3.14 Provisions and Contingent Liabilities
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking in to account the risks and uncertainties surrounding the obligation.
Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly within the control of the Company or present obligations where it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of an outflow of economic resources is considered remote.
3.15 Operating Segments
In terms of Ind AS 108, Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) viz. the Chief Executive Officer (Executive Chairman) of the Company. The Chief Operating Decision Maker is responsible for allocating resources and assessing performance of the operating segments, which are engaged in separate business activities from which it earns revenue and incur expenses. For each of the segments discreet Financial Results are available.
The above benefit plans expose the company to actuarial risks such as follows:
(i) Interest rate risk: The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
(ii) Salary inflation risk: Higher than expected increases in salary will increase the defined benefit obligation.
(iii) Demographic risk: This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.
The Company's business activities expose it to certain financial risks - market risk, liquidity risk and credit risk. In order to minimize those risks, the Company has risk management policies and procedures in place as approved by the Risk Management Committee of the Board of Directors of the Company after due evaluation of key risks facing the business of the Company:
a) Market Risk
The Company's business of Cultivation, Manufacture and Sale of Tea is primarily agricultural in nature and subject to vagaries of nature. Moreover, the sale price of Tea is largely determined by the market forces of demand and supply. Thus, adverse weather conditions and uncertain tea market expose it to the risk that the fair value or future cash flows may adversely fluctuate. The Company closely monitors the changes in market conditions and select the sales strategies to mitigate its exposure to various market risks. Other Market risks are as under:
i. Foreign Currency Risk
The Company undertakes significant transactions denominated in foreign currency with its customers in relation to Exports by Rossell Tea Division and 100% EOU of Rossell Techsys Division. This results in wide exposure to exchange rate fluctuations. Such exchange rate risk primarily arises from transactions made in foreign exchange and reinstatement risks arising from recognized assets and liabilities, which are not in the Company's functional currency (Indian Rupees). A significant portion of these transactions are in US Dollar, Euro, British Pound Sterling etc.
The Company, as Risk Management Policy, hedges its exposure in foreign exchange whenever considered appropriate based on their perception about such market and reviews periodically its exposure therein to ensure that results from fluctuating currency exchange rate are appropriately managed.
ii. Interest Rate Risk
Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The objectives of the Company's interest rate risk management processes are to lessen the impact of adverse interest rate movements on its earnings and cash flows and to minimize counter party risks.
The Company is exposed to interest rate volatilities primarily with respect to its borrowings from Banks. Such volatilities primarily arise due to changes in the Lending rates of Banks, which in turn are linked with Repo Rates as announced by RBI from time to time as well as other economic parameters of the Country. The Company manages such risk by operating with Banks having strong fundaments with comparatively lower Lending Rates in the Market.
Interest rate sensitivity
Since the significant amount of borrowings of the Company are short term in nature, the possible volatility in the interest rate is minimal.
b) Liquidity Risk
Liquidity risk is the risk that the Company may encounter difficulty, including seasonality, in meeting its obligations due to shortage of liquid assets.
The Company mitigates its liquidity risks by ensuring timely collections of its trade receivables, close monitoring of its credit cycle, ensuring optimal movements of its inventories and avoid blockage of working capital in non-productive current assets.
The remaining contractual maturities of significant financial liabilities payable within one year (other than borrowings from the Banks) as at 31st March, 2024 and 31st March, 2023 are as under:
c) Credit Risk
Credit risk is the risk that counter party will not meet its obligations leading to a financial loss to the Company.
The Company has its policy to limit its exposure to credit risk arising from outstanding receivables. Management regularly assesses the credit quality of its customer's based on which, the terms of payment are decided. Credit limits are set for each customer, which are reviewed at periodic intervals. The credit risk of the Company is low as the Company sells a significant volume of its Teas through the auction system which is on cash and carry basis. The exports are made mostly to worldwide reputed Corporates like Boeing, Lockheed Martin, Taylors of Harrogate etc., and otherwise backed by letter of credit or on advance basis.
In terms of our Report of even date
For Khandelwal Ray & Co., H. M. Gupta Rahul Bhatnagar
Chartered Accountants Executive Chairman Director
Registration No. 302035E DIN: 00065973 DIN: 07268064
Place: Delhi Place: Noida, UP
Pinaki Sarkar N. K. Khurana D. M. Parikh
Partner Director (Finance) and Vice President (Finance)
Membership No.051449 Company Secretary PAN: AAFPP7379G
M. No.: FCS 2173 Place: Delhi
Place: Kolkata Place: Kolkata
Date: 29th May, 2024 Date: 29th May, 2024
51. Business Restructuring
The Board of Directors at their Meeting held on 12th July, 2022 approved the Scheme of Amalgamation between BMG Enterprises Limited ("the Transferor Company") and Rossell India Limited ("the Transferee Company') and their respective shareholders under the provisions of Sections 230 to 232 read with Section 66 and other applicable provisions of the Companies Act, 2013 ('the Scheme'). The Appointed Date set out in the Scheme is 1st July, 2022 or such other date as the Hon'ble National Company Law Tribunal ("NCLT") may approve. After receiving the No Objection / Observation Letters for the Scheme from the Stock Exchanges as well as the approval from the Shareholders and Creditors, the petition for approval of the Scheme is pending final disposal before NCLT. The Company has not incurred any expenses for this Scheme as all the expenses in this regard are being borne by the Transferor Company, in terms of the said Scheme.
The Board of Directors of the Company at their Meeting held on 16th December, 2022 approved the Scheme of Arrangement between Rossell India Limited ("the Demerged Company') and Rossell Techsys Limited ("the Resulting Company') and their respective shareholders under the provisions of Sections 230 to 232 read with Section 66 and other applicable provisions of the Companies Act, 2013 involving demerger of Rossell Techsys Division from the Demerged Company into the Resulting Company. The Appointed Date set out in the Scheme is 1st April, 2023 or such other date as the Hon'ble National Company Law Tribunal ("NCLT") may approve. After receiving the No Objection / Observation Letters for the Scheme from the Stock Exchanges as well as the approval from the Shareholders and Creditors, the petition for approval of the Schemes was moved before NCLT, who has already pronounced their final order recently. However, the same is still not being effective pending receipt of Certified Copy from NCLT and filing thereof with the concerned Registrar of Companies.
52. Preferential Allotment of Shares
52.1 The Board of Directors by adopting a Resolution by Circulation on 27th June, 2022 allotted 10,00,000 0.01% Compulsorily Convertible Preference Shares (CCPS) (Instruments entirely Equity in nature) of ' 10 each at an issue price of ' 156 per CCPS including Securities Premium of ' 146 per CCPS aggregating to ' 1,560 Lakhs on preferential basis (for cash consideration) after obtaining the required regulatory approvals to BMG Enterprises Ltd., the Holding Company. (Allottee)
52.2 Subsequently, the Board of Directors at its Meeting held on 16th December, 2022 approved the conversion of aforesaid CCPS of ' 10 each into 10,00,000 Equity Shares of ' 2 each pursuant to the option exercised by the Allottee as per the Terms of the Preferential Issue. The difference in face value of ' 8 per Share aggregating to ' 80 Lakhs was treated as further Securities Premium received on such issue and allotment of Equity Shares.
52.3 The funds raised from the issue and allotment of the said CCPS have been fully utilised for meeting long term fund requirements and other general corporate purposes of the Company.
53. Quarterly returns or statements of current assets filed by the company with banks are in agreement with the books of accounts.
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