2.16 Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
A) Warranty Provisions
Provision for assurance type warranty-related costs are recognised when the product is sold or service is provided to customer. Initial recognition is based on historical experience. The Company periodically reviews the adequacy of product warranties and adjust warranty percentage and warranty provisions for actual experience, if necessary. The timing of outflow is expected to be with in one to five years.
B) Decommissioning Liability
Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part of the cost of the particular asset.
C) Contingent Liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases, where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the probability of outflow of resources is remote. Provisions, contingent liabilities, contingent assets and commitments are reviewed at each Balance Sheet date.
2.17 Retirement and other employee benefits
A) Defined benefit Plan
The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
B) Defined Contribution Plan
The Company pays provident fund contributions to publicly administered provident funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
C) Short-term Obligations
Liabilities for wages, salaries and bonus, including non-monetary benefits that are expected to be settled wholly within 3 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
D) Post-Employment Obligations
The Company operates the following post-employment schemes:
- defined benefit plans for gratuity, and
- defined contribution plans for provident fund.
2.18 Investment in Subsidiaries
The investment in subsidiaries, associate and Joint venture are carried at cost as per Ind AS 27.
2.19 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the management. The Management monitors the operating results of all strategic business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit and loss and is measured consistently with profit and loss in the financial statements.
2.20 Cash and cash equivalent
Cash and cash equivalents in the Balance Sheet comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and which are subject to insignificant risk of changes in value.
2.21 Cash flow statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or 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.
2.22 Finance costs
Borrowing costs are recognised in the statement of profit and loss using the effective interest method. The associated cash flows are classified as financing activities in the statement of cash flows.
2.23 Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest INR as per the requirement of Schedule III, unless otherwise stated.
2.24 Earning Per share
A) Basic EPS
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders of the Company (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.
B) Diluted EPS
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
2.25 Approval of Financial Statements
The financial statements were approved for issue by the board of directors on May 9, 2024.
Secured borrowings and assets pledged as security
1) ICICI Bank had sanctioned Term loan of Rs. 600.00 Lacs on 01.12.2022, 360.50 Lacs on 13.04.2023, 185.30 Lacs on 26.04.2023, 154.20 Lacs on 14.06.2023 & 300 Lacs on 30.11.2023. Out of above Rs 600 Lacs against Property and 1000 Lacs towards Machineries. Such loan is secured against equitable mortgaged of commercial property situated (Killa No-14/6/1/2(0-3), Village- Safiabad, Tehsil-Rai, Sonepat-231029) and personal guarantees of directors. The said loan is repayable in upto 84 equal monthly installments.Outstanding balance as on 31.03.2024 was Rs. 1363.25 Lacs (Previous year 571.71 Lacs) , Payable within one year Rs 227.29 Lacs (Previous year 85.71 Lacs) .
2) Punjab National Bank had sanctioned working capital term loan of Rs. 247 Lacs on 18.07.2020 under GECL Scheme to meet operational liabilities and restart the business effected due to COVID-19. The loan is repayable in 36 installments after one year moratorium period. Outstanding as on 31.03.2024 was Rs. 20.58 Lacs (Previous year Rs. 102.13 Lacs) payable within one year Rs. 20.58 Lacs (Previous year Rs. 78.00 Lacs)
3) Punjab National Bank had sanctioned working capital term loan of Rs. 172.96 Lacs on 15.12.2021 under GECL Scheme to meet operational liabilities. The loan is repayable in 36 installments after 2 years moratorium period. Outstanding as on 31.03.2024 was Rs. 153.74 Lacs (Previous year Rs. 173.94 Lacs) payable within one year Rs. 57.65 Lacs (Previous year Rs. 14.41Lacs)
*Punjab National Bank had renewed fund based limit of Cash Credit Rs 4600 Lacs & Term Loan Rs 1000 Lacs (Previous year Rs 626 Lacs towards Cash Credit) and non fund based limit of Rs.1500 Lacs (Previous year Rs 1150 Lacs) towards Bank Guarantee/ Letter of Credit on 10.08.2023. These limit are secured against hypothecation of inventories, books debts, other current assets, fixed deposits of Rs. 200 Lacs, Plant and machineries and all other fixed assets of the company, besides equitable mortgage of properties of company and its directors along with their personal guarantees. Current assets are having pari passu charge with HDFC Bank and ICICI Bank. Property is having pari passu charge with ICICI bank.
*HDFC Bank had renewed Fund Based Limit of Cash Credit Rs.2000 Lacs including WCDL of Rs. 1800 Lacs being sublimit of Cash Credit facility(Previous year Cash Credit Limit of Rs 400 Lacs and WCDL of Rs 500 Lacs) and Non Fund Based Limit of Rs 2000 Lacs towards Bank Guarantee/Letter of Credit on 22.03.2024. These limits are secured by exchange of Pari passu charge on current assets with ICICI Bank, Punjab National Bank for working capital limits & pari passu Charge for Hypothecation & equitable Mortgage of properties at Village Safiyabad, Industrial Area, Sector-43, Narela Road, Tehsil Rai, District Sonipat, Haryana - 131029 and fixed deposits of Rs 305 Lacs as Colletral Security.
*ICICI Bank had renewed Fund Based Limit of Rs.1400 Lacs including WCDL of Rs. 800 Lacs being sublimit of Cash Credit (Cash Credit Limit of Rs 1400 Lacs and Working Capital Demand Loan of Rs 800 Lacs which is sublimit of Cash Credit), Non Fund Based Limit of Rs 1000 Lacs towards Bank Guarantee/Letter of Credit being sublimit of Cash Credit and Rs 1600 Lacs towards Term Loan of on 22.11.2023. These limit are secured by Exchange of Pari passu charge on current assets with Punjab National Bank & HDFC Bank.
*CITI Bank had sanctioned Fund Based Limit of Rs.2000 Lacs (Cash Credit Limit of Rs 1000 Lacs and WCDL and bill discounting of Rs 1000 Lacs) on 28.03.2023.
*Company has taken unsecured loan from its subsidiary Servotech EV Infra Pvt. Ltd.of Rs. 806.33 Lacs on 26.02.2024 and interest rate on the same is @8.50% P.A.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual funds that have quoted price and are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the counter derivatives) 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 level3.
NOTE 24.2 : VALUATION TECHNIQUE USED TO DETERMINE FAIR VALUE
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices
NOTE 24.3 : FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT AMORTISED COST
The carrying amounts of financial assets comprising trade receivables, cash and cash equivalents, fixed deposits with banks, security and other deposits and carrying value of financial liabilities comprising borrowings and trade paybles and other payables are considered to be the same as their fair values, due to their short-term nature and covered under level 3 category.
NOTE 25 : FINANCIAL RISK MANAGEMENT
The Company's activities expose it to market risk, liquidity risk and credit risk. In order to minimise any adverse effects on the financial performance, derivative financial instruments, such as foreign exchange forward contracts and commodity forward contracts, are entered to hedge certain foreign currency risk exposures and commodity price risk exposures.
This note explains the sources of risk which the Company is exposed to and how such risk were managed.
The risk of financial loss due to counterparty's failure to honour its obligations arises principally in relation to transactions where the Company provides goods on deferred terms.
The Company's policies are aimed at minimising such losses, and require that deferred terms are granted only to customers who demonstrate an appropriate payment history and satisfy creditworthiness procedures. Individual exposures are monitored with customers subject to credit limits to ensure that the Company's exposure to bad debts is not significant. The maximum exposure to credit risk regarding financial assets is the carrying amount as disclosed in the balance sheet. With respect to credit risk arising from all other financial assets of the Company, the Company's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the corresponding carrying amount of these instruments.
On account of the adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables. The provision matrix takes into account available external and internal credit risk factors such as historical experience for customers. The Company's receivable are high quality with negligible credit risk and the counter-party has strong capacity to meet the obligations and where the risk of default is negligible or nil. Accordingly, no provision for expected credit loss is recognised.
The following table provides information about the exposure to credit risk for trade receivables from individual customers.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company's liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. In addition, the Company's liquidity management policy involves monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
NOTE 25.3 MARKET RISK MANAGEMENT INTEREST RATE RISK
The Company's main interest rate risk arises from borrowings with variable rates, which expose the Company to cash flow interest rate risk. During 31 March 2024 and 31 March 2023, the Company's borrowings at variable rate were mainly denominated in INR.
The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
The long term variable interest rate borrowings are not significant and accordingly, no such sensitivity for interest rate cash flow has been disclosed.
PRICE RISK
The Company's significant exposure for price risk is relating to commodity forward contracts. However, no open commodity forward contract is outstanding as on the reporting date and accordingly, doesn't have related price risk.
NOTE 26 : CAPITAL MANAGEMENT
NOTE 26.1
RISK MANAGEMENT
The Company's objectives when managing capital are 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.
In order to maintain or adjust the capital structure, the Company issue new shares. Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio: Net debt (total borrowings net of cash and cash equivalents) divided by Total ‘equity' (as shown in the balance sheet.
NOTE : 27.2 FELLOW SUBSIDIARIES
Rebreathe Medical Devices India Private Limited
Techbec Industries Limited
Techbec Green Energy Private Limited
Servotech EV Infra Private Limited
Associate Company
NIL
NOTE 27.3 KEY MANAGEMENT PERSONNEL AND THEIR RELATIVE
A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over those entities. A number of these personnel transacted with the Company during the reporting period. The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or those which might reasonably be expected to be available, in respect of similar transactions with non-key management personnel related entities on an arm's length basis.
Name of key management personnel, their relatives and entities over which they have control or significant influence with whom transaction were entered during the year or balance was outstanding at the balance sheet date are as follows:
Key management personnel and relatives:
Mr. Raman Bhatia Ms. Sarika Bhatia
*Punjab National Bank had renewed fund based limit of Cash Credit Rs 4600 Lacs & Term Loan Rs 1000 Lacs (Previous year Rs 626 Lacs towards Cash Credit) and non fund based limit of Rs.1500 Lacs (Previous year Rs 1150 Lacs) towards Bank Guarantee/ Letter of Credit on 10.08.2023. These limit are secured against hypothecation of inventories, books debts, other current assets, fixed deposits of Rs. 200 Lacs, Plant and machineries and all other fixed assets of the company, besides equitable mortgage of properties of company and its directors along with their personal guarantees. Current assets are having pari passu charge with HDFC Bank and ICICI Bank. Property is having pari passu charge with ICICI bank.
*HDFC Bank had renewed Fund Based Limit of Cash Credit Rs.2000 Lacs including WCDL of Rs. 1800 Lacs being sublimit of Cash Credit facility(Previous year Cash Credit Limit of Rs 400 Lacs and WCDL of Rs 500 Lacs) and Non Fund Based Limit of Rs 2000 Lacs towards Bank Guarantee/Letter of Credit on 22.03.2024. These limits are secured by exchange of Pari passu charge on current assets with ICICI Bank, Punjab National Bank for working capital limits & pari passu Charge for Hypothecation & equitable Mortgage of properties at Village Safiyabad, Industrial Area, Sector-43, Narela Road, Tehsil Rai, District Sonipat, Haryana - 131029 and fixed deposits of Rs 305 Lacs as Colletral Security.
*ICICI Bank had renewed Fund Based Limit of Rs.1400 Lacs including WCDL of Rs. 800 Lacs being sublimit of Cash Credit (Cash Credit Limit of Rs 1400 Lacs and Working Capital Demand Loan of Rs 800 Lacs which is sublimit of Cash Credit), Non Fund Based Limit of Rs 1000 Lacs towards Bank Guarantee/Letter of Credit being sublimit of Cash Credit and Rs 1600 Lacs towards Term Loan of on 22.11.2023. These limit are secured by Exchange of Pari passu charge on current assets with Punjab National Bank & HDFC Bank.
*CITI Bank had sanctioned Fund Based Limit of Rs.2000 Lacs (Cash Credit Limit of Rs 1000 Lacs and WCDL and bill discounting of Rs 1000 Lacs) on 28.03.2023.
*Company has taken unsecured loan from its subsidiary Servotech EV Infra Pvt. Ltd.of Rs. 806.33 Lacs on 26.02.2024 and interest rate on the same is @8.50% P.A.
Other Matters
(a) The VAT Department of Government of Haryana at Kundli had assessed the Sales Turnover of the company up to 30.06.2017 and created the demand of Rs.8.81 Lacs (Including Interest) for short submission of statutory forms on 12th March 2021. The Company paid the amount of Rs 2.28 lacs on 29th June,2020. Hence net demand of Rs 6.52 Lacs is payable as on balance sheet date. The company had charged the said amount to profit & loss account and reduce the advance payment Rs. 40.92 Lacs from the said Government Department .
(b) The income tax department has created demand of Rs 252.12 Lacs for the A.Y. 2017-18 on 26th of December 2019. The company had filed an appeal before Commissioner of Income Tax, New Delhi on 21st January 2020 and deposited Rs. 2.50 Lac against the same. The appeal is pending.
(c ) The income tax department has created demand of Rs 143.36 Lacs for the A.Y. 2016-17 on 28th March 2022. The company had filed an appeal before Commissioner of Income Tax, New Delhi on 19th of April 2022. The appeal is pending.ng.
(d) The income tax department has created demand of Rs 275.23 Lacs for the A.Y. 2017-18 on 26th May 2023. The company had filed an appeal before Commissioner of Income Tax, New Delhi on 12th of June 2023. The appeal is still pending.
(e) In the opinion of the Board, the current assets, loans and advances have a value on realization in the ordinary course of business, at least equal to the aggregate amount as shown in the Balance Sheet.
(f) The company had received Rs. 96.53 Lacs from different customers against supply / to be supply of goods has been shown as advance from customers in books of accounts, will be adjusted against their outstanding after reconciliation of their accounts.
(g) The outstanding balances of sundry debtors ,creditors & securities are as per the books of accounts of the Company which are subject to confirmations and reconciliation, if any.
(h) Previous year figures have been regrouped/rearranged wherever found necessary.
Note 1 to 33 are forming part of Balance Sheet, Profit & Loss & Cash Flow Statement and have been authenticated by the
directors.
Events occurring after the reporting period
No event occurred after Balance Sheet date.
Significant accounting policies 1&2
The accompanying notes are an integral part of standalone financial statements
As per our report of even date
For Rohit KC Jain & Co. For and on behalf of the Board of Directors of
Chartered Accountants Servotech Power Systems Limited
FRN:020422N
CA Rohit Jain Raman Bhatia Sarika Bhatia
(Partner) (Managing Director) (Whole-time Director)
M.No.- 099444 DIN-00153827 DIN-00155602
Place: Delhi Rupinder Kaur Vikas Bhatia
Date : 09.05.2024 (Company Secretary ) (Chief Financial Officer)
UDIN : 24099444BKGXZZ4519 M.No.- A38697 PAN- AJNPB0303P
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