o. Provisions, contingent liabilities and contingent assets
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future obligation at pre-tax rate that reflects current market assessments of the time value of money risks specific to liability. They are not discounted where they are assessed as current in nature. Provisions are not made for future operating losses.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly with in the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or reliable estimate of the amount cannot be made. Therefore, in order to determine the amount to be recognised as a liability or to be disclosed as a contingent liability, in each case, is inherently subjective, and needs careful evaluation and judgement to be applied by the management. In case of provision for litigations, the judgements involved are with respect to the potential exposure of each litigation and the likelihood and/or timing of cash outflows from the Company, and requires interpretation of laws and past legal rulings.
Contingent assets are not recognised but disclosed in the financial statements when an inflow of economic benefits is probable.
p. Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognised in respect of carried forward tax losses and tax credits.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of a history of recent losses, the Company recognises a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realised.
The Company's ability to recover the deferred tax assets is assessed by the management at the close of each financial year which depends upon the forecasts of the future results and taxable profits that Company expects to earn within the period by which such brought forward losses may be adjusted against the taxable profits as governed by the Income-tax Act, 1961. Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date and are recognised/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset deferred tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle deferred tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
q. Investment in subsidiaries
The Company has elected to recognise its investments in subsidiaries at cost in accordance with the option available in Ind AS 27, 'Separate Financial Statements', less accumulated impairment loss, if any. Cost represents amount paid for acquisition of the said investments.
The Company has elected to continue with the carrying value for all of its investments in subsidiaries as recognised in the financial statements. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to profit or loss. Investment in equity shares of subsidiaries are carried at cost.
r. Measurement of profit before depreciation and amortisation expense, finance costs, foreign exchange fluctuation and exceptional item
The Company have elected to present profit before depreciation and amortisation expense, finance costs, foreign exchange fluctuation and exceptional item as a separate line item on the face of the statement of Profit and Loss.
I n the measurement, the Company includes interest income but does not include depreciation and amortisation expense, finance costs, foreign exchange fluctuation, exceptional item and tax expense.
s. Amendment to Accounting Standards (Ind AS) issued but not yet effective
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. During the year ended 31st March, 2024 MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
38. Employee benefits a) Defined contribution plan
An amount of H5.88 Crore [31 March 2023: H6.37 Crore] for the year has been recognised as an expense in respect of the Company's contributions towards Provident Fund, an amount of H0.09 Crore [31 March 2023: H0.22 Crore] for the year has been recognised as an expense in respect of Company's contributions towards Employee State Insurance and an amount of H0.33 Crore [31 March 2023: H0.29 Crore] for the year has been recognised as an expense in respect of the Company's contributions towards National Pension Scheme, which are deposited with the government authorities and have been included under employee benefit expenses in the Statement of Profit and Loss.
40. Segment information Basis of segmentation:
The Company's primary business segment is reflected based on principal business activities carried on by the Company. Chairman and Managing Director has been identified as being the Chief Operating Decision Maker ('CODM') and evaluates the Company's performance and allocates resources based on analysis of the various performance indicators of the Company as a single unit. As per Indian Accounting Standard 108, Operating Segments, as notified under the Companies (Indian Accounting Standards) Rules 2015, the Company operates in one reportable business segment i.e., manufacturing and trading of polyester goods.
Geographical information:
The geographical information analyses the Company's revenue and trade receivables from such revenue in India and other countries. In presenting the geographical information, segment revenue and receivables has been based on the geographic location of customers.
Notes:
1. The amortised cost of all financial assets and liablities approximate to the fair values on the respective reporting dates.
2. There have been no transfers between Level 1, Level 2 and Level 3 for the years ended 31 March 2024 and 31 March 2023.
3. Investment in equity shares of subsidiaries, carried at cost have not been disclosed in the statement above
B. Financial risk management
The Company has exposure to the following risks arising from financial instruments:
• credit risk
• liquidity risk
• market risk
(i) 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 has established the risk management committee, which is responsible for developing and monitoring the Company's risk management policies. The committee reports regularly to the board of directors on its activities.
The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities.
The Company's risk committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.
(ii) Credit risk
The Company assesses and manages credit risk of financial assets based on following categories arrived on the basis of assumptions, inputs and factors specific to the class of financial assets.
A: Low credit risk on financial reporting date
B: Moderate credit risk
C: High credit risk
(iv) Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and commodity prices - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Commodity price risk
Commodity price risk arises due to fluctuation in prices of crude oil. The Company has a risk management framework aimed at prudently managing the risk arising from the volatility in commodity prices and freight costs. The Company's commodity risk is managed centrally through well-established control processes. In accordance with the risk management policy, the Company enters into various transactions using derivatives to hedge its exposure, as and when required. Further, selling price of finished goods and cost of raw materials fluctuates due to fluctuation in prices of crude oil and Company expects that the net impact of such fluctation would not be material.
Currency risk
The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated. The currencies in which these transactions are primarily denominated are US dollars, Japanese Yen and Euro. The Company uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date, as and when required.
Lease payments not recognised as a liability
The Company has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. The Company does not have any liability to make variable lease payments for the right-to-use the underlying asset recognised in the financials.
The expense relating to payments not included in the measurement of the lease liability for short-term leases and leases of low value is H14.71 Crore (31 March 2023: H15.98 Crore).
At 31 March 2024, the Company was committed to short term-leases and leases of low value, and the total commitment as at that date was H8.09 Crore (31 March 2023: H7.57 Crore).
Total cash outflow for short term-leases and leases of low value for the year ended 31 March 2024 was H14.71 Crore (31 March 2023: H15.98 Crore).
Total cash outflow for leases for the year ended 31 March 2024 was H18.90 Crore (31 March 2023: H23.07 Crore).
43. Particulars of investments made and loans given as required by clause (4) of Section 186 of the Companies Act, 2013 and as required by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been given under the investment schedule. Refer note 6(a) and note 7.
47. The Company carries an amount of H258.61 Crore as deferred tax assets (net) as at 31 March 2024 as detailed in Note 9. The management of the Company is confident of generating sufficient taxable profits to realise aforesaid deferred tax assets based on future business projections which is supported by ongoing capacity expansion through Debottlenecking of the existing plants and favourable industry focussed trade policies of the Government that are expected to enhance the operations and profitability of the Company.
48. The current liabilities of the Company exceed its current assets by H689.05 Crore as at 31 March 2024 and the Company has incurred losses in the year then ended. However, considering the future business projections supported by capacity expansion through debottlenecking of the existing plants, favourable industry focused trade policies of the government and sufficient existing and expected credit facilities with the Company from the bankers, the management believes that the Company will be able to realise its assets and will be able to meet its liabilities in the normal course of business.
49. Per transfer pricing legislation under section 92-92F of the Income-tax Act 1961, the Company is required to use certain specific methods in computing arm's length price of international transactions with associated enterprises and maintains adequate documentation in this respect. The legislations require that such information and documentation to be contemporaneous in nature. The Company has appointed independent consultants for conducting the Transfer Pricing Study to determine whether the transactions with associated enterprises undertake during the financial year are on an "arm's length basis". The Company is in the process of conducting a transfer pricing study for the current financial year and expects such records to be in existence latest by the due date as required by law. However, in the opinion of the management the update would not have a material impact on these financial statements. Accordingly, these standalone financial statements do not include any adjustments for the transfer pricing implications, if any.
Reasons for variance
1 Higher ratio in the current year due to proceeds from borrowings and lower earnings as compared to previous year
2 Increase in net loss in the current year in comparision to previous year resulting in deterioration of ratio
3 Decrease in business activity (decrease in sales and corresponding net purchases) in comparision to previous year and increase in capital employed has resulted in deterioration of ratio
4 During the current year revenue has undergone a reduction as compared to last year. Further, trade recievables have increased due to increase in trade receivables from related party. The same has resulted in deterioration of the ratio.
5 During the current year revenue has undergone a reduction as compared to last year and there has been a increase in net current liability. The same has resulted in deterioration of the ratio.
Notes:
(i) Current ratio = Current assets/ current liabilities
(ii) Debt equity ratio = Total debt/ shareholders equity
(iii) Debt service coverage ratio = Earnings available for debt service/ debt service (refer point (A) below)
(iv) Return on equity ratio = Net profits after taxes - preference dividend (if any)/ average shareholder's equity
(v) Inventory turnover ratio = sales (excluding other operating income) /average inventory
(vi) Trade receivables turnover ratio = net credit sales/ avg. accounts receivable
(vii) Trade payables turnover ratio = Net credit purchases (comprise of purchase of raw materials stores & spares packing materials) / average trade payables)
(viii) Net capital turnover ratio = net sales/ working capital
(ix) Net profit ratio= net profit/ net sales
(x) Return on capital employed (ROCE)= earning before interest and taxes/ capital employed (refer point (B) below)
(xi) Return on investment= income received from investments/ average investments. No income has been received on investment in the year ended 31 March 2024 and 31 March 2023 hence reported as nil.
Other explanatory points
(A) Earning for debt service = net profit after taxes non-cash operating expenses like depreciation and other amortisations Interest other adjustments like loss on sale of property, plant & equipment etc.
Debt service = interest & lease payments principal repayments
"Net profit after tax" means reported amount of "profit / (loss) for the period" and it does not include items of other comprehensive income.
(B) Capital employed = tangible net worth total debt deferred tax liability (asset)
51. Other statutory information
(a) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(b) The Company do not have any transactions with companies struck off.
(c) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period.
(d) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(e) The Company have 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:
(i) 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
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries"
(f) The Company have 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:
(i) 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
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,"
(g) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961
(h) The Company is not declared wilful defaulter by any bank or financial institution or government or any government authority.
(i) The Company has been sanctioned a working capital limit by banks or financial institutions on the basis of security of current assets. Pursuant to the terms of the sanction letter(s),the Company is not required to file any quarterly return or statement with such banks or financial institutions.
52. The Ministry of Corporate Affairs (MCA) has prescribed a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules 2021 requiring companies, which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
The Company uses an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the accounting software. However, the audit trail feature is not enabled at database level for accounting software to log any direct data changes for users with certain privileged access rights. Further there is no instance of audit trail feature being tampered with in respect of the accounting software where such feature is enabled.
Presently, the log is enabled at the application level and the privileged access to accounting software database continues to be restricted to limited set of users who necessarily require this access for maintenance and administration of the database.
This is the summary of material accounting policy information and other explanatory information referred to in our report of even date
For Walker Chandiok & Co LLP For and on behalf of the Board of Director of
Chartered Accountants Indo Rama Synthetics (India) Limited
Firm Registration No.: 001076N/N500013
Kartik Gogia Om Prakash Lohia Dhanendra Kumar Vishal Lohia
Partner Chairman and Managing Director Director Executive Director
Membership No.: 512371 DIN: 00206807 DIN: 05019411 DIN: 00206458
Place: Gurugram Place: Gurugram Place: New Delhi Place: New Delhi
Date: 17 May 2024 Date: 17 May 2024 Date: 17 May 2024 Date: 17 May 2024
Manish Kumar Rai Umesh Kumar Agrawal
Company Secretary Chief Commercial and Financial Officer
Place: Gurugram Place: Gurugram
Date: 17 May 2024 Date: 17 May 2024
|