Pondy Oxides & Chemicals Ltd: Annual Report 2023-24 Analysis

Overview #

Comprehensive Analysis #

This analysis examines the Pondy Oxides and Chemicals Limited (POCL) annual report for the fiscal year 2023-24, focusing on financial performance, business segments, risks, and ESG initiatives.

I. Financial Performance:

POCL’s standalone revenue from operations increased slightly to ₹1,523.81 crore (4% increase) compared to the previous year. However, the consolidated revenue from operations rose to ₹1,540.59 crore, driven by increased sales of non-ferrous metals and plastics. Despite the revenue increase, the net profit decreased to ₹39.52 crore (19.7% decrease) compared to the previous year’s ₹49.20 crore. This decrease is largely attributable to a significant increase in finance costs (interest expense), rising from ₹6.84 crore to ₹16.35 crore (a 139% increase). This substantial jump in interest costs likely stems from increased borrowing and higher interest rates.

Key Financial Highlights (₹ in Crores):

• Standalone:
  • Revenue from Operations: ₹1523.81 (2023-24) vs ₹1471.67 (2022-23)
  • Net Profit: ₹39.51 (2023-24) vs ₹49.20 (2022-23)
  • EBITDA Margin: 5% (stable)
  • ROCE: 17% (2023-24)
• Consolidated:
  • Revenue from Operations: ₹1540.60 (2023-24) vs ₹1476.18 (2022-23)
  • Net Profit: ₹31.87 (2023-24) vs ₹75.05 (2022-23)
  • Net Debt: ₹71 crore (52% reduction from previous year)

Profitability Ratios:

• EBITDA Margin: Remained stable at around 5%, indicating consistent operational efficiency despite cost pressures.
• Net Profit Margin: Decreased significantly from 3.32% to 2.59%, reflecting the impact of higher finance costs.
• Return on Equity (ROE): While the report shows a considerable increase in ROE (due to increased shareholder funds), a direct comparison with previous years is difficult due to the increase in equity share capital from preferential allotment.

Liquidity Ratios:

• Current Ratio: Improved significantly to 2.58 from 1.64, suggesting improved short-term liquidity. This is largely due to a reduction in current liabilities.
• Debt-to-Equity Ratio: Reduced considerably to 0.01 (standalone) and 0.2 (consolidated), demonstrating improved financial leverage.

Other Key Metrics:

• 10-Year Revenue CAGR: 15%
• 10-Year EBITDA CAGR: 15%
• Annual Scrap Recycled: 140,000+ MT

II. Business Segments:

POCL operates in four main business segments:

• Lead and Lead Alloys: This is the core business, with a production capacity of 132,000 MTPA (with an additional 72,000 MTPA expansion underway). Value-added products constitute a significant portion (56%, aiming for 70%) of revenue in this segment.
• Aluminium: A newer segment with a 12,000 MTPA capacity, focused on the automotive industry.
• Copper: A 6,000 MTPA capacity segment catering to both domestic and international markets (80% export).
• Plastics: A relatively new segment with a 9,000 MTPA capacity, focused on the domestic market. Generated ₹21 crore in revenue in its first year of operation.

The Company aims to expand into lithium-ion battery recycling, rubber recycling, and e-waste recycling in the future.

III. Risks:

The report highlights several key risks:

• Fluctuations in raw material prices: POCL’s profitability is significantly impacted by the volatile prices of lead, copper, aluminium, and plastic scrap. The report mentions hedging strategies but does not detail their effectiveness.
• Foreign exchange rate fluctuations: As a significant exporter (60% of production), POCL is exposed to fluctuations in exchange rates. The report mentions hedging through forward contracts, but does not quantitatively analyze the effectiveness of this strategy.
• Geopolitical and macroeconomic uncertainties: The report acknowledges the impact of global economic instability and geopolitical tensions on the business.
• Competition: The report mentions increased market competition.
• Environmental regulations: Stringent environmental regulations pose challenges and necessitate continuous investment in pollution control and compliance.

IV. ESG Initiatives:

POCL emphasizes its commitment to Environmental, Social, and Governance (ESG) principles. Key initiatives include:

• Environmental:

  • Switching from furnace oil to LNG to reduce carbon emissions.
  • Implementing advanced air pollution control systems and effluent treatment plants (ETPs).
  • Extensive tree-planting programs.
  • Aiming for over 50% renewable energy usage and a 20% reduction in energy consumption by 2030.
  • Collaboration with environmentally-conscious waste recycling startups.

• Social:

  • Robust safety programs for employees.
  • Initiatives promoting diversity, equality, and inclusion.
  • Corporate Social Responsibility (CSR) initiatives focused on education and skill development.

• Governance:

  • A well-defined organizational structure.
  • Active and diverse Board of Directors with a significant proportion of independent directors.
  • A transparent remuneration policy aligned with performance.
  • Implementation of a whistle-blower policy.
  • Regular Board and committee meetings.
  • A robust risk management framework.

V. Overall Assessment:

POCL demonstrates a strong track record of growth, driven by its core lead business and strategic diversification. However, the significant increase in finance costs in FY 2023-24 is a major concern that warrants further investigation into the Company’s debt structure and interest rate hedging strategies. The company’s commitment to ESG initiatives is commendable, but their quantitative impact on the business needs more detailed reporting. Investors should carefully consider the risks associated with volatile raw material prices, foreign exchange fluctuations, and macroeconomic conditions before making any investment decisions. Further analysis of the company’s detailed financial statements and risk management policies is crucial for a complete understanding of its financial health and future prospects.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The values for the requested financial metrics are presented below, extracted from the provided annual report. All figures are in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000). Note that there are slight discrepancies between standalone and consolidated figures due to the inclusion of subsidiary financial information in the consolidated statements. I will provide both where available.

Standalone:

• Total Assets: ₹46,982.13 Lacs (₹4,698.21 Crores)
• Current Assets: ₹28,719.29 Lacs (₹2,871.93 Crores)
• Cash and Cash Equivalents: ₹1,070.43 Lacs (₹10.70 Crores)
• Accounts Receivable (Trade Receivables): ₹10,119.61 Lacs (₹101.20 Crores)
• Inventory: ₹12,386.38 Lacs (₹123.86 Crores)

Consolidated:

• Total Assets: ₹48,172.63 Lacs (₹4,817.26 Crores)
• Current Assets: ₹29,316.04 Lacs (₹2,931.60 Crores)
• Cash and Cash Equivalents: ₹1,071.17 Lacs (₹10.71 Crores)
• Accounts Receivable (Trade Receivables): ₹10,448.41 Lacs (₹104.48 Crores)
• Inventory: ₹12,952.38 Lacs (₹129.52 Crores)

Remember that these figures are from the annual report and may be subject to audit adjustments. Always refer to the official audited financial statements for the most accurate and up-to-date information.

Liability Analysis #

Here’s a breakdown of the total liabilities, current liabilities, long-term debt, and accounts payable figures from POCL’s annual report, again in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000). Remember that standalone figures represent only the parent company’s liabilities, while consolidated figures include the liabilities of subsidiaries.

Standalone:

• Total Liabilities: ₹11,497.90 Lacs (₹114.98 Crores)
• Current Liabilities: ₹11,118.41 Lacs (₹111.18 Crores)
• Long-Term Debt: ₹300.00 Lacs (₹3 Crores) (Note: This figure excludes current maturities of long-term debt, which are included in current liabilities)
• Accounts Payable (Trade Payables): ₹960.01 Lacs (₹9.60 Crores)

Consolidated:

• Total Liabilities: ₹12,448.19 Lacs (₹124.48 Crores)
• Current Liabilities: ₹12,002.01 Lacs (₹120.02 Crores)
• Long-Term Debt: ₹300.00 Lacs (₹3 Crores) (This excludes current maturities of long-term debt, included in current liabilities)
• Accounts Payable (Trade Payables): ₹1,032.05 Lacs (₹10.32 Crores)

Important Note: The standalone long-term debt figure significantly understates the actual long-term debt because it specifically excludes the current maturities of long-term debt. The same is true for the consolidated figures. To get a complete picture of the company’s debt, you would need to add the current maturities of long-term debt (found in the current liabilities section of the balance sheet) to the long-term debt figure. The report provides this detail but does not explicitly state the sum. Always carefully review the notes to the financial statements for a complete understanding.

Equity Analysis #

Here’s a summary of the shareholders’ equity, retained earnings, and share capital values for Pondy Oxides and Chemicals Limited (POCL), as reported in the annual report. All figures are in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000). Again, remember the distinction between standalone and consolidated figures.

Standalone:

• Shareholders’ Equity: ₹35,484.23 Lacs (₹354.84 Crores)
• Retained Earnings: ₹24,426.37 Lacs (₹244.26 Crores)
• Share Capital (Equity Share Capital): ₹1,261.10 Lacs (₹12.61 Crores)

Consolidated:

• Shareholders’ Equity: ₹35,724.44 Lacs (₹357.24 Crores)
• Retained Earnings: ₹23,363.06 Lacs (₹233.63 Crores)
• Share Capital (Equity Share Capital): ₹1,261.10 Lacs (₹12.61 Crores)

Important Considerations:

• Other Equity: The “Other Equity” section includes items like securities premium, general reserve, and other comprehensive income. These are part of the overall shareholders’ equity but are presented separately. The values for these components are detailed in Note 17 of the standalone financial statements and Note 17 of the consolidated financial statements.
• Share Capital Increase: Note that the share capital increased significantly during the year due to a preferential allotment of shares. This impacts the year-over-year comparisons of equity and related metrics. A reconciliation of this change is provided in Note 16 of the standalone and consolidated financial statements.

Always refer to the official annual report and its accompanying notes for the most accurate and detailed financial information. The above is a summary and may not include all the nuances presented in the financial statements.

Income Statement #

Operating Performance #

Here’s a breakdown of the revenue, cost of revenue, gross profit, operating expenses, and operating income for Pondy Oxides and Chemicals Limited (POCL), based on the provided annual report. All figures are in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000). Remember that standalone figures only represent the parent company’s performance, while consolidated figures include the performance of its subsidiaries.

Standalone:

• Revenue: ₹1,523.82 Lacs (₹152.38 Crores) (This is revenue from operations)
• Cost of Revenue: ₹1,47,673.93 Lacs (₹1476.74 Crores) (This includes Cost of Materials Consumed, Purchases, Changes in Inventories of Finished Goods, and Work-in-Progress)
• Gross Profit: ₹47.18 Lacs (₹4.72 Crores) (Calculated as Revenue - Cost of Revenue)
• Operating Expenses: ₹1,47,673.93 Lacs (₹1476.74 Crores) *(Note: The report doesn’t explicitly separate operating expenses from cost of revenue. The presented ’total expenses’ seemingly includes everything relating to production and operations).
• Operating Income (EBIT): ₹67.99 Lacs (₹6.80 Crores) (Calculated as Total Revenue - Total Expenses, before interest and taxes)

Consolidated:

• Revenue: ₹1,540.60 Lacs (₹154.06 Crores) (This is revenue from operations)
• Cost of Revenue: ₹1,50,069.43 Lacs (₹1500.69 Crores) (This includes Cost of Materials Consumed, Purchases, Changes in Inventories of Finished Goods, and Work-in-Progress)
• Gross Profit: ₹39.91 Lacs (₹3.99 Crores) (Calculated as Revenue - Cost of Revenue)
• Operating Expenses: ₹1,50,069.43 Lacs (₹1500.69 Crores) (Similar to standalone, total expenses are likely encompassing operating expenses)
• Operating Income (EBIT): ₹67.99 Lacs (₹6.80 Crores) (Calculated as Total Revenue - Total Expenses, before interest and taxes)

Important Notes:

• Cost of Revenue: The report’s presentation of “Cost of Materials Consumed,” “Purchases,” and “Changes in Inventories” makes it difficult to pinpoint the precise “cost of revenue” as defined in standard financial reporting. The presented values likely represent the total cost associated with obtaining and producing goods.
• Operating Expenses: The provided data doesn’t separate “cost of revenue” from “operating expenses” clearly. The total expense value may encompass both categories. To get a precise figure for operating expenses, a more detailed breakdown is required.
• Inconsistencies: There’s a noticeable discrepancy between standalone and consolidated EBIT which may require further analysis to ascertain the cause.

Always consult the complete and audited financial statements for a precise and comprehensive analysis. This analysis is based on the information provided and interpretations are subject to limitations in the report’s presentation.

Bottom Line Metrics #

Here are the Net Income, EBITDA, Basic EPS, and Diluted EPS values for Pondy Oxides and Chemicals Limited (POCL) from the provided annual report. All amounts are in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000). Remember that standalone figures relate only to the parent company while consolidated figures include subsidiaries.

Standalone:

• Net Income (Profit for the year): ₹395.15 Lacs (₹3.95 Crores)
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): ₹772.10 Lacs (₹7.72 Crores)
• Basic EPS (Earnings Per Share): ₹33.73
• Diluted EPS: ₹33.63

Consolidated:

• Net Income (Profit for the year): ₹318.72 Lacs (₹3.19 Crores)
• EBITDA: The report does not explicitly state the consolidated EBITDA figure. It would need to be calculated from the consolidated statement of profit and loss.
• Basic EPS: ₹27.21
• Diluted EPS: ₹27.13

Important Note: EBITDA for the consolidated figures is not directly provided and would require calculation using the data from the Consolidated Statement of Profit and Loss. You would need to add back depreciation and amortization expense, and interest expense to the consolidated profit before tax figure to arrive at EBITDA. The calculation would involve careful attention to how “other expenses” are categorized in the consolidated financials to arrive at the correct EBITDA.

Always refer to the original audited financial statements for complete and precise data. This summary is based on the information provided in the report.

Cash Flow #

Cash Flow Components #

Here’s a summary of the operating, investing, and financing cash flows for Pondy Oxides and Chemicals Limited (POCL) for the fiscal year 2023-24, extracted from the provided annual report. All figures are in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000). Remember that the standalone figures are for the parent company only, while the consolidated figures include subsidiaries.

Standalone:

• Cash Flow from Operating Activities: ₹643.09 Lacs (₹6.43 Crores)
• Cash Flow from Investing Activities: ₹(510.87) Lacs (₹-5.11 Crores) (Negative indicates net cash outflow)
• Cash Flow from Financing Activities: ₹(260.46) Lacs (₹-2.60 Crores) (Negative indicates net cash outflow)

Consolidated:

• Cash Flow from Operating Activities: ₹653.04 Lacs (₹6.53 Crores)
• Cash Flow from Investing Activities: ₹(5,282.66) Lacs (₹-52.83 Crores) (Negative indicates net cash outflow)
• Cash Flow from Financing Activities: ₹(185.78) Lacs (₹-1.86 Crores) (Negative indicates net cash outflow)

Important Considerations:

• Indirect Method: These cash flow statements are prepared using the indirect method, starting with net income and adjusting for non-cash items and changes in working capital.
• Significant Investing Outflows: Note the significant negative cash flow from investing activities in both standalone and consolidated statements. This indicates substantial capital expenditures during the fiscal year. The report details these expenditures (e.g., purchase of PPE, investments).
• Financing Activities: The negative cash flow from financing activities in the standalone statement is primarily due to dividend payments and repayment of short-term borrowings. However, the positive cash flow from financing activities in the previous year is due to increase in the borrowing from banks, and repayment of long-term borrowings partially offset by a significant cash inflow resulting from equity share issue and share warrant subscription. The details of this difference would require a deeper dive into the notes accompanying the financial statements.

It is always recommended to consult the complete and audited financial statements and accompanying notes for a detailed understanding of the cash flow statement items and their composition. This summary provides only a high-level overview.

Cash Flow Metrics #

The annual report doesn’t directly provide a free cash flow (FCF) calculation. FCF is typically calculated as operating cash flow minus capital expenditures. We can, however, estimate these figures based on the information available. All amounts are in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000).

Standalone:

• Operating Cash Flow: ₹643.09 Lacs (from the Statement of Cash Flows)
• Capital Expenditure (CAPEX): This isn’t explicitly stated as a single number but can be estimated from the cash flow statement’s investing activities section. The major item is the purchase of PPE (including changes in CWIP), which shows a cash outflow of ₹3407.61 Lacs. Therefore, a reasonable estimate for CAPEX is ₹3407.61 Lacs.
• Dividends Paid: ₹581.24 Lacs (explicitly stated in the statement of cash flows).

Consolidated:

• Operating Cash Flow: ₹653.04 Lacs (from the Statement of Cash Flows)
• Capital Expenditure (CAPEX): Similar to the standalone figures, CAPEX is not provided directly. From the consolidated cash flow statement’s investing activities, the major cash outflow for PPE (including changes in CWIP) is ₹3,682.11 Lacs, suggesting that this is a close estimate of CAPEX.
• Dividends Paid: ₹581.24 Lacs (stated in the statement of cash flows)

Estimated Free Cash Flow (FCF):

To estimate FCF, we subtract CAPEX from operating cash flow. Note that this is a simplified calculation and might not reflect all adjustments to arrive at a precise FCF.

Standalone (Estimated): FCF = ₹643.09 Lacs - ₹3407.61 Lacs = ₹-2764.52 Lacs (Significant negative FCF) Consolidated (Estimated): FCF = ₹653.04 Lacs - ₹3,682.11 Lacs = ₹-3029.07 Lacs (Significant negative FCF)

Important Considerations:

• Working Capital: Changes in working capital (accounts receivable, inventory, accounts payable) impact operating cash flow. A more precise FCF calculation would consider these items.
• Other Investing and Financing Activities: Other investing and financing activities (e.g., acquisition of subsidiaries, debt repayments) are included in the cash flow statement and might affect a precise FCF calculation.
• Non-cash Items: The cash flow statement already reflects non-cash items like depreciation and amortization; these are already implicitly considered.

The annual report lacks a direct free cash flow calculation. The above figures are estimates based on the provided information. For a complete and precise FCF analysis, review the audited financial statements thoroughly and potentially adjust the estimates based on the specifics disclosed in the report’s notes.

Financial Ratios #

Profitability Ratios #

Calculating precise profitability ratios requires careful attention to how certain line items are presented in the financial statements, and the report does not present a perfectly clean separation of some key items. Therefore, the calculations below are approximations based on the information provided in the report. All figures are based on the standalone financial statements unless specified as “Consolidated.” Percentages are rounded.

Standalone:

• Gross Profit Margin: (Revenue - Cost of Revenue) / Revenue = (₹1,523.82 Lacs - ₹1,476.74 Lacs) / ₹1,523.82 Lacs = 3.1%
• Operating Margin (EBIT Margin): Operating Income / Revenue = ₹679.9 Lacs / ₹1,523.82 Lacs = 44.6%
• Net Profit Margin: Net Income / Revenue = ₹395.15 Lacs / ₹1,523.82 Lacs = 26%
• Return on Equity (ROE): Net Income / Average Shareholders’ Equity = ₹395.15 Lacs / [(₹354.84 Lacs + ₹254.15 Lacs)/2] = 1.8%
• Return on Assets (ROA): Net Income / Average Total Assets = ₹395.15 Lacs / [(₹46,982.13 Lacs + ₹43,410.51 Lacs)/2] = 0.9%

Consolidated (Approximations):

• Gross Profit Margin: (Revenue - Cost of Revenue) / Revenue = (₹1,540.60 Lacs - ₹1,500.69 Lacs) / ₹1,540.60 Lacs = 3%
• Operating Margin (EBIT Margin): Operating Income / Revenue = ₹67.99 Lacs / ₹1,540.60 Lacs = 4%
• Net Profit Margin: Net Income / Revenue = ₹318.72 Lacs / ₹1,540.60 Lacs = 21%
• Return on Equity (ROE): Net Income / Average Shareholders’ Equity = ₹318.72 Lacs / [(₹357.24 Lacs + ₹264.19 Lacs)/2] = 1.4%
• Return on Assets (ROA): Net Income / Average Total Assets = ₹318.72 Lacs / [(₹48,172.63 Lacs + ₹47,249.33 Lacs)/2] = 0.7%

Important Notes:

• Cost of Revenue: The report doesn’t cleanly separate cost of revenue from operating expenses. This makes the gross profit and gross margin calculations approximations. The values used are likely encompassing more than just direct costs associated with revenue generation.
• Operating Expenses: As previously mentioned, the clear separation between Cost of Revenue and Operating Expenses is missing. The reported ’total expenses’ seems to combine both. This affects the precision of operating margin calculations.
• ROE and ROA: These calculations use average equity and assets. The report doesn’t provide average values, so these calculations are based on the average of the beginning and ending balance sheet values for the relevant items.
• Consolidated EBITDA: Consolidated EBITDA is not directly provided and was not calculated here. To determine the consolidated EBITDA, you would need to make adjustments to the Consolidated Statement of Profit and Loss.
• Rounding: Percentages are rounded for simplicity.

These are approximate profitability ratios. For exact figures, you must refer to the audited financial statements and accompanying notes, making necessary adjustments based on the reporting format used by the company. Always exercise caution when using these numbers for any financial analysis.

Liquidity Ratios #

Calculating liquidity ratios requires using specific balance sheet figures. The provided annual report presents some data in a way that makes precise calculations challenging. The values below are approximations, and a precise calculation would require a more detailed balance sheet breakdown. All values are based on the standalone financial statements unless indicated as “Consolidated.”

Standalone:

• Current Ratio: Current Assets / Current Liabilities = ₹28,719.29 Lacs / ₹11,118.41 Lacs = 2.58
• Quick Ratio (Acid-Test Ratio): (Current Assets - Inventories) / Current Liabilities = (₹28,719.29 Lacs - ₹12,386.38 Lacs) / ₹11,118.41 Lacs = 1.47
• Cash Ratio: (Cash and Cash Equivalents) / Current Liabilities = ₹1,070.43 Lacs / ₹11,118.41 Lacs = 0.10

Consolidated:

• Current Ratio: Current Assets / Current Liabilities = ₹29,316.04 Lacs / ₹12,002.01 Lacs = 2.44
• Quick Ratio (Acid-Test Ratio): (Current Assets - Inventories) / Current Liabilities = (₹29,316.04 Lacs - ₹12,952.38 Lacs) / ₹12,002.01 Lacs = 1.36
• Cash Ratio: (Cash and Cash Equivalents) / Current Liabilities = ₹1,071.17 Lacs / ₹12,002.01 Lacs = 0.09

Important Considerations:

• Inventory: The calculation of the quick ratio excludes inventories because they may not be easily converted to cash. The report provides a detailed breakdown of inventory, which is essential for accurate quick ratio calculation.
• Other Current Assets: The report groups “Other Current Assets” into a single line item. Some components might be highly liquid and should ideally be included in the quick ratio calculation, whereas others might not be.
• Precision: The calculations above are approximations. The exact figures would depend on a more detailed breakdown of current assets and liabilities as reported in the balance sheet.

These are approximate liquidity ratios. Consult the full audited financial statements for precise figures and a complete understanding of the company’s liquidity position. Remember to always use the most up-to-date information for your financial analysis.

Efficiency Ratios #

Calculating efficiency ratios requires using data from both the income statement and balance sheet. The provided annual report presents some data in a way that makes precise calculations challenging, particularly regarding the denominator for the asset turnover ratio. The calculations below are approximations. All figures are based on the standalone financial statements unless otherwise stated as “Consolidated”. Turnover ratios are expressed in times, rounded to two decimal places.

Standalone:

• Asset Turnover: Revenue / Average Total Assets = ₹1,523.82 Lacs / [(₹46,982.13 Lacs + ₹43,410.51 Lacs) / 2] = 0.03 times
• Inventory Turnover: Cost of Goods Sold / Average Inventory = ₹1,476.74 Lacs / [(₹12,386.38 Lacs + ₹15,097.78 Lacs) / 2] = 0.10 times
• Receivables Turnover: Revenue / Average Accounts Receivable = ₹1,523.82 Lacs / [(₹10,119.61 Lacs + ₹9,919.68 Lacs) / 2] = 0.15 times

Consolidated:

• Asset Turnover: Revenue / Average Total Assets = ₹1,540.60 Lacs / [(₹48,172.63 Lacs + ₹47,249.33 Lacs) / 2] = 0.03 times
• Inventory Turnover: Cost of Goods Sold / Average Inventory = ₹1,500.69 Lacs / [(₹12,952.38 Lacs + ₹16,082.39 Lacs) / 2] = 0.09 times
• Receivables Turnover: Revenue / Average Accounts Receivable = ₹1,540.60 Lacs / [(₹10,448.41 Lacs + ₹10,154.76 Lacs) / 2] = 0.15 times

Important Considerations:

• Asset Turnover: This calculation uses the average of beginning and ending total assets. A more precise calculation might use a weighted average of assets throughout the year. The denominator here is not easily determined directly from the reported financials and there could be potential alternative methods for calculating the denominator.
• Inventory Turnover: Cost of Goods Sold is not explicitly stated, but an approximation has been used.
• Average Values: The calculations use simple averages for inventory and accounts receivable. A weighted average would be more precise.
• Consolidated Figures: Consolidated values may not precisely reflect the standalone ratios due to the influence of subsidiary companies.

Limitations: The calculations are approximations due to the presentation format of the annual report. A deeper analysis of the company’s balance sheet and the related notes to the financial statements is required to obtain precise figures. Consult the audited financial statements for accurate figures and a complete picture of the company’s efficiency. Remember that these ratios should be compared to industry benchmarks and the company’s historical performance for a more meaningful interpretation.

Leverage Ratios #

Calculating leverage ratios requires using data from both the balance sheet and income statement. The provided annual report presents some data in a way that necessitates approximations in these calculations. All figures are based on the standalone financial statements unless otherwise stated as “Consolidated”. Percentages are rounded.

Standalone:

• Debt-to-Equity Ratio: Total Debt / Total Equity = (₹300.00 Lacs + ₹9,146.44 Lacs) / ₹35,484.23 Lacs = 0.28
• Debt-to-Assets Ratio: Total Debt / Total Assets = (₹300.00 Lacs + ₹9,146.44 Lacs) / ₹46,982.13 Lacs = 0.20
• Interest Coverage Ratio: Earnings Before Interest and Taxes (EBIT) / Interest Expense = ₹679.9 Lacs / ₹1,636.20 Lacs = 0.42

Consolidated:

• Debt-to-Equity Ratio: Total Debt / Total Equity = (₹300.00 Lacs + ₹9,759.32 Lacs) / ₹35,724.44 Lacs = 0.29
• Debt-to-Assets Ratio: Total Debt / Total Assets = (₹300.00 Lacs + ₹9,759.32 Lacs) / ₹48,172.63 Lacs = 0.21
• Interest Coverage Ratio: Earnings Before Interest and Taxes (EBIT) / Interest Expense = ₹67.99 Lacs / ₹1,718.38 Lacs = 0.40

Important Considerations:

• Total Debt: This includes both current and long-term debt. Current maturities of long-term debt are included as part of current liabilities.
• Average Values: The debt-to-equity and debt-to-assets ratios ideally use average equity and assets for a more precise calculation, but the report only provides beginning and ending balance sheet values. Calculations here use the average of beginning and ending balances.
• EBIT: Earnings Before Interest and Taxes (EBIT) is used to calculate the interest coverage ratio. The standalone EBIT figure is given directly; however, in the consolidated financials there is a notable discrepancy between Standalone and Consolidated EBIT, which may require further investigation.
• Precision: The report’s presentation makes the calculation of precise values of some line items difficult. The figures above should be seen as reasonable approximations.

These are approximate leverage ratios. Refer to the full audited financial statements, make necessary adjustments based on the reporting format, and compare these figures with industry benchmarks for a more meaningful interpretation of the company’s financial risk profile.

Market Analysis #

Market Metrics #

Calculating some of these market-based ratios requires information not explicitly provided in the annual report itself. We can determine some, but others will require assumptions or external data. All monetary values are in Indian Rupees (₹) in Crores (₹1 Crore = ₹10,000,000). Percentages are rounded.

From the Annual Report:

• Market Capitalization (as of March 31, 2024): ₹721.67 Crores (This is explicitly stated)
• Dividend Declared (for FY 2023-24): ₹6.51 Crores (This is explicitly stated)

Calculations Requiring Assumptions/External Data:

• Price-to-Earnings Ratio (P/E Ratio): This requires the company’s share price (not provided) and earnings per share (EPS). The report provides EPS (₹33.73 standalone; ₹27.21 consolidated), but you would need to obtain the market price per share from a financial website or data provider to calculate the P/E ratio. The formula is: Market Price per Share / Earnings Per Share.

• Price-to-Book Ratio (P/B Ratio): Similar to the P/E ratio, this requires the market price per share (not provided) and book value per share (also not directly provided, but can be calculated from the balance sheet). You would need to divide the market price per share by the book value per share to calculate P/B ratio.

• Dividend Yield: This requires the annual dividend per share and the market price per share. The annual dividend per share would be the dividend declared divided by the number of outstanding shares. Again, you need the market price per share from an external source. The formula is: (Annual Dividend per Share / Market Price per Share) * 100.

• Dividend Payout Ratio: This is the percentage of net income paid out as dividends. It can be calculated as: (Dividends Paid / Net Income) * 100. Using the values from the report:

  • Standalone: (₹651 Lacs / ₹3951.52 Lacs) * 100 = 16%
  • Consolidated: (₹651 Lacs / ₹3187.22 Lacs) * 100 = 20%

In summary:

The market capitalization is readily available. However, to calculate the P/E ratio, P/B ratio, and dividend yield, you need the current market price per share, which is not given in the annual report and must be obtained from a financial data provider. The dividend payout ratio can be calculated using figures from the report and is approximately 16% standalone and 20% consolidated.

Remember that market-based ratios are highly dynamic and will change as the share price fluctuates. Always use the most current market price and other relevant financial data to calculate these ratios.

Business Analysis #

Segment Analysis #

The annual report doesn’t provide a complete breakdown of all requested metrics for each business segment. Specifically, market share data is not included. Also, the report groups the aluminum, copper, and plastic segments together under “Other Non-ferrous Metals” for segment reporting purposes, making a precise segment-wise analysis challenging. The following analysis combines and approximates data wherever possible. All monetary values are in Indian Rupees (₹) in Lacs (₹1 Lac = ₹100,000), and growth rates and margins are approximate percentages.

I. Lead and Lead Alloys:

• Name: Lead and Lead Alloys
• Revenue (Standalone): ₹1,469.88 Lacs (₹147 Crores) (approximation, based on the breakdown in Note 26)
• Revenue (Consolidated): ₹1,483.21 Lacs (₹148 Crores) (approximation, based on the breakdown in Note 28)
• Growth Rate (Standalone): ~3.5% (approximation)
• Growth Rate (Consolidated): ~3% (approximation)
• Operating Margin: Not directly provided, but can be inferred as a substantial contributor to the overall profitability given its size and the report’s emphasis.
• Key Products: Pure Lead, Lead Calcium Alloys, Lead Tin Alloys, Lead Antimony Alloys, Lead Master Alloys, Speciality Alloys (over 100 types)
• Geographic Presence: India (Domestic and Exports to various countries including Japan, South Korea, Thailand, and Middle East)

II. Other Non-ferrous Metals (Aluminium, Copper, Plastics):

This segment combines the Aluminum, Copper, and Plastics divisions, making a detailed breakdown difficult.

• Name: Other Non-ferrous Metals (Aluminium, Copper, Plastics)
• Revenue (Standalone): ₹53.93 Lacs (₹5.4 Crores) (approximation, obtained by subtracting Lead revenue from total revenue)
• Revenue (Consolidated): ₹57.4 Lacs (₹5.7 Crores) (approximation, by subtracting Lead revenue from total revenue)
• Growth Rate (Standalone): High growth, given that Plastics division’s first year revenue was ₹21 Crores. The exact overall growth rate needs further calculation from the individual segment revenues.
• Growth Rate (Consolidated): High growth, as seen in the Aluminum division’s revenue increase from ₹2.84 Crores to ₹4.20 Crores. A more precise figure needs individual segment data.
• Operating Margin: Not directly stated; likely lower than lead due to the relatively smaller scale of Aluminum and Copper operations. The Plastics division contributes to improved consolidated operating margins.
• Key Products:
  • Aluminum: ADC series alloys (JIS standard), LM series alloys (BS standard), tailor-made alloys.
  • Copper: Copper Clove, Copper Cobra, other alloys.
  • Plastics: Polypropylene Copolymer Plastic (PPCP), Acrylonitrile Butadiene Styrene (ABS), High-Density Polyethylene (HDPE), Low-Density Polyethylene (LDPE), Polycarbonate (PC), Polypropylene Homopolymer Plastic (PPHP), Nylon 6, 66, and other industrial and engineering plastic granules.
• Geographic Presence: Primarily India (Aluminum and Plastics), with significant exports for Copper (80%).

Limitations:

• Market Share: The report does not provide market share data for any segment.
• Operating Margins: Precise operating margins for each segment are not available due to the consolidated nature of reporting “Other Non-ferrous Metals.”
• Revenue Breakdown: The revenue for “Other Non-ferrous Metals” is an approximation, calculated by deducting Lead and Lead alloy revenue from total revenue.
• Growth Rate: The growth rates are also approximations due to the lack of separate revenue figures for each individual segment within “Other Non-ferrous Metals.”

To obtain more precise data on these aspects of POCL’s business, you would need to analyze the more detailed financial statements. Analyzing individual segment performances requires the individual segment operating data. Additionally, external market research would be necessary to get industry-wide market share estimates.

Risk Management #

Risk Assessment #

The annual report doesn’t explicitly categorize risk factors or provide a detailed risk matrix (likelihood and impact severity). However, we can identify key risks and discuss potential impacts and mitigation strategies based on the information presented. Remember this analysis is based on interpretations of the provided text, and a formal risk assessment would require access to more comprehensive internal company data.

I. Key Risk Factors:

We can group the identified risk factors into several categories:

A. Market Risks:

• Raw Material Price Volatility: The prices of lead, copper, aluminum, and plastic scrap fluctuate significantly due to global supply-demand dynamics, geopolitical events, and economic conditions.

  • Impact Severity: High (affects cost of goods sold and profitability).
  • Likelihood: High (inherent to commodity markets).
  • Mitigation: Hedging strategies (details not fully disclosed), diversifying sourcing.
  • Trends: Ongoing volatility expected; increasing emphasis on sustainable sourcing and recycling.

• Demand Fluctuations: Demand for POCL’s products (particularly lead-acid batteries) is sensitive to economic cycles and the adoption of alternative battery technologies.

  • Impact Severity: High (affects sales volume and revenue).
  • Likelihood: Moderate (cyclical nature of the industry).
  • Mitigation: Diversification into new product verticals (e.g., plastics, aluminum), focus on value-added products, global market expansion.
  • Trends: Increasing demand for EVs and renewable energy presents opportunities, but competition from alternative battery technologies is a threat.

• Foreign Exchange Rate Fluctuations: POCL’s significant export business exposes it to currency risk.

  • Impact Severity: High (affects export revenues and import costs).
  • Likelihood: Moderate (global currency volatility).
  • Mitigation: Forward contracts (details not fully disclosed), natural hedging.
  • Trends: Global economic uncertainty and geopolitical events will likely continue impacting exchange rates.

B. Operational Risks:

• Supply Chain Disruptions: Reliance on global supply chains for raw materials makes POCL vulnerable to disruptions caused by geopolitical events, transportation bottlenecks, and supplier issues.

  • Impact Severity: High (affects production and timely delivery).
  • Likelihood: Moderate (global supply chain complexity).
  • Mitigation: Diversified sourcing, strong supplier relationships, strategic partnerships, and backup supply plans.
  • Trends: Supply chain resilience will continue to be a critical concern.

• Environmental Regulations: Increasingly stringent environmental regulations necessitate investments in pollution control technologies and compliance measures.

  • Impact Severity: High (affects operational costs and compliance).
  • Likelihood: High (growing emphasis on sustainability).
  • Mitigation: Continuous investment in ETPs and pollution control technologies, adherence to regulatory frameworks, and proactive compliance measures.
  • Trends: Regulations are likely to become more stringent over time.

C. Financial Risks:

• Interest Rate Risk: Changes in interest rates impact the cost of borrowing, affecting profitability.

  • Impact Severity: High (affects finance costs and overall profitability).
  • Likelihood: Moderate (fluctuating interest rates).
  • Mitigation: Appropriate mix of fixed and floating rate borrowings, hedging strategies (details not fully disclosed).
  • Trends: Interest rate volatility is expected to continue.

• Credit Risk: The risk that customers might not pay their dues on time.

  • Impact Severity: Moderate (affects cash flow and receivables).
  • Likelihood: Moderate (depends on customer creditworthiness and industry conditions).
  • Mitigation: Credit evaluation policies, security deposits, diversification of customer base, and effective debt collection mechanisms.
  • Trends: Credit risk management will be increasingly important in a volatile economic environment.

II. Mitigation Strategies (Overall):

The report mentions several mitigation strategies, many of which are broad. To assess their effectiveness, more detailed information would be needed. These strategies include:

• Diversification of products and markets.
• Hedging strategies (specifics are largely absent).
• Strong supplier and customer relationships.
• Continuous investment in technology and operational efficiency.
• Proactive compliance with environmental regulations.
• Robust risk management framework.

III. Limitations:

The provided annual report does not offer a comprehensive risk assessment, lacking details about likelihood, impact severity scoring, and the effectiveness of mitigation strategies. A complete and quantitative risk assessment would require access to the company’s internal risk management documents. The above analysis is interpretive and based only on the information explicitly provided within the annual report.

Strategic Overview #

Management Assessment #

POCL’s management outlines several key strategies, competitive advantages, market conditions, challenges, and opportunities in the annual report. Here’s a summary:

I. Key Strategies:

• Capacity Expansion: POCL is significantly expanding its lead production capacity, aiming to become a leading global player. This involves substantial capital investments in new and upgraded facilities.
• Product Diversification: The company is actively diversifying beyond its core lead business into aluminum, plastics, and plans for future expansion into lithium-ion battery recycling, rubber recycling, and e-waste recycling. This strategy aims to reduce reliance on a single product and mitigate market risks.
• Value-Added Products: POCL emphasizes the development and sales of value-added products within its existing portfolio, aiming to increase profitability and reduce reliance on commodity-based pricing. The target is to increase the value-added product revenue share from 56% to 70%.
• Global Market Expansion: The company is actively pursuing international market opportunities to broaden its customer base and reduce dependence on the domestic market.
• Sustainable and Responsible Manufacturing: POCL highlights its commitment to sustainable manufacturing practices, including pollution control measures, renewable energy adoption, and waste reduction. This strategy aims to enhance its reputation, meet increasingly stringent environmental regulations, and attract environmentally conscious customers.
• Technological Upgradation and Automation: Investment in advanced technologies and automation to enhance operational efficiency, reduce costs, and improve product quality.
• Strengthening Procurement: Developing a robust global procurement network to ensure reliable and diverse sources of raw materials, reducing supplier dependency.

II. Competitive Advantages:

• Technological Leadership: Being India’s first 3N7 LME-registered lead brand signifies its technological prowess and quality standards.
• Integrated Operations: POCL’s vertically integrated operations (from scrap recycling to finished products) provide cost advantages and greater control over the supply chain.
• Established Market Position: Long operational history (29 years) has built a strong reputation and customer base.
• Strategic Location: Manufacturing facilities strategically located near ports offer logistical advantages for both domestic and international trade.
• Experienced Management Team: A seasoned management team with extensive industry experience.
• Commitment to Sustainability: A strong focus on ESG factors differentiates POCL in a market increasingly prioritizing environmental responsibility.

III. Market Conditions:

• Growing Demand for Lead-Acid Batteries: The global and Indian automotive markets’ growth drives demand for lead-acid batteries and associated lead products.
• Rise of Alternative Battery Technologies: The increasing adoption of lithium-ion and other advanced battery technologies presents both opportunities (through recycling of these new batteries) and threats (potential decrease in demand for lead-acid batteries) for POCL.
• Stringent Environmental Regulations: Governments worldwide are implementing increasingly strict environmental regulations related to waste management and emissions, presenting challenges and opportunities for companies adopting environmentally-friendly practices.
• Circular Economy Initiatives: Growing emphasis on circular economy principles creates opportunities for companies like POCL specializing in recycling and sustainable manufacturing. Government regulations like EPR are supporting this trend.
• Global Economic Uncertainty: Geopolitical events and economic fluctuations create uncertainty in raw material prices, currency exchange rates, and overall market demand.

IV. Challenges:

• Raw Material Price Volatility: POCL faces significant challenges in managing the fluctuating prices of its raw materials.
• Competition: Intense competition in the lead and related recycling markets.
• Environmental Regulations Compliance: Meeting stringent environmental regulations requires continuous investment in technology and processes.
• Supply Chain Disruptions: Global supply chains’ vulnerability to disruptions affects production and timely delivery of goods.
• Interest Rate Volatility: Fluctuations in interest rates may affect the cost of financing.

V. Opportunities:

• Growth of the EV Market: The increasing adoption of electric vehicles creates opportunities for aluminum and potentially lithium-ion battery recycling in the future.
• Renewable Energy Sector Growth: Expansion of the renewable energy sector boosts demand for certain metals and plastics, offering growth potential.
• Government Initiatives: Government policies promoting a circular economy, including EPR and other initiatives, benefit recycling businesses like POCL.
• Technological Advancements in Recycling: Advancements in recycling technologies provide opportunities for improved efficiency and cost reductions.
• Expansion into New Recycling Verticals: POCL’s plans to expand into lithium-ion battery recycling, rubber recycling, and e-waste recycling represent significant growth opportunities.

In summary: POCL’s management is pursuing a growth strategy based on capacity expansion, product diversification, global market penetration, and a strong commitment to sustainability. The company recognizes significant opportunities in the evolving market landscape but also acknowledges substantial challenges related to market volatility, competition, and environmental regulations. Their success hinges on their ability to execute their strategies effectively and manage the identified risks.

ESG Ratings #

The provided annual report does not contain ESG ratings from any specific rating agencies. While the report details various ESG initiatives undertaken by POCL, it does not include numerical scores or rankings from organizations that specialize in ESG assessments. To find ESG ratings for POCL, you would need to consult independent ESG rating agencies such as MSCI, Sustainalytics, Refinitiv, etc., or utilize financial data platforms that compile this information.

ESG Initiatives #

POCL’s annual report details various Environmental, Social, and Governance (ESG) initiatives, although quantitative data on some metrics (like precise carbon footprint) is limited. Here’s a summary:

I. Environmental Initiatives:

• Shifting to LNG: Transitioning from furnace oil to Liquified Natural Gas (LNG) as fuel for operations to reduce greenhouse gas emissions. This demonstrates a commitment to lowering their carbon footprint, although the specific reduction achieved is not quantified.
• Air and Water Pollution Control: Investment in advanced air pollution control systems and effluent treatment plants (ETPs) to minimize environmental impact. Specific emission reduction data is not provided.
• Tree Plantation: Implementing extensive tree-planting programs across their factory sites to increase green cover and offset carbon emissions. The scale and carbon sequestration impact of this initiative are not quantified.
• Renewable Energy: The company aims to increase renewable energy use to over 50% and reduce overall energy consumption by 20% by 2030. This is a long-term goal, with no current progress data explicitly provided in the report.
• Waste Management: The report highlights a commitment to efficient waste management practices, but specifics regarding waste reduction targets or achievements are not provided.
• Sustainable Sourcing: Emphasizes responsible sourcing practices, but detailed information on sustainable procurement targets or current progress is missing.

II. Carbon Footprint:

The annual report does not provide a quantified measure of their carbon footprint. While various initiatives aimed at carbon reduction are mentioned, the report lacks specific data on current emissions or reduction targets.

III. Social Initiatives:

• Employee Well-being: Focus on employee safety through robust safety programs and initiatives. The report highlights a strong safety culture and various programs but lacks specific safety incident data or metrics.
• Diversity, Equity, and Inclusion (DEI): A commitment to DEI is mentioned, but no specific targets or progress data are provided.
• Employee Engagement: Various initiatives aim to enhance employee engagement, but measurable data is not presented.
• Corporate Social Responsibility (CSR): CSR activities focused on education and skill development within the communities where POCL operates. However, detailed information on the scale and impact of these initiatives is limited. The report states ₹95.99 Lacs was spent in 2023-24.

IV. Governance Practices:

• Board Composition: The board comprises executive and independent directors, aiming for diversity in expertise and viewpoints. The composition seems to align with good governance principles.
• Board Committees: The establishment of committees (Audit, Nomination & Remuneration, Stakeholder Relationship, and CSR) demonstrates a structured approach to corporate governance.
• Whistle-blower Policy: A formal whistle-blower policy is in place to encourage ethical conduct and transparency.
• Risk Management: The report states they have a risk management policy and framework, but specifics of the processes and assessments are limited.
• Compliance: The report mentions compliance with relevant laws and regulations.

V. Sustainability Goals:

POCL has set some ambitious long-term sustainability goals for 2030:

• Renewable Energy: Increase renewable energy usage to over 50%.
• Energy Consumption: Reduce energy consumption by 20%.
• Volume Growth: Achieve 15%+ volume growth.
• ROCE (Return on Capital Employed): Maintain a minimum 20% ROCE.
• EBITDA Margin: Achieve an EBITDA margin exceeding 6%.

Limitations:

The annual report provides qualitative descriptions of many ESG initiatives. However, it lacks the quantitative data (e.g., specific emission reduction targets, carbon footprint data, DEI metrics, CSR impact assessments) necessary for a comprehensive evaluation of POCL’s ESG performance. The report emphasizes the company’s commitment, but more robust reporting of key ESG metrics is needed for a thorough assessment.

Additional Information #

Operational Metrics #

The provided annual report does not specify the R&D expenditure for the fiscal year 2023-24. While the report mentions the importance of R&D for developing value-added products and exploring new verticals, it does not provide a numerical value for R&D spending.

The report states that the total number of employees on payroll as of March 31, 2024, is 438. Additionally, it mentions an estimated 352 indirect employees.

To find the R&D expenditure, you would need to consult additional financial documents or company releases beyond the provided annual report.

Key Events #

Several significant events occurred during POCL’s fiscal year 2023-24:

• Acquisition of Land in Mundra, Gujarat: POCL acquired 123 acres of industrial land in Mundra, Gujarat, for ₹41.40 Crores. This strategic acquisition is intended to expand the company’s presence in the western region of India and facilitate enhanced export capabilities due to its proximity to a port.

• Preferential Issue of Equity Shares and Warrants: POCL successfully raised ₹132.50 Crores through a preferential issue of equity shares and warrants. This capital infusion is intended to fund expansion projects and working capital needs.

• Commissioning of Aluminum Recycling Facility: POCL successfully established and commenced operations of an aluminum recycling/melting facility in Sriperumbudur, Tamil Nadu. This marked a significant step in the company’s diversification strategy.

• Capacity Expansion Plans: The company announced plans for significant expansion of its lead production capacity, increasing it from 132,000 MTPA to 204,000 MTPA in two phases. The first phase was expected to be commissioned in Q3 of 2024-25.

• Acquisition of Harsha Exito Engineering Pvt. Ltd.: POCL acquired Harsha Exito Engineering Pvt. Ltd., in Tamil Nadu, for future expansion. This acquisition likely supports the planned lead smelting capacity increase.

• Listing on National Stock Exchange (NSE): The company’s equity shares commenced trading on the NSE during the fiscal year.

• Signing of MoU with Tamil Nadu Government: The company signed a Memorandum of Understanding (MoU) with the Tamil Nadu government for establishing advanced recycling and manufacturing facilities in the state, including ventures into lithium-ion battery recycling, e-waste, and plastics. This indicates long-term strategic goals.

These events reflect POCL’s focused strategy on capacity expansion, geographical diversification, product diversification, and commitment to sustainable growth and expansion into new recycling verticals. The acquisitions, capital raising, and operational expansions highlight the company’s ambitious growth plans.

Audit Information #

Auditor’s Opinion:

The independent auditors, L. Mukundan & Associates, Chartered Accountants, issued an unqualified (unmodified) opinion on both the standalone and consolidated financial statements of Pondy Oxides and Chemicals Limited for the fiscal year ended March 31, 2024. This means the auditors found the financial statements to be presented fairly in accordance with Indian Accounting Standards (Ind AS) and other applicable accounting principles, and free from material misstatements. The auditors also issued an unqualified opinion on the adequacy and operating effectiveness of the company’s internal financial controls over financial reporting.

Key Accounting Policies:

The annual report details several key accounting policies employed by POCL. Key highlights include:

• Revenue Recognition: Revenue from the sale of goods is recognized when the risk and rewards of ownership transfer to the buyer, generally upon shipment. Revenue from services is recognized upon completion of the service.
• Property, Plant, and Equipment (PPE): PPE and capital work-in-progress are initially recorded at cost and subsequently depreciated using the written-down value method over their estimated useful lives. The report details the specific useful lives assigned to various asset categories.
• Intangible Assets: Intangible assets are recorded at cost less accumulated amortization and impairment losses. Goodwill is tested for impairment annually.
• Inventories: Inventories are valued at the lower of cost (using the weighted average method) and net realizable value.
• Financial Instruments: POCL applies the Ind AS 109 financial instrument standards, classifying financial assets and liabilities into various categories (amortized cost, fair value through other comprehensive income (FVOCI), fair value through profit or loss (FVTPL)) based on their characteristics and the company’s business model. The report explains the specific accounting treatment for each category.
• Foreign Currency Transactions: Transactions in foreign currencies are recorded at the exchange rate at the transaction date. Monetary items are translated at the year-end rate, while non-monetary items are translated using the rate at the date of the transaction or fair value measurement.
• Borrowing Costs: Borrowing costs directly attributable to the acquisition or construction of qualifying assets are capitalized; other borrowing costs are expensed.
• Government Grants: Government grants are recognized when there is reasonable assurance of receipt and compliance with conditions. Revenue grants are recognized systematically over the period they relate to, while grants related to assets are recognized over the asset’s useful life.
• Taxes: Current and deferred tax liabilities and assets are recognized using the liability method, reflecting applicable tax rates and laws.
• Retirement and Other Employee Benefits: The report explains the accounting treatment for short-term and long-term employee benefits, including defined contribution plans and defined benefit plans (using the projected unit credit method). The report also mentions the treatment of compensated absences.
• Leases: POCL applies the single recognition and measurement approach to leases as per Ind AS 16, recognizing right-of-use assets and lease liabilities. The report also mentions the treatment of short-term leases and low-value assets.
• Impairment of Non-Financial Assets: The report describes the process used to assess and account for impairment of non-financial assets.

The detailed accounting policies are crucial for understanding how POCL’s financial statements are prepared. A thorough review of Note 3 in the annual report is highly recommended for a comprehensive understanding of the key accounting principles applied.