REG - Indus Gas Limited - Final Results <Origin Href="QuoteRef">INDII.L</Origin> - Part 2
29/09/2017 07:11
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operates in a single
operating segment being the production and sale of gas.
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6. INTANGIBLE ASSETS : EXPLORATION AND EVALUATION ASSETS
Intangible assets comprise of exploration and evaluation assets. Movement in
intangible assets is as below:
Balance as at 1 April 2015 -
Additions A 61,117,653
Transfer to development assets B (61,117,653)
Balance as at 31 March 2016 -
Additions A 28,719,544
Transfer to development assets B (28,719,544)
Balance as at 31 March 2017 -
Balance as at 31 March 2017
-
AThe above includes borrowing costs of US$ 859,043 (previous year: US$
2,034,442). The weighted average capitalisation rate on funds borrowed
generally is 6.17 per cent per annum (previous year: 5.84 per cent per
annum).
B On 19 November 2013, Focus Energy Limited submitted an integrated
declaration of commerciality (DOC) to the Directorate General of Hydrocarbons,
ONGC, the Government of India and the Ministry of Petroleum and Natural Gas.
Upon submission of DOC, exploration and evaluation cost incurred on SSF and
SSG field was transferred to development cost. Focus continues to carry out
further appraisal activities in the Block, and exploration and evaluation cost
incurred subsequent to 19 November 2013, to the extent considered recoverable
as per DOC submitted by Focus, is immediately transferred on incurrence to
development assets.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise of the following:
Cost Land Extended well test equipment Development /Production assets Bunk Houses Vehicles Other assets Capital work-in-progress Total
Balance as at 1 April 2015 167,248 3,737,654 491,344,442 5,917,523 4,576,803 1,492,748 1,189,853 508,426,271
Additions/transfers - - 89,444,612 - - 13,541 38,116 89,496,269
Disposals/transfers - - - - - - - -
Balance as at 31 March 2016 167,248 3,737,654 580,789,054 5,917,523 4,576,803 1,506,289 1,227,969 597,922,540
Additions/transfers - 382,389 88,090,155 9,397 157,816 70,687 89,939 88,800,383
Disposals/transfers - - - - - - - -
Balance as at 31 March 2017 167,248 4,120,043 668,879,209 5,926,920 4,734,619 15,76,976 1,317,908 686,722,923
Accumulated Depreciation
Balance as at 1 April 2015 - 1,369,651 14,506,669 4,516,785 2,878,730 1,359,963 - 24,631,798
Depreciation for the year - 260,108 9,374,247 498,262 623,283 92,887 - 10,848,787
Balance as at 31 March 2016 - 1,629,759 23,880,916 5,015,047 3,502,013 1,452,850 - 35,480,585
Depreciation for the year - 240,855 10,352,335 373,561 365,785 47,632 - 11,380,168
Balance as at 31 March 2017 - 1,870,614 34,233,251 5,388,608 3,867,798 1,500,482 - 46,860,753
Carrying values
At 31 March 2016 167,248 2,107,895 556,908,138 902,476 1,074,790 53,439 1,227,969 562,441,955
At 31 March 2017 167,248 2,249,429 634,645,958 538,312 866,821 76,494 1,317,908 639,862,170
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
field and development assets in respect of SSF and SSG field.
Development assets of SGL field includes the amount of exploration and
evaluation expenditure transferred to development cost on the date of the
first commercial discovery declared by the Group in 2012 and also includes
expenditure incurred for the drilling of further wells in the SGL field to
enhance the production activity. Production assets in respect of SGL field
includes completed production facilities and under construction Gas gathering
station - 2. The Group commenced the production facility in October 2012, and
accordingly such production assets have been depreciated since this date.
Development assets of SSF and SSG are explained in note 6. The assessment of
these reserves by the Directorate General of Hydrocarbons, ONGC, the
Government of India and the Ministry of Petroleum and Natural Gas has been
received by the company post 31 March 2017 hence pending the development for
production activities, no depreciation has been charged on the same.
The additions in Development/Production assets also include borrowing costs
US$ 27,753,096 (previous year: US$ 23,304,470) (including the amount stated in
note 6 above). The weighted average capitalisation rate on funds borrowed
generally is 6.17 per cent per annum (previous year 5.84 per cent).
The depreciation has been included in the following headings-
Depreciation included in development assets 1,027,833 1,474,540
Depreciation included in statement of comprehensive income under the head cost of sales 10,352,335 9,374,247
Total 11,380,168 10,848,787
Total
11,380,168
10,848,787
8. DEFERRED TAX ASSETS/ LIABILITIES (NET)
Deferred taxes arising from temporary differences are summarized as follows:
Deferred tax assets
Unabsorbed losses/credits 215,699,664 199,258,525
Total 215,699,664 199,258,525
Deferred tax liability
Development assets/ property, plant and equipment 274,547,778 239,704,056
Total 274,547,778 239,704,056
Net deferred tax liabilities 58,848,114 40,445,531
239,704,056
Net deferred tax liabilities
58,848,114
40,445,531
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:
Current tax - -
Deferred tax charge (18,402,583) (14,000,208)
Total (18,402,583) (14,000,208)
Total
(18,402,583)
(14,000,208)
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 profit or loss is reconciled as follows:
31 March 2017 31 March 2016
Accounting profit for the year before tax 43,785,891 29,705,711
Effective tax at the domestic rates applicable to profits in the country concerned 18,941,776 12,850,690
Impact of change in tax rate on deferred tax - 252,699
Non allowable expenses/(Non-taxable income) (539,193) 896,819
Tax expense 18,402,583 14,000,208
The reconciliation shown above has been based on the rate 43.26 per cent
(previous year: 43.26 per 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 corporates. 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 in respect
of the Oil Block incurred 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 Company has opted to claim the expenditure in the first year
of commercial production. As the Group has commenced commercial production in
2011 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 2017 31 March 2016
Drilling and production stores and spares 4,344,244 3,503,608
Fuel 31,665 15,521
Goods in transit 1,205,594 594,478
Total 5,581,503 4,113,607
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 5.10.
Inventories of US$ 169,331 (previous year: US$ 254,090) were recorded as an
expense under the heading 'cost of sales' in the consolidated statement of
comprehensive income during the year ended 31 March 2017.
Inventories of US$ 7,037,963 (previous year: US$ 8,908,991) were capitalized
as part of exploration and evaluation assets and development assets.
11. OTHER CURRENT ASSETS
31 March 2017 31 March 2016
Prepayments 38,784 238,879
Total 38,784 238,879
12. CASH AND CASH EQUIVALENTS
31 March 2017 31 March 2016
Cash at banks in current accounts 11,401,788 61,081,916
Total 11,401,788 61,081,916
The Group only deposits cash surpluses with major banks of high quality credit
standing.
13. EQUITY
Authorised share capital
The total authorised share capital of the Company is GBP 5,000,000 divided
into 500,000,000 shares of GBP 0.01 each. The total number of shares issued by
the Company as at 31 March 2017 is 182,973,924 (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
entities 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.
Share option reserve
The amount of share option reserve represents the accumulated expense
recognised by the company in its consolidated statement of comprehensive
income on account of share based options given by the Company.
Retained earning
Retained earnings include current and prior period retained profits.
14. LONG TERM DEBT
From Banks
Maturity 31 March 2017 31 March 2016
Non-current portion of long term debt 2018/2024 168,252,860 210,454,996
Current portion of long term debt from banks 44,069,933 34,932,179
Total 212,322,793 245,387,175
Current interest rates are variable and weighted average interest for the year
was 5.96 per cent per annum (previous year: 5.80 per cent per annum). The fair
value of the above variable rate borrowings are 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 6 and 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 2017 31 March 2016
Non-current portion of long term debt 2018 71,394,500 73,324,297
Current portion of long term debt 2,544,421 2,624,560
Total 73,938,921 75,948,857
During the period ended 31 March 2016, the Group has issued Singapore Dollar
("SGD") 100 million (USD 74.18 million) notes under the US$ 300 million MTN
programme which carries interest at the rate of 8 per cent per annum. These
notes are unsecured notes and are fully repayable at the end of 3 years i.e.
April 2018, further interest on these notes is paid semi-annually.
15. PROVISION FOR DECOMMISSIONING
Balance at 1 April 2015 1,281,862
Decrease in provision (149,136)
Balance as at 31 March 2016 1,132,726
Increase in provision 188,307
Balance as at 31 March 2017 1,321,033
Balance as at 31 March 2017
1,321,033
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 utilised when the related wells are fully depleted. The majority of the
cost is expected to be incurred within a period of next 8 years. The discount
factor being the risk adjusted rate related to the liability is estimated to
be 9 per cent for the year ended 31 March 2017 (previous year: 8 per cent).
16. PAYABLE TO RELATED PARTIES
Related parties payable comprise the following:
Maturity 31-Mar-17 31-Mar-16
Current
Liability payable to Focus On demand 5,250,197 6,916,510
Payable to directors On demand 320,425 258,613
5,570,622 7,175,123
Other than current
Borrowings from Gynia Holdings Ltd.* 149,071,994 128,107,609
149,071,994 128,107,609
Total 154,642,616 135,282,732
Liability payable to Focus
Liability payable to Focus represents amounts due 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.
The management estimates the current borrowings to be repaid on demand within
twelve months from the statement of financial position date and these have
been classified as current borrowings.
* 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 in year 2024.
Interest capitalised on loans above have been disclosed in notes 6 and 7.
17. OTHER OPERATING INCOME
The Company's subsidiaries decided to enter into the business of leasing
Rig/Drillship for oil and gas exploration and Production activities and
entered into contracts for purchase of drillship and rig. The counter party
to the respective contracts failed on their commitment to timely deliver the
rig and Drillship consequently, in accordance with terms of the respective
contracts, the Company received compensation amounting to US$ 15.5 million for
loss of profit on account of cancellation of contracts. This income is
recorded as other operating income in the consolidated financial statements.
18. EMPLOYEE COST
Costs pertaining to the employees of Focus have been included in the cost of
sales and administrative expenses in the consolidated statement of
comprehensive income amounting to
US$ 327,733 (previous year US$ 324,428) and US$ 473,106 (previous year US$
532,756) respectively. Cost pertaining to the employees of the Group have been
included under administrative expense is US$ 449,778 (previous year US$
621,455).
19. FOREIGN CURRENCY EXCHANGE (LOSS)/ GAIN, NET
The Group has recognized the following in the profit or loss on account of
foreign currency fluctuations:
31 March 2017 31 March 2016
Gain/ (Loss) on restatement of foreign currency monetary receivables and payables 2,260,762 (702,683)
Gain/(loss) arising on settlement of foreign currency transactions and restatement of foreign currency balances arising out of Oil block operations 15,148 336,253
Total 2,275,910 (366,430)
20. OPERATING LEASES
Lease payments capitalised under exploration and evaluation assets and
development/ production assets during the year ended 31 March 2017 amount to
US$ 40,298,219 (previous year US$ 45,601,638). No sublease payments or
contingent rent payments were made or received. No sublease income is expected
as all assets held under lease agreements are used exclusively by the Group.
All the operating leases of the Group can be cancelled and there are no future
minimum payments for the existing operating leases. The terms and conditions
of these operating leases do not impose any significant financial restrictions
on the Group.
21. Share based payment
The Company maintained an equity settled share-based payment scheme adopted
and approved by the directors on 29 May 2008. Vesting of these options have
completed in earlier years and there is no expense in respect of these options
during the years ended 31 March 2017 and 31 March 2016. All share options
granted to directors and advisors of the Company and Arden Partners have
expired in June 2015 and the Company has no legal or constructive obligation
to repurchase or settle the options hence the amount of share option reserve
has been transferred to retained earnings during the year ended 31 March
2016.
22. 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 2017 31 March 2016
Profits attributable to shareholders of Indus Gas Limited, for basic and dilutive 25,383,308 15,705,503
Weighted average number of shares (used for basic earnings per share) 182,973,924 182,973,924
Diluted weighted average number of shares (used forDiluted earnings per share) 182,973,924 182,973,924
Basic earnings per share 0.14 0.09
Diluted earnings per share 0.14 0.09
23. RELATED PARTY TRANSACTIONS
The related parties for each of the entities in the Group have been summarised
in the table below:
I. Holding Company Gynia Holdings Ltd.
II. Ultimate Holding Company Multi Asset Holdings Ltd. (Holding Company ofGynia Holdings Ltd.)
III. Enterprises over which Key Management Personnel (KMP) exercise control (with whom there are transactions) Focus Energy Limited
III. Enterprises over which Key Management Personnel (KMP) exercise control
(with whom there are transactions)
Focus Energy Limited
Disclosure of transactions between the Group and related parties and the
outstanding balances as at 31 March 2017 and 31 March 2016 is as under:
Transactions with holding company
Transactions during the year with the holding company
Amount received 12,500,000 -
Interest 8,464,385 7,818,774
Balances at the end of the year
Total payable* 149,071,994 128,107,609
*including interest
149,071,994
128,107,609
*including interest
Transactions with KMP and entity over which KMP exercise control
Particulars 31-Mar-17 31-Mar-16
Transactions during the year
Remuneration to KMP
Short term employee benefits 449,778 621,455
Total 449,778 621,455
Entity over which KMP exercise control
Cost incurred by Focus on behalf of the Group in respect of the Block 65,122,032 64,768,570
Remittances to Focus 66,426,722 82,020,937
Balances at the end of the year
Total payable* 5,570,622 6,824,887
*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 also separately disclosed in the directors' report
on page 10.
24. 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. 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$ 639,863,055
(previous year: US$ 562,442,840).
The Group has a product natural gas and its by-product i.e. condensate. The
natural gas is supplied to a single customer, GAIL, in a single geographical
segment, being India. Sale of by product is not significant to be classified
as separate reportable segment.
25. COMMITMENTS AND CONTINGENCIES
The Group has no contingent liabilities as at 31 March 2017 (previous year
Nil).
The Group has no commitments as at 31 March 2017 (previous year Nil).
26. 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 exploration and
evaluation expenditure against the 'successful efforts' method. As further
explained in Note 5.6 and 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. The
management has assessed that no such indicators have occurred or exists as at
31 March 2017 to require impairment testing of property, plant and equipment.
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
summarised 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 summarised in note 15.
Impairment testing
As explained above, management carried out impairment testing of property,
plant and equipment of the Block on 19 November 2013 on submission of
integrated declaration of commerciality report by Focus Energy Limited to the
Directorate General of Hydrocarbons, ONGC, the Government of India and the
Ministry of Petroleum and Natural Gas. 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. Selling price
of the gas is based on selling price to GAIL which has been agreed for a
period of three years which has expired on September 2016 (the Company is
presently in negotiations with GAIL for increase in gas 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 9% p.a. Management
believes that no reasonably possible changes in the assumptions may lead to
impairment of property, plants and equipment and intangible assets of the
Block.
The company is in the process of negotiating selling prices with GAIL and
expects that revised selling price will not be less than the existing selling
price.
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, especially when it can be utilized
without a time limit, then deferred tax asset is usually recognized in full.
27. BASIS OF GOING CONCERN ASSUMPTION
The Group has current liabilities amounting to US$ 57,393,947 the majority of
which is towards current portion of borrowings from banks and related parties,
primarily to Focus. As at 31 March 2017, the amounts due for repayment
(including interest payable) within the next 12 months for long term
borrowings are US$ 46,614,354 which the Group expects to meet from its
internal generation of cash from operations.
Further, the Group is contemplating to raise funds which will be used for
planned capital expenditures (including the exploration, appraisal and
development of assets).
28. 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 makes adjustments to 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 equity is calculated as 'equity' as shown in the consolidated statement
of financial position plus total debt.
Total debt (A) 531,846,443 529,013,474
Total equity (B) 129,249,252 103,865,944
Total capital employed (A+B) 661,095,695 632,879,418
Gearing ratio 80.45 per cent 83.59 per cent
Gearing ratio
80.45 per cent
83.59 per cent
The gearing ratio has marginally decreased since in the current year due to
proportionately greater increase in equity as compared to increase in the
draw-down of loans from banks and related party to fund additional
exploration, evaluation and development activities for the Group.
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.
29. 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
recognised at the end of the reporting period are as follows:
Non-current assets
Loans and receivables
- Security deposits 885 885
Current assets
Loans and receivables
- Trade receivables 2,045,252 3,266,738
- Cash and cash equivalents 11,401,788 61,081,916
Total financial assets under loans and receivables 13,447,925 64,349,539
Non-current liabilities
Financial liabilities measured at amortised cost:
- Long term debt 239,647,360 283,779,293
- Payable to related parties 149,071,994 128,107,609
Current liabilities
Financial liabilities measured at amortised cost:
- Current portion of long term debt 46,614,354 37,556,739
- Current portion of payable to related parties 5,570,622 7,175,123
- Accrued expenses and other liabilities 131,885 175,372
Total financial liabilities measured at amortised cost 441,036,215 456,794,136
Total financial liabilities measured at amortised cost
441,036,215
456,794,136
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$. No forward exchange
contracts were entered into during the year.
Entities within the Group conduct the majority of their transactions in their
functional currency other than finance lease obligation balances which are
maintained in Indian Rupees and amounts of cash held in GBP. All other
monetary assets and liabilities are denominated in functional currencies of
the respective entities. The currency exposure on account of assets and
liabilities which are denominated in a currency other than the functional
currency of the entities of the Group as at 31 March 2017 and 31 March 2016 is
as follows:
Particulars Functional currency Foreign currency 31 March 2017 31 March 2016
(Amount in US$) (Amount in US$)
Short term exposure- Cash and cash equivalents US$ Great Britain Pound 20,594 149,937
Short term exposure- Cash and cash equivalents US$ Singapore Dollar 143,583 44,881,697
Long term exposure- Long term debt US$ Singapore Dollar 73,938,921 75,948,857
Total exposure 74,103,098 120,980,491
As at March 31, 2017, 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 USD (665,166) and USD 665,166
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
31 March 2017
Non-interest bearing 5,250,197 131,885 - - - 5,382,082
Variable interest rate liabilities - 13,338,846 39,458,607 139,919,422 53,892,270 246,609,146
Fixed interest rate liabilities - - - 80,608,933 149,071,994 223,010,915
5,250,197 13,397,222 39,458,607 240,036,831 176,785,778 475,001,144
240,036,831
176,785,778
475,001,144
31 March 2016
Non-interest bearing 6,916,510 175,373 - - - 7,091,883
Variable interest rate liabilities - 8,013,352 29,802,000 158,944,00 122,397,19 319,156,542
Fixed interest rate liabilities - - - 73,498,806 128,107,608 201,606,414
6,916,510 8,188,725 29,802,000 232,442,806 250,504,798 527,854,839
6,916,510
8,188,725
29,802,000
232,442,806
250,504,798
527,854,839
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 issued during the year is fixed at 8% per annum. The
Group is exposed to changes in market interest rates through bank borrowings
at variable interest rates. Interest rate on US$ 110 million bank borrowing is
5 percent plus LIBOR; on US$ 40 million bank borrowing is 4 percent plus LIBOR
and on US$ 180 million bank borrowing is 4.1 percent plus LIBOR (detailed in
note 14).
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.
+ 0.50 per cent - 0.50 per cent
31 March 2017 1,073,074 (1,073,074)
31 March 2016 1,226,936 (1,226,936)
1,226,936
(1,226,936)
Since the loans are taken specifically for the purpose of exploration and
evaluation, development and production activities and according to the Group's
policy the borrowing costs are capitalized to the cost of the asset and hence
changes in the interest rates do not have any immediate adverse impact on the
profit or loss.
Commodity price risks
The Group's share of production of gas from the Block is sold to GAIL. The
prices has 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 made short-term deposits of surplus funds available with banks
and financial institutions of good credit repute and therefore, doesn't
consider credit risk to be significant. Other receivables such as security
deposits and advances with related parties, do not comprise of a significant
cumulative balance and thus do not expose the Group to a significant credit
risk. The Group has concentration of credit risk as all the Group's trade
receivables are held with GAIL, its only customer. However, GAIL has a
reputable credit standing and hence the Group does not consider credit risk in
respect of these to be significant. None of the financial assets held by the
Group are past due.
Post reporting date event
No adjusting or significant non adjusting event have occurred between 31 March
2017 and the date of authorization.
This information is provided by RNS
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