GEEC.L Regulatory News (GEEC)

RNS Number : 5170P

Great Eastern Energy Corp Ltd

19 July 2010

 

19 July 2010

Great Eastern Energy Corporation Limited

("Great Eastern" or the "Company")

 

Full Year Results (IFRS)

Year ended 31 March 2010

 

Further to the announcements on 5 July and 7 July 2010, Great Eastern Energy Corporation Limited ("Great Eastern"), a company involved in the exploration, development and production of coal bed methane in India, is pleased to announce its audited financial statements for the 12 months ended 31 March 2010 according to International Financial Reporting Standards ("IFRS").

 

On 7 July the Company announced audited financial statements in accordance with Indian Generally Accepted Accounting Principles ("IGAAP"). The Income Statement reconciliation between IGAAP and IFRS is given here below:

 

Income Statement reconciliation between IGAAP and IFRS for the FY 2009-10

Particulars	US$
Profit/(Loss) after taxes as per IGAAP	(6,988,428)
Add/Less IFRS Adjustments:
Excess loss on sale assets	(5,229)
ESOP fair valuation	(77,768)
Site restoration Cost	34,667
Forward cover mark to market	(70,739)
Profit/Loss for the year before Depreciation	(7,107,497)
Depreciation	(1,365,050)
Profit/(Loss) for the year as per IFRS	(8,472,547)

 

Explanatory notes for the differences:

 

·; Excess loss on sale of assets - Reversal of accumulated depreciation for asset disposals was higher in IGAAP vs IFRS.

·; ESOP fair valuation - Under IGAAP, the Intrinsic Value method is followed for valuing the options granted to the employees, whereas the Fair Value method is followed for options granted to employees under IFRS. The impact of using the Fair Value method under IFRS leads to a higher charge in books as the Fair Value method is greater than the Intrinsic Value.

·; Site Restoration Cost - Under IGAAP, Site restoration cost is charged to the Income Statement but under IFRS the site restoration cost is capitalised.

·; Forward cover mark to market - In IGAAP, premium paid/payable on forward cover on US$ loans is amortised over the period of forward cover. Under IFRS, financial assets are recognised at the fair value, i.e., amount payable at the expiry of forward contract period, leading to a higher charge in the income statement during the year of contract.

·; Depreciation - Under IGAAP, the method of depreciation was changed from Written Down Value ("WDV") to Straight Line Method ("SLM"), based on the date of acquisition of each asset. Current year depreciation in IGAAP is low as depreciation pertaining to previous years was reversed during the year. Under IFRS the depreciation method continues under SLM.

Recent Performance

 

Unaudited Profitability Statement from Oct 2009 to June 2010 (US $ million)

Particulars	Oct - Dec 09	Jan - March 10	Apr - June 10	June-10
Revenue	0.55	1.54	2.54	1.01
Operating Expenses	(1.30)	(1.41)	(1.53)	(0.53)
EBITDA	(0.75)	0.13	1.01	0.47

 

The above figures are unaudited management numbers.

 

Prashant Modi, President and COO of Great Eastern, reiterated:

 

"The focus over the last year has been to develop sales and distribution to end users. We have now successfully achieved both of these aims, with a significant uplift in the quantity of gas under sales agreements and the completion of the pipeline distribution network to the major industrial markets of Asansol, Kulti and Durgapur. The growth in sales agreements is reflected in the significant increase in revenue from gas sales and the Company moving into profit on an EBITDA basis for the first time in the current financial year.

 

A further reflection of the growth in the business is the move post the year end to the main market of the London Stock Exchange. Looking ahead, we are in advanced discussions to put additional sales agreements in place, are well positioned to further increase production to meet contracted demand and, with the award of the Mannargudi Block, have a firm longer term growth opportunity in place."

 

 

 

Disclaimer: http://www.geecl.com/IPO-SEBI-Disclaimer.html 

 

For Further Information:

 

Great Eastern Energy

YK Modi Chairman & CEO +44 (0)20 7337 1516

Prashant Modi President & COO

 

Arden Partners

Richard Day +44 (0)20 7614 5900

Adrian Trimmings

 

RBC Capital Markets

Martin Eales +44 (0)20 7653 4000

Brett Jacobs

 

Pelham Bell Pottinger

Philip Dennis +44 (0)20 7861 3919

Elena Dobson +44 (0)20 7861 3147

 

 

 

Statement of financial position

		As at 31 March
	Notes	2010	2009
ASSETS
Non-current assets
Property, plant and equipment	5	71,221,372	34,227,389
Capital work-in-progress	6	40,639,692	41,464,058
Intangible assets	7	344,896	343,582
Prepayments	8	255,115	179,122
Restricted deposits with banks	12	-	18,646
Trade and other receivables	10	152,169	78,744
		112,613,244	76,311,541
Current assets
Prepayments	8	1,205,500	943,064
Available for sale-investments	11	22,315,986	-
Trade and other receivables	10	1,009,165	1,158,441
Advance income tax		181,918	343,847
Restricted deposits with bank	12	20,979	545,584
Deposits with banks	9	62,396	-
Cash and cash equivalents	13	162,323	502,714
		24,958,267	3,493,650
Total assets		137,571,511	79,805,191
Capital and reserves attributable to equity holders of the Company
Ordinary shares	14	13,021,808	12,246,781
Share premium		79,603,603	33,301,944
Other reserve		1,079,519	(4,270,102)
Share-based payment reserve	15	170,315	73,429
Retained earnings		(19,830,502)	(11,357,955)
Total equity		74,044,743	29,994,097

 

		As at 31 March
	Notes	2010	2009
LIABILITIES
Non-current liabilities
Borrowings	16	55,704,697	42,417,694
Retirement benefit obligations	17	234,739	105,911
Provisions	19	137,172	71,545
		56,076,608	42,595,150
Current Liabilities
Borrowings	16	541,233	23,763
Trade and other payables	18	6,578,348	6,990,591
Derivative financial instruments		305,579	-
Provisions	19	25,000	201,590
		7,450,160	7,215,944
Total liabilities		63,526,768	49,811,094
Total equity and liabilities		137,571,511	79,805,191

 

The accompanying notes form an integral part of these financial statements.
As per our report of even date attached
For Price Waterhouse	On behalf of the Board of Directors
Firm Registration No. - 012745N Chartered Accountants
V. Njhawan
Partner	Yogendra Kr. Modi	Kashi Nath Memani
Membership no. F-87228	Chairman and Chief Executive Officer	Director
Place: New Delhi
Date: 17 July 2010

 

Statement of comprehensive income

 

	Notes	Year ended 31 March
		2010	2009
Income
Revenue		2,474,450	701,146
Other income	23	644,645	133,419
Stores and consumables		(389,083)	(662,737)
Employee benefit expenses	22	(1,696,773)	(1,144,651)
Depreciation and amortisation		(1,470,908)	(824,779)
Other operating expenses	21	(3,290,509)	(2,712,222)
Foreign exchange gain/(loss)		367,795	(219,654)
Operating Loss		(3,360,383)	(4,729,478)
Finance income	24	34,003	39,164
Finance costs	25	(5,146,167)	(1,852,227)
Finance income/costs net		(5,112,164)	(1,813,063)
Loss before income tax		(8,472,547)	(6,542,541)
Income tax benefit	20	0	0
Loss for the year		(8,472,547)	(6,542,541)
Other comprehensive income
Unrealised gain on available for sale-investments		545,905	-
Currency translation adjustment		4,771,083	(9,200,945)
Total comprehensive income		(3,155,559)	(15,743,486)

 

Loss per share 27
- basic and diluted loss per share		0.1482648	0.1201305

 

The accompanying notes form an integral part of these financial statements.
As per our report of even date attached
For Price Waterhouse	On behalf of the Board of Directors
Firm Registration No. - 012745N Chartered Accountants
V. Njhawan
Partner	Yogendra Kr. Modi	Kashi Nath Memani
Membership no. F-87228	Chairman and Chief Executive Officer	Director
Place: New Delhi
Date: 17 July 2010

 

Statement of changes in equity

 

	Issued capital	Share premium	Retained earnings	Other reserves (Currency translation reserve)	Share-based payment reserve		Total equity
At 1 April 2008	12,246,781	33,301,944	(4,815,414)	4,930,843		-		45,664,154
Employees share-based payment scheme	-	-	-	-		73,429		73,429
Loss for the period	-	-	(6,542,541)	-		-		(6,542,541)
Currency translation adjustment	-	-	-	(9,200,945)		-		(9,200,945)
Total comprehensive income	-	-	(6,542,541)	(9,200,945)		-		(15,743,486)
As at 31 March 2009	12,246,781	33,301,944	(11,357,955)	(4,270,102)		73,429		29,994,097

 

	Issued Capital	Share premium	Retained earnings	Other Reserves		Share Based payment reserve	Total equity
				Currency translation reserve	Unrealised gains
At 1 April 2009	12,246,781	33,301,944	(11,357,955)	(4,270,102)	-	73,429	29,994,097
Shares issued during the year	775,027	46,301,659	-	-	-	-	47,076,686
Employees share-based payment scheme	-	-	-	-	-	96,886	96,886
Loss for the period	-	-	(8,472,547)	-	-	-	(8,472,547)
Currency translation adjustment	-	-	-	4,803,716	-	-	4,803,716
Unrealised gain on available for sale investments	-	-	-	-	545,905	-	545,905
Total comprehensive income	-	-	(8,472,547)	4,803,716	545,905	-	(3,122,926)
As at 31 March 2010	13,021,808	79,603,603	(19,830,502)	533,614	545,905	170,315	74,044,743

 

Share premium represents the premium paid by shareholders on issue of shares and is net of equity transaction costs. Under the Indian Companies Act, 1956 such a reserve has got a restricted usage. The accompanying notes form an integral part of these financial statements.

As per our report of even date attached
For Price Waterhouse	On behalf of the Board of Directors
Firm Registration No. - 012745N Chartered Accountants
V. Njhawan
Partner	Yogendra Kr. Modi	Kashi Nath Memani
Membership no. F-87228	Chairman and Chief Executive Officer	Director
Place: New Delhi
Date: 17 July 2010

 

 

Cash Flow Statement

		For the year ended 31 March
	Note	2010	2009
Cash flows from operating activities
Net cash flow from operating activities	26	(649,937)	1,160,946
Income tax paid		-	-
Net cash used in operating activities		(649,937)	1,160,946
Cash flows from investing activities
Purchase of property, plant and equipment ('PPE')		(17,307,349)	(13,195,169)
Additions to capital work-in-progress (Development of wells)		(9,584,980)	(16,220,541)
Purchase of intangible assets		(19,739)	(17,185)
Increase in restricted deposits, (net)		526,865	181,708
Purchase of available for sale-investments		(90,706,525)	-
Sale of available for sale-investments		70,180,086	-
Proceeds from sale of PPE		85,823	990
Interest received		56,408	116,578
Net cash used in investing activities		(46,769,411)	(29,133,619)
Cash flows from financing activities
Proceeds from issue of shares		47,076,686	-
Proceeds from borrowings		22,428,629	30,626,079
Repayment of borrowings		(14,291,662)	-
Interest paid		(7,216,945)	(3,925,710)
Net cash provided by financing activities		47,996,708	26,700,369
Net (decrease)/increase cash and cash equivalents		577,360	(1,272,304)
Cash and cash equivalents at beginning of year		502,714	2,102,196
Exchange gains/losses on cash and cash equivalents		(917,751)	(327,178)
Cash and cash equivalents at end of year		162,323	502,714
The accompanying notes form an integral part of these financial statements. As per our report of even date attached For Price Waterhouse On behalf of the Board of Directors Firm Registration No. - 012745N Chartered Accountants   V. Njhawan Partner Yogendra Kr. Modi Kashi Nath Memani Membership no. F-87228   Place: New Delhi Chairman and Chief Executive Officer Director Date: 17 July 2010

1. GENERAL INFORMATION

 

Great Eastern Energy Corporation Limited ('GEECL' or 'the Company') is a public limited company incorporated in India with its registered office at M-10, ADDA Industrial Area, Asansol-713305, West Bengal, India. The financial statements of the Company for the year ended 31 March 2010 were authorized for issue in accordance with a resolution of the directors on 17 July 2010. GEECL is a public limited company incorporated in India, with shares listed as Global Depository Receipts in the Alternate Investment Market, London. The Company made a publication of its prospectus in relation to the introduction of its Global Depositary Receipts ('GDRs') to the standard list of the official list of the UK Listing Authority (the 'Official List') and admission to trading on the London Stock Exchange plc's Main Market for listed securities, (the 'Main Market'). Pursuant to the admission of its GDRs to the standard list on the official list and commencement of trading in the GDRs on the main market on 28 May 2010, trading of its GDRs on AIM has been cancelled.

 

The Company was incorporated in 1992 to explore, develop, distribute and market Coal Bed Methane or CBM in India. GEECL originally entered into a license agreement in December 1993 with Coal India Limited (CIL) for exploration and development of CBM over an area of approximately 210 Sq. km (approximately 52,000 acres) in the Raniganj coalfields of West Bengal (the Block). Following the transfer of CBM administration in India from the Ministry of Coal to the Ministry of Petroleum and Natural Gas (MoPNG), the Company entered into Production Sharing Contract (PSC) for CBM on 31 May 2001 for the Block.

 

The PSC is effective from 9 November 2001 as a result of the granting by Government of West Bengal of the Petroleum Exploration License on the same date and provides for a five year initial assessment and market development phase, followed by a five year development phase and then a twenty-five year production phase, extendable with the approval of the Government of India (GOI).

 

These financial statements were approved by the Board of Directors on 17 July 2010.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

a. Basis of preparation

 

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards [IFRSs] as issued by International Accounting Standards Board ('IASB') applicable to the company's reporting for the year ended 31 March 2010. The financial statements have been prepared on an accrual basis and under historical cost convention. The financial statements are presented in US Dollar and all values are rounded to the nearest US dollar except where otherwise indicated.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial information are disclosed in the note 4. 

 

§ New and amended standard adopted by the Company. 

 

The Company has adopted the following new and amended IFRSs as of 1 April 2009:

 

IFRS 2 (Amendment), 'Share-based payment' (effective for periods beginning on or after 1 January 2009). The amended standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The company has adopted IFRS 2 (amendment) from 1 April 2009. The amendment does not a have material impact on the Company's financial statements.

 

IAS 1 (Revised), 'Presentation of financial statements' (effective for periods beginning on or after 1 January 2009). The revised standard prohibits the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. As the change in accounting policy only impacts presentation aspects, there is no impact on earning per share.

 

IAS 1 (Amendment), 'Presentation of financial statements' (effective for periods beginning on or after 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with IAS 39, 'Financial instruments: Recognition and measurement' are examples of current assets and liabilities respectively. The company has adopted IAS 1(amendment). The amendment does not have any material impact on the Company's financial statements.

 

IAS 19 (Amendment), 'Employee benefits' (effective for periods beginning on or after1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008.

·; The amendment clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation.

·; The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation.

·; The distinction between short term and long term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered.

·; IAS 37, 'Provisions, contingent liabilities and contingent assets, requires contingent liabilities to be disclosed, not recognised. IAS 19 has been amended to be consistent.

The amendment does not have material impact on the Company's financial statements.

 

IAS 20 (Amendment), 'Accounting for government grants and disclosure of government assistance' (effective for periods beginning on or after 1 January 2009). The benefit of a below market rate government loan is measured as the difference between the carrying amount in accordance with IAS 39, 'Financial instruments: Recognition and measurement', and the proceeds received with the benefit accounted for in accordance with IAS 20. The company has adopted IAS 20 (Amendment). The amendment does not have any material impact on the company financial statements.

 

IAS 23 (Amendment), 'Borrowing costs' (effective for periods beginning on or after1 January 2009). It requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs has been removed. This standard does not have any impact on Company's financial statements as the Company has already been capitalising the eligible borrowing costs as allowed by this standard before the amendment.

 

IAS 23 (Amendment), 'Borrowing costs' (effective for periods beginning on or after1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in IAS 39 'Financial instruments: Recognition and measurement'. This eliminates the inconsistency of terms between IAS 39 and IAS 23. The amendment does not have any material impact on the Company's financial statements.

 

IAS 36 (Amendment), 'Impairment of assets' (effective for periods beginning on or after1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made. The company has adopted IAS 36 (Amendment). The amendment does not have any material impact on the Company's financial statements.

 

IAS 38 (Amendment), 'Intangible assets' (effective for periods beginning on or after1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. The amendment deletes the wording that states that there is 'rarely, if ever' support for use of a method that results in a lower rate of amortisation than the straight-line method. The company has adopted IAS 38 (Amendment). The amendment does not have any material impact on the Company's financial statements.

 

IFRS 7 'Financial instruments - Disclosures' (amendment) - effective for periods beginning on or after 1 January 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share.

 

IFRS 8, 'Operating segments'(effective for periods beginning on or after 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and related information'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. IFRS 8 does not have material impact on company financial statements.

 

b. Foreign currency translation

 

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The functional currency of the Company is Indian Rupees ("Rs." or "INR"). The financial statements are presented in US Dollar (US $), which is the Company's presentation currency.

 

For the purpose of conversion from the functional currency to the presentation currency the assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet. Income and expense for each income statement presented are converted using an average rate and all resulting exchange difference are recognized as a separate component of equity.

 

(ii) Transactions and balances

Transactions in foreign currencies are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currency are translated into functional currency at the exchange rates ruling at the balance sheet date. Exchange differences arising on the settlement of monetary items or translation at rates that are different from those at which they were initially recorded, are recognized as income or expense in the period in which they arise. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

 

 

c. Property, plant and equipment

 

Property, plant and equipment is stated at historical cost including an initial estimate of dismantling and site restoration cost, less accumulated depreciation and any impairment in value. Land is measured at cost. Historical cost includes expenditure that is directly attributable to the acquisition or self-construction of property, plant and equipment. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with them will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance expenditures are charged to the statement of comprehensive income during the financial period in which they are incurred. When any major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.

 

Depreciation (other than Gas producing wells) is calculated on a straight-line basis over the estimated useful life of the assets as follows -

 

Buildings	:	30-58
Plant and Machinery	:	5-20
Furniture, Fixture and Office Equipment	:	15-20
Vehicles	:	10
Pipeline	:	18

 

The property, plant and equipment acquired under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term.

 

The asset's residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each balance sheet date. Depreciation on Gas producing wells is calculated based on unit of production method.

 

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of the net selling price and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of inflows. The recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in the statement of comprehensive income.

 

d. Capital work in progress

 

Expenses incurred for development and construction of wells are capitalized and included under the heading capital work-in-progress until the wells are ready for their intended use using the Full Costing method. The cost of drilling, wire line logging and perforation services, cementing and fracturing services, which have been outsourced, has been included in well development costs. All other expenses directly attributable in respect to developing and constructing wells are capitalized and included under capital work in progress. Once the wells are ready for their intended use depreciation is charged on the unit of production method.

 

Inventories consumed as well as inventories lying in stock for the purpose of well development are grouped as part of capital work in progress. These items are not meant for sale in the ordinary course of business or for use as supplies in the production process of saleable gas, but are to be used towards well development and hence, are treated as capital work in progress. Advances paid for supply of capital goods and services are also grouped as part of capital work in progress.

 

Changes in the measurement of an existing decommissioning, restoration and similar liabilities that result from changes in the estimated timing or amount of the outflow of resources embodying economic benefits required to settle the obligation, are deducted from the cost of the related asset in the current period provided that the amount deducted shall not exceed the carrying amount of the asset.

 

e. Impairment of non-financial assets

 

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the company makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.

 

f. Intangible Assets

 

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

 

The useful lives of intangible assets are assessed to be finite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognized in the statement of comprehensive income in the expense category consistent with the function of the intangible asset.

 

A summary of the policies applied to the Company's intangible assets is as follows:

 

·; Gas exploration rights and right of way are capitalized at historical costs.

·; Computer software-costs associated with identifiable and unique software products controlled by the Company having probable economic benefits exceeding the costs beyond one year are recognized as intangible assets. Costs incurred during the development stage of computer software are shown as intangible assets under development and are not amortized until the software is ready for its intended use. These costs are amortized using the straight line method over their useful lives not exceeding 5 years.

 

	Gas exploration rights	Computer software	Right of way
Useful lives	Finite	Finite	Finite
Amortisation method used	Amortized on a straight line basis over the period of 25 years	Amortized on a straight line basis over the period of 5 years	Amortized on a straight line basis over the period of 5 years
Internally generated or acquired	Acquired	Acquired	Acquired
Impairment testing/ recoverable amount testing	Where an indicator of impairment exists	Where an indicator of impairment exists	Where an indicator of impairment exists
Remaining unamortized period	Twenty three years and three months	Three and half years	Four years and nine months

 

 

g. Financial assets

 

Financial assets within the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, and available for sale financial assets, as appropriate. The classification of financial assets depends on the purpose for which the financial assets were acquired. The management determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates this classification at each financial year end.

 

These financial assets are recognized initially at fair value plus transaction costs that are directly attributable to the acquisition or issue of these financial assets. Subsequent to initial recognition, these are carried at amortised cost using the effective interest method.

 

• Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except for maturities greater than 12 months after the balance sheet date in which case, these are classified as non-current assets. The Company's loans and receivables comprise of 'trade and other receivables', 'restricted deposits with banks' and 'cash and cash equivalents' on the balance sheet date. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and any impairment loss is required to be recognised in the statement of comprehensive income. Impairment testing of receivables is discussed in note 2(h) below.

 

The Company considers whether a contract contains an embedded derivative when the entity first becomes a party to it. The embedded derivatives are separated from the host contract which is not measured at fair value through profit or loss when the analysis shows that the economic characteristics and risks of embedded derivatives are not closely related to those of the host contract.

 

All regular way purchases and sales of financial assets are recognized on the trade date, which is the date that the Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

 

• Available for sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Changes in the fair value of securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statement of comprehensive income as 'gains and losses from investment securities'.

 

h. Derecognition of financial assets and liabilities

 

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires. Where the Company has transferred a financial asset and retained substantially all the risks and rewards of ownership of the transferred financial asset, the group continues to recognise the transferred asset in its entirety and recognises a financial liability for the consideration received. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in profit or loss

 

i. Trade and other receivables

 

Trade and other receivables are initially recognized at fair value. Subsequent to initial recognition, trade and other receivables are subsequently carried at amortized cost using the effective interest method less any allowance for impairment. Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs.

 

A provision for impairment of trade and other receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables.The allowance for impairment of receivables reflects management's best estimate of probable losses inherent in the accounts receivable balance. Management primarily determines the allowance based on the ageing of accounts receivable balances, historical write-off experience and customer credit worthiness. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of comprehensive income. When the receivable is uncollectible, it is written off against the allowance account.

 

j. Cash and cash equivalents

 

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

 

k. Inventories

 

Inventories of stores and spares are valued at the lower of cost and net realisable value. Costs include expenses incurred in bringing each product to its present location and condition and is determined using the weighted average cost method. Net realizable value is the replacement cost of the stores, spares and consumables.

 

l. Trade and other payables

 

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

 

m. Borrowings

 

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of comprehensive income over the period of the borrowings using the effective interest method.

 

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

 

Borrowing costs incurred for the construction of any qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed.

 

n. Derivative financial liability

 

Derivative financial liability are classified as fair value through profit and loss (FVTPL) and are initially recognised at fair values on the date the contract is entered into and subsequently remeasured at their fair values. Gains or losses arising from changes in the fair value of the derivative financial instruments are recognised in the statement of comprehensive income.

 

o. Provisions

 

Provisions are recognized when the company 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 company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as other finance expense.

 

These provisions are capitalized where they are expected to increase the economic benefits flowing from the use or eventual disposal of the asset, or when they represent an obligation to remediate at the end of the asset's life and are recoverable from future economic benefits of using the asset. In all other cases, they are charged to the statement of comprehensive income.

 

p. Employee costs, pensions and other post-employment benefits

 

Employee retirement benefits

 

The company has both defined benefit and defined contribution plans. The defined benefit plans are the gratuity plan and superannuation plan and the defined contribution plan is the state administered provident fund.

 

A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate fund. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

 

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

 

i. The Gratuity plan

The gratuity plan is a defined benefit plan that provides a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment based on the respective employee's last drawn salary and length of employment.

 

The liability recognized in the balance sheet in respect of the gratuity plan is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized past- service costs. The defined benefit obligation is, each year, determined by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds denominated in Indian Rupees, being the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

 

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to statement of comprehensive income in the period in which they arise.

 

ii. Superannuation

The Superannuation (pension) plan for the company is a defined benefit scheme where monthly contribution at the rate of 15% of salary is payable. These contributions will accumulate at the prevailing rate of interest. At the time of retirement, termination or separation of employee, accumulated contribution will be utilized to buy pension annuity from an insurance company. The company makes provision of such pension liability in the books of accounts on the basis of actuarial valuation.

 

iii. State administered provident fund

Under Indian law, employees are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a pre-determined rate (currently 12.0%) of the employee's basic salary to a government recognised provident fund. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they accrue. Upon retirement or separation, an employee becomes entitled for this lump sum benefit, which is paid directly to the concerned employee by the fund.

 

iv. Compensated absences

Compensated absences comprises of leave balances accrued by employees. The leave balance is en-cashable for a maximum of 30 days. These balances can be accumulated up to a maximum of 60 days and carried forward for a period of 3 years. The leave lapses after 3 years if unutilized, or on the employee leaving the Company or on retirement. Compensated absences are being provided on the basis of actuarial valuation.

 

v. Share-based compensation

The Company operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total amount expensed is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income with a corresponding adjustment to equity.

 

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

 

q. Leases

 

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies:

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement.

(b) A renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term.

(c) There is a change in the determination of whether fulfillment is dependent on a specified asset.

(d) There is a substantial change to the asset.

 

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios a), c) or d) and at the date of renewal or extension period for scenario b).

 

• Company as a lessee

Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. 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 against income.

 

Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term.

 

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the statement of comprehensive income on a straight-line basis over the lease term.

 

r. Revenue Income

 

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Company's activities. Revenue is shown net of value-added tax, excise duty, sales tax, returns, rebates and discounts.

 

Sales revenue is recognised on individual sales when persuasive evidence exists that the significant risks and rewards of ownership of the product have been transferred to the buyer.

 

These conditions are generally satisfied when the product is delivered, at a fixed or determinable price, and when an inflow of economic benefits is reasonably assured. Delivery is defined based on the terms of the sale contract.

 

Revenue on the sale of Coal Bed Methane ('CBM') is recognised on sale of gas to customers at delivery point. Revenue on the sale of Compressed Natural Gas ('CNG') is recognised on sale of gas to customers at retail outlet.

 

Revenue for take or pay contracts is recognised when the committed volumes are due to customer. Revenue in respect of undelivered volumes is accounted for as deferred income and recognized as revenue at the time when deficit committed volumes cannot be allowed to be carried forward to be set off against future volumes.

 

s. Interest income

 

Income is recognized as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

 

t. Government grants

 

Government grants are recognized at their fair value where there is reasonable assurance that the grant will be received and all the conditions attached to it will be complied with. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Government grants relating to the purchase of property, plant and equipment are adjusted against the carrying amount of the related asset.

 

u. Taxes

 

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

 

Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

 

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

 

Income tax relating to items recognized directly in equity is recognized in equity and not in the statement of comprehensive income.

 

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

 

v. Equity instruments

 

Equity instruments, convertible into fixed number of equity shares at a fixed predetermined price, and which are exercisable after a specific period, are accounted for as and when such instruments are exercised. The transaction costs pertaining to such instruments are adjusted against equity.

 

w. Segment Reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief operating officer who makes strategic decisions.

 

3. Financial risk management

 

3.1 Financial risk factors

 

The company's activities expose it to a variety of financial risk such as market risk (foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk.

 

a) Market risk

 

i) Foreign exchange risk:

 

The Company's exposure to foreign currency risk arises from foreign-currency denominated liabilities on account of purchase of services and materials from foreign contractors and suppliers and borrowings. The Company does not hold any financial assets denominated in any currency other than INR.

The Company measures the foreign currency exchange risk as a product of the carrying value of its financial assets and liabilities denominated in currencies other than the functional currency of the company and the forward rate between INR and the foreign currency as at the next reporting date. The company has entered into derivative forward contracts with banks to hedge the borrowings denominated in foreign currency.

 

The following table gives a quantitative summary of the exposures by foreign-currency (carrying amounts of foreign currency financial assets and financial liabilities) as at the balance sheet date:

 

Particulars	Denomination currency	As at 31 March 2010	As at 31 March 2009
Financial Liabilities:
Trade and other payables	USD	1,508,471	2,600,826
	GBP	16,580	15,950
Provisions for demobilization	USD	45,000	180,000
Borrowing	USD	8,805,858	-
		10,375,909	2,796,776

The above amounts are disclosed on the basis of information provided internally by the key management personnel of the company.

 

At 31 March 2010, if INR had weakened/strengthened by 5% against the US dollar with all other variables held constant, pre-tax loss for the year would have been $81,597 (2009: $154,305) higher/lower, mainly as a result of foreign exchange gains/losses on translation of year-end balances of US dollar-denominated financial assets and liabilities. The sensitivity analysis has been computed after offsetting the foreign currency borrowing against the foreign exchange forward contract. The amount of loss is more sensitive to movement in currency/US dollar exchange rates in 2010 than 2009 because of the increased amount of fluctuations in INR versus US Dollar rates.

 

At 31 March 2010, if INR had weakened/strengthened by 5% against the Sterling with all other variables held constant, pre-tax loss for the year would have been $1,189 (2009: $1,266) higher/lower, mainly as a result of foreign exchange gains/losses on translation of Sterling denominated financial assets and liabilities.

 

The sensitivity analysis is based on a reasonably possible change in the underlying foreign currency against the Indian rupee computed from historical data and is representative of the foreign exchange currency risk inherent in financial assets and financial liabilities reported at the balance sheet date.

 

ii) Interest rate risk

 

All the financial assets and financial liabilities of the Company are either interest-free or at a fixed rate of interest except for borrowings at various floating rates linked to prime lending rates of respective banks. The carrying value of this loan as at 31 March 2010 is $56,245,930 (2009: $42,441,455). Accordingly, the company is exposed to cash flow interest rate risk on its secured loans.

 

The company analyse its interest rate exposure regularly. Various scenarios are analysed taking into consideration refinancing, alternative financing etc. Based on these scenarios, the Company calculates the impact on profit and loss of a defined interest rate shift.

 

At 31 March 2010, if lending rates had weakened/strengthened by 100bp with all other variables held constant, post-tax loss for the year and capital work in progress would have been $425,426 (2009: $216,663) $165,443 (2009: $254,334) higher/lower respectively, mainly as a result of fluctuation in floating interest rates for the term loan.

 

The above amounts are disclosed on the basis of information provided internally by the key management personnel of the company.

 

The sensitivity analysis is based on a reasonably possible change in the market interest rates computed from historical data and is representative of the interest rate risk inherent in financial assets and financial liabilities reported at the balance sheet date.

 

iii) Price risk:

 

The Company's exposure to securities price risk arises from investment made in the units of mutual funds classified in the balance sheet as available-for-sale financial assets. The Company is not exposed to the commodity price risk. To manage its price risk arising from investments in mutual fund units, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company. The Company measures the price risk as a product of the mutual fund units held and net asset value of the units. It has not entered into any contracts to hedge such exposure in absence of practice of taking cover against such risk.

At 31 March 2010, if price of the units had weakened/strengthened by 6%, equity for the year would have been $1,406,589 (2009: Nil) lower/higher. The sensitivity analysis is based on a reasonably possible change in the net asset value of the units computed from historical data and is representative of the price risk inherent in financial assets reported at the balance sheet date.

 

b) Credit Risk

 

Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The Company makes advances to suppliers and vendors in the normal course of its business and generally requires bank guarantees from them against these advances. The Company also makes advances to employees and places security deposits with related parties and restricted margin money deposits with banks. The majority of the Company's sales to its customers are on credit and it generally requires these customers to provide bank guarantees against the sales made to them. These transactions expose the Company to credit risk on account of default by any of the counterparties. Credit risk is managed through credit approvals and continuously monitoring the creditworthiness of counterparties.

 

The below table discloses by class of financial instruments, the maximum amounts of exposures to credit risk as at the balance sheet date without taking into account any collateral or credit enhancements.

 

Class of financial instrument	Description of collateral / other credit enhancements	31 March 2010	31 March 2009
Trade and other receivables
Trade receivables	Bank guarantee*	669,313	45,799
Due from related parties	None	32,200	25,668
Advances to employees	None	104,332	84,730
Security deposits	None	24,710	38,217
Interest receivable	None	5,262	20,959
Others	None	19,163	16,978
		854,980	232,351
Cash and cash equivalents
Balance with banks		159,980	498,608
		159,980	498,608
Restricted deposits with banks	None	20,979	564,230
Short term deposits with banks	None	62,396	-
		1,098,335	1,295,189

 

* The Company holds bank guarantees against trade receivables amounting to $102,101 (2009: $26,774).

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (where available) or to historical information about counterparty default rates. The below table provides information in that respect.

	31 March 2010	31 March 2009
Trade receivables:
Customers without external credit rating and with no defaults in the past	669,313	45,799
	669,313	45,799
Other receivables:
Counterparties without external credit rating and with no defaults in the past	185,667	186,552
	185,667	186,552
Cash with banks and short-term deposits with banks:
A1+	185,206	2,036
BA2	-	438,033
P1	37,170	1,258
Rating not available	-	57,281
	222,376	498,608
Restricted deposits with banks:
BA2	-	494,553
A1+	20,979	-
Rating not available	-	69,677
	20,979	564,230

 

c) Liquidity Risk

 

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities. The company ensures flexibility in funding by maintaining availability under committed credit lines. The unused amount under the line of credit as of the balance sheet date is to the tune of $6,535,682 (2009: $26,303,233). These unused amounts pertain to the credit facility availed from the consortium of banks. The management prepares quarterly budgets based on the business plans and needs and submits the same to the bank for disbursement of funds in the following quarter. In addition, the company's liquidity management policy involves considering the level of liquid assets necessary to meet the funding requirement; monitoring balance sheet liquidity ratios against internal requirements and maintaining debt financing plans.

 

The following tables set forth the Company financial liabilities to make future payments as at 31 March 2010 and 2009.

As at 31 March 2010	Within1 Year	1-3 Years	3-5 Years	After 5 Years	Total
Borrowings	7,004,212	29,401,440	43,671,571	-	80,077,223
Derivative financial liability	305,579	-	-	-	305,579
Trade and other payables
-Trade payables	4,153,525	-	-	-	4,153,525
-Other payables	1,084,411	-	-	-	1,084,411
-Due to related parties	24,286	-	-	-	24,286
-Security deposits	237,669	-	-	-	237,669
-Interest accrued	-	-	-	-	-
	12,809,682	29,401,440	43,671,571	-	85,882,693
Provisions	25,000	20,000	-	117,172	162,172
	12,834,682	29,421,440	43,671,571	117,172	86,044,865

 

As at 31 March 2009	Within1 Year	1-3 Years	3-5 Years	After 5 Years	Total
Borrowings	5,271,497	22,825,848	42,458,351	762,519	71,318,215
Trade and Other Payables
-Trade Payables	5,721,023	-	-	-	5,721,023
-Other Payables	211,963	-	-	-	211,963
-Due to related parties	34,755	-	-	-	34,755
-Security deposits	181,961	-	-	-	181,961
-Interest accrued	203,846	-	-	-	203,846
	11,625,045	22,825,848	42,458,351	762,519	77,671,763
Provisions	201,590	-	-	71,545	273,135
	11,826,635	22,825,848	42,458,351	834,064	77,944,898

 

As the amounts included in the table are the contractual undiscounted cash flows, these amounts will not reconcile to the amounts disclosed on the balance sheet for borrowings.

 

3.2 Capital risk management

 

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for stakeholders. The Company also proposes to maintain an optimal capital structure to reduce the cost of capital. Hence, the Company may adjust any dividend payments, return capital to shareholders or issue new shares. Total capital is the equity as shown in the balance sheet. Currently, the Company primarily monitors its capital structure in terms of evaluating the funding of potential new investments. The Directors are in the process of further enhancing the Company's systems for monitoring capital use.

 

Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'current and non-current borrowings' as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the balance sheet plus net debt.

 

 

	As at 31 March 2010	As at 31 March 2009
Total borrowings	56,245,930	42,441,457
Less: cash and cash equivalents	162,323	502,714
Net debt	56,083,607	41,938,743
Total equity	74,044,743	29,994,097
Total capital	130,128,350	71,932,840
Capital Gearing Ratio	0.43	0.58

 

 

The above amounts are disclosed based on information provided internally by the key management personnel of the company.

 

3.3 Fair value estimation

 

The carrying value less impairment provision of trade and other receivables and payables are assumed to approximate their fair values. The fair value of financial assets and liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

 

Set out below is a comparison of carrying amounts and fair values by class of the Group's financial instruments with reference to the corresponding IAS 39 measurement categories that are carried in the financial statements.

 

 

	Fair value measurement hierarchy		Measurement category according to IAS 39		Carrying amount as at 31 March 2010		Fair value as at 31 March 2010
Financial assets:
Deposits with Banks	NA		LaR *		83,375		83,375
Trade and Other Receivable	NA		LaR *		1,161,334		1,161,334
Cash and cash equivalents	NA		LaR *		162,323		162,323
Available for sale-investments	Level 1		AfS**		22,315,986		22,315,986
Financial liabilities
Borrowings	NA		FLaC ***		56,245,930		56,245,930
Trade and Other Payables	NA		FLaC ***		6,578,348		6,578,348
Derivative financial liabilities	Level 2		FVPL ****		305,579		305,579

* LaR = loans and receivables

**AfS = available for sale-investments

*** FLaC = financial liability at amortised cost

****FVPL=fair value through profit and loss.

 

 

Effective 1 January 2009, the group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs

 

Trade receivables, cash and cash equivalents and financial assets (current) have remaining terms of less than one year and are non-interest bearing. Therefore, their present value as of the reporting date is approximately the same as their fair value.

 

Trade liabilities and other financial liabilities(current) have remaining terms of less than one year and are non-interest bearing. Therefore, their present value as of the reporting date is approximately the same as their fair value.

 

4. Critical accounting estimates and judgments

 

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

The Company invests in the development and production of coal bed methane gas. The assessment as to whether this expenditure will achieve a complete product for which the technical feasibility is assured is a matter of judgment, as is the forecasting of how the product will generate future economic benefit. Finally, the period of time over which the economic benefit associated with the expenditure occurred will arise is also a matter of judgment.

 

Estimates and Assumptions

 

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

(i) Pension and other employment benefits

The cost of defined benefit plans consisting of the gratuity plan, superannuation and compensated absences plan is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. The net employee liability for these three plans at 31 March 2010 is $404,386 (2009: $210,697) (refer note 15).

 

(ii) Income taxes

Significant judgment is required in determining provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(iii) Impairment property, plant and equipments

The company assesses its properties, plant and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Such indicators include changes in the company's business plans, changes in commodity prices and, for oil producing wells natural gas properties, significant downward revisions of estimated proved-reserve quantities. An impairment loss is recognised if the carrying value of an asset exceeds the higher of its fair value less costs to sell and the value in use.

 

Determination as to whether and how much an asset is impaired involves management estimates on highly uncertain matters such as future commodity prices, the effects of inflation and technology improvements on operating expenses, production profiles, and the outlook for global or regional market supply and demand conditions for natural gas. However, the impairment reviews and calculations are based on assumptions that are consistent with the company's business plans and long-term investment decisions.

5. Property, plant and equipment

 

	Freehold Land	Building	Plant and machinery	Pipeline	Gas producing wells	Furniture, fixture and office equipment	Vehicles	Total
Carrying amount as at 1 April 2008, net of accumulated depreciation	363,178	589,819	3,629,861	372,112	11,281,659	376,652	205,420	16,818,701
Additions during the year	198,700	1,323,014	5,618,495	4,254,243	12,894,721	45,648	43,603	24,378,424
Disposals / retirements	(1,592)	-	(1,767)	-	-	-	-	(3,359)
Depreciation charge for the year	-	(37,180)	(661,368)	(155,963)	(124,881)	(31,841)	(22,281)	(1,033,514)
Depreciation retirement	-	-	685	-	-	-	-	685
Exchange fluctuation	(97,765)	(254,305)	(1,272,509)	(485,597)	(3,694,457)	(82,537)	(46,378)	(5,933,548)
As at 31 March 2009, net of accumulated depreciation	462,521	1,621,348	7,313,397	3,984,795	20,357,042	307,922	180,364	34,227,389
Carrying amount as at 1 April 2009, net of accumulated depreciation	462,521	1,621,348	7,313,397	3,984,795	20,357,042	307,922	180,364	34,227,389
Additions during the year	400,366	227,458	2,526,381	14,131,029	15,577,926	22,115	-	32,885,275
Disposals / retirements	-	(19,782)	(92,908)	-	-	(232)	-	(112,922)
Depreciation charge for the year	-	(49,179)	(759,472)	(679,210)	(225,627)	(31,233)	(22,369)	(1,767,090)
Depreciation retirement	-	7,210	9,091	-	-	99	-	16,400
Exchange fluctuation	79,753	217,055	1,026,324	1,192,332	3,395,605	39,166	22,085	5,972,320
As at 31 March 2010, net of accumulated depreciation	942,640	2,004,110	10,022,813	18,628,946	39,104,946	337,837	180,080	71,221,372
As at 31 March 2009
Gross carrying amount	462,521	1,704,950	8,289,203	4,148,385	20,517,181	365,285	224,646	35,712,171
Accumulated depreciation	-	(83,602)	(975,806)	(163,590)	(160,139)	(57,363)	(44,282)	(1,484,782)
Net Carrying Amount	462,521	1,621,348	7,313,397	3,984,795	20,357,042	307,922	180,364	34,227,389
As at 31 March 2010
Gross carrying amount	942,640	2,129,536	11,772,629	19,507,884	39,500,414	427,120	247,357	74,527,580
Accumulated depreciation	-	(125,426)	(1,749,816)	(878,939)	(395,467)	(89,283)	(67,277)	(3,306,208)
Net Carrying Amount	942,640	2,004,110	10,022,813	18,628,945	39,104,947	337,837	180,080	71,221,372

Depreciation amounting to $356,767 (2009: $273,905) has been transferred to capital work in progress.

 

Effective 1 April 2009, based on a review, the Company has revised the estimated economic useful lives of plant and machinery, office equipments, pipeline and building consequent to the revision, the depreciation rate have revised from 10-20% to 5-16.66%, 20% to 5%, 10% to 5.5%, 3.33% to 1.72-3.33% respectively. Pursuant to the change, depreciation expense for the year ended March 31, 2010 is lower by $ 714,416 and consequently, loss after tax for the year ended 31 March 2010 is lower by $ 714,416.

 

The carrying value of buildings acquired under finance lease at 31 March 2010 is $251,240 (2009: $226,517) net of accumulated depreciation of $37,019 (2009: $28,870).

 

Items of stores and spares included in property, plant and equipment are net of excise duty and customs duty which have been exempted by the Government of India. The Company enjoys exemption from paying excise duty and customs duty on the purchase of goods under the deemed export category as per EXIM policy of the Government of India. The amount of such exemption relating to items of Property, Plant and Equipment is as follows:

 

	As at 31 March 2010	As at 31 March 2009
Towards excise duty	150,489	39,552
Towards customs duty	445,335	173,632
	595,824	213,184

 

There are no un-fulfilled conditions or contingencies attaching to these grants.

 

Borrowings costs have been capitalised at a weighted average rate of capitalization of 12.46% (2009: 12.98%) during the year ended 31 March 2010. Property, plant and machinery include borrowing costs capitalised for $3,564,154 as at 31 March 2010 (2009: $382,775).

 

Buildings include:

a) Premises acquired for $423,505 (2009: $393,622) which are yet to be registered in the name of the company.

b) Warehouse constructed at a cost of $4,674 (2009: $4,141) on land not owned by the company.

 

Refer note 16 for security details.

 

6. Capital work-in-progress

	As at 31 March  2010	As at 31 March 2009
Cost as at beginning of the year	41,464,058	45,121,201
Additions during the year	6,450,207	17,662,494
Disposals	-	-
Capitalization	(12,315,202)	(10,929,769)
Exchange fluctuation	5,040,629	(10,389,868)
Cost as at end of the year	40,639,692	41,464,058

 

Items of stores and spares included in capital work in progress are net of excise duty and customs duty which have been exempted by the Government of India. The Company enjoys exemption from paying Excise duty and Customs Duty on the purchase of goods under the Deemed Export category as per EXIM policy of the Government of India.

The amount of such exemption relating to items of Capital Work in Progress is as follows:

 

	As at 31 March 2010	As at 31 March  2009
Towards excise duty	18,744	720,507
Towards customs duty	617,768	1,173,957
	636,512	1,894,464

There are no un-fulfilled conditions or contingencies attaching to these grants.

 

Borrowings costs have been capitalised at a weighted average rate of capitalization of 12.46% (2009: 12.98%) during the year ended 31 March 2010. Capital work in progress includes borrowing costs capitalised for 1,303,113 at 31 March 2010 (2009: $382,775).

 

As at 31 March 2010, CWIP includes advances to capital equipment supply vendors amounting to $254,791 (2009: $676,886), net of provision for impairment of advances amounting to $47,926 (2009: $42,461). Movement in the provision for impairment of advances is on account of exchange difference on translation. The creation of provision for impaired advances to vendors is included in "other operative expenses" in the statement of comprehensive income.

 

Refer note 16 for security details.

 

7. Intangible Assets

	Gas Exploration Right	Right of way	Computer Software	Total
Cost as at 31 March 2008, net of accumulated amortisation	250,188	-	120,756	370,944
Additions during the year	-	103,137	18,524	121,661
Exchange fluctuation	(52,440)	(8,672)	(24,602)	(85,714)
Amortisation charge for the year	(14,943)	(15,470)	(32,896)	(63,309)
As at 31 March 2009, net of accumulated amortisation	182,805	78,995	81,782	343,582
Additions during the year	-	-	19,739	19,739
Exchange Fluctuation	23,104	9,157	9,898	42,159
Amortisation charge for the year	(8,435)	(19,970)	(32,179)	(60,584)
As at 31 March 2010, net of accumulated amortisation	197,474	68,182	79,240	344,896
As at 31 March 2009
Cost	196,270	92,935	151,392	440,597
Accumulated amortisation	(13,465)	(13,940)	(69,610)	(97,015)
Net Carrying Amount	182,805	78,995	81,782	343,582
As at 31 March 2010
Cost	221,533	104,896	191,613	518,042
Accumulated amortisation	(24,059)	(36,714)	(112,373)	(173,146)
Net Carrying Amount	197,474	68,182	79,240	344,896

 

Refer note 16 for security details.

 

8. Prepayments

	As at 31 March 2010	As at 31 March 2009
Prepayments for leasehold	200,519	162,264
Prepaid expenses	1,260,096	959,922
	1,460,615	1,122,186
Less: Non current portion
- Prepayments for leasehold	196,754	159,116
- Prepaid expenses	58,361	20,006
Current portion	1,205,500	943,064

 

Leasehold land represents non-current portion of payments made for taking different pieces of land on lease for 30-99 years for the Company's site at Asansol, West Bengal, India. An amount of $3,441 (2009: $1,860) representing amortisation for the current year has been charged to revenue

 

Prepaid expenses include:

a) an amount of $32,200 (2009: $19,289) on account of rent paid in advance to a related party YKM Holdings Private Limited (refer note 30).

b) share issue expenses amounting to $1,157,117 (2009: $844,820) incurred by the Company for raising of funds through public issue of ordinary shares in India. This amount shall be adjusted with share premium on successful raising of funds through public issue.

Refer note 16 for security details.

 

9. Deposits with Banks

 

Short-term deposits are made for varying periods ranging from one day to three months depending on the immediate cash requirements of the Company, and earn fixed interest at the respective short-term deposit rates.

  

10. Trade and other receivables

 

	As at 31 March 2010	As at 31 March 2009
Trade receivables	669,313	45,799
Less: provision for impairment of receivables	-	-
	669,313	45,799
Statutory dues recoverable	168,129	1,003,688
Due from related parties (refer note 30)	32,200	25,668
Advances to employees	104,332	84,730
Security deposits	24,710	38,217
Interest receivable	5,262	20,959
Others	157,388	18,124
Total trade and other receivables	1,161,334	1,237,185
Less: Non current portion:
Due from related parties	32,200	-
Advances to employees	95,259	78,744
Security deposits	24,710	-
Current portion	1,009,165	1,158,441

 

The advance to employees has not been discounted to its present value as the impact of the discounting is not expected to be material.

 

Movements in the provision for impairment of advances were as follows:

	As at 31 March  2010	As at 31 March  2009
As at beginning of the year	73,314	-
Provision for advances impairment	20,791	81,362
Exchange difference on translation	10,486	(8,048)
As at end of the year	104,591	73,314

 

The fair value of financial trade and other receivables approximates their carrying value in the balance sheet. Fair value has been estimated by discounting the cash flows at the market rate at the balance sheet date.

As of 31 March 2010, trade receivables of $669,313 (2009: $45,799) were fully performing. Out of these, trade receivables amounting to $102,101 (2009: $26,774) are secured through a performance bank guarantee received from the customers

As of 31 March 2010, none of the trade receivables are either past due but not impaired or impaired and provided for.

The carrying amount of trade and other receivables are all denominated in INR.

The other classes within trade and other receivables do not contain impaired assets.

 

Refer note 16 for security details.

 

11. Available for sale Investments:

	As at 31 March  2010	As at 31 March  2009
Current Investments(unquoted)-
Units in mutual fund	21,770,081	-
Add: unrealised gain	545,905	-
Fair value at the end of the year	22,315,986	-

 

Scheme based investments in hand is set out below:

	No. of Units in hand at year end	Fair Value of Units in hand at year end
Current Investments(unquoted)-		-
Birla Sun life Dynamic Bond Fund	2,64,01,537	9,069,812
HDFC HIF STP	17,54,691	716,139
Templeton India STIP	3,05,368	12,507,867
SBI SHF Ultra Short Term Fund	84,479	22,168
	28,546,075	22,315,986

 

12. Restricted deposits

	As at 31 March 2010	As at 31 March 2009
Fixed deposits maturing within 12 months	20,979	545,584
Fixed deposits maturing beyond 12 months	-	18,646
	20,979	564,230

All the restricted fixed deposits are denominated in INR.

These fixed deposits earn fixed interest at the respective bank deposit rates. These are margin money deposits against bank guarantee issued by banks on behalf of the company. Restrictions on such deposits are released on the expiry of terms of respective arrangements.

 

 

13. Cash and cash equivalents

	As at 31 March 2010	As at 31 March 2009
Cash in hand	2,343	4,106
Cash at banks	159,980	498,608
	162,323	502,714

 

Cash at banks is non-interest bearing.

The carrying amounts of cash and cash equivalents are representative of their fair values as at the respective balance sheet dates.

The carrying amounts of the cash and cash equivalents are all denominated in INR.

Refer note 16 for security details.

 

14. Share Capital

	As at 31 March 2010	As at 31 March 2009
Authorised share capital
65,000,000 ordinary shares of INR 10 each (2009: 650,000,000 equity shares of INR 1)	14,724,745	14,724,745
	14,724,745	14,724,745
Issued, Subscribed and Paid-up
58,016,950 ordinary shares of INR 10 each (2009: 544,619,499 ordinary shares of INR 1 each)	13,021,808	12,246,781
	13,021,808	12,246,781

 

During the year the Company has allotted 3,600,000 shares of face value of Rs. 10 each to one of the promoter Group Company, YKM Holdings International Limited at premium of Rs. 597.42 per share. The offer said preferential allotment was made in compliance with Companies Act and (unlisted public Companies) Rule, 2003 and other applicable laws and regulations as per IPO (Initial Public Offering) placement. Pending utilization, the net proceeds which are earmarked for investment in project have been invested temporarily in mutual funds.

The Company has during the year consolidated its equity shares from face value of INR 1 to INR 10 each. The Consolidation was approved by the shareholders in the annual general meeting held on 3 July 2009.

 

15. Share-based payments

 

Share options are granted to non-executive directors and eligible employees under the stock option plan established and operated by the Company. The plan is an equity settled plan. The Plan was established by the Company on 27 May 2008. The policy provides for allotment of up to 500,000 equity shares of INR 10/- (before consolidation of shares 5,000,000 equity shares of INR 1).

 

These options are fair valued using the Black-Scholes model. The share based payment charge on these options granted are amortised over the vesting period of 60 months in accordance with the vesting schedule below, provided that the holders of the options continue to be an employee on the vesting date. The options must be exercised before the expiry of 9 years from the date of first vesting.

 

The options vest on a graded basis from the grant date as follows:

 

On completion of one year	20%
On completion of two years	20%
On completion of three years	20%
On completion of four years	20%
On completion of five years	20%

 

 

A reconciliation of option movements for the Plan is as follows:

 

	2010 2010				2009* 2009*
	Number of equity shares	Weighted average exercise price (in USD per share)		Number of equity shares			Weighted average exercise price (in USD per share)
Beginning of the year	43,568	8.44		-			-
Granted	46,011	8.44		48,558			8.71
Forfeited	(11,948)	8.44		(4,996)			8.71
End of the year/period	77,631	8.44		43,562			8.71
Exercisable at the end of Year	7,945	8.44		-			-

 

Options exercisable as of 31 March 2010 are 7,945 (2009: Nil).

 

All the options outstanding as of 31 March 2010 carry an exercise price of $8.44 (2009: $8.71) and their remaining weighted average contractual life is 9.03 years (2009: 9.38).

 

The fair value of each option award is estimated on the date of grant using the Black- Scholes Option Pricing model. The weighted average fair value of options granted during the year ended 31 March 2009 determined using the Black-Scholes Option Pricing valuation model was $6.76 (2009: $6.30*). The following table gives the weighted-average assumptions used to determine fair value:

 

*Consequent upon the change in the face value of Equity Shares of the Company from Rs. 1 each to Rs. 10 each share, effected on 3 July 2009, the exercise price was also adjusted by the same ratio to Rs. $8.44. On 3 July 2009 the total outstanding options were 435,615 which were accordingly consolidated in 43,568 options due to rounding off to each employee. Hence the number of options disclosed for the current year and previous year has been restated.

	2010
	Option Granted on
	1 August 2008	1 Dec 2008	1 April 2009	1 August 2009		1 Dec 2009
Weighted average share price on grant date (in USD)	10.00	6.70	6.50	10.64		13.43
Weighted average exercise price (in USD)	8.44	8.44	8.44	8.44		8.44
Dividend yield	-	-	-	-		-
Expected volatility	50.88%	54.85%	54.89%	54.37%		54.43%
Risk-free interest rate	9.29% to 9.30%	7.17% to 7.51%	7.06% to 7.21%	6.75% to 7.17%		7.09% to 7.43%
Expected term (in years)	5.50 to 7.50	5.50 to 7.50	5.50 to 7.50	5.50 to 7.50		5.50 to 7.50
			2009
			Option Granted on
			1 August 2008		1 Dec 2008
Weighted average share price on grant date (in USD)			1.00		0.67
Weighted average exercise price (in USD)			0.87		0.87
Dividend yield			0%		0%
Expected volatility			50.88%		54.85%
Risk-free interest rate			9.29% to 9.30%		7.17% to 7.51%
Expected term (in years)			5.50 to 7.50		5.50 to 7.50

Expected volatility was computed on the basis of the historical daily volatility of the closing price of the equity share of Company on Alternate Investment Market, London over the expected life of the option.

 

The total charge for the year ended 31 March 2010 relating to employee share-based payment plans was $96,886 (2009: $73,429).

 

16. Borrowings

	As at 31 March 2010	As at 31 March 2009
Non current
Borrowings from banks and financial institutions	55,704,697	42,417,694
Current	55,704,697	42,417,694
Borrowings from banks and financial institutions	541,233	23,763
Total	56,245,930	42,441,457

 

The fair value of borrowings equals their carrying amount, as the debts are at floating rates of interest.

 

Borrowings from banks and finance company have been taken from consortium of banks and financial institution and are secured by:

a) First mortgage and charge over all the immovable properties and assets of the project, both present and future.

b) First charge by way of hypothecation on all the movables (including movable plant and machinery, machineries, spares, tools and accessories and other current assets) of the project, both present and future.

c) First charge/assignment and/creation of security interest on (i) all the rights, title, interest, benefits, claims and demands whatsoever of the Company in the project documents, any letter of credit, guarantee or performance bond that may be provided by any party to any project document in favour of the Company, all as amended, varied or supplemented from time to time; (ii) all the rights, title, interest, benefits, claims and demands whatsoever of the Company in or under the authorization.

d) First charge on all Company's bank account in relation to the project including, without limitation, the project capex account and each of the other accounts required to be created by the Company under any project document or contract.

e) First charge and or creation of security interest on the trust and retention account (TRA) established by the Company for the revenue generated from the project

The aforesaid mortgage and charge shall rank pari-passu with mortgages and charges created/to be created in favour of the participating institutions/ banks to the project (refer notes 5, 6, 7, 8, 10 and 13). 

 

Borrowings from others are secured by way of hypothecation of vehicle.

 

Borrowings from banks and finance institution mature until 2015.

 

The average annual interest rate for the borrowings as of 31 March 2010 is 12.46% (2009: 12.98%)

 

The carrying amounts of the company borrowings are denominated in INR and USD.

 

The unused amounts available under the line of credit with consortium of banks and a finance company as of 31 March 2010 are $6,535,682 (2009: $26,303,233).

 

The Company has during the year converted loans amounting to $8,805,858 (2009: Nil) from two banks to foreign currency non-resident borrowing. The Loan would be again convertible to Rupee loan at the end of six months if the loan agreement is not renewed. The other terms and conditions of the loan including security and repayments terms for the foreign currency loan remain the same as Rupee Loan.

 

The Company has also taken forward contract cover on these equivalents to the amount of loan in USD.

 

17. Retirement benefit obligations

 

(a) The following tables summarize the components of net benefit expense recognised in the statement of comprehensive income and the amounts recognised in the balance sheet for the respective plans -

 

	For the year ended 31 March 2010			For the year ended 31 March 2009
	Superannuation	Gratuity	Total	Superannuation	Gratuity	Total
Current service cost	51,244	26,546	77,790	27,347	18,125	45,472
Interest cost on benefit obligations	5,624	3,397	9,021	3,087	3,315	6,402
Expected return on plan assets	-	-	-	-	-	-
Actuarial (gains)/losses recognised in the period	2,050	22,847	24,897	1,026	(20,482)	(19,456)
Past service costs	-	-	-	-	-	-
	58,918	52,790	111,708	31,460	958	32,418
Less: transferred in capital work in progress	35,351	25,319	60,670	18,875	(3,179)	15,696
Charged to revenue	23,567	27,471	51,038	12,585	4,137	16,722

 

Changes in the present value of the defined benefit obligation are as follows:

 

	As at 31 March 2010			As at 31 March 2009
	Superannuation	Gratuity	Total	Superannuation	Gratuity	Total
Opening defined benefit obligation	65,431	40,480	105,911	47,270	51,034	98,304
Current service cost	51,244	26,546	77,790	27,347	18,125	45,472
Interest cost	5,624	3,397	9,021	3,087	3,315	6,402
Actuarial (gains) and losses	2,050	22,847	24,897	1,026	(20,482)	(19,456)
Exchange fluctuation	11,399	3,669	15,068	(13,299)	(11,048)	(24,347)
Benefits paid	-	2052	2052	-	(464)	(464)
Closing defined benefit obligation	135,748	98,991	234,739	65,431	40,480	105,911

 

The principal actuarial assumptions used for gratuity and superannuation plans were as follows:

 

	As at 31 March 2010	As at 31 March 2009
Particulars
Salary growth	5.00%	6.00%
Inflation Factor	5.00%	5.00%
Discount rate	8.00%	7.50%
Mortality rates have been taken as per	LIC (1994-96) Ultimate Table	LIC (1994-96) Ultimate Table

 

Both the gratuity and the superannuation plan are unfunded.

 

18. Trade and other payables

 

	As at 31 March 2010	As at 31 March 2009
Trade Payables	4,153,525	5,721,023
Other Payables	941,130	211,963
Due to related parties (refer note 30)	24,286	34,755
Employee benefit liability	528,993	267,075
Statutory dues	548,017	366,729
Security deposits	237,669	181,961
Interest accrued	-	203,846
Other liabilities	144,728	3,239
	6,578,348	6,990,591
Less: Non current portion:	-	-
Current portion	6,578,348	6,990,591

 

Trade and other payables are non-interest bearing.

 

The carrying amounts of trade and other payables approximate their fair values at the respective balance sheet dates.

 

Except for financial liabilities denominated in USD and GBP for $1,508,471 (2009: $2,606,826) and $16,580 (2009: $15,950), respectively, all other trade and other payables are denominated in INR.

 

Employee benefit liabilities include:

 

a) Defined contribution plans - Provident fund

The liability for provident fund payable to fund is $21,212 (2009: $12,182). The Company contributed $119,428 (2009: $72,067) to the Provident fund. Out of total contributions, $70,080 (2009: $43,842) has been charged to statement of comprehensive income and $49,348 (2009: $28,225) has been allocated to capital work in progress

 

b) Compensated absences plan

The liability for the compensated absences plan is $169,647 (2009: $104,786). During the year $63,777 (2009: $3,556) been charged to statement of comprehensive income and an amount of $69,610 (2009: $21,447) has been allocated to capital work in progress on account of the compensated absences plan.

 

19. Provisions

	As at 31 March 2010	As at 31 March 2009
Provision for equipment demobilization	45,000	201,590
Provision for site restoration	117,172	71,545
	162,172	273,135
Less: Non current portion
- Provision for site demobilization	20,000	-
- Provision for site restoration	117,172	71,545
Current portion	25,000	201,590
	Provision for site demobilization	Provision for site restoration
As at 1 April 2008	45,000	62,588
Arising during the year *	184,543	24,910
Exchange fluctuation	(27,953)	(15,953)
Utilized during the year	-	-
As at 31 March 2009	201,590	71,545
Arising during the year *	-	34,667
Exchange fluctuation	5,131	10,959
Reversal during the year	161,721	-
As at 31 March 2010	45,000	117,171

* The provisions created during the year ended 31 March 2010 and 2009 have been capitalised and no amount has been charged to the statement of comprehensive income.

 

Provision for equipment demobilization

A provision is recognized in the accounts for demobilization of equipment payable to various service providers, as and when the equipment reaches the site. All obligations under this provision are expected to be settled within the next 12 months as of balance sheet date and hence have been treated as current liability. The provisions under this head are not discounted to their present value as the impact of the discounting is not expected to be material.

 

Site restoration costs

A provision for restoring the land back to its originality is created by way of site restoration costs, on a well by well basis. Such expenses are provided when the wells have been drilled substantially. These are expected to be incurred when the company has commercially exploited the proved reserves of the well or when a well which has been drilled has been declared as a dead well.

 

20. Deferred income tax

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

 

The break-up of deferred tax assets and liabilities is as follows:

	As at 31 March 2010	As at 31 March 2009
Deferred tax assets:
Deferred tax assets to be recovered after more than 12 Months	6,815,242	1,133,691
Deferred tax liabilities:
Deferred tax liabilities to be recovered after more than 12 months	6,815,242	1,133,691
Deferred tax asset/ (liabilities), net	-	-

 

The gross movement on deferred income tax account is as follows:

	Property, plant and equipment	Total
Deferred tax liabilities
At 1 April 2008	687,767	687,767
Charged to the statement of comprehensive income	659,366	659,366
Exchange differences	(213,442)	(213,442)
At 31 March 2009	1,133,691	1,133,691
Charged to the statement of comprehensive income	5,269,474	5,269,474
Exchange differences	412,077	412,077
At 31 March 2010	6,815,242	6,815,242

 

 

	Retirement benefit obligation	Unabsorbed tax losses	Provision for doubtful advances	Total
Deferred tax assets
At 1 April 2008	69,196	600,174	18,397	687,767
Credited to the statement of comprehensive income	19,235	612,476	27,655	659,366
Exchange differences	(16,815)	(189,927)	(6,700)	(213,442)
At 31 March 2009	71,616	1,022,723	39,352	1,133,691
Credited to the statement of comprehensive income	76,432	5,185,975	7,067	5,269,474
Exchange differences	13,078	393,577	5,422	412,077
At 31 March 2010	161,126	6,602,275	51,841	6,815,242

 

 

The Company is entitled to tax holiday for 7 years under sec. 80IB (9) of the Indian Income Tax Act, 1961, These incentives provide a deduction from taxable income of an amount equal to 100% of profits derived from the business for 7 years from the date of commencement of production. The benefit of this deduction would expire during the year ending 31 March 2015.

 

The tax expense in the statement of comprehensive income for the year differs from the standard tax rate of corporation tax in India. Reconciliation between tax (expense) income and the product of accounting profit (loss) multiplied by India's standard corporate tax rate 33.22% (2009: 33.99%) for the year ended 31 March 2010 is as follows:

 

 

	As at 31 March 2010	As at 31 March 2009
Loss before tax	8,472,547	2,509,111
Tax benefit at domestic tax rate	(2,814,368)	(852,847)
Tax effects of : - Tax losses for which no deferred income tax assets was recognized	2,814,368	852,847
Tax charge	-	-

Except to the extent of reversal of taxable temporary differences, deferred tax asset on unused losses has not been recognized as the same are expected to reverse within the tax holiday period.

 

The following are the unused tax losses, and unused tax credits (on account of unabsorbed depreciation) for which no deferred tax asset is recognised in the balance sheet:-

 

Unused Tax Losses

	As at 31 March 2010	As at 31 March 2009	Expiry Date
2005-06	-	138,017	2013-2014
2006-07	-	309,324	2014-2015
2007-08	2,243,512	2,586,281	2015-2016
2008-09	5,488,839	2,254,147	2016-2017
2009-10	7,180,986	-	2017-2018
	14,913,337	5,287,769
Unused tax credit towards unabsorbed depreciation
2005-06	-	158,876	Can be carried forward indefinitely
2006-07	-	109,497
2007-08	187,016	1,867,046
2008-09	8,843,728	7,040,991
2009-10	11,492,408	-
	20,523,152	9,176,410