29(viii). Financial instruments
The details of significant accounting policies, including crieteria for recognition, the basis of measurement and the basis on which income and expenditure are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1.
A Calculation of fair values
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair values of financial instruments:
i. The fair value of the long-term borrowings carrying floating-rate of interest is not impacted due to interest rate changes and will not be significantly different from their carrying amounts as there is no significant change in the under-lying credit risk of the Company (since the date of inception of the loans).
ii. Cash and cash equivalents, trade receivables, investments in term deposits, other financial assets, trade payables, and other financial liabilities have fair values that approximate to their carrying amounts due to their short-term nature.
c. Fair value hierarchy
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
The categories used are as follows:
Level 1: It includes financial instruments measured using quoted prices and the mutual funds are measured using the closing Net Asset Value (NAV).
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize 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: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
29(x). Earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit 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 attributable to equity holders of the Company by the weighted average number of Equity shares outstanding during the year.
29(xii). FINANCIAL RISK MANAGEMENT
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.
The Company has exposure to the following risks arising from financial instruments:
a. Credit risk;
b. Liquidity risk;
c. Market risk; and
d. Interest rate risk
(A) Credit risk
Credit risk arises from the possibility that the value of receivables or other financial assets
of the Company may be impaired because counterparties cannot meet their payment or other performance obligations.
To manage credit risks from trade receivables other than Related Party, the credit managers from Order to Cash department of the Company regularly analyse customer’s receivables, overdue and payment behaviors. Some of these receivables are collateralized and the same is used according to conditions. These could include advance payments, security deposits, post-dated cheques etc. Credit limits for this trade receivables are evaluated and set in line with Company’s internal guidelines. There is no significant concentration of default risk.
Credit risks from financial transactions are managed independently by Finance department. For banks and financial institution s, the Company has policies and operating guidelines in place to ensure that financial instrument transactions are only entered into with high quality banks and financial institutions. The Company had no other financial instrument that represents a significant concentration of credit risk.
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding looking information such as:
i) Actual or expected significant adverse changes in business;
ii) Actual or expected significant changes in the operating results of the counterparty;
iii) Financial or economic conditions that are expected to cause a significant change to the counterparty’s ability to meet its obligations;
iv) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.
Financial assets are written off when there is no reasonable expectation of recovery. Where loans or receivables have been written off, the Company continues engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in statement of profit & loss.
Credit risk is managed at Company level.
For other financial assets, the Company assesses and manages credit risk based on internal control and credit management system. The finance function consists of a separate team who assess and maintain an internal credit management system. Internal credit control and management is performed on a Company basis for each class of financial instruments with different characteristics.
The Company considers whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. It considers available reasonable and supportive forward-looking information.
Macroeconomic information (such as regulatory changes, market interest rate or growth rates) are also considered as part of the internal credit management system.
A default on a financial asset is when the counterparty fails to make payments as per contract. This definition of default is determined by considering the business environment in which entity operates and other macro-economic factors.
The Company measures the expected credit loss of trade receivables from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, no additional provision has been considered necessary in respect of trade receivables more than 90 days for the March 31, 2024, since the management has taken suitable measures to recover the said dues and is hopeful of recovery in due course of time.
The Company maintains exposure in cash and cash equivalents, deposits with banks, investments, and other financial assets. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Management of the Company. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. The Company believes that the current value of trade receivables reflects the fair value/recoverable values.
(B) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Due to the dynamic nature of underlying businesses, the Company maintains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecast of Company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. In addition, the Company’s liquidity management policy involve s projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
All non-derivative financial liabilities, and 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
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimizing the return.
The Company is exposed to market risk primarily related to foreign exchange rate risk (currency risk), interest rate risk and market value of its investments. Thus the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.
(i) Foreign Currency Risk
Foreign currency opportunities and risks for the Company result from changes in exchange rates and the related changes in the value of financial instruments (including receivables and payables) in the functional currency (INR). The Company is exposed to foreign exchange risk arising from foreign currency transactions primarily with respect to US Dollar(USD).
The USD exchange rate has changed substantially in recent periods and may continue to fluctuate substantially in the future. The Company has put in place a Financial Risk Management Policy to Identify the most effective and efficient ways of managing the currency risks.
Sensitivity analysis
The following table details the Company’s sensitivity to a25 basis points increase and decrease in the Rupee against the relevant foreign currencies is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. This is mainly attributable to the net exposure outstanding on receivables or payables in the Company at the end of the reporting period. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 0.25% change in foreign currency rate. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases, hi cases where the related foreign exchange fluctuation is capitalised to fixed assets or recognised directly in reserves, the impact, indicated below may affect the Company's income statement over the remaining life of the related fixed assets or the remaining tenure of the borrowing respectively.
(D) Cash flow and fair value interest rate risk
- Interest rate risk management:
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 rates. The Company's exposure to the risk of changes in market rates relates primarily to the Company's long-term debt obligations with floating interest rates.
The Company’s approach to managing interest rate risk is to have a judicious mix of borrowed funds with fixed and floating interest rate obligation. Moreover, the short-term borrowings of the Company do not have a significant fair value or cash flow interest rate risk due to their short tenure.
The Company is also exposed to interest rate risk on its financial assets that includes fixed deposits, since the same are generally for short duration, the Company believes it has manageable risk and achieving satisfactory returns. The Company also has long -term fixed interest bearing assets. However, the Company has in place an effective system to manage risk and maximize return
- Interest rate risk exposure:
The exposure of the Company's borrowing to interest rate changes at the end of the reporting period are as follows:
- Interest rate sensitivity Interest rate sensitivity
A reasonably possible change of 25 basis points in interest rates at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. In cases where the related interest rate risk is capitalized to fixed assets, the impact indicated below may affect the Company's income statement over the remaining life of the related fixed assets.
(iii) Price Risk
The Company’s exposure to price risk arises from investment in mutual funds and classified in the balance sheet as fair value through profit and loss Mutual fund investments are susceptible to market price risk, mainly arising from changes in the interest rates or market yields which may impact the return and value of such investments. However, due to very short tenor of the underlying portfolio in the liquid schemes, these do not pose any significant price risk
29(xiii). CAPITAL MANAGEMENT (a) Risk management
The Company's objectives when managing capital are to:
1. 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
2. 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, reduce debt or sell assets.
29(xvi). SEGMENT INFORMATION FOR THE YEAR ENDED 31.03.2024
The Managing Director & CEO, and Executive Director & CFO are identified as Chief Operating Decision Maker of the Company. They are responsible for allocating resources and assessing the performance of the operating segments. Accordingly, they have determined “Auto Tyre/Tube” as its operating Segment.
Thus the segment revenue, interest revenue, interest expense, depreciation and amortization, segment assets and segment liabilities are all as reflected in the Financial Statement as at and for the year ended March 31, 2024.
29(xvii). In the opinion of Board of Directors and to the best of their knowledge and belief, the value on realization of Loans, advances and current assets in the ordinary course of business will not be less than the amount at which they are stated in the balance sheet
29(xviii). Balances of sundry creditor, sundry debtors, loans & advances and security deposit are subject to confirmation. Assets have been classified as current when it satisfies the following criteria:
It is expected to be settled in the company’s normal operating cycle.
It is held primarily for the purpose of being traded
It is expected to be realized within 12 months after the reporting date; or
It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date Current assets include current portion of non-current financial assets
Further, A liability is classified as current when it satisfies the following criteria:
It is expected to be settled in the company’s normal operating cycle.
It is held primarily for the purpose of being traded
It is due to be settled within 12 months after the reporting date; or
The company does not have an unconditional right to defer the settlement of liability for more than 12 months after the reporting date
Current liabilities include current portion of non-current financial liabilities
29(xix) Notes to reconciliations:
A Remeasurement of defined benefit liabilities
Under previous GAAP, the Company recognised re-measurement of defined benefit plans under Statement of Profit or Loss. Under Ind AS, re-measurement of defined benefit plans are recognised in Other Comprehensive Income.
B Other Comprehensive Income
Under hid AS, all items of income and expense recognised in the year should be included in the Statement of Profit and Loss for the year, unless a standard requires or permits otherwise. Items of income or expense that are not recognised in the Statement of Profit and Loss but are shown in statement of profit and loss as “Other Comprehensive Income” includes re-measurement of defined benefit plans. The concept of Other Comprehensive Income did not exist under previous GAAP.
29(xx). Leases
Long-term leases:
The company has no long term leases.
Short-term leases and leases of low-value assets:
During the year under consideration, the company has taken on lease a Reclaim Rubber manufacturing unit namely M/s. Majestic Reclaimnation LLP for a period of less than 12 months. The Company has elected not to recognize ROU assets and lease liabilities for short term leases as well as low value assets and recognizes the lease payments associated with these leases as an expense in the statement of profit and loss.
29(xxi). Financial and Derivative Instruments: Nil (Previous Year Nil)
29(xxii) The Company has issued securities during the year by way of bonus share.
29(xxiii) The immovable properties disclosed in the financial statements included under Property, Plant and Equipment are held in the name of the Company as at the balance sheet date.
29(xiv) The Company has not revalued its Property, Plant and Equipment.
29(xxv) The Company has not granted any Loans or Advances in the nature of loans to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013,) either severally or jointly with any other person. That are (a) repayable on demand or (b) without specifying any terms or period of repayment.
29(xxvii) The Company has no Intangible assets under development.
29(xxviii) No proceedings have been initiated or pending against the company for holding any benami property under the Benarni Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder.
29(xxix) The Company has taken borrowings from banks on the basis of security of current assets, monthly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts.
29(xxx) The Company is not declared willful defaulter by any bank or financial Institution or other lender.
29(xxxi) The Company has no transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act 1956.
29(xxxv). The company has no scheme of agreements which falls under sections 230 to 237 of the Companies Act 2013. 29(xxxvi) Utilization of Borrowed funds and share premium:
The Company have 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:
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
Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company have 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:
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
29(xxxvii). 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.
29(xxxviii). Corporate Social Responsibility under Section 135(5) of the Companies Act, 2013 is not applicable to the Company during the year. Due to profit during current financial year is more than 5 crore, CSR will be applicable on the company in the F.Y 2024-25.
29(xxxix). The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
29(xxxx). Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.
29(xxxxi). Corporate Information & Significant accounting policies and practices adopted by the Company are disclosed in the statement annexed to these financial statements as Note I.
|