TIDMINDI
RNS Number : 3651A
Indus Gas Limited
29 September 2020
Indus Gas Limited
Audited final results for the 12 months ended 31 March 2020
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 2020.
Highlights
-- The Petroleum & Natural Gas Regulatory Board (PNGRB) has
re-invited bids for the laying of a gas pipeline from the gas
processing facility for the evacuation of gas from RJ-ON/6 Block as
the transportation tariff proposed in the bid was too high. The
Board is confident that there is an opportunity to materially lower
the transportation tariff in the next bidding round. This will
enable natural gas from RJ-ON/6 block to be delivered to customers
through the National Grid at a fair and reasonable transportation
tariff.
-- Approvals from the DGH and Government had already been
received for the development and enhanced production covering a
total field area of 2176 sq. km
-- The gas sand reservoirs were successfully exploited for
production.
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 (including other operating income) were US$
57.97 million (2018-19: US$ 60.61 million).
-- Operating profit increased to US$ 53.38 million (2018-19: US$
53.29 million).
-- Profit before tax decreased to US$ 53.12 million (2018-19:
US$ 53.90 million).
-- Net Investments made in property, plant and equipment,
exploration and evaluation assets amounting to US$ 129.42
million.
-- All repayments under the existing debt terms were made on a
timely basis.
Fo r further inf o rmation pl e ase
c ontact:
Indus Gas Limited +44 (0)20 7877 0022
Peter Cockburn
Jonathan Keeling
Arden Partners plc +44 (0)20 7614 5900
Ciaran Walsh, Dan Gee-Summons (Corporate
Finance)
James Reed-Daunter (Equity Sales)
Overview
Indus Gas Limited ("Indus" or "Company") is engaged in oil and
gas exploration and development in Block RJ-ON/6, Rajasthan, India.
Indus owns a 90% participating interest in the Block (excluding the
SGL gas field, in respect of which its participating interest is
63%). Other partners in the block are (i) Focus Energy Ltd., which
operates the Block, and (ii) Oil and Natural Gas Corporation
(ONGC), India, which is the licensee of the Block. The
'Participative Interest' of Indus as mentioned above is held
through its wholly owned subsidiaries iServices Investment Limited,
Mauritius and Newbury Oil Company Limited, Cyprus. The Block
currently measures an area of 2,176 sq. km and lies onshore in the
highly prospective mid Indus Basin. The first discovery in the
Block was made in 2006 and the first commercial production
commenced in 2010. The Company has received approval from the
Directorate General of Hydrocarbons (DGH) and government for the
integrated Field Development Plan ("FDP") of SSG (Pariwar) &
SSF (B&B) discoveries and for enhancement of production from
the SGL field to 90 MMSCFD . The Petroleum & Natural Gas
Regulatory Board (PNGRB) have re invited bids for the laying of a
gas pipeline from the gas processing facility for the evacuation of
gas from RJ-ON/6 Block. The transportation tariff proposed in the
first bidding round was very high and the Board is confident that
there is an opportunity to materially lower the transportation
tariff in the next bidding round. This will enable natural gas from
RJ-ON/6 block to be delivered to customers through the National
Grid at a fair transportation tariff thereby maximizing value for
shareholders.
Chairman's Statement
This has been another period of operational progress for the
Group. The approval of the Field Development Plans combined with
the PNGRB re-inviting bids for a pipeline to evacuate gas from the
RJ-ON/6 block with a view to achieving a fair transportation
tariff, represented a major milestone achieved in the period under
review.
The Company's strong operational and financial performance is
highlighted by another year of good profit generation and the Board
continues to anticipate a substantial increase in revenues once the
additional gas supplies commence through the new pipeline.
The Board would like to thank their employees, shareholders,
bankers and all other stakeholders for their loyalty and continued
support. The safety and well-being of our employees and all the
workers on-site at the RJ-ON/6 Block is our number one priority.
The directors have taken a conservative approach whilst assessing
the impact of the coronavirus pandemic. This prudent approach means
results for this financial year are anticipated to be slightly
lower than those achieved in the year ended 31st March 2020. The
board continues to monitor the situation and anticipates results
will return to previous levels once the worst of the pandemic is
over and the site returns to unrestricted operations. 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 thereby reducing
the dependence on expensive imported energy and enhancing energy
security.
Peter Cockburn
Chairman
Board of Director's Review
We are pleased to announce another strong year of consolidated
total revenues (including other operating income) totaling US$
57.97 million. We have continued to increase 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. Building on these earlier successes, the
PNGRB has re-invited the bids for the construction of a pipeline to
evacuate gas from the RJ-ON/6 Block with the purpose of achieving a
reasonable transportation tariff.
Operations
Operational activities over the last year have followed the
Group's objectives and are summarised below:
a) drilling of additional wells to support the integrated field development plan;
b) drilling and completion of production wells for the SGL field
development continued as scheduled to meet planned gas sale
requirements;
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
(including other operating income) of US$ 57.97 million (2018-19:
US$ 60.61 million), resulting in reported operating profit of US$
53.38 million (2018-19 US$ 53.29 million). The reported profit
after tax was US$ 49.06 million (2018-19 US$ 37.49 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 non-cash deferred tax liability of US$ 4.06 million as
per IFRS requirements.
Post this deferred tax liability provision, the net profit for
the year was US$ 49.06 million.
The net expenditure on the purchase of property, plant &
equipment was US$ 129.42 million . The property plant and
equipment, including development assets and production assets,
increased to US$ 980.69 million.
The current assets (excluding cash) as of 31 March 2020 stood at
US$ 93.55 million, which majorly includes US$ 7.64 million of
inventories, US$ 59.56 million of receivables from related party
and US$ 26.36 million of trade receivables. Receivables of US$
24.07 million of this total of US$ 26.32 million have been realized
subsequent to 31 March 2020. The current liabilities of the
Company, excluding the related party liability of US$ 0.35 million
and current portion of long term debt of US$ 29.32 million, stood
at US$ 8.12 million. This comprised mainly of deferred revenue of
US$ 5.08 million (GAIL-Take or Pay Obligation) and other
liabilities of US$ 3.04 million.
As of 31 March 2020, the outstanding debt of the Company to
banks was US$ 100.15 million, of which US$ 25.75 million was
categorised as repayable within a year and the remaining US$ 74.40
million has been categorised as a long term liability. During the
year, the Company repaid an amount of US$ 39.40 million of the
outstanding term loan facilities, as per the scheduled repayment
plan. As of 31 March 2020, the outstanding unsecured debt from
bonds was US$ 153.47 million, of which US$ 3.58 million was
categorized as repayable within a year and the remaining US$ 149.89
million has been categorized as a long term liability.
Outlook
During the next twelve months, we expect that the Company will
be able to withstand the adverse impact of the coronavirus pandemic
and 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
Director
Consolidated Statement of Financial Position
(All amounts in United States Dollars, unless otherwise
stated)
Note 31 March 2020 31 March 2019
-------------- -----------------------
ASSETS
Non-current assets
Intangible assets: exploration 7 - -
and evaluation assets
8 980,692,787 851,277,557
2,029,537 2,695,055
Property, plant and equipment 550 605
--------------
Tax assets
Other assets
--------------
Total non-current assets 982,722,874 853,973,217
-------------- -----------------------
Current assets
Inventories 11 7,635,420 9,327,984
Trade and other receivables 12 26,359,203 27,628,583
Receivables from related party 17 59,558,299 57,098,640
Cash and cash equivalents 13 284,619 129,152
-------------- -----------------------
Total current assets 93,837,541 94,184,359
-------------- -----------------------
Total assets 1,076,560,415 948,157,576
-------------- -----------------------
LIABILITIES AND EQUITY
Shareholders' equity
Share capital 14 3,619,443 3,619,443
Additional paid-in capital 14 46,733,689 46,733,689
Currency translation reserve 14 (9,313,782) (9,313,782)
Merger reserve 14 19,570,288 19,570,288
Retained earnings 14 188,815,231 139,755,664
Total shareholders' equity 249,424,869 200,365,302
-------------- -----------------------
Liabilities
Non-current liabilities
Long term debt, excluding current
portion 15 224,294,116 249,722,044
Provision for decommissioning 16 1,699,209 1,606,825
Deferred tax liabilities (net) 9 93,504,835 89,442,675
Payable to related parties,
excluding current portion 17 444,282,706 331,088,491
Deferred revenue 19 25,563,995 25,563,995
Total non-current liabilities 789,344,861 697,424,030
-------------- -----------------------
Current liabilities
Current portion of long term
debt 15 29,323,478 42,869,400
Current portion payable to
related parties 17 351,405 352,909
Trade and other payables 18 3,038,716 2,068,849
Deferred revenue 19 5,077,086 5,077,086
Total current liabilities 37,790,685 50,368,244
-------------- -----------------------
Total liabilities 827,135,546 747,792,274
-------------- -----------------------
Total equity and liabilities 1,076,560,415 948,157,576
-------------- -----------------------
(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 28 September 2020 and was
signed on its behalf by:
Peter Cockburn
Chairman
Consolidated Statement of Comprehensive Income
(All amounts in United States Dollars, unless otherwise
stated)
Year ended Year ended
Note 31 March 2020 31 March 2019
---------------------- ----------------------- -------------
Revenues 19 57,971,296 60,605,486
Cost of sales (3,852,182) (6,191,595)
---------------------- -----------------------
Gross profit 54,119,114 54,413,891
---------------------- -----------------------
Cost and expenses
Administrative expenses (736,630) (1,128,726)
-----------------------
Operating profit 53,382,484 53,285,165
---------------------- -----------------------
Foreign currency exchange (loss)/gain,
net (260,754) 612,594
Interest Income 21 - 56
Profit before tax 53,121,730 53,897,815
---------------------- -----------------------
Income taxes 10
- Deferred tax expense (4,062,159) (16,411,144)
---------------------- -----------------------
Profit for the year (attributable
to the shareholders of the Group) 49,059,571 37,486,671
Total comprehensive income for
the year (attributable to the
shareholders of the Group) 49,059,571 37,486,671
---------------------- ----------------------- -------------
Earnings per share 23
Basic 0.27 0.20
Diluted 0.27 0.20
(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 Currency Merger Retained Total
paid in translation reserve earnings shareholders'
capital reserve equity
------------------------- ----------- ------------ ----------- ------------- --------------
No. Amount
of shares
--------------- ------------ ----------- ----------- ------------ ----------- ------------- --------------
Balance as
at 1 April
2018 182,973,924 3,619,443 46,733,689 (9,313,782) 19,570,288 102,268,989 162,878,627
--------------- ------------ ----------- ----------- ------------ ----------- ------------- --------------
- - - - - 37,486,671 37,486,671
---------------
Profit and
total
comprehensive
income for
the year
--------------- ------------ ----------- ----------- ------------ ----------- -------------
Balance as
at 31 March
2019 182,973,924 3,619,443 46,733,689 (9,313,782) 19,570,288 139,755,660 200,365,298 -
--------------- ------------ ----------- ----------- ------------ ----------- ------------- --------------
- - - - - 49,059,571 49,059,571
---------------
Profit and
total
comprehensive
income for
the year
--------------- ------------ ----------- ----------- ------------ ----------- ------------- --------------
Balance as
at 31 March
2020 182,973,924 3,619,443 46,733,689 (9,313,782) 19,570,288 188,815,231 249,424,869
--------------- ------------ ----------- ----------- ------------ ----------- ------------- --------------
(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)
Note Year ended Year ended
31 March 2020 31 March 2019
-------------------- --------------
Cash flow from operating activities
Profit before tax 53,121,730 53,897,815
Adjustments
Unrealized exchange (gain)/loss 364,016 (612,594)
Interest income - (56)
Depreciation 8 2,072,366 3,995,473
Changes in operating assets and liabilities
Inventories 1,692,563 (986,900)
Trade receivables 1,299,558 (9,431,672)
Other current and non-current assets (30,167) 23,443
Payable to related party-operating
activities 2,815,402 4,697,692
Provisions for decommissioning 92,384 25,729
Accrued expenses and other liabilities 968,363 996,591
-------------------- --------------
Cash generated from operations 62,396,215 52,605,521
Income taxes paid 317,441 (270,528)
-------------------- --------------
Net cash generated from operating
activities 62,713,656 52,334,993
-------------------- --------------
Cash flow from investing activities
Purchase of property, plant and equipment
(A) (90,871,650) (118,948,933)
Interest received - 56
-------------------- --------------
Net cash used in investing activities (90,871,650) (118,948,877)
-------------------- --------------
Cash flow from financing activities
Repayment of long term debt from banks (39,402,000) (32,942,671)
-------------------- --------------
Proceeds from loans by related parties 87,900,000 108,299,952
Payment of interest (20,168,638) (22,569,737)
-------------------- --------------
Net cash generated from financing
activities 28,329,362 52,787,544
-------------------- --------------
Net (decrease)/increase in cash and
cash equivalents 171,368 (13,826,340)
Cash and cash equivalents at the beginning
of the year 129,152 13,342,498
Effects of exchange differences on
cash and cash equivalents (15,901) 612,994
-------------------- --------------
Cash and cash equivalents at the end
of the year 284,619 129,152
-------------------- --------------
(A) The purchase of property, plant and equipment above,
includes additions to exploration and evaluation assets amounting
to US$ 1 9,180,603 (previous year: US$ 9,569,925) transferred to
development cost, as explained in note 7.
(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 has received its declaration of commercial
discovery on 21 January 2008. Subsequent to the declaration of
commercial discovery in SGL field, ONGC had exercised the option to
acquire a 30 per cent participating interest in the discovered
fields on 6 June 2008. The exercise of this option would reduce 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. For recovery of past contract cost, production from the
field is first allocated towards exploration and evaluation cost
and thereafter towards development cost.
On the basis of the above, gas production for the year ended 31
March 2020 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 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 2020 31 March
2019
Non-current assets 980,692,787 851,277,557
Current assets 66,426,624
67,193,720
Non-current liabilities 1,699,209 1,606,825
Expenses (net of finance income) 2,815,402 4,697,750
Commitments NIL NIL
Further, the SSF and SSG field has 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, I services 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 SSF and SSG in the
block.
4. NEW AND AMED STANDARDS ADOPTED BY THE GROUP
A number of new or amended standards became applicable for the
current reporting period and the Group had to change its accounting
policies as a result of adopting the following standards. As a
result, Company has changed its accounting policies, which has been
detailed below:
IFRS 16: Leases
The International Accounting Standard Board (IASB) issued IFRS
16 Leases replacing the previous lease standard, IAS 17 Leases. The
standard establishes the principles for the recognition,
measurement, presentation and disclosure of leases for both the
lessee and lessor. The standard defines lease as contract that
conveys the right to use an asset for a period of time in exchange
for consideration. The standard requires all lease transactions to
be recognised on the balance sheet as Right of use assets and lease
liabilities, and to depreciate lease assets separately from
interest on lease liabilities in the income statement. This
standard became effective on 1 January 2019. There are optional
exemptions for short-term leases and leases of low value items.
Having assessed the requirements of IFRS 16, management has
concluded that the Group's leases do not falls under the definition
of 'leases" as per the standard as the Group does not have the
right to direct the use of leased asset. The operator of the block
i.e Focus Energy Limited has entered the lease agreements and it
has not been subleased to joint arrangement. Therefore, the
recognition principle is not applicable for the Group and no right
of use asset or lease liability has been recognised.
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 2020, 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:
-- Amendments to References to Conceptual Framework in IFRS
Standards (effective from 1 January 2020);
-- Amendments to IFRS 3 'Definition of a Business' (effective from 1 January 2020);
-- IFRS 17 'Insurance Contracts' (effective from 1 January 2023).
-- Amendments to IAS 16 -PPE - Proceeds before intended use (effective from 1 January 2023).
-- Amendments to IAS 1 & IAS 8- 'Definition of material' (effective from 1 January 2020).
-- IBOR Reform Phase 1 amendments (IFRS9, IAS 39 & IAS 7)- January 2020.
-- Annual Improvements to IFRS's 2018-2020 cycle - 1 January 2022.
-- Amendments to IAS 1 'classification of Liabilities as current
or non-current' (effective from 1 January 2023).
-- Amendment for covid -19 related rent concessions- (effective from 1 June 2020)
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 2020. 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 and intangible 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 recognised 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 27.
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 recognised 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 good
or service 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 and service, net of taxes on
sales, estimated rebates and other similar allowances.
Sale of gas
The contracts with customers generally establishes, a single
performance obligation in relation to supply of natural gas. The
transfer of control of natural gas usually 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.
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.
Revenue from technical services
The Company provides technical and commercial feasibility
reports to its customers to enable them in their evaluation of
investments in oil and gas fields. Each report is considered as a
separate performance obligation and the transfer of control of
reports usually coincides with acceptance of reports by the
customer. The price charged for each such report is reflective of
its standalone selling price and the revenue has been recognised on
point in time basis on acceptance of the report by its
customers.
6.5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprises 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 derecognised 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 derecognised. However, where the asset is being
consumed in developing exploration and evaluation intangible
assets, such gain or loss is recognised as part of the cost of the
intangible 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 recognised 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 or
intangible according to the nature of the assets acquired and the
classification is applied consistently. Tangible exploration and
evaluation assets are recognised 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 an
intangible exploration and evaluation asset, the amount reflecting
that consumption is recorded as part of the cost of the intangible
asset.
Exploration and evaluation assets are not amortised 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
recognised.
6.7. IMPAIRMENT TESTING FOR EXPLORATION AND EVALUATION ASSETS AND PROPERTY, PLANT AND EQUIPMENT
An impairment loss is recognised 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 recognised during the year.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised 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 recognised 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 recognised.
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 recognised for the asset in prior years. Such
reversal is recognised 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 assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognised 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 derecognised 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. 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.
On initial recognition, a financial asset is classified as
measured at
- Amortised 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 amortised 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 recognised in consolidated
statement of comprehensive income.
After initial recognition, financials assets at amortised cost
are measured at amortised 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 recognised at amortised 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 recognised in profit or loss in
consolidated statement of comprehensive income.
6.10. INVENTORIES
Inventories are measured at the lower of cost and net realisable
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 unpaid/un-recovered 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 recognised 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 the 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 recognised 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 recognised 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 capitalised 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 capitalised 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 unutilised debt facility are 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. LEASING ACTIVITIES
IFRS 16 supersedes IAS 17 Leases. All contracts that meet the
definition of a lease will be recorded in the consolidated
statements of financial position with a "Right of use" asset and a
corresponding lease liability. The Group has elected not to
recognize right-of-use assets and lease liabilities for leases that
have a lease term of 12 months or less and for leases of low-value
assets.
In accordance with management's evaluation, the Group's leases
do not fall under the definition of leases as per the standard
since the Group does not have the right to direct the use of leased
asset. The operator of the block i.e Focus Energy Limited has
entered the lease agreements and it has not been subleased to joint
arrangement. Therefore, the Group recognises its share in the lease
cost from the operations in accordance with the IFRS 6 "Exploration
for and evaluation of mineral resources".
Where the Group makes the lease payments in respect of its share
of lease cost for exploration and evaluation activities or
development and production activities, these are capitalised as
part of the cost of these assets (Exploration and evaluation,
development and production assets).
6.15. OTHER PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognised 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
recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision net of any
reimbursement is recognised 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 recognised 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 recognised 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 recognised 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 recognised but disclosed in the
financial statements when an inflow of economic benefits is
probable but when it is virtually certain than the asset is
recognised 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 recognised in the statement of financial
position and no disclosure is made.
6.16. 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. INTANGIBLE ASSETS: EXPLORATION AND EVALUATION ASSETS
Intangible assets comprise of exploration and evaluation assets.
Movement in intangible assets is as below:
Exploration and
Evaluation assets
------------------------------------ -------------------
Balance as at 1 April 2018 -
Additions (A) 9,569,925
Transfer to development assets (B) ( 9,569,925 )
Balance as at 31 March 2019 -
Additions (A) 19,826,564
Transfer to development assets (B) (19,826,564)
-------------------
Balance as at 31 March 2020 -
-------------------
(A) The above includes borrowing costs of US$ 645,961 (previous
year: US$ 314,083). The weighted average capitalisation rate on
funds borrowed generally is 6.74 per cent per annum (previous year:
6.70 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.
Further, field development plan has been approved by Directorate
General of Hydrocarbons ('DGH') as on 23 June 2017. Accordingly,
the cost incurred on the aforesaid fields from 23 June 2017 is
capitalized directly to development cost.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise of the following:
Cost Land Extended Production Bunk Houses Vehicles Other assets Capital Total
well test Development assets work-in-progress
equipment assets
--------------- -------------- ----------- ------------- ------------- ----------------- --------------- -------------- ----------------- ---------------
Balance as at
31 March
2018 167,248 4,324,033 587,114,867 190,449,112 5,926,920 4,767,563 1,620,590 1,371,441 795,741,774
Additions - 263,697 90,923,274 21,562,829 - 5,764 69,510 265,491 113,090,565
Disposals - - - - - - - - -
--------------- -------------- ----------- ------------- ------------- ----------------- --------------- -------------- ----------------- ---------------
Balance as at
31 March
2019 167,248 4,587,730 678,038,141 212,011,941 5,926,920 4,773,327 1,690,100 1,636,932 908,832,339
--------------- -------------- ----------- ------------- ------------- ----------------- --------------- -------------- ----------------- ---------------
Additions - 287,354 100,548,333 29,008,120 1,013,584 143,708 5,165 1,020,875 132,027,139
Transfers - - - - 929,071 - - (929,071) -
Disposals - - - - - - - - -
Balance as at
31 March
2020 167,248 4,875,084 778,586,474 241,020,061 7,869,575 4,917,035 1,695,265 1,728,736 1,040,859,478
--------------- -------------- ----------- ------------- ------------- ----------------- --------------- -------------- ----------------- ---------------
Accumulated
Depreciation
Balance as at
1 April
2018 - 2,105,807 - 39,645,716 5,652,284 4,059,330 1,573,350 - 53,036,487
Depreciation
for the
year - 176,618 - 3,995,473 129,833 183,883 32,488 - 4,518,295
-------------- ----------- ------------- ------------- ----------------- --------------- -------------- ---------------
Balance as at
31 March
2019 - 2,282,425 - 43,641,189 5,782,117 4,243,213 1,605,838 - 57,554,782
--------------- -------------- ----------- ------------- ------------- ----------------- --------------- -------------- ----------------- ---------------
Depreciation
for the
year - 189,687 - 2,072,366 111,078 194,869 43,909 - 2,611,909
-------------- ----------- ------------- ------------- ----------------- --------------- -------------- ---------------
Balance as at
31 March
2020 - 2,472,112 - 45,713,555 5,893,195 4,438,082 1,649,747 - 60,166,691
--------------- -------------- ----------- ------------- ------------- ----------------- --------------- -------------- ----------------- ---------------
Carrying
values
At 31 March
2018 167,248 2,218,226 587,114,867 150,803,396 274,636 708,233 47,240 1,371,441 742,705,287
At 31 March
2019 167,248 2,305,305 678,038,141 168,370,752 144,803 530,114 84,262 1,636,932 851,277,557
At 31 March
2020 167,248 2,402,972 778,586,474 195,306,506 1,976,380 478,953 45,518 1,728,736 980,692,787
--------------- -------------- ----------- ------------- ------------- ----------------- --------------- -------------- ----------------- ---------------
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 7. 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 assets also include borrowing costs
US$ 45,891,007 (previous year: US$ 41,500,334) (including the
amount stated in note 7 above). The weighted average capitalisation
rate on funds borrowed generally is 6.74 per cent per annum
(previous year 6.70 per cent).
The depreciation has been included in the following
headings-
31 March 2020 31 March 2019
-------------------------------------- --------------- ------------------
Depreciation included in development
assets 539,543 522,822
Depreciation included in statement
of comprehensive income under the
head cost of sales 2,072,366 3,995,473
Total 2,611,909 4,518,295
--------------------------------------- --------------- ----------------
9. DEFERRED TAX ASSETS/ LIABILITIES (NET)
Deferred taxes arising from temporary differences are summarized
as follows:
31 March 2020 31 March 2019
----------------------------------------- -------------- -------------------
Deferred tax assets 275,249,311 276,662,094
Unabsorbed losses/credits 275,249,311 276,662,094
Total
Deferred tax liability
Development assets/ property, plant and
equipment 368,754,146 366,104,769
Total 368,754,146 366,104,769
Net deferred tax liabilities 93,504,835 89,442,675
------------------------------------------- -------------- -------------------
a) The Group has recognised 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 10.
b) The deferred tax movements during the current year have been
recognised in the consolidated statement of comprehensive
income
10. 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 2020 31 March 2019
---------------------------- -----------------------------------------
Deferred tax charge (4,062,159) (16,411,144)
Total (4,062,159) (16,411,144)
----------------------------- -------------------------- -------------
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 31 March
2020 2019
Accounting profit for the year before
tax 53,121,730 54,897,815
Effective tax at the domestic rates applicable
to profits in the country concerned 23,203,572 23,489,235
Tax impact of bought forward losses lapsed
during the year - 7,668,185
Non-taxable income (19,141,413) (14,746,276)
Tax expense 4,062,159 16,411,144
------------------------------------------------ ------------- -------------
The reconciliation shown above has been based on the rate 43.68
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 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 field 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.
11. INVENTORIES
Inventories comprise the following:
31 March 2020 31 March
2019
------------------------------------ ------------------------- ----------
Drilling and production stores and
spares 6,232,486 8,291,996
Fuel 68,620 26,350
Goods in transit 1,334,314 10,09,638
Total 7,635,420 9,327,984
------------------------------------ ------------------------- ----------
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$ 115,326 (previous year: US$ 529,007) were
recorded as an expense under the heading 'cost of sales' in the
consolidated statement of comprehensive income during the year
ended 31 March 2020.
Inventories of US$ 11,960,540 (previous year: US$ 9,142,006)
were capitalized as part of exploration and evaluation assets and
development assets.
12. TRADE AND OTHER RECEIVABLE
31 March 2020 31 March
2019
------------------ ----------------------------- -----------
Trade receivable 26,318,068 27,617,626
Prepayments 41,135 10,957
Total 26,359,203 27,628,583
------------------ ----------------------------- -----------
The carrying amount of trade receivables approximates their fair
values. Refer "Credit risk" in note 30 for further information.
13. CASH AND CASH EQUIVALENTS
31 March 2020 31 March 2019
----------------------------------- --------------------- --------------
Cash at banks in current accounts 284,619 129,152
-----------------------------------
Total 284,619 129,152
----------------------------------- --------------------- --------------
The Group only deposits cash surpluses with major banks of high
quality credit standing.
14. 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.
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 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.
Retained earning
Retained earnings include current and prior period retained
profits.
15. LONG TERM DEBT
From Banks
Maturity 31 March 2020 31 March
2019
------------------------------------ ----------- ---------------- --------------
Non-current portion of long term
debt 2022/2024 74,400,500 100,003,278
Current portion of long term
debt from banks 25,750,809 39,171,055
Total 100,151,309 139,174,333
------------------------------------ ----------- ---------------- --------------
Current interest rates are variable and weighted average
interest for the year was 6.78 per cent per annum (previous year:
6.89 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 30.
Due to outbreak of Covid-19 pandemic, RBI has issued guidelines
relating to Covid-19 Regulatory Package dated March 27, 2020
wherein Banks have proposed to offer three months holiday on the
payment of instalments to eligible borrowers. The Company has
availed the offer and accordingly classified the current maturities
of long term loans from Bank.
Interest capitalised on loans above have been disclosed in notes
7 and 8.
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 2020 31 March 2019
---------------------------------- --------- -------------- --------------
Non-current portion of long term
debt 2022 149,893,616 149,718,766
Current portion of long term
debt 3,572,669 3,698,345
Total 153,466,285 153,417,111
---------------------------------- --------- -------------- --------------
The Group has issued US Dollar 150 million notes 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 5 years i.e.
December 2022, further interest on these notes is paid
semi-annually.
16. PROVISION FOR DECOMMISSIONING
Amount
----------------------------- ------------------------
Balance at 1 April 2018 1,581,096
Increase in provision 25,729
Balance as at 31 March 2019 1,606,825
Increase in provision 92,384
Balance as at 31 March 2020 1,699,209
----------------------------- ------------------------
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 4
years.
17. PAYABLE/ RECEIVABLE TO RELATED PARTIES
Related parties payable comprise the following:
Maturity 31 March 2020 31 March 2019
-------------------------------- ----------- -------------- --------------
Current
Payable to directors On demand 351,405 352,909
351,405 352,909
Other than current
Borrowings from Gynia Holdings
Ltd.* 444,282,706 331,088,491
444,282,706 331,088,491
Total 444,634,111 331,441,400
--------------------------------------------- -------------- ----------------
* 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 15) 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
7 and 8.
Related parties' receivable comprise the following:
Maturity 31 March 31 March
2020 2019
------------------------------ ----------- ----------- ---------------
Current
Amount receivable from Focus On demand 59,558,299 57,098,640
Total 59,558,299 57,098,640
------------------------------------------- ----------- ---------------
Amount receivable from Focus
Amount receivable from 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.
18. TRADE AND OTHER PAYABLES
31 March 2020 31 March 2019
------------------- -------------- --------------
Trade payables 2,948,400 1,948,400
VAT payables 50,653 29,443
Other liabilities 39,663 91,006
------------------- -------------- --------------
3,038,716 2,068,849
------------------- -------------- --------------
The carrying amount of trade and other payable approximates
their fair values and are non-interest bearing.
19. REVENUE
The Group's revenue disaggregated by primary geographical
markets is as follows:
31 March 2020 31 March 2019
-------- -------------- --------------
Asia 37,371,296 41,605,486
Europe 20,600,000 19,000,000
-------- -------------- --------------
57,971,296 60,605,486
-------- -------------- --------------
The Group's revenue disaggregated by the portion of revenue
recognition is as follows:
31 March 2020 31 March 2019
-------------------------------------- -------------- --------------
Goods transferred at a point in time 37,371,296 41,605,486
Services transferred at a point in
time 20,600,000 19,000,000
57,971,296 60,605,486
-------------------------------------- -------------- --------------
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 be liable to pay 75 % (Previous year: 50%)
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 2020 31 March 2019
-------------------------------- -------------------------- --------------------------
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
recognised against opening
contract liabilities (5,077,086) - (5,077,086) -
-------------------------------- ------------ ------------ ------------ ------------
Add: Transfer from non-current
to current liabilities 5,077,086 (5,077,086) 5,077,086 (5,077,086)
-------------------------------- ------------ ------------ ------------ ------------
Add: Addition in balance
of contract liabilities
for current year - 5,077,086 - 5,077,086
-------------------------------- ------------ ------------ ------------ ------------
Closing balance of Contract
liabilities - Deferred
revenue 5,077,086 25,563,995 5,077,086 25,563,995
-------------------------------- ------------ ------------ ------------ ------------
20. 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$ 249,963 (previous year US$ 331,882) and US$ 91,214 (previous
year US$ 254,718) respectively. Cost pertaining to the employees of
the Group have been included under administrative expense is US$
226,407 (previous year US$ 172,828 ).
21. FOREIGN CURRENCY EXCHANGE (LOSS)/ GAIN, NET
The Group has recognised the following in the consolidated
statement of comprehensive income on account of foreign currency
fluctuations:
31 March 2020 31 March 2019
----------------------------------------- -------------- --------------
Loss on restatement of foreign currency
monetary receivables and payables (411,462) (19,456)
Gain arising on settlement of foreign
currency transactions and restatement
of foreign currency balances arising
out of Oil block operations 150,708 632,050
Total (260,754) 612,594
----------------------------------------- -------------- --------------
22. LEASES
The leasing activities involve lease of drilling rig and other
equipments for exploration and development purpose by the operator.
In reference to note 4 and 6.14, the Group's leases do not fall
under the definition of lease as per IFRS 16 and accordingly they
capitalise the share of lease rentals under exploration and
evaluation assets and development assets. Group's share in lease
payments capitalised under exploration and evaluation assets and
development assets during the year ended 31 March 2020 amount to
US$ 56,370,023 (previous year US$ 43,682,502).
No sublease payments or contingent rent payments were made or
received. All the 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 leases do not impose any
significant financial restrictions on the Group.
23. 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 2020 31 March 2019
--------------------------------------- -------------------- --------------------
Profits attributable to shareholders
of Indus Gas Limited, for basic
and dilutive 49,059,571 37,486,671
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)
Diluted earnings per share) 182,973,924 182,973,924
Basic earnings per share 0.27 0.20
Diluted earnings per share 0.27 0.20
--------------------------------------- -------------------- --------------------
24. 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 Focus Energy Limited
Management Personnel (KMP) exercise
control (with whom there are transactions)
-------------------------------------------- ---------------------------
Disclosure of transactions between the Group and related parties
and the outstanding balances as at 31 March 2020 and 31 March 2019
is as under:
Transactions with holding Company
Particulars 31 March 2020 31 March 2019
----------------------------------------- -------------- --------------
Transactions during the year with the
holding Company
Amount received 87,900,000 108,299,250
Interest 25,294,215 18,147,917
Balances at the end of the year
Total payable* 444,282,706 331,088,491
----------------------------------------- -------------- --------------
*including interest
Transactions with KMP and entity over which KMP exercise
control
Particulars 31 March 2020 31 March 2019
----------------------------------------- -------------- --------------
Transactions during the year
Remuneration to KMP
Short term employee benefits 226,407 179,741
Total 226,407 179,741
Entity over which KMP exercise control
Cost incurred by Focus on behalf of the
Group in respect of the Block 83,481,341 72,742,272
Remittances to Focus 85,941,000 115,926,000
Balances at the end of the year
Total receivables* 59,558,229 57,098,640
Total payable * (351,405) (352,909)
----------------------------------------- -------------- --------------
* 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.
25. 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$ 980,692,787 (previous year: US$ 851,277,557).
Revenue from customers have been identified on the basis of the
customer's geographical location and are disclosed in note 19. The
total revenue from the Group is from the sale of natural gas, its
by-products (i.e. condensate) and from the technical assistance
services to Oil and gas exploration companies. The revenue from the
top three customer comprise 97.31% (Previous year: 97.67%) of the
Group's total revenue.
26. COMMITMENTS AND CONTINGENCIES
The Group has no contingent liabilities as at 31 March 2020
(previous year Nil).
The Group has no commitments as at 31 March 2020 (previous year
Nil).
27. 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 6.6 and 7,
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 2020 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 8.
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 16.
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 recognised 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 8%
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 Group 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. However, the agreement clearly
specifies that until both the parties mutually agree to change the
selling price, the prices will remain the same.
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 recognised 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.
28. BASIS OF GOING CONCERN ASSUMPTION
The Group has current liabilities amounting to US$ 37,790,686
the majority of which is towards current portion of borrowings from
banks and related parties, primarily to Focus. As at 31 March 2020,
the amounts due for repayment (including interest payable) within
the next 12 months for long term borrowings are US$ 29,323,478
which the Group expects to meet from its internal generation of
cash from operations.
The Group is contemplating to raise funds which will be used for
planned capital expenditures (including the exploration, appraisal
and development of assets).
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. Also, refer note
31 for management's evaluation on covid-19 impact.
29. 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.
31 March 2020 31 March 2019
---- -------------------------------- ----------------
Total debt (A) 827,135,546 747,792,274
Total equity (B) 249,424,869 200,365,302
Total capital employed (A+B) 1,076,560,415 948,157,576
Gearing ratio 76.83 % 78.87 %
------------------------------------- ---------------- --------------
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.
30. 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:
31 March 2020 31 March 2019
----------------------------------------- -------------- -----------------
Non-current assets
Loans
- Security deposits 550 605
Current assets
- Trade receivables 26,318,068 27,617,626
- Cash and cash equivalents 284,619 129,152
Total financial assets under loans
and receivables 26,603,237 27,747,383
----------------------------------------- -------------- -----------------
Non-current liabilities
Financial liabilities measured at
amortised cost:
- Long term debt 224,294,116 249,722,044
- Payable to related parties 444,282,706 331,088,491
Current liabilities
Financial liabilities measured at
amortised cost:
- Current portion of long term debt 29,323,478 42,869,400
- Current portion of payable to related
parties 351,405 352,909
- Trade and other payables (other
than VAT payable) 2,988,063 2,039,406
----------------------------------------- -------------- -----------------
Total financial liabilities measured
at amortised cost 701,290,421 626,101,693
----------------------------------------- -------------- -----------------
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$. No forward exchange contracts were entered into
during the year.
Entities within the Group conduct the majority of their
transactions in their functional currency other than amounts of
cash held in GBP, SGD and INR. All other monetary assets and
liabilities are denominated in functional currencies of the
respective entities. The currency exposure on account of assets and
liabilities which are denominated in a currency other than the
functional currency of the entities of the Group as at 31 March
2020 and 31 March 2019 is as follows:
Particulars Functional Foreign currency 31 March 2020 31 March 2019
currency
----------------- ------------ --------------------
(Amount in (Amount in
US$) US$)
----------------- ------------ -------------------- -------------- --------------
Great Britain
US$ Pound 58,607 17,537
Short term
exposure- US$ Singapore Dollar 10,191 10,758
Cash and cash
equivalents US$ Indian Rupee 18,530 -
Total exposure 87,328 28,295
----------------------------------------------------- -------------- --------------
As at March 31, 2020, 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$ (873) and US$ 873 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
0-3 months to 1 year 1-2 years 2-5 years 5+ years Total
------------------- ------------ ---------- ---------- ----------- -------- ------------
31 March 2020
Non-interest
bearing 3,390,121 - - - - 3,390,121
Variable interest
rate liabilities* - 25,463,872 20,530,461 54,156,976 - 100,151,309
Fixed interest
rate liabilities 3,572,669 - - 594,176,322 - 597,748,991
6,962,790 25,463,872 20,530,461 648,333,298 - 701,290,421
------------------- ------------ ---------- ---------- ----------- -------- --------------
* Deferment of loan installment for 3 months due to RBI
moratorium.
3 months
0-3 months to 1 year 1-2 years 2-5 years 5+ years Total
------------------ ------------ ------------ ---------- ----------- ----------- -----------
31 March 2019
Non-interest
bearing 2,421,758 - - - - 2,421,758
Variable interest
rate liabilities 10,008,335 28,765,245 31,236,252 69,164,501 - 139,174,333
Fixed interest
rate liabilities 3,747,945 - - 149,669,166 331,088,491 484,505,602
16,178,038 28,765,245 31,236,252 218,833,667 331,088,491 626,101,693
------------------ ------------ ------------ ---------- ----------- ----------- -----------
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
+ 0.50 per cent cent
--
31 March 2020 618,722 (618,722)
31 March 2019 695,853 (695,853)
--------------- --------------- ----------
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 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 as some of Group's
trade receivables are held with GAIL. However, GAIL has a 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, 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 12M or Lifetime Gross carrying Net carrying
rating ECL amount Loss allowance amount
------------------ ----------- ------------------------ --------------- -------------- ------------
31 March 2020
Security deposit
s Performing 12 Month ECL 550 - 550
Lifetime ECL
Trade receivables Performing (simplified approach) 26,318,068 - 26,318,068
Cash and cash
equivalents Performing 12 Month ECL 284,619 - 284,619
26,603,237 - 26,603,237
------------ ------------------------ -------------- -------------- ------------
Internal
credit 12M or Lifetime Gross carrying Net carrying
rating ECL amount Loss allowance amount
------------------ ----------- -------------------------- --------------- -------------- ------------
31 March 2019
Security deposits Performing 12 Month ECL 605 - 605
Lifetime ECL (simplified
Trade receivables Performing approach) 27,617,626 - 27,617,626
Cash and cash
equivalents Performing 12 Month ECL 129,152 - 129,152
27,747,383 - 27,747,383
------------ -------------------------- -------------- -------------- ------------
An assets is performing when the counterparty has a low risk of
default.
Post reporting date event
No adjusting or significant non adjusting event have occurred
between 31 March 2020 and the date of authorization.
31. Covid-19 Impact
India and global markets have experienced significant disruption
resulting from Covid-19 pandemic. Considering that the entity is in
the business of essential services and facts and circumstances
available, the management has assessed that there is not much of a
significant impact likely on operations of the Group, liquidity
position, recoverability of its assets etc due to this pandemic.
The Group continues to maintain sufficient liquidity to meet all
its obligations.
However, the impact assessment of Covid-19 is a continuing
process given the uncertainties associated with its nature and
duration and the impact of Covid-19 may be different from that
estimated as at the date of approval of these financial statements
and the Group will continue to monitor any material changes to
future economic conditions.
32. RECONCILIATION OF LIABILITIES FROM FINANCING ACTIVITIES
Non-current borrowings
---------------------------------------------- -----------------------
As at April 01, 2019 623,679,935
Cash Movement:
Net proceeds 28,329,361
Other non- cash movements
Impact of effective interest rate adjustment 739,399
Impact of exchange fluctuations -
Interest accruals 45,151,609
---------------------------------------------- -----------------------
Net debts as at March 31, 2020 697,900,300
---------------------------------------------- -----------------------
Non-current borrowings
---------------------------------------------- -----------------------
Cash Movement:
Net proceeds 52,787,544
Other non- cash movements
Impact of effective interest rate adjustment 738,367
Impact of exchange fluctuations (42,235)
Interest accruals 40,804,599
---------------------------------------------- -----------------------
Net debts as at March 31, 2019 623,679,935
---------------------------------------------- -----------------------
33. Posting of Annual Report and Accounts
Indus Gas Limited confirms the Company will post its Annual
Report and Accounts for the 12 months to 31 March 2020 to
shareholders on 30 September 2020. The Annual Report and Accounts
is available for review at http://www.indusgas.com/
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