There are no material overdues compared to original plans as on March 31, 2024 and March 31, 2023.
The Company evaluates completion of the projects based on its original plan which includes certain projects relating to research and development monitored on an ongoing basis.
Details of Leases :
The note provides information for leases where the Company is a lessee. The Company has taken land, various offices and plant and machinery on lease. Rental contracts for offices and plant and machinery are typically made for fixed periods of 2 to 15 years, but have extension options.
The total cash outflow for leases for the year ended March 31, 2024 is ' 28 crores. (March 31, 2023 - ' 28 crores)
Extension and Termination option :
Extension and termination options are included in a number of property and equipment leases held by the company. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Company and not by the respective lessor.
Commitment for leases not yet commenced on March 31, 2024 was ' Nil (March 31, 2023 - ' Nil)
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
During the year ended March 31, 2024, the Company considered indicators of impairment such as operational losses in previous years, changes in outlook of future profitability among other potential indicators for investments held in subsidiaries and business operations either directly or indirectly.
Speedon Network Limited (SNL) is a wholly owned subsidiary of the Company. In the previous year, the fair value less cost to sell of SNL has been determined using replacement cost method using level III inputs by an independent valuer which is lower than its carrying value. The replacement cost was computed using the factors such as number of home passes, the cost to install each home pass, depreciation adjustment and first mover advantage premium. Accordingly, impairment of ' 4 crores in the value of investment held was recognised in the previous year.
No trade or other receivable are due from directors or other officers of the company either severally or jointly. Also no trade or other receivable are due from firms or private companies in which any director is a partner, a director or a member.
Refer note 18 for information on trade receivables hypothecated as security by the Company.
The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person or entity, including foreign entities ("Intermediaries”) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall, whether, directly or indirectly lend or invest in other persons/ entities identified in any manner whatsoever by or on behalf of the Company ('ultimate beneficiaries') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries other than loans aggregating ' 28 crores (March 31, 2023: '
79 crores) given during the year to STL UK Holdco Limited and Sterlite Technologies UK Ventures Limited, subsidiaries of the Company in the ordinary course of business and in keeping with the applicable regulatory requirements. for onward funding to one of the overseas subsidiary of the Company towards meeting its business requirements. Accordingly, no further disclosures, in this regard, are required.
Significant changes in Contract assets
Contract assets have decreased from previous year as entity has provided fewer services ahead of agreed billing and payment schedule for fixed price contracts and on account of billing done in current year.
During the year ended March 31, 2024, ' 781 crores (March 31, 2023: ' 626 crores) of opening unbilled revenue has been reclassified to Trade receivables upon billing to customers on completion of milestones.
Refer note 18 for information on other assets hypothecated as security by the Company.
Amounts recognised in profit or loss :
Write-downs of inventories to net realisable value amounted to ' 26 crores (March 31, 2023: ' 20 crores). These were recognised as an expense and included in '(Increase) / decrease in inventories of finished goods, work-in-progress & stock-in-trade and Cost of raw materials & components consumed in the statement of profit and loss of the respective years.
Refer note 18 for information on inventories hypothecated as security by the Company.
b. Terms and rights attached to equity shares
The Company has only one class of equity shares having a par value of ' 2 per share. Each holder of equity shares is entitled to one vote per share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
e. Shares reserved for issue under options
For information relating to employees stock options plan, 2010 including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, refer note 33.
g. Details of shares bought back during the 5 years preceding March 31, 2024:
On March 24, 2020, the Board of Directors had approved the buyback of Equity Shares for a total amount not exceeding ' 145 Crores, being 9.95% and 9.32% of the aggregate of the total paid-up equity capital and free reserves (including securities premium) of the Company based on the audited standalone and consolidated financial statements, respectively, of the Company for the financial year ended March 31, 2019. The Company closed the buy back on August 27, 2020. The Company has bought back 88,67,000 shares for ' 100 crores (excluding taxes).
h. Details of Qualified Institutions Placement (QIP)
Subsequent to the year end, the Company has issued 88,456,435 equity shares of face value ' 2 each at an issue price of ' 113.05 per equity share pursuant to Qualified Institutions Placement (QIP) under the provisions of Chapter VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (the "SEBI ICDR Regulations”), and section 42 and 62 of the Companies Act, 2013, including the rules made thereunder, each as amended. The promoter's shareholding has decreased from 53.98% to 44.19% pursuant to the QIP issue. The management does not expect any material impact on account of the change in the promoter's shareholding.
Nature and Purpose of reserves other than retained earnings
Securities Premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
Capital Reserve
Capital reserve was created on account of merger of passive infrastructure business of wholly owned subsidiary, Speedon Network Limited, in the year ended March 31, 2017.
General Reserve
General reserve is created out of the amounts transferred from debenture redemption reserve on account of redemption of debentures.
Cash Flow Hedge Reserve
The Company uses hedging instruments as part of its management of foreign currency risk associated with its highly probable forecasted sales and purchases and interest rate risk associated with variable interest rate borrowings as described in note 45. For hedging foreign currency risk, the Company uses foreign currency forward contracts which are designated as cash flow hedges. For hedging interest rate risk, the Company uses interest rate swaps which are also designated as cash flow hedges. To the extent these hedges are effective, the change in fair value of the hedging instrument is recognised in the cash flow hedging reserve. Amounts recognised in the cash flow hedging reserve are reclassified to profit or loss when the hedged item affects profit or loss. When the forecasted transaction results in the recognition of a nonfinancial asset (e.g. inventory), the amount recognised in the cash flow hedging reserve is adjusted against the carrying amount of the non financial asset.
Employee Stock Options Outstanding
The share options outstanding account is used to recognise the grant date fair value of options issued to employees under employee stock option plan (ESOP Scheme) approved by shareholders of the Company.
Capital Redemption Reserve
As per provisions of the Companies Act, 2013, the Company has created a capital redemption reserve (CRR) of 2 Crores against face value of equity shares bought back by the Company during the year ended 31 March 2021.
a) 8.25% Non convertible debentures carry 8.25% p.a rate of interest. Total amount of non-convertible debentures is due in 4 equal annual installments starting from FY 2027-28 till FY 2030-31. These nonconvertible debentures are secured by way of hypothecation on specified movable fixed assets at Shendra plant (project Gaurav) (both present and future).
b) 7.30% Non convertible debentures carry 7.30% p.a rate of interest. The non convertible debentures have been repaid in FY 2023-24
c) 9.10% Non convertible debentures carry 9.10% p.a rate of interest. Total amount of non-convertible debentures is due in the FY 2025-26. These non-convertible debentures are secured by way of a first pari passu charge over movable fixed assets of the Company, other than assets located at Shendra Aurangabad.
d) Secured Indian rupee term loan from bank amounting to ' 83 crores (March 31, 2023: ' 166 crores) carries interest @ One Year MCLR 0.15% p.a. Loan amount was repayable in 12 quarterly instalments from June 2022 of ' 20.75 crores per Quarter (excluding interest). The term loan was secured by way of first pari passu charge on entire movable fixed assets (both present and future).
e) Secured Indian rupee term loan from bank amounting to ' Nil (March 31, 2023: ' 200 crores) carries interest @ overnight MCLR. The loan amount was repaid in FY 23-24.
f) Secured Indian rupee term loan from NBFC amounting to ' 100 crores (March 31, 2023: ' Nil ) carries interest @ benchmark rate - 11.25% p.a. Loan amount is repayable in FY 2025-26. The term loan is secured by way of first pari passu charge by way of hypothecation of entire movable fixed assets of the Company, other than assets located at Shendra, Aurangabad (both present and future).
g) Unsecured Indian rupee term loan from NBFC amounting to ' 78 crores (March 31, 2023: ' 74 crores) carries interest @ 6.5% p.a. Loan amount is repayable in FY 2024-25, 2025-26 and 2026-27.
(i) Working capital demand loan from banks is secured by first pari-passu charge on entire current assets of the Company (both present and future) and second pari-passu charge on plant & machinery and other movable fixed assets of the Company. Working capital demand loans have been taken for a period of 7 days to 180 days and carry interest @ 7.65% to 8.30% p.a (March 31, 2023: 6.85 % to 8.60% p.a).
(ii) Commercial Papers are unsecured and are generally taken for a period from 60 Days to 180 days and carry interest @ 8.20% to 9.00% p.a (March 31, 2023: 7.55% to 8.40% p.a ).
(iii) Other loans include buyer's credit arrangements (secured) and export packing credit (secured and unsecured). These secured loans are secured by hypothecation of raw materials, work in progress, finished goods and trade receivables. Export packing credit is taken for a period ranging from 30-180 days. Interest rate for both the products range from 4.46% - 8.30% p.a (March 31, 2023: 3.26% - 8.05% p.a).
Borrowing secured against current assets :
The Company has borrowings from banks and financial institutions on the basis of security of current assets. The quarterly returns or statements of current assets filed by the company with banks and financial institutions are in agreement with the books of accounts except as disclosed in Note no.49.
Utilisation of borrowed funds :
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.
The borrowings obtained by the Company during the year from banks and financial institutions have been applied for the purposes for which such loans were taken.
The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.
The amount of net debt considering the amount of lease liability of ' 74 crores (March 31, 2023 : ' 80 crores) and Advances under advance payment and sales agreement (APSA) of ' 207 crores (March 31, 2023 : Nil) is ' 2,331 crores (March 31, 2023 : ' 2,821 crores). For movement of lease liability refer note 4.
* includes other bank balance of ' 50 crores (March 31, 2023 : ' 50 crores) with respect to fixed deposit excluding deposits held as lien by banks against bank guarantees. These fixed deposits can be encashed by the Company at any time without any major penalties.
Significant changes in Contract liabilities
During the year the Company has recognized revenue of ' 8 crores (March 31, 2023: ' 20 crores ) arising from opening unearned revenue. Unearned revenue has decreased in current year as entity has recognised revenue from opening unearned revenue. The movement in advance from customers is on account of advances received and utilised during the year.
ii) Post employment benefit obligation - Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972 (amended). Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to fund managed by Life Insurance Corporation of India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimate of expected gratuity payments.
The Company has no legal obligation to settle the deficit in the funded plans with an immediate contribution or additional one off contributions. The Company intends to continue to contribute the defined benefit plans as per the demand from LIC of India.
The estimated future salary increase, considered in actuarial valuation, takes into account the effect of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
Risk exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below :
Asset volatility:
The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Plan assets are maintained with fund manager, LIC of India.
The Company's assets are maintained in a trust fund managed by public sector insurance company (LIC of India). LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years. The plan asset mix is in compliance with the requirements of the respective local regulations.
Changes in bond yields:
A decrease in bond yields will increase plan liabilities.
Future salary escalation and inflation risk:
Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management's discretion may lead to uncertainties in estimating this risk.
Life expectancy
Increases in life expectancy of employee will result in an increase in the plan liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.
The weighted average duration of the defined benefit obligation is 7 years (March 31, 2023 - 8 years). The expected maturity analysis of gratuity is as follows:
Revenue disaggregation in terms of nature of goods and services has been included above.
The total contract price of ' 3,906 crores (March 31, 2023: ' 5,259 crores) is reduced by the consideration of ' 18 crores (March 31, 2023: ' 13 crores) towards variable components and ' 5 crores ( March 31, 2023: ' Nil ) towards financing components.
Refer note 2 and 3 for accounting policy and significant judgements, respectively.
The Company's unsatisfied (or partially satisfied) performance obligations which mainly pertain to GSB projects and AMC contracts can vary due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates or other relevant economic factors. The aggregate value of unsatisfied (or partially satisfied) performance obligations is ' 3,966 crores (March 31, 2023: ' 3,950 crores) which is expected to be recognised over a period of one to eight years. Amount of unsatisfied (or partially satisfied) performance obligations does not include contracts with original expected duration of one year or less since the Company has applied the practical expedient in Ind AS 115.
Revenue from sale of services pertains to shipment services provided after transfer of control of the goods to the customers in accordance with the contract.
*This relates to government grants pertaining to indirect tax benefits availed under Industrial Promotion Scheme, Remission of Duties or Taxes on Export Products Scheme and Duty Drawback Scheme.
Defined Contribution Plans:
The Company has a provident fund plan which is a defined contribution plan. Contributions are made to provident fund administered by the Government in India for employees at the rate of 12% of basic salary as per local regulations. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.
33 EMPLOYEE SHARE BASED PAYMENTS
The Company has established employees stock options plan, 2010 ("ESOP Scheme”) for its employees pursuant to the special resolution passed by shareholders at the annual general meeting held on July 14, 2010. The employee stock option plan is designed to provide incentives to the employees of the Company to deliver long-term returns and is an equity settled plan. The ESOP Scheme is administered by the Nomination and Remuneration Committee. Participation in the plan is at the Nomination and Remuneration Committee's discretion and no individual has a contractual right to participate in the ESOP Scheme or to receive any guaranteed benefits. Options granted under ESOP scheme would vest in not less than one year and not more than five years from the date of grant of the options. The Nomination and Remuneration Committee of the Company has approved multiple grants with related vesting conditions. Vesting of the options would be subject to continuous employment with the Company and hence, the options would vest with passage of time. In addition to this, the Nomination and Remuneration Committee may also specify certain performance parameters subject to which the options would vest. Such options would vest when the performance parameters are met.
Once vested, the options remain exercisable for a period of maximum five years. Options granted under the plan are for no consideration and carry no dividend or voting rights. On exercise, each option is convertible into one equity share. The exercise price is ' 2 per option.
The Company has credited ' 5 crores (charged ' 9 crores in March 31, 2023) to the statement of profit and loss in respect of options granted under ESOP scheme.
b) Fair Value of the options granted during the year
During the current year nomination and remuneration committee has approved one grant. Following are the details of assumptions under the grant, related vesting conditions and fair valuation model used based on the nature of vesting.
2. Vesting criteria - 25% Vesting based on share price performance (SPP)
Fair Valuation Method - Monte carlo simulation model
Vesting of these options is dependent on the share price performance (SPP) conditions of FY 2023-24 identified by Nomination and Remuneration Committee. The Monte carlo model requires the following information of the company and comparator group companies:
- the historical share price and expected volatility during the performance period
- Risk free interest rate of the country where stock of comparator group is listed
- Dividend yield based on historical dividend payments
- Estimate of correlation coefficients for each pair of company
3. Vesting criteria - 50% Vesting based on achivement of target EBITDA Fair Valuation Method - Monte carlo simulation model
Vesting of these options is dependent on the achivement of target EBITDA during the performance of FY 2023-24 as per the criteria determined by Nomination and Remuneration Committee. The Monte carlo model requires the following information of the company :
- the historical share price and expected volatility during the performance period
- Risk free interest rate of the company
- Dividend yield based on historical dividend payments
- Estimate of EBITDA as per approved business plan
Options granted to employees under the ESOP Scheme 2010 are considered to be potential equity shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are given in note 33.
35 CODE ON SOCIAL SECURITY, 2020
The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident Fund and Gratuity. The draft rules for the Code on Social Security, 2020 have been released by the Ministry of Labour and Employment on November 13, 2020.
The Company is in the process of assessing the additional impact on Provident Fund contributions and on Gratuity liability contributions and will complete their evaluation and give appropriate impact in the financial statements in the period in which the rules that are notified become effective.
36 CAPITAL AND OTHER COMMITMENTS
a] Estimated amount of contracts remaining to be executed on capital account and not recognised for (net of advances) are ' 28 crores (March 31, 2023: ' 43 crores)
2. The Company had issued Corporate guarantees amounting to ' 114 crores to the Income tax Authorities in FY 2003-04 on behalf of the Group companies. The matter against which corporate guarantee was paid by STL was decided in favour of the Group companies by both ITAT and HC orders against which the Department has filed an appeal with the Supreme Court. The above corporate guarantee is backed by the corporate guarantee issued by Volcan Investments Limited (refer note 47) in the favour of the Company.
# In an earlier year, one of the Bankers of the Company had wrongly paid an amount of ' 19 crores under the letter of credit facility. The letter of credit towards import consignment was not accepted by the Company, owing to discrepancies in the documents. Thereafter, the bank filed claim against the Company in the Debt Recovery Tribunal (DRT). Against the DRT Order dated October 28, 2010, the parties had filed cross appeals before the Debt Recovery Appellate Tribunal. The Debt Recovery Appellate Tribunal vide its Order dated January 28, 2015 has allowed the appeal filed by the Company and has dismissed the appeal filed by the bank. The bank has challenged the said order in Writ petition before the Bombay High Court. The management doesn’t expect the claim to succeed and accordingly no provision for the contingent liability has been recognised in the financial statements.
In the FY21-22, the Company had received show cause notices with respect to 4 Service tax registrations of ?57 crores each demanding service tax on difference between value of services appearing in 26AS (at legal entity level) vis-a-vis respective service tax registrations for the period 2016-17. Out of these 4 show cause notices, 3 cases were heard and got converted in Order, by subsuming 2 orders and dropping the demand of ?5.61 crores and thereby confirming the demand of ?50.72 crores. Management has assessed the said case and it is not required to be disclosed as contingent liability as it is erroneous in nature and the probability of an unfavourable outcome is remote.
3. The Company has not provided for disputed liabilities disclosed above arising from disallowances made in assessments which are pending with different appellate authorities for its decision. The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be upheld in the appellate process. No liability has been accrued in the financial statements for the demands raised. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s financial position. In respect of the claims against the company not acknowledged as debts as above, the management does not expect these claims to succeed. It is not practicable to indicate the uncertainties which may affect the future outcome and estimate the financial effect of the above liabilities.
4. The Company has certain on-going litigations by/or against the Company with respect to tax and
other legal matters, other than those disclosed above. The Company believes that it has sufficient and strong arguments on facts as well as on point of law and accordingly no provision/disclosure in this regard has been considered in the financial statements.
43 CORPORATE SOCIAL RESPONSIBILITY
The Company has spent an amount of ' 6 crores (March 31, 2023: ' 8 crs) during the year as required under section 135 of the Companies Act, 2013 for the areas of education, healthcare, woman empowerment and environment. The amount was spent by way of contribution to Sterlite Tech Foundation of ' 6 crores (refer note 47).
44 FINANCIAL RISK MANAGEMENT
The Company's principal financial liabilities, comprise borrowings, trade and other payables 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 Investments, loans, trade and other receivables, cash and shortterm deposits and other financial assets that arise directly from its operations. The Company also enters into derivative transactions.
The Company's activities expose it to market risk, credit risk and liquidity risk. The Company's senior management oversees the activities to manage these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company's policy that no trading in derivatives for speculative purposes should be undertaken.
The Risk Management policies of the Company are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are approved and reviewed regularly by the Board to reflect changes in market conditions and the Company's activities.
Management has overall responsibility for the establishment and oversight of the Company's risk management framework. The risks to which Company is exposed and related risk management policies are summarised below -
(a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk mainly includes loans given and borrowings, financial assets and liabilities in foreign currency, investments in quoted instruments and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at March 31, 2024 and March 31, 2023.
The sensitivity analysis have been prepared on the basis that the amount of debt, the ratio of fixed to floating interest rates of the debt, derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2024 and March 31, 2023.
Interest rate risk
Interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in interest rates. The Company's exposure to the risk of changes in interest rate primarily relates to the Company's debt obligations with floating interest rates.
The Company is exposed to the interest rate fluctuation in domestic as well as foreign currency borrowing. The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate borrowings. At March 31, 2024, approximately 92% of the Company's borrowings are at a fixed rate of interest (March 31, 2023: 88%).
Foreign currency risk
The company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD, EURO and GBP. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company's functional currency (?). The risk is measured through a forecast of highly probable foreign currency cash flows. The objective of the hedges is to minimise the volatility of the ' cash flows of highly probable forecast transactions.
The Company has a policy to keep minimum forex exposure on the books that are likely to occur within a 15-month period for hedges of forecasted sales and purchases. As per the risk management policy, foreign exchange forward contracts are taken to hedge its exposure in the foreign currency risk. During the year ended March 31, 2024 and 2023, the company did not have any hedging instruments with terms which were not aligned with those of the hedged items.
When a derivative is entered into for the purpose of hedge, the Company negotiates the terms of those derivatives to match the terms of the underlying exposure. For hedges of forecast transactions the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.
Out of total foreign currency exposure the Company has hedged the significant exposure as at March 31, 2024 and as at March 31, 2023.
The Company exposure to foreign currency risk at the end of the year expressed in ' are as follows
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in USD, EUR and GBP exchange rates, with all other variables held constant. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets and liabilities. The impact on the Company's pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges. The Company's exposure to foreign currency changes for all other currencies is not material. With all the other variable held constant, the Company's profit before tax is affected through the impact on change of foreign currency rate as follows-
Commodity price risk
The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase and manufacture of copper cables and therefore require a continuous supply of copper. To meet requirements the company enters into contracts to purchase copper. The prices in these purchase contracts are linked to the price on London Metal Exchange.
The Company has a risk management strategy to mitigate commodity price risk.
Based on a 1 month forecast of the required copper supply, the Company hedges the purchase price using future commodity purchase contracts. The forecast is deemed to be highly probable.
Commodity price sensitivity
As per the Company's policy for commodity price hedging, all the commodity price exposures as on reporting dates are fully hedged. Thus, there are no open unhedged exposures on the reporting dates.
Price risk
The Company has investments mainly in wholly owned subsidiaries.These investment are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company's senior management on a regular basis. The Company's Board of Directors review and approve all equity investment decisions.
The Company also invests into highly liquid mutual funds which are subject to price risk changes. These investments are generally for short duration and therefore impact of price changes is generally not significant. Investment in these funds are made as a part of treasury management activities.
(b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its investing activities, including deposits with banks, foreign exchange transactions and other financial instruments.
Trade receivables and Contract assets
Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed taking into account its financial position, past experience and other factors, eg. credit rating and individual credit limits are defined in accordance with credit assessment. Outstanding customer receivables are regularly monitored.
The Company provides for expected credit loss of trade receivables and contract assets based on life-time expected credit losses (simplified approach). The Company assesses the expected credit loss for Global Services Business (GSB) individually for each customer. The expected credit losses for other businesses is assessed using a provision matrix as per the practical expedient prescribed under Ind AS 109.
A major portion of the GSB trade receivables and contract assets consists of government customers. The credit default risk on receivables and contract assets with government customers is considered to be remote. Disputes, if any, are assessed for indicators of increase in credit risk and, the Company considers the expected date of billing and collection, interpretation of contractual terms, project status, past history, latest discussion/ correspondence with the customers and legal opinions, wherever applicable in assessing the recoverability. The average project execution cycle in GSB ranges from 12 to 36 months based on the nature of contract and scope of services to be provided. General payment terms include mobilisation advance, progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases retentions are substituted with bank/corporate guarantees.
For other businesses, a provision matrix is used to measure the lifetime expected credit losses as per the practical expedient prescribed under Ind AS 109. The trade receivables and contract assets for other businesses are mainly related to contracts for sale of goods and time and material contracts.
An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of smaller receivable balance are grouped into homogenous groups and assessed for impairment collectively using a provision matrix. The assessment is based on historical information of defaults. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.
The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets. During the period, the company made write-offs of Nil (March 31, 2023: Nil) trade receivables and it does not expect to receive future cash flows or recoveries from collection of cash flows previously written off. The contract assets have substantially the same risk characteristics as trade receivables for same type of contract etc. Therefore management has concluded that the expected loss for trade recievables are at reasonable approximation for loss rates for contract assets.
Reconciliation of loss allowance provision of inter company loans and financial guarantee:
The Company has given interest bearing loans to its subsidiaries which are repayable on demand. Further, certain external loans taken by the subsidiaries are guaranteed by the Company. The loans and financial guarantees given to subsidiaries are reviewed and assessed for impairment at each reporting date under Ind AS 109. The inter-company loans have been provided to the subsidiaries for operational purposes and with an expectation of an extended gestation period. The Company intends to allow the subsidiaries to continue trading and thus reviews the cash flow forecasts to confirm whether the projections are in line with the initial expectations and whether the credit risk has increased significantly since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. The Company uses a weighted average probability based default rate model to determine the expected credit loss. The gross carrying amount of loans for which credit risk has not increased significantly since initial recognition is ' 577 crores (March 31, 2023 :'
426 crores). The gross carrying amount of loans for which credit risk has increased significantly since initial recognition and are credit-impaired is ' 36 crores (March 31, 2023 :' 32 crores)
Financial assets and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company's treasury department in accordance with the Company's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty's potential failure to make payments. The credit default risk on balances with banks and financial institutions is considered to be negligible.
The Company's maximum exposure to credit risk for the components of the balance sheet at March 31, 2024 and March 31, 2023 is the carrying amounts of each class of financial assets.
(c) Liquidity risk
Liquidity risk is the risk that the Company may encounter difficulty in meeting its present and future obligations associated with financial liabilities that are required to be settled by delivering cash or another financial asset. The Company's objective is to, at all times, maintain optimum levels of liquidity to meet its cash and collateral obligations. The Company requires funds both for short term operational needs
as well as for long term investment programs mainly in growth projects. The Company closely monitors its liquidity position and deploys a robust cash management system. It aims to minimise these risks by generating sufficient cash flows from its current operations, which in addition to the available cash and cash equivalents, liquid investments and sufficient committed fund facilities which will provide liquidity.
The liquidity risk is managed on the basis of expected maturity dates of the financial liabilities. The average credit period for trade payables is about 60 - 180 days. The other payables are with short term durations. The carrying amounts are assumed to be reasonable approximation of fair value. The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments:
Cash flow hedges
Foreign exchange forward contracts are designated as hedging instruments in cash flow hedges of highly probable forecast transactions/firm commitments for sales and purchases mainly in USD, EUR and GBP.
The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates.
The cash flow hedges for such derivative contracts as at March 31, 2024 were assessed to be highly effective and a net unrealised gain of ' 12 crores, with a deferred tax liability of ' 3 crores relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges as at March 31, 2023 were assessed to be highly effective and an unrealised loss of ' 33 crores, with a deferred tax asset of ' 9 crores was included in OCI in respect of these contracts. The amounts retained in OCI at March 31, 2024 are expected to mature and affect the statement of profit and loss during the year ended 31 March 2025.
The Company's hedging policy requires for effective hedge relationships to be 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 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.
Ineffectiveness is recognised on a cash flow hedge where the cumulative change in the designated component value of the hedging instrument exceeds on an absolute basis the change in value of the hedged item attributable to the hedged risk. In hedges of foreign currency forecast sale may arise if:
- the critical terms of the hedging instrument and the hedged item differ (i.e. nominal amounts, timing of the forecast transaction, interest resets changes from what was originally estimated), or
- differences arise between the credit risk inherent within the hedged item and the hedging instrument.
Refer note 17 for the details related to movement in cash flow hedging reserve.
45 CAPITAL MANAGEMENT
For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the shareholders of the Company. The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating, healthy capital ratios in order to support its business and maximise shareholder value and optimal capital structure to reduce cost of capital.
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company's policy is to keep the gearing ratio optimum. The Company includes within net debt interest bearing loans and borrowings less cash and cash equivalents excluding discontinued operations.
The recent investments by the Company in new businesses, increasing the capacity of existing businesses and increase in working capital due to certain projects has lead to increase in capital requirement. The Company expects to realise the benefits of these investments in near future.
* includes other bank balance of ' 50 crores (March 31, 2023 : ' 50 crores) with respect to fixed deposit excluding deposits held as lien by banks against bank guarantees. These fixed deposits can be encashed by the Company at any time without any major penalties.
In order to achieve this overall objective, the Company's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year and previous year.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2024 and March 31, 2023.
Dividend Distribution made and proposed
As a part of Company's capital management policy, dividend distribution is also considered as key element and management ensures that dividend distribution is in accordance with defined policy. Below mentioned are details of dividend distributed and proposed during the year.
46 FAIR VALUES
a) Financial Instruments by Category
Set out below, is a comparison by class of the carrying amounts and fair value of the Company's financial instruments, other than those with carrying amounts that are reasonable approximations of fair values as of the year end:
b) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value. 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 Ind AS. An explanation of each level follows underneath the table.
Level 1 : The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The mutual funds are valued using the closing NAV. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
There have been no transfers among Level 1, Level 2 and Level 3.
c) Valuation technique used to determine fair value
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
The fair value of mutual funds are based on NAV at the reporting date.
The Company enters into derivative financial instruments with financial institutions with investment grade credit ratings. The foreign currency forwards - the present value of the future cash flows based on the forward exchange rates at the balance sheet date.
d) Valuation processes
The finance department of the Company includes a team that oversees the valuations of financial assets and liabilities required for financial reporting purposes, including level 3 fair values.
External valuers are involved for valuation of significant assets, such as unquoted financials assets. Involvement of external valuers is decided by the valuation team. Selection criteria includes market knowledge, reputation, independence and whether professional standards are maintained. The Valuation team decides, after discussions with the company's external valuers, which valuation techniques and inputs to use for each case.
The management assessed that cash and cash equivalents, trade receivables, trade payables, other current assets and liabilities approximate their carrying amounts largely due to the shortterm maturities of these instruments.Further the loans given are loans repayable on demand. The management has further assessed that borrowings availed and loans given approximate their carrying amounts largely due to the interest rates being variable or in case of fixed rate borrowings/loans, movements in interest rates from the recognition of such financial instrument till period end not being material.
Ultimate Controling Party
Sterlite Technologies Limited is a majority-owned and controlled subsidiary of Twin Star Overseas Limited (Twin Star). Volcan Investments Limited ('Volcan') holds 100 % of the share capital and 100 % of the voting rights of Twin Star. Volcan is 100 % beneficially owned and controlled by the Anil Agarwal Discretionary Trust ('Trust'). Mr. Anil Agarwal is the protector and the one of the beneficiaries of the Trust. Twin Star Overseas Limited, Volcan Investments Limited, and Anil Agarwal Discretionary Trust do not produce Group financial statements.
(E) Terms and Conditions
a) Transactions relating to dividends for equity shares were on the same terms and conditions that applied to other shareholders.
b) All outstanding balances are unsecured and repayable in cash
c) The transactions with the related parties disclosed above are net of goods and services tax (as applicable).
d) The outstanding balances of related parties disclosed above are gross of goods and services tax (as applicable).
e) The outstanding balances receivable for Loans/advance receivables and Investment in equity shares, preference shares & debentures from related parties are net of impairment loss.
##Includes interest & expenses incurred and recoverable.
" Refer note 37 for details
* Share-based payments include the perquisite value of stock incentives excercised during the year,determined in accordance with the provisions of the Income-tax Act,1961.
$ The Company has paid / provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act except for managerial remuneration aggregating to ' 14 crores. The Company will seek necessary approval in the ensuing Annual General Meeting.
The Company has borrowings from banks on the basis of security of current assets. The quarterly returns of statements of current assets filed by the Company with banks are in agreement with the books of accounts, except for the following statements in the table below:-
49 SEGMENT REPORTING
The Company has presented segment information in the Consolidated Financial Statements which are part of in the same annual report. Accordingly, in terms of provisions of Ind AS 108 'Operating Segments', no disclosures related to segments are presented in these Standalone Financial Statements.
50 DEMERGER
The Board of Directors of the Company at its meeting held on May 17, 2023 has considered and approved, subject to necessary approvals, a Scheme of Arrangement ("Scheme”) between Sterlite Technologies Limited (the "Demerged Company” or "Company”) and STL Networks Limited (the "Resulting Company”) and their respective shareholders and creditors, under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 and the rules made thereunder.
The Scheme, inter alia, provides for the following:
(a) Transfer by way of demerger of the Demerged Undertaking (as defined in the Scheme) consisting of Global Services Business (as defined in the Scheme) of the Demerged Company to the Resulting Company and consequent issuance of equity shares by the Resulting Company to the shareholders of the Demerged Company; and
(b) Various other matters consequential or otherwise integrally connected therewith including the reorganisation of the share capital of the Resulting Company.
The equity shares of the Resulting Company are to be listed on BSE Limited and National Stock Exchange of India Limited (collectively, the "Stock Exchanges”), post the effectiveness of the Scheme. The shareholders of the Company will be issued shares in the Resulting Company in the same proportion as their holding in the Company. The Scheme is subject to necessary statutory and regulatory approvals, including the approval of Hon'ble National Company Law Tribunal, Mumbai Bench.
The Hon'ble National Company Law Tribunal, Mumbai Bench has passed an order dated April 17, 2024 and directed the Company to convene meeting of Stakeholders.
51 ADVANCES UNDER ADVANCE PAYMENT AND SALES AGREEMENT (APSA)
During the year ended March 31, 2024, the Company has received an interest-bearing advance of ' 207 crores under an Advance Payment and Sales Agreement (APSA). The advance received is recongnized as a current financial liability in accordance with the terms of the agreement and requirements of Ind AS 109 (Financial Instruments).
52 ROUNDING OFF
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crores as per the requirement of Schedule III, unless otherwise stated. Amounts below rounding off norm followed by the Company are disclosed as "0”.
53 PREVIOUS YEAR FIGURES
Previous year figures have been reclassified to conform to this year's classification.
|