o. Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a 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. If the effect of the time value of money is material, provisions are discounted using equivalent period government securities interest rate. Unwinding of the discount is recognised in the statement of profit and loss as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. Contingent assets are not recognised, but disclosed in the financial statements. However, when the realisation of income is virtually certain, then the related asset is no longer a contingent asset, but it is recognised as an asset.
p. Employee Benefits Short term obligations:
Short term employee benefits, including compensated absences that are expected to be settled within twelve months from the reporting date, are recognised as an expense at the undiscounted amount in the Statement of profit and loss of the year in which the related service is rendered.
Post employment obligations:
The Company operates the following post employment schemes:
Defined benefit plans:
i) Gratuity: The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to eligible employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting (eligibility) occurs upon completion of five years of service. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for funding this plan. The Company recognises such obligation net of fair value of plan assets as a liability/asset. Defined benefit plans provision is based on an actuarial valuation by an actuary, using the projected unit credit method. Actuarial gains and losses arising on the remeasurement of defined benefit obligation and experience adjustments are charged/ credited to other comprehensive income. All other costs / reversals are recognised in the statement of profit and loss.
ii) Provident fund: For certain employees, the monthly contribution for Provident Fund is made to a Trust administered by the Company. Both the eligible employees and the Company make monthly contributions, equal to a specified percentage of the covered employee's salary, to the Employees' Provident Fund Trust (The PF trust'). The PF trust invests in specific designated instruments as permitted by Indian Law. The rate at which the annual interest is payable to the beneficiaries by the PF trust is being administrated by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the PF trust and the notified interest rate.
Defined contribution plans:
Provident fund and family pension fund: Defined contribution plans such as Provident Fund and family pension fund are charged to the Statement of Profit and Loss as incurred. The Company's contribution to the Statutory Provident Fund and family pension fund is determined based on a fixed percentage of the eligible employees' salary and charged to the Statement of Profit and Loss on accrual basis. The Company does not have any obligation other than the contribution made to the fund administered by the government.
Other long term employee benefit obligations:
Compensated absences (other than those considered short term): The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/availment. The Company makes provision for compensated absences based on an actuarial valuation by an actuary, using the projected unit credit method. Actuarial gains and losses are charged/credited to the Statement of Profit and loss. The company presents entire leave as a current liablity in the balance sheet, since it does not have an unconditional right to defer it's settlement for 12 months after the reporting date.
q. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss (excluding other comprehensive income) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events such as bonus issue, bonus element in a right issue, shares split and reserve share splits (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss (excluding other comprehensive income) for the year attributable to equity share holders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
r. Operating Cycle
Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
(i) An asset is considered as current when it is:
a. Expected to be realised or intended to be sold or consumed in the normal operating cycle, or
b. Held primarily for the purpose of trading, or
c. Expected to be realised within twelve months after the reporting period, or
d. Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
(ii) All other assets are classified as non-current.
(iii) Liability is considered as current when it is:
a. Expected to be settled in the normal operating cycle, or
b. Held primarily for the purpose of trading, or
c. Due to be settled within twelve months after the reporting period, or
d. There is no unconditional right to defer the settlement of the liability for at least twelve months
after the reporting period.
(iv) All other liabilities are classified as non-current.
s. Critical estimates and judgements
The preparation of financial statements in conformity with Ind AS requires management to make estimates, assumptions and exercise judgement in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities at the date of financial statements and the reported amounts of income and expenses during the year.
The management believes that these estimates are prudent and reasonable and are based upon the management's best knowledge of current events and actions. Actual results could differ from these estimates and differences between actual results and estimates are recognised in the periods in which the results are known or materialised.
This note provides an overview of the areas that involved a comparatively, higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
i) Property, plant and equipment and intangible assets:
Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation/amortisation to be recorded during any reporting period. The useful lives and residual values are determined as per schedule II to the Companies Act, 2013 or a technical evaluation which are based on the Company's historical experience with similar assets and taking into account anticipated technological changes, to the extent applicable to the asset.
ii) Deferred tax assets:
The Company reviews at each balance sheet date the carrying amount of deferred tax assets. The
factors used in estimates may differ from actual outcome which could lead to an adjustment to the amounts reported in the financial statements.
iii) Contingencies:
Management has estimated the possible outflow of resources at the end of each annual reporting financial year, if any, in respect of contingencies / claim / litigations by / against the Company as it is not possible to predict the outcome of pending matters with accuracy.
iv) Impairment of financial assets:
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
v) Defined benefit obligation:
The cost of post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the long term nature of these plans such estimates are subject to significant uncertainty.
vi) Fair value measurements:
Management applies valuation techniques to determine fair value of equity shares (where active market quotes are not available). This involves developing estimates and assumptions around volatility, dividend yield which may affect the value of equity shares.
vii) Impairment of assets:
In assessing impairment, management estimates the recoverable amounts of each asset (in case of non-financial assets) based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future cash flows and the determination of a suitable discount rate.
viii) Provisions:
Provisions are recognised when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding defined benefit plan) are not discounted to their present value and are determined based on best estimate of the amount required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
ix) Leases:
Determining the lease term of contracts with renewal and termination options - company as lessee Ind AS 116 requires the lessee to determine the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The company has two lease contracts that include extension and termination options. The company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the com-
pany reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset). When it is reasonably certain to exercise extension option and not to exercise termination option, the company includes such extended term and ignore termination option in determination of lease term.
The company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (iBR) to measure lease liabilities. The company has taken indicative rates from its bankers and used them for Ind AS 116 calculation purposes.
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.
t. Events after report date
Where events occuring after the balance sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of such events is adjusted within the financial statements. Where the events are indicative of conditions that arose after the reporting period, the amounts are not adjusted, but are disclosed if those non-adjusting events are material.
u. Recent accounting pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31 March 2023, MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from 1 April 2023, as below:
i. Ind AS 1 - Presentation of Financial Statements:
The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected to influence decisions of primary users of general purpose financial statements. The Company does not expect this amendment to have any significant impact in its financial statements.
ii. Ind AS 12 - Income Taxes:
The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company is evaluating the impact, if any, in its financial statements.
iii. Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors:
The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company does not expect this amendment to have any significant impact in its financial statements.
(ii) Rights attached to equity shares:
a) The company declares and pays dividend in Indian Rupee. Dividend proposed by the board of directors
is subject to approval by shareholders in the Annual General Meeting. (refer note 41 (B))
b) The equity shares are not repayable except in the case of a buy back, reduction of capital or winding up in terms of the provision of the Companies Act, 2013.
c) Every member of the Company holding equity shares has a right to attend the General Meeting of the Company and has a right to speak and shall have the right to vote in proportion to his share of the paid-up capital of the Company.
d) In the event of liquidation of the Company, the holders of equity shares will be entitled to receive assets of the Company remaining after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
(iii) Rights attached to preference shares:
The Company has one class of preference share. The preference shares have preferred right on payment of dividend and repayment of capital over equity shareholders. No preference shares are issued / subscribed during the year or as at reporting date.
I. Fair value hierarchy
The fair values of the financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
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. An explanation of each level follows underneath the table.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. For example, listed equity instruments that have quoted market price.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, 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 level 3. This is the case for unlisted equity securities included in level 3.
During the periods mentioned above, there have been no transfers amongst the levels of hierarchy.
II Valuation techniques used to determine fair value
Significant valuation techniques used to value financial instruments include :
The fair values for investment in mutual fund are based on the published NAV's and other financial assets/ liabilities are based on discounted cash flows using a discount rate determined considering Company's incremental borrowing rate.
The carrying amounts of all the above assets are considered to be approximately equal to the fair value.
Mutual fund investment have been categorised into level 1 (recurring fair value measurement) of fair value hierarchy.
40. Financial risk management
The Company's principal financial liabilities comprise borrowings, lease liabilities, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include loans, trade and other receivables, investments and cash and cash equivalents and other bank balances other than cash and cash equivalents that derive directly from its operations.
The Company is exposed to credit risk, liquidity risk and market risk. The Company's senior management oversees the management of these risks.
A Credit risk
The Company is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities (deposits with banks and other financial instruments).
Credit risk management
To manage credit risk, the Company follows a policy of providing 0-75 days credit to the domestic and export customers basis the nature of customers. The credit limit policy is established considering the current economic trends of the industry in which the Company is operating. However, the trade receivables are monitored on a periodic basis for assessing any significant risk of non-recoverability of dues and provision is created accordingly.
Bank balances are held with only high rated banks and majority of other security deposits are placed majorly with government agencies/public sector undertakings.
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at a reasonable price. For the Company, liquidity risk arises from obligations on account of financial liabilities - borrowings, lease liabilities, trade payables and other financial liabilities.
Liquidity risk management
The Company's corporate treasury department is responsible for liquidity and 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 net liquidity position through rolling forecasts on the basis of expected cash flows.
Market risk is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes in market prices. Market risk comprise three types of risk: Foreign currency risk, intrest rate risk and price risk.
(i) Foreign currency risk
The Company is exposed to foreign exchange risk on its receivables and payables which are held in USD and EURO. The fluctuation in the exchange rate of INR relative to these currencies may have a material impact on the Company's assets and liabilities.
Foreign currency risk management
In respect of the foreign currency transactions, the Company does not hedge the exposures since the management believes that the same is insignificant in nature and also it will be offset to some extent by the corresponding receivables and payables.
41. Capital management (A) 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.
The Company monitors its capital by using gearing ratio, which is net debt divided by total equity. Net debt includes non-current and current borrowings net of cash and cash equivalents. Total equity comprises of equity share capital, security premium, general reserve, other comprehensive income and retained earnings.
43. Contingent liabilities (claims against the company not acknowledged as debt)
(i) The Company had received an Order dated 6 September 2004 from the Employees Provident Fund Organisation raising a demand of ^ 161 lakhs including interest of ^ 47 lakhs for default in making payment of Employees Provident Fund and allied dues for the period April, 1986 to February, 2003. The Company had been making contributions to the 'SNL Officers Provident Fund Trust' and 'SNL Employee's Provident Fund Trust', being Trusts formed by the Company in earlier years; these Trusts have net assets of ^ 166 lakhs and ^ 40 lakhs respectively as at 31 March 2023 as reflected in their latest audited balance sheets. As per the order, the existence of the said Trusts and the act of switching over from Employees trust to the Officers trust on salary exceeding the statutory limit fixed by The Employee's Provident Funds and Miscellaneous Provisions Act, 1952, have been considered violative of the Act. The authorities had attached one of the Company's bank accounts and had recovered an amount of ^ 3 lakhs in an earlier year. The Company has contested the above demand and on a writ petition filed by the Company in the High Court of Jharkhand, Ranchi, the High Court has directed the authorities not to take coercive steps till the disposal of the petition. The Company denies all the allegations made against it since the Company had made the necessary applications to grant exemption to the Trusts which was neither granted nor rejected in spite of several reminders from time to time. In view of the facts of the case, the Company does not expect any liability in this regard.
(ii) The Honourable Supreme Court, had passed a decision on 28 February 2019 in relation to inclusion of certain allowances within the scope of "Basic wages" for the purpose of determining contribution to provident fund under the Employees' Provident Funds & Miscellaneous Provisions Act, 1952. The Company, has been advised to wait for further clarifications in this matter in order to reasonably assess the impact on its financial statements, if any. Accordingly, the applicability of the judgement to the Company, with respect to the period and the nature of allowances to be covered, and resultant impact on the past provident fund liability, cannot be reasonably ascertained, at present. From November 2020, the Company has started making the deduction and payment of provident fund basis the revised definition of "basic wages". For the period 1 April 2019 to 31 October 2020 the Company has recognised a provision of ^ 14 lakhs as per the revised definition, for which it is awaiting further clarifications before depositing the same with the authorities.
(iii) Other money for which the company is contingently liable - Income tax matters For Assessment year 2017-18:
Income tax demand raised of ^ 26 lakhs under Section 143(3) of the IT Act for AY 2017-18 for non collection of tax collected at source (TCS) and double disallowance of loss on sale of property, plant and equipment. This dispute is pending at the forum of Assistant Commissioner of Income tax - Mumbai. In view of the facts of the case, the Company does not expect any liability in this regard.
(iv) Sales tax demand against the non submission of C forms / VAT forms for the financial year 2011-12 and 2012-13 ^ 15 lakhs. This dispute is pending at the forum of Deputy Commissioner of Commercial Taxes. In view of the facts of the case, the Company does not expect any liability in this regard.
Notes:
1. The above disclosure has been made on the basis of information available with the Company.
2. 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.
3. The amounts disclosed above represent the best possible estimates arrived at on the basis of the available information and do not include any penalty payable.
52 Other statutory information
i. The Company does not have any transactions and outstanding balances during the current as well previous year with Companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
ii. The Company has not been declared a willful defaulter by any bank.
iii. The Company does not have any Benami property, where any proceedings initiated or are pending against the Company for holding any benami property.
iv. The Company has not traded or invested in Crypto Currency or Virtual Currency during the financial year.
v. The Company has not received any fund from any person or entiy including foreign entities (funding party) with the understanding (whether recording 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 to or on behalf of the ultimate beneficiary.
vi. The Company has sanctioned borrowings/facilities from bank on the basis of security of current assets. The monthly returns or statements of current assets filed by the Company with bank are in agreement with the books of account.
vii. During the year the Company has not disclosed or surrendered, any income other than the income recognised in the books of account in the tax assessments under Income Tax Act, 1961.
viii. The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) to any other person or entity, including foreign entity (Intermediaries')
with the understanding (whether reocorded in writing or otherwise) 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.
ix. 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, shall 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 has used an accounting software microsoft dynamic navision 2016 for maintaining its books of account which has a feature of recording audit trail (edit log) facility. The audit trail (edit log) is enabled at the application level, however the audit trail feature was not enabled throughout the year at database level.
53 Previous year figures
Previous year figures have been reclassed/ regrouped wherever necessary to correspond with the current year classification/ disclosure, which are not considered material to these financial statements.
This is a summary of significant accounting policies and other explanatory information referred to in our audit report of even date.
For and on behalf of the Board of Directors
Harshbeena S. C. Rangani Arvinder Singh
For Walker Chandiok & Co LLP Zaveri Director - DIN : Kohli
Chartered Accountants Director - DIN : 00209069 Director - DIN :
Firm Registration No. 001076N / N500013 00003948 08135020
Adi P. Sethna Reshmi Panicker K M Marfatia Lalit Pandey
Partner Director - DIN : Director - DIN : Chief Executive
Membership l\lo.: 108840 05178086 03449627 Officer
Place: Mumbai Ram Narayan Pooja Jeswani Place: Mumbai
Date : 15 May 2024 Sahu Company Date : 15 May
Chief Financial Secretary 2024
Officer
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