3.20 Provisions, contingent liabilities and contingent assets
Provisions are recognized when the Company has a present (legal or constructive) obligation as a result of past events, for which it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions required to settle are reviewed regularly and are adjusted where necessary to reflect the current best estimates of the obligation. Provisions are discounted to their present values, where the time value of money is material.
Contingent liability is disclosed unless the likelihood of an outflow of resources is remote and there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.
Contingent assets are disclosed only when inflow of economic benefits therefrom is probable and recognize only when realization of income is virtually certain.
3.21 Material accounting judgments, estimates and assumptions Use of estimates and judgements
The preparation of financial statements requires management to make judgments, estimates and assumptions that may impact the application of accounting policies and the reported value of assets, liabilities, income, expenses and related disclosures concerning the items involved as well as contingent assets and liabilities at the balance sheet date. The estimates and managements judgments are based on previous experience and other factors considered reasonable and prudent in the circumstances. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In order to enhance understanding of the financial statements, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Standalone Financial Statements is as under:
Estimates and judgements are continuously evaluated. They are based on historical experience and other factors including expectation of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
Useful lives of property, plant and equipment
The Company uses its technical expert along with historical and industry trends for determining the economic life of an asset/ component of an asset. The useful lives are reviewed by management periodically and revised, if appropriate. In case of a revision, the unamortised depreciable amount is charged over the remaining useful life of the assets.
Under the terms of the related agreement, the lease period may be extended at the option of the lessee. Assets constructed on such leasehold properties are depreciated over their useful life or respective lease terms, whichever is lower.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using certain valuation techniques. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree ofjudgement is required in establishing fair values. Judgements include considerations of inputs such as volatility risk, credit risk and volatility.
Recognition of deferred tax assets
The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company’s future taxable income (supported by reliable evidence) against which the deferred tax assets can be utilized.
Evaluation of indicators for impairment of assets
The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
Contingent liabilities
At each balance sheet date basis the managements judgment, changes in facts and legal aspects, the Company assesses the requirement of provisions against the outstanding contingent liabilities. However, the actual future outcome may be different from this judgement.
Leases
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Leases (“Ind AS 116”). Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the non-cancellable period of a lease.
4. Other significant accounting policies
4.01 Current / non-current classification
All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Act.
4. Other significant accounting policies Contd.
Assets
An asset is classified as current when it satisfies any of the following criteria:
(a) it is expected to be realised in, or is intended for sale or consumption in, the Company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realised within 12 months after the reporting date; or
(d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
Current assets include the current portion of non-current financial assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
(a) it is expected to be settled in the Company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within 12 months after the reporting date; or
(d) the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Current liabilities include current portion of non-current financial liabilities.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
4.02 Impairment
(i) Impairment of financial instruments: financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its financial assets and the impairment methodology depends on whether there has been a significant increase in credit risk.
Trade receivables
In respect of trade receivables, the Company applies the simplified approach of Ind AS 109, which requires measurement of loss allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.
Other financial assets
In respect of its other financial assets, the Company assesses if the credit risk on those financial assets has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12-month expected credit losses, else at an amount equal to the lifetime expected credit losses.
When making this assessment, the Company uses the change in the risk of a default occurring over the expected life of the financial asset. To make that assessment, the Company compares the risk of a default occurring on the financial asset as at the balance sheet date with the risk of a default occurring on the financial asset as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. The Company assumes that the credit risk on a financial asset has not increased significantly since initial recognition if the financial asset is determined to have low credit risk at the balance sheet date.
(ii) Impairment of non-financial assets
Assessment is done at each balance sheet date as to whether there is any indication that an asset may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets and group of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying vale exceeds their recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an assets or cash generating units selling price and its value in use. Value in use is the present value of estimated future cash flows expected to raise from continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each balance sheet date as to whether there is any indication that an impairment loss recognised for an assets in prior accounting years may no longer exist or may have decreased.
4.03 Employee benefits Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Company’s gratuity benefit scheme is a defined benefit plan. The Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in the current and prior years, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan (‘the asset ceiling’). In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in Other Comprehensive Income (OCI). The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the year as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in the Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (‘past service cost’ or ‘past service gain) or the gain or loss on curtailment is recognised immediately in the Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
When the benefits of a plan are improved, the portion of the increased benefit related to past service by employees is recognised in Statement of Profit and Loss on a straight-line basis over the average period until the benefits become vested.
Other long-term employees benefits
The Company’s net obligation in respect of long-term employee benefits other than post-employment benefits is the amount of future benefit that employees have earned in return of their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The obligation is measured on the basis of an annual independent actuarial valuation using the projected unit credit method. Remeasurement gains or losses are recognised in profit or loss in the year in which they arise.
Compensated absences
The employees can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilised wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences (which includes privilege leave and sick leave) in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method. Remeasurements gains and losses are recognised in the Statement of Profit and Losses in the year in which they arise.
4.04 Foreign currency
Functional and presentation currency
Items included in the Standalone Financial Statements of the Company are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency). The Standalone Financial Statements have been prepared and presented in Indian Rupees (INR), which is the Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are recorded in the functional currency, by applying to the exchange rate between the functional currency and the foreign currency at the date of the transaction.
Foreign currency monetary items outstanding at the balance sheet date are converted to functional currency using the closing rate. Non-monetary items denominated in a foreign currency which are carried at historical cost are reported using the exchange rate at the date of the transaction.
Exchange differences arising on monetary items on settlement, or restatement as at reporting date, at rates different from those at which they were initially recorded, are recognized in the Statement of Profit and Loss in the year in which they arise.
4.05 Recognition of dividend income and interest income
Dividend income is recognised in the Statement of Profit and Loss on the date on which the Company’s right to receive payment is established. Interest income or expense is recognised using the effective interest method. The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:
- the gross carrying amount of the financial asset; or
- the amortised cost of the financial liability.”
In calculating interest income, the interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
4.06 Property, plant and equipment and capital work-in-progress Subsequent expenditure
Subsequent expenditures related to an item of property, plant and equipment are added to its book value only if it is probable that future economic benefits associated with the item will flow to the enterprise and the cost of the item can be measured reliably.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the Standalone Statement of Profit and Loss .
4.07 Accounting judgments, estimates and assumptions
Use of estimates and judgements Defined benefit obligation (‘DBO’)
Managements estimate of the DBO is based on a number of underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
Share based payment
At the end of each period, the Company revises its estimates of the number of options that are expected to vest based on the nonmarket vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in the Standalone Statement of Profit and Loss, with a corresponding adjustment to the equity.
4.08 Share based payments - Employee stock option Scheme (ESOP’s)
The fair value of options granted under Employee Stock Option Plan is recognized as an employee benefits expense with a corresponding increase in the equity. The total amount to be expensed is determined by reference to the fair value of the options, derived using Black-Scholes model. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in the Statement of Profit and Loss, with a corresponding adjustment to the equity. Upon exercise of share options, the proceeds received are allocated to the share capital up to the par value of the shares issued with any excess being recorded as securities premium.
4.09 Equity investment
Equity investments in subsidiaries are measured at cost. The investments are reviewed at each reporting date to determine whether there is any indication of impairment considering the provisions of Ind AS 36 ‘Impairment of Assets’. If any such indication exists, policy for impairment of non-financial assets is followed.
4.10 Share issue expenses
Share issue expenses are adjusted against the Securities Premium Account as permissible under Section 52 of the Companies Act, 2013, to the extent any balance is available for utilisation in the Securities Premium Account. Share issue expenses in excess of the balance in the Securities Premium Account is expensed in the Standalone Statement of Profit and Loss.
7. Right-of-use assets Contd.
Notes:
(a) The Company as a lessee has obtained certain assets such as immovable properties on various leasing arrangements for the purposes of setting up of retail stores, work-shops and guest houses. With the exception of short-term leases and leases of low value underlying assets, each lease is reflected on the balance sheet as a right-to-use asset and a lease liability. Variable lease payment which do not depend on an index or a rate are excluded from the initial measurement of the lease liability and right-of-use assets. The Company has presented its right-of-use assets separately from other assets. Each lease generally imposes a restriction that unless there is a contractual right for the Company to sub-lease the asset to another party, the right-of-use asset can only be used by the Company. Some lease contain an option to extend the lease for a further term.
(b) Additional information on extension/ termination options:
Extension and termination options are included in a number of property lease arrangements of the Company. These are used to maximise operational flexibility in terms of managing the assets used in the Company’s operations. The majority of extension and termination options held are exercisable based on consent of the Company."
(c) There are no leases which are yet to commence as on 31 March 2024 and 31 March 2023.
(d) Lease payments, not included in measurement of liability
The Company has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. The expense relating to payments not included in the measurement of the lease liability is as follows:
(b) Terms and rights attached to shares
Rights, preferences and restrictions attached to equity shares
The Company has a single class of equity shares having face value of Rs. 10/- each. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid. Failure to pay any amount called up on shares may lead to forfeiture of the shares. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.
Rights, preferences and restrictions attached to compulsorily convertible non-cumulative preference shares
Compulsorily convertible non-cumulative preference shares were issued at par on 8 October 2014 and each share was convertible into one equity share of par value Rs. 10 at any time on or after 8 October 2014 but not later than 7 October 2034. The Board of Directors of the Company had the power to decide the appropriate mechanism for transfer/buy back of these shares, in case the same was exercised by the holder of such preference shares. The holders of these shares were entitled to a non-cumulative dividend of 0.01% of the face value of the preference shares. The holders of the preference shares were also entitled to participate in dividend and capital distributed by the Company over and above the preference dividend on as-if converted basis pari passu with the holders of the equity shares of the Company.
Preference shares carried a preferential right as to dividend over equity shareholders. Where dividend on preference shares was not declared for a financial year, the entitlement thereto in the case of non-cumulative preference shares for that year lapses. The preference shares were entitled to one vote per share at meetings of the Company on any resolutions of the Company directly affecting their rights as mentioned in their shareholder agreement. In the event of liquidation, preference shareholders had a preferential right over equity shareholders to be repaid to the extent of capital paid-up on such shares.
During the current year, this compulsorily convertible non-cumulative preference shares have been converted to equity share capital.
19. Share capital Contd.
(i) The Company completed the Initial Public Offer (‘IPO’) its equity shares during the year ended March 2024 and listed its shares on BSE Limited and National Stock Exchange on 14 July 2023. Pursuant to IPO, the Company had allotted 85,17,350 fresh equity shares of Rs. 10 each to public at a premium of Rs. 307.00 per equity share on 14 July 2023. The total share premium arising on IPO amounting to Rs. 228.03 millions had been accounted under securities premium reserve.
Note:
The Board of Directors of the Company at its meeting held on 03 March 2018 had recommended issue of bonus shares, subject to the approval of shareholders in their ensuing general meeting, in the ratio of two equity shares of Rs. 10 each for every one equity share of Rs. 10 each and two compulsorily convertible non-cumulative preference shares of Rs. 10 each for every one compulsorily convertible noncumulative preference share of Rs. 10 each of the Company as held by the shareholders as on the record date. The issue of bonus shares was approved by the shareholders of the Company in the Extra Ordinary General Meeting held on 28 March 2018, by way of special resolution, and accordingly, the Company has allotted 35,457,408 equity shares of Rs. 10 each and 8,864,102 compulsorily convertible non-cumulative preference shares of Rs. 10 each on 6 May 2018 to their shareholders.
The description, nature and purpose of each reserve within other equity are as follows:
(a) Security premium: Security premium is credited when shares are issued at premium. It is utilised in accordance with the provisions of the Companies Act, 2013.
(b) General reserve: The Company had transferred a portion of the net profit of the Company before declaring dividend to general reserve pursuant to the erstwhile provisions of the Companies Act, 1956. Consequent to the introduction of the Companies Act, 2013, there is no such requirement to mandatorily transfer a specified percentage of net profit to general reserve.
(c) Share based payment reserve: This represents the fair value of the stock options granted by the Company, accumulated over the vesting period. The reserve will be utilised on exercise of the options.
(d) Special economic re-investment reserve: It has been created for the purpose of acquiring machinery or plant which is put to use before the expiry of three years following the previous year in which the reserve was created.
(e) Retained earnings: Retained earnings represents the profits earned by the Company till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.
(f) Equity instruments through OCI: The Company has elected to recognise changes in the fair value of certain investments in equity instruments in other comprehensive income. These changes are accumulated within the equity instruments through OCI shown under the head other equity.
Notes:
(a) Cash credit facilities from banks carry interest ranging between 8.75% p.a. - 11.65% p.a. (31 March 2023 : 8.00% p.a. - 11.50% p.a.), computed on a daily basis on the actual amount utilised, and are repayable on demand. These are secured by way of hypothecation of the Company’s entire inventories and such other movables including book debts, bills whether documentary or clean, outstanding monies, receivables, both present and future, pertaining to all shops and showrooms of the Company, entire property, plant and equipments, present and future, except for land and building not provided as collateral in a form and manner satisfactory to the bank. These facilities are also secured by the unconditional and irrevocable personal guarantees given by Mrs. Joita Sen (Director) and Mr. Suvankar Sen (Managing Director and Chief Executive Officer).
(b) Short-term demand loan (working capital demand loan) has been availed from banks for financing of the working capital requirement for a period of 60 - 90 days. The rate of interest on the facilities is ranging between 9.00% p.a. - 12.05% p.a. (31 March 2023: 7.50% p.a. - 11.40% p.a.), fixed and shall be payable at monthly rests on the 1st day of the subsequent month/maturity, wherever applicable. These facilities are secured against is personal guarantees of Mrs. Joita Sen (Director) and Mr. Suvankar Sen (Managing Director and Chief Executive Officer).
(c) Gold metal loans carry interest ranging between 2.25% p.a. - 4.25% p.a. (31 March 2023: 2.75% p.a. - 4.25% p.a.), calculated on the quantum of ounce outstanding. These are repayable within 270 days, if the end use of bullion is for export purposes and within 180 days if the end use of bullion is for domestic purposes. These loans are secured by standby letter of credits provided by the issuing bank to the bullion bank, earmarked cash credit limits, fixed deposits and margin account balances with an excess value of margin money of 1% - 12%.
(d) There has been no default in repayment of principal amount or interest thereon during the current and previous financial year.
40. Employee benefits
Defined contribution plans
The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards Provident Fund, which is a defined contribution plan. The Company has no obligations other than to make the specified contributions. The contributions are charged to the Statement of Profit and Loss as they accrue. The amount recognised as an expense towards contribution to Provident and Pension Fund for the year aggregated to Rs. 58.94 millions.( 31 March 2023: Rs. 51.53 millions)
Defined benefit plans
The Company operates one post-employment defined benefit plan (i.e., gratuity). The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive 15 days basic salary for each year of completed service at the time of retirement/exit. Gratuity scheme is funded by the plan assets.
Inherent risk
The plan is defined benefit in nature which is sponsored by the Company and hence it underwrites all the risk pertaining to the plan. In particular, this exposes the Company, to actuarial risk such as adverse salary growth, change in demographic experience, inadequate return on underlying plan assets. This may result in an increase in cost of providing these benefits to employees in future. Since the benefits are lump sum in nature, the plan is not subject to longevity risk.
(X) The Company expects to contribute Rs. 47.44 millions to its gratuity plan for the next year.
(XI) Risk exposure:
Valuation are based on certain assumptions, which are dynamic in nature and may vary over time. As such valuations of the Company is exposed to follow risks -
a) Salary increase: Higher than expected increases in salary will increase the defined benefit obligation.
b) Discount rate: The defined benefit obligation calculated use a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
c) Mortality and disability: If the actual deaths and disability cases are lower or higher than assumed in the valuation, it can impact the defined benefit obligation.
d) Withdrawals: If the actual withdrawals are higher or lower than the assumed withdrawals or there is a change in withdrawal rates at subsequent valuations, it can impact defined benefit obligation.
41. Employee’s share based payment plans
Senco Gold Employee Stock Option Scheme- 2018
During the year ended 31 March 2018, the Company implemented its Employee Stock Option Scheme (‘the Plan). The plan was originally approved by the members of the Company on 24 May 2018 and subsequent amendments were approved on 25 October 2021. The Plan enables grant of stock options to the eligible employees of the Company not exceeding 1,000,000 options, which is 1.79% of the paid-up equity share capital of the Company as on 31 March 2024. Further, the stock options to any single employee under the Plan shall not exceed 1% of the issued capital of the Company, at the time of grant of options, during the tenure of the Plan, subject to compliance with applicable law. The options granted under the Plan have a maximum vesting period of 4 years.
43. Deposits received from customers under jewellery purchase schemes includes provision for discount accrued by the Company amounting to Rs. 65.97 millions (31 March 2023: Rs. 83.51 millions) as per the terms of the respective schemes against which advance has been received from these customers.
44. Operating segments A. Basis for segmentation
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components, and for which discrete financial information is available. All operating segments’ operating results are reviewed regularly by the Company’s Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segments and assess their performance.
The Company is engaged in the business of manufacture and sale of jewellery and other articles of various designs/ specification based on customer’s requirements. The Company’s manufacturing facilities are located in India and products sold in the domestic and overseas market are manufactured in these facilities. Based on the dominant source and nature of risk and returns of the Company, its internal organisation and management structure and its system of internal financial reporting, business segment has been identified as the primary segment. The Company has only one business segment, viz., sale of jewellery and other articles.
46. Corporate social responsibility expenses (“CSR”):
As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the Company. The funds are utilised on the activities which are specified in Schedule VII of the Act. The Company has created a registered trust for purpose of CSR activities as approved by the CSR committee. The utilisation is done by way of contribution to this trust.
(a) Gross amount as per the limits of Section 135 of the Companies Act, 2013, required to be spent by the company: Rs. 32.25 millions (31 March 2023: Rs. 26.50 millions)
(b) Amount approved by the board to be spent during the year:- Rs. 32.25 million (31 March 2023: Rs. 26.50)
(c) Details of amount spent:
B. Measurement of fair values
Valuation techniques and significant unobservable inputs
(a) The fair value of cash and cash equivalents, bank balances other than cash and cash equivalents, trade receivables, loans, trade payables and other financial assets and liabilities approximate their carrying amount largely due to the short-term nature of these instruments.
(b) Investments in equity instruments, other than in subsidiary Companies are classified as FVOCI. The carrying cost of unquoted equity instrument has been considered as an appropriate estimate of fair value in the current period. There are no such significant unobservable inputs used for the valuation technique.
(c) In case of Derivatives, the fair value is determined using quoted forward exchange rates at the reporting dates in the respective commodities and currencies. There are no such significant unobservable inputs used for the valuation technique.
D. Risk management
The Company’s principal financial liabilities includes borrowings, trade payable and other financial liabilities. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade receivables, cash and cash equivalents,bank balances other than cash and cash equivalents and other financial assets that derive directly from its operations.
The Company’s activities expose it to credit risk, liquidity risk and market risk. The Company’s primary risk management focus is to minimise potential adverse effects of market risk on its financial performance. The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer. The Company’s risk management assessment and policies and processes are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities.
(i) Credit risk
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, and arises principally from the Company’s receivables from customers and loans given. Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to customers, including outstanding accounts receivables. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.
In respect of trade and other receivables, the Company is not exposed to any significant credit risk exposure to any single counterparty or any Company of counterparties having similar characteristics. Trade receivables consist of a large number of customers. The Company has very limited history of customer default, and considers the credit quality of trade receivables that are not past due or impaired to be good.
(ii) Liquidity risk
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at 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’s finance team 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 on the basis of expected cash flows.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
(iii) Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates and interest rates - will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
(a) Currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Company’s functional currency.
E. Hedging activity and derivatives
Fair value hedge of gold price risk in inventory
The Company is exposed to fluctuations in gold price (including fluctuations in foreign currency) arising on purchase/ sale of gold and inventory of gold lying with the Company. To manage the variability in cash flows, the Company enters into derivative financial instruments to manage the risk associated with gold price fluctuations relating to the highly probable forecasted transactions. Such derivative financial instruments are primarily in the nature of future commodity contracts. The risk management strategy against gold price fluctuation also includes procuring gold on loan basis, with a flexibility to fix price of gold at anytime during the tenor of the loan.
The Company designates certain derivatives as hedging instruments in respect of commodity price risk in fair value hedges. As the value of the derivative instrument generally changes in response to the value of the hedged item, the economic relationship is established.
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 the hedging instrument. The Company enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Company uses the hypothetical derivative method to assess effectiveness. The Company assesses the effectiveness of its designated hedges by using the same hedge ratio as that resulting from the quantities of the hedged item and the hedging instrument that the Company actually uses.
51. Capital management
The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investors, creditors and market confidence and to sustain future development and growth of its business. In order to maintain the capital structure, the Company monitors the return on capital, as well as the level of dividends to equity shareholders. The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to all its shareholders. The Company is not subject to externally imposed capital requirements. For the purpose of the Company’s capital management, capital includes issued equity share capital, instruments entirely equity in nature and all other equity reserves attributable to the equity holders and debt includes borrowings and lease liabilities.
53. Audit trail:
The Ministry of Corporate Affairs (MCA) has prescribed a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules, 2021 requiring companies, which use accounting software for maintaining its books of account, to use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
The Company, in respect of financial year commencing on 1 April 2023, has used an accounting software operated by a third-party software service provider for maintaining its books of account which has a feature of recording audit trail (edit log) facility. Further, the database of the accounting software is operated by a third-party software service provider and the availability of audit trail (edit log) are not covered in the ‘Independent Service Auditors Assurance Report on the Description of Controls, their Design and Operating Effectiveness’ (‘Type 2 report’ issued in accordance with ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information) at the database level. However, at application level the audit trail (edit log) is enabled and operated throughout the year.
54. Other statutory information
(i) The Company does not have any Benami property, where any proceeding have been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any charge or satisfaction of charge, which is yet to be registered with the Registrar of Companies beyond the statutory period.
(iii) The Company has not traded or invested in crypto-currency or virtual currency during the financial 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 has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(viii) The Company has not entered into any scheme of arrangement which has an accounting impact on the current or previous financial year.
(ix) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.
(x) The Company does not have any balances with companies struck off under section 248 of Companies Act, 2013.
55. Code of Social Security, 2020
The Code of Social Security, 2020 (‘Code) relating to employee benefits during employment and post employment received Presidential assent in September 2020. Subsequently, the Ministry of Labour and Employment had released the draft rules on the aforementioned Code. However, the same is yet to be notified. The Company will evaluate the impact and make necessary adjustments to the standalone financial statements in the year when the Code will come into effect.
56. Figures for the previous period have been regrouped/ reclassified wherever necessary to conform to current years classification. The impact of such reclassification/ regrouping is not material to these financial statements.
This is the notes to the standalone financial statements including a summary of material accounting policies and other explanatory information referred to in our report of even date.
For Walker Chandiok & Co LLP For and on behalf of the Board of Directors of
Chartered Accountants Senco Gold Limited
Firm's Registration Number: 001076N/N500013
Rajni Mundra Suvankar Sen Ranjana Sen
Partner Managing Director Director
Membership No.: 058644 and Chief Executive Officer DIN: 01226337
Place: Kolkata DIN: 01178803 Place: Kolkata
Date: 23 May 2024 Place: Kolkata Date: 23 May 2024
Date: 23 May 2024
Surendra Gupta Sanjay Banka
Company Secretary Chief Financial Officer
and Compliance Officer Place: Kolkata
Membership No.: A20666 Date: 23 May 2024
Place: Kolkata Date: 23 May 2024
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