The Company does not face a significant liquidity risk with regard to its lease liabilities, as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
The effective interest rate for lease liabilities is 10%, with maturity between 2024-2038.
*Represents Goodwill acquired on acquisition of Techno Tools, which is tested for impairment on an annual basis. The estimated value-in-use is based on future cash flows (discounted @ 14% post tax) for a forecast period of 5 years and terminal growth rate of 0.5%. An analysis of the sensitivity of the computation to a change in key parameters (operating margin, discount rates) are based on reasonably probable assumptions and we did not identify any probable scenario in which the recoverable amount of Goodwill would decrease below its carrying amount.
Note: Investments at fair value through OCI (fully paid) reflect investment in unquoted equity securities. These equity shares are designated as FVTOCI as they are not held for trading purpose and are not in similar line of business as the company. Thus, disclosing their fair value fluctuation in profit or loss will not reflect the purpose of holding.
During the year ended 31 March 2023, the Company had incurred share issue expenses in connection with proposed public offer of equity shares of which ?61.93 was accounted for various services received for Initial Public Offering (IPO) which was later adjusted with securities premium on issue of shares.
Expected Credit Loss (ECL):
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the company grants credit terms in the normal course of business. The average credit period is between 60-90 days. Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer's credit quality and defines credit limits for each customer. Limits and scoring attributed to customers are reviewed once a year.
As a practical expedient, the Company uses a provision matrix to determine impairment loss of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. Accordingly, the Company creates provision for past due receivables less than 270 days ranging between 1%-30% and 100% for the receivables due beyond 270 days. The ECL allowance (or reversal) during the year is recognised in the statement of profit and loss.
Note 1: No trade or other receivable are due from directors or other officers of the company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.
*Deposits held as margin money is towards non-fund based limits sanctioned by the bank for establishment of bank guarantee and letter of credits.
**Represents money received from issue of shares through Initial Public Offering, which were not required for immediate utilization and invested in fixed deposits payable on demand.
Note:
Changes in liabilities arising from financing activities and non-cash financing and investing activities:
i. On June 6, 2023, the Company has undertaken a pre-IPO placement by way of private placement of 4,075,471 equity shares aggregating to ? 1,080 million at an issue price of ? 265 per equity share.
ii. The Company has completed an Initial Public Offer ("IPO") by way of fresh issue of 22,364,653 equity shares of face value of ? 10 each of the Company at an issue price of ? 265 per equity share aggregating to ? 5,920 million. The equity shares of the Company were listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) on July 10, 2023.
iii. The Company has neither issued any shares with differential voting rights nor issued any sweat equity shares during the year ended March 31, 2024 and March 31, 2023.
(D) Rights, preferences and restrictions attached to equity shares:
The Company has only one class of equity shares having a par value of ?10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company in proportion to their shareholding.
(E) Equity shares issued as bonus during the five years preceding March 31, 2024:
Pursuant to resolution passed by the Directors of the Company on December 13, 2022 and approved by the extraordinary general meeting held on December 14, 2022, the Company had allotted 49,929,000 fully paid-up equity shares of face value of ? 10 each by way of bonus issue to its shareholders bonus shares in the ratio of 1:17.
(F) Employee Share based expenses
(i) Cyient Limited ("Ultimate Holding Company") of the Company instituted Associate stock option plan 2015 (ASOP 2015) in July 2015 and earmarked 1,200,000 equity shares of ? 5 each for issue to the employees of the Holding Company and its subsidiaries. Under ASOP 2015, options will be issued to employees at an exercise price, which shall not be less than the market price of the Ultimate Holding Company on the date of grant. These options vest over a period ranging from one to three years from the date of grant, starting with 10% at the end of first year, 15% at the end of one and half years, 20% after two years, 25% at the end of two and half years and 30% at the end of third year. Share based expenses incurred by Ultimate Holding Company are recharged to respective group companies. In this regard, the Company has accounted for share based expenses in the statement of profit and loss and a corresponding liability towards amount payable to Ultimate Holding Company.
The fair value of options were priced using Black Scholes pricing model. Grant date share price - ? 455 - ? 678 Dividend yield (%) - 1.7 - 2.9, Expected volatility (%) - 29.8 - 41.60, Risk-free interest (%) - 4.49 - 7.9, Expected term (in years) - 3 - 4.
(ii) Cyient Limited ("Ultimate Holding Company") of the Company instituted the ARSU's 2020 plan earmarking 1,050,000 shares of ? 5 each which provided for grant of RSUs to eligible associates of the Company and its subsidiaries. The Board of Directors recommended the establishment of the plan on January 16, 2020 and
the shareholders approved the recommendation of Board of Directors on March 5, 2020 through a postal ballot. The RSUs will vest over a period of three years from the date of grant. These options vest over a period ranging from one to three years from the date of grant, starting with 30% at the end of first year, 50 % after two years, 20% at the end of third year. Share based expenses incurred by Ultimate Holding Company are recharged to respective group companies. In this regard, the Company has accounted for share based expenses in the statement of profit and loss and a corresponding liability towards amount payable to Ultimate Holding Company.
The fair value of RSUs granted in the year was March 31, 2024 ? Nil, March 31, 2023 ? 726 to 745. The fair value of options were priced using Black Scholes pricing model. Grant date share price - ? 811 - ? 874 Dividend yield (%) - 2.6 - 2.9, Expected volatility (%) - 38.73 - 41.90, Risk-free interest (%) - 4.96 - 6.8, Expected term (in years) - 3.
(iii) Cyient Limited ("Ultimate Holding Company") of the Company has instituted the ASOP 2021 scheme and also incorporated 'Cyient Associate Stock Option Scheme 2021 Trust' (Trust), whereunder shares were purchased from the stock exchanges through the Trust. KP Corporate Solutions Limited, Corporate Trustee, has been appointed as trustee for this Trust. Shareholders of the Ultimate Holding Company have approved the Scheme and the formation of Trust through postal ballot on February 23, 2021.
During the year ended March 31, 2022, Trust purchased 1,079,000 shares. The options will vest over 3 years from the grant date and the Leadership Nomination and Remuneration Committee will determine the vesting schedule. Vesting in any particular year will not exceed 50% of the total grant. Share based expenses incurred by Ultimate Holding Company are recharged to respective group companies. In this regard, the Company has accounted for share based expenses in the statement of profit and loss and a corresponding liability towards amount payable to Ultimate Holding Company.
The fair value of options were priced using Black Scholes pricing model. Grant date share price - ? 806 - ? 983. Dividend yield (%) - 2.6 - 2.9, Expected volatility (%) - 36 - 41.80, Risk-free interest (%) - 5.1 - 6.3, Expected term (in years) - 3 - 4.
(iv) Cyient DLM Limited instituted the restricted stock unit plan 2023 plan earmarking 7,33,800 shares of ? 10 each which provided for grant of RSUs to eligible associates of the Company and its subsidiaries. The Board of Directors recommended the establishment of the plan on July 21, 2023 and the shareholders approved the recommendation of Board of Directors on September 9, 2023 through a postal ballot. The RSUs will vest over a period of three years from the date of grant.
The fair value of RSUs granted in the year was March 31, 2024 - ? 444, March 31, 2023 - Nil. The fair value of options were priced using Black Scholes pricing model. Grant date share price - ? 634, Dividend yield (%) - 0.5, Expected volatility (%) - 35.60 - 40.40, Risk-free interest (%) - 7, Expected term (in years) - 5.
The total charge for the year relating to employee share based payment plans was March 31, 2024 - ? 54.49, March 31, 2023 - ? 5.42
Nature and Purpose :
a) General reserve:
The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to profit or loss.
b) Securities premium:
Amounts received on issue of shares in excess of the par value has been classified as securities premium. The
reserve is utilised in accordance with the provisions of the Companies Act, 2013.
(c) Retained earnings
(i) Retained earnings comprises of prior years' undistributed earnings after taxes along with current year profit.
(ii) Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. These are presented within retained earnings.
(d) Share based payments reserve
The Share based payments reserve is used to record the value of equity-settled share based payment transactions with employees. The amounts recorded in this account are transferred to Equity upon exercise of stock options by employees.
(e) Equity Instruments through OCI
Represents the cumulative gains and losses arising on fair valuation of the equity instruments measured at fair value through OCI.
Details of the borrowings along with their terms and conditions
a. Term loan from related party
The Company has obtained term loan of ? 1,000.00 from Cyient Limited for capital expenditure purpose, which is availed in various tranches starting from February 2019 repayable in 16 quarterly instalments starting from the June 2023 for each tranche. During the previous year, the Company has renewed the term loan agreement with Cyient Limited. As per the renewal agreement, loan will be repaid in 16 quarterly instalments starting from June 2024 and accrued interest on term loan as at March 31, 2024 will be repaid proportionately along with the repayment of principal amount. Outstanding balance of the term loan as at March 31, 2024 was ? 995.63 (ROI -7.80% p.a), March 31, 2023 was ? 995.63 (ROI - 6.00% p.a). There is no default in the repayment of principal loan and interest amount.
b. Working capital loan from related party
The Company has availed working capital loan repayable on demand from Cyient Limited whose outstanding balance as at March 31, 2024 is ? 340.00 (ROI - 7.80% p.a.), March 31, 2023 is ? 540.00 (ROI - 6.00% p.a.). This loan is repayable on demand.
Note: The working capital loans from banks have been repaid out of the IPO proceeds during the year Security terms for working capital loans from banks:
i. First pari-passu charge on present and future current assets including inventory and trade receivables of the Company
ii. Second pari-passu charge on all existing and future movable fixed assets of the Company.
iii. Corporate guarantee from Cyient Limited.
iv. The quarterly returns or statements of current assets filed by the Company with banks are in agreement with the books of accounts.
The Company classifies the right to consideration in exchange for deliverables as trade receivable. A trade receivable is a right to consideration that is unconditional upon passage of time.
Contract Liabilities
Advance from customers represents the amounts received from customers, which are adjusted against the future supplies against each customer order upon delivery. Unearned revenues represents invoicing in excess of revenue.
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognised as at the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts that have original expected duration of one year or less and there were no contract exceeding a period of one year.
i. Expenditure for Corporate Social Responsibility:
The Company contributes towards Corporate Social Responsibility (CSR) activities through Cyient Foundation and Cyient Urban Micro Skill Centre Foundation. The Company has formed CSR committee as per Section 135 of the Companies Act, 2013 to formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified by law. The areas for CSR activities are promoting education, adoption of schools, facilitating skill development, medical and other social projects. Expenses incurred on CSR activities through Cyient Foundation and contributions towards other charitable institutions are charged to the statement of profit and loss under 'Other Expenses': April 2023 to March 2024 - ? 7.28, April 2022 to March 2023 - ? 4.47
The Company has assessed that it is only possible, but not probable, that outflow of economic resources will be required in respect of these matters.
29. Employee Benefits
The employee benefit schemes are as under:
1 Defined contribution plans i. 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 recognised during the year ended as follows:
i. Year ended March 2024 : ? 28.64
ii. Year ended March 2023 : ? 19.96
2 Defined Benefit Plans i. 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 the Company's own trust which has subscribed to the "Group Gratuity Scheme" of Life Insurance Corporation of India.
The present value of the defined benefit obligation (DBO), and the related current service cost and past service cost, were measured using the projected unit credit method.
The average rate of increase in compensation levels is determined by the Company, considering factors such as, the Company's past compensation revision trends and management's estimate of future salary increases.
Composition of plan assets
Plan assets comprise of 100% insurer managed funds. Fund is managed by Life Insurance Corporation of India as per Insurance Regulatory and Development Authority of India (IRDA) guidelines, category wise composition of the plan assets is not available.
Sensitivity Analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.
The average duration of the defined benefit plan obligation at the end of the reporting period is 9.38 years (March 31, 2023: 9.48 years).
The accrual for unutilised leave is determined for the entire available leave balance standing to the credit of the employees at year-end as per Company's policy. The value of such leave balance eligible for carry forward, is determined by an independent actuarial valuation and charged to Statement of Profit and Loss in the period determined.
The average rate of increase in compensation levels is determined by the Company, considering factors such as, the Company's past compensation revision trends and management's estimate of future salary increases.
32. Financial Instruments 32.1 Capital management
The Company manages its capital to ensure that it maximises the return to stakeholders through the optimisation of the capital structure. The Company monitors the return on capital. In order to optimise the Company's position with regards to its borrowings, interest income and interest expense, treasury team performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.
* Includes current, non-current and current maturities of non-current borrowings. (refer note 14)
** Total equity includes issued equity capital, securities premium and all other equity reserves attributable to the equity holders of the Company. (refer note 12 and 13)
*** For the year ended March 31, 2024, the cash and bank balances does not include money received from issue of shares through Initial Public Offering of ? 4,218.35
There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period. No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2024 & March 31, 2023.
The management assessed that fair value of cash and cash equivalents and other bank balances, trade receivables, other financial assets, Borrowings, trade payables, and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments, and hence these are carried at amortised cost. Carrying value of unquoted instruments represents fair value which is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
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.
Investments in other equity instruments (unquoted) are measured at fair value through initial designation in accordance with Ind-AS 109.
32.1.3 Fair value hierarchy Valuation technique and key inputs
Level 1 - Quoted prices (unadjusted) in an 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 assets or liabilities that are not based on observable market data (unobservable inputs)
The fair values of the unquoted equity instruments have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, and probabilities of the various estimates within the range used in management's estimate of fair value for these unquoted equity investments.
There have been no transfers among Level 1, Level 2 and Level 3 during the year.
32.2 Financial risk management
Financial risk factors
The Company's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company's primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk and interest rate risk. The Company's exposure to credit risk is influenced mainly by the individual characteristic of each customer. The liquidity risk is measured by the Company's inability to meet its financial obligations as they become due.
Foreign exchange risk
The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services and purchases from overseas suppliers in various foreign currencies. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company's operations are adversely affected as the rupee appreciates/ depreciates against these currencies. The Company monitors and manages its financial risks by analysing its foreign exchange exposures.
Sensitivity analysis:
Every 5% increase / decrease of the respective foreign currencies compared to functional currency of the Company would impact profit before tax by ? 18.17 for the year ended March 31, 2024 and ? 18.82 for the year ended March 31, 2023
Interest Risk
There is no material interest risk relating to the Company's financial liabilities which are detailed in note 14.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of expected losses in respect of trade receivables.
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.
Liquidity risk
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, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company's reputation. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low.
The Company had unutilized credit limits from banks as at March 31, 2024 of ? 2,860.85 (? 579 - as at March 31, 2023)
The Company had working capital of ? 7,864.87 (? 948.23 - as at March 31, 2023) and cash and bank balance of ? 5,365.87 ( ? 1,676.01 - as at March 31, 2023)
The table below provides details regarding undiscounted contractual maturities of significant financial liabilities (excluding borrowings and lease liabilities) as at March 31, 2024:
The Company's obligation towards payment of borrowings has been included in note 14.
The Company's obligation towards payment of lease liabilities has been included in note 3B.
33. Segment Information
The Company's operations fall within a single operating segment "Electronic Manufacturing Solutions" which is considered as the primary reportable business segment.
The reporting of geographical segments is based on the location of customers i.e., Domestic (Within India) and Overseas (Outside India).
36. Other Statutory Information
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the company for holding any Benami property
(ii) The Company does not have any transactions with companies struck off.
(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 been declared wilful defaulter by any bank or financial institution or government or any government authority.
(vi) 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.
(vii) The Company has not received any fund 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, whether, 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, security or the like on behalf of the Ultimate Beneficiaries other than Issue proceeds raised through Right's Issue aggregating to ?888 Mn from Cyient Limited, Holding Company for acquiring Investment in STUAM Technologies Limited (Formerly known as Innovation Communications Systems Limited) (refer note 6) during the year ended March 2023.
(viii) 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.
37. The code of Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment received Presidential assent in September 2020 and its effective date is yet to be notified. The Company will assess and record the impact of the Code, once it is effective.
38. The Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software except in respect of accounting software, audit trail feature is not enabled for direct changes to data when using certain access rights. Further, audit trail feature has not been tampered with in respect of other accounting software.
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