15 Provisions and Contingent Liabilities
Provisions : Provisions are recognized when there is a present obligation as result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value unless the effect of time value of money is material. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Contingent Liabilities : Contingent liabilities are 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 or 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. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
16 Segment Reporting
The Company is engaged in providing Electronics Manufacturing Services (EMS) with capabilities in printed circuit board assembly, custom cable and wire harnesses, etc. Since
the Chief Operating Decision Maker (Board of Directors) review the operating results as a whole for purposes of making decisions about resources to be allocated and to assess its performance, the entire operations are to be classified as a single business segment, namely EMS.
17 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company's earnings per share is the net profit for the period after deducting equity dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
18 Share issue expense
The transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction.
19 Investment in subsidiaries
I nvestment in subsidiaries are measured at cost less accumulated impairment as per Ind AS 27.
20 Cash & Cash Equivalents
Cash and cash equivalents comprises cash on hand and at banks and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
21 Exceptional items
Exceptional items are those items that management considers, by virtue of their size or incidence, should be disclosed separately to ensure that the financial information allows an understanding of the underlying performance of the business in the year, so as to facilitate comparison with prior periods. Such items are material by nature or amount to the year's result and require separate disclosure in accordance with Ind AS
3 CRITICAL ACCOUNTING JUDGEMENTS, ASSUMPTIONS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The following are the critical judgements, assumptions concerning the future, and key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next Financial year.
3.1. Useful Lives of Property, Plant and Equipment
As described above, the charge in respect of periodic depreciation for the year is derived after determining an estimate of an asset's expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Company's assets are determined by the management at the time the asset is acquired and reviewed annually. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technical or commercial obsolescence arising from changes or improvements in production or from a change in market demand of the product or service output of the asset.
3.2. Employee Benefits
The cost of defined benefit plans are determined using actuarial valuation, which involves making assumptions about discount rates, expected rates of return on assets, future salary increases, and mortality rates. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.
3.3. Taxation
Significant assumptions and judgements are involved in determining the provision for tax based on tax enactments, relevant judicial pronouncements and tax expert opinions, including an estimation of the likely outcome of any open tax assessments / litigations. Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be available, based on estimates thereof. Significant assumptions are also involved in evaluating the recoverability of deferred tax assets recognised on unused tax losses.
3.4 Provisions and Contingencies
Critical judgements are involved in measurement of provisions and contingencies and estimation of the likelihood of occurrence thereof based on factors such as expert opinion, past experience etc.
3.5 Impairment of Trade Receivable -Expected Credit Loss
The impairment provisions for trade receivables are based on assumptions about risk of default. The Company uses judgement in making these assumptions and selecting the inputs for the impairment calculation, based on Company's past history at the end of each reporting period
3.6 Impairment of Investment in Subsidiaries
The Company carries out an assessment of impairment in respect of investments in subsidiaries where any indications of impairment exist as at the balance sheet date. The determination of recoverable amount for this purpose requires the use of critical assumptions and judgements.
4 RECENT ACCOUNTING PRONOUNCEMENTS
Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. As at March 31, 2024, there are no Ind AS Standards/ amendments that have been issued but are not yet effective.
f) Critical Judgements in determining the Lease Term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
For leases of buildings, the following factors are normally the most relevant:
(a) If there are significant penalties to terminate (or not extend), the Company is typically reasonably certain not terminate (or to extend).
(b) I f any lease hold improvements are expected to have a significant remaining value the Company is typically reasonably certain to extend (or not terminate).
(c) Otherwise, the Company considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset
The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise it). The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects the assessment, and that is within the control of the lessee. During the current financial year, there was no revision in the lease terms.
g) Extension and Termination Options
Extension and termination options are included in a number of property leases. These are used to maximise operational flexibility in terms of managing the assets used in the Company's operations. The majority of extension and termination options held are exercisable only by the Company and not with the respective lessor.
10.5 Equity shares movement during 5 years preceding the reporting period
(i) Shares allotted as fully paid-up pursuant to contract(s) without payment being received in cash:
During the year 2019-20, pursuant to an agreement entered with the shareholders of a related entity, the company issued 8,386 equity shares of ' 100 Each at a price of ' 12,700 Share (including premium) in-lieu of the shares held by the said shareholders in the related entity.
(ii) Sub-division of equity shares:
The Shareholders in their extra-ordinary general meeting dated 27.06.2022 had approved sub-division of each fully paid up equity share of nominal value of ' 100 (Rupees One Hundred Only), into fifty equity shares having a face value of '2/- (Rupees Two only) each. As a result of the same, the issued share capital has changed from 1,59,667 Equity Shares of '100/- each to 79,83,350 Equity Shares of '2/- each. Consequently, the Authorised Share Capital of the Company is changed to ' 220 millions divided into 8,50,00,000 Equity Shares of '2 each and 5,00,000 Preference Shares of '100/-each.
(iii) Issue of Bonus shares
As per recommendation of the Board of Directors in their meeting held on 24.06.2022 and approval of the shareholders dated 27.06.2022 the Company had issued 4,79,00,100 bonus equity shares of face value of ' 2/- each in ratio of 6:1 (i.e. 6 Bonus Shares for every 1 Equity Share), which were allotted to the shareholders on 27.06.2022. Consequently, the issued, subscribed and paid-up share capital had increased to ' 111.76 Millions comprising of 5,58,83,450 equity shares of face value of ' 2/- each.
10(a).2 Terms and rights attached to Mandatorily Convertible Preference Shares:
The company has allotted 3,50,000 Cumulative, Non participating, 10% Optionally Convertible Preference shares (OCPS) of ' 100 each vide a Share Subscription Agreement (“SSA”) dated 1st March, 2018, which was classified as a financial liability measured at amortised cost till 31st March, 2022. During the year ended 31st March, 2023, in view of the proposed public offering, the company had entered into an amendment agreement to the SSA which stipulates a mandatory conversion of the OCPS and accordingly, the same
Nature and Purpose of Other Reserves
(a) Securities Premium
Securities premium is used to record the premium on issue of securities. The reserve is utilised in accordance with the provisions of the Act. During the year ended 31st March 2024, the securities premium has been utilised against share issue expense (net of tax benefit) in connection with the IPO of the Company (Refer No. 10.1)
(b) Special Economic Zone Re-investment Allowance Reserve
The Special Economic Zone (SEZ) Reinvestment Reserve has been created out of profit of eligible SEZ unit as per provisions of section 10AA(l)(ii) of the Income-tax Act, 1961 for acquiring new plant and machinery. Utilisations out of the same as per the extant provisions of the Income Tax Act, 1961, are reclassified from this reserve to retained earnings in the year of utilisation.
(c ) ESOP Reserve
Employee stock option reserve relates to the share options granted by the Company to the Company's and subsidiary's employees under its stock option plan. (Refer No. 29)
(d) Retained Earnings
Retained Earnings represents Company's cumulative earnings since its formation less the dividends / Capitalisation, if any. These reserves are free reserves which can be utilised for any purpose as may be required. All adjustments arising on account of transition to Ind AS are recorded here.
(e) Share application money pending allotment
Share application money pending allotment represents amounts received towards issue of shares for which shares are pending to be allotted as at the balance sheet date.
Pursuant to the IPO (refer Note No. 38), the Company had opened the bid/offer on 23rd March,2023 to the Anchor investors and received ' 4016.28 Million on March 31, 2023. Out of this, the Company has allocated 73,39,449 towards fresh issue of equity shares and such shares have been issued at a price of ' 436/- per share on April 12, 2023. Out of the balance amount, ' 123.78 Million has been refunded subsequently and ' 692.50 Million relates to the proceeds received by the Company on behalf of selling shareholders. These amounts were carried under Note 15.B - Other financial liabilities as at March 31, 2023.
(i) Basic EPS amounts are calculated by dividing the profit/(loss) for the year attributable to equity holders of the company by the weighted average number of Equity shares outstanding during the year. Diluted EPS amounts are calculated by dividing the profit/(loss) attributable to equity holders of the company by the weighted average number of Equity shares outstanding during the year.
(ii) Dilutive component of ESOP outstanding as at 31st March, 2024 and 31st March, 2023 is computed after factoring the impact of sub-division, issue of bonus shares and ESOP. (Refer note 10)
(iii) Share transactions that have occurred during 2022-23:
(a) Issue of shares against mandatorily convertible preference shares (Refer note no. 10A.2)
(b) Issue of ordinary shares - The Company has issued 11,73,543 equity Shares at a face value of 2/- each for cash, at a premium of 424.06/- per share on private placement basis.
(c) Issue of ordinary shares - The Company has issued 7,98,339 Equity Shares at a face value of 2/- each for cash, at a premium of 373.78/- per share on private placement basis.
(iv) Share transactions that have occurred during 2023-24:
(a) Issue of ordinary shares - The Company has issued 73,39,449 Equity Shares at a face value of 2/- each for cash, at a premium of 434/- per share through Initial Public Offer (IPO).
(b) Issue of ordinary shares - The Company has issued 4,20,115 Equity Shares at a face value of 2/- each for cash, at a premium of 18/- per share upon exercise of Employee stock options by the eligible employees.
28.1 The Company is engaged in providing Electronics Manufacturing Services (EMS) with capabilities in printed circuit board assembly, custom cable and wire harnesses, etc. Since the Chief Operating Decision Maker (Board of Directors) review the operating results as a whole for purposes of making decisions about resources to be allocated and to assess its performance, the entire operations are to be classified as a single business segment, namely EMS. The geographical segments considered for disclosure are - India and Rest of the World. All the manufacturing facilities are located in India.
28.3 Information about major Customers
Revenue from one external customer having more than 10% each of the Company's total revenue amounting to 868.61 million (Revenue from two external customer having more than 10% each of the Company's total revenue amounting to 1205.13 million for March 31, 2023).
NOTE 29: SHARE BASED PAYMENTS
During the financial year 2022 - 23, in pursuant to resolutions adopted by the Board of Directors and Shareholders both dated July 7, 2022, the Company has instituted the ESOP Scheme, which is an equity settled share based payment scheme.. The ESOP Scheme has been instituted to grant stock options exercisable into Equity Shares to eligible employees of the Company. In terms of the ESOP Scheme, grants to eligible employees will be made by the Nomination and Remuneration Committee or the Board, based on the determination of a criteria described under ESOP Scheme.
The ESOP Scheme has been instituted in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
The Shareholders, through their resolution dated July 7, 2022, have approved a maximum of 30,00,000 options, exercisable into 30,00,000 Equity Shares under the ESOP Scheme. The vesting period under the ESOP Scheme shall be a minimum of one and a maximum of seven years, and the specific vesting schedule applicable to each employee will be as mentioned in the letter of grant issued to such employee. Employees covered by the plan are granted an option to purchase shares subject to certain vesting conditions. Each employee share option converts into one equity share of the Company on exercise of option.
Subsequently, the Board of the Company at its meeting held on July 19, 2022 have granted 17,79,750 options under the ESOP Scheme.
A. Defined Contribution Plans
The Company participates in a number of defined contribution plans on behalf of relevant personnel. Any expense recognised in relation to these schemes represents the value of contributions payable during the period by the Company at rates specified by the rules of those plans. The only amounts included in the balance sheet are those relating to the prior months contributions that were not due to be paid until after the end of the reporting period.
The major defined contribution plans operated by the Company are as below:
(a) Provident fund and pension
I n accordance with the Employee's Provident Fund and Miscellaneous Provisions Act, 1952, eligible employees of the Company are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees' salary.
The contributions, as specified under the law, are made to Employee Provident Fund Organisation.
B. Defined Benefit Plans
The defined benefit plans operated by the Company are as below:
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees, which is unfunded. The plan provides for a lump-sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company accounts for the liability for gratuity benefits payable in the future based on an actuarial valuation.
The defined benefit plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
NOTE 31: FINANCIAL INSTRUMENTS 31.1 Capital Management
For the purpose of the Company's capital management, capital includes issued capital and all other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. As at the year end, the Company has only one class of equity shares.
31.3 Financial Risk Management
The Company is exposed to Market risk, Credit risk and Liquidity risk.The Company 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.
The following disclosures summarize the Company's exposure to financial risks. Quantitative sensitivity analysis have been provided to reflect the impact of reasonably possible changes in market rates on the financial results, cash flows and financial position of the Company.
31.3.1 Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market conditions. Market risk mainly comprises of interest rate risk, currency risk. Financial instruments affected by market risk includes borrowings, investments, trade payables, trade receivables and current investments. The Company's activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and other price risk.
There has been no change to the Company's exposure to market risks or the manner in which these risks are being managed and measured.
(a) Interest rate risk
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. The group's exposure to changes in interest rates primarily relates to the companies outstanding floating rate debt and investments in fixed deposits. The group has investments in INR denominated fixed deposits and a portion of it's working capital debt is denominated in foreign currency. These credit facilities are subject to periodic interest rate resets. Based on the past experience the variability of interest investments and working capital loan are not expected to be material. Further there are only short term foreign currency debt in the form of packing credit which are subject to minimal changes in interest rate during it's term.
(b) Foreign Currency risk
The company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Significant portion of the companies purchases and sales are denominated in foreign currency and hence, a natural hedge exists as a result of which, major foreign exchange fluctuations in import payables gets Offset export receivables. Apart from the above, exchange rate exposures are also managed within approved policy parameters by constant monitoring.
31.3.2 Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The company's exposure of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management.
Trade receivables consist of a large number of customers. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 8. The company does not hold collateral as security. The Company has evaluated the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.
Credit risk arising from other balances with banks is limited and there is no collateral held against these because the counterparties are banks with high credit ratings assigned by the international credit rating agencies. Similarly, credit risk arising from investment in Mutual Funds are held without any collateral but credit risk is limited as the company deals with counterparties of repute and excellent track record.
31.3.3 Liquidity Risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the company's short-term, medium-term and long-term funding and liquidity management requirements. The company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
The following tables detail the company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay.
Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the company. This has been relied upon by the auditors. According to the records available with the Company certain amount have been identified as dues to suppliers registerd under Micro, Small and Medium Enterprises Development Act, 2006 ('MSMED Act'). The disclosure pursuant to the said MSMED Act are as follows:
The Company has completed the Initial Public Offering of 1,98,39,446 equity shares of face value of '2 each at an issue price of '436 per equity share, consisting of a fresh issue of 73,39,449 equity shares aggregating to '3,200 million and an offer for sale of 1,24,99,997 equity shares aggregating to '5,450 million by the Selling Share Holders. Consequently, the equity shares of the company were listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) w.e.f April 18, 2023.
The Company has received an amount of ' 2,995.70 Million (net of IPO expenses including GST thereon) from proceeds out of the fresh issue of equity shares. The utilisation of net IPO proceeds is summarised below:
(a) The company does not have any long term contracts for which there were any material foreseeable losses.
(b) There are no amounts required to be transferred to the Investor Education and Protection Fund by the Company as on the reporting date.
(c) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries).
(d) There are no funds which have been received by the company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Funding Party or provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries.
(e) The Company is not declared as a willful defaulter by any bank or financial institution or other lender or Government or Government authorities. Accordingly, no disclosures are made in this regard.
(f) The Company has not traded or invested in Crypto currency or Virtual Currency during the year.
(g) The Company does not have any such transaction which is not recorded in the books of account 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).
(h) The Company does not have any Benami property, where any proceeding has been initiated or pending against the company for holding any Benami property.
Explanation for Variance in ratios by more than 25%
1. (March 2024 vs March 2023)
(i) Current ratio comparatively increased due to repayment of short term borrowings.
(ii) Decrease in Debt - Equity ratio is due to repayment of borrowings through IPO funds
(iii) Decrease in Debt Service Coverage Ratio is due to prepayment of debt during the year.
(iv) Decrease in Inventory Turnover Ratio is due to increase in inventory during the year as per the business plan.
NOTE 42:
Pursuant to resolution passed by the Members in the Extraordinary General Meeting dated 06.07.2022 and as approved by Registrar of the Company, w.e.f. 29.07.2022, the Company has been converted from Private Limited Company into a Public Limited Company including adoption of new Memorandum of Association and new Articles of Association as applicable to Public Company in place of existing Memorandum of Association and Articles of Association of the Company.
NOTE: 43
Previous years figures have been regrouped / reclassified wherever necessary to conform to current year's classification / presentation.
As per our report of even date attached For and on behalf of the Board of Directors
For Varma & Varma
Chartered Accountants
Firm Registration Number : 004532S
Sd/- Sd/- Sd/-
P R Prasanna Varma Kunhamed Bicha R M Subramanian
Partner Chairman & Managing Director Chief Financial Officer
Membership No. 025854 DIN: 00819707
Sd/-
Place: Chennai Rajesh V
Date: May 16, 2024 Company Secretary
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