2.17 Provisions and contingencies
Provisions:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Where the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.
Contingencies:
Contingent liabilities:
A contingent liability is:
• a possible obligation arising from past events, the existence of which willbe confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or
• a present obligation that arises from past events but is not recognised because:
- it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
- the amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities are not recognized but disclosed unless the contingency is remote.
Contingent assets:
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.
Contingent assets are not recognised but are disclosed when the inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognized.
2.18 Segment reporting
Operating segments are defined as components of an enterprise for which discrete financialinformation is available that is evaluated regularly by the chief operating decision maker, in deciding how to allocate resources and assessing performance.
The Company is engaged in manufacture and trading of synthetic yarn and textiles which is considered as the only reportable business segment. The Company's Chief Operating Decision Maker (CODM) is the Managing Director. He evaluates the Company's performance and allocates resources based on analysis of various performance indicators by geographical areas only.
2.19 Related party
A related party is a person or entity that is related to the reporting entity and it includes:
(a) A person or a close member of that person's family if
that person:
(i) has controlor joint controlover the reporting entity;
(ii) has significant influence over the reporting entity; or
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
(b) An entity is related to the reporting entity if any of the
following conditions apply:
(i) The entity and the reporting entity are members of the same Group;
(ii) One entity is an associate or joint venture of the other entity;
(iii) Both entities are joint ventures of the same third party;
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity;
(vi) The entity is controlled or jointly controlled by a person identified in (a);
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity);
(viii) The entity, or any member of a Group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity including:
(a) that person's children, spouse or domestic partner, brother, sister, father and mother;
(b) children of that person's spouse or domestic partner; and
(c) dependents of that person or that person's spouse or domestic partner.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
Related party transactions and outstanding balances disclosed in the financial statements are in accordance with the above definition as per Ind AS 24.
2.20 Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at banks and cash on hand and short term deposits/ investments with an original maturity of three months or less from the date of acquisition, which are subject to an insignificant risk of changes in value. These exclude bank balances (including deposits) held as margin money or security against borrowings, guarantees etc. being not readily available for use by the Company.
For the purpose of the Statement of cash flows, cash and cash equivalents consist of cash and short term deposits and exclude items which are not available for general use as on the date of Balance Sheet, as defined above, net of bank overdrafts which are repayable on demand where they form an integral part of an entity's cash management.
2.21 Dividend to equity share holders of the Company
The Company recognises a liability to make dividend distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
2.22 Cash flow statement
Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing activities. Cash flow from operating activities is reported using indirect method as set out in Ind AS 7 'Statement of Cash Flows', adjusting the net profit for the effects of:
i. changes during the period in inventories and operating receivables and payables transactions of a non-cash nature;
ii. non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses, and
iii. all other items for which the cash effects are investing or financing cash flows.
2.23 Earnings per share
The Basic Earnings per equity share ('EPS') is computed by dividing the net profit or loss after tax before other comprehensive income for the year attributable to the equity shareholders of the Company by weighted average number of equity shares outstanding during the year. Ordinary shares that will be issued upon the conversion of a mandatorily convertible instrument are included in the calculation of basic earnings per share from the date the contract is entered into. Contingently issuable shares are treated as outstanding and are included in the calculation of basic earnings per share only from the date when all necessary conditions are satisfied (i.e. the events have occurred).
Diluted earnings per equity share are computed by dividing the net profit or loss before OCI attributable to equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares (including options and warrants). The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value. Dilutive potential equity shares are deemed converted as of the beginning of the period unless issued at a later date. Anti-dilutive effects are ignored.
2.24 Events after reporting date
Where events occurring after the Balance Sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of such events is adjusted within the financialstatements. Where the events are indicative of conditions that arose after the reporting period, the amounts are not adjusted, but are disclosed if those non-adjusting events are material.
2.25 Exceptional items
An item of Income or expense which by its size, type or incidence requires disclosure in order to improve an understanding of the performance of the Company is treated as an exceptional item and the same is disclosed in the financial statements.
2.26 Corporate Social Responsibility (CSR) expenditure
The Company charges its CSR expenditure during the year to the statement of profit & loss.
2.27 Recent accounting pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. During the year ended March 31,2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
Nature and Purpose of Reserves
a) Capital Reserve
Capital Reserve was created under the previous GAAP on account of Capital profit in settlement with IDBI Bank and on redemption of certain preference shares.
b) Capital Redemption Reserve
Capital Redemption Reserve was created on redemption of Preference shares and purchase of its own shares out of free reserves of the Company in accordance with the requirements of Companies Act. This can be utilized in accordance with the provisions of the Companies Act, 2013.
c) Securities Premium
The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. This can be utilized in accordance with the provisions of the Companies Act, 2013.
d) General Reserve
This Reserve is created by an appropriation from one component of equity (generally retained earnings) to another, not being an item of Other Comprehensive Income. The same can be utilized by the Company in accordance with the provisions of the Companies Act, 2013.
e) Employee Stock Option Outstanding
The fair value of the equity-settled share based payment transactions with employees is recognised in Statement of Profit and Loss with corresponding credit to Employee Stock Options Outstanding Account.
f) Retained Earnings
Retained earnings are the profits that the Company has earned till date, less any transfer to General Reserve, dividends or other distributions paid to the shareholders.
I. Term loans
a) From Indian Banks
From banks under consortium arrangement lead by PNB and member bank BOB ' 7,485.62 Lakhs (net of transaction cost of ' 58.49 Lakhs) [previous year ' 8,906.69 Lakhs (net of transaction cost of ' 81.41 Lakhs)]. Rupee term loan bear floating interest rate at 1Y MCLR to 1Y MCLR 0.25% are repayable in ballooning quarterly instalments and is secured by equitable mortgage created/extended by way of deposit of title deeds on pari passu basis in respect of immovable property at Dahej (land & buildings) and first charge by way of hypothecation of Company's all movable & immovable assets pertaining to specific loan (also save & except vehicles, plant & machinery and equipment acquired through specific loans) and personal guarantees of the promoter directors. These loans are further secured by second pari passu charge by way of hypothecation all other movable & immovable assets including mortgage of other properties of the Company and inventory of raw material, finished goods, semi-finished goods, stores & spares, book debts and other receivables (both present and future).
b) External Commercial Borrowings (ECB) From Foreign Consortium Banks
(i) ' 8,240.33 Lakhs (net of transaction cost ' 257.98
Lakhs) [previous Year ' 10,157.10 Lakhs (net of transaction cost ' 396.97 Lakhs)], are secured by first priority exclusive charge over Fully Drawn Yarn spinning machinery and equipment's thereof and personal guarantee of promoter directors. The loan is repayable in 20 half yearly equal instalments that commenced
from September 2018 and bear Interest at 6M Euribor 1.10% p.a.
(ii) ' 3,396.40 Lakhs (net of transaction cost ' 75.90 Lakhs) [previous Year ' 4,307.61 Lakhs (net of transaction cost ' 126.58 Lakhs)], are secured by first priority exclusive charge over Partial Oriented Yarn spinning machinery and equipment's thereof and personal guarantee of promoter directors. The loans are repayable in 14 half yearly equal instalments that commenced from December 2019 and bear Interest at 6M Euribor 0.80% p.a.
(iii) ' 3,897.93 Lakhs (net of transaction cost ' 138.61 Lakhs) [previous Year ' 4,544.75 Lakhs (net of transaction cost ' 193.44 Lakhs)], are secured by first priority exclusive charge over Partial Oriented Yarn spinning machinery and equipment's thereof and personal guarantee of promoter directors. The loans are repayable in 16 half yearly equalinstalments that commenced from February 2023 and bear Interest at 6M Euribor 0.88% p.a.
II. Vehicle loans are secured by hypothecation of specific vehicles acquired out of proceeds of the Loans. The said loans carry interest rate 8.85% p.a and repayable in 60 Equated Monthly instalments till July 2028.
III . The Company has used the borrowings from banks and financial institution for the specific purpose for which it was taken at the balance sheet date.
IV. As on the balance sheet date, there is no default in repayment of loan and interest.
50. SHARE BASED PAYMENTS
(I) Employee Stock Option Scheme (ESOS) - TRANCHE 3
(Refer Note No 2.13 of accounting policy)
The Nomination and Remuneration Committee of the Company had at its meeting held on October 30, 2023, approved grant of 27,20,000 (face value of ' 1/- per share) stock options ("options") to the eligible employees of the Company under the Filatex Employee Stock Option Scheme 2015 (Filatex ESOS -2015), at an exercise price of ' 48.05 per option (being the closing price at BSE on October 27, 2023 i.e. immediately preceding the grant date), each option being convertible into one Equity Share of the Company upon vesting subject to the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the terms and conditions of the Filatex ESOS 2015.
The terms and conditions of the grant as per the Filatex Employee Stock Option Scheme, 2015 (Filatex ESOS 2015) are as under:
A. Vesting period
On completion of 2 Years from the date of grant of options for 15%
On completion of 3 Years from the date of grant of options for 20%
On completion of 4 Years from the date of grant of options for 25%
On completion of 5 Years from the date of grant of options for 40%
B. Exercise period
The exercise period will be 30 days from the date of vesting for 1st, 2nd and 3rd vesting and 45 days for 4th vesting of options. The options, which have been vested and not exercised within such period, can be carried forward till the last vesting and can be exercised, either partially or wholly, within a period upto one year from last vesting or within such other period and at such time as may be decided and communicated by the Nomination and Remuneration committee, however, the options not so exercised with the period available for exercising of last vesting shall lapse and will not be available for exercise by the employee.
The Nomination and Remuneration Committee of the Company had at its meeting held on May 07, 2018, approved grant of 4,30,000 (face value of ' 10/- per share) [subsequently sub-divided into 21,50,000 shares of face value of ' 2/- per share, further sub-divided into 43,00,000 shares of face value of ' 1/- per share] stock options ("options") to the eligible employees of the Company under the Filatex Employee Stock Option Scheme 2015 (Filatex ESOS -2015), at an exercise price of ' 211 per option (being the closing price at BSE on May 04, 2018 i.e. immediately preceding the grant date), each option being convertible in to one Equity Share of the Company upon vesting subject to the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the terms and conditions of the Filatex ESOS 2015.
The Nomination and Remuneration Committee of the Company had at its meeting held on August 28, 2020 approved modification/re-pricing of outstanding 19,95,000 Stock Options (of face value of ' 2/- each) granted in 2nd Tranche under Filatex Employee Stock Option Scheme, 2015 (hereinafter referred to as "Filatex ESOS, 2015" or "the Scheme"), exercisable into not more than 19,95,000 fully paid-up equity shares of face value of ' 2/- (Rupees Two) each from Exercise price of ' 42.20 per option to ' 28.85 per option.
The terms and conditions of the grant as per the Filatex Employee Stock Option Scheme, 2015 (Filatex ESOS 2015) are as under:
A. Vesting period
On completion of 3 Years from the date of grant of options for 50%
On completion of 4 Years from the date of grant of options for 25%
On completion of 5 Years from the date of grant of options for remaining 25%
B. Exercise period
The exercise period will commence from the date of vesting itself and shall be exercised in such period as may be decided and communicated by the Nomination & Remuneration Committee. The options, which have been vested and not exercised within such period, can be carried forward till the last vesting and can be exercised, either partially or wholly, within a period upto one year from last vesting or within such other period and at such time as may be decided and communicated by the Nomination and Remuneration committee, however, the options not so exercised with the period available for exercising of last vesting shall lapse and will not be available for exercise by the employee.
1. The carrying value of Cash and cash equivalents, trade receivables, trade payables, short-term borrowings, other current financial assets and financial liabilities approximate their fair value mainly due to the shortterm maturities of these instruments.
2. The fair values of investment in quoted investment in equity shares is based on the quoted price in the active market of respective investment as at the Balance Sheet date.
3. Derivative financial instruments: The fair value of forward foreign exchange contracts is determined using the forward exchange rates at the balance sheet date using valuation techniques with inputs that are directly or indirectly observable in the marketplace. The derivatives are entered into with the banks/counterparties with investment grade credit ratings.
4. Description of significant unobservable inputs to valuation (Level 3):
The following shows the valuation techniques and inputs used for Non-current financial instruments that are not carried at fair value:
a. Security deposits given against lease and lease liabilities: Discounted cash flow method using appropriate discounting rate.
b. Non-current Financial assets/liabilities other than above: Expected Cash Flow for the financial instruments.
5. Unquoted equity instruments: where most recent information to measure fair value is insufficient and where the fair value of these investments cannot be reliably measured, or if there is a wide range of possible fair value measurements, cost has been considered as the best estimate of fair value.
6. There has been no change in the valuation methodology for Level3 inputs during the year. There were no transfers between Level 1 and Level 2 during the year and no transfer into and out of Level 3 fair value measurements.
II. Financial Risk Management Objectives and Policies
The Company's activities expose it to a variety of financial risks namely market risk, credit risk and liquidity risk. The Company's primary risk management focus is to minimize potentialadverse effects of market risk on its financial performance. The Company's risk management assessment and policies and processes are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same.
Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company's activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company's risk assessment and management policies and processes.
The Company's financial risk management policy is set by the management. Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. The Company manages market risk which evaluates and exercises independent control over the entire process of market risk management. The management recommends risk management objectives and policies, which are approved by Senior Management and the Audit Committee.
a) Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers. Credit risk arises from cash held with banks as well as credit exposure to clients, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financialassets. The objective of managing counterparty credit risk is to prevent losses in financialassets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors. The Company establishes an allowance for impairment that represents its expected credit losses in respect of trade and other receivables. The management uses a simplified approach for the purpose of computation of expected credit loss for trade receivables.
The Company's exposure to credit risk is influenced mainly by the individualcharacteristics of each customer. The demographics of the customer, including the default risk of the industry and country, in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits, continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business and through regular monitoring of conduct of accounts. The Company also holds security deposits for outstanding trade receivables which mitigate the credit risk to some extent.
An impairment analysis is performed at each reporting date on an individualbasis for major customers and follows simplified approach for recognition of impairment loss allowance. The history of trade receivables shows a negligible provision for bad and doubtful debts. The management believes that no further provision is necessary in respect of trade receivables based on historical trends of these customers. Further, the Company's exposure to customers is diversified and no single customer has significant contribution to trade receivable balances.
In respect of financial guarantees provided by the Company to banks & financial institutions, the maximum exposure which the Company is exposed to is the maximum amount which the Company would have to pay if the guarantee is called upon. Based on the expectation at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the guarantees provided.
The credit risk on liquid funds such as banks in current and deposit accounts and derivative financial instruments is limited because the counterparties are banks with high credit-ratings.
b) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due.
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company's short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and committed borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities and by monitoring rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.
c) Market Risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments and all short term and long-term debt. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, FVTPL investments, trade payables, trade receivables, derivative financial instruments and other financial instruments. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company's exposure to market risk is a function of investing and borrowing activities.
i) Foreign exchange risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company's foreign exchange risk arises from its foreign currency borrowings and trade receivables and trade payables denominated in foreign currencies. The results of the Company's operations can be affected as the rupee appreciates/depreciates against these currencies. The Company enters into derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures The Company has a treasury team which monitors the foreign exchange fluctuations on a continuous basis and advises the management of any material adverse effect on the Company.
III. Capital Risk Management Policies and Objectives
The Company's objective while managing capital is to safeguard its ability to continue as a going concern (so that it is enabled to provide returns and create value for its shareholders, and benefits for other stakeholders), support business stability and growth, ensure adherence to the covenants and restrictions imposed by lenders and/or relevant laws and regulations, and maintain an optimal and efficient capital structure so as to reduce the cost of capital and to maximise shareholders value. In order to maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares, obtain new borrowings or sell assets to reduce debt, etc.
The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions or its business requirements and the requirements of the financial covenants.
The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. Net debt is calculated as interest bearing loans and borrowings less cash and cash equivalents.
1. Details of Benami property: No proceedings have been initiated or are pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 and the rules made thereunder.
2. Transaction with Struck Off Companies: The
Company do not have any transaction with companies struck off.
3. Charges with Registrar of Companies: The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
4. Details of crypto currency or virtual currency: The
Company has not traded or invested in Crypto currency or Virtual Currency during the current or previous year.
5. Utilisation of borrowed funds and share premium:
The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries): or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has 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:
(a) 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
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
6 Compliance with approved scheme(s) of arrangements: The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
7 Valuation of PPE, Intangible Assets and Investment property: The Company has not revalued its property, plant & equipment (including Right Of Use Assets) or intangible assets or both during the current or previous year.
8 Loans/advances to specified persons: There is no grant of loans/advances in the nature of loans repayable on demand.
9 Undisclosed income: There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
The Company has decided to present Exchange fluctuation (net) as a separate line item on the face of Statement of Profit and Loss, distinct from other income/other expenses. This change aims to provide stakeholders with better visibility into the impact of currency fluctuations on the Company's financial performance.
58. USE OF ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with the recognition and measurement principles of Ind AS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based
upon management's best knowledge of current events and actions, historical experience and other factors, including expectations of future events that are believed to be reasonable, actual results could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
A. Judgements in applying accounting policies
The judgements, apart from those involving estimations (see note below), that the Company has made in the process of
applying its accounting policies and that have a significant effect on the amounts recognised in these financial statements pertain to:
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 options 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 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. After considering current and future economic conditions, the Company has concluded that no changes are required to lease period relating to the existing lease contracts.
Investment:
The Company has invested more than 20% equity capital in the power SPV's namely FPEL Sunrise Private Limited and FP Crysta Energy Private Limited to qualify as a captive user.
As per the shareholding agreement, the Company shall not directly or indirectly take part in financial and operation policy decisions of the Power SPV's.
As per Ind AS 28, If an entity holds, directly or indirectly (e.g. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case.
Based on the above facts, the presumption of significant influence/participating in financial and operating decision making is not valid even though it holds 20% or more of the voting rights of another entity as the shareholding by the Company is only by virtue of compliance with electricity regulations with no intent of influencing the operations of the power SPV's. In view of the above investments are not considered as investment in associates.
B. Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of 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:
(i) Impairment of trade receivables:
The impairment provisions for trade receivables are based on lifetime expected credit loss based on a provision matrix. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. The provision matrix takes into
account historical credit loss experience and is adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the receivables that are due and the rates used in the provision matrix.
The Company uses judgment in making assumptions about risk of default and expected loss rates and selecting the inputs to the impairments calculation, based on the Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
(ii) Fair value measurements of financial instruments:
In estimating the fair value of a financial asset or a financial liability, the Company uses market-observable data to the extent it is available. Where active market quotes are not available, the management applies valuation techniques to determine the fair value of financial instruments. This involves developing estimates, assumptions and judgements consistent with how market participants would price the instrument.
(iii) Actuarial valuation:
The determination of Company's liability towards defined benefit obligation viz. gratuity and other long-term employee benefit obligation viz. long term compensated absences to employees is made through independent actuarial valuation including determination of amounts to be recognised in the Statement of Profit and Loss and in other comprehensive income. Such valuation depend upon assumptions determined after taking into account inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. Information about such valuation is provided in notes to the financial statements.
(iv) Claims, provisions and contingent liabilities:
the Company has ongoing litigations with various regulatory authorities and third parties. Where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the dispute can be made based on management's assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such accruals are by nature complex and can take number of years to resolve and can involve estimation uncertainty. These estimates could change substantially over time as new facts emerge and each dispute progresses. Information about such litigations is provided in notes to the financial statements.
(v) Income taxes:
Deferred tax assets are recognised for unused tax losses and unabsorbed depreciation carry forwards to the extent that it is probable that taxable profit will be available against which the losses/depreciation can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
(vi) Share-based payments:
Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. This requires a reassessment of the estimates used at the end of each reporting period. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in notes to the financial statements.
(vii) Useful lives of property, plant and equipment and intangible assets:
As described in the significant accounting policies, the Company determines and also reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period. Such lives are dependent upon an assessment of both the technical life of the assets and also their likely economic life, based on various internal and external factors including relative efficiency and operating costs. Accordingly, depreciable lives are reviewed annually using the best information available to the Management.
59. The figures for the previous years have been regrouped and/or reclassified wherever necessary to conform with the current year presentation.
As per our report of even date
for ARUN K. GUPTA & ASSOCIATES for R.N. MARWAH & CO LLP For and on behalf of the Board of Directors of
Firm Registration No. 000605N Firm Registration Filatex India Limited
Chartered Accountants No. 001211N/N500019
Chartered Accountants
SACHIN KUMAR SUNIL NARWAL MADHU SUDHAN BHAGERIA PURRSHOTTAM BHAGGERIA
Partner Partner Chairman & Managing Director Joint Managing Director
Membership No. 503204 Membership DIN: 00021934 DIN: 00017938
No. 511190
MADHAV BHAGERIA RAMAN KUMAR JHA
Joint Managing Director & CFO Company Secretary
DIN: 00021953
Date: April 30, 2024
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