1.11) Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the notes on accounts. Contingent Assets are neither recognized nor disclosed in the Financial Statements.
1.12) Income Taxes
Income Tax expense comprises current tax and deferred tax charge or credit. The current tax is detennined as the amount of tax payable in respect of the estimated taxable income of the
period. The deferred tax charge or credit is recognised using prevailing enacted or substantively enacted tax rates. Where there are unabsorbed depreciation or carry forward Losses, deferred tax asset is recognised only if there is virtual certainty of realisation of such assets. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each Balance Sheet date based on the developments during the year and available case laws, to reassess realisation/liabilities.
MAT Credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal Income Tax during the specified period. In the year in which the Minimum Alternative Tax (MAT) Credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Profit and Loss account and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.
1.13) Earnings Per Share
The Company presents basic and diluted Earnings Per Share (“EPS") data for its ordinary shares. Basic EPS is calculated by dividing the Profit or Loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the Profit or Loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which includes all stock options granted to employees.
1.14) Cash Flow Statement
Cash Flows are reported using the Indirect Method. Whereby Profit for the period is adjusted for effects of transactions of a non-cash nature, any deferrals are accruals of past or future Operating cash receipts or payments and item of income or expenses associated with Investing or Financing cash flows. The cash flows from Operating, Investing and Financing activities of the Company are segregated.
1.15) Segment Reporting
Segment Reporting is not applicable since the entire operations of the Company are related to one segment i.e. manufacturing of ceramics tiles in terms of Ind AS 108 on operating segments.
1.16) Exceptional Items
Exceptional items refer to items of Income or Expenses within the Statement of Profit and Loss from ordinary activities which are non-recurring and are of each size, nature or incidence that their separate disclosure is considered necessary to explain the performance of the Company.
Note on Exceptional Loss: Exceptional Loss of Rs. 1263.34 Lakhs is on account of short recovery of Insurance claim on inventory as the said amount cannot be recovered as per the award of Arbitral Tribunal.
1.17) Recent Accounting Pronouncements and Adoption
a) Amendment in Schedule III of the Companies Act, 2013
On 24th March,2021, the Ministry of Corporate Affairs (“MCA”) through a notification amended Schedule III of the Companies Act, 2012 which is applicable from 01st April, 2021. The effect of said amendment has been incorporated in these Financial Statements to the extent applicable to the Company.
b) Standards issued but not Effective
Ind AS 16- Proceeds before intended use
The amendments mainly prohibit an entity from deducting the cost of Plant and Equipment amounts received from selling items produced while the Company is preparing the asset for its intended use. Instead, an entity will recognize such sale proceeds and related cost in Profit or Loss. The Company does not expect the amendments to have any impact in its recognition of its Plant and Equipment in its financial statements.
Ind AS 106 - Annual Improvements to Ind AS (2021)
The amendment removes the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives were described in that illustration. The Company does not expect the amendment to have any significant impact in its Financial Statements.
Ind AS 109 - Annual Improvements to Ind AS (2021)
The amendments clarifies which fees an entity includes when it applies the '10 percenf test of Ind AS 109 in Assessing whether to de-recognized a Financial Liability. The Company does not expect the amendment to have any significant impact in its Financial Statements.
1.18) Events after Reporting date
Where events occurring after the Balance Sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of such events is adjusted within the Financial Statements. Otherwise, events after the Balance Sheet date of material size or nature are only disclosed.
1.19) Critical Accounting Estimates and Judgments
The preparation of Financial Statements is in conformity with generally Accepted Accounting Principles that require management to make estimates and assumptions that affect the reported amounts of Assets and Liabilities and disclosure of contingent liabilities at the date of the Financial Statements and the result of operations during the reporting period. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Revisions in accounting estimates are recognized
prospectively.
The areas involving critical estimates or judgments are -
- Estimates of Useful life of Plant and Equipment and Intangibles
- Measurement of Defined Benefit Obligation
- Recognition of Deferred Taxes
- Estimation of Impairment
Estimation of Provisions and Contingent Liabilities Note 23
Financial Risk Management
The Company’s activities expose it to Market Risk, Credit Risk and Liquidity Risk. Company’s overall risk management focuses the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance.
i. Market Risk
Market Risk is the risk of Loss of future earnings, fair values or future cash flows that may result from a change in the price of a Financial Instrument. The value of a Financial Instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices and other market changes that affect Market Risk sensitive instruments Market Risk is attributable to all market risk sensitive Financial Instruments including investments and deposits, foreign currency receivables, payables and borrowings.
ii. Foreign Currency Risk
Foreign Currency Risk is the risk of impact related to fair value or future cash flows of an exposure in foreign currency, which fluctuate due to change m foreign currency rates. The Company’s exposure to the risk of changes in foreign exchange rates is negligible.
The Company did not enter into any derivative instruments for trading or speculative purposes.
iii. Interest Rate Risk
Interest Rate Risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market rates relates primarily to the Company’s Short-term borrowing. The Company constantly monitors the credit markets and rebalances its financing strategies to achieve an optimal maturity profile and financing cost.
iv. Credit Risk
Credit Risk arises when a customer or counterparty does not meet its obligations under a financial instrument or custom contract, leading to a Financial Loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its fmancmg/mvesting activities, including deposits with banks. The Company has a prudent and conservative process for managing its credit risk arising in the course of its business activities. The Company receives payments regularly from its customers and hence the Company has no significant credit risk.
v. Liquidity Risk
Liquidity Risk is defined as the risk that the Company will not be able to settle or meet obligations on time or at a reasonable price. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Company is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company’s liquidity position through rolling forecasts based on expected cash flows.
Note 24
Capital Management
The Company’s objectives when managing capital are to
I) Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders.
II) Maintain an optimal capital structure to reduce the cost of capital consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:
Note 25 Factory Status
The Company suffered extensive damage to the Buildings, Plant & Machinery and other assets situated atFactory, Yanam due to unprecedented violence, occurred on January 27,2012. Stocks of Finished goods, Raw materials, stores and spares, stocks-in-process and other
inventories were damaged / looted to a large extent. The Company declared lock-out of the Plant from January 31, 2012.
The extent of Loss/damage to Plant & Machinery, Buildings and other assets of the Company were not considered in the books pending assessment and disclosed at book value after providing depreciation without considering 5% residual value on account of efflux of time. The Company has started the process of estimating the condition of the existing fixed assets & its realizable value. As such, the machinery & buildings have not been insured.
Note 26
Status with lenders
The Company has paid entire OTS amount and thereafter, all the lenders have filed Satisfaction of Memo in the DRT and Satisfaction of Charge with ROC.
Note 27
Exceptional Items
Exceptional Loss of Rs. 1263.34 Lakhs is on account of short recovery of Insurance claim on inventory as the said amount cannot be recovered as per the award of Arbitral Tribunal.
Note 28
Status of Insurance
The claim in respect of Loss/damage to Company’s Plant and Equipment, Finished Goods and Raw Materials during labour unrest on 27.01.2012 was not settled by the Insurance Company on reinstatement/ replacement basis. Thereafter, the Company invoked arbitration clause as per the terms of Policy. The Hon’ble Arbitral Tribunal had pronounced an unanimous award in favour of the Company. The Insurance Company had filed set-aside petition U/s 34 of the Arbitration and Conciliation Act 1996 before the court of Principal District Judge, Puducherry. Pending final Judgement, the Principal District Judge ordered the Insurance Company to pay the amount accepted by the Insurance Company along with interest to the Company. Accordingly, Rs.15.17 Crores including interest of Rs.24.89 Lakhs was received in January, 2023. Out of the said amount, Rs.2.76 crores (claims accepted on Inventories) was adjusted against the claim receivable and the balance is shown in current liabilities since the same is to be utilized for the reinstatement/ replacement of assets damaged / destroyed.
Note 30
Confirmation of Balances
The Company could not obtain confirmation of balances in respect of Sundry Debtors & SundryCreditors, loans and advances, other current assets and other liabilities.
Note 31
Fair Value Measurement Hierarchy
The following table provide analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into level 1 to 3 as described below.
Level 1 -Quoted Prices in an Active Market
Level 1 hierarchy includes financial instruments measured using quoted prices. This included listed equity instruments, traded bonds, ETFs and mutual funds that have quoted prices. The fair value of all equity instruments (including bonds) which are traded in the Stock Exchanges is valued using the closing price as at the reporting period.
Level 2 -Valuation Techniques with Observable Inputs.
The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the counter derivatives) is detennined using valuation techniques which maximize the use of observable market data and really as little as possible and entity-specific estimates if all significant in put required to fail value an instrument are observable, the instrument is included in level 2.
Level 3 -Valuation Techniques with Significant unobservable inputs.
This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are detennined in whole or in part, using a valuation model based on assumptions that are neither supported by
Note 37
Disclosure in accordance with Ind AS 19 On Employee Benefits
The unprecedented industrial violence on 27.01.2012 resulted in deaths of personnel and destruction of buildings and Equipment in the factory. Consequent to this, a lock-out was declared at the factory from 31.01.2012. After series of negotiations with the workers union, Memorandum of settlement was arrived on 24.10.2019 at Puducherry under Section 12 (3) of the Industrial Disputes Act, 1947 before the Commissioner of Labour -cum- Chief Conciliation Officer, U T of Puducherry between the Company and the Regency Ceramics Staff and Workers Union. As per the MOU, the management has agreed to provide house sites at Yanam to all the displaced workers of the Company in three categories as proposed by the union. In this connection, two stretches of land owned by ancillary units to the extent of about 25.35 Acres was registered on 18.10.2019 in favour of the union through settlement deeds. The conversion of agricultural land into residential plots, development of land, lying of roads, allotment of plots, etc. is in progress.
or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall 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 provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
f) There are no transactions that are not recorded in the books of account to be surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
g) The provisions with respect to Corporate Social Responsibility are not applicable to the Company, as the Company does not fall within the purview of the sectionl35 of the Companies Act,2013 and Rules made thereunder.
h) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
Note 40. Previous year figures have been regrouped /reclassified wherever necessary to suit the
current year's layout.
As per our report of even date.
For K.S.Rao & Co
Chartered Accountants Sd/- Sd/-
Firm Registration No.003109S Dr.Naraiah Naidu Gudaru Narala Satyendra Prasad
Chairman and Whole Time Director/CFO
Managing Director DIN:01410333
DIN:00105597
Sd/-
M. Naga Prasad
Partner
Membership No:-231388
Sd/-
Neha Bung
Company Secretory and Compliance Officer Membership No.A71478
Place : Hyderabad
Date : 26.05.2023
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