REG - Indus Gas Limited - Annual Financial Report
29/09/2023 07:00
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RNS Number : 0751O Indus Gas Limited 29 September 2023
29 September 2023
Indus Gas Limited
("Indus" or the "Company")
Audited Final Results for the 12 months ended 31 March 2023
Indus Gas Limited (AIM:INDI), an oil & gas exploration and development
company with assets in India, announces its full year results for the 12
months to 31 March 2023.
Highlights
· With effect from 1(st) April 2022, the sales gas price was agreed to be
the price as per the Domestic Natural Gas Price (APM Price) on GCV basis as
notified by Petroleum Planning & Analysis Cell (PPAC) from time to time.
The gas price revision had resulted in the gas price being revised to US$ 6.1
per MMBTU (Metric Million British Thermal Unit) on GCV basis from 1 April 2022
to 30 September 2022 and to US$ 8.57 per MMBTU on GCV basis from 1st October
2022 to 31st March 2023. As per revised Domestic gas pricing Guidelines, Sales
gas price shall be 10 pct of monthly average of Indian crude basket as
notified by PPAC on monthly basis from 8th April, 2023.
· New development wells produced rich Gas with lower CO2.
· PNGRB is evaluating the options for pipelines infrastructure/route for
evacuation of the gas from the block.
OPERATIONAL
§ Preparations continued on site during the year for the planned ramp up in
production including the drilling of additional wells.
§ Drilling and completion of production wells for the SGL field development
continued as planned to meet the planned gas sale requirements.
§ Continued testing of previously drilled wells.
FINANCIAL
§ Total Revenues were US$ 63.03 million (2021-22: US$ 53.71 million).
§ Operating profit increased to US$ 54.76 million (2021-22: increased to US$
45.94million).
§ Profit before tax increased to US$ 54.87 million (2021-22: US$ 45.96
million).
§ Net Investments made in property, plant and equipment amounting to US$
74.21 million (2021-22: US$ 68.27 million).
§ All repayments under the existing debt terms were made on a timely basis.
Chairman's Statements
This has been a good year and the Company has been able to achieve higher
Gas Revenues.
The Company's strong operational and financial performance is highlighted by
another year of good profit generation.
The Board would like to thank employees, shareholders, bankers and all other
stakeholders for their loyalty and continued support. The management team will
continue to focus on the execution of the Company's long-term strategy of
achieving both growth in reserves and commercial production. The Indian
government continues to prioritize the increase of domestic gas production to
make India Self-reliant thereby reducing the dependence on expensive imported
energy and enhancing energy security.
The Board also wishes to thank Mr Clive Gibbons, who steps down from his role
as a Non-Executive Director, effective today following the publication of
these financial statements, for his time and contribution to the Company and
wish him all the best in future endeavours.
Jonathan Keeling
Chairman
Board of Director's Review
We are pleased to announce another strong year of consolidated total revenues
totaling US$ 63.03 million (2021-22: US$ 53.71 million). We continued to have
good operating profits and our stated long-term business plan remains on
track. The revised Field Development Plan for the SGL area and an integrated
Field Development Plan for SSG & SSF area of the Block, for the future
enhancement of revenues, had been previously approved by the Management
Committee.
Operations
Operational activities over the last year have followed the Group's objectives
and are summarized below:
a) drilling of additional wells to support the integrated field
development plan;
b) drilling and completion of production wells for the SGL, SSG and SSF
field development continued;
c) testing various wells previously drilled where gas shows were
encountered to enable the Group to increase its reserve base; and
d) Testing the B&B gas recovery potential in addition to gas
discovered in the Pariwar formation.
The current drilling programme is progressing on schedule and producing
positive results. Following the approval of the FDP for SSG & SSF
Development area, we continue to test concepts and obtain log and core data
for analysis outside of the SGL area. In the SGL area, work continues to
increase our knowledge of the producing intervals. Additional testing is an
important element of the operational programme to enhance production and
maximize recovery of gas through efficient asset management. Activities such
as these will continue to increase as we obtain and act on new data and
production history. An important development in respect of the SGL Field was
the discovery of new intervals within Pariwar. These were located below the
existing producing P10 sands. These reservoirs were successfully exploited for
production and going forward will add to the reserves and production from both
existing and new wells.
Financials
During the financial year, the Company achieved total revenue of US$
63.03million (2021-22: US$ 53.71 million), resulting in reported operating
profit of US$ 54.76 million (2021-22US$ 45.94 million). The reported profit
after tax was US$ 30.87 million (2021-22 US$ 35.21 million).
While the Company is not expected to pay any significant taxes on its income
for many years in view of the 100% deduction allowed on the capital expenses
incurred in the Block, the Company has accrued a deferred tax liability of US$
23.99 million (2021-22: US$ 10.75 million) as per IFRS
requirements.
Post this deferred tax liability provision, the net profit for the year was
US$ 30.87 million.
The net expenditure on the purchase of property, plant & equipment was US$
74.21million (2021-22: US$ 68.27 million). The property plant and equipment,
including development assets and production assets, increased to US$
1,223.43million (2021-22: US$ 1,149.22 million).
The current assets (excluding cash) as of 31 March 2023 stood at US$ 123.92
million (2021-22: US$ 149.97 million), which majorly includes US$ 9.93 million
(2021-22: US$ 9.46 million) of inventories, US$ 101.07 million (2021-22: US$
120.41 million) of receivables from related party and US$ 6.60 million
(2021-22: US$ 20.11 million) of trade receivables and another receivable.
Receivables of US$ 4.54 million of this total of US$ 6.60 million have been
realized subsequent to 31 March 2023. The current liabilities of the Company,
excluding the related party liability of US$ 0.33 million (2021-22: US$ 0.35
million) and current portion of long-term debt of US$ 28.46 million (2021-22:
US$ 172.75 million), stood at US$ 6.78 million (2021-22: US$ 6.58 million).
This comprised mainly of deferred revenue of US$ 4.75 million (2021-22: US$
5.08 million) (GAIL-Take or Pay Obligation) and other liabilities of US$ 2.03
million (2021-22: US$ 1.50 million).
As of 31 March 2023, the outstanding debt of the Company to banks was US$
40.02million (2021-22: US$ 58.32 million), of which US$ 24.16 million
(2021-22: US$ 19.08 million) was categorized as repayable within a year and
the remaining US$ 15.86million (2021-22: US$ 39.24 million) has been
categorized as a long-term liability. During the year, the Company repaid an
amount of US$ 21.94 million of the outstanding term loan facilities, as per
the scheduled repayment plan. As of 31 March 2023, the outstanding unsecured
debt from bonds was US$ 163.92million (2021-22: US$ 153.68 million), of which
US$ 4.30million (2021-22: US$ 153.68 million) was categorized as repayable
within a year and the remaining US$ 159.62million (2021-22: US$ Nil) has been
categorized as a long-term liability.
Outlook
During the next twelve months, we expect that the Company look forward to
continued drilling success in both Pariwar and B&B combined with
delivering further progress on the commercialization of our gas reserves.
Jonathan Keeling
Executive Chairman
Board of Directors
JONATHAN KEELING - EXECUTIVE CHAIRMAN
Jonathan was a founding partner and a main board member of Arden Partners plc,
a small and mid-cap institutional stockbroker and Jonathan's career in equity
capital markets spans in excess of 30 years. Prior to Arden, Jonathan worked
at Albert E Sharp, Harris All day and Old Mutual Securities. Jonathan is a
Fellow of the Chartered Institute for Securities and Investment.
CLIVE GIBBONS -DIRECTOR
Mr Clive Gibbons joined the board of directors with effect from 17 September
2020, Clive is an experienced Operations Director, specialising in the
corporate and fiduciary services sector and currently works at the Newhaven
Group, based in Guernsey. Clive is a qualified Independent Investment
Financial Advisor Level 3, compliance manager, accredited director, approved
by the Guernsey GFSC (Guernsey regulator), BVI FSC (BVI regulator), with over
18 years in the sector. He was previously a Managing Director in the Cayman
Islands for Vistra and previously worked at Close Brothers (Close Finance),
Kleinwort Benson and Royal Bank of Scotland International.
ATIQ ANJARWALLA - DIRECTOR
During the year, Mr. Atiq joined the board of director as independent
non-executive director on 3(rd) October 2022. Mr. Atiq is an experience
Lawyer and is a Solicitor of the Supreme Court of England and Wales Advocate
of the High Court of Kenya and a Legal Consultant in Dubai. Atiq has a Master
of Law from Jesus College Cambridge, England. Atiq's legal experience spans
Corporate, Private Client, Banking, Project Finance and Capital Markets.
ELIZABETH POWELL - DIRECTOR
During the year, Mrs. Elizabeth Powell joined the board of director as
independent non-executive director on 7(th) March 2023. Liz's background is
primarily in Human Resources through her work with a major Guernsey based
independent fiduciary. She has a CIPD qualification in HR and has become
skilled in international payroll matters. In recent years, in addition to her
personnel skills, she has taken on directorships in companies employing staff
in the Oil & Gas sector as well as companies owning assets for
international oil companies.
NICHOLAS SAUL - DIRECTOR
During the year, Mr. Nicholas Saul joined the board of director as independent
non-executive director on 7(th) March 2023. Nick started his career as a
Merchant Navy Officer with Texaco in 1980 and has been working in the Oil
& Gas industry since. Today, he owns successful Guernsey business that
manages the employment of thousands working in the hydrocarbons industry as
well over 10,000 mariners. Nick has a BSc in Maritime Commerce, is an
Associate Fellow of the Nautical Institute and a Chartered Member of The
Chartered Institute of Logistics and Transport.
Directors' Report
The Directors present their report and the financial statements of Indus Gas
Limited ("the Company") and its subsidiaries, iServices Investments Ltd and
Newbury Oil Co. Ltd (collectively the "Group"), which covers the year from 1
April 2022 to 31 March 2023.
PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS
The principal activity of the Company and Group is that of oil and gas
exploration, development and production and other related services.
RESULTS AND DIVIDENDS
The trading results for the year and the Group's financial position at the end
of the year are shown in the attached financial statements. The Group has
earned a profit before tax of USD 54.87 million (2021-22: US$ 45.96 million)
during the year, which is a significant aspect for measurement of the
effectiveness of company's operations.
The Directors have not recommended a dividend for the year (2022-23: Nil).
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
A review of the business and likely future developments of the Company are
contained in the Chairman's statement and the Board of Director's review,
given above.
BOARD AND SECRETARIAL CHANGES
The Company announces the following changes to its Board:
· Mrs. Elizabeth Powell has been appointed as a Non-Executive
Director with effect from 7(th) March 2023.
· Mr. Nicholas Saul has been appointed as a Non-Executive Director
with effect from 7(th) March 2023.
· Mr. Atiq Anjarwalla has been appointed as a Non-Executive
Director with effect from 3(rd) October 2022.
· Mr. Clive Gibbons is stepping down from the Board effective
today.
The Company announces following other changes with effect from 7(th) March
2023:
· Beauvoir Trust Limited have resigned as the Company Secretary of
the Company and Bachmann Secretarial Services Limited have been appointed as
the new Company Secretary of the Company.
· Registered office of the Company has changed from 1st Floor,
Tudor House, Le Bordage, St Peter Port, Guernsey GY1 1DB to the new office at
PO Box 112, St Martins House, Le Bordage, St Peter Port, Guernsey GY1 4EA.
DIRECTORS REMUNERATION
The Directors' remuneration for the year ended 31 March 2023 was:
Remuneration (£) Remuneration (US $)
Jonathan Keeling 100,000 119,166
Clive Gibbons 14,620 17,323
Atiq Anjarwalla 3,655 4,405
Fareed Soreefan* 759 1,000
Sangeeta Bissessur* 759 1,000
Angelos Alexandrou* 745 981
Paschalis Magnitis* 745 981
Total Directors' Remuneration 121,283 144,856
*Directors of subsidiary companies (I Services and Newbury)
The two new non-executive directors have only been paid in the current
financial year due to appointment on 7(th) March 2023.
The Directors' remuneration for the year ended 31 March 2022 was:
Remuneration (£) Remuneration (US $)
Peter Cockburn 75,000 101,304
Jonathan Keeling 100,000 135,851
Clive Gibbons 14,620 19,930
Antonia Kyriakou* 1,490 1,962
Fareed Soreefan* 759 1,000
Sangeeta Bissessur* 759 1,000
Total Directors' Remuneration 192,628 261,047
*Directors of subsidiary companies (iServices and Newbury)
The Director remuneration consists of monthly/quarterly compensation as per
the agreed terms. There are no further cash payments or benefits provided to
Directors.
GAS MARKETS IN INDIA
India has a significant deficit of hydrocarbons which we believe will result
in a long-term, steady demand for gas produced by our Block. According to
the Petroleum and Natural Gas Regulatory Board ("PNGRB") Report, Vision 2030,
India's natural gas demand will grow significantly to 746 MMSCM/d (26.3 BCF/d)
by the end of Fiscal 2030. India is expected to have approximately 32,727 km
of natural gas pipeline with a design capacity of 815 MMSCM/d in place by
2030. In order to further boost the consumption of natural gas in the country,
the Government established a Gas Trading Hub/ Exchange (GTHE), where natural
gas can be traded and supplied through a market-based mechanism instead of
multiple formula driven prices. Initial trading has already started on Indian
Gas Exchange.
The gas pricing policy announced by Government of India clearly outlined that
the pricing restriction under this policy is not applicable to RJ-ON/6. Gas
sold from Block RJ-ON/06 does not require any approval from the government for
the gas price. As a result, we are able to negotiate the price of natural gas
with our customers without such price restriction. The Gas sales are currently
being invoiced at a price of US$ 8.57per MMBTU on Net Calorific Value (NCV)
basis. From April 2023 the gas prices have been agreed to be US$ 9.16 per
MMBTU on Gross Calorific Value (GCV) basis. The prices for existing gas
contract will be linked to domestic gas prices on GCV basis as notified by
Petroleum planning and analysis cell of Government of India. The floor price
will continue to be existing price being US$ 4.5146 per MMBTU on GCV (US$ 5
per MMBTU on NCV).
FINANCIAL INSTRUMENTS
Details of the use of financial instruments by the Company are contained in
note 29 to the attached financial statements.
RELATED PARTY TRANSACTIONS
Details of significant related party transactions are contained in note 16 and
note 23 to the attached financial statements.
INTERNAL CONTROL
The Directors acknowledge their responsibility for the Company's system of
internal control and for reviewing its effectiveness. The system of internal
control is designed to manage the risk of failure to achieve the Company's
strategic objectives. It cannot totally eliminate the risk of failure but will
provide reasonable, although not absolute, assurance against material
misstatement or loss.
GOING CONCERN
After making enquires, the Directors have a reasonable expectation that the
Company will have adequate resources to continue in operational existence for
the foreseeable future. This expectation is based on estimates of future
potential revenues from the RJ-ON/6 Block that the Company will derive from
the sale of hydrocarbon reserves/resources and availability of adequate debt
funding from banks, financial markets as well as related parties to support
capital investment to enable the Company to undertake development activities
in the Block. For this reason, they continue to adopt the going concern basis
in preparing the financial statements. Refer note 27.
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Directors' report and
consolidated financial statements for each financial year which give a true
and fair view of the state of affairs of the Group and of the consolidated
statement of comprehensive income of the Group for that year. In preparing
those financial statements the Directors are required to:
o Select suitable accounting policies and apply them consistently;
o Make judgements and estimates that are reasonable and prudent;
o State whether International Financial Reporting Standards as adopted by
EU have been followed subject to any material departures disclosed and
explained in the financial statements; and
o Prepare consolidated financial statements on a going concern basis
unless it is inappropriate to presume that the Group will continue in
business.
The Directors confirm that the financial statements comply with the above
requirements.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and of the Group to enable them to ensure that the financial
statements comply with the requirements of the Companies (Guernsey) Law, 2008.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the provision and detection of fraud and other
irregularities.
The Directors are responsible for maintaining the integrity of the corporate
financial information included on the Group's website. Legislation in Guernsey
governing the preparation and dissemination of financial information may
differ from legislation in other jurisdictions.
To the best of our knowledge and belief:
· The financial statements have been prepared in accordance with
International Financial Reporting Standards, as adopted by the European Union;
· Give a true and fair view of the financial position and results
of the Group; and
· The financial statements include an analysis of the principal
financial instruments specific risks and uncertainties faced by the Group.
AUDITOR
All of the current Directors have taken all steps that they oughts to have
taken to make themselves aware of any information needed by the Group's
Auditor for the purposes of their audit and to establish that the Auditor is
aware of that information. The Directors are not aware of any relevant audit
information of which the Auditor is unaware.
By order of the Board
Jonathan Keeling
Risks and Risk Management
In planning our future activities and reacting to changes in our ongoing
business environment, we seek to identify, assess, mitigate and monitor the
risks that we face. Considerable effort is made during our planning process to
reduce and mitigate the various risks to the extent that this is practical and
commercially sound. Ideally large decisions taken early means that any later
adaptation or reaction should be small.
We cannot remove the Company from all risk and the oil and gas industry brings
with it many special challenges in specific risks. What we can and do strive
to achieve is to understand and manage the risk environment we work within.
The Company faces the appraisal, development and production risks of the oil
and gas industry. The business relies on extensive engineering, geological and
geophysical judgements.
As activities on the Block have grown and generated actual data and
experience, we have used this knowledge to reduce these risks. There has been
an increase in the number of wells to find hydrocarbons through the knowledge
gained from almost complete 3D seismic data and analysis of drilling results.
We shall continue to de-risk this area of our operations but the risk of a dry
hole will never reach zero. The risk of mechanical issues or well construction
failing remains. However, with greater standardization of well design and
repetition of activities this has reduced.
We currently depend on two customers for the sale of gas and substantially all
of our revenues. Discussions are on-going to find and develop new customer
relationships.
GAIL has significant financial resources and maintains a strong credit rating
providing comfort in meeting any obligations under our Agreement. Our gas is
purchased at our field and shipped via a GAIL owned pipeline to the power
plant. The pipeline is purpose built and operating well within its design
specification.
Further, the Company had entered into a Gas sale and purchase agreement with
another customer wherein the Company shall arrange to supply gas to its plant.
This provides good opportunity to the Company to expand its production.
However, the buyer's plant has been delayed and consequently the customer is
liable to pay Take or Pay charges.
The Company has one bank debt facility outstanding from its group of lenders.
These facilities were obtained on attractive terms in difficult lending
markets. Debt service for the facility remains strong and contributes to our
sound borrower track record. Additional amounts were raised during 2018
through unsecured bonds, which were further re-financed with the additional
bond offering made by the Company in November 2022. The Company has benefited
from consistent support of the majority shareholder particularly reducing the
risk of any funding gaps due to the delay in closing external finance. The
Production Sharing Contract that includes cost recovery and the long-term
sales contract for gas provide an enhanced cash flow to service debt and give
protection to lenders.
Our business, revenues and profits may fluctuate with changes in oil and gas
prices. Our production is mainly gas and has been sold on strong "Take or Pay"
contracts that significantly reduce the impact of fluctuations in the wider
global energy market. However, the prevailing prices of oil and gas can have
some bearing on new contracts and price revisions.
With effect from 1st April, 2022, the Sales Gas price was agreed to be the
price as per the Domestic Natural Gas Price (APM Price) on GCV basis as
notified by Petroleum Planning & Analysis Cell (PPAC) from time to time.
The gas price revision had resulted in the gas price being revised to US$ 6.1
per MMBTU on GCV basis from 1 April 2022 to 30 September 2022 and to US$
8.57 per MMBTU on GCV basis from 1st October 2022 to 31st March 2023. As per
the revised Domestic gas pricing Guidelines, Sales gas price shall be 10 pct
of monthly average of Indian crude basket as notified by PPAC on a monthly
basis from 8th April, 2023.
The oil and gas industry are subject to laws and regulations relating to
environmental and safety matters in exploration for and the development and
production of hydrocarbons. We are bound by the environmental laws and
regulations applicable to India and satisfy and in some areas exceed these
requirements by using good industry practice, trained staff and quality
equipment.
We are committed to upholding procedures to protect the environment and
enforce environmental, health, safety and security mechanisms through
accountability at all levels, suitable policies, feedback and full compliance
by each employee and contractor to all policies we develop.
Indus is subject to regulation and supervision by the Government of India
covering various aspects of our business. The Government has historically
played a key role, and is expected to continue to play a key role in
regulating, reforming and restructuring the Indian oil and natural gas
industry. A major platform for shaping the industry has been the award of
assets by various rounds under the NELP. Our Block was awarded before the
formation of NELP and therefore places greater emphasis on our Production
Sharing Contract (PSC) in our dealings with Government in various forms. To
date the Block Management Committee created under our PSC and including
multiple Government agencies has assisted the development progress we have
made so far. The Field Development Plan for the area beyond SGL has also been
approved by Management Committee consisting representatives of DGH and
government created under PSC.
Corporate Governance
The Directors recognize the importance of sound corporate governance and have
chosen to apply the Quoted Companies Alliance ("QCA") Corporate Governance
Code and Guernsey regulations in so far as they are appropriate given the
Company's size and stage of development. The Company may take additional
Corporate Governance measures beyond QCA guidelines and Guernsey regulations
as may be appropriate considering the Company's operations from time to time.
The Company has not adopted the UK Corporate Governance Code ("the Code") and
has chosen to apply the QCA Corporate Governance Code for Small and Mid-Size
Quoted Companies which is in line with most growing AIM companies adopted
practices. The disclosure requirements under the code have been complied with
and the detailed report is available on the official website
(http://www.indusgas.com/ (http://www.indusgas.com/) ) of the company.
Corporate Governance standards and procedures adopted by the Company are
regularly reviewed by the Chairman who has maintained dialogue and answered
questions of shareholders throughout the year. The Chairman has consulted the
Nomad on the objectives of Corporate Governance within the Company.
BOARD OF DIRECTORS
The Board is responsible for the proper management of the Company. The resumes
of the current board members are as outlined in the section 'Board of
Directors' on page no. 6.
Mr. Ajay Kalsi brings knowledge of the oil and gas industry and a range of
general business skills and continues to be an advisor to the company. The
other Directors had formed a number of committees to assist in the governance
of the Company and these are detailed below.
All Directors have access to independent professional advice, at the Company's
expense, when required.
SUB-COMMITTEES
The Board had constituted the three sub-committees outlined below, which were
then disbanded in March 2022 as a result of the Board's reduced size. Given
the Board's new directors appointed recently these sub committees will reform
in the future.
AUDIT COMMITTEE
The committee is responsible for ensuring that the financial performance of
the Company is monitored and reported on, for meeting with the Auditor and
reviewing findings of the audit with the external auditor. It is authorized to
seek any information it properly requires from any employee and may ask
questions of any employee. It meets the Auditor once per year without and is
responsible for considering and making recommendations regarding the
engagement and remuneration of the Auditor.
REMUNERATION COMMITTEE
The committee considers and recommends to the Board the framework for the
remuneration of the executive director of the Company and any other member of
senior management. It considers and recommends to the Board the total
individual termination package of each executive director including bonuses,
incentive payments and share options or other share awards. In addition,
subject to existing contractual obligations, it reviews the design of all
share incentive plans for approval by the Board and the Company's shareholders
and, for each such plan, recommends whether awards are made and, if so, the
overall amount of such awards, the individual awards to executive directors
and performance targets to be used in assessing performance. Board of
directors determines director remuneration. No director is involved in
decisions concerning his own remuneration.
NOMINATION COMMITTEE
The committee considers the selection and re-appointment of Directors. It
identifies and nominates candidates to all board vacancies and regularly
reviews the structure, size and composition of the board (including the
skills, knowledge and experience) and makes recommendations to the Board with
regard to any changes.
SHARE DEALING
The Company has adopted a share dealing code (based on the Model Code) and the
Company takes all proper and reasonable steps to ensure compliance by
Directors and relevant employees.
THE CITY CODE ON TAKEOVERS AND MERGERS
Being a Channel Islands incorporated company, the Company is subject to the UK
City Code on Takeovers and Mergers.
DISCLOSURE AND TRANSPARENCY RULES
As a Company incorporated in Guernsey, Shareholders are not obliged to
disclose their interests in the Company in the same way as shareholders of
certain companies incorporated in the UK. In particular, the relevant
provisions of chapter 5 of the Disclosure and Transparency Rules (DTR) do not
apply. While the Articles contain provisions requiring disclosure of voting
rights in Ordinary Shares, which are similar to the provisions of the DTR,
this may not always, ensure compliance with the requirements of Rule 17 of the
AIM Rules. Furthermore, the Articles may be amended in the future by a special
resolution of the Shareholders.
CONTROL BY SIGNIFICANT SHAREHOLDER
Gynia Holdings Limited, along with its wholly owned subsidiary Focus oil Inc.
own a significant percentage of outstanding shares of the Company. As a
significant shareholder, Gynia could exercise significant influence over
certain corporate governance matters requiring shareholder approval, including
the election of directors and the approval of significant corporate
transactions and other transactions requiring a majority vote.
The Company, Strand Hanson Limited (Nomad & Broker), Gynia and Mr. Ajay
Kalsi have entered into a relationship agreement to regulate the arrangements
between them. The relationship agreement applies for as long as Gynia directly
or indirectly holds in excess of thirty per cent of the issued share capital
of the Company and the Company's shares remain admitted to trading on AIM. The
relationship agreement includes provisions to ensure that:
a) The Board and its committees are able to carry on their business
independently of the personal interests of Gynia;
b) The constitutional documents of the Company are not changed in such a
way which would be inconsistent with the relationship agreement.
c) All transactions between the Group and Gynia (or its affiliates) are on
a normal commercial basis and at arm's length;
d) In the event of a conflict of interest between Gynia and the Board, no
person who is connected with Gynia is appointed as a Non-Executive Director of
the Company and no existing Non-Executive Director is removed as a director of
the Company unless such an appointment or removal has been previously approved
by the nomination committee of the Board and that to the extent that any
previously approved by the nomination committees concerns the composition of
the Board which has been approved by the Board requiring the approval of the
shareholders of the Company then Gynia will vote its Ordinary Shares in
favour; and
e) The Shareholder puts certain restrictions in place to prevent
interference with the business of the Company.
Consolidated Financial Statements and Independent Auditor's Report
Indus Gas Limited and its subsidiaries
31 March 2023
Independent auditor's report
To the members of Indus Gas Limited
Opinion
We have audited the Consolidated financial statements of Indus Gas Limited
(the 'Company') and its subsidiaries (the 'Group') for the year ended 31
March 2023 which comprise the Consolidated Statement of Financial Position,
the Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Changes in Equity, the Consolidated Statement of Cash Flows and notes to
the consolidated financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
In our opinion, the consolidated financial statements:
· give a true and fair view of the state of the Group's affairs as
at 31 March 2023 and of the Group's profit for the year then ended;
· are in accordance with IFRSs as adopted by the European Union;
and
· comply with The Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the 'Auditor's responsibilities for the
audit of the consolidated financial statements' section of our report. We are
independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Guernsey,
including the FRC's Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors' use
of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify the
auditor's opinion. Our conclusions are based on the audit evidence obtained up
to the date of our report. However, future events or conditions may cause the
Group to cease to continue as a going concern.
Our evaluation of management's assessment of the entity's ability to continue
as a going concern
Our evaluation of the directors' assessment of the Group's ability to continue
to adopt the going concern basis of accounting included the following:
· The audit engagement leader increased time spent directing and
supervising the audit procedures on going concern;
· We assessed the determination, made by the Board of Directors of
the Group, that the Group is a going concern and the appropriateness of the
financial statements to be prepared on a going concern;
· We obtained the 12 month going concern assement performed by
management, including the assumptions and sensitivities prepared by
management;
· We challenged the appropriateness of management's forecasts by;
o checking the mathematical accuracy of the cash flow forecasts
o assessing the key assumptions used in the going concern assessment based
on our knowledge of the Group and the current economic climate; and
o challenging management's consideration of downside sensitivity by applying
further sensitivies to understand the impact on liquidity reverse stress
stressing.
· We assessed the disclosures in the financial statements relating
to going concern to ensure that they were fai, balanced and understandable and
in compliance with IFRS as adopted by the European Union and
· We obtained verbal and written representations from management
and those charged with governance detailing their basis on their decision to
continue adopting the going concern assumption
In our evaluation of the directors' conclusions, we considered the inherent
risks associated with the Group's business model , we assessed and challenged
the reasonableness of estimates made by the directors and the related
disclosures and analysed how those risks might affect the Group's financial
resources or ability to continue operations over the going concern period.
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's ability to continue as
a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect
to going concern are described in the relevant sections of this report.
Our approach to the audit
Overview of our audit approach
Overall materiality: US$ 2,669,500 which represents 5% of the Group's profit
before taxation, determined at the planning stage of the audit.
Key audit matters were identified as
· impairment of production and development assets (same as previous
year)
Our audit report for the year ended 31 March 2022 included a key audit matter
relating to the material uncertainty regarding going concern of the Group for
which management's forecasts assumed the bonds would be fully repaid in
December 2022 through a fund raise that was anticiapated at the end of the
2022 calendar year. The key audit matter has not been reported in our current
year's report as this was addressed by the refinancing which occurred in the
current year.
Full scope audit procedures have been performed on the financial information
of Indus Gas Limited and its subsidiary companies. There is no change in scope
of the audit from the prior year.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the consolidated financial statements of
the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those that had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
In the graph below, we have presented the key audit matters, significant risks
and other risks relevant to the audit.
Key audit matter Significant risk Other risk
Key Audit Matter How our scope addressed the matter
Impairment of production and development assets ("P&D assets") In responding to the key audit matter, we performed the following audit
procedures:
We identified the impairment of P&D assets as one of the most significant
assessed risks of material misstatement due to error. o We have compared the carrying value of assets to management's
assessment of the recoverable amount to assess that the carrying value is not
in excess of recoverable amount.
At 31 March 2023, the Group held P&D assets of US$ 1,212,726,514 (31 o We agreed the recoverable amount to management's future cash flow
March 2022: US$ 1,142,120,102). model and performed the following detailed procedures over the model, along
with impairment assessment and disclosures in financial statements:
Recoverability of P&D assets is dependent on the expected future success
of exploration and development activities. Under International Accounting - We corroborated, through obtaining supporting documentation and
Standard (IAS) 16 "Property, plant and equipment", an impairment test is audit evidence, estimates of future cash flows and challenged whether these
required, using the principles of IAS 36 "Impairment of Assets", for P&D were appropriate in light of the future price, volume assumptions and the
assets. costs budgets.
- We assessed the sensitivity analysis over inputs to the cash flow
models wherein we have challenged the assumptions taken by management
Based on our professional judgement, we determined the recoverability of the (including price, discount rate, operating cost etc);
carrying amount of P&D assets amounting to US$1,212,726,514 is dependent
upon the future cashflows of the business. The Group has capitalised taking - We have assessed the appropriateness of management's defined cash
into account the IFRS 6 "Exploration for and Evaluation of Mineral generating units ("CGUs") and impairment testing methodology under IFRSs as
Resources" and IAS 16 "Property, Plant and Equipment" recognition criteria. In adopted by the European Union and whether disclosures in the consolidated
the previous years, the Group obtained approval on the reserves for the SSG financial statements are appropriate, complete and in accordance with IFRSs as
and SSF field from the Directorate General of Hydrocarbons ('DGH'). Further adopted by the European Union; and
the Management Committee has also approved the revised Field Development Plan
('FDP') in respect of the SGL area for the enhancement of production. Bearing - We examined the methodology used at the CGU level by the management
in mind the generally long-lived nature of the Group's assets, the most to assess the carrying value of P&D assets assigned to the Group's
critical assumption in relation to the management's assessment of future cash principal CGU to evaluate its compliance with accounting standards and
flows, which are used to project the recoverability of P&D assets are consistency of application.
management's views on sales volume and gas price outlook.
Impairment of P&D assets has been identified as a key audit matter as the
assessment of the recoverable amount of the Company's cash generating units
(CGUs) and investments involves significant judgements about the future cash
flow forecasts and the discount rate applied.
Relevant disclosures in the Annual Report and Accounts 2022-23 Our results
· Consolidated Financial statements: Note 6.7, Impariment testing
for exploration and evaluation assets and property,plant and equipment;
Based on our procedures we have not identified any material misstatements in
· Consolidated Financial Statements: Note 7, Property, plant and relation to the impairment of production and development costs.
equipment.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit,
and in evaluating the effect of identified misstatements on the audit and of
uncorrected misstatements, if any, on the consolidated financial statements
and in forming the opinion in the auditor's report.
Materiality was determined as follows:
Materiality measure Group
Materiality for consolidated financial statements as a whole We define materiality as the magnitude of misstatement in the consolidated
financial statements that, individually or in the aggregate, could reasonably
be expected to influence the economic decisions of the users of these
consolidated financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Materiality threshold US$ 2,669,500 which is 5% of the Group's profit before tax determined at the
planning stage.
Significant judgements made by auditor in determining the materiality In determining materiality, we made the following significant judgements
· Profit before tax is considered to be the most appropriate
benchmark as this is used by investors to judge the performance of the Group
and is a significant aspect for measurement of the effectiveness of the
Group's operations for management.
Materiality for the current year is higher than the level that we determined
for the year ended 31 March 2022 due to increase in profit before tax for the
year ended 31 March 2023.
Performance materiality used to drive the extent of our testing We set performance materiality at an amount less than materiality for the
consolidated financial statements as a whole to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the consolidated financial statements as
a whole.
Performance materiality threshold US$ 1,601,712 which is 60% of financial statement materiality.
Significant judgements made by auditor in determining the performance In determining performance materiality, we made the following significant
materiality judgements
· We considered the Group's overall control environment to be
effective based on the results of our risk assessment procedures; and
· There were no misstatement identified in the previous year.
Specific materiality We determine specific materiality for one or more particular classes of
transactions, account balances or disclosures for which misstatements of
lesser amounts than materiality for the consolidated financial statements as a
whole could reasonably be expected to influence the economic decisions of
users taken on the basis of the consolidated financial statements.
Specific materiality We determined a lower level of specific materiality for the following areas:
Related party transactions and balances as a class of transactions, account
balances or disclosures.
Communication of misstatements to the audit committee We determine a threshold for reporting unadjusted differences to the audit
committee.
Threshold for communication US$ 133,500 and misstatements below that threshold that, in our view, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our
overall materiality and the tolerance for potential uncorrected misstatements.
Overall materiality
FSM: Financial statements materiality, PM: Performance materiality, TFPUM:
Tolerance for potential uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the Group's
business and in particular matters related to:
Understanding the Group, its components, and their environments, including Group-wide controls (https://gtuksp.gtukint.com/audit/aop/Pages/AE%207-9-3%20Risk%20assessment%20and%20planning%20in%20group%20audits.aspx#AE-7-9-3-3)
· The engagement team obtained an understanding of the Group and
its environment, including Group-wide controls, and assessed the risks of
material misstatement at the Group level;
· All significant elements of the group's finance and accounting
function are situated and managed centrally and operate under one common
internal control environment; all operations of the group are also managed
from this location; and
Identifying significant components and the type of work performed on financial information of parent and other components (including how it addressed the key audit matters)
· The financial significance of the two significant components. In
assessing the risk of material misstatement to the consolidated financial
statements, and to ensure we had adequate quantitative coverage of significant
accounts in the consolidated financial statements, we performed full scope
audit procedures the two components. This enabled us to obtain coverage of
100% of consolidated revenue, 100% coverage of consolidated profit before tax
and 100% coverage of total assets for the group;
· We undertook substantive testing on significant transactions,
balances and disclosures, the extent of which was based on various factors
such as our overall assessment of the control environment, the effectiveness
of controls over individual systems and the management of specific risks.
· Our audit procedures in respect of key audit matters have been
described in the 'Key audit matter's section or our report
The approach adopted for the scope of the audit is same as that of the
previous year and there has been no change.
Other information
The other information comprises the information included in the annual report,
other than the consolidated financial statements and our auditor's report
thereon. The directors are responsible for the other information contained
within the annual report. Our opinion on the consolidated financial statements
does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement of the consolidated
financial statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to
which the Companies (Guernsey) Law, 2008 requires us us to report to you, in
our opinion:
· proper accounting records have not been kept by the Company; or
· the Company's financial statements are not in agreement with the
accounting records; or
· we have not obtained all the information and explanations, which
to the best of our knowledge and belief, are necessary for the purposes of our
audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out
on page 11, the directors are responsible for the preparation of the
consolidated financial statements which give a true and fair view in
accordance with IFRSs, and for such internal control as the directors
determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, the directors are
responsible for assessing the Group's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements in the consolidated financial
statements may not be detected, even though the audit is properly planned and
performed in accordance with the ISAs (UK).
The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
· We obtained an understanding of the legal and regulatory frameworks
applicable to the Group and industry in which it operates. We determined that
the following laws and regulations were most significant: IFRS as adopted by
the European Union, Companies (Guernsey) Law, 2008, and the relevant tax
compliance regulations in the jurisdictions in which the Group operates. In
addition, we concluded that there are certain significant laws and regulations
that may have an effect on the determination of the amounts and disclosures in
the consolidated financial statements such as those laws and regulations
relating to health and safety, employee matters, and bribery and corruption
practices ;
· We obtained an understanding of how the Group is complying with those
legal and regulatory frameworks by making inquiries of management and those
responsible for legal and regulatory procedures. We corroborated our inquiries
through our review of board minutes and papers provided to the Board;
· We assessed the susceptibility of the Group's financial statements to
material misstatement, including how fraud might occur. Audit procedures
performed by the engagement team included ;
- identifying and assessing the design and implementation of controls
management has in place to prevent and detect fraud;
-challenging assumptions and judgements made by management in its significant
accounting estimates;
- identifying and testing journal entries, in particular any journal entries
posted with unusual account combinations; and
· These audit procedures were designed to provide reasonable assurance
that the financial statements were free from fraud or error. The risk of not
detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error and detecting irregularities that result
from fraud is inherently more difficult than detecting those that result from
error, as fraud may involve collusion, deliberate concealment, forgery or
intentional misrepresentations. Also, the further removed non-compliance with
laws and regulations is from events and transactions reflected in the
financial statements, the less likely we would become aware of it.
· The engagement partner's assessment of the appropriateness of the
collective competence and capabilities of the engagement team including
consideration of the engagement teams :
- understanding of, and practical experience with audit engagements of
a similar nature and complexity through appropriate training and
participation;
- knowledge of industry in which the client operates; and
- understanding of the legal and regulatory requirements specific to
the Group
· We communicated relevant laws and regulations and potential fraud
risk areas to all engagement team members, and remained alert to any
indications of fraud or non compliance with laws and regulations throughout
the audit.
· In assessing the potential risks of material misstatement, we
obtained an understanding of :
- the Group's operations, including the nature of its revenue sources,
products and services and of its objectives and strategies to understand the
classes of transactions, account balances, expected financial statement
disclosures and business risks that may result in risks of material
misstatement;
- the applicable statutory provisions; and
- the adequacy of procedures for authorisation of transactions,
internal review procedures over Group's compliance with statutory
requirements;
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Michael Carpenter
For and on behalf of Grant Thornton Limited
Chartered Accountants
St Peter Port
Guernsey
Date: xx September 2023
Consolidated Statement of Financial Position
(All amounts in United States Dollars, unless otherwise stated)
Note 31 March 2023 31 March 2022
ASSETS
Non-current assets
Property, plant and equipment 7 1,223,434,478 1,149,223,672
1,140,605 1,213,986
7,891 549
Tax assets
Other assets
Total non-current assets 1,224,582,974 1,150,438,207
Current assets
Inventories 10 9,932,047 9,459,753
Trade and other receivables 11 6,640,424 20,105,840
Prepayment and other assets due from a related party 16 107,348,170 120,408,124
Cash and cash equivalents 12 11,765,514 4,452,010
Total current assets 135,686,155 154,425,727
Total assets
1,360,269,129 1,304,863,934
LIABILITIES AND EQUITY
Shareholders' equity
Share capital 13 3,619,443 3,619,443
Additional paid-in capital 13 46,733,689 46,733,689
Currency translation reserve 13 (9,313,782) (9,313,782)
Merger reserve 13 19,570,288 19,570,288
Retained earnings 13 282,833,686 251,953,802
Total shareholders' equity 343,443,324 312,563,440
Liabilities
Non-current liabilities
Long term debt, excluding current portion 14 175,475,431 39,239,735
Provision for decommissioning 15 1,894,795 1,987,325
Deferred tax liabilities (net)
Payable to related parties, excluding current portion 8 144,392,951 120,398,433
16 633,924,200 625,442,503
Deferred revenue 18 30,311,748 25,563,995
Total non-current liabilities 985,999,125 812,631,991
Current liabilities
Current portion of long-term debt 14 28,458,200 172,747,343
Current portion payable to related parties 16 333,611 345,105
Trade and other payables 17 2,034,869 1,498,969
Deferred revenue 18 - 5,077,086
Total current liabilities 30,826,680 179,668,503
Total liabilities 1,016,825,805 992,300,494
Total equity and liabilities 1,360,269,129 1,304,863,934
(The accompanying notes are an integral part of these consolidated financial
statements)
These consolidated financial statements were approved and authorized for issue
by the board on 26 September 2023 and was signed on its behalf by:
JONATHAN KEELING
Chairman
Consolidated Statement of Comprehensive Income
(All amounts in United States Dollars, unless otherwise stated)
Note Year ended Year ended
31 March 2023 31 March 2022
Revenues 18
63,034,644 53,709,538
Cost of sales (7,362,450) (6,844,856)
Gross profit 55,672,194 46,864,682
Cost and expenses
Administrative expenses (915,858) (924,699)
Operating profit 54,756,336 45,939,983
Foreign currency exchange gain, net 20 118,066 15,322
Profit before tax 54,874,402 45,955,305
Income taxes 9
- Deferred tax expense (23,994,518) (10,745,121)
30,879,884 35,210,184
Profit for the year (attributable to the shareholders of the Group)
Total comprehensive income for the year (attributable to the shareholders of 30,879,884 35,210,184
the Group)
Earnings per share 22
Basic 0.17 0.19
Diluted 0.17 0.19
(The accompanying notes are an integral part of these consolidated financial
statements)
Consolidated Statement of Changes in Equity
(All amounts in United States Dollars, unless otherwise stated)
Common stock Additional paid in capital Currency translation reserve Merger reserve Retained earnings Total shareholders' equity
No. of shares Amount
Balance as at 1 April 2021 182,973,924 3,619,443 46,733,689 (9,313,782) 19,570,288 216,743,618 277,353,256
Total comprehensive income for the year - - - - - 35,210,184 35,210,184
Balance as at 31 March 2022 182,973,924 3,619,443 46,733,689 (9,313,782) 19,570,288 251,953,802 312,563,440 -
Total comprehensive income for the year - - - - - 30,879,884 30,879,884
Balance as at 31 March 2023 182,973,924 3,619,443 46,733,689 (9,313,782) 19,570,288 282,833,686 343,443,324
(The accompanying notes are an integral part of these consolidated financial
statements)
Consolidated Statement of Cash Flow
(All amounts in United States Dollars, unless otherwise stated)
Year ended ( ) Year ended
31 March 2023 31 March 2022
Cash flow from operating activities ( )
Profit before tax 54,874,402 ( ) 45,955,305
Adjustments ( )
Unrealized exchange loss/(gain) (118,066) ( ) 36,942
Depreciation 6,443,735 ( ) 5,834,482
Changes in operating assets and liabilities ( )
Inventories (472,294) ( ) (921,489)
Trade receivables 11,736,924 ( ) 14,573,417
Other current and non-current assets (3,355,936) ( ) (1,725,158)
Payable to related party-operating activities 13,059,954 ( ) 6,375,770
Provisions for decommissioning (92,528) ( ) 74,898
Accrued expenses and other liabilities (7,724,358) ( ) (2,390,428)
Cash generated from operations 74,351,833 ( ) 67,813,739
Income taxes (paid)/received 73,384 ( ) (320,588)
Net cash generated from operating activities 74,425,217 ( ) 67,493,151
Cash flow from investing activities ( )
Purchase of property, plant and equipment (12,237,220) ( ) (22,561,337)
( )
Net cash used in investing activities (12,237,220) ( ) (22,561,337)
Cash flow from financing activities ( )
Proceeds from long term bonds 159,839,930 ( ) -
Repayment of long-term Bonds (150,000,000) -
Repayment of long-term debt from banks (18,936,000) (20,736,000)
Proceeds from loans by related parties 6,000,000 ( ) 17,425,000
Repayment of loans by related parties (37,250,000) ( ) (23,000,000)
Payment of interest (14,646,488) ( ) (15,150,562)
Net cash generated from financing activities (54,992,558) ( ) (41,461,562)
Net increase in cash and cash equivalents 7,195,439 ( ) 3,470,242
Cash and cash equivalents at the beginning of the year 4,452,010 ( ) 995,765
Effects of exchange differences on cash and cash equivalents 118,066 (14,007)
Cash and cash equivalents at the end of the year 11,765,514 ( ) 4,452,010
(The accompanying notes are an integral part of these consolidated financial
statements)
Notes to Consolidated Financial Statements
(All amounts in United States Dollars, unless otherwise stated)
1. INTRODUCTION
Indus Gas Limited ("Indus Gas" or "the Company") was incorporated in the
Island of Guernsey on 4 March 2008 pursuant to an Act of the Royal Court of
the Island of Guernsey. The Company was set up to act as the holding Company
of iServices Investments Limited. ("iServices") and Newbury Oil Co. Limited
("Newbury"). iServices and Newbury are companies incorporated in Mauritius and
Cyprus, respectively. iServices was incorporated on 18 June 2003 and Newbury
was incorporated on 17 February 2005. The Company was listed on the
Alternative Investment Market (AIM) of the London Stock Exchange on 6 June
2008. Indus Gas through its wholly owned subsidiaries iServices and Newbury
(hereinafter collectively referred to as "the Group") are engaged in the
business of oil and gas exploration, development and production.
Focus Energy Limited ("Focus"), an entity incorporated in India, entered into
a Production Sharing Contract ("PSC") with the Government of India ("GOI") and
Oil and Natural Gas Corporation Limited ("ONGC") on 30 June 1998 for petroleum
exploration and development concession in India known as RJ-ON/06 ("the
Block"). Focus is the Operator of the Block. On 13 January 2006, iServices and
Newbury entered into an interest sharing agreement with Focus and obtained a
65 per cent and 25 per cent share respectively in the Block. The balance of 10
per cent of participating interest is owned by Focus. The participating
interest explained above is subject to any option exercised by ONGC in respect
of individual fields (already exercised for all the wells in SGL field as
further explained in note 3).
2. GENERAL INFORMATION
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards ('IFRS') as
adopted by the European Union ('EU'). The consolidated financial statements
have been prepared on a going concern basis (refer to note 28), and are
presented in United States Dollar (US$). The functional currency of the
Company as well as its subsidiaries is US$.
3. JOINTLY CONTROLLED ASSETS
As explained above, the Group through its subsidiaries-iServices and Newbury
has an "Interest sharing arrangement" with Focus in the block, which under
IFRS 11 Joint Arrangements, is classified as a 'Joint operation'. All rights
and obligations in respect of exploration, development and production of oil
and gas resources under the 'Interest sharing agreement' are shared between
Focus, iServices and Newbury in the ratio of 10 per cent, 65 per cent and 25
per cent respectively.
Under the PSC, the GOI, through ONGC has an option to acquire a 30 per cent
participating interest in any discovered field, upon such successful discovery
of oil or gas reserves, which has been declared as commercially feasible to
develop.
The block is divided into 3 fields - SGL, SSF and SSG.
The SGL field received its declaration of commercial discovery on 21 January
2008. Subsequent to the declaration of commercial discovery in SGL field, ONGC
exercised the option to acquire a 30 per cent participating interest in the
discovered fields on 6 June 2008. The exercise of this option reduced the
interest of the existing partners proportionately.
However, on exercise of this option, ONGC is liable to pay its share of 30 per
cent of the SGL field development costs and production costs incurred after 21
January 2008 and are entitled to a 30 per cent share in the production of gas
subject to recovery of contract costs as explained below.
The allocation of the production from the field to each participant in any
year is determined on the basis of the respective proportion of each
participant's cumulative unrecovered contract costs as at the end of the
previous year or where there is no unrecovered contract cost at the end of
previous year on the basis of participating interest of each such participant
in the field.
On the basis of the above, gas production for the year ended 31 March 2023 is
shared between Focus, iServices and Newbury in the ratio of 10 percent, 65
percent and 25 percent, respectively. ONGC will not be entitled to any
participating interest in the production until the full exploration and
development cost and production cost is recovered by other participants.
The aggregate amounts relating to jointly controlled assets, liabilities,
expenses and commitments related thereto that have been included in the
consolidated financial statements are as follows:
31 March 2023 31 March 2022
Non-current assets 1,223,434,478 1,149,223,672
Current assets 129,867,877
111,000,741
Non-current 1,894,797 1,987,325
liabilities
Expenses (net of finance income) 6,342,915 6,702,159
Further, the SSF and SSG field also received its declaration of commerciality
on 24th November 2014. Subsequent to the declaration of commerciality for SSF
and SSG discovery, ONGC did not exercise the option to acquire 30 percent in
respect of SSG and SSF field. The participating interest in SSG and SSF field
between Focus, iServices and Newbury will remain in ratio of 10 percent, 65
percent and 25 percent respectively for exploration, evaluation and
development cost, and production revenue for SSG and SSF in the block.
4. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
There are few Standards, interpretations or amendments that have been issued
prior to the date of approval of these financial statements and endorsed by
IASB. Following are the amendments that applicable from financial year
beginning 1 January 2022.
a. Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16)
b. COVID-19 Rent Related Concessions beyond 30 June 2022 (Amendments to
IFRS 16)
These amendments do not have a significant impact on the Financial Statements
and therefore the disclosures have not been made.
5. STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE AND YET TO BE
APPLIED BY THE GROUP
A number of new and amended accounting standards and interpretations have been
published that are not mandatory for the Group's accounts ended 31 March 2023,
nor have they been early adopted. These standards and interpretations are not
expected to have a material impact on the Group's consolidated financial
statements:
i. IFRS 17, 'Insurance contracts' as amended in December 2021
ii. Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8
iii. Amendment to IAS 12- deferred tax related to assets and liabilities
arising from a single transaction
iv. Amendment to IAS 1 - Non current liabilities with covenants
v. Amendment to IFRS 16 - Leases on sale and leaseback
6. SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements have been prepared on a historical
basis, except where specified below. A summary of the significant accounting
policies applied in the preparation of the accompanying consolidated financial
statements are detailed below.
6.1. BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the
parent company and all of its subsidiary undertakings drawn up to 31 March
2023. The Group consolidates entities which it controls. Control exists when
the parent has power over the entity, is exposed, or has rights, to variable
returns from its involvement with the entity and has the ability to affect
those returns by using its power over the entity. Power is demonstrated
through existing rights that give the ability to direct relevant activities,
those which significantly affect the entity's returns.
The Group recognises in relation to its interest in a joint operation:
a. its assets, including its share of any assets held jointly;
b. its liabilities, including its share of any liabilities
incurred jointly;
c. its revenue from the sale of its share of the output
arising from the joint operation;
d. its share of the revenue from the sale of the output by the
joint operation; and
e. its expenses, including its share of any expenses incurred
jointly.
Intra-Group balances and transactions, and any unrealised gains and losses
arising from intra-Group transactions are eliminated in preparing the
consolidated financial statements. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Profit or losses of subsidiaries acquired or disposed of during the year are
recognised from the date of control of acquisition, or up to the effective
date of disposal, as applicable.
6.2. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
In preparing consolidated financial statements, the Group's management is
required to make judgments, estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statement and the reported amounts of
revenues and expenses during the reporting period. Although these estimates
are based on management's best knowledge of current events and actions, actual
results may ultimately differ from those estimates. The management's estimates
for the useful life and residual value of tangible assets, impairment of
tangible assets and recognition of provision for decommissioning represent
certain particularly sensitive estimates. The estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods. Information
about significant judgments, estimates and assumptions that have the most
significant effect on recognition and measurement of assets, liabilities,
revenues and expenses is provided in note 26.
6.3. FOREIGN CURRENCIES
The consolidated financial statements have been presented in US$ which is the
functional currency of the Company and the group entities.
Foreign currency transactions are translated into the functional currency of
the respective Group entities, using the exchange rates prevailing at the
dates of the transactions (spot exchange rate).
Functional currency is the currency of the primary economic environment in
which the entity operates.
Monetary assets and liabilities denominated in foreign currencies are
translated at the functional currency spot rates of exchange at the reporting
date. Differences arising on settlement or translation of monetary items and
other foreign currency transactions are recognized in consolidated statement
of comprehensive income.
Non-monetary items measured at historical cost are recorded in the functional
currency of the entity using the exchange rates at the date of the
transaction.
6.4. REVENUE RECOGNITION
In accordance with IFRS 15, Revenue from contracts with customers is
recognised when or as the Company satisfies a performance obligation by
transferring control of a promised goods to a customer at an amount that
reflects the consideration to which the Company expects to be entitled in
exchange for the sale of products, net of taxes on sales, estimated rebates
and other similar allowances.
Sale of gas
The contracts with customers establish, a single performance obligation in
relation to supply of natural gas. The transfer of control of natural gas
coincides with title passing to the customer and the customer taking physical
possession. The whole of the transaction price of the contract is allocated to
supply of natural gas and the revenue has been recognised on point in time
basis when the quantities of natural gas are supplied to the customers.
The Group has only one contractual arrangement for sale of gas to Gas
Authority of India Limited (GAIL), wherein the revenue gets recognised on the
basis of delivery i.e. point in time revenue recognition. Further, there are
no other performance obligations which the company is liable to perform.As per
the contract signed with customer, entity is eligible to recover the amount
from customer within 15 days of raising invoice.
Take or pay: Any payment received on account of lesser gas volume lifted by
the customer against the 'annual contracted volume 'for which an obligation
exists to make-up such differential gas in subsequent periods is recognised as
Contract Liabilities in the year of receipt. Revenue in respect of take or pay
obligation is recognised when such gas is actually supplied or when the
customer's right to make up is expired, whichever is earlier. For other
contracts, where the Company does not have any obligation to make up such gas
in subsequent period is directly recognised as revenue.
6.5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise development assets and other
properties, plant and equipment used in the gas fields and for administrative
purposes. These assets are stated at cost plus decommissioning cost less
accumulated depreciation and any accumulated impairment losses.
Development assets are accumulated on a field-by-field basis and comprise
costs of developing the commercially feasible reserve, expenditure on the
construction, installation or completion of infrastructure facilities such as
platforms, pipelines and other costs of bringing such reserves into
production. It also includes the exploration and evaluation costs incurred in
discovering the commercially feasible reserve, which have been transferred
from the exploration and evaluation assets as per the policy mentioned in note
6.6. As consistent with the full cost method, all exploration and evaluation
expenditure incurred up to the date of the commercial discovery have been
classified under development assets of that field.
The carrying values of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate that the carrying
values may not be recoverable.
An item of property, plant and equipment is derecognized upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or
loss arising on de-recognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is
included in the consolidated statement of comprehensive income of the year in
which the asset is derecognized. However, where the asset is being consumed in
developing exploration and evaluation assets, such gain or loss is recognized
as part of the cost of the asset.
The asset's residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each period end. No depreciation is
charged on development assets until production commences.
Depreciation on property, plant and equipment is provided at rates estimated
by the management. Depreciation is computed using the straight-line method of
depreciation, whereby each asset is written down to its estimated residual
value evenly over its expected useful life. The useful lives estimated by
the management are as follows:
Extended well test equipment 20 years
Bunk houses 5 years
Vehicles 5 years
Other assets
Furniture and fixture 5 years
Buildings 10 years
Computer equipment 3 years
Other equipment 5 years
Land acquired is recognized at cost and no depreciation is charged as it has
an unlimited useful life.
Production assets are depreciated from the date of commencement of production,
on a field-by-field basis with reference to the unit of production method for
the commercially probable and proven reserves in the particular field.
Advances paid for the acquisition/ construction of property, plant and
equipment which are outstanding as at the end of the reporting period and the
cost of property, plant and equipment under construction before such date are
disclosed as 'Capital work-in-progress'.
6.6. EXPLORATION AND EVALUATION ASSETS
The Group adopts the full cost method of accounting for its oil and gas
interests, having regard to the requirements of IFRS 6: Exploration for and
Evaluation of Mineral Resources. Under the full cost method of accounting, all
costs of exploring for and evaluating oil and gas properties, whether
productive or not are accumulated and capitalized by reference to appropriate
cost pools. Such cost pools are based on geographic areas and are not larger
than a segment. The Group currently has one cost pool being an area of land
located in Rajasthan, India.
Exploration and evaluation costs may include costs of license acquisition,
directly attributable exploration costs such as technical services and
studies, seismic data acquisition and processing, exploration drilling and
testing, technical feasibility, commercial viability costs, finance costs to
the extent they are directly attributable to financing these activities and an
allocation of administrative and salary costs as determined by management. All
costs incurred prior to the award of an exploration license are written off as
a loss in the year incurred.
Exploration and evaluation costs are classified as tangible asset according to
the nature of the assets acquired and the classification is applied
consistently. Tangible exploration and evaluation assets are recognized and
measured in accordance with the accounting policy on property, plant and
equipment. To the extent that such a tangible asset is consumed in developing
exploration and evaluation asset, the amount reflecting that consumption is
recorded as part of the cost of the asset.
Exploration and evaluation assets are not amortized prior to the conclusion of
appraisal activities. Where technical feasibility and commercial viability is
demonstrated, the carrying value of the relevant exploration and evaluation
asset is reclassified as a development and production asset and tested for
impairment on the date of reclassification. Impairment loss, if any, is
recognized.
The group has completed exploration and evaluation phase in 2017 when field
development plan has been approved by Directorate General of Hydrocarbons
('DGH') i.e., technical feasibility and commercial viability were
demonstrable. Therefore, any cost incurred thereafter on development
activities is capitalized directly to development assets.
6.7. IMPAIRMENT TESTING FOR EXPLORATION AND EVALUATION ASSETS AND
PROPERTY, PLANT AND EQUIPMENT
An impairment loss is recognized for the amount by which an asset's
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal discounted cash flow
evaluation.
Where there are indicators that an exploration asset may be impaired, the
exploration and evaluation assets are grouped with all development/producing
assets belonging to the same geographic segment to form the Cash Generating
Unit (CGU) for impairment testing. Where there are indicators that an item of
property, plant and equipment asset is impaired, assets are grouped at the
lowest levels for which there are separately identifiable cash flows to form
the CGU. The combined cost of the CGU is compared against the CGU's
recoverable amount and any resulting impairment loss is written off in the
profit or loss of the year. No impairment has been recognized during the year.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer exist or
may have decreased. If such indication exists, the Group estimates the asset's
or CGU's recoverable amount. A previously recognized impairment loss is
reversed only if there has been a change in the assumptions used to determine
the asset's recoverable amount since the last impairment loss was recognized.
The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been recognized
for the asset in prior years. Such reversal is recognized in profit or loss
unless the asset is carried at a re-valued amount, in which case the reversal
is treated as a revaluation increase.
6.8. FINANCIAL ASSETS
Financial Instruments
Financial assets and financial liabilities are recognized when the Group
becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognized when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and all
substantial risks and rewards are transferred. A financial liability is
derecognized when it is extinguished, discharged, cancelled or expires.
Financial assets and financial liabilities are measured initially at fair
value plus transactions costs, except for financial assets and financial
liabilities carried at fair value through profit or loss, which are measured
initially at fair value. Trade receivables that do not contain a significant
financing component are measured at the transaction price. The value of
interest free financial assets and financial liabilities with short term
maturities are not discounted at initial recognition if the impact is not
material. Financial assets and financial liabilities are measured subsequently
as described below.
Recognition of Financial Asset
On initial recognition, a financial asset is classified as measured at
- Amortized cost;
- Fair value through other comprehensive income (FVOCI) - debt investment;
- Fair value through other comprehensive income (FVOCI) - equity investment;
or
- Fair value through profit and loss (FVTPL)
Financial assets are not reclassified subsequent to their initial recognition,
except if and in the period the Group changes its business model for managing
financial assets.
A financial asset is measured at amortized cost if it meets both of the
following conditions and is not designated as at FVTPL:
· The asset is held within a business model whose objective is to hold
assets to collect contractual cash flows; and the contractual terms of the
financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
· The category determines subsequent measurement and whether any
resulting income and expense is recognized in consolidated statement of
comprehensive income.
After initial recognition, financials assets at amortized cost are measured at
amortized cost using the effective interest method.
Impairment of financial assets
IFRS 9's impairment requirements use more forward-looking information to
recognise expected credit losses - the 'expected credit loss (ECL) model'. The
Group considers a broader range of information when assessing credit risk and
measuring expected credit losses, including past events, current conditions,
reasonable and supportable forecasts that affect the expected collectability
of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
· financial instruments that have not deteriorated significantly in
credit quality since initial recognition or that have low credit risk and
· financial instruments that have deteriorated significantly in credit
quality since initial recognition and whose credit risk is not low.
· financial assets that have objective evidence of impairment at the
reporting date.
'12-month expected credit losses' are recognised for the first category while
'lifetime expected credit losses' are recognised for the second category.
The impairment methodology applied depends on whether there has been a
significant increase in credit risk. For trade receivables only, the Group
applies the simplified approach required by IFRS 9, which requires expected
lifetime losses to be recognised from initial recognition of the receivables.
6.9. FINANCIAL LIABILITIES
The Group's financial liabilities include borrowings, trade payables and other
payables which are classified as financial liabilities recognized at amortized
cost. Financial liabilities are measured subsequently at amortized cost using
the effective interest method except for financial liabilities at fair value
through profit or loss ("FVTPL"), that are carried subsequently at fair value
with gains or losses recognized in profit or loss in consolidated statement of
comprehensive income.
6.10. INVENTORIES
Inventories are measured at the lower of cost and net realizable value.
Inventories of drilling stores and spares are accounted at cost including
taxes, duties and freight. The cost of all inventories other than drilling
bits is computed on the basis of the first in first out method. The cost for
drilling bits is computed based on specific identification method.
6.11. ACCOUNTING FOR INCOME TAXES
Income tax assets and/or liabilities comprise those obligations to, or claims
from, fiscal authorities relating to the current or prior reporting period
that are unrecovered/unpaid at the date of the statement of financial
position. They are calculated according to the tax rates and tax laws
applicable to the fiscal periods to which they relate, based on the taxable
profit for the year. All changes to current tax assets or liabilities are
recognized as a component of tax expense in consolidated statement of
comprehensive income.
Deferred income taxes are calculated using the balance sheet method on
temporary differences. This involves the comparison of the carrying amounts
of assets and liabilities in the financial statement with their tax base. The
cost incurred on each field is claimed as deduction from the year of
commercial production. Deferred tax is, however, neither provided on the
initial recognition of goodwill, nor on the initial recognition of an asset or
liability unless the related transaction is a business combination or affects
tax or accounting profit. Tax losses available to be carried forward as well
as other income tax credits to the Group are assessed for recognition as
deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognized to the extent that it is probable that they will be offset
against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates and laws that are expected to
apply to their respective period of realization, provided they are enacted or
substantively enacted at the date of the statement of financial position.
Changes in deferred tax assets or liabilities are recognized as a component of
tax expense in profit or loss of the year, except where they relate to items
that are charged or credited directly to other comprehensive income or equity
in which case the related deferred tax is also charged or credited directly to
other comprehensive income or equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority.
6.12. BORROWING COSTS
Any interest payable on funds borrowed for the purpose of obtaining qualifying
assets, which are assets that necessarily take a substantial period of time to
get ready for their intended use or sale, is capitalized as a cost of that
asset until such time as the assets are substantially ready for their intended
use or sale. While the Company has not made any specific borrowings for
construction of a qualifying asset, they have capitalized certain borrowing
costs on account of general borrowings at an average rate of borrowings for
the Company in terms of IAS 23 'Borrowing Costs'.
Any associated interest charge from funds borrowed principally to address a
short-term cash flow shortfall during the suspension of development activities
is expensed in the period. Transaction costs incurred towards an unutilized
debt facility is treated as prepayments to be adjusted against the carrying
value of debt as and when drawn.
6.13. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, at bank in demand deposits and
deposit with maturities of 3 months or less from inception, which are readily
convertible to known amounts of cash. These assets are subject to an
insignificant risk of change in value.
6.14. OTHER PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognized when the Group has a present obligation (legal or
constructive) as a result of a past event. It is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
Where the Group expects some or all of provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognized as a separate
asset but only when the reimbursement is virtually certain. The expense
relating to any provision net of any reimbursement is recognized in profit or
loss of the year. To the extent such expense is incurred for construction or
development of any asset, it is included in the cost of that asset. If the
effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate,
the risks specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognized as other finance
expenses.
Provisions include decommissioning provisions representing management's best
estimate of the Group's liability for restoring the sites of drilled wells to
their original status. Provision for decommissioning is recognized at the
present value of the estimated future expenditure when the Group has an
obligation and a reliable estimate can be made, with a corresponding addition
to property, plant and equipment which is subsequently depreciated as part of
the asset.
Commitments and contingent liabilities are not recognized in the financial
statements. They are disclosed unless the possibility of an outflow of
resources embodying economic benefits is remote.
A contingent asset is not recognized but disclosed in the financial statements
when an inflow of economic benefits is probable but when it is virtually
certain than the asset is recognized in the financial statements.
In those cases, where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, or the amount to be
provided for cannot be measured reliably, no liability is recognized in the
statement of financial position and no disclosure is made.
6.15. SEGMENT REPORTING
Operating segments are identified on the basis of internal reports about
components of the Group that are regularly reviewed by the Chief Operating
Decision Maker in order to allocate resources to the segments and to assess
their performance. The Company considers that it operates in a single
operating segment being the production and sale of gas.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise of the following:
Cost Land Extended well test equipment Production Bunk Houses Vehicles Other assets Capital work-in-progress Total
Development assets Assets
Balance as at 31 March 2021 167,248 4,914,428 862,379,376 258,573,673 7,869,575 4,917,035 1,695,265 2,894,389 1,143,410,989
Additions - 258,301 73,380,143 - - - - 84,481 74,722,925
Transfers - - (71,343,270) 71,343,270 - - - - -
Disposals - - - - - - -
Balance as at 31 March 2022 167,248 5,172,729 865,416,249 329,916,943 7,869,575 4,917,035 1,695,265 2,978,870 1,218,133,914
Additions - 3,958,473 77,050,148 - - 46,888 - 45,876 81,101,385
Transfers - - (63,779,513) 63,779,513 - - - - -
Disposals - - - - - - -
Balance as at 31 March 2023 167,248 9,131,202 878,686,884 393,696,456 7,869,575 4,963,923 1,695,265 3,024,746 1,299,235,299
Accumulated Depreciation
Balance as at 1 April 2021 - 2,673,660 - 47,378,609 6,018,596 4,702,682 1,683,377 - 62,456,924
Depreciation for the year - 225,161 - 5,834,481 198,577 195,099 - - 6,453,318
Balance as at 31 March 2022 - 2,898,821 - 53,213,090 6,217,173 4,897,781 1,683,377 - 68,910,242
Depreciation for the - 230,847 - 6,443,735 195,536 18,543 1,917 - 6,890,578
year
Balance as at 31 March 2023 - 3,129,668 - 59,656,825 6,412,709 4,916,324 1,684,294 - 75,800,820
Carrying values
At 31 March 2021 167,248 2,240,768 862,379,376 211,195,064 1,850,979 214,353 11,888 2,894,389 1,080,954,065
At 31 March 2022 167,248 2,273,908 865,416,249 276,703,853 1,652,402 19,254 11,888 2,978,870 1,149,223,672
At 31 March 2023 167,248 6,001,534 878,686,885 334,039,630 1,456,864 47,599 9,971 3,024,749 1,223,434,478
The balances above represent the Group's share in property, plant and
equipment as per note 3. Tangible assets comprise development /production
assets in respect of SGL, SSG and SSF fields.
Development assets of SGL, SSG and SSF fields includes the amount of
exploration and evaluation expenditure transferred to development cost on the
date of the first commercial discovery declared by the Group and also includes
expenditure incurred for the drilling of further wells in these fields to
enhance the production activity.
Production assets in respect of SGL field includes completed production
facilities. The Group commenced the production facility in October 2012, and
accordingly such production assets have been depreciated since this date.
The additions in development assets also include borrowing costs US$
55,091,974 (previous year: US$ 53,932,526). The weighted average
capitalization rate on funds borrowed generally is 6.76per cent per annum
(previous year 6.72per cent).
The depreciation has been included in the following headings-
31 March 2023 31 March 2022
Depreciation included in assets other than production assets 446,843 618,837
Depreciation included in statement of comprehensive income under the head cost 6,443,735 5,834,481
of sales for production assets
Total 6,890,578 6,453,318
8. DEFERRED TAX ASSETS/ LIABILITIES (NET)
Deferred taxes arising from temporary differences are summarized as follows:
31 March 2023 31 March 2022
Deferred tax assets 385,508,089 385,508,089 378,661,726
Unabsorbed losses/credits 378,661,726
Total
Deferred tax liability
Development assets/ property, plant and equipment 529,901,040 499,060,159
Total 529,901,040 499,060,159
Net deferred tax liabilities 144,392,951 120,398,433
a) The Group has recognized deferred tax assets on all of its unused tax
losses/unabsorbed depreciation considering there is convincing evidence of
availability of sufficient taxable profit in the Group in the future as
summarized in note 9.
b) The deferred tax movements during the current year have been
recognized in the consolidated statement of comprehensive income.
9. INCOME TAXES
Income tax is based on the tax rates applicable on profit or loss in various
jurisdictions in which the Group operates. The effective tax at the domestic
rates applicable to profits in the country concerned as shown in the
reconciliation below have been computed by multiplying the accounting profit
by the effective tax rate in each jurisdiction in which the Group operates.
The individual entity amounts have then been aggregated for the consolidated
financial statements. The effective tax rate applied in each individual entity
has not been disclosed in the tax reconciliation below as the amounts
aggregated for individual Group entities would not be a meaningful number.
Income tax credit is arising on account of the following:
31 March 2023 31 March 2022
Deferred tax charge (23,994,518) (10,745,121)
Total (23,994,518) (10,745,121)
The relationship between the expected tax expense based on the domestic tax
rates for each of the legal entities within the Group and the reported tax
expense in consolidated statement of comprehensive income is reconciled as
follows:
31 March 2023 31 March 2022
Accounting profit for the year before tax 54,873,961 45,955,305
Effective tax at the domestic rates applicable to profits in the country 23,968,946 20,073,277
concerned
Tax impact of bought forward losses lapsed during the year - -
Non-taxable income 25,572 (9,328,156)
Other - -
Tax expense 23,994,518 10,745,121
The reconciliation shown above has been based on the rate 43.68 per cent
(previous year: 43.68per cent) as applicable under Indian tax laws.
The Company's profits are taxable as per the tax laws applicable in Guernsey
where zero per cent tax rate has been prescribed for corporate. Accordingly,
there is no tax liability for the Group in Guernsey. IServices and Newbury
being participants in the PSC are covered under the Indian Income tax laws as
well as tax laws for their respective countries. However, considering the
existence of double tax avoidance arrangement between Cyprus and India, and
Mauritius and India, profits in Newbury and iServices are not likely to
attract any additional tax in their local jurisdiction. Under Indian tax laws,
Newbury and iServices are allowed to claim the entire expenditure incurred in
respect of the respective fields in the Oil Block until the start of
commercial production (whether included in the exploration and evaluation
assets or development assets) as deductible expense in the first year of
commercial production or over a period of 10 years. The Group has opted to
claim the expenditure in the first year of commercial production. As the Group
has commenced commercial production for SGL, SSG and SSF field and has
generated profits in Newbury and iServices, the management believes there is
reasonable certainty of utilization of such losses in the future years and
thus a deferred tax asset has been created in respect of these.
10. INVENTORIES
Inventories comprise the following:
31 March 2023 31 March 2022
Drilling and production stores and spares 9,778,466 6,478,942
Fuel 109,357 90,486
Goods in transit 44,224 2,890,325
Total 9,932,047 9,459,753
The above inventories are held for use in the exploration, development and
production activities. These are valued at cost determined based on policy
explained in paragraph 6.10. Inventories of US$552,413 (previous year: US$
629,160) were recorded as an expense under the heading 'cost of sales' in the
consolidated statement of comprehensive income during the year ended 31 March
2023. Inventories of US$ 9,248,791 (previous year: US$ 10,504,352) were
capitalized as part of development assets.
11. TRADE AND OTHER RECEIVABLE
31 March 2023 31 March 2022
Trade receivable 6,598,149 18,335,073
Other Current Asset 42,275 1,770,767
Total 6,640,424 20,105,840
The carrying amount of trade receivables approximates their fair values. Refer
"Credit risk" in note 29 for further information.
12. CASH AND CASH EQUIVALENTS
31 March 2023 31 March 2022
Cash at banks in current accounts 11,765,514 4,452,010
Total 11,765,514 4,452,010
The Group only deposits cash surpluses with major banks of high-quality credit
standing.
13. EQUITY
Authorized share capital
The total authorized share capital of the Company is GBP 5,000,000 divided
into 500,000,000 shares of GBP 0.01 each.
Issued share capital
The total issued share capital of the Company is USD 3,619,443 (previous year:
3,619,443) divided into 182,973,924 shares (previous year: 182,973,924).
--For all matters submitted to vote in the shareholders meeting of the
Company, every holder of ordinary shares, as reflected in the records of the
Company on the date of the shareholders' meeting has one vote in respect of
each share held.
All shareholders are equally eligible to receive dividends and the repayment
of capital in the event of liquidation of the individual entities of the
Group.
Additional paid in capital
Additional paid-in capital represents excess over the par value of share
capital paid in by shareholders in return for the shares issued to them,
recorded net of expenses incurred on issue of shares.
Currency translation reserve
Currency translation reserve represents the balance of translation of the
entity's financial statements into US$ until 30 November 2010 when its
functional currency was assessed as GBP. Subsequent to 1 December 2010, the
functional currency of Indus Gas was reassessed as US$.
Merger reserve
The balance on the merger reserve represents the fair value of the
consideration given in excess of the nominal value of the ordinary shares
issued in an acquisition made by the issue of shares of subsidiaries from
other entities under common control.
Retained earnings
Retained earnings include current and prior period retained profits.
14. LONG TERM DEBT
From Banks
Maturity 31 March 2023 31 March 2022
Non-current portion of long-term debt November 2024 (PY: November 2024) 15,859,060 39,239,735
Current portion of long-term debt 24,155,800 19,079,585
Total 40,014,860 58,319,320
Current interest rates are variable and weighted average interest for the year
was 6.76 per cent per annum (previous year: 6.72 per cent per annum). The
fair value of the above variable rate borrowings is considered to approximate
their carrying amounts. The maturity profile (undiscounted) is explained in
note 29.
Interest capitalised on loans above have been disclosed in notes 7.
The term loans are secured by following: -
· First charge on all project assets of the Group both present and
future, to the extent of SGL Field Development and to the extent of capex
incurred out of this facility in the rest of RJ-ON/6 field.
· First charge on the current assets (inclusive of condensate receivable)
of the Group to the extent of SGL field.
· First Charge on the entire current assets of the SGL Field and to the
extent of capex incurred out of this facility in the rest of RJON/6 field.
From Bonds
Maturity 31 March 2023 31 March 2022
Current portion of long-term debt 2023 - 153,667,758
Non-current portion of long-term debt 2027 159,608,734 -
Current portion of long-term debt 4,302,400 -
Total 163,918,772 153,667,758
The Group has issued US Dollar 160.00 million bonds which carries interest at
the rate of 8 per cent per annum, for the purpose of re-financing the bonds
which were repayable in December 2022. These bonds are unsecured bonds and are
fully repayable at the end of 5 years i.e., November 2027, further interest
on these notes is paid semi-annually.
15. PROVISION FOR DECOMMISSIONING
Amount
Balance at 1 April 2021 1,912,427
Increase in provision 74,898
Balance as at 31 March 2022 1,987,325
(Decrease) in provision (92,529)
Balance as at 31 March 2023 1,894,794
As per the PSC, the Group is required to carry out certain decommissioning
activities on gas wells. The provision for decommissioning relates to the
estimation of future disbursements related to the abandonment and
decommissioning of gas wells. The provision has been estimated by the Group's
engineers, based on individual well filling and coverage. This provision will
be utilized when the related wells are fully depleted. The majority of the
cost is expected to be incurred within a period of next 4 years.
16. PAYABLE/ RECEIVABLE TO RELATED PARTIES
Related parties payable comprise the following:
Maturity 31March 2023 31March 2022
Current
Payable to directors 333,611 345,105
333,611 345,105
Other than current
Borrowings from Gynia Holdings Ltd.* 633,924,200 625,442,503
633,924,200 625,442,503
Total 634,257,811 625,787,608
* Borrowings from Gynia Holdings Ltd. carries interest rate of 6.5 per cent
per annum compounded annually. The entire outstanding balance (including
interest) is subordinate to the loans taken from the banks (detailed in note
14) and therefore, is payable along with related interest subsequent to
repayment of bank loan.
Interest capitalised on loans above have been disclosed in note7.
Related parties' receivable comprises the following:
Maturity 31March 2023 31March 2022
Current
Prepayments and other assets due from Focus On demand 107,348,170 120,408,124
Total 107,348,170 120,408,124
Prepayments and other assets due from Focus
Prepayments to Focus represents excess amounts paid to them in respect of the
Group's share of contract costs, for its participating interest in Block
RJ-ON/6 pursuant to the terms of Agreement for Assignment dated 13 January
2006 and its subsequent amendments from time to time.
Other assets comprises of the amount of royalty recoverable from Focus Energy
Limited.
17. TRADE AND OTHER PAYABLES
31March 2023 31March 2022
Trade payables 1,139,946 1,199,586
VAT payables 483,957 116,125
Other liabilities 410,966 183,258
2,034,869 1,498,969
The carrying amount of trade and other payable approximates their fair values
and are non-interest bearing.
18. REVENUE
The Group's revenue disaggregated by primary geographical markets is as
follows:
31March 2023 31March 2022
Asia 63,034,644 53,709,538
Europe - -
63,034,644 53,709,538
The Group's revenue disaggregated by the portion of revenue recognition is as
follows:
31March 2023 31March 2022
Goods transferred at a point in time 63,034,644 53,709,538
Services transferred at a point in time - -
63,992,688 53,709,538
Sale of Goods (Gas)
The revenue majorly pertains to the sale of natural gas and condensate
production (by-product). The Group sells its natural gas to GAIL at a price
fixed under the agreement. The condensate is sold in the open market through
bidding. Further, the Company has entered into a gas sale agreement wherein
the customer is to be liable to pay 41 % (Previous year: 41%) of the annual
contracted quantity if the customer does not purchase gas during the financial
year.
Sale of services
The sale of services represents revenue earned from technical and other
support services being rendered to oil and gas exploration companies.
Contractual assets and Contractual Liabilities
31 March 2023 31 March 2022
Current Non-current Current Non-current
Opening balance of Contract liabilities - Deferred revenue 5,077,086 25,563,995 5,077,086 25,563,995
Less: Amount of revenue recognized against opening contract liabilities - - - -
Add: Transfer from current to non-current liabilities (4,474,753) 4,747,753 - -
Less: Amount written off during the year (329,333) - - -
Closing balance of Contract liabilities - Deferred revenue - 30,311,748 5,077,086 25,563,995
19. EMPLOYEE COST
Per the PSC, Focus is the Operator of the Block. For SGL field, ONGC has a
participative interest of 30% in the development cost. Hence, the share of
iServices and Newbury are proportionately reduced (i.e., 45.5% and 17.5%
respectively). For the Non-SGL field, the share of iServices, Newbury and
Focus are in the ratio of 65%, 25% and 10% respectively. The Employee cost
attributable to Indus Gas Limited has been allocated in the agreed ratio
(refer note 3) by Focus and recorded as cost of sales and administrative
expenses in the consolidated statement of comprehensive income amounting to
US$ 212,270 (previous year US$ 201,245) and US$ 201,627(previous year US$
216,488) respectively. Cost pertaining to the employees of the Group have been
included under administrative expense is US$ 144,856 (previous year US$
261,045).
20. FOREIGN CURRENCY EXCHANGE (LOSS)/ GAIN, NET
The Group has recognized the following in the consolidated statement of
comprehensive income on account of foreign currency fluctuations:
31 March 2023 31 March 2022
(Loss) on restatement of foreign currency monetary receivables and payables (31,336) (6,825)
149,402 22,147
Gain arising on settlement of foreign currency transactions and restatement of
foreign currency balances arising out of Oil block operations.
Total 118,066 15,322
21. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year. Calculation of basic and diluted earnings
per share is as follows:
31 March 2023 31 March 2022
Profits attributable to shareholders of Indus Gas Limited, for basic and 30,879,884 35,210,184
dilutive
182,973,924 182,973,924
Weighted average number of shares (used for basic earnings per share)
182,973,924 182,973,924
Diluted weighted average number of shares (used for diluted earnings per
share)
Basic earnings per share 0.17 0.19
Diluted earnings per share 0.17 0.19
22. RELATED PARTY TRANSACTIONS
The related parties for each of the entities in the Group have been summarised
in the table below:
Nature of the relationship Related Party's Name
I. Holding Company Gynia Holdings Ltd.
II. Ultimate Holding Company Multi Asset Holdings Ltd. (Holding Company of Gynia Holdings Ltd.)
III. Enterprises over which Key Management Personnel (KMP) exercise control Focus Energy Limited
(with whom there are transactions)
Disclosure of transactions between the Group and related parties and the
outstanding balances as at 31 March 2023 and 31 March 2022 is as under:
Transactions with Holding Company
Particulars 31 March 2023 31 March 2022
Transactions during the year with the holding Company
Amount Received 6,000,000 17,425,000
Amount Paid 37,250,000 23,00,0000
Interest 39,731,697 38,508,705
Balances at the end of the year
Total payable* 633,924,200 625,442,503
*Including interest
Transactions with KMP and entity over which KMP exercise control
Particulars 31March 2023 31March 2022
Transactions during the year
Remuneration to KMP
Short term employee benefits 144,856 261,045
Total 144,856 261,045
Entity over which KMP exercise control
Cost incurred by Focus on behalf of the Group in respect of the Block 26,812,100 19,811,879
Remittances to Focus 7,472,670 15,825,880
Balances at the end of the year 107,348,170 12,04,08,124
Total receivables*
Total payable* (333,611) (345,105)
*Including interest
Directors' remuneration
Directors' remuneration is included under administrative expenses, evaluation
and exploration assets or development assets in the consolidated financial
statements allocated on a systematic and rational manner. Remuneration by
director is separately disclosed in the directors' report on page 7.
23. SEGMENT REPORTING
The Chief Operating Decision Maker being the Chief Executive Officer of the
Group, reviews the business as one operating segment being the extraction and
production of gas. The operating segments have been aggregated due to similar
economic characters and allied nature of product and services. Hence, no
separate segment information has been furnished herewith.
All of the non-current assets other than financial instruments and deferred
tax assets (there are no employment benefit assets and rights arising under
insurance contracts) are located in India and amounted to US$ 1,223,434,478
(previous year: US$ 1,149,223,672).
Revenue from customers have been identified on the basis of the customer's
geographical location and are disclosed in note 18. The total revenue from the
Group is from the sale of natural gas, its by-products (i.e., condensate) to
Oil and gas exploration companies. The revenue from the top three customer
comprises 99.93% (Previous year: 94.02%) of the Group's total revenue.
24. COMMITMENTS AND CONTINGENCIES
The Group has no contingent liabilities as at 31 March 2023 (previous year
Nil).
The Group has no commitments as at 31 March 2022 (previous year Nil).
25. ACCOUNTING ESTIMATES AND JUDGEMENTS
In preparing consolidated financial statements, the Group's management is
required to make judgments and estimates that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The judgments and estimates are
based on management's best knowledge of current events and actions and actual
results from those estimates may ultimately differ.
Significant judgments applied in the preparation of the consolidated financial
statements are as under:
Determination of functional currency of individual entities
Following the guidance in IAS 21 "The effects of changes in foreign exchange
rates", the functional currency of each individual entity is determined to be
the currency of the primary economic environment in which the entity operates.
In the management's view each of the individual entity's functional currency
reflects the transactions, events and conditions under which the entity
conducts its business. The management believes that US$ has been taken as the
functional currency for each of the entities within the Group. US$ is the
currency in which each of these entities primarily generate and expend cash
and also generate funds for financing activities.
Full cost accounting for exploration and evaluation expenditure
The Group has followed 'full cost' approach for accounting for exploration and
evaluation expenditure against the 'successful efforts' method. As further
explained in note 6.6, exploration and evaluation assets recorded using 'full
cost' approach are tested for impairment prior to reclassification into
development assets on successful discovery of gas reserves.
Impairment of tangible assets
The Group follows the guidance of IAS 36 and IFRS 6 to determine when a
tangible asset is impaired. This determination requires significant judgment
to evaluate indicators triggering impairment. The Group monitors internal and
external indicators of impairment relating to its tangible assets. For the
purpose of impairment assessment, judgements are involved in estimating the
expected gas extraction from production assets, based on which, indicators are
identified necessary for determining that an impairment assessment is
necessary. Based on management assessment, the management has carried out
impairment testing for impairment of property, plant and equipment as at 31
March 2023.
Estimates used in the preparation of the consolidated financial statements:
Useful life and residual value of tangible assets
The Group reviews the estimated useful lives of property, plant and equipment
at the end of each annual reporting period. Specifically, production assets
are depreciated on a basis of unit of production (UOP) method which involves
significant estimates in respect of the total future production and estimate
of reserves. The calculation of UOP rate of depreciation could be impacted to
the extent that the actual production in future is different from the
forecasted production. During the financial year, the directors determined
that no change to the useful lives of any of the property, plant and equipment
is required. The carrying amounts of property, plant and equipment have been
summarized in note 7.
Recognition of provision for decommissioning cost
As per the PSC, the Group is required to carry out certain decommissioning
activities on gas wells. The ultimate decommissioning costs are uncertain and
cost estimates can vary in response to many factors including changes to
relevant legal requirements, the emergence of new restoration techniques or
experience at other production sites. The expected timing and amount of
expenditure can also change, for example, in response to changes in reserves
or changes in laws and regulations or their interpretation. As a result, there
could be adjustments to the provisions established which would affect future
financial results. The liabilities estimated in respect of decommissioning
provisions have been summarized in note 15.
Impairment testing
As explained above, management carried out impairment testing of property,
plant and equipment as on 31 March 2023. An impairment loss is recognized for
the amount by which the asset's or cash generating unit's carrying amount
exceeds its recoverable amount.
To determine the recoverable amount, management estimates expected future cash
flows from the Block and determines a suitable interest rate in order to
calculate the present value of those cash flows. In the process of measuring
expected future cash flows management makes assumptions about future gross
profits. These assumptions relate to future events and circumstances. In most
cases, determining the applicable discount rate involves estimating the
appropriate adjustment to market risk and the appropriate adjustment to
asset-specific risk factors.
The recoverable amount was determined based on value-in-use calculations;
basis gas reserves confirmed by an independent competent person. The gas price
has been revised to US$ 9.16 per Metric Million British Thermal Unit (MMBTU)
on Gross Calorific Value (GCV) basis from 1 April 2023 to 30 April 2023
resulting in price increase of 6.88% on the existing price. The discount rate
calculation is based on the Company's weighted average cost of capital
adjusted to reflect pre-tax discount rate and amounts to 7% p.a.
USD (In million)
Sensitivity analysis has been performed by the management with respect to the assumptions as mentioned below:
Particulars Carrying value of Property, Plant & Equipment
Reduction in projected revenue by 1% and increasing discount rate by 1% 1,868
Increase in projected revenue by 1% and decreasing discount rate by 1% 1,340
Deferred tax assets
The assessment of the probability of future taxable income in which deferred
tax assets can be utilized is based on the management's assessment, which is
adjusted for specific limits to the use of any unused tax loss or credit. The
tax rules in the jurisdictions in which the Group operates are also carefully
taken into consideration. If a positive forecast of taxable income indicates
the probable use of a deferred tax asset, then deferred tax asset is usually
recognized in full. The recoverability of deferred tax assets is monitored as
an ongoing basis based on the expected taxable income from the sale of gas.
26. BASIS OF GOING CONCERN ASSUMPTION
The Group has current liabilities amounting to US$ 35,574,432 (2021-22: US$
179,668,503) the majority of which is towards current portion of borrowings
from banks and bond and other liabilities. As at 31 March 2023, the amounts
due for repayment (including interest payable) within the next 12 months for
long term borrowings are US$ 28,458,200(2021-22: US$ 172,747,343) which the
Group expects to meet from its internal generation of cash from operations.
The Group has sufficient cash flows to repay the maturing debt as the Group is
financially sound. The Group has net profits after tax of US$ 30,879,443
(2021-22: US$ 35,210,183) for the year ended 31 March 2023 and net working
capital of US$ 100,112,213 as at March 2023.
Further, there is no significant impact of Covid-19 on the Company's ability
to continue as going concern considering that the entity is in the business of
essential services.
27. CAPITAL MANAGEMENT POLICIES
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group manages the capital structure and adjusts it in the light of changes
in economic conditions and the risk characteristics of the underlying assets.
The Group monitors capital on the basis of the gearing ratio. This ratio is
calculated as net debt divided by total capital. Debt is calculated as total
liabilities (including 'current and non-current liabilities' as shown in the
consolidated Statement of Financial Position). Total capital employed is
calculated as 'equity' as shown in the consolidated statement of financial
position plus total debt.
31 March 2023 31 March 2022
Total debt (A) 1,016,825,804 992,300,494
Total equity (B) 343,443,324 312,563,440
Total capital employed (A+B) 1,360,269,128 1,304,863,934
Gearing ratio 74.75 % 76.05 %
The gearing ratio has marginally decreased in the current year due to
proportionately lesser increase in the draw-down of loans from related party
to fund additional exploration, evaluation and development activities for the
Group as compared to increase in equity.
The Group is not subject to any externally imposed capital requirements. There
were no changes in the Group's approach to capital management during the year.
28. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
A summary of the Group's financial assets and liabilities by category are
mentioned in the table below. The carrying amounts of the Group's financial
assets and liabilities recognized at the end of the reporting period are as
follows:
31 March 2023 31 March 2022
Non-current assets
Loans
- Security deposits 7,891 549
Current assets
- Trade receivables 6,598,149 18,335,073
- Cash and cash equivalents 11,765,514 4,452,010
Total financial assets under loans and receivables 18,371,554 22,787,632
Non-current liabilities
Financial liabilities measured at amortized cost:
- Long term debt 175,475,431 39,239,735
- Payable to related parties 633,924,200 625,442,503
Current liabilities
Financial liabilities measured at amortized cost:
- Current portion of long-term debt 28,458,200 172,747,343
- Current portion of payable to related parties 333,611 345,105
- Trade and other payables (other than VAT payable) 1,550,911 1,382,844
Total financial liabilities measured at amortized cost 839,742,353 839,157,530
The fair value of the financial assets and liabilities described above closely
approximates their carrying value on the statement of financial position date.
Risk management objectives and policies
The Group finances its operations through a mixture of loans from banks and
related parties and equity. Finance requirements such as equity, debt and
project finance are reviewed by the Board when funds are required for
acquisition, exploration and development of projects.
The Group treasury functions are responsible for managing funding requirements
and investments which includes banking and cash flow management. Interest and
foreign exchange exposure are key functions of treasury management to ensure
adequate liquidity at all times to meet cash requirements.
The Group's principal financial instruments are cash held with banks and
financial liabilities to banks and related parties and these instruments are
for the purpose of meeting its requirements for operations. The Group's main
risks arising from financial instruments are foreign currency risk, liquidity
risk, commodity price risk and credit risks. Set out below are policies that
are used to manage such risks.
Foreign currency risk
The functional currency of each entity within the Group is US$ and the
majority of its business is conducted in US$. All revenues from gas sales are
received in US$ and substantial costs are incurred in US$. No forward exchange
contracts were entered into during the year.
Entities within the Group conduct the majority of their transactions in their
functional currency other than amounts of cash held in GBP, SGD and INR. All
other monetary assets and liabilities are denominated in functional currencies
of the respective entities. The currency exposure on account of assets and
liabilities which are denominated in a currency other than the functional
currency of the entities of the Group as at 31 March 2023 and 31 March 2022 is
as follows:
Particulars Functional currency Foreign currency 31 March 2023 31 March 2022
(Amount in US$) (Amount in US$)
Short term exposure- US$ Great Britain Pound 87,781 29,338
Cash and cash equivalents
US$ Singapore Dollar 7,968 10,718
US$ Indian Rupee 27,756 27,152
Total exposure 123,505 67,208
As at March 31, 2023 every 1% (increase)/decrease of the respective foreign
currencies compared to the functional currency of the Group entities would
impact profit before tax by approximately US$ (1,235) and US$ 1,1235
respectively.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has established an appropriate liquidity risk management
framework for the management of the Group's short, medium and long-term
funding and liquidity management requirements. The Group manages liquidity
risk by maintaining adequate reserves, banking facilities and reserve
borrowing facilities, by continuously monitoring forecast and actual cash
flows, and by matching the maturity profiles of financial assets and
liabilities.
The table below summaries the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments for the liquidity
analysis.
3 months to 1 year 1-2 years 2-5 years 5+ years Total
0-3 months
31 March 2023
Non-interest bearing - - - - 1,884,522
1,884,522
Variable interest rate liabilities 17,568,000 15,866,697 - - 40,022,497
6,587,800
Fixed interest rate liabilities - - 793,532,935 - 797,835,335
4,302,400
12,774,722 17,568,000 15,866,697 793,532,935 - 839,742,354
3 months to 1 year 1-2 years 2-5 years 5+ years Total
0-3 months
31 March 2022
Non-interest bearing - - - - 1,727,949
1,727,949
Variable interest rate liabilities 14,652,000 22,914,273 16,330,049 - 58,323,907
4,427,585
Fixed interest rate liabilities 150,063,567 - 625,442,503 - 779,105,674
3,599,604
9,755,138 164,715,567 22,914,273 641,772,552 - 839,157,530
Interest rate risk
The Group's policy is to minimize interest rate risk exposures on the
borrowing from the banks and the sum payable to Focus Energy Limited.
Borrowing from the Gynia Holdings Ltd. is at fixed interest rate and
therefore, does not expose the Group to risk from changes in interest rate.
The interest rate on bond is fixed at 8% per annum. The Group is exposed to
changes in market interest rates through bank borrowings at variable interest
rates.
The Group's interest rate exposures are concentrated in US$.
The analysis below illustrates the sensitivity of profit and equity to a
reasonably possible change in interest rates. Based on volatility in interest
rates in the previous 12 months, the management estimates a range of 50 basis
points to be approximate basis for the reasonably possible change in interest
rates. All other variables are held constant.
Interest rate
+ 0.50 per cent - 0.50 per cent
31 March 2023 278,772 (278,772)
31 March 2022 339,270 (339,270)
Since the loans are taken for the general corporate purpose and according to
the Group's policy the certain borrowing costs related to development
activities are capitalized on account of general borrowings at an average rate
of borrowings to the cost of the development asset.
Commodity price risks
The Group's share of production of gas from the Block is sold to GAIL. The
prices have been agreed for a period of three years which expired in September
2016. As per the terms of contract, after expiry of three years' period, the
price will be reviewed periodically and reassessed mutually between the
parties. The Company is presently in negotiations with GAIL for increase in
gas price. No commodity price hedging contracts have been entered into.
Credit risk
The Group has concentration of credit risk against the receivable balance from
customers with reputable credit standing and hence the Group does not consider
credit risk in respect of these to be significant. The management has
evaluated the impact of expected credit loss on the receivable balance. While
evaluating the same, macroeconomic factors affecting the customer's ability to
settle the amount outstanding have been considered. The Group has identified
gross domestic product (GDP) and unemployment rates of the countries in which
the customers are domiciled to be the most relevant factors. The impact was
insignificant and accordingly no adjustment has been recorded in the financial
statements.
Other receivables such as security deposits and cash and cash equivalents do
not comprise of a significant balance and thus do not expose the Group to a
significant credit risk.
The tables below detail the credit quality of the Group's financial assets and
other items, as well as the Group's maximum exposure to credit risk by credit
risk rating grades.
Internal credit rating 12M or Lifetime ECL Gross carrying amount Loss allowance Net carrying amount
31 March 2023
Security deposits Performing 12 Month ECL 7,891 - 7,891
Performing Lifetime ECL (simplified approach) 6,598,149 - 6,598,149
Trade receivables
Cash and cash equivalents Performing 12 Month ECL 11,765,514 - 11,765,514
18,371,554 - 18,371,554
Internal credit rating 12M or Lifetime ECL Gross carrying amount Loss allowance Net carrying amount
31 March 2022
Security deposits Performing 12 Month ECL 549 - 549
Trade receivables Performing Lifetime ECL 18,335,073 - 18,335,073
(Simplified approach)
Cash and cash equivalents Performing 12 Month ECL 4,452,010 - 4,452,010
22,787,632 - 22,787,632
An asset is performing when the counterparty has a low risk of default.
29. RECONCILIATION OF LIABILITIES FROM FINANCING ACTIVITIES
Borrowings
As at April 01, 2022 837,429,581
Cash Movement:
Net utilisation (54,992,558)
Other non- cash movements
Impact of effective interest rate adjustment 662,445
Impact of exchange fluctuations -
Interest accruals 55,091,974
Net debts as at March 31, 2023 838,191,442
Borrowings
As at April 01, 2021 824,958,617
Cash Movement:
Net proceeds
Net utilisation (41,461,562)
Other non- cash movements
Impact of effective interest rate adjustment 284,629
Impact of exchange fluctuations -
Interest accruals 53,647,797
Net debts as at March 31, 2022 837,429,581
30. POST REPORTING DATE EVENT
No adjusting or significant non-adjusting event have occurred between 31(st)
March 2023 and the date of authorization.
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