3.4 g Provision and contingencies
The company estimates the provisions that have present obligation as a result of past events and it is probable that out flow of resources will be required to
settle the obligations. These provisions are reviewed at the end of each reporting period and or adjusted to reflect the current best estimates.
The company uses significant judgements to assess contingent liabilities . Contingent liabilities are disclosed when there is possible obligation arising from past events, the existance of which will be confirmed by the occurance or non occurance of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events where it is either not probable that an out flow of resoures will be required to settle the obligation or realiable estimate of the amount cannot be made. Contingent assets are disclosed in the standalone financial statements but not recognised.
4 Recent accounting pronouncements :
On 31st March 2023, The Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules 2023, notifying the requirement of disclosure of material accounting policy information in the financial statements. The said change is effective and applicable for these financial statements. Presentation of Material Accounting policies information, disclosures required under the applicable standards and explanatory information are given under the respective Notes to Accounts.
Note : 9 Leases
Accounting Policy :
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration.
i) Assets taken under lease
a) The Company recognises Right-of-Use (ROU) asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the ROU asset is measured in accordance with the measurement criteria as per Ind AS 116. The ROU asset is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of ROU asset. The estimated useful lives of ROU assets are determined on the same basis as those of property, plant and equipment. ROU assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
b) The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments. The company recognises the amount of the re-measurement of lease liability in accordance with the requirements under Ind AS 116.
c) The Company has elected not to apply the requirements of Ind AS 116 leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense.
ii) Assets given on lease
At the inception of the lease the Company classifies each of its leases as either an operating lease or a finance lease. The Company recognises lease payments received under operating leases as income. In case of a finance lease, finance income is recognised over the lease term based on a pattern reflecting a constant periodic rate of return on the lessor's net investment in the lease.
Disclosure as per IND-AS 116
( i ) The Company has adopted Ind AS 116, effective annual reporting period beginning April 1,2019 and applied the standard to its leases, retrospectively, with the cumulative effect of initially applying the standard, recognised on the date of initial application (April 1,2019). The Company has also used the practical expedient provided by the standard when applying Ind AS 116 to leases previously classified as operating leases under Ind AS 17 and therefore, has not reassessed whether a contract, is or contains a lease, at the date of initial application, relied on its assessment of whether leases are onerous, applying Ind AS 37 immediately before the date of initial application. The Company has used a single discount rate to a portfolio of leases with similar characteristics. On transition, the Company recognised a lease liability measured at the present value of the remaining lease payments. The right-of-use asset is recognised at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before the date of initial application using the practical expedient provided by the standard.
10.3 HBL Tonbo Private Limited (HTPL)
HBL Tonbo Private Limited (HTPL) was incorporated by HBL Power Systems Limited and Tonbo Imaging India Private Limited incorporated on September 12, 2022 with a sharing ratio of 51:49. There were no commercial operations since inception of HTPL. An application under Section 248 (2) of the Companies Act, 2013 was made during FY 22-23 for striking off the name of the Company and is under process with Ministry of Corporate Affairs.In view of the same, a provision for diminution of 100% value of investment in equity shares of HTPL of C51,000 has been made during the previous reporting period.
Torquedrive Technologies Private Limited (TTL) :
In view of the permenant diminution of the investments in TTL, an amount of C300 lacs had been provided for diminution in value of investments.
TTL Electric Fuel Private Limited (TTL EFL) :
During the year HBL acquired the shareholding of TTL in its subsidary TTL EFL at the fair value of C5/- per equity share of C10 face value. HBL also acquired the preference instruments held by TTL in TTL EFL in its entirety along with the outstanding accrued dividends on the optionally convertible redemable preference shares.
Tonbo Imaging India Private Limited (Tonbo):
During the year the company had acquired 1,12,156 Compulsorily Convertible Preference Shares of Tonbo at C86.67 Crs on fair value basis having face value of C100 each at a premium of C7,628/-- per share. These CCPS carry a cumulative coupon rate of 0.01% and are convertible at the option of the Company.
Note : 11 Financial instruments (financial assets and financial liabilities):
Accounting policy :
i) All financial instruments are recognized initially at fair value. The classification of financial Instruments depends on the objective of the business model for which it is held and the contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. For the purpose of subsequent measurement, financial instruments of the Company are classified into (a) Non-derivative financial instruments and (b) Derivative financial instruments.
ii) Non-derivative financial instruments
a) Security Deposits, cash and cash equivalents, employee and other advances, trade receivables and eligible current and non-current financial assets are classified as financial assets under this clause.
b) Loans and borrowings, trade and other payables including deposits collected from various parties and eligible current and non-current financial liabilities are classified as financial liabilities under this clause.
c) Financial instruments are subsequently carried at amortized cost wherever applicable using Effective Interest Rate (EIR) method less impairment loss.
d) Transaction costs that are attributable to the financial instruments recognized at amortized cost are included in the fair value of such instruments.
iii) Derivative financial instruments
a) Derivative financial assets and liabilities are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date
b) Changes in the fair value of any derivative asset or liability are recognized immediately in the income statement and are included in other income or expense.
c) Cash flow hedge: Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognized in other comprehensive income and presented within equity in the cash flow hedging reserve to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognized in the statement of profit and loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the statement of profit and loss upon the occurence of the related forecasted transaction.
(iv) Impairment
i) Financial assets
a) The Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
Financial assets that are debt instruments, and are measured at amortized cost wherever applicable for e.g., loans, debt securities, deposits, and bank balance.
b) Trade receivables
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component. The application of simplified approach does not require the company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECL's at each reporting date, right from its initial recognition.
ii) Non - financial assets
The company assesses at each reporting date whether there is any objective evidence that a non-financial asset or a group of non-financial assets is impaired. If any such indication exists, the Company estimates the amount of impairment loss.
Disclosure in accordance with Ind-AS-107 - financial instruments A) Capital management
The Company manages its capital structure and make adjustments to it, in light of changes in economic condition. To mainintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholder, or issue new shares. No changes were made in the objectives, policies and procedures in the past three years.
The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, borrowings, trade and other payables, other liabilities, less cash and cash equivalents. Capital includes Issued equity capital, securities premium and all other equity reserves attributable to the equity holders.
C) Financial risk management Financial risk factors
The Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include market risk, credit risk and liquidity risk. The management reviews and designs policies and procedures to minimise potential adverse effects on its financial performance. The primary market risk to the company is foreign exchange risk. The companies exposure to credit risk is influenced mainly by the customers repayments. The companies exposure to liquidity risks are on account of interest rate risk on borrowings. The following sections provide details regarding the companies exposure to the above mentioned financial risks and the management thereof.
Market risk
The Company operates internationally and a portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in those countires. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company's operations are affected as the rupee appreciates/ depreciates against these currencies. The company leaves exchange rate risk with regard to foreign exposures unhedged when the local currency is depreciating against the foreign currency and hedges this risk when the local currency is appreciating against the foreign currency. Currently the foreign exchange risk of the company is covered through natural hedge and the Company uses the foreign currency denominated accounts to mitigate the exchange rate variation.
Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to C38,565.17 lakhs and C32,353.60 lakhs as of March 31,2024 and March 31,2023, respectively . Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India and overseas. Credit risk has always been managed by the company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the company uses expected credit loss model to assess the impairment loss or gain. The company uses a provision matrix to compute the expected credit loss allowance for trade receivables. The provision matrix takes into account available external and internal credit risk factors and the companie's historical experience for customers.
Credit risk on cash and cash equivalents is limited as the company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies with no history of default.
Liquidity risk
The company's principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The company also has long term and short term borrowings from banks and financial institutions. Term loans are project specific and for refinancing of capital expenditures. Short term loans repayable on demand from banks are obtained for the working capital requirements of the company.
As of March 31, 2024, the Company had a working capital of C70,410.03 lakhs including cash and cash equivalents of C22,057.47 lakhs.
As of March 31, 2023, the Company had a working capital of C59,144.82 lakhs including cash and cash equivalents of C12,995.77 lakhs .
Note : 31 Revenue recognition Accounting policy:
i) Revenue from contracts with customers that meet the recognition criteria under paragraph 9 of Ind AS 115 are recognised when (or as) a performance obligation is satisfied by transferring a promised good or service to a customer, for the amount of the transaction price that is allocated to that performance obligation.
ii) Satisfaction of a performance obligation and recognition of revenue over time is followed when, transfer of control of a good or service are made over time and, if one of the following criteria is met:
(a) the customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs.
(b) the entity's performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced; or
(c) the entity's performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.
Performance obligations that are not satisfied over time are treated as performance obligations satisfied at a point in time which in case of goods are upon their despatch/delivery to domestic customers as per terms of sale and on the basis of proof of export/ delivery for export customers as per terms of sale and in case of services are upon completion of service.
There are no significant items of revenue to be recognised against performance obligation satisfied in previous year due to change in transaction price.
Timing of satisfaction of performance obligations
For each performance obligation satisfied over time the company recognises revenue over time by measuring the progress towards complete satisfaction of that performance obligation. The objective when measuring progress is to depict the company's performance in transferring control of goods or services promised to a customer (ie the satisfaction of an entity's performance obligation).
The right to payment for performance completed to date does not need to be for a fixed amount. However, at all times throughout the duration of the contract, the company is entitled to an amount that at least compensates for performance completed to date if the contract is terminated by the customer or another party for reasons other than the company's failure to perform as promised. Output method is used for measurement where the units produced or units delivered faithfully depict the company's performance in satisfying a performance obligation and, at the end of the reporting period, the company's performance has produced work in progress or finished goods that are not controlled by the customer.
Input method is used to recognise revenue where the company's efforts or inputs in satisfaction of a performance obligation (for example, resources consumed, labour hours expended, costs incurred, time elapsed or machine hours used) is relative to the total expected inputs to the satisfaction of that performance obligation and depict the company's performance in transferring control of goods or services to the customer.
Note : 32 Other income Accounting Policy :
i) Claims against outside agencies are accounted for on certainty of realization.
ii) Interest income is recognized on an accrual basis using the effective interest rate (EIR) method. Dividends, are recognized at the time the right to receive is established.
iii) Export incentives under various schemes are recognized as income on certainty of realization.
iv) Foreign currency transactions
a) Transactions relating to non-monetary items and purchase and sale of goods/services denominated in foreign currency are recorded at the prevailing exchange rate or a rate that approximates to the actual rate on the date of transaction.
b) Assets & liabilities in the nature of monetary items denominated in foreign currencies are translated and restated at exchange rates prevailing at the end of the reporting period.
Note : 35 Employee benefits Accounting policy :
i) Short term benefits:
All employee benefits falling due within twelve months of rendering the service are classified as short term employee benefits. The cost of the benefits like salaries, wages, medical, leave travel assistance, short term compensated absences, bonus, exgratia, etc. is recognised as an expense in the period in which the employee renders the related service.
ii) Post-employment benefits:
A) Defined contribution plans:
The contribution paid/payable under provident fund scheme, ESI scheme and employee pension scheme is recognised as expenditure in the period in which the employee renders the related service.
B) Defined benefit plans:
The Company's obligation towards Gratuity is a defined benefit plan. The present value of the estimated future cash flows of the obligation under such plan is determined based on actuarial valuation using the Projected Unit Credit (PUC) method. Any difference between the interest income on plan assets and the return actually achieved and any changes in the liabilities over the year due to changes in actuarial assumptions or experienced adjustments within the plan are recognized immediately in other comprehensive income and subsequently not reclassified to the statement of profit and loss.
All defined benefit plan obligations are determined based on valuation as at the end of the reporting period, made by independent actuary using the PUC Method. The classification of the Company's net obligation into current and non-current is as per the actuarial valuation report.
iii) Long term employee benefits:
The obligation for long term employee benefits such as long term compensated absences, is determined and recognised in the manner similar to that stated in the defined benefit plan.
Note : 41 Current tax and deferred tax Accounting Policy :
i) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
ii) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profits differ from the profit as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are not taxable or deductible. The Company's current tax is calculated using tax rates that have been enacted or substantively enacted upto the end of the reporting period.
iii) Deferred tax
Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
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 asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
iv) Current and deferred tax for the year
Current and deferred tax are recognised in statement of profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Income tax and Sales tax assessments:
Income tax:
Taxes were paid in accordance with income tax returns filed and were charged off to revenue. In respect of pending assessments, the liability, if any, that may arise upon completion of assessments is not ascertainable at this stage. During the year, in the income tax assessments, there were no transactions that were not recorded in the books of accounts but have been surrenderd or disclosed as income.
Sales tax:
The Company has paid/provided for VAT/CST as per the records and returns filed upto September 30, 2017 after considering the input VAT on purchases and also on the basis of concessional forms expected to be received from customers. The related assessments for various years are pending at various stages in different states. The liability, if any, in respect of such pending assessments is not ascertainable at this stage.
* The erstwhile promoters of M/s. SCIL Infracon Private Limited filed a petition with the Sole Arbitrator making several new claims against the Company and others. The Arbitration award allowed, only one claim of theirs, relating to Unsecured Loans of C2.08 cr to be paid along with interest of 12% p.a., effective from 31.01.2011 till the date of the payment. On an appeal preferred by the Company against the arbitral award, the Hon'ble Civil Court granted stay on the operation of the award on condition of depositing 50% of the amount awarded with interest till date of the order. The Company deposited the 50% amount along with interest amounting to C2.71 cr on 17th April 2023 in compliance of the Hon'ble Civil Court's order as modified by the Hon'ble High Court. However, the appeal against the arbitral award is yet to be decided by the Hon'ble Civil Court and the matter is still sub-judice. The company's legal counsel, based on the facts of the case, opined that the claim is not admissible and is likely to be dismissed by the Hon'ble City Civil Court. Based on the above facts, the claim is not acknowledged as debt against the company and is appropriately reported as a contingent liability.
The Company has other commitments, for purchase / sale orders which are issued after considering requirements per operating cycle for purchase / sale of goods and services, employee benefits in the normal course of business. The company does not have any long term committments or material non-cancellable contractual committments / contracts, which might have material impact on the financial statements.
43.3 Commitment towards dividend
The Board in its meeting held on May 27, 2024 has recommended a dividend of C0.50 paise per Equity Share of C1/- each for the financial year ended March 31, 2024. The proposal is subject to the approval of shareholders at the annual general meeting to be held, and if approved would result in a cash outflow of C1,385.97 lakhs towards dividend.
43.4 Contingent assets:
During the year 2011, some assets at one of the plants of the Company, were damaged due to heavy rains. The Company's claim for the loss was repudiated by the insurers. A case was filed for recovery of the claim of C234.60 lakhs towards loss sufferred apart from interest thereon. The matter is sub judice.
During the year 2014, there was a heavy damage to the assets and inventory at two plants of the Company, due to hud-hud cyclone. The Company's claim for the resultant losses was partly allowed by the Insurers and the balance claims were repudiated. The matter
relating to the claim of C400 lakhs towards damage to assets and inventory and C921.75 lakhs towards loss of profits, apart from interest thereon, on being referred to arbitration was partly awarded infavour of the company. Subsequently on an appeal by the insurer further proceedings of arbitration were stayed by the commercial Court. The matter is sub judice.
43.5 Confirmation of balances
The Company had sent letters seeking confirmation of balances to various parties under trade payables, trade receivables, advance to suppliers and others and advance from customers. Based on the confirmations received and upon proper review, corrective actions have been initiated and the amounts have been trued up, accounting adjustments have been made wherever found necessary. Such confirmations are awaited from some parties, comprising of government departments and public sector undertakings.
43.6 In the opinion of the board, assets other than fixed assets and non-current investments have a value, on realisation in the ordinary course of business, which is at least equal to the amount at which they are stated in the financial statements.
43.7 Relationship with Struck off Companies:
The Company has attempted machine matching of the names of its active customers/vendors with the list of "Struck Off companies" hosted in the MCA website. Since no matches were found during this exercise, there are no transactions / relationships to report.
43.10 Disclosure as per Ind AS-108 - Operating segments
This financial report contains both the consolidated financial statements of parent, that is within the scope of this Ind AS, as well as the parent's separate financial statements. Therefore, in accordance with Para 4 of Ind AS 108, segment information is given in the consolidated financial statements.
43.11 Disclosures relating to Corporate Social Responsibility (CSR)
As per section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend atleast two percent of its average net profits for the immediately preceding three years, on Corporate Social Responsibility (CSR ) activities. The areas for CSR activities are eradication of hunger and malnutrition, promotion of education, art and culture, health care, destitute care and rehabilitation, environment sustainability, disaster relief and rural development projects. A CSR committee has been formed by the Company as per the Act. The funds were utilized through the year on these activities which are specified in schedule VII of the Companies Act, 2013.
43.12 Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.
As per our report of even date annexed
For LNR Associates On behalf of the board
Chartered Accountants FRN No. 05381S
Raghuram Vedula Dr A J Prasad Kavita Prasad Aluru
Partner Chairman & Managing Director Director
M.No:242883 DIN :00057275 DIN :00319292
UDIN : 24242883BKGWEZ2547
Place : Hyderabad E Sairam GBS Naidu Place : Hyderabad
Date : May 27, 2024 Chief Financial Officer Company Secretary Date : May 27, 2024
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