(k) Provisions and contingencies
Provisions: A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.
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. Contingent liabilities: Contingent liabilities are not recognised but are disclosed in notes to accounts.
(l) Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition) and highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand, in banks and demand deposits (with an original maturity of three months or less from the date of acquisition) with banks.
(m) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets, until such time the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(n) Use of estimates and judgement
Management develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. Accounting estimates typically involve use of judgements and assumptions based on the latest available reliable information In IND AS 8,’Accounting policies, changes to accounting estimate and errors’, The definition of a change in accounting estimates is replaced with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial state-ments that are subject to measurement uncertainty”. IND AS 8 makes a distinction between how an entity should present and disclose different types of accounting changes in its financial statements.
Changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively. A change in an accounting estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods. The effect of the change relating to the current period is recognised as income or expense in the current period. The effect, if any, on future periods is recognised as income or expense in those future periods.
(o) Disclosures for recent Amendment in Schedule III
On March 24, 2021, the Ministry of Corporate Affairs (MCA) through a notification, amended Schedule III of the Companies Act, 2013. The amendments revise Division I, II and III of Schedule III and are applicable from April 1, 2021. The Company has evaluated the effect of the amendments on its financial statements and the following are disclosed
a) There is no proceeding initiated against the Company for holding any Benami Properties under the Benami tranaction (Prohibition) Act 1988
b) The Company not dealing with any struckoff Companies
c) The Company not dealing with any Crypto Currencies
d) The Title deeds of all immovable properties shown as Fixed Assets are held in the name of the Company
e) The Company has not been sanctioned any Working Capital Limit in excess of five crores against the security of Current Assets
f) No transactions not recorded in the books of accounts have been surrendered as Income in any tax assessment during the year
g) The Company has not been declared as wilful defaulters by any Bank, Financial Institution or any other lenders
h) No funds have been advanced or loaned or invested(either from the borrowed funds or share premium or any other sources or kind of funds) by the company to any person or entities, including foreign entities (“intermediaries”) with the understanding whether recorded in writing or otherwise, the intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or behalf of the company(“ultimate beneficiaries”), or provide any guarantee, or security or the like, on behalf of the ultimate beneficiaries.
i) No funds have been received from any person or entities, including foreign entities(Funding party) with the understanding whether recorded in writing or otherwise, the company shall 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 provide any guarantee or security or the like on behalf of the ultimate beneficiaries
21 Segment information
The Managing Director of the company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, Operating Segments. The CODM evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by industry classes. Accordingly, segment information has been presented.
The Chief Operating Decision Maker (CODM) of the company examines the performance from the perspective of company as a whole viz. ‘Software business’ and hence there are no seperate reportable segments as per Ind AS 108.
Geographic information is based on business sources from that geographic region. Accordingly the geographical secondary segments are determined as “North America” and “Rest of the World”.
Income and direct expenses in relation to segments are categorized based on items that are individually identifiable to that segment, while the remainder of costs are apportioned on an appropriate basis. Certain expenses are not specifically allocable to individual segments as the underlying services are used interchangeably. The management therefore believes that it is not practicable to provide segment disclosures relating to such expenses and accordingly such expenses are separately disclosed as “unallocated” and directly charged against total income.
23 Contingent liabilitites and comittments A. Contingent liabilities
i) No provision has been made on a claim for non-payment of fixed deposit amounting to Rs.10.56 Lakhs by 6 complainants before the High Court, the company has disputed the claim and the case is pending.
ii) The Regional Provident Fund commissioner passed an order on 29.11.16 directing the company to enroll the Home based worker and trainees in EPF . The said order has not quantified the demand . The Company had appealed against the order passed by Regional Provident Fund Commissioner before the Employees Provident Fund Appellate Tribunal and obtained a stay against the order passed by PF Commissioner on 20.12.2016.
24 Employee benefit plans
(a) Defined Contribution Plan
The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs towards the benefits. The Company has recognised Rs.71.81 lakhs (for the year ended March 31, 2023: Rs.70.37 lakhs) as contribution to Provident Fund, and Rs.1.33 lakhs (for the year ended March 31, 2023: Rs.1.57 lakhs) as payment under Employee State Insurance Scheme in the Statement of Profit and Loss. These contributions have been made at the rates specified in the rules of the respective schemes and has been recognised in the Statement of Profit and Loss under the head Employee Benefits Expense.
(b) Defined Benefit Plans:
Gratuity
The Company has partly funded its gratuity obligations. The following table sets out the status of the defined benefit schemes and the amount recognised in the financial statements as per the Actuarial Valuation done by an Independent Actuary:
As at March 31,2024 & March 31,2023, 100% of the plan assets were invested in insurer managed funds.
The Company has established an income tax approved irrevocable trust fund to which it regularly contributes to finance liabilities of the plan. The fund’s investments are managed by certain insurance companies as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations.
The employee benefit obligations expose the Company to actuarial risks such as: longevity risk and salary risk.
Longevity Risk: The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of the participants during their employment. An increase in the life expectancy of the the participants will increase the obligation.
Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of the participants. As such, an increase in the salary of the the participants will increase the obligation.
Note 25 - Related party disclosures
List of related parties where control exists and also related parties with whom transactions have taken place and relationships
26.2 Categories of Financial Instruments
This section gives an overview of the significance of financial instruments for the Company and provides additional information on balance sheet items that contain financial instruments. The details of significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, and financial liability are disclosed in Note 2(xv) of Significant Accounting Policies.
A. Financial assets and liabilities
The accounting classification of each category of financial instruments, and their carrying amounts, are set out below:
The management has assessed that the fair values of cash and cash equivalents, bank balances, trade receivables, other financial assets, trade payables and other financial liabilitie recorded at amortised cost is considered to be a reasonable approximation of fair value.
The following methods and assumptions are used to estimate the fair values:
Fair values of the Company’s interest-bearing borrowings are determined by using Effective Interest Rate (EIR) method. The own non- performance risk as at March 31,2024 was assessed to be insignificant.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
B. Fair value hierarchy
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
26.3 - Financial risk management objective
The Company’s activities expose it to certain / reasonable financial risks. The Company’s primary focus is to foresee the unpredictability of such risks and seek to minimize potential adverse effects on its financial performance.
The Company has a risk management process and framework in place. This process is coordinated by the Board, which meets regularly to review risks as well as the progress against the planned actions. The Board seeks to identify, evaluate business risks and challenges across the Company through such framework. These risks include market risks, credit risk and liquidity risk.
The risk management process aims to:
- improve financial risk awareness and risk transparency
- identify, control and monitor key risks
- identify risk accumulations
- provide management with reliable information on the Company’s risk situation
- improve financial returns
This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements:
Market risk - Foreign exchange
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to US Dollar. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Company’s functional currency. Exposures to foreign currency balances are periodically reviewed to ensure that the results from fluctuating currency exchange rates are appropriately managed.
The Company does not have any derivatives financial instruments either for hedging or for speculation purpose.
Foreign currency sensitivity analysis
The following information details the Company’s sensitivity to a 5% increase and decrease in the Rupee against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. A positive number below indicates an increase in profit where the Rupee strengthens 5% against the relevant currency will increase the profit and equity by Rs.1.15 Lakhs (Previous year Rs. 0.73 lakhs). For a 5% weakening of the Rupee against the relevant currency, there would be an equal and opposite impact on profit and equity.
Market risk - Interest rate (i) Liabilities:
The Company’s policy is to minimise interest rate cash flow risk exposures on long-term financing. At March 31, 2024, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. Below is the overall exposure of the Company to interest rate risk:
Interest rate sensitivity analysis:
For non derivative instruments there is no change in the the floating rate borrowings during the year. Hence there is no impact in the Company’s profit for the year ended March 31,2024 (year ended March 31,2023 Nil).
(ii) Assets:The Company’s financial assets are carried at amortised cost and are at fixed rate only. They are, therefore, not subject to interest rate risk since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
Credit Risk
Credit risk is the risk that a customer or counterparty to a financial instrument will fail to perform or pay amounts due to the Company causing financial loss. It arises from cash and cash equivalents, deposits with banks, security deposits, loans given and principally from credit exposures to customers relating to outstanding receivables. The Company’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at reporting date.In respect of trade and other receivables, the Company is not exposed to any significant credit risk exposure to any single counterparty or any company of counterparties having similar characteristics. The Company has very limited history of customer default, and considers the credit quality of trade receivables, that are not past due or impaired, to be good. Therefore, the Company does not expect any material risk on account of non performance by any of the Company’s counterparties.The credit risk for cash and cash equivalents, bank deposits, security deposits and loans is considered negligible, since the counterparties are reputable organisations.
Liquidity risk
The Company requires funds both for short-term operational needs as well as for long-term expansion programmes. The Company remains committed to maintaining a healthy liquidity ratio, deleveraging and strengthening the balance sheet. The Company manages liquidity risk by maintaining adequate support of facilities and by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
The Company’s Finance department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management.
The Company’s financial liability is represented significantly by long term and short term borrowings from banks and trade payables. The maturity profile of the Company’s short term and long term borrowings and trade payables based on the remaining period from the date of balance sheet to the contractual maturity date is given in the table below. The figures reflect the contractual undiscounted cash obligation of the Company.
27 Leases
The Company has adopted Ind AS 116 ‘Leases’ with the date of initial application being April 1,2019. IndAS 116 replaces Ind AS 17 - Leases and related interpretation and guidance. The Company has applied Ind AS 116 using the modified retrospective approach (Modified Retrospective (ROU asset = Lease Liability and incremental borrowing rate)). As a result, the comparative information has not been restated. In adopting Ind AS 116, the Company has applied the below practical expedients:
The Company has applied a single discount rate to a portfolio of leases with reasonably similar characteristics
The Company has used hindsight, in determining the lease term if the contract contains options to extend or terminate the lease
The Company has treated the leases with lease term of less than 12 months as “short term leases”
The Company has not applied the requirements of Ind AS 116 for leases of low value assets.
28.5 Dividend
In respect of the current year, the directors propose that a dividend of Rs.1.00 per share shall be paid on equity shares-. This equity dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed equity dividend is payable to all shareholders whose names appear on the Register of Members as on the date of Annual General Meeting . The total estimated equity dividend to be paid is Rs.50.50 lakhs
29 The financial statements of CG-VAK Software and Exports Limited were approved by the Board of Directors and authorised for issue on 24.05.2024
For and on Behalf of the Board of Directors In terms of our report attached
G.Suresh P.S. Subramanian For M/s. SPP & Co
Managing Director Chief Financial Officer Chartered Accountants
DIN : 00600906 Firm Regn.No.011059S
K.Kathirvel Harcharan J S.Prabhu
Independent Director Company Secretary Partner
DIN : 09091676 Membership No.A33394 Membership No.213598
Place : Coimbatore Date : 24th May, 2024
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