The company has accupied the leased building for factory, the lease period, ranges from 2-7 years, lease terms included for workings is the non-cancellable period and expected lease term.
Company has excercised the option of short term leases and low value asset exemption.
Extension and termination options
Extension options has been included in a certain of leases. These are used to maximise operational flexibility in terms of managing the assets used in the Company's operations.
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 exercise a termination option. Extension options are only included in the lease term if the lease is reasonably certain to be extended.
For leases of factory building, the following are normally the most relevant:
• If there are significant penalties to terminate or not extend, the Company is typically reasonably certain to extend.
• If the leasehold improvements are expected to have a significant remaining value, the Company is typically reasonably certain to extend.
• 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. The assessment of reasonable certainty is only revised if
a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.
The Company has adopted Ind AS 116 ‘Leases' with the date of initial application being April 1,2019. Ind AS 116 replaces Ind AS 17 - Leases. The Company has applied Ind AS 116 using the modified retrospective approach with cumulative effect of initial application recognised in retained earnings at April 1,2019. The comparative information in the financial statements would not be restated and would be presented based on the requirements of the previous standard i.e. Ind AS 17.
In adopting Ind AS 116, the Company has applied the below practical expedients:
• The company has not reassessed whether a contract is, or contains, a lease as per the definitions of Ind AS 116 at the date of initial application.
• The company applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
• The company relied on its assessment of whether leases are onerous applying Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets, immediately before the date of initial application as an alternative to performing an impairment review as per Ind AS 36 Impairment of assets.
• The Company has treated the leases with remaining lease term of less than 12 months as “short term leases”.
• The Company has excluded the initial direct costs from measurement of the right-of-use asset at the” date of transition.
• The company used hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.
Effective 1st April 2019, the company has adopted Ind AS 116
“Leases” and applied the Standard to its leases retrospectively and
has recognised the effect of the cumulative adjustment (net of taxes) of Rs.3.25 Crores in the opening balance of retained earnings, on the date of initial application (1st April 2019). Accordingly, comparatives for the period prior has not been restated.
The adoption of the Standard has resulted in recognising “Right-of-use asset” of Rs. 20.83 crores and a corresponding “Lease liability” of Rs. 20.83 crores as at the date of initial application. The net impact on retained earnings on 1st April 2019 is Nil.
c Rights, Preferences and Restrictions attached to equity Shares
Equity Shares having a par value of '10/- each with voting rights. Each holder of Equity Shares is entitled to one vote per share.
In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive any of the remaining assets of the Company in proportion to the number of Equity Shares held by the shareholders, after distribution of all preferential amounts.
The above facilities in the form of Term Loans, Export Packing Credit, Cash Credit and Export Bills Discounting facility are secured by way of charge on the inventories of the Company in the form of Raw Materials, Stock in Process and Finished Goods, Receivables and Other Current Assets. The Loans are additionally Secured by the following collaterals :
Hypothecation charge of the entire plant & machinery
Equitable mortgage over leasing rights of land (2.306 acres) and building (168050 Sq.ft) at plot no.C-2, Phase - II,
Pledge of 1,41,68,540 shares belonging to the Promoter Directors Personal Guarantee of Promoter Directors & Managing Director
There were no pending obligations on interest and debt repayment to the lender, State Bank of India as on 31st March 2024
The Company had issued 2,51,04,500 1% Cumulative Redeemable Preference Shares of Rs.10/- each to State Bank of India redeemable in five equal instalments between FY22 to FY26 . The second Instalment due on March 31,2023 is redeemed on April 29, 2023. And the third instalment due on March 31,2024 is redeemed on March 26, 2024 out of proceeds from preferential allotment of equity shares made on March 31,2023 and March 20, 2024 respectively.
REVENUE FROM OPERATIONS (GROSS)
Revenue from contracts with customers are disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Company identifies geography, amongst others to indicate the factors as mentioned above.
The operations of the Company relate to only one segment viz., garment manufacturing. Thus, the information on the relationship between disaggregated revenue under Ind AS 115 and for reportable segment under Ind AS 108 is not required.
Transaction price allocated to the remaining performance obligations
The Company's contracts with customers are short term contracts with performance obligations that has an original expected duration of one year or less. Therefore, taking the practical expedient, the details on transaction price allocated to the remaining performance obligations are not disclosed.
There is no impact on the retained earnings as on the date of adoption of the standard. There is no effect on any financial statement line item due to application of this standard and there is no requirement to disclose the same.
Auditors' Remuneration includes ?4.50 lakhs (Previous Year ?4.50 lakhs) against Statutory Audit, ?1.00 lakhs (Previous Year ?1.00 lakhs) against Tax Audit. Secretarial Audit Fee ?1.15 lakhs (Previous year?1.15 lakhs).
An amount of ?0.20 lakhs (Previous Year ?0.30 lakhs) was paid to the Auditors towards certification, out-of-pocket expenses and for representation in taxation matters and Tax Audit and the same is classified under Consultancy Charges.
Provision for Variable Bonus of ?. 24 lakhs to Managing Director has been included Directors Remuneration, (Previous Year ?. 24 lakhs classified under Bonus).
(a) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.
There are no transfers between levels 1 and 2 during the year.
The company's policy is to recognise transfers in and transfers out of fair value hierarchy levels as at the end of the reporting period.
(b) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include the use of quoted market prices or dealer quotes for similar instruments The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.
33. Financial risk management
The company's activities expose it to market risk, liquidity risk and credit risk.
A. Credit risk
Company faces credit risk from cash and cash equivalents, deposits with banks and financial institutions and unsecured trade receivables. The company doesn't face any credit risk with other financial assets.
(i) Credit risk management
Credit risk on deposit is mitigated by depositing the funds in reputed private sector bank. For trade receivables, the primary source of credit risk is that these are unsecured.The Company sells the products to customers only when the collection of trade receivables is certain and whether there has been a significant increase in the credit risk on an on-going basis is monitored throughout each reporting period. As at the balance sheet date, based on the credit assessment the historical trend of low default is expected to continue. An impairment analysis is performed at each reporting date on an individual basis for major clients. Any recoverability of receivables is provided for based on the impairment assessment. Historical trends showed as at 31st March 2024 company had no significant credit.
B. Liquidity risk
Objective of liquidity risk management is to maintain sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Management monitors rolling forecasts of the company's liquidity position and cash and cash equivalents on the basis of expected cash flows.
(i) Maturities of financial liabilities
The tables below analyse the company's financial liabilities into relevant maturity groupings based on their contractual maturities for:
a) all non-derivative financial liabilities, and
b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
C.Market risk
(i) Foreign currency risk
The company activities exposes it to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD and EURO Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company's functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows. The company's exposure to foreign currency risk at the end of the reporting period expressed in INR, are as follows:
34. Capital management (a) Risk management
The company's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, The company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
35. Segment Information
(All amounts in 'Crores unless otherwise stated)
The company is primarily in the business of manufacturing and export of garments to reputed multinational brand. Chief Operating Decision Makers (CODM) evaluates the company's performance and allocate resources based on the analysis of various performance indicators of the company as single unit. Therefore there is only single reportable segment for the Company. Company is domiciled in India.
The Company has identified Geographical Segment as the secondary segment which consists of:
Revenue directly attributable to segments is reported based on items that are individually identifiable to that segment. The Company believes that it is not practical to allocate segment expenses, segment results, assets used, except trade receivables, in the Company's business or liabilities contracted since the resources / services/ assets are used interchangeably within the segments. All fixed assets are located in India. Accordingly, no secondary segmental information is disclosed.
36 The company has significant accumulated losses. In this connection, the company has implemented various initiatives to improve on the efficiencies and control the losses. In view of the various strategic initiatives that the Company is exploring, it is confident of being able to continue and operate the business on a “Going Concern” basis and accordingly the financial statements have been prepared on the same lines.
37 Some balances of Trade/Other receivables, Trade/Other Payables and Loans and Advances are subject to confirmation/reconciliation. Adjustments (if any) will be accounted for on confirmation/reconciliation of the same. In the opinion of the Board of Directors this will not have a material adverse impact on the Company's financial position and results of operations.
Based on the decisions of the appellate authorities for the earlier years and interpretations of other relevant provisions, the Company is of the opinion that the demands are likely to be deleted and consequently no provision has been made for such demands. The Management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations.
d In terms of the “Master Restructuring Agreement dated August 11,2015 (“MRA”) entered into between SBI and CFL, with an effective date of March 31,2011, SBI had extended concessional interest rate for the credit facilities sanctioned and has preferred a recompense claim against CFL vide the above stated agreement. The estimated contingent liability of the Recompense amount, as on 31st Mar'21, has been determined at Rs.56.19 Cr. This amount may be payable in future, based on profits and cash flows, in the manner to be determined between CFL and SBI. The exact modalities shall be detailed once the technical matters related to payment of agreed settlement amount reaches a finality between parties.
The Sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occuring at the end of the reporting period holding all other assumptions constant
The sensitivity analysis presented above may not be representative of the actual change in the Defined Benefit Obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated
Furthermore, in presenting the above sensitivity analysis, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the Defined Benefit Obligation as recognised in the balance sheet
#1 The Net Equity has increased due to additional equity allotment and Debt has reduced on Redemption of 1%CRPS. #2 Significant reduction in Working Capital Loan and repayment of 2 tranches of CRPS has impacted DSCR.
#3 The equity has gone up by 27% and reduction in revenue has impacted PAT.
#4 Regulated the supply chain process and inventory levels are maintained at optimum level.
#5 Increase in Debtors has impacted net capital turnover.
#6 Decreased revenue and Increase in Rate of Interest & Employee Cost has effected in Net Profit Ratio.
b The Title deeds of the immovable properties (other than properties where the Company is the lessee and the lease agreement with MEPZ - SEZ has expired on 31-12-2022 Approval has been received from The Development Commissioner and Chariperson, MEPZ - SEZ, Chennai - 600045 for renewal of the lease from 01/01/2023 and the lease agreement are executed and registered on 22/06/2023) are held in the name of the Company.
c The Company has not granted Loans or Advances in the nature of loan to any promoters, Directors, KMPs and the related parties (As per Companies Act, 2013), which are repayable on demand or period of repayments.
d In the opinion of the Management , Current Assets, Loans and Advances have a value of at least equal to the amounts shown in the Balance Sheet, if realized in the due course of the business. The provision for all liabilities is adequate and not in excess of the amount reasonably necessary.
e The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
f The Company does not have any transactions with companies struck off.
g The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,
h The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
i The Company has sanctioned facilities from banks on the basis of security of current assets. The periodic returns filed by the Company
with such banks are in agreement with the books of accounts of the Company except for quarter 1and quarter 2. The company has followed the instruction from bank and submitted the stock statement in value to the extent its eligible for Drawing power and however the differential quantities are declared separately under “Stock not Considered for DP” and disclose entire stocks in quantities in stock statement as per books of accounts.
j The Company has adhered to debt repayment and interest service obligations on time. “wilful defaulter” related disclosures required as per Additional Regulatory Information of Schedule III (revised) to the Companies Act, is not applicable.
k The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017.
l The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), 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
m 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,
n The Company does not have 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).
o The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.
50 The figures / percentages / ratios for the previous period have been reclassified / reworked / regrouped wherever necessary including for
amendments relating to Schedule III of the Companies Act, 2013 for better understanding and comparability.
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