xviii) Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a presentobligation (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.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
A present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is disclosed as a contingent liability. Contingent liabilities are also disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Claims against the Company where the possibility of any outflow of resources in settlement is remote, are not disclosed as contingent liabilities.
Contingent assets are not recognised in financial statements since this may result in the recognition of income that may never be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and is recognised. A contingent asset is disclosed, in financial statements, where an inflow of economic benefits is probable.
xix) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The management evaluates the Company’s performance and allocates resources based on analysis of various performance indicators by business segments.
xx) Leases
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (I) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the lease term and useful life of the underlying asset. The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
xxi) Operating cycle
Based on the nature of activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as twelve months for the purpose of classification of its assets and liabilities as current and non-current.
xxii) New standards and interpretations
Ministry of Corporate Affairs (“MCA”) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. There is no such notification which would have been applicable from April 01,2024.
Notes:
No trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person nor any trade or other receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.
Trade receivables are pledged against borrowings of the Company (Refer note 13A and 13B).
The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as per the provision matrix. The ageing of the receivables is as follows:
(b)Rights, preferences and restrictions attached to the equity shares:
The Company has only one class of equity shares having a par value of ^ 10 each per share. Each holder of equity shares is entitled to one vote per share. The dividend , if any proposed by the Board of Directors is subject to the approval of the shareholders, except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Movement in other equity is as follows:
Nature of reserves:
(a) Deemed investment in equity
Deemed investment in equity represents the gain on account of corporate guarantee given by Sagar Cements Limited (Holding Company).
(b) Securities premium
Amounts received on issue of shares in excess of the par value has been classified as securities premium. The utilisation of securities premium is governed by the Section 52 of the Companies Act, 2013.
(c) Capital redemption reserve
The Company had created Capital Redemption Reserve out of the profits for redemption of Preference Shares. This reserve may be utilized for the specified purpose in accordance with the provisions of the Act.
(d) Capital reserve
Capital reserve created with respect to cancellation of equity shares and written off of debt as per the resolution plan.
(e) Retained earnings
Retained earnings comprises of undistributed earnings after taxes.
(f) Equity component of financial instrument
Equity component of financial instrument was created for the unsecured loan from the Erstwhile Holding Company ("Mahabhadra Constructions Limited").
(g) Other items of other comprehensive income
Other items of other comprehensive income consist of re-measurement of net defined benefit liability.
28. Contingent liabilities, capital and other commitments
a) Contingent Liabilities:Claims / Debts against the Company upto the closing date which are addressed under the NCLT approved resolution plan are not included in contingent liabilities though many of such claims / debts may be pending for disposal at various judicial forums. As per clause 3.3.13 of the aforesaid resolution plan, these liabilities stands extinguished. Accordingly, the management has assessed that the possibility of outflow of resources embodying economic benefits with respect to such claims / debts is remote.
All direct and indirect tax liabilities relating to assessments of earlier year upto the closing date stand extinguished as per the NCLT approved resolution plan. Further, the implementation of the resolution plan does not have any effect over claims or receivables owed to the Company. Accordingly, the Company has assessed that any receivables due to the Company, evaluated based on merits of underlying litigations, from various governmental agencies continues to subsist.
The Company has no contingent liabilities as at March 31,2024 and as at March 31, 2023.
The material accounting policies, including the criteria for recognition, the basis for measurement and the basis on which income and expenses are recognized, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 (b)(xiv) to the financial statements.
A. Capital Management
The Company manages its capital to ensure that it will be able to continue as going concern while maximizing the return to stakeholders through the optimization of the debt and equity balances. The capital structure of the Company consists of net debt (borrowings as detailed in Note 13A & 13B offset by cash and bank balances) and total equity of the Company. The Company is not subject to any externally imposed capital requirements. The Company’s management reviews the capitalstructure of the Company on monthly basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital.
The Company’s corporate finance function monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (includes interest rate risk), credit risk and liquidity risk. The Company seeks to minimize the effects of these risks through continuous monitoring on day to day basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
The corporate finance function reports monthly to the Company’s management which monitors risks and policies implemented to mitigate risk exposures.
i) Market risk:
The Company’sactivities expose it primarily to the financial risk of changes in interest rates. The Company seeks to minimize the effect of this risk through continuous monitoring and take appropriate steps to mitigate the aforesaid risk.
Interest rate risk management:
The Company is exposed to interest rate risk because it borrows funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
Interest rate sensitivity analysis
The sensitivity analysis below have been determined based on the exposure to interest rates at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the
reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s loss for the year ended March 31, 2024 would increase/ decrease by t 338 (Profit for the year ended March 31,2023: decrease/ increase by t 262). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings.
Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit and loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies. There are outstanding derivative instruments at the end of the current financial year.
ii) Credit risk management:
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Company does not have significant credit risk exposure to any single counterparty, except for one customer against whom the concentration of credit risk did not exceed 15% of gross monetary assets. Concentration of credit risk to any counterparty did not exceed 5% of gross monetary assets.
D. Liquidity risk management:
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Also, the Company has unutilized credit limits with banks. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended March 31, 2024 and March 31, 2023. Cash flow from operating activities provides the funds to service the financial liabilities on a day to day basis.
31. Employee benefits:
The employee benefit schemes are as under:
(i) Defined contribution plan:
Provident Fund
The Company makes provident fund contributions which are defined contribution plans for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. These contributions are made to the Fund administered and managed by the Government of India. The Company’s monthly contributions are charged to the Statement of Profit and Loss in the period they are incurred. Total expense recognized during the year aggregated 68 (2022-23: 33).
Employee State Insurance
The Company makes employee state insurance contributions which are defined contribution plans for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. These contributions are made to the funds administered and managed by the Government of India. The Company’s monthly contributions are charged to the Statement of Profit and Loss in the period they are incurred. The total expense recognized during the year aggregated 2 (2022-23: 2).
(ii) Defined benefit plan:
Gratuity:
In accordance with the ‘Payment of Gratuity Act, 1972’ of India, the Company provides for gratuity, a defined retirement benefit plan (the ‘Gratuity Plan’) covering eligible employees. Liabilities with regard to such gratuity plan are determined by an independent actuarial valuation and are charged to the Statement of Profit and Loss in the period determined. The gratuity plan is administered by Life Insurance Corporation of India.
The following table sets out the funded status of the gratuity plan and the amounts recognized in the Company’s financial statements as per actuarial valuation as at March 31,2024 and March 31,2023:
34. Operating Lease
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Operating lease commitments
The Company’s lease asset classes primarily consist of leases for buildings. The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straightline method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Companymeasures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.
The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.
36. (i) National Company Law Tribunal (“NCLT”), Amaravati Bench vide order dated April 26, 2022 (“Order”) has initiated Corporate Insolvency Resolution Process (“CIRP”) against Company pursuant to an application u/s 7 of the Insolvency and Bankruptcy Code, 2016 (the “Code”) filed by Pridhvi Asset Reconstruction and Securitisation Company Limited, one of the financial creditors of the Company. Mr. Nirav Kirit Pujara having IP Registration Number IBBI/IPA-001/IP-P-01450/2018-2019/12285 has been appointed as Interim Resolution Professional (“IRP”) to manage the affairs of the Company, and as per the Code, it is required that the Company be managed as a going concern during the CIRR By virtue of the provisions of Code read with the Order, from the date of the Order i.e., April 26, 2022 (“Insolvency Commencement Date”), the management of the affairs of the Company vests in IRP. Also, the powers of the board of directors of the Company stands suspended and would be exercised by the IRP.
(ii) The IRP has not signed the financial statements and that no statement, fact, information (whether current or historical) or opinion contained herein should be construed as a representation or warranty, express or implied, of the IRP including, his authorized representatives and advisors.
(iii) The financial statement of the Company for the year ended March 31,2022 have just been taken on record by the IRP. For all such information and data, the IRP has assumed that such information and data are in the conformity with the Companies Act, and other applicable laws with respect to the preparation of the financial results and that they give true and fair view of the position of the Company as of the dates and period indicated therein. Accordingly, the IRP has not verified the genuineness or accuracy or the fairness of the financial statement and is not making any representations regarding accuracy, veracity or completeness of the data or information in the financial statements.
(iv) In accordance with Code, public announcement was made calling uponfinancial creditors and operational creditors for the Company to submit their claims to Interim Resolution Professional. Further in accordance with Code, IRP/RP has to receive, collate and admit claims submitted against Company.
All amounts are in < Lakhs unless otherwise stated
(v) The National Company Law Tribunal (“NCLT”), Amaravati Bench vide its order dated February 16, 2023 (“Order”) has since approved the resolution plan submitted by Sagar Cements Limited (SCL) for acquisition and revival of Andhra Cements Limited (ACL). Basis this SCL has completed the resolution process within the prescribed time and became the holding company of ACL by subscribing to 95% of the revised paid up capital of the company.
(vi) Post completion of the resolution process under the supervision of the monitoring committee (MC) which was constituted as per the mandate given in the NCLT order SCL got the control of ACL with effect from March 18, 2023, post dissolution of the MC and to maintain the Company as a going concern. Considering the above facts, the financial statements of the Company for the financial year 2022-23 have been prepared on a going concern basis.
(vii) The implementation of the Approved Resolution Plan commenced on February 17, 2023, the entire process got completed within the prescribed timeline of 30 days as mentioned in the approved Resolution Plan. The abstract of the implementation of the Resolution Plan is given below:
Pursuant to implementation of Resolution Plan Erstwhile promoters fully paid up 20,17,41,371 Equity shares have been canceled and public shareholdings have been reduced from 9,17,79,121 Equity shares to 46,08,607 Equity shares oft 10/- each i.e. reduced to 5% of the reconstituted paid-up Equity Share capital of the Company.
The Board of Directors of the company in its meeting held on March 23, 2023, approved allotment of 8,75,63,533 fully paid equity shares t 10/- each to Sagar Cements Limited with a premium oft 26.80 per share, aggregating to t 32,223, representing 95% of the equity share capital of the Company.
As per the approved resolution plan, all claims have been settled and remaining liability stands extinguished and accounted as exceptional item.
(viii)The Company has incurred losses oft 8,793 for the financial year ended March 31, 2023 before exceptional items and however due to implementation of resolution plan the gain has been recognized on account of reversal of liabilities after settlements, the accumulated losses were reduced to oft 36,198 as at March 31,2023.
(1) Debt = Long term secured loans Current maturities of long-term debt Loan term unsecured loans Cash credit facilities
(2) Net Worth = Equity share capital Other equity
(3) Excluding refinanced debt for all the loan funds during the period '4) Average inventory = (Opening Closing balance) / 2
(5) Average trade receivables = (Opening Closing balance)/ 2
(B) Average trade payables = (Opening Closing balance)/ 2
(n Capital Employed = Tangible net worth Total debt Deferred tax liability
Notes:
1. The Company was under shut down for the years ended March 31, 2021, March 31, 2022 and March 31,2023. It has restarted the commercial operations during the current financial year, but operations are yet to be fully ramped up. This has resulted in variations in ratios as reported above.
42. As per the requirements of Rule 3(1) of the Companies (Accounts) Rules 2014, the Company is required to use only such accounting software for maintaining its books of accounts that have 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 who made those changes within such accounting software.
In respect of the accounting software used by the Company, audit trail was not enabled at certain master tables at application level and database level to log any direct data changes. In respect of such application and database, the Company has established and maintained an adequate internal control framework over its financial reporting and based on its assessment, has concluded that the internal controls for the year ended March 31, 2024 were effective. The Company is in the process of system upgradation to meet the audit trail requirements for the relevant masters at application level and database.
43. The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.
44. Other statutory information
(i) The Company does not have any Benami property, nor any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company has not revalued its Property, plant & equipment (including right-of-use assets) and Intangible assets during the period.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company has not advanced or loaned or invested funds to any other person or entity, including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(vi) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
(vii) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(viii) The Company has not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
45. These financial statements were approved by the Company’s Board of Directors on May 14, 2024.
For and on behalf of the Board of Directors of Andhra Cements Limited
Dr. S Anand Reddy S Sreekanth Reddy
Managing Director Director
DIN:00123870 DIN: 00123889
G. Tirupati Rao KPrasad
Company Secretary Chief Financial Officer
M.No.F2818
Place: Hyderabad Date: May 14, 2024
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