(k) Provisions, contingent liabilities and contingent assets
i. General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
ii. Contingent liabilities
Contingent liabilities are disclosed for (i) possible obligations which will be confirmed only by future
events not wholly within the control of the Company or (ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements, but are disclosed where an inflow of economic benefits is probable.
iii. Onerous Contracts
Provision for onerous contracts i.e. contracts where the expected unavoidable cost of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be recognised to settle a present obligation as a result of an obligating event based on the reliable estimate of such an obligation.
(l) Employee benefits
i. Short-term employee benefits
All employee benefits falling due wholly within twelve months of rendering the services are classified as short-term employee benefits, which include benefits like salaries, wages, short-term compensated absences and performance incentives and are recognised as expenses in the period in which the employee renders the related service.
ii. Post-employment benefits Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in the statement of profit and loss in the periods during which the related services are rendered by employees.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan ('the asset ceiling'). In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in OCI. The Company determines the net interest expense/ (income) on the net defined benefit liability/ (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/ (asset), taking into account any changes in the net defined benefit liability/(asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in the statement of profit and loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service ('past service cost' or 'past service gain') or the gain or loss on curtailment is recognised immediately in the statement of profit and loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
iii. Other long-term employee benefits
All employee benefits (other than postemployment benefits and termination benefits) which do not fall due wholly within twelve months after the end of the period in which the employees render the related services are determined based on actuarial valuation or discounted present value method carried out at each balance sheet date. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary as at 31st March every year using projected unit credit method on the additional amount expected to be paid / availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-
accumulating compensated absences is recognised in the period in which the absences occur.
iv. Voluntary retirement scheme benefits
Voluntary retirement scheme benefits are recognised as an expense in the year they are incurred.
(m) Share-based payments
Employees of the Company receive remuneration in the form of share-based payments in consideration of the services rendered. Under the equity settled share based payment, the fair value on the grant date of the awards given to employees is recognised as 'employee benefit expenses' with a corresponding increase in equity over the vesting period. The fair value of the options at the grant date is calculated by an independent valuer basis Black Scholes model. At the end of each reporting period, apart from the non-market vesting conditions, the expense is reviewed and adjusted to reflect changes to the level of options expected to vest. The Company has availed exemption given under Ind AS 101 and has not applied the fair value to the equity instruments that were vested before the date of transition to Ind AS i.e. April 1, 2016.
(n) Cash and cash equivalents
For the purpose of presentation in the cash flow statement, cash and cash equivalents include cash on hand, in banks, demand deposit with bank and other short-term, highly liquid investments with original maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings under current liabilities as on Balance Sheet date.
(o) Earnings per share
Basic Earnings Per Share ('EPS') is computed by dividing the net profit attributable to the equity
shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares. Diluted earnings per share is computed by dividing the net profit by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the year, unless issued at a later date. In computing diluted earnings per share, only potential equity shares that are dilutive and that either reduces earnings per share or increases loss per share are included. The number of shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for the share splits.
(p) Borrowing costs
Borrowing costs consist of interest and other ancillary costs that the Company incurs in connection with the borrowing of funds. All the other borrowing costs are recognised in the statement of profit and loss within finance costs of the period in which they are incurred.
(q) Treasury Shares
The Company has created an Employee Welfare Trust - Agro Tech ESOP Trust ('ATET') for implementation of the schemes that are notified or may be notified from time to time by the Company under the plan, providing share based payment to its employees. ATET purchases shares of the Company out of funds borrowed from the Company. The Company treats ATET as its extension and shares held by ATET are treated as treasury shares. Own equity instruments (treasury shares) are recognised at cost and deducted from equity. Profit on sale of treasury shares by ATET is recognised in ATET reserve.
The Company's policy is to maintain a stable and strong capital structure with focus on total equity so as to maintain investors, creditors and market confidence and to sustain future development and growth of its business. In order to maintain the capital structure, the Company monitors the return on capital, as well as the level of dividends of equity share holders. The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to all its shareholders. For the purpose of Company's capital management, capital includes issued capital and all other equity reserves and debt includes long-term borrowings and short-term working capital demand loan.
a) The employee benefit schemes are as under:
i. Provident fund :
All employees of the Company receive benefits under the Provident Fund which is a defined benefit plan wherein the Company provides the guarantee of a specified return on contribution. The contribution is made both by the employee and the Company equal to 12% of the employees' salary. These contributions are made to the fund administered and managed by the Company's own Trust. (Refer Note 42).
ii. Superannuation fund:
The Company has a defined contribution scheme to provide pension to its eligible employees. The Company makes monthly contributions equal to a specified percentage of the covered employees' salary. These contributions are administered by Company's own Trust which has subscribed to "Group Superannuation Policy" of ICICI Prudential Life Insurance Company Limited. The Company's monthly contributions are charged to the Statement of Profit and Loss. (Refer Note 42).
iii. Compensated absences :
The accrual for unutilised leave is determined for the entire available leave balance standing to the credit of the employees at the year end. The value of such leave balances that are eligible for carry forward, is determined by an actuarial valuation as at the end of the year and is charged to the Statement of Profit and Loss.
iv. Gratuity :
In accordance with the 'The Payment of Gratuity Act, 1972' of India, the Company provides for Gratuity, a defined retirement benefit scheme (the Gratuity Plan), covering eligible employees. Liabilities with regard to such gratuity plan are determined by an actuarial valuation as at the end of the year. The gratuity plan is a funded plan administered by Company's own Trust which has subscribed to "Group Gratuity Scheme" of ICICI Prudential Life Insurance Company Limited.
Risk Management :
Investment risk - The probability or likelihood of occurrence of losses related to the expected return on any particular investment.
Interest rate risk - The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability.
Longevity risk - The present value of defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after employment. An increase in the life expectancy of the plan participants will increase the plan's liability.
Salary risk - The present value of the defined benefit plan is calculated with reference to the future salaries of participants under the plan. Increase in salary due to adverse inflationary pressures might lead to higher liabilities.
The Company's principal financial liabilities comprise borrowings, trade payables and other liabilities. The Company's principal financial assets include loans, investments, trade and other receivables, and cash and cash equivalents that are derived directly from its operations. The Company's activities expose it to a variety of financial risks viz. market risk, credit risk and liquidity risk. The Company's primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company's exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company's policy that no trading in derivatives for speculative purposes may be undertaken.
The Board of Directors review and agree policies for managing each of these risks, which are summarised below:
The fair value of financial instruments as referred to above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identified assets or liabilities [Level 1 measurements] and lowest priority to unobservable inputs [Level 3 measurements]
The following levels have been used for classification:
• Level 1: Quoted prices (unadjusted) for identical instruments in active market
• Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs
• Level 3: Inputs which are not based on observable market data.
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparty.
The fair value of trade receivables, trade payables and other current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short-term nature. Where such items are non-current in nature, the same has been classified as Level 3 and fair value determined using discounted cash flow basis. There has been no change in the valuation methodology for Level 3 inputs during the year. There were no transfers between Level 1 and Level 2 during the year.
Financial risk management
The Company has exposure to the following risks arising from financial instruments:
i. Credit Risk
ii. Liquidity Risk
iii. Market Risk
Risk Management framework:
The Company's financial risk management is an integral part of how to plan and execute its business strategies. The Company's risk management policy is set by the Risk Management Committee. The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk. The Company's primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance.
A summary of the risks have been given below:
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers and loans given. Credit risk arises from cash held with banks, as well as credit exposure to clients, including outstanding accounts receivables. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.
Trade and other receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are wholesale, retail or institutional customers, their industry, trading history with the Company and existence of previous financial difficulties. The default in collection as a percentage to total receivable is low.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or any other financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risk of damage to the Company's reputation.
The Company monitors the level of expected cash inflows on trade receivables and loans together with expected cash outflows on trade payables and other financial liabilities.
Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates and interest rates - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Since the Company has insignificant interest bearing borrowings, the exposure to risk of changes in market interest rates is minimal. The Company has not used any interest rate derivatives. Currency risk
The Company is exposed to currency risk to the extent that there is mismatch between the currencies in which sales, purchase are denominated and the respective functional currencies of Company. The functional currency
Note 48 - During the year ended March 31,2024 and March 31,2023 no material foreseeable loss was incurred for any long-term contract including derivative contracts.
Note 49 - The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment benefits has been enacted. However, the date on which the Code will come into effect has not been notified. The Management will assess the impact of the Code and will give appropriate impact in the financial statements in the period in which, the Code becomes effective.
Note 50 - Agro Tech Foods Limited (Company) informed the stock exchanges about the receipt of a copy of the Public announcement dated February 29, 2024 in relation to an open offer from Centrum Capital Limited on behalf of Zest Holding Investments Limited ("Acquirer"), made pursuant to and in compliance with the requirements of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and subsequent amendments thereto. According to the said Announcement, pursuant to the Share Subscription Agreement ("the Agreement") dated February 29, 2024 entered into between the Acquirer, CAG-Tech (Mauritius) Limited (Holding Company of Agro Tech Foods Limited) ("Promoter Company") and ConAgra Europe B.V. (the sole existing shareholder of Promoter Company), the Acquirer will obtain 100% of the shareholding and control of the Promoter Company subject to the receipt of the approval from Competition Commission of India (CCI) and other terms and conditions set out in the Agreement. Pursuant to the completion of the Underlying Transaction in accordance with the provisions of the Agreement:
(a) the Acquirer shall hold 100 % of the equity shares and control of the Promoter Company. The Promoter Company, in turn, will continue to hold 12,616,619 equity shares in the Company representing 51.77% of the Voting Share Capital of the Company, and will continue to be disclosed as part of the promoter group of the Company.
(b) transaction will result in a deemed direct acquisition (being an indirect acquisition meeting the thresholds as per the SEBI Regulations). "Further, the "Draft Letter of Offer" in relation to the proposed Open Offer to the Eligible
Public Shareholders of the Company to acquire 6,336,009 equity shares of Rs. 10/- each constituting 26 % of the voting share capital by the Acquirer was filed on March 13, 2024 with Securities and Exchange Board of India in terms of SEBI (SAST) Regulations, 2011.
As on the date of approval of these standalone financial statements by the Board, the aforesaid underlying transaction and the open offer are awaiting regulatory / statutory approvals.
Note 51 - As per the proviso to Rule 3(1) of Companies (Accounts) Rules, 2014, for the financial year commencing on or after the 1st day of April 2023, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
The Company used Oracle E-Business as its primary accounting software for recording all the accounting transactions viz., sales, purchases, production/costing, fixed assets, other expenses, cash and bank transactions, journal entries and all other general ledger accounting transactions for the year ended March 31, 2024. Oracle E-Business has a feature of recording audit trail (edit log) facility which log was enabled from July 25, 2023 onwards. This log was enabled from the aforesaid date for all relevant transactions recorded in this accounting software at the application/ transaction level, however, the edit logs were not enabled at database level throughout the year.
In respect of accounting software used by the Company i.e. 'Oracle CRM Seibel' used for processing certain customer related transactions (i.e. sale orders, credit notes/claims from distributors) the audit trail feature of such software was not enabled throughout the year.
Further, the accounting software 'Adrenaline' used for maintaining payroll masters did not have a feature of recording audit trail.
The Management has adequate general information technology controls including access controls, change management controls, and manual controls which are operating, to prevent inappropriate/unauthorized changes to the accounting softwares. The Management will work towards enabling edit logs in the aforesaid softwares in the near future.
# Net profit after tax Interest non cash operating expenses ## Net worth lease liabilities total debt deferred tax liability
Note 53 - The financial statements are approved for issue by the Audit Committee and Board of Directors at their meetings held on April 24, 2024.
For and on behalf of the Board of Directors
Sachin Gopal Lt.Gen.D.B. Singh
Managing Director & CEO Director
DIN 07439079 DIN 00239637
K P N Srinivas Jyoti Chawla
Chief Financial Officer Company Secretary
Place : Gurugram Date : April 24, 2024
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