(x) Contingent Liability, Contingent Asset and Provisions
Contingent liability
Contingent liabilities are possible obligations that arise from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote.
Contingent assets
Contingent assets are possible assets that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company.
Provisions
The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources, and a reliable estimate can be made of the amount of obligation.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
(xi) Cash and cash equivalents
Cash and cash equivalents include cash on hand, other short-term, highly liquid investments 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, and bank overdrafts. Bank overdrafts are shown within borrowings in current financial liabilities in the balance sheet.
(xii) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average numbers of equity shares outstanding during the period are adjusted for events such as bonus issue, share split or consolidation of shares.
For calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted into equity shares as at the beginning of the period, unless they have been issued at a later date.
(xiii) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
In accordance with Ind AS 108 - Operating Segments, the operating segments used to present segment information are identified on the basis of internal reports used by the Company’s Management to allocate resources to the segments and assess their performance.
Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.
The operating segments have been identified on the basis of the nature of products/ services. Further:
1. Segment revenue includes sales and other income directly identifiable with / allocable to the segment.
2. Expenses that are directly identifiable with / allocable to segments are considered for determining the segment result. Expenses which relate to the Company as a whole and not allocable to segments are included under unallowable expenditure.
3. Income which relates to the Company as a whole and not allocable to segments is included in unallowable income.
4. Segment assets and liabilities include those directly identifiable with the respective segments. Unallowable assets and liabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment.
The Board of Director(s) are collectively the Company’s ‘Chief Operating Decision Maker’ or ‘CODM’ within the meaning of Ind AS 108. Refer Note 41 for segment information.
(xiv) Leases
Company as a lessee
The Company’s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. 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. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
♦ the contract involves the use of an identified asset
♦ the Company has substantially all the economic benefits from use of the asset through the period of the lease and
♦ the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a right-of-use (ROU) asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (shortterm leases) and low value leases. For these short-term and low-value leases, the Company recognises the lease payments as an operating expense on a straight- line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The ROU assets are initially recognised at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortised cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination option.
Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Company as a lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the ROU asset arising from the head lease.
For operating leases, rental income is recognised on a straight-line basis over the term of the relevant lease.
c. Terms/rights attached to equity share
Voting
Each holder of equity shares is entitled to one vote per share held.
Dividends
The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in ensuing Annual general meeting except in the case where interim dividend is distributed.
Liquidation
In the event of liquidation of the Company, the holders of equity shares shall be entitled to receive all of the remaining assets of the Company after distribution of all preferential amounts, if any. Such distribution amounts will be in proportion to the number of equity shares held by the shareholders.
In the event of liquidation of the Company, the holders of equity shares shall be entitled to receive all of the remaining assets of the Company after distribution of all preferential amounts, if any. Such distribution amounts will be in proportion to the number of equity shares held by the shareholders.
d. The Company does not have any Holding Company.
(ii) Vehicle Loan
Axis Bank Limited
Vehicle Loan obtained from Axis Bank Limited amounting to H17.00 millions which is secured against the respective vehicle and is repayable in 48 equal instalments commencing from October 10, 2019. Rate of interest is 9.15% p.a, has been prepaid during the year.
HDFC Bank Limited
Vehicle Loan obtained from HDFC Bank Limited amounting to H1.67 millions which is secured against respective vehicle and is repayable in 39 equal instalments commencing from April 07, 2021. Rate of interest is 7.45% p.a. and balance outstanding as at March 31, 2024 is H0.14 millions (March 31, 2023 is H0.69 millions), which is repayable in next 03 months.
Vehicle Loan obtained from HDFC Bank Limited amounting to H1.53 millions which is secured against respective vehicle and is repayable in 39 equal instalments commencing from April 07, 2021. Rate of interest is 7.45% p.a. and balance outstanding as at March 31, 2024 is H0.13 millions (March 31, 2023 is H0.63 millions), which is repayable in next 03 months.
For the year ended March 31, 2023 Secured loan
(i) Term Loan
IndusInd Bank Ltd
The Company has availed WCTL (Sanctioned Limit H12.60 Million) from IndusInd Bank Ltd, which are secured against first and exclusive charge on the hypothecation of the entire movable fixed assets, first pari passu charge on hypothecation of all current assets (charge shared with HDFC Bank Ltd). Also, there is a collateral guarantee in form of first and exclusive equitable mortgage of industrial land and building of the Company situated at Haridwar. Further, there is personal guarantees of Directors and one of close relative of directors.
The tenure for the loan is 36 months to be fully paid by 31st December, 2024. The loan carries floating rate of interest of MIBOR(daily) 2% at monthly rest.
(ii) Vehicle Loan
HDFC Bank Limited
Vehicle Loan obtained from HDFC Bank Limited amounting to H1.67 millions which is secured against respective vehicle and is repayable in 39 equal instalments commencing from April 07, 2021. Rate of interest is 7.45% p.a. and balance outstanding as at March 31, 2023 is H0.69 millions (March 31, 2022 is H1.20 millions) out of which H0.55 millions is repayable in next 12 months.
Vehicle Loan obtained from HDFC Bank Limited amounting to H1.53 millions which is secured against respective vehicle and is repayable in 39 equal instalments commencing from April 07, 2021. Rate of interest is 7.45% p.a. and balance outstanding as at March 31, 2023 is H0.63 millions (March 31, 2022 is H1.10 millions) out of which H0.50 millions is repayable in next 12 months.
Cash Credit
IndusInd Bank Ltd
The Company has availed cash credit facility (Sanctioned Limit H96.50 million) from IndusInd Bank Ltd, which are secured against first and exclusive charge on the hypothecation of the entire movable fixed assets, first pari passu charge on hypothecation of all current assets (charge shared with HDFC Bank Ltd), the limit has been paid and closed during the year.
HDFC Bank Ltd
The company has also availed Cash Credit facility / LC limit (Sanctioned Limit H250.00 million) from HDFC Bank Ltd, Which is secured against pari passu charge on hypothecation of stock and debtors. Also, there is a collateral guarantee in form of industrial property situated at Noida owned by IKIO Solutions Pvt Ltd (A Related Party). Further, there are personal guarantees of Directors.
The loan carries a floating rate of interest of 8.35% per annum (Repo rate Spread).
IndusInd Bank Ltd
The Company has availed cash credit facility (Sanctioned Limit H96.50 Million) from IndusInd Bank Ltd, which are secured against first and exclusive charge on the hypothecation of the entire movable fixed assets, first pari passu charge on hypothecation of all current assets (charge shared with HDFC Bank Ltd). Also, there is a collateral guarantee in form of first and exclusive equitable mortgage of industrial land and building of the Company situated at Haridwar. Further, there is personal guarantees of Directors and one of close relative of directors.
The loan carries a floating rate of interest of 7.00% per annum linked with 6 month CD.
HDFC Bank Ltd
The company has also availed Cash Credit facility / LC limit (Sanctioned Limit H250.00 Million) from HDFC Bank Ltd, Which is secured against pari passu charge on hypothecation of stock and debtors (charge shared with IndusInd Bank Ltd). Also, there is a collateral guarantee in form of industrial property situated at Noida owned by IKIO Solutions Private Limited (A Related Party). Further, there are personal guarantees of Directors.
The loan carries a floating rate of interest of 8.35% per annum (Repo rate Spread).
2. Corporate Social Responsibility expenses
As per section 135 of the Companies Act, 2013, a Company, meeting the applicability threshold, needs to spend at least 2% of average net profit for the immediately preceding three financial year on Corporate Social Responsibility (‘CSR’) activities. The area for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief and rural development projects. A CSR committee has been formed by the group as per the Act.
a) Gross amount required to be spent by the company during the year was H6.60 millions.
b) Amount spent during the year was H6.60 millions.
c) There are no shortfalls at the end of the year.
d) The company does not have any ongoing project as at March 31, 2024.
41 SEGMENT REPORTING
A. Basis for Segmentation
An operating segment is a component that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the other components, and for which discrete financial information is available.
The board of directors have been identified as the Chief Operating Decision Maker (‘CODM’), since they are responsible for all major decision w.r.t. the preparation and execution of business plan, preparation of budget, planning, expansion, alliance, joint venture, merger and acquisition, and expansion of any facility.
The Company’s board reviews the results of each segment on a quarterly basis. The company’s board of directors uses Profit after tax (‘PAT’) to assess the performance of the operating segments. Accordingly, there is only one reportable segment for the Company which is "Sale of Product” , hence, no specific disclosures have been made.
Entity wide disclosures
B. Information about reportable segments
The Company deals in one business segment namely Manufacturing of LED Lighting therefore, product wise revenue disclosures are not applicable to the Company.
i) Information about geographical areas
Company operates primarily under a single geographic location i.e. India and accordingly, there are no separate reportable geographical segments.
C. Revenue from Major customer
In IKIO lighting limited, Revenue generated from one customer amounting to H 2175.90 Million (March 31, 2023: H 2257.98 million).
2. Defined benefit plan:
Gratuity
The Company operates a post-employment defined benefit plan for Gratuity. This plan entitles an employee to receive half month’s salary for each year of completed service at the time of retirement/exit. The gratuity liability is entirely funded.
The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognise each period of service as giving rise to additional employee benefit entitlement and measures each unit separately to build up the final obligation.
The most recent actuarial valuation of present value of the defined benefit obligation for gratuity were carried out as at March 31, 2024. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
Level 1: It includes financial instruments measured using quoted prices.
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 and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. The fair value of financial assets and liabilities included in Level 3 is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes of similar instruments.
The Company’s borrowings have been contracted at floating rates of interest. Accordingly, the carrying value of such borrowings (including interest accrued but not due) which approximates fair value.
The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other financial assets and liabilities, approximates the fair values, due to their short-term nature. Fair value of non-current financial assets which includes bank deposits (due for maturity after twelve months from the reporting date) and security deposits is similar to the carrying value as there is no significant differences between carrying value and fair value.
The fair value for security deposits were calculated based on discounted cash flows using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.
Valuation processes
The Management performs the valuations of financial assets and liabilities required for financial reporting purposes on a periodic basis, including level 3 fair values.
b) Financial risk management
The Company has exposure to the following risks arising from financial instruments:
• Credit risk
• Liquidity risk
• Interest rate risk
Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board of Directors have authorised senior management to establish the processes and ensure control over risks through the mechanism of properly defined framework in line with the businesses of the company.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risks limits and controls, to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and the Company’s activities.
The Company has policies covering specific areas, such as interest rate risk, foreign currency risk, other price risk, credit risk, liquidity risk, and the use of derivative and non-derivative financial instruments. Compliance with policies and exposure limits is reviewed on a continuous basis.
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.
The Company’s credit risk is primarily to the amount due from customer and investments. The Company maintains a defined credit policy and monitors the exposures to these credit risks on an ongoing basis. Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with scheduled commercial banks with high credit ratings assigned by domestic credit rating agencies.
The maximum exposure to the credit risk at the reporting date is primarily from trade receivables. Trade receivables are unsecured and are derived from revenue earned from customers primarily located in India. The Company does monitor the economic environment in which it operates. The Company manages its Credit risk through credit approvals, establishing credit limits and continuously monitoring credit worthiness of customers to which the Company grants credit terms in the normal course of business.
On adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company establishes an allowance for impairment that represents its expected credit losses in respect of trade receivable. The management uses a simplified approach (i.e. based on lifetime ECL) for the purpose of impairment loss allowance.
ii. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are fallen due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company believes that its liquidity position, including total cash (including bank deposits under lien and excluding interest accrued but not due) of H1,844.56 millions as at March 31, 2024 (March 31, 2023 H0.70 millions) and the anticipated future internally generated funds from operations will enable it to meet its future known obligations in the ordinary course of business.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Company’s policy is to regularly monitor its liquidity requirements to ensure that it maintains sufficient reserves of cash and funding from group companies to meet its liquidity requirements in the short and long term.
The Company’s liquidity management process as monitored by management, includes the following:
- Day to day funding, managed by monitoring future cash flows to ensure that requirements can be met.
- Maintaining rolling forecasts of the Company’s liquidity position on the basis of expected cash flows.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and includes interest accrued but not due on borrowings.
iii. Market Risk
Market risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, the Company mainly has exposure to two type of market risk namely: currency risk and interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Currency risk
Currency risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed to the effects of fluctuation in the prevailing foreign currency exchange rates on its financial position and cash flows to the extent of earnings and expenses in foreign currencies. Exposure arises primarily due to exchange rate fluctuations between the functional currency and other currencies from the Company’s operating, investing and financing activities.
Exposure to currency risk
The summary of quantitative data about the company exposure to currency risk, as expressed in Indian Rupees as at March 31, 2024 and March 31, 2023
Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk.
Exposure to interest rate risk
The Company’s interest rate risk arises majorly from the term loans from banks carrying floating rate of interest. These obligations exposes the Company to cash flow interest rate risk. The exposure of the Company’s borrowing to interest rate changes as reported to the management at the end of the reporting period are as follows:
47 CAPITAL MANAGEMENT
For the purpose of the Company’s capital management, capital includes issued equity share capital and all other equity reserves attributable to the equity holders of the Company.
Management assesses the Company’s capital requirements in order to maintain an efficient overall financing structure. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
To maintain or adjust the capital structure, the Company may return capital to shareholders, raise new debt or issue new shares.
The Company monitors capital on the basis of the debt to total equity, which is calculated as interestbearing debts divided by total equity (equity attributable to owners of the parent).
Notes:-
i. Current Ratio:- Increased due to IPO proceeds received and invested in current Fixed Deposits and repayment of current borrowings in the current year.
ii. Debt Equity Ratio: - In current year there was fresh issue of shares which increase equity of the company, proceeds from issue were used for repayment of loans.
iii. Debt Service Coverage Ratio:- The Ratio has increased due to repayment in borrowings from IPO proceeds.
iv. Return on Equity Ratio:- Equity raised in IPO, not yet utilised and has not starting earning yet, which resulted decrease in ROE.
v. Net Capital Turnover Ratio:- The ratio has decreased mainly due to increase in average working capital which includes unutilised IPO money, parked in term deposits and interest accrued thereon.
vi. Return on Capital Employed (pre tax):- Equity raised in IPO, not yet utilised and has not starting earning yet, which resulted decrease in ROCE.
50 DETAILS WITH RESPECT TO THE BENAMI PROPERTIES:
No proceedings have been initiated or pending against the entity under the Benami Transactions (prohibition) Act, 1988 for the year ended March 31, 2024 and year ended March 31, 2023.
51 SCHEME OF AMALGAMATION OF FINE TECHNOLOGIES (INDIA) PRIVATE LIMITED WITH ROYALUX LIGHTING PRIVATE LIMITED
Pursuant to and in terms of the Scheme of Amalgamation by and among Fine Technologies (India) Private Limited (Subsidiary Company) as Transferor Company, Royalux Lighting Private Limited as Transferee Company (Step Down Subsidiary Company), under Sections 233 of the Companies Act, 2013, and other applicable provisions of the Act, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“Scheme”), which was approved by the Regional Director (NR) vide its order dated March 18, 2024 which came into effect from April 01, 2023:
• As per the approved scheme, existing shareholders of Fine Technologies (India) Private Limited will receive 69 equity shares of Transferee Company for every 1 equity share held in Transferor Company as a purchase consideration.
• The Transferee Company issued and allotted, an aggregate of 16538265 fully paid-up equity shares of H10/- each, to the Company on April 20, 2024.
• Pursuant to the scheme, Royalux Lighting Private Limited becomes a Wholly Owned Subsidiary of the Company.
52 UNDISCLOSED INCOME
There is no such income which has not been disclosed in the books of accounts. No such income is surrendered or disclosed as income during the year in the tax assessments under Income Tax Act, 1961.
55 WILFUL DEFAULTER:
No bank or financial institution has declared the company as "Wilful defaulter”.
56 A. RELATIONSHIP WITH STRUCK OFF COMPANIES:
No transaction has been made with the company struck off under section 248 of The Companies Act, 2013 or section 560 of Companies Act, 1956 during the year ended March 31, 2024 and year ended March 31, 2023.
B. REGISTRATION OF CHARGES OR SATISFACTION WITH REGISTRAR OF COMPANIES:
All applicable cases where registration of charges or satisfaction is required with Registrar of Companies have been done. No registration or satisfaction is pending for the year ended March 31, 2024 and year ended March 31, 2023.
57 RECONCILIATION BETWEEN THE OPENING AND CLOSING BALANCES IN THE BALANCE SHEET FOR LIABILITIES ARISING FROM FINANCING ACTIVITIES:
59 LOAN OR ADVANCES GRANTED TO THE PROMOTERS, DIRECTORS AND KMPS AND THE RELATED PARTIES:
No loan or advances in the nature of loans are granted to the promoters, directors, key managerial persons and the related parties (as defined under Companies Act, 2013), either severally or jointly with any other person that are:
a) Repayable on demand or
b) Without specifying any terms or period of repayment
60 Fig ures less than H5000 are disclosed as 0.00
61 Previous year’s figures have been regrouped / reclassified as per the current year presentation for the purpose of comparability.
The accompanying notes are an integral part of these financial statements.
As per our report of even date.
For BGJC & Associates LLP For and on behalf of the Board of Directors of
Chartered Accountants IKIO Lighting Limited
Firm’s Registration No.: 003304N/N500056
Pranav Jain Hardeep Singh Surmeet Kaur
Partner Managing Director Whole Time Director
Membership No. 098308 DIN: 00118729 DIN: 00118695
Subhash Agrawal Sandeep Agarwal
Place: Noida Chief Financial Officer Company Secretary
Date: May 24, 2024 M. No.: A66255
|