Estimation of fair value
The fair values of investment properties have been determined by registered valuers as defined under Rule 2 of Companies (Registered valuers and Valuation) Rules, 2017. The fair valuation is based on prevailing market prices/ price trend of the property in that locality/ city considering the location, size of plot, approach road, amenities, locality etc and fall in level 3 of valuation hierarchy.
(v) The Company has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.
Amount recognised in statement of profit or loss:
During the year ended March 31, 2024 write down of inventories on account of provision in respect of obsolete/ slow moving items amounted to ' 56 million (March 31, 2023: write-down amounting ' 59 million). These were recognised as an expense during the year and included in changes in value of inventories of work-in-progress, stock-in-trade and finished goods in statement of profit or loss.
b. Rights, preferences and restrictions attached to shares Equity Shares:
The Company has only one class of equity shares having a par value of ' 1 per share. Each holder of equity is entitled to one vote per share held. The Company declares and pays dividends in Indian rupees. The dividend, if proposed by the Board of Directors, is subject to the approval of the shareholders in the Annual General Meeting, except in case of interim dividend.
In the event of liquidation of the Company, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amounts, in proportion to their shareholding.
* Sumitomo Wiring Systems Ltd., Japan ("SWS") along with H.K Wiring Systems Limited, Hong Kong ("HKWS") vide letter dated May 17, 2024 has requested for re-classification from 'Promotor Group' to 'Non-Promotor Group' under Regulation 31A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Board of Directors of the Company in its meeting held on May 29, 2024, has inter-alia, considered and approved the aforesaid request letters received for reclassifying them from 'Promoter/Promoter Group' category to 'Public' category. The approval of the Board towards aforesaid reclassification is subject to the approval from the members of the Company and the Stock Exchanges.
** Ms. Renu Alka Sehgal ceased to be part of the Promotor Group in terms of Regulation 31A(6)(c) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 upon her sad demise on May 01, 2024.
As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
Reserve on amalgamation
This reserve was created at the time of amalgamation and mergers carried out in earlier years. The reserve will be utilised in accordance with the provisions of the Act.
Securities premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Act.
Capital reserve
The Capital Reserve has been generated in previous years because of the Amalgamation and Mergers in past years.
The reserve will be utilised in accordance with the provisions of the Act.
General reserve
General reserve is the retained earnings of the Company which are kept aside out of the Company's profits to meet any future obligations.
FVOCI equity investments
The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investment reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
Cash flow hedging reserve
The Company uses hedging instruments as part of its management of foreign currency risk and interest rate risk associated on borrowings. For hedging foreign currency and interest rate risk, the Company uses foreign currency forward contracts, cross currency swaps and interest rate swaps. To the extent these hedges are effective, the change in fair value of the hedging instrument is recognised in the effective portion of cash flow hedges. Amounts recognised in the effective portion of cash flow hedges is reclassified to the statement of profit and loss when the hedged item affects profit or loss (e.g. interest payments).
** Pursuant to Scheme of Amalgamation with Motherson Invenzen X-Lab Private Limited, INR loan from Samvardhana Motherson Innovative Solutions Limited has been transferred to the Company amounting to ' 230 million carrying rate of interest as RBI repo rate 3% p.a. The entire loan has been fully repaid during the year. (refer note 51)
1 The carrying amount of financials and non financial assets pledged as security for short term borrowings as on March 31, 2023 is disclosed in Note 44
2 Short term borrowings carry interest rate ranging from 7.15% to 7.9% p.a.
Warranty
Provision for warranty relates to the estimated outflow in respect of warranty for products sold by the Company. Due to the very nature of such costs, it is not possible to estimate the timing/ uncertainties relating to the outflows of economic benefits.
Contingencies
Provision for contingencies relates to excise, entry tax and octroi demands including interest thereon, where applicable, being contested by the Company. It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above, pending resolution of the respective proceedings.
The long term defined employee benefits and contribution schemes of the Company are as under:
A. Defined Benefit Schemes Gratuity
The Company operates a gratuity plan administered through Life Insurance Corporation of India (LIC) under its Group Gratuity Scheme. Every employee is entitled to a benefit equivalent to fifteen days' salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier. The benefits vest after five years of continuous service. The Company pays contribution to Life Insurance Corporation of India to fund its plan.
During the previous year ended March 31, 2023, the said LIC fund was transferred to the Motherson Sumi Wiring India Limited (MSWIL) to the extent of its share which was determined basis the employees transferred to the MSWIL post demerger. Pursuant to such determination by LIC, adjustments for actualisation of the fund balances amounting to ' 207 million has been effected during the previous year.
Note: In respect of Employees Gratuity Fund, composition of plan assets is not readily available from LIC of India. The expected rate of return on assets is determined based on the assessment made at the beginning of the year on the return expected on its existing portfolio, along with the estimated increment to the plan assets and expected yield on the respective assets in the portfolio during the year.
Note: Estimate of future increases considered in actuarial valuation takes account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
Above sensitivity analysis is based on a change in assumption while holding all the other assumptions constant. In practice, this is unlikely to occur, and change in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in balance sheet.
x) Risk exposure
The gratuity scheme is a salary Defined Benefit Plan that provides for lump sum payment made on exit either by way of retirement, death, disability or voluntary withdrawal. The benefits are defined on the basis of final salary and the period of service and paid as lump sum at exit. The plan design means the risk commonly affecting the liabilities and the financial results are expected to be:
(a) Interest rate risk: The defined benefit obligation calculated uses a discount rate based on government bonds, if bond yield fall, the defined benefit obligation will tend to increase.
(b) Salary inflation risk: Higher than expected increases in salary will increase the defined benefit obligation.
(c) 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 .
xi) Defined benefit liability and employer contributions
Weighted average duration of the defined benefit obligation is 9 years (March 31, 2023: 9 years)
*The carrying amounts of trade receivables, borrowings, cash and cash equivalents, other financial assets, trade payables and other financial liabilities are considered to be the same as their fair values.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments that have quoted price. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities included in level 3.
ii. Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
a. the use of quoted market prices or dealer quotes for similar instruments.
b. the fair value of forward foreign exchange contracts and principal swap is determined using forward exchange rates at the balance sheet date.
c. the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.
d. the fair value of the remaining financial instruments covered under level 3 is determined using discounted cash flow analysis.
1 The fair value of non-current financial assets and financial liabilities (except Non-convertible debentures, which are valued at their respective traded prices as at March 31, 2024 available at Bloomberg)) carried at amortized cost is substantially same as their carrying amount.
2 The Company has taken interest rate swap amounting to ' 17,850 million (March 31, 2023: ' 39,650 million) and a borrowing with fixed interest rate amounting ' 21,000 million (March 31, 2023: ' 11,150 million).
Note: The carrying amounts of current financial assets and current financial liabilities i.e. trade receivables, loans, other financial assets, trade payables, short term borrowings and other financial liabilities are considered to be the same as their fair values, due to their short-term nature.
37 (a) Financial risk management
The Company in its capacity as an internationally active supplier for the automobile industry is exposed to various risks i.e., market risk, liquidity risk and credit risk. The company has global presence and decentralized management structure. Concentrating on the plants make it necessary for implementing an organized risk management system. The Company is therefore exposed to risks associated with global organizations and automotive industry in particular.
The Company has set up a Risk Management Committee (RMC) at the board level to periodically review operating, financial and strategic risks in the business and their mitigating factors. RMC has formulated Risk Management Policy for the Company which outlines the risk management framework to help minimize the impact of uncertainty on the Company's strategic goals. The framework enables a structured and disciplined approach to risk management. The Company has developed guidelines on risk controlling and the use of financial instruments. These guidelines contain a clear allocation of duties. Risks are controlled and monitored by means of operational and financial measures.
Below are the major risks which can impact the Company:
A Market risk:
Market risk is the risk that the fair value of future cashflows of a financial instruments will fluctuate because of changes in market price/ rate. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risks. Financial instruments affected by market risk include loans and borrowings, deposits and payables/ receivables in foreign currencies.
a. Price risk:
Fluctuation in commodity price in global market affects directly and indirectly the price of raw material and components used by the Company in its various products segment. Substantial pricing pressure from major OEMs to give price cuts and inability to pass on the increased cost to customers may also affect the profitability of the Company. The Group has set up Global Sourcing Procurement (GSP) at Sharjah which gives leverage of bulk buying and helps in controlling prices to a certain extent.
The key raw material for the Company's wiring harness business is copper. There are substantial fluctuations in prices of copper. The Company has arrangements with its major customers for passing on the price impact.
The major raw materials used by Polymer Division of the Company are polypropylenes, polycarbonates and various grades of nylons and resins. The Company is having arrangement with major customers for actualization of raw material price variations periodically. The setting up of Global Sourcing Procurement division further strengthens the procurement function.
The Company is regularly taking initiatives like VA-VE (value addition, value engineering) to reduce its raw material costs to meet targets set up by its customers for cost downs. In respect of customer nominated parts, the Company has back to back arrangements for cost savings with its suppliers.
b. Foreign currency risk:
The exchange variations in India has mainly impacted the imports, but however the Company has arrangements with its major domestic customers for passing on the exchange impact on import purchase and has considerably increased its export sales during last few years to attain natural hedge. The Company also does selective hedging to hedge its risks associated with foreign currency.
c. Interest rate risk:
Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. The Company's main interest rate risk arises from long-term borrowings with variable rates, which exposes the Company to cash flow interest rate risk. During March 31, 2024 and March 31, 2023, the Company's borrowings at variable rate were mainly denominated in INR.
Financial instruments and cash deposits
The Company has deposited liquid funds at various banking institutions. Primary banking institutions are major Indian and foreign banks. In long term credit ratings these banking institutions are considered to be investment grade. Also, no impairment loss has been recorded in respect of fixed deposits that are with recognised commercial banks and are not past due.
C Liquidity risk:
The liquidity risk encompasses any risk that the Company cannot fully meet its financial obligations. To manage the liquidity risk, cash flow forecasting is performed in the operating divisions of the Company and aggregated by Company finance. The Company's finance monitors rolling forecasts of the Company's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities / overdraft facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.
B Credit risk:
The credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations towards the Company and arises principally from the Company's receivables from customers and deposits with banking institutions.
Trade receivables
The Company has developed guidelines for the management of credit risk from trade receivables. The Company's primary customers are major Indian automobile manufacturers (OEMs) with good credit ratings. Non-OEM clients are subjected to credit assessments as a precautionary measure, and the adherence of all clients to payment due dates is monitored on an on-going basis, thereby practically eliminating the risk of default and impairment.
38 Capital management (a) Risk management
The Company's objectives when managing capital is to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal capital structure to reduce the cost of capital.
Consistent with others in the industry, the Company monitors Net Debt to EBITDA ratio i.e. Net debt (total borrowings (including lease liabilities) net of cash and cash equivalents) divided by EBITDA (Earnings before interest, depreciation, dividend income, interest income and exceptional items)
**Dividend of ' 572 million (March 31, 2023 : ' 382 million) paid to Mr. V. C. Sehgal, Mr. Laksh Vaaman Sehgal, Mr. Pankaj Mital, Mr. Naveen Ganzu, Mr. Alok Goel, Mr. Kunal Malani and Mr. Gautam Mukherjee.
*** Contribution for CSR activity is made through M/s Swarn Lata Motherson Trust (entity in which Key Managerial Personnel or their relatives have control/ significant influence), the implementing agency for ongoing projects.
Includes provision of expected credit loss amounting to ' 562 million considered during current year (March 31, 2023: ' 600 million).
The Company has also issued a letter for financial and operational support in certain cases where Group entities required such support for their operations.
The Company is the subscriber to the memorandum of association of its newly incorporated entity as an International Financial Services Centre (IFSC) in India, namely Samvardhana Motherson International Leasings IFSC Limited (the Entity) whereby the Company will invest ' 17 million in the subsidiary.
41 Segment Information:
The Company is primarily in the business of manufacture and sale of components to automotive original equipment manufacturers.
The Chief Operating Decision Maker "CODM" reviews the operations of the Company in the following operating segments i.e. 'Wiring Harness', 'Modules and polymer products', 'Vision systems', 'Integrated assemblies' and residual as 'Emerging businesses' at a consolidated level. Segment information had been reported in the Company's standalone financial results in past on voluntary basis, though not required as per para 4 of Ind AS 108 "Operating Segments" as the Company presents consolidated financial results along with Standalone financial results. Hitherto, the Company has opted not to disclose segment information in the standalone financial results and disclose segment information in the consolidated financial results only.
The Company has also issued a letter for financial and operational support in certain cases where Group entities required such support for their operations.
The Company is the subscriber to the memorandum of association of its newly incorporated entity as an International Financial Services Centre (IFSC) in India, namely Samvardhana Motherson International Leasings IFSC Limited (the Entity) whereby the Company will invest ' 17 million in the subsidiary. The entity is incorporated on March 29, 2024 under the Companies Act, 2013. The Entity has received the approval of The Office of Administrator International Financial Services Centres Authority (the 'Administrator (IFSCA), GIFT-Multi-Services-SEZ') dated April 19, 2024 for establishment of unit at Zone 1, SEZ-PA, District Gandhinagar in the state of Gujarat.
During the year ended March 31, 2023, the company had moved the working capital arrangements from consortium banks to multiple banks. All the working capital facilities are unsecured as per agreements with "the respective bank".
The carrying amount of assets pledged as security for current and non-current borrowings as on 31st March 2023 of the transferor company, MS Global India Automotive Private Limited included in above table are as follows:
Contract assets are initially recognised for revenue earned from development of tools and secondary equipment as receipt of consideration is conditional on successful completion and acceptance by the customer. Upon completion and acceptance by the customer, the amounts recognised as contract assets are reclassified to trade receivables. The expected credit loss on contract assets is considered very low and hence no provision for credit loss is recorded in respect of contract assets.
46 Leases
The Company assesses each lease contract and if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration, the Company recognised right to use assets and lease liabilities for those lease contracts except for short-term lease and lease of low-value assets.
The Company has leases contracts for land, building, plant & machinery and vehicles. These lease arrangements for land are for a period upto 99 years, for building are for a period upto 10 years, plant & machinery are for a period upto 5 years and vehicles are for a period upto 5 years. The Company also has certain leases of machinery, computers, vehicles with lease terms of 12 months or less and leases of office equipment with low value. The Company applies the 'short-term lease' and 'lease of low-value assets' recognition exemptions for these leases.
SMAST is engaged in the business of manufacturing and sale of Electric Wiring and Interconnect Systems (EWIS) for customers engaged in aerospace and advance systems.
iv) Rollon Hydraulics Private Limited
On July 31, 2023, the Company acquired 100% stake in Rollon Hydraulics Private Limited (""Rollon"") at a total consideration of ' 1,031 million.
Rollon is engaged in the business of manufacturing and sale of Electric Wiring and Interconnect Systems (EWIS) for customers engaged in aerospace and advance systems.
v) Prysm Displays (India) Private Limited
On March 28, 2024, the Company acquired 100% stake in Prysm Displays (India) Private Limited at a total consideration of ' 54 million.
Prysm is engaged in design, development, manufacturing, and sale of large format touch enabled display screens with embedded collaborative software.
Proposed investments
i) Irillic Private Limited (IRILLIC)
Subsequent to the Balance Sheet date, the company acquired 73.05% stake (on a fully diluted basis) in Irillic Private Limited. IRILLIC is engaged in design, development, manufacturing and distribution of real time Fluorescence Imaging and 4K Laparoscopy Imaging systems.
47 Acquisitions by the Company
A) During the year ended March 31, 2024
i) Saddles International Automotive and Aviation Interiors Private Limited
On July 13, 2023, the Company acquired 51% stake in Saddles International Automotive and Aviation Interiors Private Limited ("SADDLES") at a total consideration of ' 438 million. SADDLES is engaged in manufacturing of premium upholstery for passenger vehicles applications.
ii) Youngshin Motherson Auto Tech Limited
On June 2, 2023, the Company acquired additional 30% stake in Youngshin Motherson Auto Tech Limited ("YMAT") at a consideration of ' 66 million. Consequently, YMAT became subsidiary with total investment of ' 184 million.
Post completion of the transaction, the Company holds 80% of equity share capital of YMAT and accordingly YMAT has become subsidiary of the Company. As on March 31, 2023, the Company held 50% stake in YMAT and the same is reported under investment in joint ventures (refer note 6).
iii) Samvardhana Motherson Adsys Tech Limited
On December 20, 2023, the Company acquired 100% stake in Samvardhana Motherson Adsys Tech Limited (""SMAST"") at a total consideration of ' 219 million.
50 Pursuant to implementation of Composite scheme, domestic wiring harness business of the Company is transferred to Motherson Sumi Wiring India Limited (MSWIL). There are various common facilities/functions with the Company and cost in respect of the same are incurred by the Company. Motherson Sumi Wiring India Limited (MSWIL) reimburses to the Company the cost at actual basis or shared basis based on mainly in the ratio of sales of domestic and non-domestic wiring harness business as mutually decided by both the Companies with effect from the appointed date of April 1, 2021. These costs are excluded in the respective expense head as mentioned below.
51 Amalgamation of Motherson Consultancies Services Limited and Motherson Invenzen Xlab Private Limited and Samvardhana Motherson Polymers Limited and MS Global India Automotive Private Limited with the Company
The Board of Directors of the Company in its meeting held on January 27, 2023, approved the Scheme of Amalgamation of Motherson Consultancies Services Limited and Motherson Invenzen Xlab Private Limited and Samvardhana Motherson Polymers Limited and MS Global India Automotive Private Limited (hereinafter collectively referred as "the Transferor Companies") and Samvardhana Motherson International Limited (Formerly known as Motherson Sumi System Limited) (" the Company") and their respective shareholders and creditors under section 230 to 232 and other applicable provisions, if any, of the Companies Act, 2013 ("the Scheme").
The Hon'ble National Company Law Tribunal, Mumbai Bench ("Hon'ble NCLT") vide its order dated November 07, 2023 approved the Scheme for which certified copy of the order was issued on November 21, 2023. The order sanctioning the Scheme has been filed with the Registrar of Companies on December 05, 2023. As per the approved scheme, the appointed date is April 01, 2022.
Considering that all necessary and substantive approvals were received, the Company has now given effect to the merger accounting from Appointed date i.e April 01, 2022 in accordance with the accounting treatment prescribed in the Scheme and relevant accounting principles and consequently previous year figures have also been restated.
(i) Amalgamation of Motherson Consultancies Services Limited, Motherson Invenzen Xlab Private Limited and Ms Global India Automotive Private Limited
As per the Scheme, all the assets, liabilities and reserves of the concerned Transferor Companies have been recorded in the books of accounts of the Company at their existing carrying amounts as appearing in the consolidated financial statements of the Company with effect from April 01, 2022. The Consolidated Financial Information of these companies have been prepared from the financial information as appearing in their respective statutory financial statements and consolidated adjustments made at the Group level. In these financial statements, to the extent there were inter-company balances and transactions were eliminated.
(ii) Amalgamation of Samvardhana Motherson Polymers Limited (SMPL)
As per the Scheme, all the assets and liabilities (except investment in group companies) of SMPL have been recorded in the books of accounts of the Company at their existing book value as appearing in the standalone financial statements of SMPL. In these financial statements, to the extent there were inter-company balances and transactions were eliminated.
SMPL is engaged as a holding company to hold investments in a group entity namely Samvardhana Motherson Automotive Systems Group B.V. Now the Company holds these investments directly.
52 Other Statutory Information
(i) There are no proceeding that has been initiated or pending against the company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 and rules thereunder.
(ii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period except few charges which are in process of satisfaction.
(iii) The Company has not traded or invested in Crypto currency or Virtual Currency during year.
(iv) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding that the intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
(v) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
(vi) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
(vii) The Company is not declared as wilful defaulter by any bank or financial institutions.
53 The Company has used multiple accounting software for maintaining its books of account which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software except that audit trail features is not enabled at the database level in so far it relates to two accounting software and one software (used to maintain property, plant and equipment records) where audit trail features is not enabled for the entire audit period and has been enabled subsequently. Further there was no instance of audit trail feature being tampered with respect to the accounting software used for maintaining books of accounts.
54 Standards notified but not yet effective
There are no standards that are notified and not yet effective as on the date.
55 Previous year's figures has been regrouped and /or reclassed wherever applicable necessary to confirm to the current year's groupings and classifications.
56 Amounts appearing as zero "0" in financial are below the rounding off norm adopted by the Company
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