Indus Gas Regulatory News (INDI)

28th September 2018

Indus Gas Limited

('Indus' or 'the Company')

Preliminary Financial Results

Indus Gas Limited (AIM:INDLL), an oil and gas exploration and developing company, is pleased to report its full year results for the 12 months to 31st March 2018.

Highlights

§ Petroleum & Natural Gas Regulatory Board (PNGRB) have invited bids for laying of a Gas Pipeline of 580 Kms from the Gas Processing facility located at Langtala to Bhilwara for the evacuation of Gas from RJ-ON/6 Block. This will enable natural gas from RJ-ON/6 block to be delivered to the National Grid Hazira-Vijaypur-Jagdishpur pipeline of GAIL.

§ The Integrated Field Development Plan for the SSG (Pariwar) & SSF (B&B) area of 2,000 km2 was earlier approved by the Directorate General of Hydrocarbons (DGH) and Ministry of Petroleum and Natural Gas (MoP&NG).

§ The revised Field Development Plan in respect of the SGL area for the enhancement of production to about 90mmscfd and reserves to 474 Bcf has also been approved by the Management Committee with representation from the MoP&NG, DGH & Contractors.

§ Successfully drilled development wells with positive results.

§ The new gas sand reservoirs were successfully exploited for production.

§ Discussions are also being held for the gas pipeline to evacuate additional gas supply from the SSG & SSF Development area of 2000 km2 of the block with GAIL India Ltd./GSPL India Gasnet Limited (GIGL) /Indian Oil Corporation (IOC). The additional production of SSG & SSF area has been approved to be about 200mmscfd.

OPERATIONAL

§ During the year additional development wells were drilled.

FINANCIAL

§ Total Revenues (including other operating income) increased to US$ 60.60million (2016-17 : US$ 54.57 million).

§ Operating profit increased to US$ 51.51million (2016-17: US$ 41.51million).

§ The profit before tax increased to US$ 47.81 million (2016-17: US$ 43.78 million).

§ Investments were made in property plant equipment, exploration and evaluation assets amounting to US$ 109.02million.

§ All repayments under the existing debt terms were made on a timely basis.

Mr. Peter Cockburn, Chairman of the Company commented:

"The financial period witnessed some improved conditions in the global oil and gas sector. The approval of the Field Development Plans alongwith PNGRB inviting bids for Langtala-Bhilwara pipeline to evacuate gas of RJ-ON/6 block, represented a major milestone achieved in 2018.

The Company's strong operational and financial performance is highlighted by another year of improved revenue and profit generation. The Board continues to anticipate a substantial increase in revenues once the additional gas supplies commence through the new pipeline.

The Board would like to thank their employees, shareholders, bankers and all other stakeholders for their loyalty. The management will continue to focus on the execution of the Company's long-term strategy of achieving both growth in reserves and commercial production. India is making all efforts to increase the domestic production of gas thereby reducing dependence on imported energy."

The 2018 Annual Report has now been posted to shareholders and is available to download from the investor relations section on the Company's website at www.indusgas.com

ENDS-

Introduction

Since flotation in June 2008 the Company has executed a clear and consistent strategy with the central objective being to maximise long term shareholder value creation from our license block. This strategy has delivered prolific exploration success as evidenced by the rapid growth in our underlying reserves base and the successful execution of the first production phase.

Development and appraisal activity has continued at a rapid pace in the last twelve months. This drilling and appraisal programme has provided further valuable insight into the gas structures present in the western half of our block.

Indian energy security remains one of the key challenges facing the government. India continues to be a major net importer of energy. This energy deficit can only be addressed through major investment programmes in long term infrastructure build and incentivising domestic energy companies to increase exploration and production. 

Activity

Indus is pleased to announce another year of good consolidated total revenues (including other operating income) of US$ 60.60 million. We have continued to increase operating profits and our long term business plan remains on track. The revised Field Development Plan for SGL area and an integrated Field Development Plan for SSG & SSF area of the Block, for future enhancement of revenues, has been approved by the Management Committee. PNGRB has invited bids for the laying of a Gas pipeline from our block to Bhilwara connecting to the National Gas Grid HVJ pipeline of GAIL.

The Company has continued to drill development wells during the year.

A summary of activities since April 2017 is provided below:

Operations

The company has achieved total revenue (including other operating income) of US$ 60.60 million in the financial year ended March2018.

Operational activities over the last year have followed the Group's key objectives:

a) drilling and completion of production wells for the SGL field development continued as planned to meet contracted and planned gas sale requirements;

b) testing various wells previously drilled, where gas shows were encountered to enable the Group to increase its reserve base; and

c) testing the B&B gas recovery potential in addition to gas discovered in the Pariwar formation.

The current drilling programme is progressing on schedule and producing positive results. Now that the FDP for SSG & SSF Development area has been approved, we continue to test concepts and obtain log and core data for analysis outside the SGL area. In the SGL area, work continues to expand knowledge of the producing intervals. Additional testing is part of a programme to enhance production and maximize recovery of gas through good asset management. Activities such as these will increase as we obtain and act on new data and production history. An important development in respect of SGL Field was the discovery of new sands within Pariwar. These were located just below the existing producing P10 sands. These reservoirs were successfully exploited for production and going forward will add to the reserves and production from existing and new wells.

Financials

During the financial year, the Company achieved total revenue (including other operating income) of US$ 60.60 million, resulting in reported operating profit of US$ 51.51 million (2016/17 US$ 41.51million). The reported profit after tax was US$ 33.63million (2016/17 US$ 25.38 million)

While the Company is not expected to pay any significant taxes on its income for many years in view of the 100% deduction allowed on the capital expenses in the Block, the Company has accrued a non-cash deferred tax liability of US$ 14.18 million in the current year as per IFRS requirements.

Post this deferred tax liability provision, the net profit for the year was US$ 33.63million.

The expenditure on the purchase of property, plant & equipment was US$ 109.01 million. The property plant and equipment including development assets and production assets increased to US$ 742.71 million.

The current assets (excluding cash) as of 31 March 2018 stood at US$ 40.486 million, which includes US$ 8.34 million of inventories and trade receivables of US$ 18.19 million. The current liabilities of the Company, excluding the related party liability of US$ 0.36 million and current portion of long term debt of US$ 37.30 million, stood at US$ 6.13 million. This comprised mainly of deferred revenue of US$ 5.08 million (GAIL Take or Pay Payment) and other liabilities of US$ 1.07 million.

As of 31 March 2018, the outstanding debt of the Company to banks was US$ 170.65 million, out of which US$ 32.99 million was categorized as repayable within a year and the remaining US$ 137.66 million has been categorized as a long term liability to banks. During the year, the Company has repaid an amount of US$ 39.25 million of the outstanding term loan facilities from Banks, as per the scheduled repayment plan. The Company also repaid unsecured bonds of US$ 74.25 million and raised additional amount of US$ 150 million through unsecured bonds during the year.

Outlook

During the next twelve months, we expect a further step change in the growth of the Company. Production will increase upon the laying of the pipeline. We look forward to continued drilling success in both Pariwar and B&B. Negotiations on the new gas sales contract with GAIL/IOC/GIGL are on-going. Connection to the HVJ pipeline (national pipeline Grid) will enable the Company to access more customers and realise better gas prices.

Ajay Kalsi

Chief Executive Officer

 Consolidated Statement of Financial Position

(All amounts in United States Dollars, unless otherwise stated)

(The accompanying notes are an integral part of these consolidated financial statements)

These consolidated financial statements were approved and authorized for issue by the board on 27th September 2018 and was signed on its behalf by:

Peter Cockburn

Director

Consolidated Statement of Comprehensive Income

(All amounts in United States Dollars, unless otherwise stated)

(The accompanying notes are an integral part of these consolidated financial statements)

Consolidated Statement of Changes in Equity

(All amounts in United States Dollars, unless otherwise stated)

(The accompanying notes are an integral part of these consolidated financial statements)

Consolidated Statement of Cash Flow

(All amounts in United States Dollars, unless otherwise stated)

A The purchase of property, plant and equipment above, includes additions to exploration and evaluation assets amounting to US$ 5,927,548 (previous year: US$ 28,719,544) transferred to development cost, as explained in Note 6.

B Interest cost is capitalised in the books of accounts

(The accompanying notes are an integral part of these consolidated financial statements)

Notes to Consolidated Financial Statements

(All amounts in United States Dollars, unless otherwise stated)

1. INTRODUCTION

Indus Gas Limited ("Indus Gas" or "the Company") was incorporated in the Island of Guernsey on 4 March 2008 pursuant to an Act of the Royal Court of the Island of Guernsey. The Company was set up to act as the holding company of iServices Investments Limited. ("iServices") and Newbury Oil Co. Limited ("Newbury"). iServices and Newbury are companies incorporated in Mauritius and Cyprus, respectively. iServices was incorporated on 18 June 2003 and Newbury was incorporated on 17 February 2005. The Company was listed on the Alternative Investment Market (AIM) of the London Stock Exchange on 6 June 2008. Indus Gas through its wholly owned subsidiaries iServices and Newbury (hereinafter collectively referred to as "the Group") is engaged in the business of oil and gas exploration, development and production and related consultancy services.

Focus Energy Limited ("Focus"), an entity incorporated in India, entered into a Production Sharing Contract ("PSC") with the Government of India ("GOI") and Oil and Natural Gas Corporation Limited ("ONGC") on 30 June 1998 for petroleum exploration and development concession in India known as RJ-ON/06 ("the Block"). Focus is the Operator of the Block. On 13 January 2006, iServices and Newbury entered into an interest sharing agreement with Focus and obtained a 65 per cent and 25 per cent share respectively in the Block. Balance 10 per cent of participating interest is owned by Focus. The participating interest explained above is subject to any option exercised by ONGC in respect of individual wells (exercised only for all the wells in SGL field as further explained in Note 3).

2. GENERAL INFORMATION

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adapted by the European Union ('EU'). The consolidated financial statements have been prepared on a going concern basis (refer to note 26), and are presented in United States Dollar (US$). The functional currency of the Company as well as its subsidiaries is US$.

3. JOINTLY CONTROLLED ASSETS

As explained above, the Group through its subsidiaries has an interest sharing arrangement with Focus in the block which under IFRS 11 Joint Arrangements, is classified as a 'Joint operation'. All rights and obligations in respect of exploration, development and production of oil and gas resources under the 'Interest sharing agreement' are shared between Focus, iServices and Newbury in the ratio of 10 per cent, 65 per cent and 25 per cent respectively.

Under the PSC, the GOI, through ONGC had an option to acquire a 30 per cent participating interest in any discovered field, upon such successful discovery of oil or gas reserves, which has been declared as commercially feasible to develop.

Subsequent to the declaration of commercial discovery in SGL field on 21 January 2008, ONGC had exercised the option to acquire a 30 per cent participating interest in the discovered fields on 06 June 2008. The exercise of this option would reduce the interest of the existing partners proportionately.

On exercise of this option, ONGC is liable to pay its share of 30 per cent of the SGL field development costs and production costs incurred after 21 January 2008 and are entitled to a 30 per cent share in the production of gas subject to recovery of contract costs as explained below.

The allocation of the production from the field to each participant in any year is determined on the basis of the respective proportion of each participant's cumulative unrecovered contract costs as at the end of the previous year or where there is no unrecovered contract cost at the end of previous year on the basis of participating interest of each such participant in the field. For recovery of past contract cost, production from the field is first allocated towards exploration and evaluation cost and thereafter towards development cost.

On the basis of the above, gas production for the year ended 31 March 2018 is shared between Focus, iServices and Newbury in the ratio of 10 percent, 65 percent and 25 percent, respectively.

The aggregate amounts relating to jointly controlled assets, liabilities, expenses and commitments related thereto that have been included in the consolidated financial statements are as follows:

Also subsequent to the declaration of commerciality for SSF and SSG discovery on 24 November 2014, ONGC did not exercise the option to acquire 30 percent in respect of SSG and SSF field. The participating interest in SSG and SSF field between Focus, I services and Newbury will remain in the ratio of 10 percent, 65 percent and 25 percent respectively.

4. STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE AND YET TO BE APPLIED BY THE GROUP

Summarised in the paragraphs below are standards, interpretations or amendments that have been issued prior to the date of approval of these consolidated financial statements and endorsed by EU and will be applicable for transactions in the Group but are not yet effective. These have not been adopted early by the Group and accordingly, have not been considered in the preparation of the consolidated financial statements of the Group.

Management anticipates that all of these pronouncements will be adopted by the Group in the accounting period beginning after the effective date of each of the pronouncements. Information on the new standards, interpretations and amendments that are expected to be relevant to the Group's consolidated financial statements is provided below.

· IFRS 9 Financial Instruments Classification and Measurement

In July 2014, the International Accounting Standards Board (IASB) issued the final version of IFRS 9, Financial Instruments. The standard reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss. It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable to the entity's own credit risk in other comprehensive income.

IFRS 9 replaces the 'incurred loss model' in IAS 39 with an 'expected credit loss' model. The measurement uses a dual measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or lifetime expected credit losses. The standard also introduces new presentation and disclosure requirements.

This standard is effective for reporting periods beginning on or after 1 January 2018 with early adoption permitted. Management is currently evaluating the impact that this new standard will have on its consolidated financial statements.

· IFRS 15 Revenue from contracts with customers

The IASB has published a new standard, IFRS 15 Revenue from Contracts with customers on 28 May 2014. This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC-31 Revenue- Barter Transactions involving advertising services. It sets out the requirements for recognizing revenue that apply to contracts with customers, except for those covered by standards on leases, insurance contracts and financial instruments.

The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities.

This standard is effective for reporting periods beginning on or after 1 January 2018 with early adoption permitted. It applies to new contracts created on or after the effective date and to the existing contracts that are not yet complete as of the effective date.

Management is currently evaluating the impact that this new standard will have on its consolidated financial statements.

• IFRS 16 Leases

On 13 January 2016, the IASB issued the final version of IFRS 16, Leases. IFRS 16 will replace the existing leases Standard, IAS 17 Leases, and related interpretations. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. The Standard also contains enhanced disclosure requirements for lessees. The effective date for adoption of IFRS 16 is annual periods beginning on or after 1 January 2019 (but not yet endorsed in EU), though early adoption is permitted for companies applying IFRS 15 Revenue from Contracts with Customers.

Management is currently evaluating the impact that this new standard will have on its consolidated financial statements.

IFRIC 22 Foreign Currency Transactions and Advance Consideration

The amendment clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration.

Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may apply the Interpretation prospectively to all asfsets, expenses and income in its scope that are initially recognized on or after:

(i) The beginning of the reporting period in which the entity first applies the interpretation or

(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the interpretation.

Management is currently evaluating the impact that this new standard will have on its consolidated financial statements.

5. SUMMARY OF ACCOUNTING POLICIES

The consolidated financial statements have been prepared on a historical basis, except where specified below. A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements are detailed below:

5.1. BASIS OF CONSOLIDATION

The consolidated financial statements include the financial statements of the parent company and all of its subsidiary undertakings drawn up to 31 March 2018. The Group consolidates entities which it controls. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity's returns.

The Group recognises in relation to its interest in a joint operation:

a. its assets, including its share of any assets held jointly;

b. its liabilities, including its share of any liabilities incurred jointly;

c. its revenue from the sale of its share of the output arising from the joint operation;

d. its share of the revenue from the sale of the output by the joint operation; and

e. its expenses, including its share of any expenses incurred jointly.

Intra-Group balances and transactions, and any unrealised gains and losses arising from intra-Group transactions are eliminated in preparing the consolidated financial statements. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Profit or losses of subsidiaries acquired or disposed of during the year are recognised from the date of control of acquisition, or up to the effective date of disposal, as applicable.

5.2. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

In preparing consolidated financial statements, the Group's management is required to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The management's estimates for the useful life and residual value of tangible assets, impairment of tangible and intangible assets and recognition of provision for decommissioning represent certain particularly sensitive estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Information about significant judgments, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, revenues and expenses is provided in note 25.

5.3. FOREIGN CURRENCIES

The consolidated financial statements have been presented in US$ which is the functional currency of the group entities

Foreign currency transactions are translated into the functional currency of the respective Group entities, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Functional currency is the currency of the primary economic environment in which the entity operates.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in the profit or loss for the year.

Non-monetary items measured at historical cost are recorded in the functional currency of the entity using the exchange rates at the date of the transaction.

5.4. REVENUE RECOGNITION

Revenue from the sale of natural gas and condensate production (a by- product) is recognised when the significant risks and rewards of ownership have been transferred, which is when title passes, to the customer. This occurs when the product is physically transferred into a vessel, pipe or other delivery mechanism.

Revenue is stated after deducting sales taxes, excise duties and similar levies.

Revenue in respect of Take or Pay is recognised as and when the gas is delivered as per contractual arrangement with the customers. Per take or pay agreement with the GAIL (India) Limited ('GAIL' or the 'customer'), the Company has a right to recover price for minimum offtake quantity committed by GAIL. Where actual quantity taken by GAIL is less than the committed quantity then value of such shortfall is recorded as recoverable (under the head 'Trade receivable') with a corresponding credit to Deferred revenue account. Revenue for the deficit quantity would be recognised at the earlier of delivery of physical quantity towards the deficit to GAIL or at the expiry of the contract period.

Service income comprising technical and other support services fee is recognised as per the terms of the agreement. Revenue in respect of time and material contracts are recognised based on time spent in accordance with the contractual terms.

5.5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprises development assets and other properties, plant and equipments used in the gas fields and for administrative purposes. These assets are stated at cost plus decommissioning cost less accumulated depreciation and any accumulated impairment losses.

Development assets are accumulated on a field by field basis and comprise costs of developing the commercially feasible reserve, expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and other costs of bringing such reserves into production. It also includes the exploration and evaluation costs incurred in discovering the commercially feasible reserve, which have been transferred from the exploration and evaluation assets as per the policy mentioned in note 5.6. As consistent with the full cost method, all exploration and evaluation expenditure incurred up to the date of the commercial discovery have been classified under development assets of that field.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss of the year in which the asset is derecognised. However, where the asset is being consumed in developing exploration and evaluation intangible assets, such gain or loss is recognised as part of the cost of the intangible asset.

The asset's residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each period end. No depreciation is charged on development assets until production commences.

Depreciation on property, plant and equipment is provided at rates estimated by the management. Depreciation is computed using the straight line method of depreciation, whereby each asset is written down to its estimated residual value evenly over its expected useful life. The useful lives estimated by the management are as follows:

# These are depreciated from the date of commencement of production, on a field by field basis with reference to the unit of production method for the commercially probable and proven reserves in the particular field.

Land acquired is recognised at cost and no depreciation is charged as it has an unlimited useful life.

Advances paid for the acquisition/ construction of property, plant and equipment which are outstanding as at the end of the reporting period and the cost of property, plant and equipment under construction before such date are disclosed as 'Capital work-in-progress'.

5.6. EXPLORATION AND EVALUATION ASSETS

The Group adopts the full cost method of accounting for its oil and gas interests, having regard to the requirements of IFRS 6: Exploration for and Evaluation of Mineral Resources. Under the full cost method of accounting, all costs of exploring for and evaluating oil and gas properties, whether productive or not are accumulated and capitalised by reference to appropriate cost pools. Such cost pools are based on geographic areas and are not larger than a segment. The Group currently has one cost pool being an area of land located in Rajasthan, India.

Exploration and evaluation costs may include costs of license acquisition, directly attributable exploration costs such as technical services and studies, seismic data acquisition and processing, exploration drilling and testing, technical feasibility, commercial viability costs, finance costs to the extent they are directly attributable to financing these activities and an allocation of administrative and salary costs as determined by management. All costs incurred prior to the award of an exploration license are written off as a loss in the year incurred.

Exploration and evaluation costs are classified as tangible or intangible according to the nature of the assets acquired and the classification is applied consistently. Tangible exploration and evaluation assets are recognised and measured in accordance with the accounting policy on property, plant and equipment. To the extent that such a tangible asset is consumed in developing an intangible exploration and evaluation asset, the amount reflecting that consumption is recorded as part of the cost of the intangible asset.

Exploration and evaluation assets are not amortised prior to the conclusion of appraisal activities. Where technical feasibility and commercial viability is demonstrated, the carrying value of the relevant exploration and evaluation asset is reclassified as a development and production asset and tested for impairment on the date of reclassification. Impairment loss, if any, is recognised.

5.7. IMPAIRMENT TESTING FOR EXPLORATION AND EVALUATION ASSETS AND PROPERTY, PLANT AND EQUIPMENT

An impairment loss is recognised for the amount by which an asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.

Where there are indicators that an exploration asset may be impaired, the exploration and evaluation assets are grouped with all development/producing assets belonging to the same geographic segment to form the Cash Generating Unit (CGU) for impairment testing. Where there are indicators that an item of property, plant and equipment asset is impaired, assets are grouped at the lowest levels for which there are separately identifiable cash flows to form the CGU. The combined cost of the CGU is compared against the CGU's recoverable amount and any resulting impairment loss is written off in the profit or loss of the year. No impairment has been recognised during the year.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognized in profit or loss unless the asset is carried at a re-valued amount, in which case the reversal is treated as a revaluation increase.

5.8. FINANCIAL ASSETS

Financial assets and financial liabilities are recognised on the Group's Statement of Financial Position when the Group has become a party to the contractual provisions of the related instruments.

Financial assets of the Group, under the scope of IAS 39 'Financial Instruments: Recognition and Measurement' fall into the category of loans and receivables. When financial assets are recognised initially, they are measured at fair value plus transaction costs. The Group determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method, less provision for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Loans and receivables are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been affected.

De-recognition of loans and receivables occur when the rights to receive cash flows from the instrument expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.

5.9. FINANCIAL LIABILITIES

The Group's financial liabilities include debts, trade and other payables and loans from related parties.

Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the related instrument.

Financial liabilities are recognised at their fair value less transaction costs and subsequently measured at amortised cost less settlement payments. Amortised cost is computed using the effective interest method.

Trade and other payables and loans from related parties are interest free financial liabilities with maturity period of less than twelve months and are carried at a transaction value that is not materially different from their fair value.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

5.10. INVENTORIES

Inventories are measured at the lower of cost and net realisable value. Inventories of drilling stores and spares are accounted at cost including taxes, duties and freight. The cost of all inventories other than drilling bits is computed on the basis of the first in first out method. The cost for drilling bits is computed based on specific identification method.

5.11. ACCOUNTING FOR INCOME TAXES

Income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period that are unpaid / un-recovered at the date of the Statement of Financial Position. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in statement of profit or loss.

Deferred income taxes are calculated using the balance sheet method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the financial statement with their tax base. Deferred tax is, however, neither provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates and laws that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the date of the statement of financial position.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss of the year, except where they relate to items that are charged or credited directly to other comprehensive income or equity in which case the related deferred tax is also charged or credited directly to other comprehensive income or equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.

5.12. BORROWING COSTS

Any interest payable on funds borrowed for the purpose of obtaining qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, is capitalised as a cost of that asset until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

Any associated interest charge from funds borrowed principally to address a short-term cash flow shortfall during the suspension of development activities is expensed in the period.

Transaction costs incurred towards an un-utilised debt facility are treated as prepayments to be adjusted against the carrying value of debt as and when drawn.

5.13. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand, at bank in demand deposits and deposit with maturities of 3 months or less from inception, which are readily convertible to known amounts of cash. These assets are subject to an insignificant risk of change in value. Cash and cash equivalents are classified as loans and receivables under the financial instruments category.

5.14. LEASING ACTIVITIES

Finance leases which transfer substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease, at the fair value of the leased property or the present value of the minimum lease payments, whichever is lower.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly in profit or loss of the year.

All leases other than finance leases are treated as operating leases. Operating lease payments are recognised as an expense in statement of profit or loss on the straight line basis over the lease term.

Where the lease payments in respect of operating leases are made for exploration and evaluation activities or development and production activities, these are capitalized as part of the cost of these assets.

5.15. OTHER PROVISIONS AND CONTINGENT LIABILITIES

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision net of any reimbursement is recognised in statement of profit or loss of the year. To the extent such expense is incurred for construction or development of any asset, it is included in the cost of that asset. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as other finance expenses.

Provisions include decommissioning provisions representing management's best estimate of the Group's liability for restoring the sites of drilled wells to their original status. Provision for decommissioning is recognised when the Group has an obligation and a reliable estimate can be made. The amount recognised is the present value of the estimated future expenditure. A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recognised and is subsequently depreciated as part of the asset. The unwinding discount is recognised as a finance cost.

Commitments and contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

A contingent asset is not recognised but disclosed in the financial statements when an inflow of economic benefits is probable but when it is virtually certain than the asset is recognised in the financial statements.

In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the statement of financial position and no disclosure is made.

5.16. SEGMENT REPORTING

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker in order to allocate resources to the segments and to assess their performance. The Company considers that it operates in a single operating segment being the production and sale of gas.

6. INTANGIBLE ASSETS: EXPLORATION AND EVALUATION ASSETS

Intangible assets comprise of exploration and evaluation assets. Movement in intangible assets is as below:

A The above includes borrowing costs of US$ 898,344 (previous year: US$ 859,043). The weighted average capitalisation rate on funds borrowed generally is 6.50 per cent per annum (previous year: 6.17 per cent per annum).

B On 19 November 2013, Focus Energy Limited submitted an integrated declaration of commerciality (DOC) to the Directorate General of Hydrocarbons, ONGC, the Government of India and the Ministry of Petroleum and Natural Gas. Upon submission of DOC, exploration and evaluation cost incurred on SSF and SSG field was transferred to development cost. Focus continues to carry out further appraisal activities in the Block, and exploration and evaluation cost incurred subsequent to 19 November 2013, to the extent considered recoverable as per DOC submitted by Focus, is immediately transferred on incurrence to development assets.

Further, field development plan has been approved by Directorate General of Hydrocarbons ('DGH') as on 23 June 2017. Accordingly, the cost incurred on the aforesaid fields from 23 June 2018 are capitalised directly to development cost.

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7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprise of the following:

The balances above represent the Group's share in property, plant and equipment as per Note 3.

Tangible assets comprise development /production assets in respect of SGL field and development assets in respect of SSF and SSG field.

Development assets of SGL field includes the amount of exploration and evaluation expenditure transferred to development cost on the date of the first commercial discovery declared by the Group in 2012 and also includes expenditure incurred for the drilling of further wells in the SGL field to enhance the production activity. Production assets in respect of SGL field includes completed production facilities and under construction Gas gathering station - 2. The Group commenced the production facility in October 2012, and accordingly such production assets have been depreciated since this date. Development assets of SSF and SSG are explained in note 6.

The additions in Development/Production assets also include borrowing costs US$ 32,077,622 (previous year: US$ 27,753,096) (including the amount stated in note 6 above). The weighted average capitalisation rate on funds borrowed generally is 6.50 per cent per annum (previous year 6.17 per cent).

The depreciation has been included in the following headings-

8. DEFERRED TAX ASSETS/ LIABILITIES (NET)

Deferred taxes arising from temporary differences are summarised as follows:

a) The Group has recognised deferred tax assets on all of its unused tax losses/unabsorbed depreciation considering there is convincing evidence of availability of sufficient taxable profit in the Group in the future as summarized in note 9.

b) The deferred tax movements during the current year have been recognised in the Consolidated Statement of Comprehensive Income

9. INCOME TAXES

Income tax is based on the tax rates applicable on profit or loss in various jurisdictions in which the Group operates. The effective tax at the domestic rates applicable to profits in the country concerned as shown in the reconciliation below have been computed by multiplying the accounting profit by the effective tax rate in each jurisdiction in which the Group operates. The individual entity amounts have then been aggregated for the consolidated financial statements. The effective tax rate applied in each individual entity has not been disclosed in the tax reconciliation below as the amounts aggregated for individual Group entities would not be a meaningful number.

Income tax credit is arising on account of the following:

The relationship between the expected tax expense based on the domestic tax rates for each of the legal entities within the Group and the reported tax expense in profit or loss is reconciled as follows:

The reconciliation shown above has been based on the rate 43.26 per cent (previous year: 43.26 per cent) as applicable under Indian tax laws.

The Company's profits are taxable as per the tax laws applicable in Guernsey where zero per cent tax rate has been prescribed for corporates. Accordingly, there is no tax liability for the Group in Guernsey. iServices and Newbury being participants in the PSC are covered under the Indian Income tax laws as well as tax laws for their respective countries. However, considering the existence of double tax avoidance arrangement between Cyprus and India, and Mauritius and India, profits in Newbury and iServices are not likely to attract any additional tax in their local jurisdiction. Under Indian tax laws, Newbury and iServices are allowed to claim the entire expenditure in respect of the Oil Block incurred until the start of commercial production (whether included in the exploration and evaluation assets or development assets) as deductible expense in the first year of commercial production or over a period of 10 years. The Company has opted to claim the expenditure in the first year of commercial production. As the Group has commenced commercial production in 2011 and has generated profits in Newbury and iServices, the management believes there is reasonable certainty of utilisation of such losses in the future years and thus a deferred tax asset has been created in respect of these.

10. INVENTORIES

Inventories comprise the following:

The above inventories are held for use in the exploration, development and production activities. These are valued at cost determined based on policy explained in paragraph 5.10.

Inventories of US$ 202,220 (previous year: US$ 169,331) were recorded as an expense under the heading 'cost of sales' in the consolidated statement of comprehensive income during the year ended 31 March 2018.

Inventories of US$ 9,158,954 (previous year: US$ 7,037,963) were capitalised as part of exploration and evaluation assets and development assets.

11. OTHER CURRENT ASSETS

12. CASH AND CASH EQUIVALENTS

Cash and cash equivalents bears lowest risk as the Group only deposits cash surpluses with major banks of high quality credit standing. The management considers the credit quality of deposits with such banks to be good and reviews the banking relationships on an on-going basis.

13. EQUITY

Authorised share capital

The total authorised share capital of the Company is GBP 5,000,000 divided into 500,000,000 shares of GBP 0.01 each. The total number of shares issued by the Company as at 31 March 2018 is 182,973,924 (previous year: 182,973,924).

--For all matters submitted to vote in the shareholders meeting of the Company, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting has one vote in respect of each share held.

All shareholders are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the individual entities of the Group.

Additional paid in capital

Additional paid-in capital represents excess over the par value of share capital paid in by shareholders in return for the shares issued to them, recorded net of expenses incurred on issue of shares.

Currency translation reserve

Currency translation reserve represents the balance of translation of the entities financial statements into US$ until 30 November 2010 when its functional currency was assessed as GBP. Subsequent to 1 December 2010, the functional currency of Indus Gas was reassessed as US$.

Merger reserve

The balance on the merger reserve represents the fair value of the consideration given in excess of the nominal value of the ordinary shares issued in an acquisition made by the issue of shares of subsidiaries from other entities under common control.

Retained earning

Retained earnings include current and prior period retained profits.

14. LONG TERM DEBT

From Banks

Current interest rates are variable and weighted average interest for the year was 6.50 per cent per annum (previous year: 5.96 per cent per annum). The fair value of the above variable rate borrowings are considered to approximate their carrying amounts. The maturity profile (undiscounted) is explained in note 28.

Interest capitalised on loans above have been disclosed in notes 6 and 7.

The term loans are secured by following: -

· First charge on all project assets of the Group both present and future, to the extent of SGL Field Development and to the extent of capex incurred out of this facility in the rest of RJ-ON/6 field.

· First charge on the current assets (inclusive of condensate receivable) of the Group to the extent of SGL field.

· First Charge on the entire current assets of the SGL Field and to the extent of capex incurred out of this facility in the rest of RJON/6 field.

From Bonds

During the year ended 31 March 2018, the Group has issued USD 150 million notes under the USD 300 million MTN programme which carries interest at the rate of 8 per cent per annum. These notes are unsecured notes and are fully repayable at the end of 3 years from the date of issuance i.e. December 2021, further interest on these notes is paid semi-annually.

15. PROVISION FOR DECOMMISSIONING

As per the PSC, the Group is required to carry out certain decommissioning activities on gas wells. The provision for decommissioning relates to the estimation of future disbursements related to the abandonment and decommissioning of gas wells. The provision has been estimated by the Group's engineers, based on individual well filling and coverage. This provision will be utilised when the related wells are fully depleted. The majority of the cost is expected to be incurred within a period of next 8 years. The discount factor being the risk adjusted rate related to the liability is estimated to be 9 per cent for the year ended 31 March 2018 (previous year: 9 per cent).

16. PAYABLE/RECEIVABLE TO RELATED PARTIES

Related parties payable comprise the following:

Related parties' receivable comprises the following:

Liability payable/Amount receivable to/from Focus

Liability payable/amount receivable to/from Focus represents amounts due to/from them in respect of the Group's share of contract costs, for its participating interest in Block RJ-ON/6 pursuant to the terms of Agreement for Assignment dated 13 January 2006 and its subsequent amendments from time to time.

The management estimates the current borrowings to be repaid on demand within twelve months from the statement of financial position date and these have been classified as current borrowings.

* Borrowings from Gynia Holdings Ltd. carries interest rate of 6.5 per cent per annum compounded annually. The entire outstanding balance (including interest) is subordinate to the loans taken from the banks (detailed in note 14) and therefore, is payable along with related interest subsequent to repayment of bank loan in year 2024.

Interest capitalised on loans above have been disclosed in notes 6 and 7.

17 OTHER OPERATING INCOME

The other operating income represents revenue earned from technical assistance services being rendered to oil and gas exploration companies.

In the previous year amounts pertain to business of leasing Rig/Drillship for oil and gas exploration and Production activities where the Company's subsidiaries entered into contracts for purchase of drillship and rig and the counter party to the respective contracts failed on their commitment to timely deliver the rig and Drillship consequently, in accordance with terms of the respective contracts, the Company received compensation for loss of profit on account of cancellation of contracts.

18. EMPLOYEE COST

The Employee cost attributable to Indus Gas Limited has been allocated in the agreed ratio (refer note 3) by Focus and recorded as the cost of sales and administrative expenses in the consolidated statement of comprehensive income amounting to US$ 369,852 (previous year US$ 327,733) and US$ 553,217 (previous year US$ 473,106) respectively. Cost pertaining to the employees of the Group have been included under administrative expense is US$ 155,719 (previous year US$ 449,778).

19. FOREIGN CURRENCY EXCHANGE (LOSS)/ GAIN, NET

The Group has recognised the following in the profit or loss on account of foreign currency fluctuations:

20. OPERATING LEASES

Lease payments capitalised under exploration and evaluation assets and development/ production assets during the year ended 31 March 2018 amounts to US$ 51,376,926 (previous year US$ 40,298,219). No sublease payments or contingent rent payments were made or received. No sublease income is expected as all assets held under lease agreements are used exclusively by the Group. All the operating leases of the Group can be cancelled and there are no future minimum payments for the existing operating leases. The terms and conditions of these operating leases do not impose any significant financial restrictions on the Group.

21. EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

Calculation of basic and diluted earnings per share is as follows:

22. RELATED PARTY TRANSACTIONS

The related parties for each of the entities in the Group have been summarised in the table below:

Disclosure of transactions between the Group and related parties and the outstanding balances as at 31 March 2018 and 31 March 2017 is as under:

Transactions with holding company

Transactions with KMP and entity over which KMP exercise control

*including interest

Directors' remuneration

Directors' remuneration is included under administrative expenses, evaluation and exploration assets or development assets in the consolidated financial statements allocated on a systematic and rational manner.

Remuneration by director is also separately disclosed in the directors' report on page 7.

23. SEGMENT REPORTING

The Chief Operating Decision Maker being the Chief Executive Officer of the Group, reviews the business as one operating segment being the extraction and production of gas. Hence, no separate segment information has been furnished herewith.

All of the non-current assets other than financial instruments and deferred tax assets (there are no employment benefit assets and rights arising under insurance contracts) are located in foreign countries and amounted to US$ 742,705,287 (previous year: US$ 639,863,055).

The total revenue of the Group is from the sale of natural gas, its by-product (i.e. condensate) and from the technical assistance services to Oil and Gas Exploration Companies. The revenue from top two customers comprise 94.50% (previous year: 96.84%)

24. COMMITMENTS AND CONTINGENCIES

The Group has no contingent liabilities as at 31 March 2018 (previous year Nil).

The Group has no commitments as at 31 March 2018 (previous year Nil).

25. ACCOUNTING ESTIMATES AND JUDGEMENTS

In preparing consolidated financial statements, the Group's management is required to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The judgments and estimates are based on management's best knowledge of current events and actions and actual results from those estimates may ultimately differ.

Significant judgments applied in the preparation of the consolidated financial statements are as under:

Determination of functional currency of individual entities

Following the guidance in IAS 21 "The effects of changes in foreign exchange rates" the functional currency of each individual entity is determined to be the currency of the primary economic environment in which the entity operates. In the management's view each of the individual entity's functional currency reflects the transactions, events and conditions under which the entity conducts its business. The management believes that US$ has been taken as the functional currency for each of the entities within the Group. US$ is the currency in which each of these entities primarily generate and expend cash and also generate funds for financing activities.

Full cost accounting for exploration and evaluation expenditure

The Group has followed 'full cost' approach for accounting exploration and evaluation expenditure against the 'successful efforts' method. As further explained in Note 5.6 and 6, exploration and evaluation assets recorded using 'full cost' approach are tested for impairment prior to reclassification into development assets on successful discovery of gas reserves.

Impairment of tangible assets

The Group follows the guidance of IAS 36 and IFRS 6 to determine when a tangible asset is impaired. This determination requires significant judgment to evaluate indicators triggering impairment. The Group monitors internal and external indicators of impairment relating to its tangible assets. The management has assessed that no such indicators have occurred or exists as at 31 March 2018 to require impairment testing of property, plant and equipment.

Estimates used in the preparation of the consolidated financial statements

Useful life and residual value of tangible assets

The Group reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. Specifically, production assets are depreciated on a basis of unit of production (UOP) method which involves significant estimates in respect of the total future production and estimate of reserves. The calculation of UOP rate of depreciation could be impacted to the extent that the actual production in future is different from the forecasted production. The depletion in reserve will change the estimated rate of depreciation in the future. During the financial year, the directors determined that no change to the useful lives of any of the property, plant and equipment is required. The carrying amounts of property, plant and equipment have been summarised in note 7.

Recognition of provision for decommissioning cost

As per the PSC, the Group is required to carry out certain decommissioning activities on gas wells. The ultimate decommissioning costs are uncertain and cost estimates can vary in response to many factors including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing and amount of expenditure can also change, for example, in response to changes in reserves or changes in laws and regulations or their interpretation. As a result, there could be adjustments to the provisions established which would affect future financial results. The liabilities estimated in respect of decommissioning provisions have been summarised in note 15.

Impairment testing

Impairment testing

As explained above, management carried out impairment testing of property, plant and equipment of the Block on 19 November 2013 on submission of integrated declaration of commerciality report by Focus Energy Limited to the Directorate General of Hydrocarbons, ONGC, the Government of India and the Ministry of Petroleum and Natural Gas. An impairment loss is recognized for the amount by which the asset's or cash generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from the Block and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows management makes assumptions about future gross profits. These assumptions relate to future events and circumstances, which majorly includes projected profile of gas production and sales based on current estimates of reserves and risked resources and expected market demand and price, applicable discount rate. All of the above assumptions involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.

For the purpose of determination of recoverable value the Company has taken a gas price at $ 5 per MMBTU (previous year $ 5 per MMBTU) based on selling price to GAIL which has been agreed for a period of three years which has expired on September 2016 (the Company is presently in negotiations with GAIL for increase in gas price). The discount rate calculation is based on the Company's weighted average cost of capital adjusted to reflect pre-tax discount rate and amounts to 9% p.a.. The Company expects the volumes to increase in line with the new reserves approved in the SGL field amounting to 473.60 BCF. Management believes that a possible change of 5% in any of the above assumptions will not lead to impairment of property, plants and equipment and intangible assets of the Block.

The Company is in the process of negotiating selling prices with GAIL and expects that revised selling price will not be less than the existing selling price.

Deferred tax assets

The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the management's assessment, which is adjusted for specific limits to the use of any unused tax loss or credit. The tax rules in the jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, then deferred tax asset is usually recognized in full.

26. BASIS OF GOING CONCERN ASSUMPTION

The Group has current liabilities amounting to US$ 43,801,883 the majority of which is towards current portion of borrowings from banks and related parties, primarily to Focus. As at 31 March 2018, the amounts due for repayment (including interest payable) within the next 12 months for long term borrowings are US$ 37,299,630 which the Group expects to meet from its internal generation of cash from operations.

Further, the Group is contemplating to raise funds which will be used for planned capital expenditures (including the exploration, appraisal and development of assets).

27. CAPITAL MANAGEMENT POLICIES

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Debt is calculated as total liabilities (including 'current and non-current liabilities' as shown in the consolidated Statement of Financial Position). Total equity is calculated as 'equity' as shown in the consolidated statement of financial position plus total debt.

The gearing ratio has marginally decreased since in the current year due to proportionately greater increase in equity as compared to increase in the draw-down of loans from banks and related party to fund additional exploration, evaluation and development activities for the Group.

The Group is not subject to any externally imposed capital requirements. There were no changes in the Group's approach to capital management during the year.

28. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

A summary of the Group's financial assets and liabilities by category are mentioned in the table below:

The carrying amounts of the Group's financial assets and liabilities recognised at the end of the reporting period are as follows:

The fair value of the financial assets and liabilities described above closely approximates their carrying value on the statement of financial position date.

Risk management objectives and policies

The Group finances its operations through a mixture of loans from banks and bonds and related parties and equity. Finance requirements such as equity, debt and project finance are reviewed by the Board when funds are required for acquisition, exploration and development of projects.

The Group treasury functions are responsible for managing funding requirements and investments which includes banking and cash flow management. Interest and foreign exchange exposure are key functions of treasury management to ensure adequate liquidity at all times to meet cash requirements.

The Group's principal financial instruments are cash held with banks and financial liabilities to banks and related parties and these instruments are for the purpose of meeting its requirements for operations. The Group's main risks arising from financial instruments are foreign currency risk, liquidity risk, commodity price risk and credit risks. Set out below are policies that are used to manage such risks:

Foreign currency risk

The functional currency of each entity within the Group is US$ and the majority of its business is conducted in US$. All revenues from gas sales are received in US$ and substantial costs are incurred in US$. No forward exchange contracts were entered into during the year.

Entities within the Group conduct the majority of their transactions in their functional currency other than finance lease obligation balances which are maintained in Indian Rupees and amounts of cash held in GBP. All other monetary assets and liabilities are denominated in functional currencies of the respective entities. The currency exposure on account of assets and liabilities which are denominated in a currency other than the functional currency of the entities of the Group as at 31 March 2018 and 31 March 2017 is as follows:

As at March 31, 2018, every 1% (increase)/decrease of the respective foreign currencies compared to the functional currency of the Group entities would impact profit before tax by approximately USD (19,533) and USD 19,533 respectively.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The table below summaries the maturity profile of the Group's financial liabilities based on contractual undiscounted payments for the liquidity analysis

Interest rate risk

The Group's policy is to minimise interest rate risk exposures on the borrowing from the banks and the sum payable to Focus Energy Limited. Borrowing from the Gynia Holdings Ltd. is at fixed interest rate and therefore, does not expose the Group to risk from changes in interest rate. The interest rate on bond issued during the year is fixed at 8% per annum. The Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Interest rate on US$ 110 million bank borrowing is 5 percent plus LIBOR; on US$ 40 million bank borrowing is 4 percent plus LIBOR and on US$ 180 million bank borrowing is 4.1 percent plus LIBOR (detailed in note 14).

The Group's interest rate exposures are concentrated in US$.

The analysis below illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates. Based on volatility in interest rates in the previous 12 months, the management estimates a range of 50 basis points to be approximate basis for the reasonably possible change in interest rates. All other variables are held constant.

Since the loans are taken specifically for the purpose of exploration and evaluation, development and production activities and according to the Group's policy the borrowing costs are capitalised to the cost of the asset and hence changes in the interest rates do not have any immediate adverse impact on the profit or loss.

Commodity price risks

The Group's share of production of gas from the Block is sold to GAIL. The prices has been agreed for a period of three years which expired in September 2016. As per the terms of contract, after expiry of three years period, the price will be reviewed periodically and reassessed mutually between the parties. The Company is presently in negotiations with GAIL for increase in gas price. No commodity price hedging contracts have been entered into.

Credit risk

The Group has made short-term deposits of surplus funds available with banks and financial institutions of good credit repute and therefore, doesn't consider credit risk to be significant. Other receivables such as security deposits and advances with related parties, do not comprise of a significant cumulative balance and thus do not expose the Group to a significant credit risk. The Group has concentration of credit risk as all the Group's trade receivables are held with Gas Authority (India) Limited and EICR (Cyprus) Limited only. Credit risk in respect of these customers is managed through monitoring of credit worthiness which they considers to be reputable and hence they does not consider credit risk to be significant. None of the financial assets held by the Group are past due.

Post reporting date event

No adjusting or significant non adjusting event have occurred between 31 March 2018 and the date of authorisation.

29. Reconciliation of liabilities from financing activities