Note 11.2 Rights, preferences and restrictions attached to shares
Equity Shares
The Company has only one class of equity shares having a par value of ' 2 per share. Each holder of Equity Shares Is entitled to one vote per share.
The Company declares and pays dividend in Indian Rupees. 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. The distribution will be in proportion to the number of equity shares held by the shareholders.
The Company has not declared any dividend during the year.
Note:* as Nominee Shareholder on behalf of Mirza International Limited
Note 11.5 Pursuant to the Scheme of arrangement the Company had issued 13,82,01,900 Equity Shares to the Shareholders of Mirza International Limited. On 31st March 2023 (Allotment date) Redtape Limited had issued one equity share for every equity share held of Mirza International Limited on the date of 29th March 2023 (Record date) for consideration other than cash.
Note 11.6 There are no buy back of equity shares during the last one year.
Note 11.7 There are no bonus shares issued during the last one year.
Note 11.8 There is no holding / ultimate holding company of the company.
Nature and purpose of reserve
- Capital reserve
Surplus resulted pursuant to Scheme of Arrangement of Demerger.
- Retained earnings:
Retained earnings represents the net profits after all distributions and transfers to other reserves.
Other comprehensive income:
- Cash flow hedge reserve
The cumulative effective portion of gains or losses arising from changes in fair value of hedging instruments designated as cash flow hedges are recognised in cash flow hedge reserve. Such changes recognised are reclassified to the statement of profit and loss when the hedged item affects the profit or loss. The Company has designated certain foreign currency forward contracts as cash flow hedges in respect of foreign exchange risks.
- Remeasurements of defined benefit obligation
Remeasurements of defined benefit obligation comprises actuarial gains and losses and return on plan assets (excluding interest income).
(1) HDFC Bank term loans amounting to ' 5,091 Lakh secured by exclusive charge on moveable assets funded from HDFC Bank term loan, exclusive charge on industrial property measuring 2,72,646.39 square meters located in Industrial Area Unnao Site 2 (Uttar Pradesh) and Pari-passu charge on current & future stocks and book debts.
(2) HDFC Bank working capital loan of ' 1,380 Lakh is secured by Pari passu charge on current & future stocks & book debts and exclusive charge on industrial property measuring 2,72,646.39 square meters located in Industrial Area Unnao Site 2 (Uttar Pradesh),
(3) CITI Bank working capital loan of ' 7,400 Lakh is secured by First Pari passu charge on present & future stocks & book debts and exclusive charge on property situated at Plot No.4,5,36&37, Sector-59, Noida.
(4) Federal Bank working capital loan of ' 2,100 Lakh is secured by First Pari passu charge by way of hypothecation on entire current assets present & future stocks & book debts and exclusive charge on property situated at Plot No.8, Sector-90, Noida.
(5) Auto Loans are secured by the hypothecation of respective vehicle for which was availed.
(6) All the above secured Loans are guaranteed by Mr. Shuja Mirza (Non-cumulative) Compulsorily Redeemable Preference Shares
As per Clause 3.10 of Composite Scheme of Arrangement the pre-Scheme issued and paid-up share capital of the Company which consists of 50,000 Equity Shares of '2 each aggregating '1,00,000, will be cancelled. 50,000 9% Compulsorily Redeemable Preference Shares of '2 each, credited as fully paid-up, aggregating '1,00,000, will be issued in place of such cancelled equity share capital.
50,000 9% Non-cumulative compulsorily redeemable preference shares of ' 2/- each fully paid up shall be redeemed in terms of the provisions of the Companies Act, 2013, at Par within a period of 5 years from the date of issue (maturity date is 30 March 2028) of such Redeemable Preference Shares with a put and call option available to the Shareholders and the Issuer Company for early redemption.
Note 32 Employee benefits
A. Defined benefit plan -Gratuity
The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the gratuity plan, every employee who has completed at least five years of service usually gets a gratuity on departure 15 days of last drawn basic salary for each completed year of service. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The following table set out the funded status of the gratuity plan and the amount recognised in the company’s financial statement as at 31-March-2024 and 31-March-2023.
(viii) The salary growth rate indicated above is the Company’s best estimate of an increase in salary of the employees in future years, determined considering the general trend in inflation, seniority, promotions, past experience and other relevant factors such as demand and supply in employment market, etc.
(ix) Sensitivity Analysis:
Significant actuarial assumptions for the determination of the define benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The result of sensitivity analysis is given below :
(xi) Actuarial risks exposures:
Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follows;
Interest Rate risk ; The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
Liquidity Risk ; This is the risk that the Company is not able to meet the short-term gratuity payouts. This may arise due to non-availability of enough cash / cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
Salary Escalation Risk ; The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan’s liability.
Demographic Risk ; The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
Regulatory Risk ; Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act , 1972(as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (e.g. Increase in the maximum limit on gratuity of Rs. 2Q,QQ,QQQ).
B. Defined contribution plan Contribution to Provident Fund
The company has recognized an expense of ' 167 lakhs (Previous year ' 154 lakhs) in respect of contribution to Provident Fund.
(i) The transactions with related parties are made in the ordinary course of business and on terms equivalent to those that prevail in arm’s length transactions with other vendors. Outstanding balances at the year-end is unsecured and settlement occurs in cash.
*(ii) Long-term employee benefits for Key Managerial Personnel:
The managerial personnel are covered by Group’s gratuity policy and are eligible for compensated absences along with other employees of the Group. The proportionate amount of gratuity and compensated absences cost pertaining to managerial remuneration have not been included in aforementioned disclosures as these are not determined on individual basis.
(ii) The shortfall amount Is on account of funds that are allocated to the ongoing projects Initiated during the current year and being unspent as at 31-Mar-2024 has been transferred to the unspent CSR account within 30 days from the end of financial year in accordance with the Companies Act 2013, read with Companies (Corporate Social Responsibility Policy) Rules, 2014.
Note 35 Leases
Right-of-use assets and Lease Liability:
This note provides information for leases where the company is a lessee. The Company leases various warehouses and retail stores. Rental contracts are generally made for fixed periods of five years to twelve years
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Variable Lease Payment
Some leases contain variable payment terms that are linked to sales generated from a store. For some individual stores, up to 100% of lease payments are on the basis of variable payment terms with percentages ranging from 8% to 10% of sales. Variable payments terms are used for a variety of reasons, including minimizing the fixed costs base for newly established stores. Variable lease payments that depend on sales are recognized in profit or loss in the period in which the condition that triggers those payments occurs.
Expenses relating to short-term leases and expenses relating to variable lease payments not included in lease liabilities (included in other expenses) were ' 560 Lakhs (31 March 2023- ' 432 Lakhs).
As at Balance Sheet date, the Company is not exposed to future cash flows for extension / termination options, residual value guarantees, and leases not commenced to which lessee is committed.
Note 36 Financial risk management objective and policies
The financial assets of the company include loans, trade and other receivables, security deposits and cash and bank balances that derive directly from its operations. The financial liabilities of the company, other than derivatives, include loans and borrowings, trade payables and other payables, and the main purpose of these financial liabilities is to finance the day to day operations of the company. The Company also enters into derivative transactions.
The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Company’s senior management oversees the management of these risks and advises on financial risks and the appropriate financial risk governance framework for the Company.
The company is mainly exposed to the following risks that arise from financial instruments:
A. Market risk (including currency risk, interest rate risk and other price risk)
B. Liquidity risk
C. Credit risk
This note explains the risks which the company is exposed to and policies and framework adopted by the company to manage these risks:
A. Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise two types of risk: foreign currency risk and interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Company uses derivatives to manage 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. There have been no significant changes to the Company’s exposure to market risk or the methods in which they are managed or measured.
(a) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company 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 imports finished goods from outside India and export finished goods. The exchange rate between the Indian rupee and foreign currencies has fluctuated in recent years and may fluctuate substantially in the future. Consequently, the company is exposed to foreign currency risk and the results of the company may be affected as the rupee appreciates/ depreciates against foreign currencies. Foreign exchange risk arises from the future probable transactions and recognized assets and liabilities denominated in a currency other than company’s functional currency.
The company measures the risk through a forecast of highly probable foreign currency cash flows and manages its foreign currency risk by hedging appropriately. The Company also holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures.
Foreign currency sensitivity analysis
Any changes in the exchange rate of USD against ' is not expected to have significant impact on the Company’s profit due to the less exposure of these currencies. Accordingly, a 2% appreciation/depreciation of the INR as indicated below, against the USD would have reduced/increased profit by the amounts shown below. This analysis is based on the foreign currency exchange rate variances that the Company considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variable remains constant:
Derivatives designated as hedging instruments
The Company enters into hedging instruments in accordance with policies as approved by the Board of Directors with written principles which is consistent with the risk management strategy of the Company. The Company has decided to apply hedge accounting for derivative contracts that meets the qualifying criteria of hedging relationship entered.
Cash flow hedges
During the current year ended 31 March 2024 and previous year ended 31 March 2023, the Company has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure. The Company does not use forward contracts for speculative purposes. The Counterparty for such contracts is generally a bank.
The critical terms of the foreign currency forward contracts match the terms of the expected highly probable forecast purchase transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.
The cash flow hedges of the forecasted purchase transactions during the year ended 31 March 2023 were assessed to be highly effective and unrealized loss of ' 19 lakh (Previous year ' 310 lakh), with a deferred tax charge of ' 5 lakh (Previous year ' 80 lakh) relating to the hedging instruments, is included in other comprehensive income.
During the year ended 31 March 2024 and 31 March 2023 the company has designated certain foreign exchange contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedge reserve as at 31 March 2024 are expected to occur and reclassified to statement of profit and loss within one year.
The company determines the existence of economic relationship between the hedging instrument and hedged item based on the currency, amount and timings of its forecasted cash flows. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in the Statement of Profit or Loss at the time of the hedge relationship rebalancing.
(b) Interest Rate Risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to long term debt. Borrowings at variable rates exposes to cash flow risk. With all other variables held constant, the following table demonstrates composition of fixed and floating rate borrowing of the company and impact of floating rate borrowings on company’s profitability.
Cash flow sensitivity analysis for variable rate instruments
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. A change of 100 basis points in interest rates for variable rate instruments at the reporting date would have increased/(decreased) profit or loss for the below years by the amounts shown below. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:
B. Liquidity Risk
Financial liabilities of the company include borrowings, lease liabilities, trade and other payables. The company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations.
Liquidity Risk Management
The Management of the Company is responsible for liquidity risk management who has established an appropriate liquidity risk management framework for the Company’s short, medium and long-term 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 company monitors its risk of shortage of funds to meet the financial liabilities. The company plans to maintain sufficient cash to meet the obligations as and when falls due.
C. Credit risk
Credit risk refers to the risk of default on its contractual terms or obligations by the counterparty resulting in a financial loss. The Company is exposed to credit risk from trade receivables, security deposit to landlord & cash and bank balances.
(a) Trade receivables
Sales to retail customers are required to be settled in cash or using credit cards, mitigating credit risk. There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/ or regions. For non-retail customers and sale through E-Commerce portal, the Company assesses the credit quality of the customer and E-Commerce Portal, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings by the management. The compliance with credit limits by customers is regularly monitored by line management.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. The credit risk to the Company is limited in cases of retail sales since they are in nature of cash and carry and for non-retail sales, the Company’s exposure to customers is diversified and there is no concentration of credit risk with respect to any particular customer.
(b) Other Financial Assets
With regards to all the financial assets with contractual cashflows other than trade receivables, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from which these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible.
Credit risk on cash and bank balances is limited as the company generally invests in deposits with banks and financial institutions with high credit ratings assigned by credit rating agencies.
The Company’s maximum exposure to credit risk for the components of the financial assets as at 31 March 2024 and 31 March 2023 is to the extent of their respective carrying amounts as disclosed in respective notes
Note 37 Capital Management
The Company’s capital management objectives are:
- to ensure the Company’s ability to continue as a going concern.
- to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
- to maintain optimum capital structure to reduce cost of capital and to maximize the shareholder value
The company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants which otherwise would permit the banks to immediately call loans and borrowings.
in order to maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
Further, there have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
There were no changes in the objectives, policies or processes for managing capital during the year ended 31 Mar 2024 and 31 Mar 2023.
Note 38 Micro, Small and Medium Enterprises as defined under the MSMED Act, 2006
Micro enterprises and small enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 (as amended till date) have been determined based on the confirmations received in response to intimation in this regard sent by the Company to the suppliers.
Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006 (as amended till date), certain disclosures are required to be made relating to Micro, Small and Medium Enterprises.
No interest in terms of Section 16 of Micro, Small and Medium Enterprises Development Act, 2006 or otherwise has either been paid or payable or accrued and remaining unpaid as at March 31,2024.
Based on the information and records available with the management, there are no outstanding dues to the Micro, Small and Medium Enterprises development Act, 2006 beyond the statutory period of 45 days
(b) Basis of Fair value of Financial assets and liabilities (i) Fair value hierarchy
The Company categorizes financial assets and financial liabilities measured at fair value into one of three levels depending on the ability to observe inputs employed in their measurement which are described as follows:
i) Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
ii) Level 2 - Inputs are inputs that are observable, either directly or indirectly, other than quoted prices included within level 1 for the financial asset or financial liability.
iii) Level 3 - Inputs are unobservable inputs for the asset or liability reflecting significant modifications to observable related market data or Company’s assumptions about pricing by market participants.
i) Fair valuation of current financial liabilities is considered as approximate to respective carrying amount due to the short-term maturities of these instruments.
ii) Trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents, other financial assets, trade payables and other financial liabilities have fair values that approximate to their carrying amounts due to their short-term nature.
There are no transfers between Level 1, Level 2 and Level 3 during the year ended 31 March 2024 and 31 March 2023.
Note 40 The main business of the Company is retailing/ trading of merchandise which primarily consist of apparels and footwears. All other operating activities of the Company are incidental to its main business. Accordingly, the Company has only one identifiable segment reportable under Ind AS 108 “Operating Segment”. The chief operational decision maker monitors the operating results of the entity’s business for the purpose of making decisions about resource allocation and performance assessment.
Note 41 In accordance with the Ind AS-36 on Impairment of Assets, the Company has assessed as on the balance sheet date, whether there are any indications with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly, no impairment loss has been provided in the books of account.
Note 43 “The Code on Social Security, 2020 (‘SS Code’) relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The SS Code has been published in the Gazette of India. However, the date on which the SS Code will come into effect has not been notified. The Company will assess the impact of the SS Code when it comes into effect and will record any related impact in the period when the SS Code becomes effective.”
The Company is operating certain retail stores where the respective lease agreements were made in the name of M/s Mirza International Limited (Transferee Company). The company is in process of preparing addendum to the said lease agreements to incorporate the name of the Company as lessee.
ii) The Company is not holding any investment property.
iii) The Company has not revalued any of its Property, Plant & Equipment and Right of use assets.
iv) The Company has not revalued any of its Intangible Assets
v) The Company has not given any loan or advances to its Promoters, Directors, KMP and related Parties as defined
under Companies Act, 2013.
vi) The Company does not hold any Benami property defined under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder. Further, no proceedings have been initiated during the year or are pending against the Company as at 31-Mar-2024 for holding any benami property.
vii) The quarterly returns of current asset fled by the Company with Banks in agreement with the financial statements.
viii) The Company has never been declared as wilful defaulter by any bank or financial institution or other lenders.
ix) The company does not have any relationship with any struck off company.
x) All the charges are duly registered with the ROC within the prescribed time under the Companies Act 2013 & Rules made there under.
xi) As at 31-Mar-2024, the Company have following subsidiary companies i.e.
i. Redtape Bangla Limited
ii. Redtape HK Limited
iii. Redtape London Limited (Step down subsidiary - Wholly Owned Subsidiary of Redtape HK Limited)
iv. Redtape (Quanzhou) Sports Goods Co. Limited (Step down subsidiary - Wholly Owned Subsidiary of Redtape HK Limited)
The Company is in compliances of requirement of number of layer of companies.
xii) There is no scheme of Arrangement approved during the year.
xiii) The company has not received any share premium amount and the term loan availed during the year has been applied for the purpose for, which, they were obtained. The working capital borrowing has been utilised by the company in its own business, the company has not loaned or advanced or invested funds to any other person(s) or entity(ies), including foreign entities with any understanding.
xiv) The company has not traded or invested in Crypto currency or Virtual currency during the financial year.
xv) There is no income that has been surrendered or disclosed as income during the year in Tax Assessments under Income Tax Act,1961.
Note 46 The Company deals in Fashion Items such as Footwear, Apparel, Accessories etc. Company has made its sales network through its retail stores pan India at various remote locations. The Company operates these retail stores, through its owned stores or stores operated by its Franchisee. Due to remote locations and volumes of transactions, there are few instances where employees of the company misappropriated the Cash of the sale proceeds of the retail store.
During the year there are no such cases reported ( In previous year three cases reported amounting '19.01 lakh which constitute even less than 0.01% of the total sales proceeds of company owned stores). This is general trend of the industry.
Note 47 The company has complied with the provisions of Section 186(4) of the companies act, 2013 in respect of investments made (refer note no:5)
Note 48 Previous year figures have been regrouped/ recasted/ rearranged wherever necessary to conform its classification of the current year.
Note 49 Figures in bracket indicate deductions.
Note: 1. The above mentioned analytical ratios for F.Y. 2022-23 at s.no.. 1 and 8 are being restated due to regrouping of previous year figure.
2. The ratio mentioned at s. no. 3, 4 & 10 is being restated for F.Y. 2022-23 due to change in formula.
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