Nature and purpose of other reserves
(i) Securities premium
The amount received in excess of face value of the equity shares in recognized in Securities Premium.The account in utilized in accordance with the provisions of the Companie's Act, 2013
(ii) Retained earnings
Retained earnings are the profits that the Company has earned till date including gain/(loss) on remeasurement of defined benefits plans as adjusted for distributions to owners, transfer to other reserves etc.
(iii) General Reserve
Under the erstwhile Companies Act, 1956, general reserves was created through an annual transfer of net income at a specified percentange in accordance with applicable regulations, however the same is not required to be created under Companies Act, 2013. This reserve can be utilised only in accordance with the specified requirements of the Companies Act, 2013.
(iii) Statutory Reserves
Under the erstwhile Companies Act, 1956, general reserves was created through an annual transfer of net income at a specified percentange in accordance with applicable regulations, however the same is not required to be created under Companies Act, 2013. This reserve can be utilised only in accordance with the specified requirements of the Companies Act, 2013.
(i) The Company has obtained terms loans for the purpose of Vehicle purchase, Property purchase and WC Term loan from various banks.
Vehicle loan is repayable in 37 to 60 equal monthly installments and carries interest rate ranging from 7.99% p.a. to 13% p.a. and maturity between December 2023 till October 2027. The loan is secured against vehicles purchased.
Property loan is repayable in 156 equal monthly installment carrying interest rate 9.8% p.a. and will be maturing in September 2033.The Property is mortaged to the banks tilll the time loan is repaid.
Working Capital loan is repayable in equal monthly installment between August 20234 to June 2029 and carries interest rate 7.50 % p.a. to 16.25% p.a. The loan is secured against Personal gurantee of Directors, commercial property and vacant land which are owned by the Directors.
(a) Trade Receivable represents the amount of consideration in exchange for goods or services transferred to the customers that is unconditional.
(b) The Company has entered into the agreements with customers for sales of goods and services. The company has identified these performance obligations and recognised the same as contract liabilities in respect of contracts, where the company has obligation to deliver the goods and perform specified services to a customer for which the company has received consideration. Contract liabilities have increased in the current year on account of increase in advance from customer pursuant to increase in business.
(iii) Unsatisfied performance obligations:
Information about the Company's performance obligations are summarised below:
Sale of products: Performance obligation in respect of sale of goods is satisfied when control of the goods is transferred to the customer, generally on delivery of the goods and payment is generally due as per the terms of contract with customers.
Sales of services: The performance obligation in respect of ITeS services is satisfied over a period of time and acceptance ofthe customer. In respect of these services, payment is generally due upon completion of service based on time elapsed and acceptance of the customer. Advances received for unsatisfied performance obligation is recognised as contract liability and disclosed as Advances from customers as at the year end.
4 Right of use assets
(i) Right of use assets: The Company’s lease asset primarily consist of following:
(a) Lease contracts entered by the company pertain for building taken on lease to conduct its business in the ordinary course having lease terms between 36 to 60 months.The Company’s obligations under its leases are secured by the lessor’s title to the leased assets.
There are certain premises taken on lease by the Company wherein the lease duration is less than 12 months. These are short term leases and the Company has elected not to recognise right-of-use assets and lease liabilities for these leases.
(v) The Company does not face significant liquidity risk with regard to its lease liabilities as the current cash flow are sufficient to meet the obligation related to lease liabilities as and when they fall due.
22 Disclosure of Defined benefit plans and defined contribution plan (A) Defined benefit plan
The Company operates following defined benefit obligations:
(a) Gratuity (defined benefit plan)
In accordance with the applicable laws, the company provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan”) covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment of amounts that are based on salary and tenure of employment. Liabilities with regard to the gratuity plan are determined by actuarial valuation.
The following tables summaries the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plan:-
(xi) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
(xii) The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period while holding all other assumptions constraint. In practice it is unlikely to occur and change in some of the assumption may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
(xiii) The estimates of rate of escalation in salary considered in actuarial valuation are after taking into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is as certified by the Actuary.
(xiv) The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
Notes:
(a) The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free. The settlement for these balances occurs through payment. There have been no guarantees provided or received for any related party receivables or payables. For the year ended March 31, 2023, the Company has not recorded any impairment of receivables relating to amounts owed by related parties . This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
(b) As at March 31, 2023 , the Company has not granted any loans to the promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013), either severally or jointly with any other person.
(c) All the liabilities for post retirement benefits being ‘Gratuity, compensated absence and pension benefit’ are provided on actuarial basis for the Group as a whole, accordingly the amount pertaining to Key management personnel are not included above.
Management of the Company has assessed that trade receivables, cash and cash equivalents, other bank balances, other financial assets, trade payables and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
(i) Fair value hierarchy
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives and equity securities) is based on quoted market prices at the end of the reporting period for identical assets or liabilities.These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) 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. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.
There are no transfers among levels 1, 2 and 3 during the year
This section explains the judgement and estimates made in determining the fair value of financial assets that are:
a) Recognized and measured at Fair value
b) Measured at amortized cost and for which fair value is disclosed in financial statements
27 Financial risk management objectives and policies
In the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk. The Company’s primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Company’s risk management policy which has been approved by its Board of Directors.
(a) Market Risk Management
Market risk is the risk that the fair value of 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 and currency risk. Financial instruments affected by market risk include loans deposits, and investments, and foreign currency receivables and payables. The sensitivity analysis in the following sections relate to the position as at reporting date. The analysis exclude the impact of movements in market variables on: the carrying values of gratuity obligations and the non-financial assets and liabilities. The sensitivity of the relevant profit and loss item and equity is the effect of the assumed changes in the respective market risks. This is based on the financial assets and financial liabilities held as of March 31, 2023 and March 31, 2022.
(i) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company's major customers are located in international market due to which the Company is also exposed to foreign exchange risk arising from foreign currency transactions primarily with respect to the movement in foreign currency exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in foreign currency). The Company evaluates exchange rate exposure arising from foreign currency transactions and follows established risk management policies approved by its Board of Directors.
(b) Liquidity Risk
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing through the use of short term bank deposits, short term loans, and cash credit facility etc. Processes and policies related to such risks are overseen by senior management. Management monitors the Company’s liquidity position through rolling forecasts on the basis of expected cash flows. The Company assessed the concentration of risk with respect to its debt and concluded it to be low.
(c) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations towards the Company and arises principally from the Company’s receivables from customers and deposits with banking institutions. The maximum amount of the credit exposure is equal to the carrying amounts of these receivables. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
(i) Trade Receivables
The customers are subjected to credit assessments as a precautionary measure, and the adherence of all customers to payment due dates is monitored on an on-going basis, thereby practically eliminating the risk of default.
Customer credit risk is managed by respective department head subject to the Company’s established policy, procedures and control relating to customer credit risk management. An impairment analysis is performed at each reporting date on trade receivables by lifetime expected credit loss method based on provision matrix. The Company does not hold collateral as security. There is one single customer from whom the Company earns revenue of more than 10%, however, there is no credit default risk from this customer since the amount are generally received in advance. Refer note 5(B) for movement in credit loss allowance during the year.
(ii) Financial instruments and deposits
Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made in bank deposits and other risk free securities. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments. The Company’s maximum exposure to credit risk for the components of the balance sheet at March 31, 2023 is the carrying amounts . The Company’s maximum exposure relating to financial instrument is noted in liquidity table below.
28 Capital management
For the purposes of Company's capital management, Capital includes equity attributable to the equity holders of the parent company and all other equity reserves. The primary objective of the Company's capital management is to safeguard its ability to continue as going concern and to ensure that it maintains an efficient capital structure and maximize shareholder value. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders or issue new shares. The Company is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2023 and March 31, 2022. The Company monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. Net debt is calculated as loans and borrowings less cash and cash equivalent.
29 Additional Regulatory Information
(i) Details of Benami property: No proceedings have been initiated on or are pending against any of the group companies for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Wilful defaulter: Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(iii) Compliance with approved scheme of arrangements: The Company has entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(iv) Utilisation of borrowed funds and share premium: The Company has not advanced or loaned or invested funds to any other person or entity, including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
The Company has not received any fund from any person or entity, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries
(v) Details of crypto currency or virtual currency: The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(vi) Valuation of PP&E, intangible asset and investment property: The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(a) Reasons for movement in ratios greater than 25%
(i) Current Ratio : Decrease is due to increase in current liability as short term borrowings are increased during the year.
(ii) Debt Equity Ratio : Increase in current year is primarily due to additional borrowings during the year.
(iii) Return of Equity (%) : Return on Equity in the current year has improved from 7 % in previous year to 10% in current year on the base of higher profit for the year.
(iv) Trade Receivables Turnover (times): Decrease is due to higher receivables at the year end on account of unbilled and pending realisation of the Q4 debtors.
(v) Net Capital Turnover Ratio : Decrease is due to increase in current liability during the year on account of current maturity of long term borrowings.
(vi) Operating Profit Margin (%) : Increase is due to higher operation performance during the year.
(vii) Interest Coverage Ratio : Interest Coverage Ratio is 3.31 in the current year as against 5.19 in the previous year primarily due to excessive use of debt compared to last year.
(viii) Debt Service Coverage Ratio : The debt service coverage ratio is lower due to increased borrowings during the year and scheduled repayment of the borrowed funds.
30 The comparative previous year figures are reclassified or regrouped, wherever required.
The accompanying notes form an integral part of the standalone financial statements.
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