N. Provisions and Contingencies Provisions
Provisions are recognised when there is a present obligation (legal or constructive) as a result of past event, where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
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.
Contingencies
Contingent liabilities exist 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 within 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 or the amount cannot be reliably estimated. Contingent liabilities are appropriately disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.
O. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial Assets
• Initial recognition and measurement
All financial assets except for trade
receivable (as they are recognize at transaction price) are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that requires delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
• Subsequent measurement
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
• Financial assets at amortised cost
A ‘Financial Asset’ is measured at its amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss.
• Financial assets at fair value through profit or loss (FVTPL)
FVTPL is a residual category for financial assets. Any financial assets, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL. Financial assets included within the FVTPL category are measured at fair
value with all changes recognized in the statement of profit and loss.
Ý Equity Instruments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, other than investment in Subsidiary, the Company makes an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
Ý Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a company of similar financial assets) is primarily derecognised (i.e., removed from the Company’s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the company continues to recognise the transferred asset to the extent of the Company’s continuing involvement. In that case, the company also recognises an associated liability. The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.
• Impairment of financial assets
The Company assessed the expected credit losses associated with its assets carried at amortised cost and fair value through profit and loss based on the Company’s past history of recovery, credit worthiness of the counter party and existing and future market conditions.
For all financial assets other than trade receivables, expected credit losses are measured at an amount equal to the 12-month expected credit loss (ECL) unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The Company applied the expected credit loss (ECL) model for measurement and recognition of impairment losses on trad e receivables. For trad e receivables, the Company follows simplifies approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected losses based on a provision matrix which uses historical credit loss experience of the Company and where applicable, specific provision are made for individual receivables.
• Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets.
Financial Liabilities
• Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
• Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
• Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Gains or losses on liabilities held for trading are recognised in the profit or loss.
• Financial liabilities at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit and loss wh en th e liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
• Derecognition
A financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Ý Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
P. Investment in Associate
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The Company’s investments in its associates are accounted at cost less impairment. The Company reviews its carrying value of investments carried at cost annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is recorded in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the Investment is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the cost of the Investment. A reversal of an impairment loss is recognised immediately in Statement of Profit or Loss.
Q. Cash and Cash Equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of; changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and
short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company’s cash management.
R. Earnings per share (EPS)
Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to equity shareholders and the weighted average number of equity shares outstanding for the effects of ail dilutive potential equity shares.
S. Segment Reporting
Operating segments are reported based on the internal reporting provided to the chief operating decision maker (CODM). The chief operating decision-maker assesses the financial performance and position of the Company as a whole and makes strategic decisions. The Company operates in one reportable business segment i.e., “Industrial Business”.
T. Borrowing Cost
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
U. Current Versus Non-Current Classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
• Expected to be realised or intended to be sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after the reporting period, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after the reporting period, or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
3. Significant Accounting judgements, estimates and assumptions:
In the application of the Company’s accounting policies, which are described in Note 2, Management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
Estimation of useful life of Property, Plant and Equipment and intangible assets [Note 5 and Note 6]
The Company has estimated useful life of each class of assets based on the nature of assets, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological
changes, etc. The Company reviews the useful life of property, plant and equipment and intangible assets as at the end of each reporting period. This reassessment may result in change in depreciation and amortisation expense in future periods.
Contingencies [Note 33]
Management has estimated the possible outflow of resources at the end of each annual reporting financial year, if any, in respect of contingencies / claim / litigations by / against the Company as it is not possible to predict the outcome of pending matters with accuracy.
Defined benefit plans [Note 35]
The cost of the defined benefit plans and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. All assumptions are reviewed at each Balance Sheet date and disclosed in the Financial Statements.
Litigations [Note 33]
From time to time, the Company is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made, and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other
factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each Balance Sheet date and revisions made for the changes in facts and circumstances.
Impairment of financial assets [Note 11]
The Company’s Management reviews periodically items classified as receivables and to assess whether a provision for impairment should be recorded in the statement of profit and loss. Management estimates the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgement and uncertainty.
Fair value measurement of financial instruments
When the fair values of financial assets or financial liabilities recorded or disclosed in the financial statements cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include consideration of inputs such as liquidity risk, credit risk and volatility.
4. Standards notified but not yet effective:
There are no standards that are notified, but not yet effective, upto the date of the issuance of the Company’s financial statement.
2) Trade receivables are non-interest bearing and are generally on the terms of 30 to 75 days of credit period.
3) As at March 31,2024, there are no trade receivable which are due from directors or other officers of the company either severally or jointly with any other person. Further, there are no trade receivables which are due from firms or private companies respectively in which any director is a partner, a director or a member.
4) The Company and NRB IBC Bearings Private Limited (NIBC) have transactions with IBC INDUSTRIAL BEARINGS AND COMPONENTS AG (IBC AG) and IBC Walzlager, Gmbh (IBC Gmbh) in nature of export of goods and import of raw materials since December 2013 For transactions held between December 2013 and August 2015, IBC AG and IBC Gmbh has netted off the outstanding receivables and payables in their books of accounts and remitted Euro 28,079 in October 2015 for the same.
As per RBI Circular RBI/2014-15/5 Master Circular No 14/2014-15 dated July 1, 2014 Clause C.25, RBI had delegated the powers to accept the application for set-off of export receivables against import payables to Authorised Dealer bank (Ad) on behalf of RBI.
The Company had made the statutory application to its AD bank along with all the necessary documents seeking approval for set off of export receivables against import payables in the books of the Company. Pending approval the Company has disclosed receivables of Rs. 156.08 lakhs (March 31,2023 Rs. 155.02 lakhs) as Non current Trade Receivable in Note 11 and payable of Rs. 90.94 lakhs (March 31,2023 Rs. 90.33 lakhs) as Non current Trade Payable in Note 18.
5) The Company applied the expected credit loss (ECL) model for measurement and recognition of impairment losses on trade receivables. The Company follows simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected losses based on a provision matrix which uses historical credit loss experience of the Company and where applicable, specific provision are made for individual receivables.
( i) (a) Rights attached to equity shares:
1) The Company has only one class of equity shares having a face value of Rs. 2 each. The Equity Shareholders have all the rights of equity shares as provided by the Companies Act, 2013 and Rules & Regulations made thereunder.
2) The Company in General Meeting may declare dividend to be paid to members according to their respective rights, but no dividend shall exceed the amount recommended by the Board, but the Company in General Meeting may declare a smaller dividend.
3) In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts.
(b) Rights attached to Preference shares:
1) The Preference shareholders shall carry a preferential right over the equity shareholders with respect to payment of dividend and repayment of capital in case of winding up;
2) The Preference shareholders shall be non- participating in the surplus fund;
3) The Preference shareholders shall be non-participating in the surplus assets and profits which may remain after the entire capital has been repaid on winding up of the Company;
4) The holders of Preference shares shall be paid dividend on a cumulative basis at the rate as recommended by the Board and declared by the shareholders of the Company. Presently, the preference dividend be paid annually at 2% p.a. post tax expenses;
5) The Preference share shall not be convertible into equity shares;
6) The Preference share shall carry voting rights as per the provisions of Section 47(2) of the Companies act 2013;
7) The Preference share shall be redeemed after the end of 10 years from the date of issue of such shares;
. 8) The Preference shares shall not be listed on any stock exchange.
1. Consequent to the demise of Mr. Trilochan Singh Sahney, the Company has not received share transmission application from legal heirs of Late Mr. Trilochan Singh Sahney and accordingly the name of Late Trilochan Singh Sahney is still appearing in register of Members and is accordingly disclosed above.
2. As at March 31,2021, number of equity shares in the name of Late Mr. Trilochan Singh Sahney was 29,29,101 equity shares in the Company. Out of 29,29,101 equity shares, 11,46,000 equity shares were held in the joint names of Late Mr. Trilochan Singh Sahney and Mrs. Hanwantbirkaur Trilochansingh Sahney. During the year ended March 31,2022, the 11,46,000 shares were transferred to Mrs. Hanwantbirkaur Trilochan Singh Sahney due to applicable procedural requirements and are appearing in register of members in her name and accordingly disclosed above. However, as per the communication received from Executrix of the estate of Late Mr. Trilochan Singh Sahney, the above mentioned shares will ultimately devolve to the legal heirs of Late Mr. Trilochan Singh Sahney.
Nature and purpose of reserves
(i) Capital reserve
This represents value of excess of asset received over liabilities assumed during demerger from NRB Bearings Limited.
(ii) Equity component of compound financial instruments
This represents the difference between fair valuation and transaction price on initial recognition of preference shares issued to a Promoter shareholder.
(iii) Retained earnings
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 remeasurement loss / (gain) on defined benefit plans, net of taxes that will not be reclassified to Statement of Profit and Loss. The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the financial statements of the Company and also considering the requirements of the Companies Act, 2013.
Secured
Term loans from Bank
(a) Rs. 44.54 lakhs (March 31,2023 Rs. 102.05 lakhs) secured by second charge on all present and future stock and book debts of the Company and second pari pasu charge over immovable Property, plant and equipment (buildings), leasehold land of the Company and its movable plant and machinery, furniture and fixtures and other movables at its factory at Shendra (near Aurangabad) and personal guarantee of Promoter Director of the Company. The working capital term loan is repayable in balance 9 equal monthly instalments of Rs. 5.50 lakhs each till December 7, 2024 and carried interest rate of 7.5 % p.a.
(b) Rs. 83.51 lakhs (March 31,2023 Rs. 98.77 lakhs) secured by second charge on all present and future stock and book debts of the Company and second pari passu charge over immovable Property, plant and equipment (buildings), leasehold land of the Company and its movable plant and machinery, furniture and fixtures and other movables at its factory at Shendra (near Aurangabad) and personal guarantee of Promoter Director of the Company. The working capital term loan is repayable in 33 equal monthly instalments of Rs. 2.72 lakhs each till December 7, 2026 after end of balance moratorium period of 5 months and carries interest rate of 7.5 % p.a.
(c) Rs.316.71 lakhs (March 31, 2023 Rs. 361.68 lakhs) secured by first pari- passu charge over Land and Building situated at Shendra, MIDC Aurangabad. The working capital term loan is repayable in remaining 51 monthly instalments Rs. 8.90 lakhs each till June 27, 2028 and carries interest rate of 14 % p.a.
(d) Rs. 84.82 lakhs (March 31,2023 Rs. 115.09 lakhs) secured by hypothecation of vehicles. Out of these , the term loan of Rs. 74.45 lakhs (March 31,2023 Rs. 101.46 lakhs) carrying interest rate of 7.65% p.a. is repayable in remaining 29 equal monthly instalments by August, 2026 and the term loan of Rs. 10.37 lakhs (March 31, 2023 Rs. 13.63 lakhs) carrying interest rate of 7.65 % p.a. is repayable in remaining 33 equal monthly instalments by December 5, 2026.
(e) Rs. 112.27 lakhs (March 31,2023 Rs. NIL lakhs) secured by hypothecation of machineries purchased out of bank’s finance at its factory at Shendra (near Aurangabad) and personal guarantee of Promoter Director of the Company. The machinery term loan is repayable in 78 equal monthly instalments of Rs. 3.84 lakhs each till March 30, 2030 after end of balance moratorium period of 6 months and carries interest rate of 12.30 % p.a.
Term loan from Others
(a) Rs. 7.21 lakhs (March 31,2023 Rs. 13.41 lakhs) secured by hypothecation of vehicles. The entire term loan carrying interest rate of 8.21 % p.a. is repayable in remaining 20 equal monthly instalments by November 20, 2025.
Unsecured
Loans from related parties
(a) 100 lakhs each 6 % Redeemable Cumulative Non - Convertible Preference shares of Rs. 10 each fully paid up were issued to a Promoter shareholder in March 2016 and in April 2016 with redemption at the end of 5 years from the date of issue. During the year ended March 31,2018, the terms of existing Redeemable Cumulative Non - Convertible Preference shares were changed w.e.f. February 15, 2018, the preference dividend rate is modified to 2 % and redemption term is changed to 10 years for above said preference shares.
200 lakhs 2 % Redeemable Cumulative Non - Convertible Preference shares of Rs. 10 each fully paid up were issued to a Promoter shareholder in February 2018 with redemption at the end of 10 years.
100 lakhs and 35 lakhs 2 % Redeemable Cumulative Non - Convertible Preference shares of Rs. 10 each fully paid up were issued to a Promoter shareholder in January 2019 and in March 2019 respectively with redemption at the end of 10 years.
50 lakhs, 15 lakhs, 150 lakhs and 50 lakhs 2 % Redeemable Cumulative Non - Convertible Preference shares of Rs. 10 each fully paid up were issued to a Promoter shareholder in June 2019, August 2019, December 2019 and in March 2020 respectively with redemption at the end of 10 years.
65 lakhs 2 % Redeemable Cumulative Non - Convertible Preference shares of Rs. 10 each fully paid up were issued to a Promoter shareholder in March 2023 with redemption at the end of 10 years.
75 lakhs 2 % Redeemable Cumulative Non - Convertible Preference shares of Rs. 10 each fully paid up were issued to a Promoter shareholder in March 2023 with redemption at the end of 10 years.
(b) Pursuant to the members’ resolution passed dated November 29, 2019 for conversion of unsecured loan of a Promoter shareholder amounting to Rs. 1,400 lakhs into 2% Redeemable Cumulative Non- convertible Preference Shares of Rs. 10 each (“Preference Shares”), the Company, during the year ended March 31, 2023, sought to increase its authorized share capital from Rs. 85 Crore (Equity share capital Rs. 5 Crore and Preference share capital Rs. 80 Crore) to Rs. 99 Crore (Equity share capital Rs. 5 Crore and Preference share capital Rs. 94 Crore) by obtaining an approval from members via a resolution approved through a postal ballot dated March 20, 2023.
During the voting period for such postal ballot, the Scrutinizer invalidated the vote of a Promoter shareholder, who had initially voted against the resolution and later (during the voting period) communicated the decision to vote in favour of the said resolution. Accordingly, the Scrutinizer, in accordance with Clause 16.5.3 (d) of SS-2 ‘Secretarial Standard on General Meetings’ while counting the votes and declared that the resolution to increase the authorized share capital was passed by absolute majority (‘the decision’). Basis such decision, unsecured loan of a Promoter shareholder has been converted into 2% Redeemable Cumulative Non-convertible Preference Shares by the Company.
Subsequently, during March 2023 the Scrutinizer received communication from another Promoter shareholder challenging the decision / result published by the Scrutinizer. In the event the said Promoter pursues and is successful in setting aside the Scrutinizer’s report then the same could result in certain modifications to the above financial results such as decrease in authorised share capital by Rs. 1,400 lakhs and its resultant impact on reclassification of borrowings from Non-Current Liabilities and Deemed capital contribution under Equity to Borrowings under Current Liabilities by equivalent amount and increase in the profit for the period by approximately Rs. 25 lakhs. The Company is of the view, supported by legal opinions, that the Scrutinizer’s decision is appropriate and accordingly the resolution for increase in authorised capital and consequent conversion of unsecured Promoter loan to preference shares is valid. Accordingly, no adjustments have been made by management in the said Standalone Financial Statements.
Note 30:
Consequent to the demise of Mr. Trilochan Singh Sahney (“TSS”) in 2018, his WILL has been probated. According to the Will, Mrs. Hanwantbir Kaur Sahney is sole executrix having lifetime interest.
The Company has received the communication of the Probate of the WILL. As per the WILL, subject to the life interest of the Executrix:
a) The redeemable cumulative non-convertible preference shares (“Preference Shares”) and the unsecured interest free loan from TSS will be distributed amongst the beneficiaries as mentioned in the WILL.
b) The Company has received certain communication pertaining to transmission (of the Preference Shares) and transfer (of the unsecured interest free loan), from the representatives of the Executrix of the estate of Mr. TSS and has received communication from beneficiary that the matter as per (a) above is under discussion with the Executrix.
Accordingly, as at March 31,2024, the name of TSS is still appearing in books of accounts.
2. Company as a lessor:
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset is classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms. 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.
The Company had entered into lease agreement with a related party effective from 8 March, 2013 for certain portion of its factory and office premises including furniture and fixtures, electrical installation, etc. During the year, Rs. 102.22 lakhs (previous year Rs. 92.93 lakhs) recognised as rental income in the Statement of Profit and Loss. The agreement contains renewal clause. The said agreement was renewed with effect from April 1,2023 for a period of seven years.
Note 35 : Employee Benefits Brief description of the Plans:
1) Defined contribution plans :
a) Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension fund, in which both employees and the Company make monthly contributions at a specified percentage of the employees’ eligible salary (currently 12% of employees’ eligible salary). The contributions are made to the Regional Provident Fund Commissioner. Provident Fund and Family Pension Fund are classified as Defined Contribution Plans as the Company has no further obligations beyond making the contribution.
b) Superannuation
The eligible employees of the Company are entitled to receive post employment benefits in respect of superannuation scheme, in which the Company makes quarterly contributions at 15% of employees’ eligible salary. Superannuation scheme is classified as Defined Contribution Plan as the Company has no further obligations beyond making the contribution.
2) Defined Benefit Plans : (Gratuity Funded)
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, as applicable, payable for each completed year of service, without any payment ceiling. Vesting occurs upon completion of five years of service.
Nature of benefits:
The gratuity benefits payable to the employees are based on the employee’s service and last drawn salary at the time of leaving. The employees do not contribute towards this plan and the full cost of providing these benefits are met by the Company.
Regulatory framework:
There are no minimum funding requirements for a gratuity plan in India. The trustees of the gratuity fund have a fiduciary responsibility to act according to the provisions of the trust deed and rules. Since the fund is income tax approved, the Company and the trustees have to ensure that they are at all times fully compliant with the relevant provisions of the income tax and rules. Besides this if the Company is covered by the Payment of Gratuity Act, 1972 then the Company is bound to pay the statutory minimum gratuity as prescribed under this Act.
Governance of plan:
The Trust established for the purpose, has arrangement with Insurance Company (currently HDFC Standard Life Insurance Company Limited and Kotak Life Insurance Company Limited) for future payments of gratuities on behalf of the Trust.
Inherent risk
The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. In particular, there is a risk for the Company that any adverse salary growth or demographic experience or inadequate returns on underlying plan assets can result in an increase in cost of providing these benefits to employees in future. Since the benefits are lump sum in nature the plan is not subject to any longevity risks.
The most recent actuarial valuation of the present value of the defined benefit obligation was carried out at March 31, 2024 by an independent actuary. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.
Note 39 : Capital management and Risk management I Capital Management
For the purpose of the Company’s capital management, capital includes issued equity capital, convertible preference shares, securities premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise the shareholder value.
The Company’s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or combination of short term /long term debt as may be appropriate. The Company determines the amount of capital required on the basis of its product, capital expenditure, operations and strategic investment plans. The same is funded through a combination of capital sources be it either equity and/or preference and/or combination of short term/long term debt as may be appropriate.
II Financial Risk Management Framework
The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include loans, trade receivables, and cash and cash equivalents that derive directly from its operations.
The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk. In order to manage the 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
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables).
Trade receivable
Customer credit risk is managed as per the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on payment performance over the period of time. The Company’s exposure of its customers are continuously monitored based on the customer’s past performance and business dynamics. Credit exposure is controlled by customer’s credit limits that are reviewed and approved by the management at regular intervals.
An impairment analysis is performed at each reporting date. The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company and where applicable, specific provisions are made for individual receivables.
B Liquidity Risk
(i) Liquidity Risk management
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. 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 way of banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
(ii) Maturities of financial liabilities
The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities . The amount disclosed in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.
Interest rate sensitivity
Interest rate risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in market interest rate. During the year, the Company has availed benchmarked linked, short term and long term debts from Bank. Therefore, the Company has exposure to the risk of changes in market interest rates towards the debt availed during the year. It is estimated that an increase in 40 bps change in benchmark rate would result in a loss of approximately Rs. 6.61 lakhs whereas a decrease in 40 bps change in benchmark rate would result in a profit of approximately Rs. 6.61 lakhs. The movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.
C Market Risk
Market risk is the risk that the fair value or 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 rate 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. The Company uses derivatives to manage any significant market risks. Derivatives are only used for economic hedging purposes and not as speculative investments. All such transactions are carried out within the guidelines set by the Board of Directors .
(i) Currency Risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company’s exposure to currency risk relates primarily to the Company’s operating activities when transactions are denominated in a different currency from the Company’s functional currency.
The Company’s foreign currency exposure are denominated in US Dollar, Euro and Emirati Dirham which arise mainly from foreign exchange imports, exports and foreign currency borrowings.
As at the end of the reporting period, the carrying amounts of the company’s foreign currency denominated financial assets and financial liabilities are as follows:
b) Fair value of financial assets and financial liabilities that are not measured at fair value (but fair value disclosures are required):
The Company consider that the carrying amount of financial asset and financial liabilities recognised in the financial statements approximate their fair value.
Note 41 :
As at March 31,2024 the Company has a net current liability position of Rs. 3,496.71 lakhs and has a negative net worth of Rs. 3,626.06 lakhs. The management of the Company has formulated strategic plans for improving the profitability of the Company, which includes increase in sales and reduction in operating expenses. The Promoter director has also provided a commitment in the form of support letter to provide the necessary financial support to the Company to meet its operational and financial obligations including loan from other Promoter as and when they fall due. Based on the business plans of the Company, cash flow projections and support letter from Promoter director, management is confident that the Company will be able to meet its financial obligations as they arise. Accordingly, these Standalone Financial Statements have been prepared on the basis that the Company will continue as a going concern for the foreseeable future.
Note 43 : 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 does not have any transaction with Companies struck off.
(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 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
(vi) 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.
(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 is not declared wilful defaulter by and bank or financials institution or lender during the year.
(ix) The Company has complied 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
(x) The Company is maintaining its books of account in electronic mode and these books of account are accessible in India at all times and the back-up of books of account has been kept in servers physically located in India on a daily basis.
(xi) The Company is using the 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 for certain changes, if any, made using privileged/ administrative access rights in the Navision software. Audit trail for deletion of logs performed by users having such access has not been maintained by the Company. Further, no instance of the audit trail feature being tampered with was noted in respect of an accounting software where the audit trail has been enabled.
As per our report of even date attached For and on behalf of the Board of Directors
For S R B C & CO LLP
Chartered Accountants D. S. Sahney
ICAI Firm Registration No. 324982E/E300003 Chairman and Managing Director
DIN Number : 00003956
per Aruna Kumaraswamy Gulestan Kolah Vandana Yadav
Partner Chief Financial Officer Company Secretary
Membership No: 219350
Place : Mumbai Place : Mumbai
Date : May 21,2024 Date : May 21,2024
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