s) Provision, contingent liabilities and contingent assets
Provisions are recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are discounted to their present values, where the time value of money is material. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are discounted to their present values, where the time value of money is material.
Any reimbursement that the Company can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision.
All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
In cases where the outflow of economic resources as a result of present obligations is considered improbable or remote, no provision is recognised.
Contingent liability is disclosed for:
- Possible obligations which will be confirmed only by future events not wholly within the control of the Company or
- Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Contingent assets are not recognised. However, when inflow of economic benefits is probable, related asset is disclosed.
t) Cash and cash equivalents
Cash and cash equivalent comprise cash at banks and on hand and short-term deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
u) Statement of Cash Flows
Standalone Statement of Cash Flows is prepared segregating the cash flows from operating, investing and financing
activities. Cash flow from operating activities is reported using indirect method. Under the indirect method, the net profit/(loss) is adjusted for the effects of:
(a) transactions of a non-cash nature;
(b) any deferrals or accruals of past or future operating cash receipts or payments and,
(c) all other items of income or expense associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. Cash and cash equivalents are reflected as such in the Standalone Statement of Cash Flows and excludes balances which are not available for general use as on the date of Standalone Balance Sheet are also included under this category with a specific disclosure. The interest received has been considered as investing activity for the purpose of Standalone Statement of Cash Flows.
v) 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 assess the financial performance and position of the Company, and makes strategic decisions and therefore the board would be the chief operating decision maker or 'CODM, within the meaning of Ind AS 108. The CODM evaluates the Company's performance and allocates resources based on the dominant source, nature of product and nature of risks and returns.
w) Significant management judgement in applying accounting policies and estimation uncertainty
n the application of the Company's accounting policies, which are described above, the Management of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Significant management judgements
Classification of leases - The Company enters into leasing arrangements for certain assets. The classification of the leasing arrangement as a finance lease or operating lease is based on an assessment of several factors, including, but not limited to, transfer of ownership of leased asset at end of lease term, lessee's option to purchase and estimated certainty of exercise of such option, proportion of lease term to the asset's economic life, proportion of present value of minimum lease payments to fair value of leased asset and extent of specialized nature of the leased asset.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:
Impairment of financial assets - At each balance sheet date, based on historical default rates observed over expected life, the management assesses the expected credit loss on outstanding financial assets.
Provisions and Contingencies - The Company is the subject of certain legal, tax (direct and indirect taxes) and other regulatory matters which are pending in various jurisdictions. Due to the uncertainty inherent in such matters, it is difficult to predict the final outcome of such matters. The cases and claims against the Company often raise difficult and complex factual and legal issues, which are subject to many uncertainties, including but not limited to the facts and circumstances of each particular case and claim, the jurisdiction and the differences in applicable law. In the normal course of business, management consults with legal counsel and certain other experts on matters related to litigation and taxes. The Company accrues a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated.
At each balance sheet date basis the management judgment, changes in facts and legal aspects, the Company assesses the requirement of provisions against the outstanding regulatory and tax matters referred above. However, the actual future outcome may be different from this judgement.
Useful lives of depreciable/amortisable assets - Management reviews its estimate of the useful lives of depreciable/amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of these assets.
Defined benefit obligation (DBO) - Management's estimate of the DBO is based on a number of underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
31 Fair value disclosures
(i) Fair values hierarchy
Financial assets and financial liabilities measured at fair value in the balance sheet are classified into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
(ii) Investment in equity shares are being carried at fair value through profit and loss except for investment in subsidiary which is carried at cost. The fair value of investment in GI Power Corporation Limited is determined to be zero. The fair values of the unquoted investment in shares of Vyshali Energy Private Limited approximates the cost of the shares.
(iii) Fair value of instruments measured at amortised cost
Cash and cash equivalents, loans, trade receivables, investments in compulsorily convertible debentures, other current financial assets, trade payables and other current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of the financial assets and liabilities is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.The following methods and assumptions were used to estimate the fair values:
• The fair values of investments are determined by using discounted cash flow method using the appropriate discount rate.
The discount rate is determined using other similar instruments incorporating the risk associated.
• Security deposits given to government authorities are shown at cost as the same are given till perpetuity.
1. Investment in equity instrument of subsidiary of ?510.00 lacs (previous year ?510.00 lacs) has been accounted at cost in accordance with Ind AS 27, therefore not within scope of Ind AS 109, hence, not included here.
2. The Company has an investment in GI Power Corporation Limited which is carried at fair value which is determined to be zero.
3. Financial instruments carried at FVTPL has been valued using level 3 hierarchy,
ii) Risk management
The Company's activities expose it to credit risk, liquidity risk and market risk. The Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the standalone financial statements.
A) Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Company. The Company is exposed to this risk for various financial instruments, for example receivables from customers, placing deposits, etc. The Company's maximum exposure to credit risk is limited to the carrying amount of following types of financial assets.
- cash and cash equivalents,
- trade receivables,
- margin money kept with banks, and
- other financial assets.
a) Credit risk management
The Company assesses and manages credit risk based on internal credit rating system, continuously monitoring defaults of customers and other counterparties, identified either individually or by the Company, and incorporates this information into its credit risk controls. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit risks to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.
Cash and cash equivalents and bank deposits
Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.
Trade receivables
The Company closely monitors the credit-worthiness of the customers through internal systems that are configured to define credit limits of customers, thereby, limiting the credit risk to pre-calculated amounts. The Company assesses increase in credit risk on an ongoing basis for amounts receivable that become past due and default is considered to have occurred when amounts receivable become six months past due.
Other financial assets measured at amortised cost
Other financial assets measured at amortised cost includes security deposits, export incentive receivables and others (including advances to employees). Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously, while at the same time internal control system in place ensure the amounts are within defined limits.
b) Expected credit losses
The Company provides for expected credit losses based on the following:
The Company recognizes expected credit losses on trade receivables using a simplified approach, wherein Company has defined percentage of provision by analysing historical trend of default and adjusted for forward-looking information. Allowance for expected credit loss has been created based on the past experience of the Company. Wherever required, past trend is adjusted to reflect the effects of the current conditions and forecasts of future conditions that did not affect the period on which the historical data is based, and to remove effects of the conditions in the historical period that are not relevant to the future contractual cash flows.
Considering ongoing Russia-Ukraine crisis, during the current year the Company has provided for doubtful recovery of '195.58 lacs in respect of amount recoverable from the related party though confident of ultimate recovery in due course. In respect of trade receivable balances from other related parties, there are no indicators at the period end for default in receipt of payments. Accordingly, the Company does not anticipate risk of recovery and expected credit loss in respect thereof.
B) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining liquidity under committed facilities.
Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company's liquidity management policy involves 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.
Maturities of financial liabilities
The tables below analyses the Company's financial liabilities into relevant maturity classification based on their contractual maturities for all non-derivative financial liabilities.
The amounts disclosed in the table are the contractual undiscounted cash flows. For balances due within 12 months amounts equal their carrying values as the impact of discounting is not significant.
f Satisfaction of performance obligations
The Company's revenue is derived from the single performance obligation to transfer primarily its products under arrangements in which the transfer of control of the products and the fulfilment of the Company's performance obligation occur at the same time. Revenue from the sale of goods is recognized when the Company has transferred control of the goods to the buyer and the buyer obtains the benefits from the goods, the potential cash flows and the amount of revenue (the transaction price) can be measured reliably, and it is probable that the Company will collect the consideration to which it is entitled to in exchange for the goods.Whether the customer has obtained control over the asset depends on when the goods are made available to the carrier or the buyer takes possession of the goods, depending on the delivery terms. Revenue is measured at the transaction price of the consideration received or receivable, the amount the Company expects to be entitled to.
g Payment terms
The sale of goods is typically made under credit payment terms differing from customer to customer and ranges between 30-60 days (excluding transit period).
h Variable considerations associated with such sales
Periodically, the Company announces various volume and other rebate programs, where once a certain volume or other conditions are met, it refunds the customer some portion of the amounts previously billed or paid. For such arrangements, the Company only recognizes revenue for the amounts it ultimately expects to realize from the customer. The Company estimates the variable consideration for these programs using the most likely amount method or the expected value method, whichever approach best predicts the amount of the consideration based on the terms of the contract and available information and updates its estimates each reporting period.
42 Details of dues to micro enterprises and small enterprises as defined under the MSMED Act, 2006
On the basis of confirmation obtained from suppliers who have registered themselves under the Micro, Small and Medium Enterprise Development Act, 2006 (MSMED Act, 2006) and based on the information available with the Company, the following are the details:
43 Provision for contingencies
The Company is involved in certain legal, tax (direct and indirect taxes) and other regulatory matters ('litigations'), the outcome of which may not be favourable to the Company. The Company is actively seeking to resolve these actual and potential statutory, taxation and regulatory matters. Management is in consultation with the legal, tax and other advisers to assess the likelihood that a pending claim will succeed. The Company has applied its judgement and has recognised liabilities based on whether additional amounts will be payable and has included contingent liabilities where economic outflows are considered possible but not probable.
Based on management assessment on likelihood, timing of cash outflows (current/non-current), interpretation of local laws, pending disposal of these matters and consultations obtained from the management experts, where considered
necessary in respect of these matters, the management has recognised for provision for contingencies towards legal, tax and other regulatory matters amounting to ? 982.80 lacs as at 31 March 2024 (Previous year: ? 1,122.79 lacs).
44 Management support charges
During the financial year 2023-24, the Company has paid the management support charges under cost allocation agreement with Federal Mogul Holding Deutschland Gmbh amounting ? 3,456.76 lacs (previous year ? 3,414.99 lacs).These charges are paid to availment of centralised services pertaining to all the products of the Company and, inter-alia, include Technical Support, Operations Management, Applications Engineering, Global Executive Management Services, Purchasing, Key Accounts Sales Management.
45 As per transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm's length prices of international transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company has appointed independent consultants for conducting a Transfer Pricing Study (the 'Study') to determine whether the transactions with associate enterprises undertaken during the financial year are on an "arms length basis". Management is of the opinion that the Company's international transactions are at arm's length and that the results of the on-going study will not have any impact on the standalone financial statements and the independent consultants appointed have also preliminarily confirmed that they do not expect any transfer pricing adjustments.
46 During the earlier years, Tenneco Inc. (USA) (the Ultimate Holding Company till 16 November 2022 and intermediate holding company w.e.f. 17 November 2022) had granted certain share-settled restricted stock units (RSUs) to an eligible employee of the Company which vest on the grant date.
RSUs are time-based service awards and generally vest according to a three-year graded vesting schedule. One-third of the award will vest on the first anniversary of the grant date, one-third of the award will vest on the second anniversary, and one-third of the award will vest on the third anniversary.
During the previous year, all the common stock of Tenneco Inc. (USA) got delisted from New York Stock Exchange effective 17 November 2022 and each of the Tenneco's outstanding awards of RSUs which were subject solely to service-based vesting conditions at such date have become fully vested and stood cancelled in exchange for the right to receive an equivalent amount in cash (subject to tax deducted at source). All the outstanding RSUs at such effective date have been settled in cash by Tenneco Inc. at price of USD 20 per RSUs. In terms of understanding reached, the Company had paid ?302.18 lacs to the eligible employee of the Company and recovered the same from group company (Refer note 37).
Further, in the previous year, the Company had recognized share-based payment amounting ?419.52 lacs (including amount of ?252.85 lacs pertaining to period prior to 31 March 2022 determined by the management on the basis of graded vesting schedule) as an expense under employee benefit expense (refer note 25) with a corresponding credit to Other equity as Deemed capital contribution (refer note 12).
49. Additional Disclosures
a) The title deeds of immovable properties (other than immovable properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the standalone financial statements are held in the name of the Company.
b) There are no proceedings initiated or pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 and rules made there under.
c) The Company has not revalued its property, plant and equipment (including right-of-use assets) or Intangible assets or both during the year.
d) The Company has been sanctioned working capital amounts from banks on the basis of security of Inventories Trade Receivables and Trade Payables. The returns being filed by the Company with banks are in line with the books of account.
e) The Company has not been declared willful defaulter by any bank or financial institution or other lender during the year.
f) The Company does not have any material transactions with companies which were struck off under section 248 of the Companies Act, 2013.
g) The Company has not traded or invested in Crypto curreny or virtual currency during the financial year.
h) 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 such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
i) As per the MCA notification dated 05 August 2022, the Central Government has notified the Companies (Accounts) Fourth Amendment Rules, 2022. As per the amended rules, the Companies are required to maintain back-up on daily basis of such books of account and other relevant books and papers maintained in electronic mode that should be accessible in India at all the time. Also, the Companies are required to create backup of accounts on servers physically located in India on a daily basis. The books of account along with other relevant records and papers of the Company are maintained in electronic mode on servers physically located out of India. These books of account are readily accessible in India at all times however the backup of such books of account is not maintained in India .
j) The Code on Social Security,2020 ('Code') relating to employee benefits during employment and post employment 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. Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.
k) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.
l) The Company has not 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, 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 on behalf of the Ultimate Beneficiaries.
m) 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, 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.
n) The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.
o) As per records maintained by the Company, there are no charges which are pending to be registered with Registrar Of Companies (ROC). Further, in respect of credit facilities availed and settled in earlier years to the extent of ? 9,988.07 lacs (previous year ? 12,560.00 lacs), satisfaction of charges are yet to be registered with ROC beyond the statutory period. The Company is taking necessary steps for rectifying of ROC records in respect of the same.
p) As per the proviso to Rule 3(1) of Companies (Accounts) Rules, 2014, for the financial year commencing on or after the 1st day of April 2023, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
The Company uses SAP as its primary accounting softwares for recording all the accounting transactions viz., sales, purchases, production/costing, fixed assets, other expenses, payroll, cash and bank transactions, journal entries and all other general ledger accounting transactions for the year ended March 31, 2024. The Company has used accounting softwares 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 that: (a) audit trail feature is not enabled for certain changes made using privileged/administrative access rights, and (b) the feature of recording audit trail (edit log) facility was not enabled at the database level to log any direct data changes.
For and on behalf of the Board of Directors of Federal-Mogul Goetze (India) Limited
Thiagarajan Kannan Manish Chadha Dr. Khalid Iqbal Khan
Managing Director Chief Financial Officer Whole Time Director- Legal &
& Finance Director Company Secretary
DIN : 10486912 DIN : 07195652 DIN : 05253556
Place: Coimbatore Place: Gurugram Place: Gurugram
Date: 29 May 2024 Date: 29 May 2024 Date: 29 May 2024
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