REG - Indus Gas Limited - Preliminary Financial Results <Origin Href="QuoteRef">INDII.L</Origin> - Part 3

Indus GasAnnouncement

29/10/2014 13:59

- Part 3: For the preceding part double click  ID:nRSX4397Sb 

capital is calculated as 'equity' as shown in the consolidated Statement
of Financial Position plus total debt. 
 
 Net debt                355,953,141  299,598,091  
 Total equity            71,915,850   60,143,917   
 Total capital employed  427,868,991  359,742,008  
 Gearing ratio           83 per cent  83 per cent  
 
 
Gearing ratio 
 
83 per cent 
 
83 per cent 
 
The gearing ratio has increased since the previous year due to increase in the
draw-drown 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 as
recognised at the date of the statement of financial position of the reporting
periods under review may also be categorised as follows: 
 
 Non-current assets                                                                
 Loans and receivables                                                             
 - Security deposits                                     885          885          
 Current assets                                                                    
 Loans and receivables                                                             
 - Trade receivables                                     7,847,404    9,926,029    
 - Cash and cash equivalents                             977,028      7,546,024    
 Total financial assets under loans and receivables      8,825,317    17,472,938   
                                                                                   
 Non-current liabilities                                                           
 Financial liabilities measured at amortised cost:                                 
 - Long term debt from banks                             85,266,117   102,213,678  
 - Payable to related parties                            112,947,262  106,053,767  
 Current liabilities                                                               
 Financial liabilities measured at amortised cost:                                 
 - Current portion of long term debt from banks          17,301,889   16,962,446   
 - Current portion of payable to related parties         96,783,891   55,845,886   
 - Accrued expenses and other liabilities                126,478      59,929       
 Total financial liabilities measured at amortised cost  312,425,637  281,135,706  
 
 
Total financial liabilities measured at amortised cost 
 
312,425,637 
 
281,135,706 
 
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 fund 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$. All revenues from gas sales will
be received in US$ and substantial costs are incurred in US$. No forward
exchange contracts were entered into during the year. 
 
(This space has been intentionally left blank) 
 
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 liabilities which
are denominated in a currency other than the functional currency of the
entities of the Group as at 31 March 2014 and 31 March 2013 is as follows: 
 
                      Functional currency  Foreign currency     31 March 2014  31 March 2013  
 Total exposure                                                 89,424         7,128,289      
 Short term exposure  US$                  Indian rupee         -              2,692          
 Short term exposure  US$                  Great Britain pound  89,424         7,125,597      
 Long term exposure   US$                  Indian rupee         -              -              
 
 
The Group's currency exposure risk towards Indian Rupee and GBP is
insignificant and accordingly the movement in foreign currency will not have a
material impact on the consolidated financial statements. 
 
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 summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments for the liquidity
analysis 
 
 31 March 2014                                                                                                
 Non-interest bearing                -           126,478    -           -           -            126,478      
 Variable interest rate liabilities  96,783,891  4,801,120  14,107,001  57,888,626  25,771,258   199,351,896  
 Fixed interest rate liabilities     -           -          -           -           112,947,262  112,947,262  
                                                                                                              
                                     96,783,891  4,927,598  14,107,001  57,888,626  138,718,520  312,425,636  
 
 
96,783,891 
 
4,927,598 
 
14,107,001 
 
57,888,626 
 
138,718,520 
 
312,425,636 
 
(This space has been intentionally left blank) 
 
 31 March 2013                                                                                                
 Non-interest bearing                1,160,725   59,929     -           -           -            1,220,654    
 Variable interest rate liabilities  54,685,161  4,395,631  12,926,412  76,958,289  24,895,792   173,861,285  
 Fixed interest rate liabilities     -           -          -           -           106,053,767  106,053,767  
                                                                                                              
                                     55,845,886  4,455,560  12,926,412  76,958,289  130,949,559  281,135,706  
 
 
55,845,886 
 
4,455,560 
 
12,926,412 
 
76,958,289 
 
130,949,559 
 
281,135,706 
 
Interest rate risk 
 
The Group's policy is to minimise interest rate risk exposures on the
borrowing from the banks and sum payable to Focus Energy Limited. Interest
rate on sum payable to Focus Energy Limited is linked to actual interest
incurred by Focus capped between 6.5 percent and 10 percent on the chargeable
sum (as defined under amendment in agreement for assignment of participating
interest). Borrowing from the Gynia Holdings Ltd. is at fixed interest rate
and therefore, doesn't expose the Group to risk from changes in interest rate.
 The Group is exposed to changes in market interest rates through bank
borrowings at variable interest rates. Interest rate on 110 million bank
borrowing is 5 percent plus LIBOR and on 40 million bank borrowing is 4
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 2014    996,759          (996,759)    
 31 March 2013    875,110          (875,110)    
 
 
875,110 
 
(875,110) 
 
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 capitalised 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 Blockis sold to GAIL. The
price has been agreed for the current period and for the next three years and
the same would be reviewed periodically and reassessed mutually by the
parties. 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 the 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. 
 
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