A Defined contribution plan
Contributions are made to provident fund at a fixed percentage of employee's salary as per the regulations. The contributions are made to registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the year towards contribution to provident fund is ' 96.85 million (December 31, 2021 - ' 82.60 million).
B Compensated absences
The leave obligations cover the Company's liability for privilege leave and sick leave. The amount of provision made during the year is ' 82.93 million (December 31, 2021 - ' 42.61 million). The Company does not have an unconditional right to defer settlement for any of these obligations. However, based on the past experience, the Company does not expect payment of the entire amount of accrued leaves or availment of the entire number of accrued leaves by employees within twelve months and accordingly, amounts have been classified as current and non-current.
C Long service award
The Company award all the employees who complete 25 years of service in the Company and the Workmen employees who complete 20 or more years of service in the Company but unable to complete 25 years due to superannuation. The amount of provision made during the year is ' 14.75 million (December 31,2021 - ' 50.74).
D Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employee's last drawn basic salary per month computed proportionately for 15 days to one month's salary multiplied for the number of years of service. The gratuity plan is a funded plan.
The above sensitivity analysis have been determined based on reasonable possible changes of the respective assumptions occurring at the end of the year and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method is used to calculate the liability recognised in the Balance Sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
Asset-liability mismatch risk
Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. In managing the plan assets, Board of Trustees reviews and manages these risks associated with the funded plan. Each year, the Board of Trustees reviews the level of funding in the gratuity plan. Such a review includes asset - liability matching strategy and investment risk management policy (which includes contributing to plans that invest in risk averse markets). The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
Asset volatility
All plan assets are maintained in a trust fund managed by a public sector insurer i.e., LIC of India. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years. The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence, 100% liquidity is ensured. Also, interest rate and inflation risk are taken care of.
Discount rate risk
The present value of the defined benefit obligation is calculated using discount rate based on Government bonds. The decrease in the bond yield will increase the defined benefit obligation, however the same will be partially offset by an increase in value of plan assets.
Future salary escalation risk
The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in salary of the plan participants will increase the defined benefit obligation.
34 Fair value measurements
Except derivative instruments, all financial assets and financial liabilities are measured at amortised cost. Derivative instruments are classified as fair value through profit or loss. The fair value is determined using forward exchange rates at the balance sheet date. The instruments fall under level 2 of the fair value hierarchy as per Ind AS 113 Fair Value Measurements. Level 2 fair value financial instruments are those which are not traded in an active market, which maximise the use of observable market data and rely as little as possible on entity specific estimates. Significant inputs required to measure a level 2 fair value are observable. The fair value of all the instruments measured at amortised cost is not significantly different from the carrying value of such instruments.
35 Financial risk management
The Company's activities exposes it to credit risk, liquidity risk and market risk. In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments, such as foreign exchange forward contracts are taken. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk.
The Company's risk management is carried out by the Company's treasury department under policies approved by the board of directors. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(A) Credit risk
The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and other financial instruments. For banks and other financial institutions, only high rated banks/ financial institutions are accepted. The balances with banks, loans given to employees, security deposits are subject to low credit risk and the risk of default is negligible or nil. The Company has recognized provision based on assumptions about risk of default, expected loss rates and specific identification method.
I Trade receivables
Credit risk arises from the possibility that customer will not be able to settle their obligations as and when agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts, ageing of accounts receivable and forward looking information. Individual credit limits are set accordingly. The Company has recognized the provision based on assumptions about risk of default, expected loss rates and specific identification method.
(B) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying business, the Company's treasury maintains flexibility in funding by maintaining availability under committed credit lines.
The table below analyses the Company's financial liabilities into relevant maturity groupings based on their contractual maturities for :
1) all non-derivative financial liabilities, and
Market risk
I) Foreign currency risk
The Company is engaged in international trade and thereby exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the EUR and USD. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company's functional currency '. The Company uses foreign exchange forward contracts to hedge its exposure in foreign currency risk.
i) Foreign currency risk exposure
The Company's exposure to foreign currency risk at the end of the reporting period expressed in ' million, are as follows :-
(C) Market risk
II) Interest rate risk
The Company's main interest rate risk arises from short term borrowings and deposits taken / placed over a period of time on frequent basis thereby exposing the Company to interest rate risk. The Company's policy is to have fixed interest rate at the time of deal execution.
36 Capital management
a) Risk management
The Company's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to reduce the cost of capital. For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company's capital management is to maximise the shareholders value. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company is debt-free and has net cash and bank balance.
No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2022 and December 31, 2021.
*Other bank balance consists of fixed deposits which are considered as short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
The amount of net cash and bank balance considering the amount of lease liability of ' 28.82 million (December 31, 2021: ' 29.89 million) is ' 2,574.10 million (December 31,2021: ' 3,508.77 million)
(b) Details of benami property held
No proceedings have been initiated on or are pending against the company under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(c) Borrowing secured against current assets
The Company has placed fixed deposits of ' 1,018.91 million (December 31, 2021: ' 1,137.88 million) under lien with banks and has availed the overdraft facilities against the same. Thus, the Company is not required to file quarterly returns or statement of current assets with the banks.
(d) Wilful defaulter
The company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(e) Relationship with struck off companies
Below are the details of transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.
(f) Compliance with number of layers of companies
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(g) Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact in the year ended December 31, 2022 and December 31,2021.
(h) Utilisation of borrowed funds and share premium
The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person or entity, 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
The Company has not received any funds from any person or entity, 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
(i) Undisclosed income
There is no income surrendered or disclosed as income during the year ended December 31, 2022 and December 31, 2021 in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
(j) Details of cryptocurrency or virtual currency
The Company has not traded or invested in cryptocurrency or virtual currency during the year ended December 31, 2022 and December 31,2021.
(k) Valuation of Property, plant and equipment, Right-of-use assets and Other intangible assets
The Company has not revalued its property, plant and equipment or right-of-use assets or intangible assets during the year ended December 31, 2022 and December 31,2021.
38 Events occurring after the reporting period
Refer to note 36 (b) (ii) for the final dividend recommended by the directors which is subject to the approval of shareholders in the ensuing general meeting.
39 During year ended December 31, 2022, the Company was informed by the parent entity, KSB SE & Co. KGaA, that the parent entity has encountered a cyber-attack on their IT systems in Germany. The Company's IT systems and infrastructure is part of the aforesaid IT systems. As an immediate measure, the parent entity had temporarily shut down all actual or potentially affected IT systems in a controlled manner for security reasons which led to temporary disruption in some of the Company's business services. The Company had put in place alternative control mechanisms in the temporary absence of the said systems. After taking all the possible necessary measures, the said systems were restored in a phased manner. Based on the assessment carried out (with the assistance of external specialist consultants) there was no impact on the financial statements of the Company for the year ended December 31, 2022.
40 The Ministry of Corporate Affairs (MCA) through a notification dated March 24, 2021, amended Schedule III of the Companies Act, 2013, applicable for financial years commencing from April 1, 2021. Pursuant to such amendments, security deposits of ' 38.70 million as at December 31, 2021 have been reclassified from 'Loans' to 'Other financial assets’.
41 Previous year's figures have been regrouped / reclassified wherever considered necessary to conform current year's classification / disclosure.
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