Notes forming part of Financial Statements 1. Significant Accounting Policies 1.1 Basis of Preparation of Financial Statements These financial statements are brpared on the accrual basis of accounting, under the historical cost convention except for revaluation of certain Fixed Assets, in accordance with the Companies Act, 1956 and the applicable Accounting Standards issued by the Institute of Chartered Accountants of India. There is no change in the system of accounting as being consistently followed from earlier years unless otherwise stated. All assets and liabilities have been classified as current or non-current as per company's normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956. Based on the nature of operations and time between procurement of raw material and realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities. 1.2 Use of Estimates The brparation of the Financial Statements in conformity with GAPP requires management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statements and reported amounts of income and expenditure during the period. Management believes that the estimates made in the brparation of the financial statements are prudent and reliable. Actual results might differ from the estimates. Difference between the actual results and estimates are recognized in the period in which results are known/materialized. 1.3 Significant Accounting Policies a) Fixed Assets i) Tangible Fixed Assets are stated at cost net of cenvat credit and/or at revalued price less accumulated debrciation. All costs including financing costs relating to borrowing till commencement of commercial production attributable to the fixed assets are capitalized. ii) Debrciation on fixed assets is provided on written down value method at the rates and the manner brscribed in Schedule XIV of the Companies Act, 1956. The additional debrciation, on increase in cost on account of revaluation, is transferred to statement of Profit & Loss from Revaluation Reserve and is thus not charged to statement of Profit & Loss of the year. iii) Tangible Fixed Assets costing up to Rs.5,000/- are being debrciated fully in the year of their put to use. iv) Debrciation/amortization on assets added, sold or discarded during the year is provided on pro-rata basis. v) Intangible assets expected to provide future enduring economic benefits are recorded at the consideration paid for acquisition of such assets and are carried at cost of acquisition less accumulated amortization and impairment, if any. Intangible assets: Computer software is amortized over a period of four years. b) Revenue Recognition and Expenses i. Revenue from the sale of products is recognized when the property in goods is transferred to the buyer for a consideration. Revenue from service transaction is recognized as the service is performed. ii. Insurance claims have been accounted for on cash basis as per past practice. iii. Revenue from certified emission reductions (CERs) and renewable emission certificate (REC) is recognized on cash basis in the absence of reasonable assurance that future economic benefits will flow from the same to the company. iv. All the expenses are accounted for on accrual basis. c) Inventories are valued as under: Raw Materials and Finished Goods (except molasses) are carried at lower of cost or net realizable value. Stock of Molasses are carried at net realizable value. Stores & Spares are carried at cost. Goods in Process / WIP is carried at lower of cost or net realizable Value. Banked power with UPPCL is carried at lower of cost or net realizable value. Cost of inventory comprises of purchase price, cost of conversion and other cost that have been incurred in bringing the inventories to their respective brsent location and condition. Interest cost are not included in value of inventory. Cost for the purpose of valuations of raw material and components, stores & spares are considered on following basis: Manufacturing Units Basis Sugar - Raw Material -First in First Out - Stores & Spares and other components- Weighted monthly average - Trading Goods -First in First Out Distillery - Raw Material -First in First Out - Stores & Spares Other components -Weighted monthly average Co-generation - Raw Material -First in First Out d) Investments Long term Investments are carried at cost. However, provision for diminution is made to recognize decline, other than temporary, in the value of investment, if any. Current Investment is carried at cost or market value, whichever is lower. e) Employees Benefits (i) Short term employee benefits Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits include salaries and wages, bonus and ex-gratia. The undiscounted amount of short term employee benefits to be paid in exchange for employee services are recognized as an expense as the related service is rendered by employees. ii) Post employment benefits Defined contribution plans : A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The company makes specified monthly contributions towards provident fund. The Company's contribution is recognized as an expense in the statement of profit and loss during the period in which employee renders the related service. Defined benefit plan : The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of a defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its brsent value, and the fair value of any plan assets is deducted. The brsent value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the brsent value of the estimated future cash flows. The discount rates used for determining the brsent value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date. When the calculation results in a benefit to the Company, the recognized asset is limited to the net total of any unrecognized actuarial losses and past service costs and the brsent value of any future refunds from the plan or reductions in future contributions to the plan. Actuarial gains and losses are recognized immediately in the statement of profit and loss. (iii) Long term employment benefits The Company's net obligation in respect of long-term employment benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its brsent value and the fair value of any related assets is deducted. The discount rates used for determining the brsent value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date. (iv) Compensated absences The employees can carry-forward a portion of the unutilized accrued compensated absences and utilize it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method. Short term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit & Loss for the year in which the related service is rendered. f) Borrowing Costs Borrowing costs attributable to the qualifying assets are capitalized up to the period such assets are ready for the intended use and commenced commercial production. All other borrowing cost is charged to the Statement of Profit & Loss in the period in which they are incurred. g) Government Grants Government Grants in the nature of Government promoters' contribution, i e. which have reference to the total investment in an undertaking or by way of contribution towards total capital outlay, are credited to capital reserve. h) Financial Derivatives and Commodity Hedging Transactions Financial Derivatives and commodity hedging contracts are accounted for on the date of their settlement and realized gain/loss in respect of settled contracts are recognized in the Statement of Profit & Loss, along with the underlying transactions. i) Foreign Currency Transactions a) Transactions denominated in foreign currencies are recorded at the exchange rates brvailing on the date of transaction. Monetary items denominated in foreign currency at the year end are translated at year end rates. b) Non-monetary items which are carried at historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. c) In respect of monetary items which are covered by forward exchange contracts, the difference between the year end and the rate on the date of contract is recognized as exchange difference and the brmium on such forward contracts is recognized over the life of the forward contract. d) The exchange differences arising on settlement / translation are recognized in the Statement of Profit and Loss. j) Taxes on Income i. Tax on income for the current period is determined on the basis of taxable income computed in accordance with the provisions of the Income Tax Act, 1961. ii. Deferred Tax is recognized on timing differences between accounting income and taxable income for the period, and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. iii. Deferred Tax Assets are recognized only to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred Tax Assets in respect to brought forward losses/unabsorbed debrciation is recognized only to the extent that there is a virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Impairment of Assets Impairment of individual assets/cash generating unit (a group of assets that generates identified independent cash flows) are identified using external and internal sources of information and impairment loss if any, is determined and recognized in accordance with the Accounting Standard 28 issued in this regard by the Institute of Chartered Accountants of India. l) Leases Assets acquired as leases where a significant portion of the risks and rewards of the ownership are retained by the lessor are classified as operating leases. Lease rentals are charged to the Statement of Profit & Loss on accrual basis. m) Provisions, Contingent Liabilities and Contingent Assets i. Provision is recognized in respect of obligations where, based on the evidence available, their existence at the Balance Sheet date is considered probable. ii. Provision is recognized in the accounts in respect of brsent probable obligations, the amount of which can be reliably estimated. iii. Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company. iv. A contingent asset is not recognized in the financial o v. Provisions and contingent liabilities are reviewed at each balance sheet date. n) Segment Reporting Primary Segment Based on the guiding principles given in the Accounting Standard-17 "Segment Reporting" issued by ICAI, the Company's segments are Sugar, Power Generation and Distillery. Revenue and expenses have been accounted for on the basis of their relationship to the operating activities of the respective segment. Segment Identification Business segments have been identified on the basis of the nature of products/ services, the risk return profile of individual business, the organizational structure and the internal reporting system of the company. o) Excise duty in respect of finished goods held in stock has been accounted for at the end of the year and is included in the value of closing stock. p) Earning Per Share Basic earnings per share is computed by dividing the profit/(loss) after tax (including the post tax effect of extra ordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post tax effect of extra ordinary items, if any) by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares which could be issued on the conversion of all dilutive potential equity shares. q) Cash Flow Statement 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 payment and item of income or expenses associated with investing or financing flows. The cash flows operating, investing and financing activities of the company are segregated. 2. Notes to the accounts 1. Short term loans and advances shown under Notes 2.18 includes certain advances given to suppliers of raw material and revenue purchases, which are adjustable against the supply of goods/services but are running due in the books since long. The management is of the opinion that these balances are recoverable/adjustable in future and accordingly, provision against the same has not been considered at this stage. 2. Certain bank accounts shown in Notes 2.17 of Cash and Bank balances under sub-head 'Balance with Banks' are non operating for last some period and are also subject to reconciliation and receipt of confirmation. As such, the balance of Rs.1.99 lacs shown in respect of those bank accounts in the financial statements is as per books of account only. 3. In view of the decision of Hon'ble Subrme Court, extra price and excise duty realized on levy sugar in earlier years amounting to Rs.67.11 lacs for funding under the Sugar Price Equalization Fund Act, 1976 was transferred to Sugar Price Equalization Reserve Account. Later on as per the order dated 22.09.1993 of Hon'ble Subrme Court, a sum of Rs.17.90 lacs was paid to the Government out of bank guarantee furnished by the Company and further, during the year 1998- 99 a sum of Rs.1.00 lac was paid towards Excise Duty on the above. The company has further made a payment of Rs.35.81 lacs during the year 2005-06 to the Government of India against the bank guarantee furnished by it along with interest of Rs.118.25 lacs thereon. Still a sum of Rs.12.40 lacs is lying in the Sugar Price Equalization Reserve as on 31.03.15 shown under Note 2.2 of "Reserve & Surplus". 4. Certain balances in account of debtors, advances, deposit account, and creditors are subject to reconciliation and confirmation by the respective parties. In some of the cases, the amount is overdue for last some years and consequential revenue impact, if any, is not ascertainable. However, management has reviewed these advances from its realization point of view and based on the management's working, the required provisions in respect thereof has been considered in these financial statements, wherever necessary. As far as other balances are concerned, the management is of the opinion that these balances are recoverable/adjustable and accordingly, provision against the same has not been considered at this stage and these balances are disclosed in the financial statements as per books of account only. The management is of the view that the realization from these assets in the ordinary course of business would not be less than the amount at which they are stated in the books of account. Further, there is no system of charging interest as per market tradition on amount due from sundry debtors and the parties to whom advances extended in the ordinary course of business and which remains due for a substantial period. 5. Long term liabilities (Note No.2.5) includes a loan from U.P. Government amounting to Rs.14.50 lacs. The issue relating to interest payable thereon is under dispute and the matter is subjudice before the Hon'ble Allahabad High Court. However, as per the interim order of the Court, a fixed deposit of Rs.14.50 lacs has been kept with the District Magistrate, Faizabad. In opinion of the management, the interest due on fixed deposit is sufficient to meet out the interest liability of the Company on the said loan and as such, no interest is being provided for in these financial statements. 6. For the purpose of computing deferred tax liability, amount of brought forward losses as claimed in the income tax returns filed has been considered for recognizing deferred tax assets. On the basis of future projections taken on record by the management after considering improved performance of Cogen and Distillery Divisions, the management is confident that there is a virtual certainty that sufficient taxable income will be available in the forthcoming financials years against which, the deferred tax assets can be realized in the normal course of business of the company. 7. The Commissioner, Central Excise and Service Tax, Lucknow has passed the orders on 31.03.2015 in consequence to show cause notices issued earlier and raised a demand of Rs.13,55,29,759 on account of exemption of excise duty claimed on molasses consumed in house for distillery operations and also cenvat credit availed during the period from July, 2007 to March, 2013. Accordingly a provision of Rs.1154.18 lacs after adjusting brought forward provision has been made in the Statement of Profit & Loss. 8. Cost of material consumed for the 18 months period ended 31st March, 2015 is net of financial assistance of Rs.6/- per qtl. of cane purchased during sugar season 2013-14 amounting to Rs.555.19 lacs extended by the State Government. Further for the sugar season 2014-15, the Government of Uttar Pradesh has announced certain financial assistance including Rs.8.60 per qtl of cane linked to average selling price of sugar and its by products during the period 01.10.14 to 31.05.15 which is to be recommended by the Committee constituted by the Government of Uttar Pradesh as the average selling price of sugar is significantly lower than the thresh hold specified in the above announcement. Accordingly, the company has accounted for the above financial assistance of Rs.782.45 lacs for sugar season 2014-15 lacs and adjusted the same against the cost of material. 9. Since, the sugar industry is a seasonal industry; the cost of production of sugar is worked out on annualized basis. 10. Following are the relevant disclosures as required under the Micro, Small & Medium Enterprises Development Act, 2006 a. Sundry creditors include a sum aggregating Rs.12.59 lacs (Rs.36.84 lacs) due to micro & small enterprises is on account of principal only. b. The Amount of interest paid by the Company in terms of Section 16, along with the amount of payment made to the micro & small enterprises beyond the appointed date during the year Rs. Nil. The amount of interest due and payable for the period of delay in making payment which have been paid but beyond the appointed day during the year but without adding the interest specified under this Act. Rs. Nil. The amount of interest accrued and remaining unpaid Rs. Nil. The amount of further interest remaining due and payable even in succeeding year Rs. Nil. The above mentioned outstanding are in normal course of business and the information regarding micro & small enterprises have been determined to the extent such parties have been identified on the basis of information available with the company. 11. The borrowings from banks were restructured under Corporate Debt Restructuring Mechanism (CDR) vide letter of approval dated 27.03.2012 issued by CDR EG. This CDR package has since been implemented and necessary effect to the extent allowed by the banks has been considered in the financial statements. Accordingly, interest refunded by the lenders has been adjusted against the finance cost of the period. 12. The company would be able to realize a sum of Rs.365.79 lacs against a debtor for which provision has been made in past on account of doubtful nature of the same. As the amount is realizable, the excess provision has been reversed. 13. There is no liability for the period ended on 31st March, 2015 towards Corporate Social Responsibility based on the performance of last 3 years as there is net loss computed for last 3 years. 14. Pursuant to the provisions of Companies Act, 2013, the company is required to close its financial year only on 31st March and accordingly to align its financial year as per amended provisions, the current financial year of the company has been extended till 31.03.2015 covering the period from 01.10.2013 to 31.03.2015 i.e. for 18 months and necessary compliance has been made in this regard. As such, the figures of current period are not comparable with brvious year's figures. 15. The brvious year's figures have been regrouped, reclassified, reworked and rearranged wherever necessary to correspond with the current period classification/disclosures. Amounts and other disclosures for the brceding year are included as an integral part of the current period financial statements and are to be read in relation to the amounts and other disclosures relating to current period. As per our report of even date attached hereto For MEHROTRA & MEHROTRA Chartered Accountants F.R. No.0226C CA. Rajesh Jhalani Partner M.No.74809 For & on behalf of Board of Directors S. C. Agarwal Executive Director L K Jhunjhunwala Chairman A K Gupta Chief Financial Officer Rajeev Kumar Company Secretary Place: Lucknow Date: 28.05.2015 |