(m) Provisions & contingent liabilities Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount can be reliably estimated. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the probability of outflow of resources is remote.
(n) Leases
Company as a lessor
At inception of contract, the Company assesses whether the Contract is, or contains, a lease. 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. At inception or on reassessment of a contract that contains a lease component, the Company allocates consideration in the contract to each lease component on the basis of their relative standalone price.
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
(o) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
(p) Revenue recognition
Revenue from contract with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Contract assets are transferred to receivables when the rights become unconditional. Contract asset is the right to consideration in exchange for goods or services transferred to the customer. Contract liabilities are recognised as revenue as and when the performance obligation is satisfied. Contract liability is the entity's obligation to transfer goods or services to a customer for which the entity has received consideration from the customer in advance.
Rental Income
License fee/Lease income and income incidental to it, arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms, unless there is another systematic basis which is more representative of the time pattern of the lease.
Other operating revenue comprises of car parking charges which are recognised as income as per the terms and conditions of the agreement with lessees.
Interest income
Interest income from debt instruments is recognised using the effective interest rate method.
Insurance claims and scrap sales are accounted for in the books on an accrual basis.
(q) Dividend distribution to equity shareholders
The Company recognises a liability to pay dividend to equity holders when the distribution is authorised, and the distribution is no longer at the discretion of the Company. A corresponding amount is recognised directly in equity.
(r) Critical estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
The areas involving critical estimates or judgments are:
- Estimation of defined benefit obligation (Note 35)
- Estimation of Useful life of Property, plant and equipment and Investment property (Note 2 and 3)
- Estimation of taxes (Note 6, 17 and 29)
- Estimation of provision and assessment of the likely outcome of contingent liabilities (Note 16 and 31)
- Estimation of fair value measurement of financial assets and liabilities (Note 36)
Estimates and judgments are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the group and that are believed to be reasonable under the circumstances.
(s) Changes in Ind AS and related pronouncements effective at a future date
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. On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from April 1, 2023, as below:
Ind AS 1 - Disclosure of material accounting policies:
The amendments related to shifting of disclosure of erstwhile “significant accounting policies” to “material accounting policies” in the notes to the financial statements requiring companies to reframe their accounting policies to make them more “entity specific”. This amendment aligns with the “material” concept already required under International Financial Reporting Standards (IFRS).
Ind AS 8 - Definition of accounting estimates:
The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a “change in accounting estimates” has been replaced with a definition of “accounting estimates.” Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty.” Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty.
Ind AS 12 - Income Taxes
The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12. At the date of transition to Ind ASs, a first-time adopter shall recognize a deferred tax asset to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. Similarly, a deferred tax liability be recognised for all deductible and taxable temporary differences associated with:
a) right-of-use assets and lease liabilities
b) decommissioning, restoration and similar liabilities
and the corresponding amounts recognized as part of the cost of the related asset.
Therefore, if a company has not yet recognised deferred tax on right-of-use assets and lease liabilities or has recognised deferred tax on net basis, the same need to be recognized on gross basis based on the carrying amount of right-of-use assets and lease liabilities
Ind AS 103 - Common control Business Combination
The amendments modify the disclosure requirement for business combination under common control in the first financial statement following the business combination. It requires to disclose the date on which the transferee obtains control of the transferor is required to be disclosed.
The amendments are extensive and the Company is in the process of evaluating the impact of the above amendments on the financial statements.
(v) Contractual Obligations
Refer to Note 29 for disclosure of contractual commitments for the purchase, construction or development of investment property or its enhancements.
(vi) Investment properties pledged as security
Refer to Note 13 for information on investment properties and property, plant and equipments pledged as security by the Company.
(vii) Fair value
As at March 31,2024 and March 31,2023, the fair values of the investment properties excluding capital work in progress is '4,55,827.04 lakhs and '434,460.54 lakhs respectively. These valuations are based on valuations performed by an independent valuer who is a registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. The main inputs used are the location, demand, marketability and age of building based on comparable transactions adjusted for functional differences. Fair valuation is based on market method (for land) and replacement cost (for assets other than land). The fair value measurement is categorised within level 3 fair value hierarchy.
30. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”) of the Company. Executive Director and Chief Executive Officer of the Company have been identified as CODM who is responsible for allocating resources and assessing performance of the operating segments.
The Company has determined "licensing of investment properties" as a reportable segment as evaluated by the CODM for allocation of resources and assessing the performance. There are no other reportable segment as per Ind AS 108 -Operating Segments. All the assets of the Company and source of revenue of the Company is within India and hence, no separate geographical segment is identified. Revenue from four customers, for the year ended March 31, 2024, amounting to '44,391.16 lakhs (March 31, 2023: '41,124.64 lakhs) with whom the Company has entered into leasing arrangements accounts for more than 10% of the total revenue for the year then ended
B. Measurement of fair value
The fair values of the financial assets and liabilities are 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.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and cash equivalents, other bank balances, trade receivables, other current financial assets, trade payables, security deposits from licensees and other current financial liabilities approximate their carrying amounts largely due to short term maturities of these instruments.
2. The fair values of the Company's interest-bearing borrowings are determined by using discounted cash flow method using discount rate that reflects the borrowing rate as at the end of the reporting period. The own non-performance risk as at March 31, 2024 and March 31, 2023 was assessed to be insignificant.
C. Fair value hierarchy
The fair value of financial instruments as referred to above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities
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.
i. Trade receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However credit risk with regards to trade receivable is not significant for the Company as the Company has 3 to 12 months of rentals as deposit from the licensees.
ii. Cash and bank balances
The Company held cash and cash equivalent and other bank balance of '6,095.22 lakh as at March 31, 2024 (March 31, 2023: ?2,299.66 lakh). The same are held with banks and financial institutions with good credit rating. Also, the Company invests its short term surplus funds in bank fixed deposit which carry no mark to market risks for short duration, therefore does not expose the Company to credit risk.
iii. Other financial assets
The Company has held other financial assets which majorly comprise of the security deposits, margin money held with banks and recoverable from related parties. The margin money is held with the banks and and financial institution with good credit rating. The security deposits are held with reputed power distribution company and municipal corporation for water supply, therefore does not expose the Company to credit risk.
(B) 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 due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows.
(C) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates (currency risk) and interest rates (interest rate risk), will affect the Company's income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
(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 exposure to the risk of changes in foreign exchange rates is very minimal. There are no foreign currency payables or receivable as at the end of each reporting period for which Company is exposed to foreign currency risk.
The Company closely tracks and observes the movement of foreign currency with regards to INR and also forward cover rate. The Company decides to cover or keep the foreign currency exposure open based on the above.
(ii) Cash flow and fair value interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long term debt obligation at floating interest rates.
35. Capital management a. Risk Management
For the purpose of Company's capital management, capital includes issued equity share capital, securities premium, all other equity reserves attributable to the equity shareholders of the Company and borrowings. The primary objective of the Company's capital management is to ensure that it maintains an efficient capital structure and maximises shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions, annual operating plans and long term and other strategic investment plans. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the year ended March 31,2024 and March 31,2023.
The Company monitors capital using a ratio of 'adjusted net debt' to 'equity'. For this purpose, adjusted net debt is defined as interest-bearing loans and accrued interest thereon less cash and bank balances. Equity comprises all components of equity including share premium and all other equity reserves attributable to the equity share holders.
37. Other statutory information
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company did not have any transactions with struck off companies.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company has not advanced or loaned or invested funds to any other persons or entities, 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
(vi) The Company has not received any fund from any persons or entities, 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
(vii) The Company does not have 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
(viii) The Company has not given any loans or advances in the nature of loans to promoters, directors, KMPs and/ or related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are repayable on demand, or without specifying any terms or period of repayment.
(ix) The Company is not required to file quarterly returns or statements of current assets with banks or financial institutions.
(x) The Company has used the borrowings for the purpose for which it was taken.
38. Maintenance of audit trail
The Company has used Microsoft SQL, 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 software, except that audit trail feature is not enabled at the database level, viz. fa_current, which is a non SaaS application hosted inhouse, insofar as it relates to the said accounting software. Further no instance of audit trail feature being tampered with was noted in respect of the said software.
39. Significant events after the reporting period
There were no significant adjusting events that occurred subsequent to the reporting period other than the events disclosed in the relevant notes.
40. Other Statutory Information
1. The Company has not given any loans or advances in the nature of loans to promoters, directors, KMPs and/ or related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are repayable on demand, or without specifying any terms or period of repayment.
2. No proceedings have been initiated or are pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.
3. The Company does not have any charges or satisfaction of charges which are yet to be registered with the Registrar of Companies (ROC) beyond the statutory period.
4. The Company is in compliance with the number of layers prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017 (as amended).
5. The Company has not been declared as willful defaulter by any bank or financial institution or other lender.
6. The Company does not have any transactions with companies struck off under section 248 of the Companies Act,
2013 (as amended) or section 560 of the Companies Act, 1956.
7. The Company has neither traded nor it holds any investment in Crypto currency or Virtual Currency.
8. The Company has not advanced or loaned or invested funds to any other persons or entities, 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.
9. The Company has not received any fund from any persons or entities, 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.
10. The Company does not have any transaction which is not recorded in the books of accounts but 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).
11. The Company is not required to file quarterly returns or statements of current assets with banks or financial institutions.
12. The Company has used the borrowings for the purpose for which it was taken.
41. Significant Events after the reporting period
There were no significant adjusting events that occurred subsequent to the reporting period other than the events disclosed in the relevant notes.
42. Approval of Ind AS financial statements
The financial statements were approved for issue by the Board of Directors on May 15, 2024.
For and on behalf of the Board of NIRLON LIMITED
As per our report of even date RAHUL V. SAGAR ANJALI K. SETH
For S R B C & CO LLP Executive Director and Chief Director
Firm Registration No : 324982E/ Executive Officer DIN : 05234352
E300003 DIN :00388980
ABHISHEK K. AGARWAL MANISH B. PARIKH JASMIN K. BHAVSAR
Partner Chief Financial Officer Company Secretary & Vice President (Legal)
Membership No. : 112773 FCS: 4178
Date: May 15, 2024 Date: May 15, 2024 Date: May 15, 2024
Place: Mumbai Place: Mumbai Place: Mumbai
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