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Company Information

Home » Market » Company Information

Chambal Fertilisers & Chemicals Ltd.

Dec 03
404.85 +7.85 (+ 1.98 %)
 
VOLUME : 267409
Prev. Close 397.00
Open Price 390.20
TODAY'S LOW / HIGH
390.20
 
 
 
417.80
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
194.05
 
 
 
451.00
Dec 03
405.40 +8.15 (+ 2.05 %)
 
VOLUME : 6553121
Prev. Close 397.25
Open Price 393.00
TODAY'S LOW / HIGH
390.50
 
 
 
417.95
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
194.00
 
 
 
451.00
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Market Cap. ( ₹ ) 16873.07 Cr. P/BV 3.22 Book Value ( ₹ ) 126.05
52 Week High/Low ( ₹ ) 451/194 FV/ML 10/1 P/E(X) 10.20
Bookclosure 26/08/2021 TTM EPS ( ₹ ) 43.40 Div Yield (%) 1.85
NOTES TO ACCOUNTS
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2018-03 

1. Corporate Information

Chambal Fertiliser and Chemicals Limited (the ‘Company’) is a public company domiciled in India and has been incorporated under the provisions of the Companies Act, 1956. Its equity shares are listed on two recognised stock exchanges in India. The registered office of the Company is located at Gadepan, District Kota, Rajasthan, PIN- 325208. The Company is a large manufacturers of Urea in private sector in India and also deals in other fertilisers and Agri inputs (‘Fertiliser Division’). Shipping Division (classified as discontinued operations, refer note 45(A)) of the Company was engaged in the business of running of ships for cargo for part of the year. The Company had executed agreement in May, 2017 for sale of all the 4 ships owned by the Company. With the delivery of the last ship of the Company in September 07, 2017, the Company had completed sale / disposal of all the ship forming part of the Shipping Division and ceased to have Shipping business operations. Further, the Company is in the process of setting up a new Urea plant under the New Investment Policy 2012 (amended) of the Government of India at its existing plant location at Gadepan, District Kota (Rajasthan).

These financial statements were authorised for issuance by the Board of Directors of the Company at its meeting held on May 10, 2018.

2. Significant Accounting Policies

2(a) Basis of Preparation

The separate financial statements of the Company have been prepared in accordance with Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2017. The Company has prepared these financial statements to comply in all material respects with the Accounting Standards (“Ind AS”) notified under Section 133 of the Companies Act, 2013 (“the Act”).

The financial statements have been prepared on an accrual basis and under the historical cost basis, except for the following material items those have been measured at fair value as required by relevant Ind AS:

- Derivative financial instruments;

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments);

- Defined benefit plans and other long-term employee benefits;

- Share-based payment transactions;

- Investment in debt instruments (i.e. preference shares).

The financial statements of the Company are presented in Indian Rupee (Rs.) and all values are presented in Lakhs (Rs. 00,000.00), except when otherwise indicated

Footnotes:

1. Freehold land having carrying value Rs.0.89 Lakh (Previous year : Rs.0.89 Lakh), Leasehold land having carrying value of Rs. 31.69 Lakhs (Previous year: Rs.32.04 Lakhs) and Buildings having carrying value of Rs.384.50 Lakhs (Previous year : Rs.390.98 Lakhs) are yet to be registered in the Company’s name.

2. The carrying value of Buildings includes Rs.0.28 Lakh (Previous year : Rs.0.29 Lakh) representing undivided share in assets jointly owned with others.

3. Deletions from Plant and Equipment during the year includes Equipment having gross block of Rs.63.01 Lakhs (Previous year : Rs. 347.77 Lakhs) and Accumulated Depreciation of Rs. 7.85 Lakhs (Previous year : Rs.186.85 Lakhs) transferred to ‘Assets held for sale’ (refer note 45(B)).

4. Depreciation charge for the year includes an amount of Rs. 47.19 Lakhs (Previous year : Rs. 4159.71 Lakhs) related to Shipping Division. The amount is recognised in Discontinued Operations in the Statement of Profit and Loss {refer note 45(A)}.

a) Reconciliation of the Shares Outstanding at the beginning and at the end of the Reporting Periods

There is no movement in the equity shares outstanding at the beginning and at the end of the reporting periods.

b) Terms / Rights attached to Equity Shares-

The Company has only one class of shares having a par value of Rs.10 per share fully paid up. Each holder of equity shares is entitled to one vote per share and the equity shares will rank pari passu with each other in all respects. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after payment of all liabilities.

*As at March 31, 2018, shareholding is less than 5%.

As per the records of the Company, including its register of shareholders/members, the above shareholding represents both legal and beneficial ownership of shares.

Description of Nature and Purpose of each Reserve

(a) Securities Premium: Securities Premium represents amount received on issue of shares in excess of the par value.

(b) Retained Earnings: Retained earnings comprises of prior years undistributed earnings after taxes.

(c) General Reserve: This represents appropriation of profit by the Company. General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income.

(d) Treasury Shares: Treasury shares represents equity shares of the Company acquired by CFCL Employees Welfare Trust from the secondary market to allocate or transfer these shares to eligible employees of the Company from time to time on the terms and conditions specified under the CFCL Employees Stock Option Scheme.

(e) Loss on Treasury Shares: Loss on treasury shares acquired represents the amount of loss incurred by CFCL Employees Welfare Trust, on the transfer of equity shares to the eligible employees of the Company as per CFCL Employees Stock Option Scheme.

(f) Capital Reserve: Capital reserve represents the amount on account of forfeiture of equity shares of the Company.

(g) Capital Redemption Reserve: Capital redemption reserve represents reserve created on redemption of preference shares.

(h) & (i) Tonnage Tax Reserve and Tonnage Tax Reserve (utilised) under Section 115VT of the Income Tax Act, 1961 : These reserves were created till the time ‘Shipping Division’ was under Tonnage Tax Regime.

(j) Share Option Outstanding Account: The share option outstanding account is used to recognise the grant date fair value of options issued to employees under the CFCL Employees Stock Option Scheme, 2010. Refer to note 35 for further details of the plan.

(k) Exchange Differences on Translation of Foreign Operation: Exchange differences arising on translation of foreign operation are recognised in other comprehensive income as described in accounting policy and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the foreign operations are disposed off.

(l) Cash Flow Hedging Reserve: The Company uses hedging instrument as part of its management of foreign currency risk associated with its highly probable forecast sale. Foreign currency risk associated with highly forecasted sale transaction is being hedged by taking foreign currency loan.

(B) Nature of Security, Terms and Repayment Schedule:

i. Foreign Currency Term Loans from banks of USD 3,154.61 Lakhs (Rs.205617.48 Lakhs including current maturity of Nil) (Previous Year Rs. 77654.85 Lakhs including current maturity of Nil) carry interest in the range of 3 months LIBOR plus 2.82%-3.07% p.a. The term loans amounting to USD 3,003.61 Lakhs (Rs.195775.30 Lakhs) are repayable in 13 half yearly instalments starting from September 30, 2019. Term loans amounting to USD 151.00 Lakhs (Rs.9842.18 Lakhs) are repayable in 17 equal half yearly instalments starting from September 30, 2019. These loans are secured by first pari-passu charge by way of mortgage, by deposit of title deeds in respect of immovable properties of the Company and hypothecation of the movable fixed assets of the Company, both present and future subject to prior charges created in favour of banks on current assets and other movables for securing working capital borrowings.

ii. Foreign Currency term Loans from Financial Institution of USD 1,474.00 Lakhs (Rs.96075.63 Lakhs including current maturity of Nil) (Previous Year Rs 31080.10 Lakhs including current maturity of Nil ) carry interest in the range of 3 month LIBOR plus 3.07%-3.10% p.a. Term loans are repayable in 17 equal half yearly instalments starting from September 30, 2019. These loans are secured by first pari-passu charge by way of mortgage, by deposit of title deeds in respect of immovable properties of the company and hypothecation of the movable fixed assets of the Company, both present and future subject to prior charges created in favour of banks on current assets and other movables for securing working capital borrowings.

iii. Finance Lease Obligation of Rs.32.21 Lakhs (including current maturities of Rs. 32.21 lakhs) (Previous year : Rs.106.94 Lakhs including current maturities of Rs.70.77 Lakhs) is payable in 5 monthly instalments of Rs.6.77 Lakhs each (i.e. lease obligation including interest) starting from April 2018 and carry interest rate of around 27.34% p.a. This is secured by assets acquired under the facility.

iv. Unsecured Rupee Term Loans of Rs 17500.00 Lakhs (Previous Year Nil) from banks carry interest @ 364 days treasury bill yield plus 1.45% per annum and are repayable in 8 equal quarterly instalments. Out of these, repayment of one term loan of Rs 10000.00 Lakhs will start from May 06, 2020 and repayment of another term loan of Rs 7500.00 Lakhs will start from May 20, 2020.

i Rupee loans of Rs 38373.47 Lakhs (Previous year Rs 51736.04 Lakhs) from a bank has been under Special Banking Arrangement against the subsidy on P&K Fertilisers receivable from Govt. of India. The Bank has charged interest @ 7.80% p.a.(including 6.84% p.a. paid by Govt. of India directly to banks). Accordingly, Rs 8.96 Lakhs (Previous year: Rs 108.88 Lakhs) @ 0.96% p.a. has been charged as interest expense in the statement of Profit and Loss. These loans are secured by hypothecation of subsidy receivables upto 38373.47 Lakhs (Previous Year: Rs 51736.04 Lakhs) from Govt. of India. The loans are repayable within 60 days.

ii Cash credit facilities of Rs 69695.24 Lakhs (Previous year Rs 22433.11 Lakhs) carrying interest in the range of 9.40% - 10.05% p.a. and Foreign currency loans of Nil (Previous year : Rs.18053.01 Lakhs ) from banks are secured by hypothecation of all the Company’s current assets including all stocks and book debts and other movable assets, both present & future. These loans are further secured by second charge on all the immovable properties of the Company. The loans are repayable on demand.

iii Foreign currency loans of Rs. 25102.56 Lakhs (Previous year Rs. 48175.26 Lakhs ) carrying interest in the range of 1.78% - 2.48% p.a. are secured by second charge on the Company’s current assets. The loans are repayable within 152 days.

iv Unsecured Commercial Paper of Rs 50000.00 Lakhs (Previous year Rs.110000.00 Lakhs) carry interest @ 6.98% p.a. The commercial paper is repayable on May 22, 2018.

v Unsecured foreign currency loans of Rs 62047.20 Lakhs (Previous year Rs.57361.52 Lakhs ) carry interest in the range of 1.76% - 2.08% p.a. The loans are repayable within 111 days.

v) The Company had received a demand of Rs.352.34 Lakhs (Previous year: Rs.352.34 Lakhs) from Sales Tax Department, Kota in an earlier year, which also includes penalty, towards use of natural gas for ammonia fuel, power and steam generation for the period April, 1996 to May, 2001. The Company has obtained a stay from Hon’ble High Court of Rajasthan, Jodhpur on 13th July, 2001. However, in the event of the Company having to pay the above, it is reimbursable by Fertiliser Industry Coordination Committee (FICC) / Government of India under Subsidy Scheme.

vi) The Company as well as other users of natural gas under HBJ Gas Pipeline had in earlier years received letters from GAIL (India) Limited, informing about the possibility of levy of excise duty on natural gas (presently not levied) with retrospective effect. The amount of such levy is not ascertainable. However, in the event of its levy, it is reimbursable by FICC under Subsidy Scheme.

vii) The Company as well as other users of Natural Gas under HBJ Gas Pipeline had received a letter in an earlier year from GAIL (India) Limited informing about the possibility of levy of Central Sales Tax. The Company has been taking the delivery of Gas in the State of Rajasthan and has been accordingly paying Rajasthan Sales Tax on the supply. Therefore, the Company feels that no Central Sales Tax is payable by it. Further, the amount of such levy is not ascertainable. However, in the event of its levy, it is reimbursable by FICC under Subsidy Scheme.

viii) Under the Jute Packaging Material (Compulsory use of Packing Commodities) Act, 1987, a specified percentage of fertilisers dispatched were required to be supplied in Jute bags up to August 31 2001. The provisions of the said Act were challenged in the Supreme Court which upheld the constitutional validity of this Act in its judgment in 1996. In spite of making conscious efforts to step up use of jute packaging material, the Company had been unable to adhere to the specified percentage, due to strong customer resistance to use of jute bags. The Company had received show cause notice from the Office of the Jute Commissioner, Kolkata, for levying a penalty of Rs.7380.36 Lakhs (Previous year Rs.7380.36 Lakhs) for non compliance of the provisions of the said Act. The Company has obtained a stay order from Delhi High Court against the above show cause notice and on the basis of the stay order the Company is of the view that the said levy is not tenable in law and accordingly no provision has been considered.

Based on favorable decisions in similar cases legal opinion taken by the Company discussions with the solicitors etc. the Company believes that there is fair chance of decisions in its favour in respect of all the items listed in (B) (i) to (viii) above and hence no provision is considered necessary against the same.

3. Capitalisation of Expenditure

The Company has capitalised the following expenses of revenue nature to the cost of Capital Work in progress (CWIP). Consequently expenses disclosed under the respective notes are net of amounts capitalised by the Company. The break up of expenditure is as follows :

* Includes Rs.28506.31 Lakhs (Previous year:Rs.12927.47 Lakhs) related to upcoming urea manufacturing plant under the New Investment Policy 2012.

** Interest comprises of:

(i) Rs. 8314.32 Lakhs (Previous year : Rs.2560.39 Lakhs) on specific borrowings taken for upcoming urea manufacturing plant under the New Investment Policy 2012; and

(ii) Rs. 4243.12 Lakhs (Previous year : Rs.672.72 Lakhs) on general borrowings for upcoming urea manufacturing plant and other qualifying assets using the weighted average interest rate applicable during the year which is 6.24% p.a.

*** represents capitalisation of interest expense on qualifying assets.

4. The Company is into manufacturing of Urea and Single Super Phosphate and marketing of Fertilisers and other agri inputs. Looking at the nature of business and risk involved, the operations of the Company falls into single business segment. Further all the customers and assets are located into India. Accordingly no segment information is provided. Revenue from single customer i.e. Government of India amounted to Rs.395631.20 Lakhs (Previous year : Rs. 367154.43 Lakhs) from sales in the Fertilisers and other Agri-inputs segment.

5. Related party transactions

In accordance with the requirements of Ind AS - 24 ‘Related Party Disclosures’, names of the related parties, related party relationship, transactions and outstanding balances where control exits and with whom transactions have taken place during the reported periods are:

Related party name and relationship

(a) Key Management personnel

(b) Subsidiaries

CFCL Ventures Limited, Cayman Islands Chambal Infrastructure Ventures Limited, India India Steamship Pte. Limited, Singapore India Steamship International FZE, UAE India Steamship Limited, India

Subsidiaries of CFCL Ventures Limited, Cayman Islands

ISGN Corporation, USA

ISG Novasoft Technologies Limited, India

Inuva Info Management Private Limited, India

(c) Joint venture

Indo Maroc Phosphore S.A. Morocco

(d) Post Employment Benefit Plans

CFCL Employees Provident Fund

Chambal Fertilisers and Chemicals Limited Senior Staff Superannuation Fund

CFCL Employees Group Gratuity Trust

India Steamship Staff Provident Fund

India Steamship Staff Gratuity Insurance Scheme

** Key management personnel are covered under the Company’s Group Gratuity Scheme along with other employees of the Company. The gratuity, leave liability, post retirement medical benefits, long service award scheme and settlement allowance is determined for all the employees on an overall basis, based on the actuarial valuation done by an independent actuary. The specific amount of gratuity, leave liability, post retirement medical benefits, long service award scheme and settlement allowance liability for Key management personnel cannot be ascertained separately, except for the amount actually paid.

Key Management Personnel interests in the Employees Stock Option Scheme, 2010 (ESOS)

Share Options held by Key Management Personnel under the ESOS to purchase equity shares of the Company from CFCL Employees Welfare Trust have the following expiry dates and exercise prices:

* Nil (Previous year Rs.177.07 Lakhs) included in ‘Liabilities directly associated with assets classified as held for sale’ in respect of Shipping Division of the Company classified as held for sale and Discontinued Operations (refer note 45(A).

*/ ** Plan asset of Rs.312.31 Lakhs {Previous year Rs.345.80 Lakhs (including Rs.197.83 Lakhs pertaining to Shipping Division classified as held for sale and Discontinued Operations) has not been recognised in the financial statements, as the surplus of the trust, is distributable among the beneficiaries of the provident fund trust.

a) Gratuity

In case of Fertiliser Division, the Company has a defined benefit gratuity plan. Benefit is being paid as under-

A) In case of retirement or death of an employee while in service of the Company, the gratuity will be payable as under:

i) Completed continuous service of 5 years and above upto 20 years - gratuity equivalent to 15 days last drawn salary for each completed year of service.

ii) Completed continuous service of above 20 years - gratuity equivalent to 15 days last drawn salary for first 20 years and 20 days last drawn salary for each completed year of service after 20 years.

B) In case of resignation or termination of an employee, where the employee has completed 5 years of continuous service with the Company, gratuity equivalent to 15 days last drawn salary for each completed year of service shall be payable.

The Scheme is funded with insurance companies in the form of a qualifying insurance policies. The fund has the form of a trust and it is governed by the Board of Trustees.

In case of Shipping Division, Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure @ 15 to 30 days salary (last drawn salary) for each completed year of service. The Scheme is funded with insurance companies in the form of a qualifying insurance policies except in the case of crew employees of the division. The fund has the form of a trust and it is governed by the Board of Trustees.

b) Post Retirement Medical Benefit Plan

The Fertiliser Division of the Company has post retirement medical benefit schemes in the nature of defined benefit plan which is unfunded.

c) Provident Fund

The Company has set up provident fund trusts, which are managed by the Company. Provident funds set up by employers, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan. The actuarial valuation of Provident Fund was carried out in accordance with the guidance note issued by Actuarial Society of India for measurement of provident fund liabilities and there is no shortfall as at March 31, 2018.

The Board of Trustees of Gratuity Trust and Provident Fund Trust are responsible for the administration of the plan assets and for the definition of the investment strategy. The Board of Trustees reviews the level of funding and investment and such a review includes the asset-liability matching strategy and investment risk management policy.

The Board of Trustees decides its contribution based on the results of its review. Generally, it aims to have a portfolio mix of equity instruments and debt instruments. Investments of Provident Fund Trust is being governed by the rules issued by the Ministry of Labour, Government of India for Employee Provident Fund exempted establishment.

The following tables summarise the components of net benefit expense recognised in the Statement of Profit and Loss and the funded status and amounts recognised in the Balance Sheet for the respective plans:

The Company expects to contribute Rs. 193.51 Lakhs (Previous year : Rs.195.42 Lakhs) and Rs. 482.71 lakhs (Previous year : Rs.422.49 Lakhs) to gratuity trust and provident fund respectively in the next financial year in respect of Continuing Operations of the Company.

The principal assumptions used in determining gratuity, provident fund and post-employment medical benefit obligations for the Company’s plans are shown below:

Sensitivities due to mortality & withdrawals are not material and hence impact of change is not calculated.

Sensitivities as to rate of inflation, rate of increase of pensions in payment, rate of increase of pensions before retirement & life expectancy are not applicable being a lump sum benefit on retirement.

A quantitative sensitivity analysis for significant assumptions as at March 31, 2017 is shown below:

Sensitivities due to mortality & withdrawals are not material and hence impact of change is not calculated.

Sensitivities as to rate of inflation, rate of increase of pensions in payment, rate of increase of pensions before retirement & life expectancy are not applicable being a lump sum benefit on retirement.

The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

The weighted average duration of the defined benefit plan obligation at the end of the reporting period is 14.10 years (Previous year : 14.43 years).

* Nil (Previous year : Rs.5.66 Lakhs) included in Discontinued Operations in the Statement of Profit and Loss in respect of Shipping Division of the Company {refer note 45(A)}.

** Nil (Previous year : Rs.14.31 Lakhs) included in Discontinued Operations in the Statement of Profit and Loss in respect of Shipping Division of the Company {refer note 45(A)}.

*** In respect of Fertiliser Division of the Company.

6. Subsidies

(a) Nitrogenous Fertilizers are under the Concession Scheme including freight as per the New Urea Policy 2015 and Uniform Freight Policy. The concession price and freight has been accounted for on the basis of notified prices further adjusted for input price escalation/ de-escalation and as estimated by the management based on the prescribed norms in line with known policies parameters.

Contribution from sale of surplus ammonia has been accounted for in accordance with the known policy parameters.

Current year’s subsidy income of Urea is inclusive of (Rs.593.87 Lakhs) (Previous year : Rs.647.54 Lakhs) being the subsidy income, pertaining to earlier years, but determined during the year.

(b) Subsidy on traded fertilisers (other than Gypsum) has been accounted for as per concession rates based on Nutrient Based Subsidy Policy as notified by the Government of India.

(c) Subsidy on City Compost has been accounted as notified by the Government of India.

7. Leases

(a) The lease payment made during the year amounts to Rs.83.89 Lakhs (Previous year : Rs.91.92 Lakhs), out of which Rs.64.68 Lakhs (Previous year : Rs.54.01 Lakhs) has been adjusted against principle and Rs.19.21 Lakhs (Previous year : Rs.37.91 Lakhs) has been shown as interest expense. The interest rate on finance leases is around 27.34% p.a. There is no renewal and escalation clause as well as restriction imposed in the lease agreement. There are no sub-leases.

(b) The Company has entered into Operating Lease Agreements for the premises which are non-cancellable. The lease payments recognized in the statement of profit and loss during the year amounts to Rs.678.91 Lakhs (Previous year : Rs.1032.02 Lakhs) including nil (Previous year : Rs.308.09 Lakhs) in discontinued operations in the statement of profit and loss in respect of Shipping Division of the Company (refer note 45(A)). The renewal of lease will be as per the mutual understanding of lessee and lessor and there is no escalation clause. There are no restrictions imposed in the lease agreements and there are no sub-leases. The break up of minimum lease payment outstanding as at March 31, 2018 is as follows:

* included nil (Previous year : Rs. 47.60 Lakhs) in respect of Shipping Division of the Company classified as held for sale and discontinued operations.

(c) The lease payments, other than cases covered in point no. (b) above i.e. non-cancellable leases, recognized in the statement of profit and loss during the year amounts to Rs.1486.00 Lakhs (Previous year : Rs.2238.10 Lakhs). The renewal of leases will be as per the mutual understanding of lessee and lessor and there is no escalation clause. There are no restrictions imposed by lease arrangements.

8. Share Based Payments

Employees Stock Option Scheme (ESOS)

The shareholders of the Company had approved CFCL Employees Stock Option Scheme, 2010 on August 27, 2010 which was amended by the shareholders on September 13, 2013. Consequent upon promulgation of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (“ESOP Regulations”), the shareholders of the Company had approved the revised CFCL Employees Stock Option Scheme, 2010 (ESOS) on September 15, 2015 in compliance with the ESOP Regulations. As per ESOS, 4,162,000 Stock Options can be issued to Managing Director and other specified categories of employees of the Company. The options are to be granted at market price. As per ESOP Regulations, the market price is taken as the closing price on the day preceding the date of grant of options, on the stock exchange where the trading volume is the highest. Each option, upon vesting, shall entitle the holder to acquire 1 equity share of Rs.10.

The expected volatility was determined based on historical volatility data. For calculating volatility, the Company has considered the daily volatility of the stock prices of the Company on National Stock Exchange Limited over a period prior to the date of grant, corresponding with the expected life of the options.

In financial year 2010-11, CFCL Employees Welfare Trust (“ESOP Trust”) was constituted, inter alia, for the purpose of subscribing or acquiring equity shares of the Company from the Company or Secondary market, to hold the shares and to allocate or transfer these shares to eligible employees of the Company from time to time on the terms and conditions specified under the Employee stock option scheme. The Board of Directors at its meeting held on May 08, 2010 had approved grant of financial assistance upto Rs.3000.00 Lakhs by the Company to ESOP Trust in such manner and on such terms as agreed between the trustee(s) of the ESOP Trust and Managing Director of the Company for the purpose of subscribing or acquiring shares of the Company. ESOP Trust is holding 16,96,900 equity shares (Previous year : 22,47,902 equity shares) of the Company which were purchased from the open market.

9. Interest on income tax refund has been recognized, pending receipt of appeal effect orders for the assessment years where appeals have been decided in favour of the Company by the Commissioner of Income Tax (Appeals).

10. The current tax is net of tax on dividend received from a foreign subsidiary to the extent of dividend distribution tax on dividend distributed to shareholders of the Company as per the provisions of Section 115-O of the Income Tax Act,1961.

11. The Company has, during the year, accounted for income tax credit of Nil (Previous year : Rs.52.75 Lakhs) against income tax paid on profits by its subsidiary - M/s India Steamship Pte. Ltd., Singapore in proportion to the dividend received from the said subsidiary. The income tax credit is available in line with Article 25(2) of the Double Taxation Avoidance Agreement between India and Singapore.

During the year ended March 31, 2018 and March 31, 2017, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.

The Company has long term/ short term capital losses to the tune of Rs. 51440.71 Lakhs (Previous year: Rs.54264.58 Lakhs) that are available for offsetting for six to eight years against future taxable profits (long term/ short term) of the Company. Deferred tax assets have not been recognised in respect of above losses in the year 2017-18 as there are no other tax planning opportunities or other evidence of recoverability in the near future.

12. Fair Values

The management assessed that fair value of financial assets and liabilities approximates their carrying amount.

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.

The following methods and assumptions were used to estimate the fair values:

(i) Derivative financial instruments - The fair value of foreign exchange forward contracts is determined using the foreign exchange spot and forward rates at the balance sheet date. The fair value of foreign currency option contracts is determined using the Black Scholes valuation model. The derivatives are entered into with the banks / counterparties with investment grade credit ratings.

(ii) 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.

(iii) Floating rate borrowings / Finance lease obligation - The fair values of the Company’s interest bearing borrowings are determined by using discounted cash flow (DCF) method using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at March 31, 2018 was assessed to be insignificant.

(iv) The carrying amount of bank deposits, trade receivables, cash and cash equivalents, investment at amortised cost, other current financial assets, trade payables and other current financial liabilities are considered to be the same as their fair values, due to their short term nature.

(v) The fair value of investments carried at fair value through profit and loss is determined using income and market approach. The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis has not been performed as the amount is not material.

13. Financial Risk Management Objectives and Policies

The Company’s principal financial liabilities, other than derivatives, comprises of 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 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 management of these risks is carried out by finance department under policies approved by the Board of Directors. The finance department identifies, evaluates and hedges financial risks in close co-operation with the Company’s operating units. The Board of Directors reviews overall risks periodically.

(i) Market Risk

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 ofrisk: interest rate risk, currency risk and other price risk, such as commodity risk. Financial instruments affected by market risk include borrowings, investments, other receivables, other payables and derivative financial instruments. The sensitivity analysis in the following sections relate to the position as at March 31, 2018 and March 31, 2017. 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 and liabilities of foreign operation.

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 March 31, 2018 and March 31, 2017.

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 the 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:

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

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’s exposure to the risk of changes in foreign exchange rates relates to short term borrowings taken against the Company’s import of traded fertilisers and long term foreign currency borrowing taken for new Urea project.

The Company manages its foreign currency risk on short term borrowings by usually taking option and forward contracts.

During the financial year, the Company has adopted hedge accounting on foreign currency risk associated with highly forecasted sale transaction from new Urea project which is being hedged through foreign currency borrowings. Hedge accounting is applied to remove the accounting mismatch between the hedging instrument and hedged item. The effective portion of the change in the fair value of the hedging instrument is deferred into cash flow hedge reserve through OCI and will be recognised in profit or loss when the hedge item affects profit or loss.

(c) Commodity price risk

The Company’s operating activities require the ongoing purchase of natural gas and other imported fertilisers.

(i) Natural gas being an international commodity is subject to price fluctuation on account of the change in the crude oil prices, demand supply pattern of natural gas and exchange rate fluctuations. The Company is not affected by the price volatility of the natural gas as under the Urea pricing formula, the cost of natural gas is pass through if the consumption of natural gas is within the permissible norms for manufacture of Urea.

(ii) The Company deals in imported fertilisers (i.e. DAP, MOP and NPK), which are imported by the Company and sold in the domestic market. The import prices of these goods are governed by international prices. There is a price and material availability risk, which may not be in line to meet the domestic market requirement. The risk, is also with domestic manufacturers whose costing is based on majorly imported raw materials and small value-add. However, a dynamic alignment of procurement to sales and constant review of market conditions and competitors costing help in mitigating the impact.

(ii) 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’s receivables can be classified into two categories, one is from the customers/ dealers in the market and second one is from the Government of India in the form of subsidy. As far as Government portion of receivables is concerned, credit risk is Nil. In respect of market receivables from the customers/ dealers, 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 customers. The Company monitors the payment track record of the customers. 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.

b) Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s finance department. Credit risk arising from investment in mutual funds, bonds, derivative financial instruments and other balances with banks is limited and there is no collateral held against these because the counterparties are banks and recognised financial institutions with high credit ratings assigned by the international credit rating agencies. The Company does not maintain the significant amount of cash and deposits other than those required for its day to day operations.

(iii) Liquidity risk

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.

14. Capital Management

The Company objective while managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefit for other stakeholder. The Company will maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return the capital to shareholders, issue new shares or sell assets to reduce debt.

*The Company is setting up brownfield Ammonia Urea expansion project namely Gadepan III (‘Project’) to produce 13.40 Lakhs MT of Urea. The above debt includes Rs.298148.47 Lakhs towards the Project, which is scheduled to commence production in the next Financial Year 2018-19. Majority of the balance debt is towards working capital requirement.

Under the terms of the borrowings facilities pertaining to Project, the Company is required to comply with certain financial covenants from Financial Year 2019 -20 onwards.

Proposed dividend on equity shares is subject to approval at the annual general meeting and is not recognised as a liability (including DDT thereon) as at March 31, 2018 and March 31, 2017.

15. (A) Discontinued Operations

The break up of the discontinued operations, which pertains to Shipping Division, as shown on the face of statement of profit and loss is as under:

As at March 31, 2017 the management of the Company was actively seeking a buyer for the sale of all the 4 (four) ships of the Shipping Division. During the year, the Company has entered into agreements for sale of all the ships. Therefore, the associated assets and liabilities of the Shipping Division were consequently presented as held for sale in financial statements for the year ended March 31, 2017. The division was classified as ‘discontinued operations’ as per Ind AS 105. The last ship owned by the Company was delivered to the buyer on September 07, 2017. The disposal is consistent with the Company’s long term policy to focus its activities on the Fertiliser and other Agri inputs business.

The financial information relating to the discontinued operations is set out below:

Write-down of Property, Plant and Equipment and Intangible Assets

During the previous year immediately before the classification of Shipping Division as discontinued operations, the recoverable amount was estimated for certain items of property, plant and equipment and intangible assets and a write-down of Rs.127.73 Lakhs was recognised to reduce the carrying amount of the assets in the disposal group to their fair value less costs to sell. This was recognised in Discontinued Operations in the Statement of Profit and Loss.

Allowance for Doubtful Debts and Advances

During the previous year immediately before the classification of Shipping Division as a discontinued operation, the recoverable amount was estimated for trade and other receivables and an allowance of Rs.215.85 lakhs was recognised to reduce the carrying amount of these assets in the disposal group to their net realisable value. This was recognised in Discontinued Operations in the Statement of Profit and Loss.

16. Disclosure required under Section 186 (4) of the Companies Act, 2013

(a) The Company has not granted any loan during the financial year ended March 31, 2018 under section 186 of the Companies Act, 2013.

(b) Particulars of Guarantee given:

* In case of equity investment at deemed cost, whereas investment in preference shares at fair value.

17. With effect from April 01, 2017, the Company has re-assessed residual value and useful lives of certain plant and equipment of Fertiliser and other Agri-inputs division of the Company. According to the management, the revised residual value and useful lives of such plant and equipment properly reflects the carrying value and period over which the same is expected to be used. In view of these changes, depreciation for the year ended March 31, 2018 is lower by Rs.786.00 Lakhs.

18. The Company is in the process of setting up a new Urea plant namely Gadepan III (‘Project’) under the New Investment Policy 2012 (amended) at its existing plant location at Gadepan, Kota (Rajasthan) and the contracts for the Project had been awarded on a Lumpsum Turnkey (LSTK) basis. The milestone based payments are being made to the LSTK contractors for the purpose of accomplishment of the Project. The entire amount paid to LSTK contractors for the Project on the basis of achievement of milestones of Rs.359322.79 Lakhs as at March 31, 2018 (Previous year : Rs.148681.38 Lakhs ) is included under ‘Capital work-in-progress’.

19. Disclosure on Specified Bank Notes (SBNs)

The disclosures regarding details of specified bank notes held and transacted during 8th November 2016 to 30th December 2016 has not been made since the requirement does not pertain to financial year ended March 31, 2018. Corresponding amounts as appearing in the audited financial statements for the financial year ended March 31,2017 are as under:

20. Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Company’s 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) Property, Plant and Equipment

Property, Plant and Equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Company’s assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technical or commercial obsolescence arising from changes or improvements in production or from a change in market demand of the product or service output of the asset.

b) Income 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.

The Company has Rs. 51440.71 Lakhs (Previous year: Rs.54264.58 Lakhs) of carried forward tax losses on account of long term/ short term capital losses. These losses mainly relate to the loss on voluntary liquidation of a subsidiary of the Company and merger of a subsidiary of the Company with its wholly owned subsidiary and will expire in 5 to 7 years and may be used to offset taxable income arising in the future. At present, the Company does not have any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets. On this basis, the Company has determined that it cannot recognise deferred tax assets on the tax losses carried forward. If the Company would have been able to recognise all unrecognised deferred tax assets, profit and equity would have increased by Rs.14318.82 Lakhs (Previous year: Rs.15177.32 Lakhs). Further details on taxes are disclosed in note 39 to the financial statements.

c) Defined Benefit Plans

The cost of the defined benefit gratuity plan, post-employment 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 plans are given in note 30 to the financial statements.

d) Revenue

The Company’s revenue includes subsidy claims, part of which are pending notification / final implementation by ‘Fertiliser Industry Coordination Committee’ (FICC), Government of India. As per management estimates, there is reasonable certainty based on Government of India policy and past experience that claims will be notified in due course. On issuance of notification by FICC, Government of India, the adjustments, if any, to revenue are not expected to be significant.

e) 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 discounted cash flow method. 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. Further disclosures in this regard are given in note 41.