3.12 Provisions, Contingent liabilities and Contingent assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a legal or constructive obligation as a result of past events and it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of obligation. Provisions are not recognised for future operating losses. The amount recognized 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 are not recognized and are disclosed by way of notes to the standalone financial statements when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or when there is a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the same or a reliable estimate of the amount in this respect cannot be made.
Contingent assets are not recognised but disclosed in the Standalone Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
3.13 Employee benefits
Short term employee benefits: Employee benefits are accrued in the year in which services are rendered by the employees. Short term employee benefits are recognized as an expense in the statement of profit and loss for the year in which the related service is rendered.
Defined contribution plan: Contribution to defined contribution plans such as provident fund, etc, is being made in accordance with statute and are recognised as and when incurred.
Defined benefit plan: Contribution to defined benefit plans consisting of contribution to gratuity fund are determined at close of the year at present value of the amount payable using actuarial valuation techniques. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized immediately in the Balance Sheet with a corresponding debit or credit to Retained Earnings through Other Comprehensive Income in the period in which they occur.
Other Long Term Employee Benefits: Other long term employee benefits consisting of leave encashment are determined at close of the year at present value of the amount payable using actuarial valuation techniques. The changes in the amount payable including actuarial gains and losses are recognised in the Statement of Profit and Loss.
All defined benefit plans obligations are determined based on valuations, as at the Balance Sheet date, made by independent actuary using the projected unit credit method. The classification of the Company's net obligation into current and noncurrent is as per the actuarial valuation report.
3.14 Revenue recognition Revenue from operations
The Company recognises revenue when it transfers control over the products (Power) or services to a customer at an amount that reflects the consideration to which the Company becomes entitled on such transaction in terms of agreement and/or orders as applicable to the transaction. This excludes the rebates, discounts, taxes and other collections on behalf of the third parties.
Sale of Power
Revenue in respect of sale of electricity generated is accounted for on delivery to the grid under long term/ mid-term Power Purchase Agreement (PPA) read with the regulations of State Electricity Regulatory Commission and/or short-term contracts/ merchant basis on completion of supply to the respective customers.
Revenue from third party power plant under operations and maintenance is recognised when service under the contract are rendered.
Revenue from construction contract
Revenue from construction contracts is recognized based on completion of the performance obligation in terms of the contract when the performance creates an asset with no alternative use and an enforceable right to payment as performance is completed.
Other Income
Dividend Income
Dividend income from investment in equity shares is recognised when the shareholders' right to receive payment has been established.
Interest Income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
3.15 Borrowing Cost
Borrowing cost comprises of interest and other costs incurred in connection with the borrowing of the funds. All borrowing costs are recognized in the Statement of Profit and Loss using the effective interest method except to the extent attributable to qualifying Property Plant Equipment which is capitalized to the cost of the related assets. A qualifying PPE is an asset that necessarily takes a substantial period of time to get ready for its intended use.
3.16 Taxes on income
Income tax expense representing the sum of current tax expense and the net charge of the deferred taxes is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income.
Current Tax
Current tax is provided on the taxable income and recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Advance tax and provisions are presented in the balance sheet after setting off advance tax paid and income tax provision for the respective financial year.
Interest expenses and penalties, if any, related to income tax are included in finance cost and other expenses respectively. Interest income, if any, related to income tax is included in "Other income".
Deferred Tax
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences between the carrying amount of assets and liabilities in the standalone financial statements and the corresponding tax basis used in the computation of taxable profit as well as for unused tax losses or credits. In principle, deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized.
Deferred tax assets & liabilities have been offset wherever the Company has a legally enforceable right to set off current tax assets against current tax liabilities & where deferred tax assets & liabilities relate to income tax levied by the same taxation authority.
Deferred taxes are calculated at the enacted or substantially enacted tax rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited to profit or loss, except when it relates to items credited or charged directly to other comprehensive income or equity, in which case the corresponding deferred tax is also recognized directly in other comprehensive income or equity.
Deferred tax assets include Minimum Alternate Tax (MAT) measured in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability and such benefit can be measured reliably and it is probable that the future economic benefit associated with the same will be realised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.
3.17 Earnings per share
Basic earnings per share is calculated by dividing the net profit/loss for the year by the weighted average number of equity shares outstanding during the period.
Diluted earnings per share is computed using the net profit/loss for the year and weighted average number of equity and potential equity shares outstanding during the year including share options, convertible preference shares and debentures, except where the result would be anti-dilutive. Potential equity shares that are converted during the year are included in the calculation of diluted earnings per share, from the beginning of the year or date of issuance of such potential equity shares, to the date of conversion.
3.18 Statement of Cash flows
Cash flows are reported using indirect method, whereby profit/loss before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
3.19 Segment Reporting
The identification of operating segment is consistent with performance assessment and resource allocation by the Chief Operating Decision Maker. An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the other components of the Company and for which discrete financial information is available. Operating segments of the Company comprises three segments namely, Generating division, Contract division and Trading division. All operating segments operating results are reviewed regularly by the Chief Operating Decision Maker to make decisions about resources to be allocated to the segments and assess their performance.
NOTE 4
CRITICAL ACCOUNTING JUDGMENTS, ASSUMPTIONS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY
The preparation of the standalone financial statements in conformity with the recognition and measurement principle of Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the standalone financial statements and reported amounts of revenues and expenses during the period. Accounting estimates and underlying assumptions are reviewed on an ongoing basis and could change from period to period. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Revisions to accounting estimates are recognised prospectively. Actual results may differ from these estimates. Differences between the actual results and estimates are recognized in the year in which the results are known/materialized and, if material, their effects are disclosed in the notes to the standalone financial statements.
The application of accounting policies that require significant areas of estimation, uncertainty and critical judgments and the use of assumptions in the standalone financial statements have been disclosed below. The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below:
4.1 Depreciation/amortization of and impairment loss on property, plant and equipment/intangible assets.
Depreciation on assets of generating plant and equipment, building and roads, hydraulic works, transmission lines, transformers and cable network has been provided on straight line method over useful life as per the implementation/ other agreement with the authorities. Values of spares related to the machinery are depreciated over the effective life of the plant and equipment to which they relate. ROU assets are depreciated over the lease term or expected useful life of the asset, whichever is lower. Intangible assets are amortised over a period of five years. The Company reviews the estimated useful lives of the assets regularly in order to determine the amount of depreciation/ amortization to be recorded during any reporting period. This reassessment may result in change in such expenses in future periods.
The Company reviews its carrying value of its tangible and intangible assets whenever there is objective evidence that the assets are impaired. In such situation assets recoverable amount is estimated which is higher of asset's or cash generating units (CGU) fair value less cost of disposal and its value in use. In assessing value in use the estimated future cash flows are discounted using pre-tax discount rate which reflects the current assessment of time value of money. In determining fair value less cost of disposal, recent market realisations are considered or otherwise in absence of such transactions appropriate valuations are adopted.
4.2 Arrangements containing leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any option to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to the Company's operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
4.3 Impairment allowances on financial assets
The Company evaluates whether there is any objective evidence that financial asset including loan, trade and other receivables are impaired and determines the amount of impairment allowance as a result of the inability of the concerned parties to make required payments. The Company bases the estimates on the ageing of the trade receivables balance, credit-worthiness of the trade receivables, historical write-off experience and these factors are subject to variations leading to consequential impact on the amounts considered in the standalone financial statements.
4.4 Application of "Service concession arrangements" accounting
In assessing the applicability of the service concession arrangement with respect to hydro power plants of the Company, the management has exercised significant judgement considering the ownership of the assets and consideration there against, operational capabilities and ability to sell the power generated to the consumer and determine the rate in this respect, in concluding that the arrangements with the Company as such do not meet the criteria for recognition as service concession arrangements.
4.5 Current tax and Deferred tax
Significant judgment is required in determination of taxability of certain income and deductibility of certain expenses during the estimation of the provision for income taxes.
The extent to which deferred tax assets can be recognised is based on the assessment of the probability of the Company's future taxable income against which the deferred tax assets can be utilised. In addition, significant judgement is required in assessing the impact of any legal or economic benefits.
4.6 Defined benefit obligations (DBO)
Critical estimate of the DBO involves a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate, anticipation of future salary increases etc. as estimated by Independent Actuary appointed for this purpose by the Management. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
4.7 Provisions and contingencies
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change.
Management judgment is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/ litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.
The carrying amounts of provisions and liabilities and estimation for contingencies are reviewed regularly and revised to take account of changing facts and circumstances.
20.1 Refer Standalone Statement of Changes in Equity for movement in balances of items of other equity.
Nature and purpose of reserves :
20.2 Capital reserve Capital reserve includes:
(a) ' 1,240.00 lakhs (31st March, 2023'1,240.00 lakhs) representing the reserves arising on forfeiture of 75,00,000 share warrants issued on preferential basis.
(b) ' 11.65 lakhs (31st March, 2023'11.65 lakhs) representing reserves arising on amalgamation pursuant to the Scheme of Arrangement with erstwhile Dhanashree Projects Limited. The said scheme was sanctioned by the Hon'ble High Court of Bangalore and Kolkata vide order dated 12th August, 2010 and 15th September, 2010 respectively.
20.3 Securities premium
Securities premium represents the amount received in excess of face value of equity shares issued by the Company and is to be utilised for as specified under section 52 of the Companies Act, 2013.
20.4 General reserve
The general reserve is created from time to time by appropriating profits from retained earnings. The general reserve is created by transfer from one component of equity to another and accordingly it is not reclassified to profit or loss.
20.5 Retained earnings
Retained earnings generally represents the undistributed profit/amount of accumulated earnings of the company. Any actuarial gains/ (losses) arising on remeasurement of defined benefit plan have been recognised in Retained earnings.
Notes : (As certified by Independent Actuary)
1. Assumptions relating to future salary increases, attrition, interest rate for discount and overall expected rate of return on assets have been considered based on relevant economic factors such as inflation, seniority, promotion, market growth and other factors as applicable to the period over which the obligation is expected to be settled.
2. The expected return on plan assets is based on market expectation at the beginning of the year. The rate of return on long term government bonds is taken as reference for this purpose.
3. In respect of funded gratuity, the funds are managed by the insurer and therefore the percentage or amount that each major category constitutes the fair value of total plan assets and effect thereof on overall expected rate of return on asset is not ascertainable.
4. Acquisition adjustment represents amount in respect of certain employees transferred into/ transferred from the Company.
(A) Nature of goods and services
Majority of Revenue : The revenue of the Company for the year ended 31st March, 2024 and 31st March, 2023 comprises of income from sale of electricity. The following is a description of the principal activities:
(i) Revenue from sale of electricity
The major revenue of the Company comes from sale of electricity. The Company is principally engaged in production and sale of bulk power from hydro power and wind power mills to various electricity boards and/ or sale to other parties through Indian Energy Exchange (IEX) or otherwise as per the terms agreed bilaterally on short term basis. The Company owns and operates a 9 MW Hydro-Electric Power project at Harangi, Karnataka and 6 MW Harangi Hydro-Electric Power Plant in Karnataka. It has two operating windmills of 1.5 MW each located in Hassan and Chitradurga district in the state of Karnataka.
Power is supplied in accordance with the sale price, payment terms and other conditions as per the Power Purchase Agreements ("PPA") entered into with various government institutions read along with the regulations of State Electricity Regulatory commission and/ or short term contracts/ merchant basis arrangements on completion of supply to the respective customers. Electricity generated each month is sold to the institutions set up under the government and/ or other parties through Indian Energy Exchange (IEX) or otherwise as per the terms agreed bilaterally on short term basis and maximum credit period of up to 15 days is allowed for payment.
(ii) Income from construction contract
The Company engages in construction, development, implementation, operation & maintenance of projects and consultancies. The Company has executed various infrastructure related projects like bridges and hydro projects on contractual basis. A Memorandum of Understanding (MOU) is entered into with Public Works Department (PWD) of Dharamnagar, Agartala, Khowai division of Tripura and revenue from such activity is recognised progressively on percentage of completion method. Stage of completion of contracts in progress is assessed or estimated in proportion to the contract cost incurred relative to the estimated total cost of the contract.
The construction project shall be executed in the manner as prescribed in the MOU. Monthly Running account bill (R.A bill) shall be submitted to the departments within 30 days from the date of issue of completion certificate. All duties and taxes (Works contract tax, labour welfare, Cess, Goods and Services Tax) shall be borne by the Company.
(iii) Trading Division
The Company is basically engaged in purchase and sale of electrical equipment and metals. The Company purchases such equipment from various parties and sells them to its customers.
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable and the associated costs can be estimated reliably. After the vendor accepts delivery, a credit period of 30 days is allowed for payment.
During the year ended 31st March, 2024 and 31st March, 2023, there have been no trading activities in the Company.
47 Capital Management
The Company follows a capital management strategy. The primary objective is to ensure that Company maintains a healthy capital ratio in order to support its business operations, have sufficient financial flexibility for borrowing requirements, if any, in future and to maximise shareholder value. The Company's objective when managing capital is to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stake holders.
(B) Fair Valuation Techniques
The fair values of the financial assets and liabilities are included at the amount 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:
1. The fair value of cash and cash equivalents, trade receivables, trade payables, current borrowings, current financial liabilities and assets approximate their carrying amount largely due to the short-term nature of these instruments. The management considers that the carrying amounts of financial assets and financial liabilities recognised at nominal cost/amortised cost in the standalone financial statements approximate their fair values.
2. Long-term debts are from bodies corporate and promoter and the rate of interest are reviewed annually.
49 Financial risk management objectives and policies
The Company's activities expose it to the following risks:
(a) Credit risk
(b) Liquidity risk
(c) Market risk
(a) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Trade receivables of the Company mainly comprises of receivables from state electricity boards and government department and hence such risk is negligible. Trade receivables in case of trading operations are from various private parties and are therefore exposed to general credit risk. The Company has a policy to monitor such risk on an ongoing basis. However, the Company is exposed to credit risk from its lending activities to its subsidiaries.
The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of receivables.
The carrying amount of respective financial assets recognised in the standalone financial statements, (net of impairment losses) represents the Company's maximum exposure to credit risk.
The credit risk on cash and cash equivalents and deposits with banks are insignificant as counterparties are banks with high credit ratings.
(b) Liquidity Risk
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. The Company 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 monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Company's operations and to mitigate the effects of fluctuations in cash flows.
The following tables detail the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The information included in 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. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Company may be required to pay.
The Company has current financial assets which will be realised in ordinary course of business and unused line of credit. The Company monitors its rolling forecast of its liquidity requirements to ensure it has sufficient cash to meet expected operational requirements.
The Company relies on mix of borrowings and operating cash flows to meet its need for funds and ensures that it does not breach any financial covenants stipulated by the lender.
(c) Market risk
Market risk is the risk or uncertainty arising from possible market price movements resulting in fluctuation of the fair value or future cash flows of a financial instrument. The major components of Market risk are foreign currency risk, interest rate risk and other price risk. Financial instruments affected by market risk includes trade receivables, borrowings and trade payables.
(i) Foreign currency risk
The Company does not have significant transaction in foreign currency and accordingly it is not exposed to foreign currency risk. There are certain old outstanding balances which are unhedged. The details of the unhedged foreign currency exposures are given in note no. 43. The management continuously reviews the exchange rates and are in process of settling the balances.
(ii) Interest rate risk
The Company's debt exposure includes borrowings from bodies corporate, infusion of funds from promoter and cash credit facility from bank. Borrowings from bodies corporate and promoter are subject to fixed interest rate which can be modified upon mutual agreement between the parties involved. Further, interest payable on cash credit facility is also contracted at fixed rate. Hence, the Company does not have any significant exposure to interest rate risk.
52(i) Various debit and credit balances including in respect of loans, advances, creditors, etc are subject to confirmation and consequential reconciliation thereof.
52(ii) Security deposits/retention money, advances and balances with government authorities include balances of 298.81 lakhs which are lying outstanding for a considerable period. Pending outwise of recovery of the said amount, no provision against this has been considered necessary.
53 Income Tax Authorities had conducted search under section 132 of the Income Tax Act, 1961 at the Company's Corporate Office. During the previous year, the Company has received Assessment Orders for assessment of Income Tax for the years 2011-2012 to 2020-2021 and demand notices aggregating to ' 18,817.47 lakhs had been issued to the Company. Necessary appeals against these notices have been filed before the Commissioner of Income Tax (Appeals) and the matter is pending as on this date. Further, pursuant to the application made by the Company in respect of various demands aggregating to ' 18,939.44 lakhs (including demands pertaining to other matters) pending in appeals, etc before Income Tax Authorities, the demands have been stayed. Pending resolution of the matters, ' 1,235.03 lakhs (including ' 153.30 lakhs recovered from the bank accounts of the Company) have been deposited till 31st March, 2024 in instalments as agreed upon with the Income Tax Authorities and shown as "Duties and taxes paid under protest" under "Other non-current assets" (note no. 11). As per the legal and professional advice received, the allegations and contentions made by the Income Tax Authorities are legally not tenable and no liability as such is expected to arise in this respect. Matter being pending in appeal, impact in this respect as such are not determinable.
54 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). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall, whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
55 Comparative figures of the previous year have been regrouped/ rearranged wherever considered necessary to make them comparable with those of the current year's figures.
As per our Report of even date attached For and on behalf of the Board of Directors of
For A L P S & Co. Energy Development Company Limited
Chartered Accountants
Firm's Registration No • 313132E Sd/- Pankaja Kumari Singh, Director (DIN: 00199454), Place : New Delhi
Sd/- A.K. Khetawat Sd/- Satyendra Pal Singh, Executive Director (DIN: 01055370)
Partner Sd/- Aman Jain, Director (DIN: 08187995)
Membership N°.: 052751 Sd/- Vishal Sharma, Director (DIN: 08773037)
Place : Kolkata Place : Kolkata Sd/- Prabir Goswami, Chief Financial Officer
Dated : 29th May, 2024 Dated : 29th May, 2024 Sd/- Vijayshree Binnani, Company Secretary
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