TIDMINDI
RNS Number : 9694N
Indus Gas Limited
27 September 2019
Indus Gas Limited
Audited final results for the 12 months ended 31 March 2019
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 2019.
Highlights
-- The Petroleum & Natural Gas Regulatory Board (PNGRB)
received the bid for the laying of a gas pipeline from the gas
processing facility for the evacuation of gas from RJ-ON/6 Block
and is currently evaluating the bid. This will enable natural gas
from RJ-ON/6 block to be delivered to the National Grid.
-- 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 with approved gas reserves of 1.8
tcf.
-- 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 contracted and planned gas
sale requirements.
-- Testing of previously drilled wells.
FINANCIAL
-- Total Revenues (including other operating income) were US$
60.61 million (2017-18: US$ 60.60 million).
-- Operating profit increased to US$ 53.29 million (2017-18: US$
51.51 million).
-- Profit before tax increased to US$ 53.90 million (2017-18:
US$ 47.81 million).
-- Net Investments made in property, plant and equipment,
exploration and evaluation assets amounting to US$ 108.57
million.
-- All repayments under the existing debt terms were made on a
timely basis.
For further information please contact:
Indus Gas Limited +44 (0)20 7877
Peter Cockburn 0022
Jonathan Keeling
Arden Partners plc
Ciaran Walsh / Steve Douglas / Dan Gee-Summons
(Corporate Finance) +44 (0)20 7614
James Reed-Daunter (Equity Sales) 5900
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 km(2) 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 successfully secured 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 the enhancement of
production to 90 mmscfd from the SGL field. The Petroleum &
Natural Gas Regulatory Board (PNGRB) have received a bid for the
laying of a gas pipeline from the gas processing facility for the
evacuation of gas from RJ-ON/6 Block and is currently evaluating
the bid. This will enable natural gas from RJ-ON/6 block to be
delivered to the National Grid.
Chairman's Statement
This has been another notable period of operational progress for
the group. The approval of the Field Development Plans combined our
application for a pipeline to evacuate gas from the RJ-ON/6 block
being lodged with the PNGRB, represented a major milestone achieved
in the period under review.
The Company's strong operational and financial performance is
highlighted by another year of improved 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. The
management 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
prioritise the increase of domestic gas production thereby reducing
the dependence on expensive imported energy.
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$
60.61 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 received and are currently evaluating the bid for the
construction of a pipeline to evacuate gas from the RJ-ON/6
Block.
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 planned to meet contracted and 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 zones within Pariwar. These were
located just below the existing producing upper 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$ 60.61 million, resulting
in reported operating profit of US$ 53.29 million (2017-18 US$
51.50 million). The reported profit after tax was US$ 37.49 million
(2017-18 US$ 33.63 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$ 16.41 million as
per IFRS requirements.
Post this deferred tax liability provision, the net profit for
the year was US$ 37.49 million.
The net expenditure on the purchase of property, plant &
equipment was US$ 108.57 million. The property plant and equipment,
including development assets and production assets, increased to
US$ 851.28 million.
The current assets (excluding cash) as of 31 March 2019 stood at
US$ 39.65 million, which includes US$ 9.32 million of inventories
and US$ 27.61 million of trade receivables. Receivables of US$ 25
million out of this total of US$ 27.61 million have been realized
subsequent to 31(st) March 2019. 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$ 42.87 million, stood
at US$ 7.15 million. This comprised mainly of deferred revenue of
US$ 5.08 million (GAIL-Take or Pay Obligation) and other
liabilities of US$ 2.07 million.
As of 31 March 2019, the outstanding debt of the Company to
banks was US$ 139.17 million, out of which US$ 39.17 million was
categorised as repayable within a year and the remaining US$ 100
million has been categorised as a long term liability. During the
year, the Company repaid an amount of US$ 32.94 million of the
outstanding term loan facilities, as per the scheduled repayment
plan. As of 31(st) March 2019, the outstanding unsecured debt from
bonds was US$ 153.47 million, out of which US$ 3.69 million was
categorized as repayable within a year and the remaining US$ 149.78
million has been categorized as a long term liability.
Outlook
During the next twelve months, we expect a further step change
in the growth of the Company and look forward to continued drilling
success in both Pariwar and B&B.
Jonathan Keeling
Director
Consolidated Statement of Financial Position
(All amounts in United States Dollars, unless otherwise
stated)
Note 31 March 2019 31 March 2018
--------------------------- ----------------------------
ASSETS
Non-current assets
Intangible assets: exploration 7 - -
and evaluation assets
8 851,277,557 742,705,287
2,695,055 2,424,527
Property, plant and equipment 605 709
---------------------------
Tax assets
Other assets
---------------------------
Total non-current assets 853,973,217 745,130,523
--------------------------- ----------------------------
Current assets
Inventories 11 9,327,984 8,341,084
Trade receivables 27,617,626 18,185,854
Receivables from related party 17 57,098,640 13,914,912
Other current assets 12 10,957 34,296
Cash and cash equivalents 13 129,152 13,342,498
--------------------------- ----------------------------
Total current assets 94,184,359 53,818,644
--------------------------- ----------------------------
Total assets 948,157,576 798,949,167
--------------------------- ----------------------------
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) (9,313,781)
Merger reserve 13 19,570,288 19,570,288
Retained earnings 14 139,755,664 102,268,993
Total shareholders' equity 200,365,302 162,878,632
--------------------------- ----------------------------
Liabilities
Non-current liabilities
Long term debt, excluding current
portion 15 249,722,044 287,451,403
Provision for decommissioning 16 1,606,825 1,581,096
Deferred tax liabilities (net) 9 89,442,675 73,031,531
Payable to related parties, exclu
ding
current portion 17 331,088,491 204,640,627
Deferred revenue 25,563,995 25,563,995
Total non-current liabilities 697,424,030 592,268,652
--------------------------- ----------------------------
Current liabilities
Current portion of long term
debt 15 42,869,400 37,299,630
Current portion payable to related
parties 17 352,909 355,496
Accrued expenses and other
liabilities 20,68,849 1,069,671
Deferred revenue 5,077,086 5,077,086
Total current liabilities 50,368,244 43,801,883
--------------------------- ----------------------------
Total liabilities 747,792,274 636,070,535
--------------------------- ----------------------------
Total equity and liabilities 948,157,576 798,949,167
--------------------------- ----------------------------
(The accompanying notes are an integral part of these
consolidated financial statements)
These consolidated financial statements were approved and
authorized for issue by the board on 26 September 2019 and was
signed on its behalf by:
Peter Cockburn.
Consolidated Statement of Comprehensive Income
(All amounts in United States Dollars, unless otherwise
stated)
Year ended Year ended
Note 31 March 2019 31 March 2018
-------------- --------------
Revenues 18 60,605,486 60.601,156
Cost of sales (6,191,595) (7,611,218)
-------------- --------------
Gross profit 54,413,981 52,989,938
-------------- --------------
Cost and expenses
Administrative expenses (1,128,726) (1,480,268)
--------------
Operating profit 53,285,165 51,509,670
-------------- --------------
Foreign currency exchange (loss)/gain,
net 20 612,594 (4,129,784)
Interest expense - -
Interest income 56 432,912
--------------
Profit before tax 53,897,815 47,812,798
-------------- --------------
Income taxes 10
- Deferred tax expense (16,411,144) (14,183,418)
-------------- --------------
Profit for the year (attributable
to the shareholders of the 37,486,671 33,629,380
Group)
-------------- --------------
Total comprehensive income for
the year (attributable to the
shareholders of the Group) 37,486,671 33,629,380
-------------- --------------
Earnings per share 22
Basic 0.20 0.18
Diluted 0.20 0.18
(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 Share Retained Total
paid in translation reserve option earnings shareholders'
capital reserve reserve equity
------------------------ ------------ ------------ ----------- -------- ------------- --------------
No. of Amount
shares
--------------- ------------ ---------- ------------ ------------ ----------- -------- ------------- --------------
Balance as
at 1 April
2017 182,973,924 3,619,443 46,733,689 (9,313,781) 19,570,288 - 68,639,613 129,249,252
--------------- ------------ ---------- ------------ ------------ ----------- -------- ------------- --------------
Profit and
total
comprehensive
income for
the year.
Amount
Transferred
to
retained
earnings - - - - - - 33,629,380 33,629,380
--------------- ------------ ---------- ------------ ------------ ----------- -------- -------------
Balance as
at 31 March
2018 182,973,924 3,619,443 46,733,689 (9,313,781) 19,570,288 - 102,268,993 162,878,632 -
--------------- ------------ ---------- ------------ ------------ ----------- -------- ------------- --------------
Comprehensive
income for
the year
Amount
transferred
to retained
earnings - - - - - - 37,486,671 37,486,671
---------------
- - - - - - - -
--------------- ------------ ---------- ------------ ------------ ----------- -------- ------------- --------------
Balance as
at 31 March
2019 182,973,924 3,619,443 46,733,689 (9,313,781) 19,570,288 - 139,755,664 200,365,303
--------------- ------------ ---------- ------------ ------------ ----------- -------- ------------- --------------
(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 2019 31 March
2018
-------------- ----------
Cash flow from operating activities
Profit before tax 53,897,815 47,812,798
Adjustments
Unrealized exchange (gain)/loss 20 (612,594) (176,716)
Interest income (56) (432,912)
Interest Expense 1 -
Depreciation 7 3,995,414 5,412,465
Changes in operating assets and liabilities
Inventories (986,900) (2,759,581)
Trade receivables (9,431,672) (16,140,702)
Other current and non-current assets 23,443 4,664
Payable to related party-operating
activities 4,697,750 7,261,017
Provisions for decommissioning 25,729 260,063
Accrued expenses and other liabilities 996,591 988,805
-------------- ---------------
Cash generated from operations 52,605,521 42,229,901
Income taxes paid (270,528) (259,217)
-------------- ---------------
Net cash generated from operating
activities 52,334,993 41,970,684
-------------- ---------------
Cash flow from investing activities
Investment in exploration and evaluation
assets
Purchase of property, plant and equipment
(A) (118,948,933) (102,603,984)
Interest received 56 432,912
-------------- ---------------
Net cash used in investing activities (118,948,877) (102,171,072)
-------------- ---------------
Cash flow from financing activities
Repayment of long term debt from
banks (32,942,671) (113,499,400)
Proceeds from long term debt from
banks
Proceeds from issue of bond
Proceeds from loans by related parties -
-
149,769,799
108,299,952 44,669,002
Payment of interest (22,569,737) (19,005,171)
-------------- ---------------
Net cash generated from financing
activities 52,787,544 61,934,230
-------------- ---------------
Net decrease in cash and cash equivalents (13,826,340) 1,733,842
Cash and cash equivalents at the beginning
of the year 13,342,498 11,401,788
Effects of exchange differences on
cash and cash equivalents 612,994 206,868
-------------- ---------------
Cash and cash equivalents at the end
of the year 129,152 13,342,498
-------------- ---------------
(A) The purchase of property, plant and equipment above,
includes additions to exploration and evaluation assets amounting
to US$ 9,569,925 (previous year: US$ 5,927,548) 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 adapted by the European Union ('EU'). The
consolidated financial statements have been prepared on a going
concern basis (refer to note 27), 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 2019 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 2019 31 March 2018
Non-current assets 851,277,557 742,705,287
Current assets 22,255,996
66,426,624
Non-current liabilities 1,606,825 1,581,096
Current liabilities
Expenses (net of finance income) 4,697,750 6,761,016
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 9 Financial Instruments
IFRS 9 replaces IAS 39 'Financial Instruments: Recognition and
Measurement'. It makes major changes to the previous guidance on
the classification and measurement of financial assets and
introduces an 'expected credit loss' model for the impairment of
financial assets.
The Group adjusted the impairment model applied to financial
assets from an incurred loss to a forward-looking expected credit
loss model. The change impacted the calculation of the bad debt
allowance for accounts receivable in particular. The Group applies
the simplified approach, which allows expected lifetime losses to
be recognized for accounts receivable using historical credit loss
experience, adjusted for forward-looking factors specific to the
debtors and the economic environment.
The implementation of IFRS 9 did not have a significant impact
to the classification or measurement of financial assets and
financial liabilities and on the consolidated statement of
comprehensive income in the reporting period. For detailed
accounting policy refer note 6.13.
IFRS 15 Revenue from Contracts with Customers
Effective January 1, 2018, the Group has applied IFRS 15 which
establishes a comprehensive framework for determining whether, how
much and when revenue is to be recognised. IFRS 15 replaces IAS 18
Revenue and IAS 11 Construction Contracts. The Group has adopted
IFRS 15 using the cumulative effect method. The effect of initially
applying this standard is recognised at the date of initial
application (i.e. January 1, 2018). The standard is applied
retrospectively only to contracts that are not completed as at the
date of initial application and the comparative information in the
profit or loss is not restated - i.e. the comparative information
continues to be reported under IAS 18 and IAS 11. The adoption of
the standard did not have any material impact to the financial
statements of the Group.
For detailed accounting policy refer note 6.6.
5. STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE AND YET TO BE APPLIED BY THE GROUP
Summarized in the paragraphs below are standards,
interpretations or amendments that have been issued prior to the
date of approval of these consolidated financial statements and
endorsed by EU and will be applicable for transactions in the Group
but are not yet effective. These have not been adopted early by the
Group and accordingly, have not been considered in the preparation
of the consolidated financial statements of the Group.
Management anticipates that all of these pronouncements will be
adopted by the Group in the accounting period beginning after the
effective date of each of the pronouncements. Information on the
new standards, interpretations and amendments that are expected to
be relevant to the Group's consolidated financial statements is
provided below.
-- IFRS 16 Leases
On January 13, 2016, the IASB issued the final version of IFRS
16, Leases. IFRS 16 will replace the existing leases Standard, IAS
17 Leases, and related interpretations. The standard sets out the
principles for the recognition, measurement, presentation and
disclosure of leases. IFRS 16 introduces a single lessee accounting
model and requires a lessee to recognize assets and liabilities for
all leases with a term of more than 12 months, unless the
underlying asset is of low value. The Standard also contains
enhanced disclosure requirements for lessees. The effective date
for adoption of IFRS 16 is annual periods beginning on or after
January 1, 2019, though early adoption is permitted for companies
applying IFRS 15 Revenue from Contracts with Customers.
The company will recognize a right-of-use asset and
corresponding liability in respect of the net present value of
these leases unless they qualify for short-term leases upon the
application of IFRS 16. The actual quantification of the impact of
the application of IFRS 16 on the consolidated financial statements
is ongoing and will depend on future economic conditions, including
the Company's incremental borrowing rate and the composition of the
Company's Lease Portfolio on January 1 ,2019."
IFRIC 23, Uncertainty over Income Tax Treatments
The IASB has issued IFRIC 23, Uncertainty over Income Tax
Treatments ('Interpretation'), to specify how to reflect
uncertainty in accounting for income taxes.
IAS 12 provides the recognition and measurement principles for
current and deferred tax assets and liabilities. However, it does
not provide guidance in relation to accounting of an uncertain tax
treatment, pending decision by a relevant taxation authority or
court, while measuring current and deferred taxes. The entities
would now be required to assess the effect of uncertainties on
income tax treatment of items or transactions and depending on the
likelihood of the taxation authorities accepting the treatment in
the tax return, the entity would either disclose the uncertainty in
the financial statements or include an adjustment for the same in
the tax provision for that year.
The Interpretation does not introduce any new disclosure
requirements, but strengthens the need to comply with the
significant disclosure requirements under IAS 1, Presentation of
Financial Statements, and IAS 12. The Interpretation is to be
applied to the determination of taxable profit, tax bases, unused
tax losses, unused tax credits and tax rates, where there is
uncertainty over income tax treatments under IAS 12.
Furthermore, if an entity considers a particular amount payable
or receivable for interest and penalties, associated with uncertain
tax treatment, to be an income tax, then that amount is within the
scope of this Interpretation and where a company instead applies
IAS 37, Provisions, Contingent Liabilities and Contingent Assets,
to these amounts, then it does not apply this Interpretation. The
Interpretation would also apply to uncertainty affecting deferred
tax assets and liabilities arising out of business combinations
(IFRS 3, Business Combinations).
The Interpretation is effective for annual periods beginning on
or after 01 January 2019. Earlier application is permitted, if the
entity discloses that fact.
The Group is evaluating the requirements of the amendments and
its impact if any, on the consolidated financial statements.
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 2019. 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 recognized in the period in which the
estimate is revised if the revision affects only that period or in
the period of the revision and future periods if the revision
affects both current and future periods. Information about
significant judgments, estimates and assumptions that have the most
significant effect on recognition and measurement of assets,
liabilities, revenues and expenses is provided in note 26.
6.3. FOREIGN CURRENCIES
The consolidated financial statements have been presented in US$
which is the functional currency of the 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. Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the re-measurement of monetary items at year-end exchange
rates are recognised in the profit or loss for the year.
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
Effective April 1, 2018, the Company has applied IFRS 15 which
establishes a comprehensive framework for determining whether, how
much and when revenue is to be recognised. The Company has adopted
IFRS 15 using the cumulative effect method. The effect of initially
applying this standard is recognised at the date of initial
application (i.e. April 1, 2018). The standard is applied
retrospectively only to contracts that are not completed as at the
date of initial application and the comparative information in the
Statement of Profit and Loss is not restated - i.e. the comparative
information continues to be reported under IAS 18 and IAS 11. The
adoption of the standard did not have any material impact to the
financial statements of the Company.
In accordance with IFRS 15, Revenue from contracts with
customers is recognized 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. The transfer
of control of natural gas usually coincides with title passing to
the customer and the customer taking physical possession.
Any payment received in respect of contractual short lifted gas
quantity for which an obligation exists to make-up such gas in
subsequent periods is recognised as Contract Liabilities in the
year of receipt. Revenue in respect of such contractual short
lifted quantity of gas is recognised when such gas is actually
supplied or when the customer's right to make up is expired,
whichever is earlier.
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 derecognized upon
disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on de-recognition of the
asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the
profit or loss of the year in which the asset is derecognized.
However, where the asset is being consumed in developing
exploration and evaluation intangible assets, such gain or loss is
recognized 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 recognized at cost and no depreciation is
charged as it has an unlimited useful life.
Production assets are depreciated from the date of commencement
of production, on a field by field basis with reference to the unit
of production method for the commercially probable and proven
reserves in the particular field.
Advances paid for the acquisition/ construction of property,
plant and equipment which are outstanding as at the end of the
reporting period and the cost of property, plant and equipment
under construction before such date are disclosed as 'Capital
work-in-progress'.
6.6. EXPLORATION AND EVALUATION ASSETS
The Group adopts the full cost method of accounting for its oil
and gas interests, having regard to the requirements of IFRS 6:
Exploration for and Evaluation of Mineral Resources. Under the full
cost method of accounting, all costs of exploring for and
evaluating oil and gas properties, whether productive or not are
accumulated and capitalized by reference to appropriate cost pools.
Such cost pools are based on geographic areas and are not larger
than a segment. The Group currently has one cost pool being an area
of land located in Rajasthan, India.
Exploration and evaluation costs may include costs of license
acquisition, directly attributable exploration costs such as
technical services and studies, seismic data acquisition and
processing, exploration drilling and testing, technical
feasibility, commercial viability costs, finance costs to the
extent they are directly attributable to financing these activities
and an allocation of administrative and salary costs as determined
by management. All costs incurred prior to the award of an
exploration license are written off as a loss in the year
incurred.
Exploration and evaluation costs are classified as tangible 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
recognized.
6.7. IMPAIRMENT TESTING FOR EXPLORATION AND EVALUATION ASSETS
AND PROPERTY, PLANT AND EQUIPMENT
An impairment loss is recognized for the amount by which an
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation.
Where there are indicators that an exploration asset may be
impaired, the exploration and evaluation assets are grouped with
all development/producing assets belonging to the same geographic
segment to form the Cash Generating Unit (CGU) for impairment
testing. Where there are indicators that an item of property, plant
and equipment asset is impaired, assets are grouped at the lowest
levels for which there are separately identifiable cash flows to
form the CGU. The combined cost of the CGU is compared against the
CGU's recoverable amount and any resulting impairment loss is
written off in the profit or loss of the year. No impairment has
been recognized during the year.
An assessment is made at each reporting date as to whether there
is any indication that previously recognized impairment losses may
no longer exist or may have decreased. If such indication exists,
the Group estimates the asset's or CGU's recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized.
The reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years. Such
reversal is recognized in profit or loss unless the asset is
carried at a re-valued amount, in which case the reversal is
treated as a revaluation increase.
6.8. FINANCIAL ASSETS
Financial assets and financial liabilities are recognized when
the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognized when the
contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognized when
it is extinguished, discharged, cancelled or expires. Financial
assets and financial liabilities are measured initially at fair
value plus transactions costs, except for financial assets and
financial liabilities carried at fair value through profit or loss,
which are measured initially at fair value. 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 Company
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 recognized in profit or loss or
in other comprehensive income in statement of comprehensive
income.
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'. This replaced IAS 39's 'incurred loss
model'. Instruments within the scope of the new requirements
included loans and other debt-type financial assets measured at
amortised cost and FVOCI, trade receivables and loan
commitments.
Recognition of credit losses is no longer dependent on the Group
first identifying a credit loss event. Instead 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.
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 trade and other
payables which are classified as financial liabilities recognized
at amortized cost. Financial liabilities are measured subsequently
at amortized cost using the effective interest method except for
financial liabilities held for trading or designated at fair value
through profit or loss ("FVTPL"), that are carried subsequently at
fair value with gains or losses recognized in profit or loss in
consolidated statement of comprehensive income. All derivative
financial instruments that are not designated and effective as
hedging instruments are accounted for as FVTPL.
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. SHARE BASED PAYMENTS
The Group operates equity-settled share-based plans for its
employees, directors, consultants and advisors. Where persons are
rewarded using share-based payments, the fair values of services
rendered by employees and others are determined indirectly by
reference to the fair value of the equity instruments granted. This
fair value is appraised using the Black Scholes model at the
respective measurement date. In the case of employees and others
providing services, the fair value is measured at the grant date.
The fair value excludes the impact of non-market vesting
conditions. All share-based remuneration is recognised as an
expense in profit or loss with a corresponding credit to 'Share
Option Reserve'.
If vesting periods or other vesting conditions apply, the
expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable.
Estimates are subsequently revised, if there is any indication that
the number of share options expected to vest differs from previous
estimates and any impact of the change is recorded in the year in
which that change occurs.
In addition, where the effect of a modification leads to an
increase in the fair value of the options granted, such increase
will be accounted for as an expense immediately or over the period
of the respective grant.
Upon exercise of share options, the proceeds received up to the
nominal value of the shares issued are allocated to share capital
with any excess being recorded as additional paid-in capital.
6.12. 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 profit or loss.
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. 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.
6.13. 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.
Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
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 un-utilised debt facility
are treated as prepayments to be adjusted against the carrying
value of debt as and when drawn.
6.14. 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. Cash and cash equivalents are classified as loans and
receivables under the financial instruments category.
6.15. LEASING ACTIVITIES
Finance leases which transfer substantially all the risks and
benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease, at the fair value of the
leased property or the present value of the minimum lease payments,
whichever is lower.
Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
charges are charged directly in profit or loss of the year.
All leases other than finance leases are treated as operating
leases. Operating lease payments are recognised as an expense in
profit or loss on the straight line basis over the lease term.
Where the lease payments in respect of operating leases are made
for exploration and evaluation activities or development and
production activities, these are capitalized as part of the cost of
these assets.
6.16. 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 a 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 recognized in profit or loss of the year. To the
extent such expense is incurred for construction or development of
any asset, it is included in the cost of that asset. If the effect
of the time value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the
passage of time is 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 when the Group has an obligation and
a reliable estimate can be made. The amount recognised is the
present value of the estimated future expenditure. A corresponding
item of property, plant and equipment of an amount equivalent to
the provision is also recognised and is subsequently depreciated as
part of the asset. The unwinding discount is recognised as a
finance cost.
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.
6.17. 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:
Intangible assets: Exploration
and Evaluation assets
------------------------------------ -------------------------------
Balance as at 1 April 2017 -
Additions (A) 5,927,548
Transfer to development assets (B) (5,927,548)
Balance as at 31 March 2018 -
Additions (A) 9,569,925
Transfer to development assets (B) (9,569,925)
-------------------------------
Balance as at 31 March 2019 -
-------------------------------
(A) The above includes borrowing costs of US$ 314,083 (previous
year: US$ 859,043). The weighted average capitalisation rate on
funds borrowed generally is 6.70 per cent per annum (previous year:
6.50 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
2017 167,248 4,120,043 514,274,733 154,604,476 5,926,920 4,734,619 15,76,976 1,317,908 686,722,923
Additions/transfers - 203,990 72,840,134 35,844,636 - 32,944 43,614 53,533 109,018,851
Disposals/transfers - - - - - - - - -
--------------------- -------------- ---------- ------------- ------------- --------------- --------------- -------------- ----------------- ------------
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/transfers - 263,697 90,923,274 21,562,829 5,764 69,510 265491 113,090,565
Disposals/transfers - - - - - - -
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
--------------------- -------------- ---------- ------------- ------------- --------------- --------------- -------------- ----------------- ------------
Accumulated
Depreciation
Balance as at 1
April
2017 - 1,870,614 - 34,233,251 5,388,608 3,867,798 1,500,482 - 46,860,753
Depreciation for the
year - 235,193 - 5,412,465 263,676 191,532 72,868 - 6,175,734
-------------- ---------- ------------- ------------- --------------- --------------- -------------- ------------
Balance as at 31
March
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 32,484 4,518,291
-------------- ---------- ------------- ------------- --------------- --------------- -------------- ------------
Balance as at 31
March
2019 2,282,425 - 43,641,189 5,782,117 4,243,213 1,605,836 57,554,778
--------------------- -------------- ---------- ------------- ------------- --------------- --------------- -------------- ----------------- ------------
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
--------------------- -------------- ---------- ------------- ------------- --------------- --------------- -------------- ----------------- ------------
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/Production assets also include
borrowing costs US$ 41,500,334 (previous year: US$ 32,077,511)
(including the amount stated in note 7 above). The weighted average
capitalisation rate on funds borrowed generally is 6.70 per cent
per annum (previous year 6.50 per cent).
The depreciation has been included in the following
headings-
31 March 2019 31 March 2018
-------------------------------------- --------------- -----------------
Depreciation included in development
assets 462,924 763,269
Depreciation included in statement
of comprehensive income under the
head cost of sales 3,995,414 5,412,465
Total 4,458,338 6,175,734
--------------------------------------- --------------- ---------------
9. DEFERRED TAX ASSETS/ LIABILITIES (NET)
Deferred taxes arising from temporary differences are summarized
as follows:
31 March 2019 31 March 2018
----------------------------------------- -------------- -------------------
Deferred tax assets 276,662,093 245,617,558
Unabsorbed losses/credits 276,662,093 245,617,558
Total
Deferred tax liability
Development assets/ property, plant and
equipment 366,104,769 318,649,089
Total 366,104,769 318,649,089
Net deferred tax liabilities 89,442,675 73,031,531
------------------------------------------- -------------- -------------------
a) The Group has recognized deferred tax assets on all of its
unused tax losses/unabsorbed depreciation considering there is
convincing evidence of availability of sufficient taxable profit in
the Group in the future as summarized in note 10.
b) The deferred tax movements during the current year have been
recognized 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 2019 31 March 2018
---------------------------- ----------------------------------------------------
Deferred tax charge (16,411,144) (14,183,418)
Total (16,411,144) (14,183,418)
----------------------------- ---------------------------- ----------------------
The relationship between the expected tax expense based on the
domestic tax rates for each of the legal entities within the Group
and the reported tax expense in profit or loss is reconciled as
follows:
31 March 2019 31 March 2018
Accounting profit for the year before
tax 54,297,815 47,812,798
Effective tax at the domestic rates
applicable to profits in the country
concerned 23,489,235 20,683,816
Tax impact of bought forward losses 7,668,185 -
lapsed during the year
Non allowable expenses/(Non-taxable
income) (14,746,276) (6,500,398)
Tax expense 16,411,144 14,183,418
--------------------------------------- -------------- --------------
The reconciliation shown above has been based on the rate 43.26
per cent (previous year: 43.26 per cent) as applicable under Indian
tax laws.
The Company's profits are taxable as per the tax laws applicable
in Guernsey where zero per cent tax rate has been prescribed for
corporates. Accordingly, there is no tax liability for the Group in
Guernsey. IServices and Newbury being participants in the PSC are
covered under the Indian Income tax laws as well as tax laws for
their respective countries. However, considering the existence of
double tax avoidance arrangement between Cyprus and India, and
Mauritius and India, profits in Newbury and iServices are not
likely to attract any additional tax in their local jurisdiction.
Under Indian tax laws, Newbury and iServices are allowed to claim
the entire expenditure in respect of the Oil Block incurred until
the start of commercial production (whether included in the
exploration and evaluation assets or development assets) as
deductible expense in the first year of commercial production or
over a period of 10 years. The Company has opted to claim the
expenditure in the first year of commercial production. As the
Group has commenced commercial production in 2011 and has generated
profits in Newbury and iServices, the management believes there is
reasonable certainty of utilization of such losses in the future
years and thus a deferred tax asset has been created in respect of
these.
11. INVENTORIES
Inventories comprise the following:
31 March 2019 31 March
2018
------------------------------------ ------------------------- ----------
Drilling and production stores and
spares 8,291,996 6,987,268
Fuel 26,350 34,006
Goods in transit 10,09,638 1,319,810
Total 9,327,984 8,341,084
------------------------------------ ------------------------- ----------
The above inventories are held for use in the exploration,
development and production activities. These are valued at cost
determined based on policy explained in paragraph 5.10.
Inventories of US$ 529,007 (previous year: US$ 202,220) were
recorded as an expense under the heading 'cost of sales' in the
consolidated statement of comprehensive income during the year
ended 31 March 2019.
Inventories of US$ 9,142,006 (previous year: US$ 9,158,954) were
capitalized as part of exploration and evaluation assets and
development assets.
12. OTHER CURRENT ASSETS
31 March 2019 31 March
2018
------------- ----------------------------- ----------
Prepayments 10,957 34,296
Total 10957 34,296
------------- ----------------------------- ----------
13. CASH AND CASH EQUIVALENTS
31 March 2019 31 March 2018
----------------------------------- --------------------------- --------------
Cash at banks in current accounts 129,145 13,342,498
-----------------------------------
Total 129,145 13,342,498
----------------------------------- --------------------------- --------------
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. The
total number of shares issued by the Company as at 31 March 2019 is
182,973,924 (previous year: 182,973,924).
--For all matters submitted to vote in the shareholders meeting
of the Company, every holder of ordinary shares, as reflected in
the records of the Company on the date of the shareholders' meeting
has one vote in respect of each share held.
All shareholders are equally eligible to receive dividends and
the repayment of capital in the event of liquidation of the
individual entities of the Group.
Additional paid in capital
Additional paid-in capital represents excess over the par value
of share capital paid in by shareholders in return for the shares
issued to them, recorded net of expenses incurred on issue of
shares.
Currency translation reserve
Currency translation reserve represents the balance of
translation of the entities financial statements into US$ until 30
November 2010 when its functional currency was assessed as GBP.
Subsequent to 1 December 2010, the functional currency of Indus Gas
was reassessed as US$.
Merger reserve
The balance on the merger reserve represents the fair value of
the consideration given in excess of the nominal value of the
ordinary shares issued in an acquisition made by the issue of
shares of subsidiaries from other entities under common
control.
Share option reserve
The amount of share option reserve represents the accumulated
expense recognised by the company in its consolidated statement of
comprehensive income on account of share based options given by the
Company.
Retained earning
Retained earnings include current and prior period retained
profits.
15. LONG TERM DEBT
From Banks
Maturity 31 March 2019 31 March
2018
---------------------------------- ----------- ---------------- ------------
Non-current portion of long term
debt 2021/2024 100,003,278 137,661,359
Current portion of long term
debt from banks 39,171,055 32,991,123
Total 139,174,333 170,652,482
---------------------------------- ----------- ---------------- ------------
Current interest rates are variable and weighted average
interest for the year was 6.70 per cent per annum (previous year:
6.50 per cent per annum). The fair value of the above variable rate
borrowings is considered to approximate their carrying amounts. The
maturity profile (undiscounted) is explained in note 29.
Interest capitalised on loans above have been disclosed in notes
7 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 2019 31 March 2018
---------------------------------- --------- -------------- --------------
Non-current portion of long term
debt 2022 149,718,766 149,790,044
Current portion of long term
debt 3,698,345 4,308,507
Total 153,417,111 154,098,551
---------------------------------- --------- -------------- --------------
During the period ended 31 March 2018, 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
Provision for
decommissioning
----------------------------- -----------------
Balance at 1 April 2017 1,321,033
Increase in provision 260,063
Balance as at 31 March 2018 1,581,096
Increase in provision 25,729
Balance as at 31 March 2019 1,606,825
----------------------------- -----------------
As per the PSC, the Group is required to carry out certain
decommissioning activities on gas wells. The provision for
decommissioning relates to the estimation of future disbursements
related to the abandonment and decommissioning of gas wells. The
provision has been estimated by the Group's engineers, based on
individual well filling and coverage. This provision will be
utilised when the related wells are fully depleted. The majority of
the cost is expected to be incurred within a period of next 8
years.
17. PAYABLE/ RECEIVABLE TO RELATED PARTIES
Related parties payable comprise the following:
Maturity 31-Mar-19 31-Mar-18
-------------------------------- ----------- ------------ ------------
Current
Payable to directors On demand 352,909 355,496
352,909 355,496
Other than current
Borrowings from Gynia Holdings
Ltd.* 331,088,491 204,640,627
331,088,491 204,640,627
Total 331,441,400 204,996,123
--------------------------------------------- ------------ ------------
* 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-Mar-19 31-Mar-18
------------------------------ ----------- ----------- -----------
Current
Amount receivable from Focus On demand 57,098,640 13,914,912
Total 57,098,640 13,914,912
------------------------------------------- ----------- -----------
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. REVENUE
The Group's revenue disaggregated by primary geographical
markets is as follows:
31-Mar-19 31-Mar-18
--------------- ----------- -----------
Within India 25,122,414 39,801,156
Outside India 35,483,072 20,800,000
--------------- ----------- -----------
60,605,486 60,601,156
--------------- ----------- -----------
The Group's revenue disaggregated by the portion of revenue
recognition is as follows:
31-Mar-19 31-Mar-18
-------------------------------------- ----------- -----------
Goods transferred at a point in time 41,605,486 39,801,156
Services transferred at a point in
time 19,000,000 20,800,000
-------------------------------------- ----------- -----------
60,605,486 60,601,156
-------------------------------------- ----------- -----------
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, company has
entered into a new gas sale agreement wherein the customer is be
liable to pay 50% of the contracted quantity if it does not
commence its purchase of gas in the current year.
Other Operating Income
The other operating income represents revenue earned from
technical and other support services being rendered to oil and gas
exploration companies.
Contractual assets and Contractual Liabilities
31-Mar-19 Non-current 31-Mar-18 Non- Current
Current Current
--------------------------------------- ------------ ------------ ------------ -------------
Opening balance of Contract
liabilities - Deferred income 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: Addition in balance of
contract liabilities for current
year 5,077,086 - 5,077,086 -
--------------------------------------- ------------ ------------ ------------ -------------
Closing balance of Contract
liabilities - Deferred income 5,077,086 25,563,995 5,077,086 25,563,995
--------------------------------------- ------------ ------------ ------------ -------------
19. EMPLOYEE COST
Per the PSC, Focus is the Operator of the Block. For SGL field,
ONGC has a participative interest of 30% in the development cost.
Hence, the share of Iservices and Newbury are proportionately
reduced (i.e. 45.5% and 17.5% respectively). For the Non-SGL field,
the share of Iservices, Newbury and Focus are in the ratio of 65%,
25% and 10% respectively. The Employee cost attributable to Indus
Gas Limited has been allocated in the agreed ratio (refer no 3) by
Focus and recorded as cost of sales and administrative expenses in
the consolidated statement of comprehensive income amounting to US$
331,882 (previous year US$ 369,852) and US$ 254,718 (previous year
US$ 553,217) respectively. Cost pertaining to the employees of the
Group have been included under administrative expense is US$
172,828 (previous year US$ 155,179).
20. FOREIGN CURRENCY EXCHANGE (LOSS)/ GAIN, NET
The Group has recognized the following in the profit or loss on
account of foreign currency fluctuations:
31 March 2019 31 March 2018
---------------------------------------- -------------- --------------
Gain/ (Loss) on restatement of foreign
currency monetary receivables and
payables (19,456) (4,113,835)
Gain/(loss) arising on settlement
of foreign currency transactions
and restatement of foreign currency
balances arising out of Oil block
operations 632,050 (15,949)
Total 612,594 (4,129,784)
---------------------------------------- -------------- --------------
21. OPERATING LEASES
Lease payments capitalised under exploration and evaluation
assets and development/ production assets during the year ended 31
March 2019 amount to US$ 43,682,502 (previous year US$ 51,376,926).
No sublease payments or contingent rent payments were made or
received. No sublease income is expected as all assets held under
lease agreements are used exclusively by the Group. All the
operating leases of the Group can be cancelled and there are no
future minimum payments for the existing operating leases. The
terms and conditions of these operating leases do not impose any
significant financial restrictions on the Group.
22. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
Calculation of basic and diluted earnings per share is as
follows:
31 March 2019 31 March 2018
-------------------------------------- -------------------- --------------------
Profits attributable to shareholders
of Indus Gas Limited, for basic
and dilutive 37,486,671 33,629,380
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) 182,973,924 182,973,924
Basic earnings per share 0.20 0.18
Diluted earnings per share 0.20 0.18
-------------------------------------- -------------------- --------------------
23. RELATED PARTY TRANSACTIONS
The related parties for each of the entities in the Group have
been summarised in the table below:
Nature of the relationship Related Party's Name
------------------------------------------- ---------------------------
I. Holding Company Gynia Holdings Ltd.
II. Ultimate Holding Company Multi Asset Holdings Ltd.
(Holding Company of Gynia
Holdings Ltd.)
III. Enterprises over which Key Management Focus Energy Limited
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 2019 and 31 March 2018
is as under:
Transactions with holding company
Particulars 31 March 2019 31 March 2018
--------------------------------------- -------------- --------------
Transactions during the year with the
holding company
Amount received 108,299,250 44,669,114
Interest 18,147,917 10,899,519
Balances at the end of the year
Total payable* 331,088,491 204,640,627
--------------------------------------- -------------- --------------
*including interest
Transactions with KMP and entity over which KMP exercise
control
Particulars 31-Mar-19 31-Mar-18
----------------------------------------- ------------ -------------
Transactions during the year
Remuneration to KMP
Short term employee benefits 179,741 142,462
Total 179,741 142,462
Entity over which KMP exercise control
Cost incurred by Focus on behalf of the
Group in respect of the Block 72,742,272 80,298,008
Remittances to Focus 115,926,000 99,498,082
Balances at the end of the year
Total receivables* 57,098,640 13,914,912
Total payable* (352,909) 355,496
----------------------------------------- ------------ -------------
*including interest
Directors' remuneration
Directors' remuneration is included under administrative
expenses, evaluation and exploration assets or development assets
in the consolidated financial statements allocated on a systematic
and rational manner. Remuneration by director is also separately
disclosed in the directors' report on page 10 of the Annual Report
and Accounts.
24. SEGMENT REPORTING
The Chief Operating Decision Maker being the Chief Executive
Officer of the Group, reviews the business as one operating segment
being the extraction and production of gas. Hence, no separate
segment information has been furnished herewith.
All of the non-current assets other than financial instruments
and deferred tax assets (there are no employment benefit assets and
rights arising under insurance contracts) are located in India and
amounted to US$ 851,277,557 (previous year: US$ 742,705,287).
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 98.68% (Previous year:
96.05%).
25. COMMITMENTS AND CONTINGENCIES
The Group has no contingent liabilities as at 31 March 2019
(previous year Nil).
The Group has no commitments as at 31 March 2019 (previous year
Nil).
26. ACCOUNTING ESTIMATES AND JUDGEMENTS
In preparing consolidated financial statements, the Group's
management is required to make judgments and estimates that affect
the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The judgments and estimates are based on
management's best knowledge of current events and actions and
actual results from those estimates may ultimately differ.
Significant judgments applied in the preparation of the
consolidated financial statements are as under:
Determination of functional currency of individual entities
Following the guidance in IAS 21 "The effects of changes in
foreign exchange rates" the functional currency of each individual
entity is determined to be the currency of the primary economic
environment in which the entity operates. In the management's view
each of the individual entity's functional currency reflects the
transactions, events and conditions under which the entity conducts
its business. The management believes that US$ has been taken as
the functional currency for each of the entities within the Group.
US$ is the currency in which each of these entities primarily
generate and expend cash and also generate funds for financing
activities.
Full cost accounting for exploration and evaluation
expenditure
The Group has followed 'full cost' approach for accounting
exploration and evaluation expenditure against the 'successful
efforts' method. As further explained in Note 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 2019 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 pro
duction (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 recognized for the amount by
which the asset's or cash generating unit's carrying amount exceeds
its recoverable amount. To determine the recoverable amount,
management estimates expected future cash flows from the Block and
determines a suitable interest rate in order to calculate the
present value of those cash flows. In the process of measuring
expected future cash flows management makes assumptions about
future gross profits. These assumptions relate to future events and
circumstances. In most cases, determining the applicable discount
rate involves estimating the appropriate adjustment to market risk
and the appropriate adjustment to asset-specific risk factors.
The recoverable amount was determined based on value-in-use
calculations, basis gas reserves confirmed by an independent
competent person. Selling price of the gas is based on selling
price to GAIL which has been agreed for a period of three years
which has expired on September 2016 (the Company is presently in
negotiations with GAIL for increase in gas price.). The discount
rate calculation is based on the Company's weighted average cost of
capital adjusted to reflect pre-tax discount rate and amounts to 9%
p.a. Management believes that no reasonably possible changes in the
assumptions may lead to impairment of property, plants and
equipment and intangible assets of the Block.
The company is in the process of negotiating selling prices with
GAIL and expects that revised selling price will not be less than
the existing selling price. 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 recognized in full. The recoverability of
deferred tax assets is monitored as an ongoing basis based on the
expected taxable income from the sale of gas.
27. BASIS OF GOING CONCERN ASSUMPTION
The Group has current liabilities amounting to US$ 50,368,244
the majority of which is towards current portion of borrowings from
banks and related parties, primarily to Focus. As at 31 March 2019,
the amounts due for repayment (including interest payable) within
the next 12 months for long term borrowings are US$ 42,869,400
which the Group expects to meet from its internal generation of
cash from operations.
Further, the Group is contemplating to raise funds which will be
used for planned capital expenditures (including the exploration,
appraisal and development of assets).
28. CAPITAL MANAGEMENT POLICIES
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Group manages the capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. The Group monitors
capital on the basis of the gearing ratio. This ratio is calculated
as net debt divided by total capital. Debt is calculated as total
liabilities (including 'current and non-current liabilities' as
shown in the consolidated Statement of Financial Position). Total
equity is calculated as 'equity' as shown in the consolidated
statement of financial position plus total debt.
31 March 2019 31 March 2018
---- ------------------------------ --------------
Total debt (A) 747,392,274 636,070,536
Total equity (B) 200,365,298 162,878,632
Total capital employed (A+B) 948,157,572 798,949,168
Gearing ratio 78.83 percent 79.61 percent
----------------------------------- -------------- --------------
The gearing ratio has marginally decreased since in the current
year due to proportionately greater increase in equity as compared
to increase in the draw-down of loans from banks and related party
to fund additional exploration, evaluation and development
activities for the Group.
The Group is not subject to any externally imposed capital
requirements. There were no changes in the Group's approach to
capital management during the year.
29. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
A summary of the Group's financial assets and liabilities by
category are mentioned in the table below. The carrying amounts of
the Group's financial assets and liabilities recognised at the end
of the reporting period are as follows:
31 March 2019 31 March 2018
--------------------------------------------- -------------- --------------
Non-current assets
Loans and receivables
- Security deposits 605 709
Current assets
Loans and receivables
- Trade receivables 27,617,626 18,185,854
- Receivable from related party 57,098,640 13,914,912
- Cash and cash equivalents 129,145 13,342,498
Total financial assets under loans
and receivables 84,846,016 45,443,973
--------------------------------------------- -------------- --------------
Non-current liabilities
Financial liabilities measured at amortised
cost:
- Long term debt 249,722,044 287,451,403
- Payable to related parties 331,088,491 204,640,627
Current liabilities
Financial liabilities measured at amortised
cost:
- Current portion of long term debt 42,869,400 37,299,630
- Current portion of payable to related
parties 352,909 355,496
- Accrued expenses and other liabilities 2,068,849 1,069,671
--------------------------------------------- -------------- --------------
Total financial liabilities measured
at amortised cost 626,101,693 530,816,827
--------------------------------------------- -------------- --------------
The fair value of the financial assets and liabilities described
above closely approximates their carrying value on the statement of
financial position date.
Risk management objectives and policies
The Group finances its operations through a mixture of loans
from banks and related parties and equity. Finance requirements
such as equity, debt and project finance are reviewed by the Board
when funds are required for acquisition, exploration and
development of projects.
The Group treasury functions are responsible for managing
funding requirements and investments which includes banking and
cash flow management. Interest and foreign exchange exposure are
key functions of treasury management to ensure adequate liquidity
at all times to meet cash requirements.
The Group's principal financial instruments are cash held with
banks and financial liabilities to banks and related parties and
these instruments are for the purpose of meeting its requirements
for operations. The Group's main risks arising from financial
instruments are foreign currency risk, liquidity risk, commodity
price risk and credit risks. Set out below are policies that are
used to manage such risks:
Foreign currency risk
The functional currency of each entity within the Group is US$
and the majority of its business is conducted in US$. All revenues
from gas sales are received in US$ and substantial costs are
incurred in US$. No forward exchange contracts were entered into
during the year.
Entities within the Group conduct the majority of their
transactions in their functional currency other than finance lease
obligation balances which are maintained in Indian Rupees and
amounts of cash held in GBP. All other monetary assets and
liabilities are denominated in functional currencies of the
respective entities. The currency exposure on account of assets and
liabilities which are denominated in a currency other than the
functional currency of the entities of the Group as at 31 March
2019 and 31 March 2018 is as follows:
Particulars Functional Foreign currency 31 March 2019 31 March 2018
currency
----------------------- ------------ ------------------
(Amount in (Amount in US$)
US$)
----------------------- ------------ ------------------ -------------- ----------------
Short term exposure- Great Britain
Cash and cash US$ Pound 17,537 74,015
equivalents
Short term exposure- Singapore
Cash and cash US$ Dollar 10,758 1,088,624
equivalents
Long term exposure- Singapore
Long term debt US$ Dollar - 790,699
Total exposure 28,296 1,953,338
--------------------------------------------------------- -------------- ----------------
As at March 31, 2019, every 1% (increase)/decrease of the
respective foreign currencies compared to the functional currency
of the Group entities would impact profit before tax by
approximately USD (282) and USD 282 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 2019
Non-interest
bearing 2,421,758 - - - - 2,421,758
Variable interest
rate liabilities 11,529,304 33,814,143 36,340,346 75,994,680 - 157,688,473
Fixed interest
rate liabilities 3,697,945 - - 150,000,000 331,088,491 484,786,436
17,649,007 33,814,143 36,340,346 225,994,680 331,088,491 644,891,667
------------------ ------------ ---------- ---------- ----------- ----------- -------------
3 months
0-3 months to 1 year 1-2 years 2-5 years 5+ years Total
------------------ ------------ ---------- ---------- ----------- ----------- -----------
31 March 2018
1,425,167 - - - - 1,425,167
Non-interest
bearing
Variable interest
rate liabilities 10,988,296 22,002,827 14,400,000 14,400,000 110,862,000 172,653,123
Fixed interest
rate liabilities 3,517,808 790,699 - 150,000,000 204,640,627 358,949,134
15,931,271 22,793,526 14,400,000 164,400,000 315,502,67 533,027,424
------------------ ------------ ---------- ---------- ----------- ----------- -----------
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. Interest rate
on US$ 40 million bank borrowing is 4 percent plus LIBOR and on US$
180 million bank borrowing is 4.1 percent plus LIBOR (detailed in
note 15).
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 2019 695,853 (695,853)
31 March 2018 870,851 (870,851)
----------------- ---------- ----------
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
Other receivables such as security deposits and advances with
related parties do not comprise of a significant cumulative balance
and thus do not expose the Group to a significant credit risk. The
Group has concentration of credit risk as 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. As there has been no history
of significant write off of receivable balance accordingly
management has not recorded any loss allowance on trade
receivable
Post reporting date event
No adjusting or significant non adjusting event have occurred
between 31 March 2019 and the date of authorization.
30. RECONCILIATION OF LIABILITIES FROM FINANCING ACTIVITIES
Non-current borrowings
---------------------------------------------- -----------------------
As at April 01, 2018 529,391,660
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
---------------------------------------------- -----------------------
As at April 01, 2017 435,333,708
Cash Movement:
Net proceeds 61,934,230
Other non- cash movements
Impact of effective interest rate adjustment 1,191,678
Impact of exchange fluctuations 46,100
Interest accruals 30,885,944
---------------------------------------------- -----------------------
Net debts as at March 31, 2018 529,391,660
---------------------------------------------- -----------------------
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 2019 to
shareholders on 30 September 2019. The Annual Report and Accounts
is available for review at http://www.indusgas.com/
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LRMMTMBMTBLL
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