10.3 Employees Stock Option Scheme
During the year the Company has granted 3,09,525 Employee Stock Options (ESOPs) to eligible employees under Employee Stock Options Plan 2008 (ESOP 2008) (for the previous year ended 31 March 2023 : 2,93,055 under ESOP 2008 Scheme). 1,87,382 (Previous year ended 31 March 2023 : 2,25,795) Employee Stock Options have been exercised during the year.
10.4 Rights, preference and restriction attached to equity shares:
The Company is having only one class of equity shares having par value of ' 5/- each. Each holder of equity share is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after the distribution of all preferential amounts if any. The distribution will be in proportion to the number of equity shares held by the shareholders.
I. Description of Nature and Purpose of Reserves
Securities Premium:
Securities Premium is created when shares are issued at premium. The Company can use this reserve in accordance with the provisions of the The Companies Act 2013.
General Reserve:
General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the statement of profit and loss. Employees Stock Options Outstanding Reserve:
The above reserve relates to stock options granted by the Company to its employees under its employee stock option plan.
Other Comprehensive Income:
Other Comprehensive Income represents change in the value of investments accounted through FVOCI.
Provision for warranty represents the undiscounted value of the managements best estimate of the future outflow of economic benefits that will be required for settlement of claim in respect of products sold by the Company. The estimate has been made on the basis of trends anticipated by the management and may vary as a result of variation in the market conditions. It is expected that cost will be incurred over the warranty period as per the warranty terms.
Retained Earning:
Retained earnings are the profits/(loss) that the Company has earned/incurred till date, less any transfers to general reserve, dividends or other distributions paid to shareholders. Retained earnings include re-measurement loss / (gain) on defined benefit plans, net of taxes that will not be reclassified to Statement of Profit and Loss.
Future cash flow in respect of contingent liability matters depend on the final outcome of judgement/decisions pending at various forums/ authorities.
The estimated amount of contracts remaining to be executed on capital account represents amount to be incurred for store fitout.
26 Employee Benefits:I) Defined - Contribution Plans
The Company offers its employees defined contribution plan in the form of Provident Fund and Employees' State Insurance Corporation (ESIC). Both the employees and the Company pay pre determined contributions into the Provident Fund and ESIC. The contributions are normally based on a certain proportion of the employee's salary. The Company recognised Provident Fund ' 9.02 Crores (Previous year ' 6.80 Crores) and ESIC ' 2.57 Crores (Previous year ' 2.11 Crores) in the Statement of Profit and Loss.
II) Defined Benefit Plans- Gratuity
The Company has an obligation towards gratuity, a funded defined benefit retirement plan covering eligible employees. The plan provides for lump sum payment to vested employees at retirement, death while in employment or on termination of the employment of an amount equivalent to 15 days salary, payable for each completed year of service or part thereof in excess of six months in terms of gratuity scheme of the Company or as per the Payment of the Gratuity Act, 1972, whichever is higher. Vesting occurs upon completion of five years of service.
There is no cap on the amount of gratuity paid to an eligible employee at retirement, death while in employment or on termination of the employment.
III) Defined Benefit Plans - Compensated absences
The Company has the policy for Compensated absences which allows the employee to accumulate and carry forward the unutilised Compensated absences. The expected cost of accumulating compensated absences is determined by actuarial valuation for the year ended March 31, 2024.
1) No amount has been written off/ provided for or written back in respect of amounts receivable from or payable to the related parties.
2) The Company has provided loan to its subsidiary for repayment of existing loan and working capital purpose.
3) The transactions with related parties are made in the normal course of business and on terms equivalent to those that prevail in arm's length transactions.
4) Outstanding balance at the year end are unsecured and interest free and settlement occurs in cash.
5) There are no guarantees provided or received for any related party receivables or payables.
28 Segment Reporting
The Company's only business being trading of fashion footwear, bags and accessories operating in the premium and economy category, which in terms of Ind AS 108 'Operating Segments' constitutes a single reporting segment. Further, there is no geographical segment to be reported since all the operations are undertaken in India.
31 Employee Stock Option Plan 2008 (ESOP - 2008):
The Company had granted stock options (options) to its eligible employees in terms of Employees Stock Option plan 2008 (ESOP 2008) of the Company as approved by the shareholders in the 31st Annual General Meeting held on 11th September, 2008.
The said plan was further amended vide shareholders resolution dated August 5th August, 2021.
As per the amended Scheme, the Nomination and Remuneration Committee (NRC) grants the options to the employees deemed eligible.
33.3 Fair Value measurementsFair valuation techniques and inputs used
(i) Fair Value Hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A quoted market price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available, with limited exceptions.
Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 2 inputs include:
— quoted prices for similar assets or liabilities in active markets
— quoted prices for identical or similar assets or liabilities in markets that are not active
— inputs other than quoted prices that are observable for the asset or liability, for example
— interest rates and yield curves observable at commonly quoted intervals
— implied volatilities
— credit spreads
— inputs that are derived principally from or corroborated by observable market data by correlation or other means ('market - corroborated inputs')
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. An entity develops unobservable inputs using the best information available in the circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is reasonably available.
33.4 Financial Risk Management
The Company's activities expose it to variety of financial risks: credit risk, liquidity risk and market risk. In order to manage aforementioned risks, the Company operates a risk management policy and a program that performs close monitoring of and responding to each risk factors.
A] CREDIT RISK
i) Credit Risk Management:
Credit risk is the risk of the financial loss that the counterparty will default on its contractual obligation. The credit risk for the Company primarily arises from the credit exposures to trade receivables (mainly institutional customers), deposits with landlords for store properties taken on leases , cash and cash equivalents, deposits with banks and other receivables.
ii) Trade and other receivables:
The Company's retail business is predominantly on cash and carry basis. The Company sells goods on credit basis to institutional parties. The credit risk on such collections is minimal considering that such sales are only 9.58% of the total sales. The average credit period for institutional parties is 30 days. No interest is charged on trade receivables on payment received even after the credit period. The Company has adopted a policy of dealing with only credit worthy counterparties in case of institutional customers and the credit risk exposure for institutional customers is managed by the Company by credit worthiness checks. As at March 31, 2024, the Company had 5 customers (as at March 31, 2023 : 7 customers) that accounted for approximately 86.35% (as at March 31,2023 : 82.33%) of the total receivables from Ecom customers, Institutional customers and raw material customers. The Company also carries credit risk on lease deposits with landlords for store properties taken on lease, for which agreements are signed and property possessions timely taken for store operations. The risk relating to refunds after store shut down is managed through successful negotiations or appropriate legal actions, where necessary.
The Company's experience of delinquencies and customer disputes have been minimal.
iii) Cash and cash equivalents and deposits with banks:
Credit risk on Cash and Cash Equivalents is limited as the Company generally invests in deposits with banks with high credit ratings assigned by international and domestic credit rating agencies.
B] LIQUIDITY RISK
1) Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Company's short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
2) Maturity of financial liabilities
The table below analyse the Company's financial liabilities into relevant maturity based on their remaining contractual maturities of all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balance equal their carrying balances as the impact of discounting is not significant.
C] MARKET RISK
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: Currency risk, interest risk and other price risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
1) Product Price risk
Product price increases which are not in line with the levels of customers discretionary spends, may affect the sales volumes. In such a scenario, the risk is managed by offering judicious discounts to customers to sustain volumes. Company negotiates with its vendors for purchase price rebates such that the rebates substantially absorb the product discounts offered to the retail customers. This helps Company protect itself from significant product margin losses.
2) Interest risk
The Company is not exposed to interest rate risk through the borrowing activities. The Company does not enter into financial instrument transactions for trading or speculative purposes or to manage interest rate exposure.
3) Currency risk
The Company's significant transactions are in Indian rupees and therefore there is minimal foreign currency risk.
Note : Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.
35 Events after the reporting period
No events, other than those disclosed in the financial statements, have occurred subsequent to the balance sheet date or are pending that would require adjustment to, or disclosure in the financial statements or amendment to significant assumptions used in the preparation of accounting estimate.
37 The Company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013.
38 The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
39 There are no proceedings initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.
40 The Company has not traded or invested in crypto currency or virtual currency during the financial year.
41 (A) The Company has 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:
(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.
(B) The Company has 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:
(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.
42 The title deeds of certain immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in the favor of the lease) are held in the name of Metro Shoes Limited, the erstwhile name of the Company and is in the process of being transferred in the name of the Company.
43 There is no delay in creation or satisfaction of charge which has been registered with Registrar of Companies (ROC) during the period.
44 The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.
45 The Board of Directors at its meeting held on March 23, 2023 have approved the Scheme of Arrangement ("the Scheme") for the demerger of undertaking comprising of FILA business ("Demerged Undertaking") of Metro Athleisure Limited into the Company w.e.f. April 1,2023. The Company along with Metro Athleisure Limited had filed the petition in connection with the Scheme with the Hon'ble National Company Law Tribunal ("The Tribunal"). The Scheme was sanctioned by the Tribunal vide order dated March 14, 2024. Consequently, the Company has included the financial results of Demerged Undertaking from the date of acquisition of control i.e. December 1, 2022 pursuant to the accounting treatment as prescribed in the Scheme. Consequently, the reported figures for the year ended March 31, 2023 have been restated to give impact of the Scheme. Therefore, the financial statements for the year ended March 31, 2024 are not strictly comparable with the previous year's financial statements. The proportionate investment of Demerged Undertaking held by the Company shall stand cancelled.
Metro Athleisure Limited is in the business of importing, trading, selling, marketing, advertising, retailing and distribution of footwear, apparel and accessories under it various brands including "FILA" and "Proline".
The demerger of FILA business from Metro Athleisure Limited into the Company, inter alia, would result in following benefits:
- Value unlocking of the respective businesses of the Metro Athleisure Limited and Metro Brands Limited based on respective risk return profile and cash flows;
- Provide better flexibility in accessing capital and attract business specific partners and investors; and
- Focused management approach for pursuing revenue growth and expansion opportunities in the respective business verticals.
In accordance with the Scheme and as per Ind AS 103 - Business Combinations, the assets and liabilities are recognised at carrying values as appearing in the consolidated financial statements of the Company.
Identified assets acquired and liabilities assumed for Demerged Undertaking as appearing in the consolidated financial statements of the Company.
The gross contractual amounts and fair value of trade receivables is ' 45.47 crores. Out of this trade receivables, ' 9.70 Crores is credit impaired and fully provided. Net trade receivables is expected that the full contractual amount can be collected.
The goodwill of ' 40.37 crores is primarily attributable to overall synergies from future expected economic benefits. Goodwill is not available for tax deduction purposes.
Impairment testing of goodwill:
Goodwill is not amortized, instead, it is tested for impairment annually or more frequently if indicators of impairment exist. The recoverable amount of a CGU is determined based on value-in-use which require the use of certain assumptions.
During the current year, the Company has carried out impairment testing of Goodwill by considering the estimated value-in-use is based on discounted future cash flows for a period of 19 years considering weighted average cost of capital of 17.40% which reflects the time of cash flows and the anticipated risks.
An analysis of the sensitivity of the change in key parameters mainly weighted average cost of capital based on probable assumptions, did not result in any probable scenario in which the recoverable amount would decrease below the carrying amount.
46 The Company has been sanctioned working capital limits in excess of Rs. Five crores in aggregate from banks during the year on the basis of current assets of the Company. However, the Company is not required to file quarterly returns/statements with such banks in respect of the said loan.
47 The Company do not have any transaction not recorded in the books of accounts pertaining to any assessment year, that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
48 Audit Trail feature in Accounting Software
The Company has used 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 software, except that audit trail feature is not enabled at the database level insofar as it relates to SAP accounting software. Further no instance of audit trail feature being tampered with was noted in respect of other of accounting software where audit trail feature has been enabled.
49 There were no whistle blower complaints received, other than the below complaints received and closed by the Company during the year.
Received 2
Closed 2
50 The figures for the corresponding previous year have been regrouped/reclassified wherever necessary.
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