2.19 Provisions, Contingent Liabilities & Assets:
A Provision is recognized when an enterprise has a present obligation as a result of past event, it is probable that an outflow of resources will be required to settled the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not disclosed to its present value and are determined based on best management estimate taking into account the risks and uncertainties surrounding the obligation required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
A contingent liability is a possible obligation that arises from past events and 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 enterprise 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.
A contingent asset is a possible asset that arises 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 enterprise.
Contingent liabilities and assets are not recognized but are disclosed in the notes.
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial Assets:
(a.) Classification: The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.
(b.) Initial Recognition: Financial assets are recognised initially at fair value considering the concept of materiality. Transaction costs that are directly attributable to the acquisition of the financial asset (other than financial assets at fair value through profit or loss) are added to the fair value measured on initial recognition of financial assets.
(c.) Subsequent Measurement of Financial Assets: Financial assets are subsequently measured at amortized cost if they are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income (FVTOCI): Financial assets are subsequently measured at fair value through other comprehensive income (FVTOCI), if it is held within a business model whose objective is achieved by both from collection of contractual cash flows and selling the financial assets, where the assets' cash flows represent solely payments of principal and interest. Further equity instruments where the Company has made an irrevocable election based on its business model, to classify as instruments measured at FVTOCI, are measured subsequently at fair value through other comprehensive income.
(d.) Impairment of Financial Assets: The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
In accordance with Ind AS 109: Financial Instruments, the Company recognizes impairment loss allowance on trade Standalone Financial Statement as at and for the year ended 31st March, 2018 SPML Infra Limited 114 Annual Report 2017-18 receivables based on historically observed default rates. Impairment loss allowance recognized during the year is charged to the Statement of Profit and Loss.
(e.) Derecognition of financial assets: A financial asset is primarily derecognised 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 'passthrough' 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.
Financial Liabilities:
(a.) Classification: The Company classifies its financial liabilities in the following measurement categories:
- Those to be measured subsequently at fair value through profit or loss, and
- Those measured at amortized cost using the effective interest method. The classification depends on the entity's business model for managing the financial liabilities and the contractual terms of the cash flows.
(b.) Initial Recognition: Financial liabilities are recognized at fair value on initial recognition considering the concept of materiality. Transaction costs that are directly attributable to the issue of financial liabilities that are not at fair value through profit or loss are reduced from the fair value on initial recognition.
(c.) Subsequent Measurement of Financial Liabilities: The measurement of financial liabilities depends on their classification, as described below:
Amortised cost: After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the Effective interest rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortization 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 amortization is included as finance costs in the statement of profit and loss.
(d.) Derecognition of financial liabilities: 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 or loss.
The Company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the Company intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
2.21 Fair Value Measurement:
The Company measures financial instruments, such as, equity instruments at fair value at each reporting date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement isdirectly or indirectly observable
- Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determineswhether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowestlevel input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company's management determines the policies and procedures forboth recurring fair value measurement, suchas instruments and unquoted financial assets measured at fair value, and for nonrecurring measurement,such as assets held for disposal in discontinued operation.
At each reporting date, the management analyses the movements in the values of assets and liabilities which are requiredto be re-measured or re-assessed as per the Company's accounting policies. For this analysis, the management verifiesthe major inputs applied in the latest valuation by agreeing the information in the valuation computation to contractsand other relevant documents.
The management also compares the change in the fair value ofeach asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis ofthe nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summaries accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
2.22 Non-Current Asset Held for Sale and Discontinued Operations
Non-current assets are classified as held for sale if their carrying amount will be recovered principallythrough a sale transaction rather than through continuing use. The criteria for held for sale is regarded met only whenthe assets is available for immediate sale in its present condition, subject only to terms that are usual and customaryfor sale of such assets, its sale is highly probable; and it will genuinely be sold, not abandoned.
Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell,except for assets such as deferred tax assets.
An impairment loss is recognised for any initial or subsequent write-down of the asset to fairvalue less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss notpreviously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition.
Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.
A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and:
- represents a separate major line of business or geographical area of operations,
- is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.
Discontinued operations are excluded from the results of continuing operations and are presented as profit or loss before / after tax from discontinued operations in the statement of profit and loss.
2.23 Segment Reporting and Accounting Policies
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision maker. Chief operating decision maker review the performance of the Company according to the nature ofproducts manufactured traded and services provided, with each segment representing a strategic business unit thatoffers different products and serves different markets. The analysis of segments is based on the activities performed by each segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing andpresenting financial statements of the Company as a whole.
2.24 Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with anoriginal maturity of three months or less, which are subject to an insignificant risk of changes in value.
2.25 Earnings per Share (a.) Basic EPS
Basic EPS is calculated by dividing the profit attributable to shareholders by the weighted average number of shares outstanding during financial year adjusted for bonus elements in the equity shares issued during the year.
(b.) Diluted EPS
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
3 Key Sources of Estimation Uncertainty and Critical Accounting Judgements
In the course of applying the policies outlined in all notes under section 2 above, the Company is required to make judgments, estimates and assumptions about the carrying amount 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 recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period, if the revision affects current and future period.
Key sources of estimation uncertainty
(i.) Useful lives of property, plant and equipment
Management reviews the useful lives of property, plant and equipment at least once a year. Such lives are dependent upon an assessment of both the technical lives of the assets and also their likely economic lives based on various internal and external factors including relative efficiency and operating costs. Accordingly, depreciable lives are reviewed annually using the best information available to the Management.
(ii.) Impairment of property plant and equipment
Determining whether the property, plant and equipment are impaired requires an estimate in the value in use of plant and equipment. The value in use calculation requires the Management to estimate the future cash flows expected to arise from the property, plant and equipment and a suitable discount rate in order to calculate present value. When the actual cash flows are less than expected, a material impairment loss may arise.
(iii.) Provisions and liabilities
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events that can reasonably be estimated. The timing of recognition requires application of judgment to existing facts and circumstances which may be subject to change. The amounts are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
(iv.) Impairment of investments in joint ventures and associate
Determining whether the investments in joint ventures and associate are impaired requires an estimate in the value in use of investments. In considering the value in use, the Management have anticipated the future commodity prices, capacity utilization of plants, operating margins, and availability of infrastructure, discount rates and other factors of the underlying businesses / operations of the investee companies. Any subsequent changes to the cash flows due to changes in the above mentioned factors could impact the carrying value of investments.
(v.) Contingencies
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallizing or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognized.
(vi.) Fair value measurements
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. Judgments include consideration of inputs such as liquidity risk, credit risk and volatility.
(vii.) Taxes
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
(i) General reserve
Under the erstwhile Indian Companies Act 2013, a General Reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year.
Consequent to introduction of Companies Act 2013, the requirement of mandatory transfer of a specified percentage of the net profit to general reserve has been withdrawn and the Company can optionally transfer anyamount from the surplus of profit or loss account to the General reserves.
(ii) Dividends
The Company declares and pays final dividends in Indian rupees 481.52 lacs for the year 2022-23.
(iii) Capital Reserve
Reserve is created on amalgamation as per statutory requirement for Rs. 81.67 crore and balance Rs. 41.51 crore on account of sales of assets and investments.
The Code on Social Security, 2020 (Code') relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective. Based on a preliminary assessment, the entity believes the impact of the
change will not be significant ”
(b) Defined Benefit Plans
Gratuity has been provided on the basis of actuarial valuation using the project unit credit method and same is non-funded. The obligation for leave encashment is recognized in the same manner as gratuity.
The plans in India typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
Investment risk: The liability is not funded and is not relevant in company.
Interest risk: The rate used to discount post-employment benefit obligation should be determined by reference to market yields at the balance sheet date on Government bonds. The currency and term of government bonds should be in consistent with the currency and estimated term of postemployment benefit obligation.
Discount rate
Discount Rate for the valuation is based on Yield to Maturity (YTM) available on Government bonds having similar term to decrement-adjusted estimated term of liabilities. Estimated term of liabilities, for selection of discount rate, is calculated as average term of all future benefit payments on account of death, retirement or resignation weighted by corresponding amount of benefits.
Salary growth rate
Salary growth rate is company's long term best estimate as to salary increases & takes account of inflation, seniority, promotion, business plan, HR policy and other relevant factors on long term basis as provided in relevant accounting standard.
Withdrawal rate
Assumptions regarding withdrawal rates are also set based on the estimates of expected long-term future employee turnover within the organization.
Mortality rate
Indian Assured Lives Mortality (2012-14) as issued by Institute of Actuaries of India has been used. Projected Unit Credit Method
As required under Para 51 (b) of Ind AS 19, valuation of plan benefits is done using Projected Unit Credit Method. Under this method, only benefits accrued till the date of valuation (i.e. based on service unto date of valuation) are considered for valuation. Present value of Defined Benefit Obligation is calculated by projecting salaries, exits due to death, resignation and other decrements, if any, and benefit payments made during each month till the time of retirement of each active member using assumed rates of salary escalation, mortality & employee turnover rates. The expected benefit payments are then discounted back from the expected future date of payment to the date of valuation using the assumed discount rate.
Ind AS 19 also requires 'Service Cost' to be calculated separately in respect of benefit accrued during the current period. Service Cost is calculated using the same method as described above; however instead of all accrued benefits, benefit accrued over the current reporting period is considered.
Notes:
a) The discount rate is based on the prevailing market yield on government securities as at the balance sheet date for the estimated term of obligation.
b) The estimates of future salary increase considered in actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
c) The gratuity and Leave Encashment liabilities are unfunded. Accordingly, information regarding planned assets are not applicable.
47 Financial Instruments
47.1 Capital risk Management
The Company being in a capital-intensive industry, its objective is to maintain a strong credit rating healthy capital ratios and establish a capital structure that would maximize the return to stakeholders through optimum mix of debt and eauity.
The Company's capital requirement is mainly to fund its capacity expansion, repayment of principal and interest on its borrowings and strategic acquisitions. The principal source of funding of the Company has been, and is expected to continue to be, cash generated from its operations supplemented by funding from bank borrowings and the capital markets.
The Company regularly considers other financing and refinancing opportunities to diversify its debt profile, reduce interest cost and elongate the maturity of its debt portfolio, and closely monitors its judicious allocation amongst competing capital expansion projects and strategic acquisitions, to capture market opportunities at minimum risk.
47.3 Financial Risk Management
The Company manages financial Risk by its Board of Directors for overseeing the Risk Management Framework and developing and monitoring the Company's risk management policies. The risk management policies are established to ensure timely identification and evaluation of risks, setting acceptable risk thresholds, identifying and mapping controls against these risks, monitor the risks and their limits, improve risk awareness and transparency. Risk management policies and systems are reviewed regularly to reflect changes in the market conditions and the Company's activities to provide reliable information to the Management and the Board to evaluate the adequacy of the risk management framework in relation to the risk faced by the Company.
The risk management policies aim to mitigate the following risks arising from the financial instruments:
- Market risk
- Credit risk; and
- Liquidity risk
47.4 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 the market prices. The Company is exposed in the ordinary course of its business to risks related to changes in foreign currency exchange rates, commodity prices and
47.5 Foreign Currency Risk Management (As Per Annexure 47.5A)
The Company's functional currency is Indian Rupees (INR). The Company undertakes transactions denominated in foreign currencies; consequently, exposure to exchange rate fluctuations arise. Volatility in exchange rates affects the Company's revenue from export markets and the costs of imports, primarily in relation to raw materials. The Company is exposed to exchange rate risk under its trade and debt portfolio.
Adverse movements in the exchange rate between the Rupee and any relevant foreign currency results in increase in the Company's overall debt position in Rupee terms without the Company having incurred additional debt and favorable movements in the exchange rates will conversely result in reduction in the Company's receivables in foreign currency.
47.6 Commodity Price Risk -:
The Company's revenue is exposed to the market risk of price fluctuations in its division is as under:
Engineering Segment: the company generally takes Turnkey projects from government departments. The contract price is generally fix and free from any price risk subject to change in any government policy or rules.
Real Estate Segment: the company is exposed to risk of prices of Residential and commercial units. These prices may be influenced by factors such assupply and demand, and regional economic conditions.
Other Segment (Packaging): the company is exposed to risk of prices of goods. These prices may be influenced by factors such as supply and demand, Cost of Production and regional economic conditions.
Market forces generally determine prices for the Real Estate and Packaging Segment of the Company Adverse changes in any of these factors may reduce the revenue that the Company earns from the sale of its products.
The Company aims to sell the products at prevailing market prices. Similarly the Company procures raw materials on prevailing market rates as the selling prices of its products and the prices of input raw materials move inthe same direction.
47.7 Credit Risk Management:
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks.
Company's credit risk arises principally from the trade receivables, loans, investments in debt securities, cash & cash equivalents.
Trade Receivables:
The company's customer profile includes public sector enterprises, state owned companies and private corporate as well as large individuals. Accordingly, company's customer risk is low. The company's average project execution cycle is around 24 to 36 months, general payment terms includes mobilization advances, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project.
Customer credit risk is managed centrally by the Company and subject to established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard.The history of trade receivables shows a negligible allowance for bad and doubtful debts.
47.8 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 changesin market interest rates. The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate.
47.9 Liquidity risk Management
Liquidity risk refers to the risk of financial distress or extraordinary high financing costs arising due to shortage of liquid funds in a situation where business conditions unexpectedly deteriorate and requiring financing. The Company requires funds both for short term operational needs as well as for long term capital expenditure growth projects. The Company generates sufficient cash flow for operations, which together with the available cash and cash equivalents and short-term investments provide liquidity in the short-term and long-term. The Company has established an appropriate liquidity risk management framework for the management of the Company's short, medium and longterm funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, 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.
The following tables detail the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods and its non-derivative financial assets. 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.
49 Disclosures as per IND AS -115
a) Performance obligations and remaining performance obligations
i) The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, and adjustment for revenue that has not materialized and adjustments for currency.
b) Disaggregation of revenue of segments as required by Ind As -115, has already been disclosed under note no. 45.
c) Out of Revenue from operations Rs. 105978.81 Lacs (P.Y. Rs. 71976.41 lacs) recognized under IndAS 115 during the year, Rs. 101458.75 Lacs (P.Y. Rs. 69074.91 lacs) is recognized over a period of time and Rs. 4520.05 Lacs (P.Y. Rs. 2901.50 lacs) is recognized at point in time.
d) There is no material impact on provision for expected credit loss so movement analysis is not required.
e) Contract balances: Company recognized revenue as per Ind AS 115 and revenue is directly debited in trade receivables instead of debiting it into contract assets. Retention money deducted amounting to Rs. 7812.37 Lacs (P.Y. Rs. 4335.06 lacs) is included in Trade receivables. Company's Trade receivables includes unbilled receivable of Rs. 5667.91 lacs (P.Y. Rs. 6738.31 lacs ) in balance sheet which are recognized as contact assets in balance sheets. Contract liabilities are those liabilities for which revenue recognized on point in time approach and amount has been received as booking (only in real estate activities).
52 Leases
(i) Company has taken assets on leases which majorly include Land & Building, Machinery and Vehicles.
(ii) There are exemption provided by accounting standard for following leases as defined in para 5 of IND AS-116:
a. short term lease and
b. leases for which the underlying asset is of low value.
(iii) Under such exemption company booked expenses of Rs. 2339.23 lacs (P.Y. Rs. 1213.39 Lacs) as Rental expenses, Machine Hiring and Vehicle Hiring.
(iv) Company has accounted as per guidance provided by Ind AS -116 and recognize Right to use assets and lease liability for which complete disclosure is provided in note no. 8.
57
(a)
(i) The Company, as at 31 March 2024, has (i) a non-current investment amounting to Rs. 5589.70 Lacs (31 March 2023: 5589.70 lacs), and current advances of Rs. 6492.81 Lacs (31stMarch 2023 Rs. 9757.72 Lacs) in Bhilwara Jaipur Toll Road Private Limited, subsidiary (P.Y. Joint Venture), is holding 51.28% (P.Y. 49%) share in Special Purpose Vehicle (SPV). SPV had been awarded project by Rajasthan State Govt. through PWD to Design, Build, Finance, Operate and transfer (DBFOT) SH-12 toll road through an agreement dated 12.07.2010. SPVwas granted a right to collect toll fees for 22 years starting from 02.02.2012 till 02.02.2034. Company is fulfilling its obligations perfectly despite of regular defaults made by government in fulfilling its obligations.
SPV was collecting toll on all vehicles including private vehicles as per concession agreement. But Government announced to exempt toll fees of private vehicles w.e.f. 01.04.2018. Since the private vehicle's toll fees is significant portion of total toll collection and Joint Venture calculated project viability including that toll collection on private vehicles.SPV suffered losses of revenue because of toll fees exemption on private vehicles. SPV intimated this loss to PWD and asked them to compensate the loss. But in spite of regular reminders and notices by the SPV to PWD, PWD did not respond to any of their notices.
The Special Purpose Vehicle (SPV) had filed for termination with the respective authority and claimed the amount invested along with termination payments as per the concession agreement, amounting to Rs. 61,200.00 Lakhs. The arbitrator has awarded Rs. 77,943.00 Lakhs in favor of the SPV. Out of this awarded amount, the SPV has received Rs. 25,054.00 Lakhs to comply with the commercial court's order. This amount has been used to repay loans and cover other expenses. Amount Received from PWD is treated as current liability in Financial statements of SPV.
However, neither the arbitration award nor the amount received from the government has been accounted for in the SPV's financial statements as of the balance sheet date. This is because the Public Works Department (PWD) has challenged the arbitrator's award in an appeal to the High Court. Given the ongoing legal proceedings, the recognition of this amount in the financial statements has been deferred until there is a final resolution of the case.
(b) The Company, as at 31 March 2024, has a non-current investment amounting to Rs. 2.50 lacs (31 March 2023: 2.50 lacs), and non-current advances of Rs. 748.15 Lacs (31st March, 2023 Rs. 747.98 Lacs) in Gurha Thermal Power Company Limited, aJoint Venture, is holding 50% share in Joint Venture.The Joint Venture has terminated the Power Purchase Agreement (PPA) on 15-07-2015 with Rajasthan RajyaVidhyut Prasaran Nigam Ltd (RRVPNL). The Joint Venture was formed for the Business of Power generation and selling the same to the RRVPNL. As the agreement is terminated by the Joint Venture and the Joint Venture has also filed the claim against the RRVPNL for the recovery of the amount invested by the Company of Rs. 750.16 Lacs plus interest. The Joint Venture has filed petition before the Rajasthan Electricity Regulatory Commission, Jaipur. RERC vide its order dated 09.01.2018 dismissed the petition. The Joint Venture challenged the order of RERC, Jaipur by filing appeal before the APTEL (Appellate Tribunal for Electricity), New Delhi.
The Joint Venture has filed for termination with the respective authority (DISCOMS) and has claimed the amount invested along with termination payments. Initially, the Rajasthan Electricity Regulatory Commission (RERC) dismissed the claim. Subsequently, the Joint Venture preferred an appeal before the Appellate Tribunal for Electricity (APTEL).
APTEL ruled in favor of the Joint Venture, awarding a total of Rs. 5,390.92 Lakhs, inclusive of interest. However, this verdict has not been accounted for in the Joint Venture's financial statements as of the balance sheet date. The decision has not been recognized in the financial statements due to the possibility of an appeal being filed against the APTEL's verdict in the Honorable Supreme Court. As the final outcome remains uncertain, the Joint Venture has deferred the recognition of the awarded amount in its financial records.
58 In every payment of running bill, project authority deduct retention amount on account of defect liabilities arise during the contract period which is either released by submitting bank guarantee or released after successful completion of project. This retention amount keeps accumulating. Collection of retention money is probable and therefore debtors on account of retention money are considered good based on the track record and previous performance of the company. Deduction of retention money has been claimed as per the provisions of Income Tax Computation and Disclosure Standards (ICDS). Company have created deferred tax on retention money due to difference in tax base and accounting base as per Ind As 12 and same has been considered for previous year as well.
59 The company has invested in and guaranteed OMIL-JSC JV, Kameng, by providing working capital and non-fund based banking facilities. According to a commercial understanding between the partners, documented in a letter of undertaking dated 31.03.2009, the company was to receive a higher share of profits to compensate for its additional investment and guarantees in this joint venture. This additional sum has been received by the company in the form of an arbitration award.
During the year, the joint venture and the project authority reached an agreement to settle the disputed amount related to the completed project. The initially disputed amount of Rs. 2403.26 Lakhs was reduced to Rs. 1643.19 Lakhs. Consequently, the total amount payable by the project authority, accounting for project completion and the arbitration claim, was determined to be Rs. 3497.55 Lakhs, plus GST at 18%, amounting to a total of Rs. 4127.11 Lakhs. This amount has been disbursed by the project authority following the issuance of an e-tax invoice by the joint venture.
It is important to note that the joint venture had already recognized the disputed revenue of Rs. 2403.26 Lakhs in the fiscal year 2020-21, based on the agreement signed by both parties. However, this revenue could not be realized at that time due to the dispute raised by the project authority.
As a result, the revenue of Rs. 1643.19 Lakhs was billed to the project authority and subsequently reversed through a credit note to correct the earlier recognition. Additionally, an amount of Rs. 902.63 Lakhs, which had been previously written off as various expenses and was payable by the project authority, has now been debited to the project authority's account by crediting sundry balances written off. This adjustment ensures accurate financial representation and reconciliation of accounts between the joint venture and the project authority.
60 In case of Upperbeda (Revenue C.Y. Rs. 0.00 lacs and P.Y. Rs. 4.95 lacs) and SSNNL Gujrat (Revenue C.Y. Rs. 356.71 lacs and P.Y. Rs. Rs. 498.12 lacs ) projects which has been allotted to Om Metals -Spml JV but being a lead partner, revenue is been recognized in comapny's books and Income tax is deducted in the name of Om Infra Limited itself. All payments were received by Om Infra Limited.
61 Insurance cover has been taken for bulky items at Kota factory like steel plates/ Machines etc. which are not easily subjected to for burglary or theft.
62 Due to high labour turnover at hilly or remote locations of project site some time it is very difficult to accomplish the labour related compliances in these regions.
63 The provision of Employees benefits has been taken on the basis of best judgment policy and prudent business practice as assessed and provided by the Board of directors and Remuneration committee.
64 After the award of work, sometimes other partner of the JV falls short of its financial commitment in JV and the one partner has to meet all financial obligations. This entails for modified profit percentage to the other partner in JV depending on nature and circumstances of the project and the JV agreement is supplemented to provide such effect.
65 Corporate Social Responsibility
As per section 135 of the Companies Act, 2013, a company meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years of corporate social responsibility (CSR) activities. The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief and rural development projects. A CSR committee has been formed by the Company as per the Act. The funds were primarily allocated to a corpus and utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013.
Company has contributed a sum of Rs. 40.00 Lacs to Karmaputra Charitable Trust and as per certificate of utilization received , such amount is fully utilized by the trust and company relied on this certificate for utilization of CSR amount .
• Gross amount required to be spent by the Company during the year is Rs. 35.00 Lacs (P.Y. Rs.
40.00 Lakhs).
66 Claims
The company raised various claims with various customer/ parties/subsidiaries of company/Joint Ventures/Subsidiaries amounting to Rs. 57525.18 lacs (Rs. 57367.30 Lacs in Previous Years), against these claims, the Arbitrator awarded claims of Rs. 1477.70 lacs (P.Y Rs.8297.15 lacs). The company has not been recognizing the revenue on the aforesaid Arbitration Awards on its claimed including interest as awarded from time to time. There are also some counter claims by the customer / Other Parties amounting to Rs. 1805.74 Lacs (Rs. 2517.16 Lacs included in previous year) against these claims, the Arbitrator awarded claims to the customer of Rs. 82.24 lacs (Rs 82.24 lacs in the Previous Year). These awards are further challenged by the customer as well as the Company in the higher courts as the case may be. In accordance with past practice, the Company has not made adjustment because the same has not become rule of the court due to the objections filed by customer / parties and by the Company.
67 The company, through its two subsidiaries namely Gujrat Warehousing Private Limited (GWPL) & Bihar Logistics Private Limited (BLPL), had signed a concession agreement with Food Corporation of India (FCI) for the construction of silos on a Build, Own, Develop, and Operate (BODO) basis for a period of 30 years in Gujarat and Bihar. While a significant portion of the required land was acquired, a small portion encountered statutory hurdles. As a result, the subsidiaries had to surrender the project to FCI and sought a claim for the both projects. The matter is currently under arbitration. Meanwhile, the GWPL has sold the major portion of the acquired land in Gujarat, and the land in Bihar is in the process of monetization.
The company has invested Rs. 7.53 crores as share capital and advanced Rs. 17.04 crores in both subsidiaries, which are considered good and recoverable.
68 In February 2021, Tapovan(NTPC) project was partially damaged due to massive flood in Uttrakhand. The company has raised insurance claim with insurer but insurance company on some renewal premium mismatch grounds rejected claim. Company has approached Rajasthan High court for direction to Insurance company for admission of claim and court has directed the insurer to appoint surveyor.
69 In Chamera project (NHPC), NHPC has awarded the incentive for compressed schedule but due to some delays in project, NHPC had sought BG from us and referred the matter to arbitrator. The matter is still subjudice in High court and NHPC claimed the BG amount from us in cash which we paid and sought relief in court.
70 Financial Statements includes amount of Rs. 308.26 lacs ( P.y. Rs. 175.29 Lacs) as income .Such amount written off is not receivable or payable by company as decided by management but no confirmation/ affirmations has been received from the respective parties. Such amount was pending in books since long.
71 Amount received of Rs.1.30 Lacs (P.Y. Rs. 12.40 lacs) as profit from Joint venture namely OMIL VKMCPL JV (Pench -II) is received as per agreement dated 15th Nov 2019 between company and Vijay Kumar Mishra Construction Pvt. Ltd. (VKMCPL) . As per agreement company waived its rights in OMIL-VKMCPL JV (Pench II) in lieu of 1.5% of turnover to be received as profit only but such amount is shown as contractual work by VKMCPL and TDS is deducted accordingly. But company has booked such amount as profit from JV only as per agreement terms.
72 Company has received completion certificate of A & B block of project OM Green Meadows dated 29th November,2021 and company started giving possessions to buyers after registry. Since the company has obtained completion certificate of A & B block only still the capitalization to the balance project will be continued.
73 During the year, the Company has not entered with any scheme of arrangements in terms of section 230 to 237 of the Companies Act, 2013 and there was no transactions with struck off Company.
74 No Fund have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any person or entity, including foreign entities ('Intermediaries') with the understanding, whether recorded in writing or otherwise, that the intermediary shall land or invest in party indentified by or on behalf of the Company ('ultimate beneficiaries'). The Company has not received any funds from the any party with the understanding that the Company shall whether, directly or indirectly lend or invest in other person or entities identified by or on behalf of the Company ('ultimate beneficiaries') or provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
75 The company has complied with the provision of section 2(87) of the Companies Act, 2013 read with the Companies (Restrictions on number of layers) Rules, 2017.
76 The Company has not been declared willful defaulter by any bank or financial institution or government or any government authority.
77 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 under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.
(ii) The company does not have any transactions with companies struck-off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.
(iii) The company does not have any charges or satisfaction which are yet to be registered with ROC beyond the statutory period.
(iv) The company does not have any cryptocurrency transactions during the financial year.
(v) The company does not have any transaction which is not recorded books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 .
78 The Company have proposed 50% final dividend for the year ended 31 March 2024 which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
81 Figures for previous year have been re-arranged/recomapnyed wherever necessary to make them comparable.
Significant Accounting Policies and Notes to the financial statements Signed in terms of our report of even date annexed
For Ravi Sharma & Company For and on behalf of Board of Directors
Firm's Registration No. 015143C OM INFRA LIMITED
Chartered Accountants
CA Sourabh Jain Dharam Prakash Kothari Sunil Kothari
Partner ( Chairman) (Vice Chairman)
M.No 431571 (DIN 00035298) (DIN 00220940)
Place : Delhi Dated : 23.05.2024
UDIN: 24431571BKEZQZ8522 S.K.Jain Vikas Kothari Reena Jain
(CFO) ( Managing Director & CEO) (Company Secretary)
(DIN 00223868)
|