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Company Information

Home » Market » Company Information

Petronet LNG Ltd.

Dec 09, 09:41
226.65 +0.60 (+ 0.27 %)
VOLUME : 3900
Prev. Close 226.05
Open Price 227.00
Bid PRICE (QTY.) 226.50 (1)
Offer PRICE (Qty.) 226.65 (104)
Dec 09, 09:29
225.80 -0.30 ( -0.13 %)
VOLUME : 78336
Prev. Close 226.10
Open Price 226.90
Bid PRICE (QTY.) 225.65 (13)
Offer PRICE (Qty.) 225.80 (439)
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Market Cap. ( ₹ ) 33870.00 Cr. P/BV 2.87 Book Value ( ₹ ) 78.71
52 Week High/Low ( ₹ ) 275/211 FV/ML 10/1 P/E(X) 11.52
Bookclosure 19/11/2021 TTM EPS ( ₹ ) 20.05 Div Yield (%) 0.55
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2021-03 

i) In view of expected increase in capacity utilisation at Kochi terminal, the customers of the Company are asking for lower regasification tariff for Kochi Terminal w.e.f. 1st April 2019. The Company is in discussion with its customers for volumes tied up with respect to the said terminal and pending the finalisation of tariff the Company has recognised revenue on the basis of offered regasification tariff. The management is confident that revised price will not be materially different from the offered tariff and there will not be any material financial impact on the Company on account of revision of regasification tariff for Kochi Terminal.

ii) The Company has invoiced Rs. 19,844 Lacs (excluding GST) as “Use or Pay charges” to its 3 customers, over a period of 4 years, for under utilisation of committed regasification facility at Dahej Plant, as per the terms of long-term regasification agreement and booked the same as income in respective years. Till 31st March 2021, total amount of Rs. 14,392 Lacs (excluding GST) has been withheld and Rs. 5,452 Lac (excluding GST) has been paid under protest. The Company is in discussion with respective customers for resolution of the issue. The company is confident that issue will be resolved in due course and no material adjustment is expected on settlement.

a. Terms and rights attached to equity shares

The Company has only one class of equity shares each having a par value of Rs. 10/- per share. They entitle the holder to participate in dividend and to share in the proceeds of winding up of the company in proportion to the number of and amounts paid on the shares held. Every holder of equity shares present at a meeting in person or by proxy, is entitled to one vote per share.

b. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

*The Company during the previous year has elected to exercise the option of lower tax rate of 25.17% under Section 115BAA of the Income Tax Act, 1961 as introduced by the Taxation Laws (Amendment) Ordinance, 2019. Impact of remeasurement of deferred tax liabilities (DTL) on account of the above option is reversal of DTL by Rs Nil (Rs 374 Crore during the year ended on 31st March 2020)

* The Company has entered into long term agreements for 20 years for providing LNG regasification services (w.e.f. Sept' 2016) by allocating 7 MMTPA out of the total regasification capacity from its Dahej terminal. The advance received by the Company is adjustable against charges on regasification service during the course of the agreement.

* To secure against future escalation in lease rent for the Kochi LNG Terminal and also to settle ongoing litigations with the Cochin Port Trust (CPT), the Company had entered into one-time settlement of lease rent to CPT (for the period from 2010 to 2039). Accordingly expenses of Rs. Nil (Rs 7,206 lac for the year ended 31st March, 2020) has been recognised as an exceptional item.

38 Contingent liabilities, contingent assets and commitmentsA. ommitments

a. Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for Rs 11,630 lac (as on 31 March 2020 Rs. Nil).

b. "The Company has entered into following long term LNG purchase agreements:

a. 7.5 MMTPA with Ras Laffan Liquified Natural Gas Company Limited (2), Qatar for a period upto April 2028.

b. 1.44 MMTPA with Mobil Australia Resources Company PTY Ltd, Australia for a period upto 2035.

Since the Company has entered into materially back to back sale agreements against the above purchase agreements, there is no foreseeable loss on these agreements as on the balance sheet date. The Company has issued Standby Letter of Credit of Rs. 3,10,898 lac (Rs. 4,31,924 lac as on 31 March 2020) to Ras Laffan Liquified Natural Gas Company Limited (2) and Rs. 80,954 lac (Rs 78,334 lac as on 31 March 2020) to Mobil Australia Resource Company PTY Ltd against the Long Term Purchase Agreements."

B. ontingent Liabilities

"In the ordinary course of business, the Company faces claims and assertions by various parties. The Company assesses such claims and assertions and monitors the legal environment on an ongoing basis with the assistance of internal legal team. The Company records a liability for any claims where a potential loss is probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Company provides disclosure in the financial statements but does not record a liability in its accounts unless the loss becomes probable.The following is a description of claims and assertions where a potential loss is possible, but not probable. The Company believes that none of the contingencies described below would have a material adverse effect on the Company’s financial condition, results of operations or cash flows."

a. The Collector of Electricity Duty, Gandhinagar (Gujarat) had issued notices classifying the business activities of the Company as “Storage (HTP-MA)” instead of “Industrial Undertaking (HTP I)” and hence levied Electricity Duty @ 45% (revised rates @25%) instead of 20% (Revised rate @15%) of the consumption charges. The Company has challenged the legality and validity of the notices by way of writ petitions before the Hon'ble High Court of Gujarat who had quashed the supplementary bill/demand notice and remanded the case back to the Collector of Electricity Duty vide order dated 1 July 2014. The Company has made its submissions before the Collector of Electricity Duty, Gandhinagar and the order is awaited. The total demand till 31 March, 2021 is Rs. 7,357 lac (as on 31 March 2020 Rs. 6,156 lac).

b. The Collector of Stamps, Bharuch had issued notice to the Company to pay stamp duty @ Re.1 per Rs.1000/ or part thereof of the value mentioned in the Delivery Order of the goods imported through ports in Gujarat pursuant to the amendment to Section 24 of the Bombay Stamp Act, 1958. The Hon’ble High Court of Gujarat has quashed the notice. Stamp authorities have filed Special Leave Petition (SLP) in Hon'ble Supreme Court against the same and the case is pending as on date. The potential liability from the effective date of amendment i.e. 1 April 2006 till 31 March 2021 on the CIF value would be Rs. 29,514 lac (Rs. 27,673 lac as on 31 March 2020).

c. The Company has received refund of Rs.112 lac, Rs.284 lac and Rs.346 lac from Customs department vide CESTAT order dated 7 November 2013, 9 September 2011 and 31 May 2010 respectively mainly pertaining to custom duty on short landing of LNG. The Custom Authorities have filed appeal against the order of the CESTAT with the Hon’ble High court of Gujarat and the outcome of the case is pending as on date.

d. Taxes and duties recoverable includes custom duty recoverable amounting to Rs.959 lac (in relation to short landing of LNG under spot purchase agreement). The company has received favourable order in respect of the above issue from Commissioner (Appeals) and CESTAT. However, the refund of the custom duty has been denied by department and

Commissioner (Appeals) on the ground of time barred refund application. The company has preferred an appeal against the above order with CESTAT and received a negative order. Company filed an WRIT Petition with Hon'ble Gujarat High Court against the CESTAT order, and got favourable ruling. The Company has got refund of the above amount (Rs 959 lac) in June 2020. The department has preferred an appeal with Hon'ble Supreme Court against the order of Hon’ble High court of Gujarat, the outcome of which is pending as on date.

e. The company had received demand for Service Tax on vessel hire charges for the period 16 May 2008 to 30 September 2009 amounting to Rs.4,005 lac (including Interest). The Company had paid the demand under protest and preferred an appeal before CESTAT against the above demand and received favourable order on 24 October 2013. The Company had received the refund (including interest), however the department had preferred an appeal against the CESTAT order before the Hon'ble Supreme Court, the outcome of which is pending as on 31.03.2021.

f. The Principal Commissioner of service tax has issued order against the company regarding service tax demand on boil off quantity of LNG during regasification process (for the period April 2009 to March 2015) amounting to Rs.1,780 lac. The company paid the demand under protest amounting to Rs.3,256 lac (including interest and penalty). Further, the company had suo moto paid service tax and interest amounting to Rs.2,039 lac under protest for the period April’15 -June'17. The company has received preferable order from CESTAT/Commissioner of service tax in respect of amount deposited by the company .However, refund against the amount deposoited by the company is pending to be received from department as on 31.03.2021.

g. Kochi terminal of the Company is having Co-developer status in Puthuvypeen SEZ (PSEZ). As a Co-developer, it is entitled for the tax and duty benefits on the materials/ services received for authorized operation of its Kochi terminal. After exit of only unit ( viz GAIL) from this SEZ , PSEZ officials have denied endorsement of certain service invoices on which tax benefits were availed. Total amount of tax benefits availed on such invoices is Rs. 4,776 lac during the period from April 2019 to Februry 2020. In case invoices are not endorsed, refund of GST/ input credit may be denied to the vendors which may be claimed by some of the vendors from the Company. Matter is appropriately taken up with the SEZ authorities.

h. The Company has filed Service Tax Refund Application for services availed in the Special Economic Zone for the LNG Terminal at Kochi, amounting to Rs.1,526 lac (as on 31 March 2020 Rs.1,652 lac). The Company has received the favourable order from CESTAT for Rs.774 lac, refund of which is pending as on 31 March 2021 on account of further query by Assistant Commissioner. For balance Rs. 752 lac, the application is pending at Assistant Commissioner level as on date.

i. There are certain claims amounting Rs. 25,131 lac plus interest and cost of arbitration as on 31 March 2021 made by a Contractor against capital works for which the Company has also made certain counter claims. The claim includes two matters of arbitration amounting to Rs. 10,666 lac plus interest and cost of arbitration and Rs. 14,465 lac plus interest and cost of arbitration for Kochi and Dahej terminal respectively. Both the arbitration proceedings are still in progress. Pending conclusion of arbitration and settlement final outcome of the claim is not ascertainable.

j. There are some income tax related matters which are pending at various forum. The potential liability in these case from AY 2008-09 to AY 2016-17, as on 31st March 2021 is Rs.1805 lac (Rs. 1,559 lac as on 31 March 2020).

C. ontingent Assets

The Company has no contingent assets as at 31 March 2021 (Rs Nil as on 31 March 2020).

39 Segment information

Segment information is presented in respect of the company’s key operating segments. The operating segments are

based on the company’s management and internal reporting structure.

Operating Segments

The Company's Board of Directors have been identified as the Chief Operating Decision Maker ('CODM'), since they are

responsible for all major decision w.r.t. the preparation and execution of business plan, preparation of budget, planning, expansion, alliance, joint venture, merger and acquisition, and expansion of any new facility. The company has a single operating segment "Natural Gas Business". Accordingly, there is only one Reportable Segment for the Company which is "Natural Gas Business", hence no specific disclosures have been made.

Entity wide disclosures

A. Information about products and services

Company primarily operates in one product line, therefore product wise revenue disclosure is not applicable.

B. Information about geographical areas

The major sales of the Company are made to customers which are domiciled in India. Also, all the assets other than non-current financial assets (investment and loan) of the Company are located in India.

40 Information on Covid- 19 Impact

The COVID-19 pandemic has caused significant social and economic disruption, all over the globe. The operations of the Company were not materially interrupted during the lockdown due to outbreak of COVID-19, as natural gas is declared as one of the essential commodities by the Government of India. The Company’s natural gas purchase and sale contracts are largely back to back over long term period. Further, due to the strategic location of the LNG Terminal of the Company at Dahej, Gujarat, it is the most sought-after terminal in India.The Dahej Terminal caters to about 2/3rd of the country’s LNG imports and meets around 40% of the country’s natural gas demand.The Kochi Terminal caters to a specific region in the state of Kerala, and is the only source of natural gas in the vicinity. The Company has adopted the best practices for safe and secured operation of the two LNG terminals during the lockdown period.

As per the market assessments, the Company is of the view that there would be slowdown in the demand of natural gas in a very short term period during the lockdown, and the demand would bounce back with the gradual easing off of the lockdown. The Company has evaluated the possible effects on the carrying amounts of property, plant and equipment, inventory and receivables basis the internal and external sources of information and determined, exercising reasonable estimates and judgements, that the carrying amounts of these assets are recoverable. Considering the above, and the Company’s healthy liquidity position, there is no uncertainty in the going concern of the Company and the Company will be able to meet its financial obligations over the foreseeable future.

42 The information required to be disclosed under the Micro, Small and Medium Enterprises (Development) Act, 2006 has

been determined to the extent such parties have been identified on the basis of information available with the company.

(a) the principal amount is Rs 865 lac ( Nil as on 31 March 2020) and the interest is Nil ( Nil as on 31 March 2020) due thereon remaining unpaid to any supplier;

(b) the amount of interest is Nil ( Nil as on 31 March 2020), paid by the buyer in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), along with the amount of the payment made to the supplier beyond the appointed day during each accounting year;

(c) the amount of interest due and payable for the period of delay in making payment is Nil ( Nil as on 31 March 2020) (which has been paid but beyond the appointed day during the year) but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006;

(d) the amount of interest accrued and remaining unpaid is Nil ( Nil as on 31 March 2020) at the end of each accounting year; and

(e) the amount of further interest remaining due and payable Nil ( Nil as on 31 March 2020) even in the succeeding years, until such date when the interest dues above are actually paid to the small enterprise, for the purpose of disallowance of a deductible expenditure under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.

43 Employee benefits

The Company contributes to the following post-employment defined benefit plans in India.

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. Contribution to the defined contribution plan, recognised as expenses for the year is as under:

For the year

For the year



31 March 2021

31 March 2020

Contribution to Govt. Provident Fund



Contribution to Superannuation Fund



(ii) Defined Benefit Plan:

(a) ratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to Group Gratuity cum Life Assurance Schemes administered by the LIC of India.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2021. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

(b) ost-retirement medical scheme plan (PRMS)

The Company provides Post-Retirement Medical Benefit to its employees . Under the scheme, eligible retired employees of the Company (along with their spouse) are allowed to claim reimbursement against the medical expenses for hospitalisation through insurance policy coverage. The Company has accounted for PRMS for the first time in the current financial year and accordingly comparitive figures have not been disclosed.

E. Actuarial assumptions -PRMS a) Economic assumptions

The principal assumptions are the discount rate & cost growth rate. The discount rate is based upon the market yields available on Government bonds at the accounting date relevant to currency of benefit payments for a term that matches that of the liabilities. Medical cost increase rate is company’s long term best estimate as to cost increases taking into account of inflation, other relevant factors on long term basis as provided in relevant accounting standard. These valuation assumptions are as follows & have been received as input from the company.

(iii) Other long-term employee benefits:

During the year ended 31 March 2021, the Company has incurred an expense on compensated absences amounting to Rs. 961 lac (previous year Rs. 620 lac). The Company determines the expense for compensated absences basis the actuarial valuation using the Projected Unit Credit Method.

* The Company has subscribed to share capital amonting to Rs 10 Crore of newly incorporated wholly owned subsidiary Petronet Energy Limited (PEL), which was incorporated on 26 Feb 2021, out of which Rs 2.75 Crore has been paid in advance as share application money. The financials of the PEL has not been considered for consolidation, pending issue of share capital as on 31st March 2021.

** The amount recoverable is net of provision for doubtful debts of Rs 21 lac (Rs 178 lac as on 31 March 2020)

The transactions were made on normal commercial terms and conditions and at market rates.

46 Corporate Social Responsibility

As per provisions of section 135 of the Companies Act, 2013, the Company has to incur at least 2% of average net profits of the preceding three financial years towards Corporate Social Responsibility (“CSR”). Accordingly, a CSR committee has been formed for carrying out CSR activities as per the Schedule VII of the Companies Act, 2013.Details are as under:

B. Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are:

(a) recognised and measured at fair value and

(b) measured at amortised cost and for which fair values are disclosed in the financial statements.

To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-thecounter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.

There are no transfers between level 1 and level 2 during the year

Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date

- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

All of the resulting fair value estimates are included in level 2 except for unlisted equity securities and preference

shares, where the fair values have been determined based on present values and the discount rates used were

adjusted for counter party or own credit risk.

The carrying amounts of trade receivables, trade payables, capital creditors, cash and cash equivalents, current maturities of long term debt, unpaid dividend, and other payable for capital goods are considered to be the same as their fair values, due to their short-term nature.

The fair values for loans were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit

The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

II. Financial risk management

The Company has exposure to the following risks arising from financial instruments:- credit risk;

- liquidity risk; and

- market risk

Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the board of directors on its activities.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company's Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

i. Credit risk

The Company has made investments in Debt based Mutual Funds. These Mutual funds invests in NCD / Bonds / CP / CD of various companies and banks. In case, the investee company defaults on repayment, such losses may have to be borne by the investors of Mutual funds.

"Company generally takes Stand by Letter of Credit (SBLC) from its customers, the exceptions being its Promoters namely BPCL, GAIL, IOCL and ONGC. Option to take SBLC from Promoter is also being explored by the

Company.The Company establishes an allowance for impairment that represents its estimate of expected credit losses in respect of trade and other receivables. Basis the evaluation, the management has determined that there are credit impairment loss on the trade and other receivables.

The gross carrying amount of trade receivables is Rs. 1,87,474 lac (31 March 2020 - Rs. 1,60,435 lac).

During the period, provision amounting to Rs 21 lac for doubtful debts as on 31 March 2021, has been netted off against trade receivables. The Company management also pursue all options for recovery of dues wherever necessary based on its internal assessment. A default on a financial asset is generally when counterparty fails to make payments within 365 days when they fall due.

ii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines.

Management monitors rolling forecasts of the Company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at local level in accordance with practice and limits set by the Company. These limits vary by location to take into account the liquidity of the market in which the entity operates. In addition, the Company’s liquidity management policy involves projecting cash flows in major currencies , considering the level of liquid assets necessary, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and have an average maturity of 1 year (as at 31 March 2020 - 1 year ).

(b) Maturities of financial liabilities

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and excluding contractual interest payments and exclude the impact of netting agreements.

Market risk is the risk that changes in market prices - such as commodity prices (LNG), foreign exchange rates and interest rates - will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

a) Price risk

To protect the company from fluctuation of commodity prices, same are passed through to the off-takers in long term contract. In spot or short term contract, they are generally pass through to the customers except in few cases, up to 2 cargo load, where the company keeps the commodity price risk with themselves to take benefit from market fluctuation.

PLL imports LNG mainly from Qatar and Australia through long term chartered vessels. The foreign exchange involved in making payment to LNG suppliers, loading port charges and shipper is recovered from off-takers / customers under sale contract, both long term and short term. Company does not take any exposure on account of currency in Foreign Currency Loans by parallely taking derivatives to hedge against the the foreign exchange fluctuation on loan, if any. In respect of other payments on account of repair and capex of plant, operating expenses of plant and corporate offices etc. same are monitored on a regular basis to keep the open position at an acceptable level.

The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company cash flow to interest rate risk. Company policy is to maintain most of its borrowings at fixed rate using interest rate swaps to achieve this when necessary especially if the borrowing is made in foreign currency. Company has some amount of loan taken from International Finance Corporation, which is at variable rate. The Company ensures that such amount is kept at an acceptable level. The investment of surplus funds made by company in debt based of mutual funds is also subject to this risk. Company makes investment in a manner which minimises such risk and also takes regular feedback from the market experts on such investments. The Company has also given loans to India LNG Transport Company (No. 3) Limited, Malta which is at Bank Rate and any change in Bank Rate will impact the earnings.

Fair value sensitivity analysis for fixed-rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss, and the Company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

A change of 100 basis points in interest rates would have increased or decreased equity by Rs. 32 lac after tax (Previous year Rs. 59 lac). This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

48 apital management

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital on a yearly basis as well as the level of dividends to ordinary shareholders which is given based on approved dividend policy.

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.