o) Provisions
Provisions are recognised when the Company has a present (legal or constructive) obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as finance cost.
p) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of Facor alloys Limited has been identified as being the chief operating decision maker by the Management of the company. Refer note 34 for segment information presented.
q) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand and short-term money market deposits with original maturities of three months or less that is readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
r) Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of held for sale is met when the noncurrent asset is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as held for sale. These are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets classified as held for sale are not depreciated or amortized while they are classified as held for sale.
Non-current assets that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when it no longer meets the “held for sale” criteria.
s) Events occurring after the balance sheet date
All material events occurring after the balance sheet date upto the date of approval of financial statements by the board of directors, have been considered, disclosed and adjusted, wherever applicable, as per the requirements of Ind AS 10 - Events after the Reporting Period.
3. RECENT INDIAN ACCOUNTING STANDARDS (IND AS)
Ministry of Corporate Affairs (MCA), notifies new standard or amendments to the existing standards. There are no new standards that are notified, but not yet effective, upto the date of issuance of the Company's financial statements.
5 Right-of-Use Asset
Transition to Ind AS 116
Ministry of Corporate Affairs (MCA) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian accounting Standards) Second Amendment Rules, has notified Ind AS 116 Leases which replaces the existing lease standard, Ind AS 17 Leases, and other interpretations. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessee and lessors.
The Company has adopted Ind AS 116, effective annual reporting period beginning 1st April, 2019
On application of Ind AS 116, the nature of expenses has changed from lease rent in previous periods to depreciation cost for the right-of-use asset, and finance cost for interest accrued on lease liability.
5.1 The Company as lessee
(i) Company had taken vehicle on lease with lease term of 60 months w.e.f 01-04-2019, during the year, lessor has terminated lease on 31st January, 2024, before expirations of lease term.
5.2 Company as a lessor
The Company is not required to make any adjustments on transition to Ind As 116 for leases in which it acts as a lessor. The details of the right-of-use asset held by the Company is as follows:
33 Contingent Liabilities, Contingent Assets and Commitments A. Contingent Liabilities
a. Claims against the Company not acknowledged as debts, since disputed ' 1,336.85 lakhs (Previous Year ' 1,336.85 lakhs). Amounts paid under protest ' 110.85 lakhs (Previous Year ' 110.85 lakhs) have been debited to Advance Account.
b. In view of the decision of NCLT, Mumbai bench in the application under section 30(1) and (6) and order under section 31 of Insolvency and Bankruptcy Code, 2016 in the matter of Vidarbha Iron & Steel Corporation Limited, the liability of the Company on account of Corporate Guarantee issued in favour of Consortium Banks of Facor Steels Limited is NIL.
c. Bank guarantee amounting to ' 300.00 lakhs (previous year ' 300.00 lakhs) secured by way of fixed deposit as disclosed in note 12.
d. Claims against the Company not acknowledged as debts and not provided for: Company had entered into long term conversion agreement with M/s Tata Steel Mining Ltd (TSML), a wholly owned subsidiary of M/s Tata Steel Ltd (TSL) on 22-03-2021. Consequent to the merger of TSML into TSL on 08-08-2023, agreement was modified in the name of M/s TSL w.e.f. 01-09-2023, As per conversion agreement raw materials required for conversion work will be supplied by TSL free of cost at the manufacturing site of the company and company will raise conversion bills on manufacturing of HCFC. During the year, TSL informed the company that 9885 MT of raw material was found short on physical verification of inventory laying at company’s premises on 27-02-2024 and shortage of material was valued at prevailing market price at Rs.31.15 Crores. TSL offered to offset recovery against receivables (Refer to note no.10) and bank guarantee (Ref. note no.33(c)) to reduce recoverable amount to Rs.10.52 crores. Company raised its objection on quantum of shortage of material as well as valuation and insisted TSL to initiate joint reconciliation of raw material since the inception of agreement as it was never done during the currency of agreement. Matter is under discussion at management level to arrive at solution. Both companies are enjoying decades old fruitful commercial relationship, hence no hardship are observed in settling any bilateral issues.
34 Segment Information:
Segment information is presented in respect of the company’s key operating segments. The operating segments are based on the company’s management and internal reporting structure.
Operating Segments
The Management Information System of the Company identifies and monitors Ferro Alloys as the business segment. The Company is managed organisationally as a single unit. In the opinion of the management, the Company is primarily engaged in the business of Ferro Alloys. As the basic nature of these activities are governed by the same set of risk and return, these constitute and are grouped as a single segment. Accordingly, there is only one Reportable Segment for the Company which is “Ferro Alloys”, hence no specific disclosures have been made.
Entity wise disclosures
A. Information about products and services
During the year, the Group primarily operates in one product line, therefore product wise revenue disclosure is not
applicable.
B. Information about Geographical Areas
The Group derives revenue from following major geographical areas:
Risk Management Framework
A company is exposed to uncertainties owning to the sector in which it is operating. The Company is conscious of the fact that any risk that could have a material impact on its business should be included in its risk profile. Accordingly, in order to contain / mitigate the risk, the Board of Directors have approved a Risk management policy which shall be reviewed by Board and the management from time to time.
The Company’s Risk Management framework is designed to identify, assess and monitor various risks related to key business and strategic objectives and lead to the formulation of a mitigation plan. Major risks in particular are monitored regularly at Executive meetings and the Board of Directors of the Company is kept abreast of such issues and the policy was reviewed by the Board and Committee at its meeting.
The Company’s Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
i. Credit Risk
Credit risk is the risk of financial loss to company if a customer or counterparty to the financial instrument fails to meet its financial obligations, and arises principally from the loans & advances to related parties and company’s receivables from customers.
Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, cash and cash equivalents, other balances with banks and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk other than trade receivable.
The company maintains its Cash and cash equivalents and Bank Deposits with banks having good reputation, good past track record and high quality credit rating and also reviews their credit rating on a timely basis.
The gross carrying amount of trade receivables is ' 4,413.34 lakhs (31 March 2023'5,237.54 lakhs).
During the period, the Company has made no write-offs of trade receivables. The Company management also pursue all options for recovery of dues wherever necessary based on its internal assessment. A default on a financial asset is when counterparty fails to make payments within 365 days when they fall due.
Other current financial assets basically include loans and advances recoverable from related parties. Provision is created in books of accounts on case to case basis depending upon the possibility/probability of recovery of the amount due to financial position of related parties. The gross carrying amount of loan and advances to related parties as on 31 March 2024 amounted to ' 900.03 lakhs out of which provision of expected life time credit loss amounting to ' 852.32 lakhs has been provided for the year ( As at 31 March 2023 is ' 900.05 lakhs).
ii. Liquidity risk
Liquidity risk refers to risk of financial distress or extra ordinary high financing cost arising due to shortage of liquid funds in a situation where business conditions unexpectedly deteriorate and require financing. The Company’s objective is to maintain at all times optimum levels of liquidity to meet its cash and collateral requirements. Processes and policies related to such risk are overseen by senior management and management monitors the Company’s net liquidity position through rolling forecast on the basis of expected cash flows.
(a) Financing arrangements
The company do not have undrawn bank overdraft facilities as on 31 March 2024 and as on 31 March 2023.
Market risk is the risk that changes in market prices, foreign exchange rates and interest rates - 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 optimising the return.
a) Equity Price risk
Commodity Price Risk is the risk that future cash flow of the Company will fluctuate on account of changes in market price of the material produced and sold by the company. The Company is exposed to the movement in price of key raw materials in domestic and international markets. The Company has in place policies to manage exposure to fluctuations in the prices of the materials. The Company enters into contracts for procurement of materials and most of the transactions are short term fixed price contracts.
b) Currency risk
Foreign currency risk is the risk that fair value of future cash flow of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities. The Company has foreign currency trade payables and receivables and is therefore, exposed to a foreign exchange risk. Foreign currency risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency (INR). The risk is managed through a forecast of highly probable foreign currency cash flows.
Exposure to currency risk
The summary quantitative data about the Group’s exposure to currency risk as reported to the management of the Group is as follows:
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 interest rates. The Company exposure to the risk of changes in market interest rates related primarily to the Company’s short term borrowing with floating interest rates. The Company constantly monitors the credit markets and rebalances its financing strategies to achieve an optimal maturity profile and financing cost.
Exposure to interest rate risk
The interest rate profile of the Company ‘s interest bearing financial instruments at the end of the reporting period are as follows:
46 Capital management
For the purpose of the Company’s capital management, capital includes issued equity capital, securities premium and all other equity reserves attributable to the equity share holders of the Company. The primary objective of the Company’s capital management is to safeguard continuity, maintain healthy capital ratios in order to support its business and maximise shareholder value. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The funding requirement is met through equity, internal accruals, long term borrowings and short term borrowings. In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements.
47 The Code on Social Security, 2020 (‘Code’) relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record related impact, if any, in the period the Code becomes effective.
48 The Company has terminated the conversion agreements dated 01-08-2021 (‘Agreement”) with Rajadhiraj Vinayak Natraj Pvt. Ltd (“RTVNPL”) vide termination notice dated 27-10-2022 as RTVNPL has violated the terms of the said Agreement. RTVNPL against the said termination had filed a petition bearing no.O.M.P. (I) (Comm.) 310/2022 under section 9 of arbitration and conciliation Act (“Act”) before Hon’ble High Court of Delhi and sought interim reliefs against the termination of the said Agreement. The Hon’ble High Court of Delhi vide order dated 03-11-2022 referred the parties to Mediation under the aegis of Samadhan, at Delhi High Court Mediation and Conciliation Centre, however same was unsuccessful.Thereafter, the Hon’ble High Court of Delhi vide order dated 10-11-2022 treated present petition as an application under section 17 of the Act on mutual consent of both counsels and referred the matter to the arbitration to be held under the aegis of the Delhi International Arbitration Centre, Delhi High Court. Hon’ble Ms. Justice Indira Banerjee, former judge of Supreme Court of India was appointed as Sole Arbitrator. Claim and counter claim are filed and arbitration is in process. As no Arbitration award has been passed and impact cannot be quantified at this stage, therefore, no accounting adjustment have been made in books of Accounts. Debtors include Rs. 2,444.85 lakh receivable from RTVNPL on account of conversion bills as on 31-03-2024.
49 Other Statutory Information
a) The title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) are in the name of erstwhile pre-demerged company. The immovable properties were transferred by virtue of BIFR Order No.314/98, dated 13th April, 2004. The immovable properties acquired subsequent to demerger are held in the name of the company
b) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
c) The company has not been declared wilful defaulter by any bank or financial institution or other lender.
d) The Company do not have any transactions with companies struck off.
e) The Company have not 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.
f) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
g) During the year company has not availed working capital borrowings from banks or financial institutions.
50 The figures for the corresponding previous year has been regrouped/ reclassified wherever necessary, to make them comparable.
As per our report of even date.
For and on behalf of the Board of Directors
Ashwin Mankeshwar Murlidhar Durgaprasadji Saraf Ashish Santosh Agrawal
Partner Director Whole Time Director
(Membership No. 046219) (DIN: 00011966) (DIN: 02148665)
For K.K. Mankeshwar & Co.
Chartered Accountants (Firm’s Regn. No. 106009W)
Place: Nagpur Vinod Saraf Vijay Vashisth Piyush Agarwal
Date: 30th May, 2024 President Dy. CFO Company Secretary
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