards arrears on account of wage revision of employees pertaining to the period January 1, 1997 to December 31, 2000 and the same has been charged to statement of profit and loss and shown under employee benefit expenses. No provision has been made for the liability towards balance amount of v 1887.79 lacs (brvious year Rs. 1887.79 lacs) and it is shown under contingent liability. 2B Wage Settlement / Salary Revision w.e.f.1/1/2007 - Officer During the year, the Company has paid an amount of 7 Nil (brvious year 7 3.19 lacs) towards arrears on account of wage revision of employees pertaining to the period January 1, 2007 to March 31, 2008 and the same has been charged to statement of profit and loss and shown under employee benefit expenses. No provision has been made for the liability towards balance amount of Rs. 161.55 lacs (brvious year Rs. 161.55 lacs) and it is shown under contingent liability. 2C Wage Settlement / Salary Revision w.e.f.1/1/2007 - Staff: During the year, the Company has paid an amount of Rs. Nil (brvious year Rs. 0.67 lacs) towards arrears on account of wage revision of employees pertaining to the period January 1, 2007 to March 31, 2008 and the same has been charged to statement of profit and loss and shown under employee benefit expenses. No provision has been made for the liability towards balance amount of Rs. 148.26 lacs (brvious year Rs. 148.26 lacs) and it is shown under contingent liability. 2 STAFF: The arrears payable for the period from 1st April, 2008 up to 31st March, 2015 in case of 5 employees Rs. Rs. 1.88 lacs (brvious year 6 employees amounting to Rs. 2.09 lacs) has been provided for and shown under Short-term provisions. 3 FIXED ASSETS 3A Land in possession of the Company at Rasayani admeasuring 455.69 hectares (brvious year 455.69 hectares) has been given free of cost for use, by the Government of Maharashtra, against which a nominal value of Rs. 1 is included in "Land and Land development" by creating "Capital Reserve". Land at Panvel amounting to Rs. 0.80 lacs (brvious year Rs. 0.80 lacs) included in "Land and Land development" has been given by the Government of Maharashtra for the business/residential purpose of the company. 3B Various plants NCB(X), NCB(CD), PNCB Separation, CHA, Pollution Control, Incinerator, Boiler No. MR-9618, Cooling Tower CT4, Old Weigh Bridges and other specfic assets having wdv of Rs. 161.75 lacs have been sold during the year. The profit on sale of these assets amounting to Rs. 195.97 lacs (brvious year Rs. Nil) has been booked and provision for impairment on these plants made in the earlier years of Rs. 14.07 lacs (brvious year Rs. Nil) has been written back. 3C Upon implementation of Schedule II of Companies Act 2013, the useful life of the fixed assets has been revised by the Company in terms of the schedule. Accordingly the company has revised its debrciation rate so as to debrciate its assets over the balance useful life of the assets keeping the residual value at 5%. The debrciation charge during the year pertaining to assets whose revised useful life has expired prior to commencement of the financial year has been adjusted against retained earnings in terms of Schedule II. An amount of Rs. 638.01 lacs has been adjusted against the opening Retained Earnings as per the provisions of Schedule II. Due to the change in useful life of the assets, the debrciation charge during the year (including adjusted against opening Retained Earnings) is higher by Rs. 340.64 lacs. 3D The Company appointed consultant/valuers during the year, for assessing the impairment of Fixed Assets as per the provisions of AS-28 'Impairment of Assets' for Rasayani Unit. As per the report of the consultant the loss on account of impairment has been worked out by comparing the fair market value as on date with the wdv as on 31st March, 2015 and an additional amount of Rs.14.25 lacs(brvious year Rs. 79.36 lacs) has been provided for during the year. 3E The Acetanilide, Sulphuric Acid, Nitro Toluene, Aniline-II and Hydrogen-II plants having wdv (net of impairment) Rs. 244.44 lacs (brvious year Rs. 261.33 lacs) are in working condition but are not in operation due to uneconomical conditions. 3F RASAYANI The Caustic Soda Plant having wdv of Rs. 2607.90 lacs (brvious year Rs. 2632.81 lacs) net of impairment has been transferred to held for disposal as per the decision of the Board in the meeting held on 13th Nov 2013. The Recycle column reboiler, Cumene column reboiler and Propane surge drum having wdv Rs. Nil (brvious year Rs. 1.37 lacs) have been transferred to assets held for disposal during the year. 3G i) Capital Work-in-Progress and Expenditure during Construction includes Rs. 2978.91 lacs (brvious year Rs. 2978.91 lacs) towards cost of JNPT Tank Terminal project wherein management had decided to suspend further construction. Even though the lease period has expired in June 2010, the Company has written to JNPT authorities for extension of the lease period and is hopeful of getting extension. The company has gone into arbitration alongwith other Liquid Berth Users Association against JNPT for various issues including lease period issue. Prior period expenses includes provision for impairment of JNPT Tank Terminal project which formed part of Auditors qualification in earlier years and have been provided during the current year on the basis of "recast of accounts" for FY 2012-13 as per SEBI circular and directives as directed by NSE vide letter dt.26.12.2014 and based on FRRB's opinion to restate the financial statements.The Company appointed consultant / valuers during the year for assessing the impairment of JNPT Tank Terminals Project as per the provisions of AS-28 'Impairment of Assets'. As per the report of the consultant the loss on account of impairment has been worked out by comparing the fair market value as on date with the project cost incurred to date and an amount of Rs. 2634.54 lacs (brvious year Nil) has been provided for during the year as impairment under prior period expenditure. The report was placed before the Board and the same has been approved by the Board in its meeting held on 12.02.2015. ii) As per Lease Agreement with JNPT, the Lease Rentals provide for escalation @ 10% on Lease Rent payable to JNPT. The Company had provided for Lease Rentals with old rates upto 31.03.2014 without considering the escalation @ 10% per annum as the matter is under arbitration. The amount accumulated on account of escalation upto 31.03.2014 amounting to Rs. 1351.08 lacs was disclosed as contingent liability. Prior period expenses includes provision for Lease Rent on JNPT Land for earlier years which formed part of Auditors qualification in earlier years and have been provided on the basis of "recast of accounts" for FY 2012-13 as per SEBI circular and directives as directed by NSE vide letter dt.26.12.2014 and based on FRRB's opinion to restate the financial statements. During the current year provision has been made for the escalation amounting to Rs. 1351.08 lacs and has been charged to prior period expenditure and the same has been approved by the Board in its meeting held on 12.02.2015. The total lease rentals for current year has been accounted amounting to Rs. 289.58 lacs including escalation. 3H An amount of Rs. 2429.40 lacs (brvious year Rs. 2400.46 lacs ) has been spent todate on Refurbishment of CNA Plant, which is funded by ISRO. During the year, an amount of Rs. 23.97 lacs (brvious year Rs. 157.59 lacs) has been capitalised and the balance amount of Rs. 633.39 lacs (brvious year Rs. 628.42 lacs) has been carried forward as Capital Work in progress in respect of works not completed. 3I An amount of Rs. 25.41 lacs (brvious year Rs. 25.41 lacs) incurred towards feasibility study of captive power plant was carried forward as Capital WIP from the brvious year. The project is on hold now due to high gas prices and may be taken up at a later date only. Full impairment provision has been recognised for the same in earlier year. 3J With respect to the Company's leased land at Kharghar, the commencement of construction certificate issued by CIDCO was valid upto 29.12.2012. Further the Company paid a brmium of Rs.15.41 lacs and got extension for commencement of construction upto 25.05.2013. For further extension for a period of one year upto 25.05.2014 the agreement provides for an additional brmium payment of Rs.30.81 lacs failing which CIDCO reserves the right for taking back the possession of the land. Since the Company was facing financial crunch the payment has not been made to CIDCO. So far CIDCO has not initiated any steps to take back the land. The Company has plans to construct buildings on the said land on the Public Private Partnership (PPP) model basis as per the decision of the Board in its meeting held on 14.11.2014. This will avoid cash outflow by the company for the construction purpose. 35 a) The Company has an investment of Rs. 1106.00 lacs (brvious year Rs. 1106.00 lacs) in the equity share of subsidiary company M/s. Hindustan Fluorocarbons Ltd. (HFL) which is under BIFR since 1994. HFL had made profits in the 4 financial years prior to financial year 2013 -14. During the financial year 2013-14 HFL has incurred a loss. The shares are traded below nominal value since Dec 2012 and the net worth of the Company since Dec 2012 and the net worth of the Company based on its latest audited balance sheet as at 31st March, 2015 is negative. Hence provision has been made during the year towards dimunition in the value of these investments amounting to Rs. 221.20 lacs. 35 b) The Company had invested Rs. 3.00 lacs in the Equity of M/s. HOC-Chematur Ltd. by way of joint venture as a co-promoter. The company holds 60% of the Paid-up Equity Capital of HOC-Chematur Ltd., hence HOC-Chematur is a subsidiary company of HOCL. HOC-Chematur Ltd., had initiated the process of implementing the project, however, abandoned subsequently due to inadequate support from financial institutions. In view of such uncertainties involved in implementing the project, the Company had fully provided for the losses against the investment. There is no change in the status of M/s HOC-Chematur Ltd., and the provision against the investment is continued. 4 a) During the year 2007-08, the Modified Draft Rehabilitation Scheme (MDRS) for revival of subsidiary - Hindustan Flurocarbon Ltd. (HFL) was approved by BIFR for implementation. As part of implementation of MDRS, HOCL had waived interest of Rs. 2260.26 lacs accumulated on loan given to HFL and converted the unsecured loan amounting to 7 2744.06 lacs as Zero Coupon Loan (ZCL), into secured loan by creating first charge on HFL immovable property (land valued to the extent of 7 2900 lacs) in favour of HOCL. This loan was payable in 7 equal annual instalments commencing from 2010-11. HFL has not paid the instalments for the year 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15 aggregating to Rs.1960.05 lacs (brvious year Rs. 1568.04 lacs). Further, the Company had given loans to HFL aggregating to Rs. 453.01 lacs (brvious year Rs. 456.42 lacs) bearing interest ranging from 10.25% to 14.50% out of which Rs. 381.42 lacs (brvious year Rs. 305.14 lacs ) being the installments due from financial year 2010-11 to 2014-15 remains unpaid. 5b) Advances to joint venture Company M/s HOC-Chematur Ltd. includes advance paid to M/s Chematur Engg. A.B amounting to Rs. 664.71 lacs and expenses allocated in earlier years, aggregating to Rs. 1067.46 lacs (brvious year Rs. 1066.75 lacs). In view of uncertainties involved in recovery/completion of the joint venture company project, a provision for doubtful advance of equivalent amount was made in earlier years. Since there is no improvement in the status of the joint venture project, the provision for doubtful advances is continued. 6 During the year 2001-2002, a case of misappropriation of Company's funds to the tune of Rs. 64.81 lacs (net and to the extent identified) by an official of the Company, involving fraudulent / fake payments / withdrawals under various heads of accounts including sales tax, debtors etc. had been detected. The case is at brsent under investigation of CBI. In the meantime, based on the report of the Vigilance Department, a civil suit has been filed for recovery of the amount involved from the concerned employee who was dismissed from the services of the Company. Since in the opinion of the Management the value of assets seized by CBI is sufficient to cover the losses occurred on account of fraud, no provision in the accounts is made and the amount is shown as recoverable. 7DEFERRED TAXES The company had reviewed its net deferred tax assets as at 31st March, 2004 and decided not to carry forward such assets due to uncertainty of realizing this assets against future taxable income in view of the huge accumulated loss. This decision is followed this year also in view of Accounting Standard Interbrtation issued by the Institute of Chartered Accountants of India. 8 BALANCE CONFIRMATION Balances of trade receivables, trade payables, loans, advances, other current assets and borrowings are subject to confirmation/reconciliation and subsequent adjustments. 9 In the brvious year, the Company has made an application for reference to Board for Industrial and Financial Reconstruction (BIFR) in terms of Sec-15(1) of the Sick Industrial Company's (Special Provisions Act, 1985) for declaring the Company as sick under the said Act. and it has been registered as per order dt. 30.09.2014. The Company has engaged a consultant for brparation of the revival plan for submission to the administrative ministry.The brparation of the revival plan is in progress. In view of this, the financial statements have been brpared on going concern basis although the net worth of the Company is fully eroded. 10 The Company had entered into long term supply contract with Gas Authority of India (GAIL) at Kochi for supply of Liquefied Natural Gas in 2011 for a period of 15 years ending in 2016. Material foreseeable losses can not be identified in the current scenario. 11 Previous year figures have been re-grouped / re-classified whereever necessary to make them comparable with those of the current year. As per our report of even date attached For Ford, Rhodes, Parks & Co. Chartered Accountants Firm's Registration No. 102860W Sd/- Shrikant Prabhu Partner Membership No. 35296 For and on behalf of the Board of Directors Sd/- V. B. Ramachandran Nair Chairman & Managing Director Sd/- J. N. Suryawanshi Director (Marketing) Sd/- R. Suresh Kumar Director (Finance) Sd/- S. B. Bhide Director (Technical) Sd/- Mrs. Susheela S. Kulkarni Company Secretary Place: Mumbai Date: 28/05/2015 |