PROVISIONS AND CONTINGENT LIABILITIES
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. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of the time value of money is material, provisions are discounted to reflect their present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
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 the obligation or a reliable estimate of the amount cannot be made.
REVENUE RECOGNITION
Revenue from sale of goods is recognised when control over goods is transferred to a customer as per the terms of the contract.
This is usually evidenced by a transfer of all the significant risks and rewards of ownership upon delivery of goods to the customer, which in terms of timing is not materially different to the date of shipping. Revenue is measured at the contracted (transaction) price received or receivable (includes Excise Duties and National Calamity Contingent
Duty which are payable on manufacture of goods) after deduction of any trade discount, incentive and other similar discounts and any taxes or duties collected on behalf of the Government which are levied on sales such as Goods and Service tax, etc.
Income from export incentives such as duty drawback is recognised on accrual basis.
Other Income
I nterest income is recognised using the effective interest rate (EIR) method.
Dividend income on investments is recognised when the right to receive dividend is established.
EXPENDITURE
Expenses are accounted on accrual basis.
EMPLOYEE BENEFITS Defined Contribution Plans
Contributions to defined contribution schemes such as employees' state insurance, labour welfare fund, superannuation scheme, employee pension scheme etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. Provident fund contribution in respect of certain employees, who are members of constituted and approved trusts, the Company recognises contribution payable to such trusts as an expense including any shortfall in interest between the amount of interest realised from the investment and the interest payable to members at the rate declared by the Government of India. In respect of other employees, provident funds are deposited with the government administered fund and charged as an expense to the Statement of Profit and Loss.
The Company makes contribution to defined contribution pension plan. The contribution payable is recognised as an expense, when an employee renders the related service.
Defined Benefit Plans
The Company also makes contribution to defined benefit pension and gratuity plan. The cost of providing benefits under the defined benefit obligation is calculated by independent actuary using the projected unit credit method. Service
costs and net interest expense or income is reflected in the Statement of Profit and Loss. Gain or loss on account of remeasurements are recognised immediately through other comprehensive income in the period in which they occur.
Other Long-Term Employee Benefits
The employees of the Company are entitled to compensated leave for which the Company records the liability based on actuarial valuation computed using projected unit credit method. These benefits are funded.
Termination Benefits
Termination benefits, in the nature of voluntary retirement benefits or termination benefits arising from restructuring, are recognised in the Statement of Profit and Loss. The Company recognises termination benefits at the earlier of the following dates:
(a) when the Company can no longer withdraw the offer of those benefits; or
(b) when the Company recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits.
Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
Share-based Payments
Employees of the Company receive remuneration in the form of share-based payments in consideration for the services rendered.
For equity-settled share-based payment, fair value of the option/equity instruments at the grant date is determined by an independent valuer using Black Scholes Model and this is recognised in the Statement of Profit and Loss as 'Employee benefit expense' on a systematic basis over the vesting period of the option, based on the Company's estimate of option/equity instruments that will eventually vest with corresponding increase in Other Equity.
For cash-settled share-based payments, the fair value of the amount payable to employees is recognised as employee benefits expense with a corresponding increase in liabilities, over the vesting period. The liability is remeasured at each reporting period date including up to the settlement date, with changes in fair value recognised in employee benefits expense.
In case of forfeiture/lapse of stock options, which are not vested, amortised portion is reversed by credit to employee benefit expense.
Treasury Shares
The Company has created an Employee Benefit Trust (EBT) for providing share-based payment to its employees. The Company uses EBT as a vehicle for purchasing shares from the market and distributing them to employees under the Employee Stock Option Scheme. The Company treats EBT as its extension and the shares held by EBT are treated as treasury shares.
Own equity instruments that are re-acquired (treasury shares) are recognised at cost and deducted from Other Equity. No gain or loss is recognised in Statement of Profit and Loss on purchase, sale, issue or cancellation of the Company's own equity instruments. Any difference between carrying amount and the consideration, if reissued or sold, is recognised in 'capital reserve'. Share options exercised during the reporting period are settled with treasury shares.
INCOME TAXES
Income tax expense for the year comprises of current tax and deferred tax. It is recognised in the Statement of Profit and Loss except to the extent it relates to a business combination or to an item which is recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable/ recoverable on the taxable income/loss for the year using applicable tax rates as at the Balance Sheet date, and any adjustment to taxes in respect of previous years. Interest income/expenses and penalties, if any, related to income tax are included in current tax expense.
Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
A deferred tax assets/liability is recognised based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantively enacted, by the end of the reporting period. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable the related tax benefit will be realised.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxing authority.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net profit for the period attributable to the equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity 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 for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity Shares.
DIVIDEND DISTRIBUTION
Dividend paid (including income tax thereon, if any) is recognised in the period in which the interim dividends are approved by the Board of Directors and in respect of final dividend when approved by shareholders.
LEASES
Leases which are short-term that have a lease term of 12 months and low value leases in which a substantial portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments and receipts under such leases are recognised to the Statement of Profit and Loss on a straight-line basis over the term of the lease unless the lease payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor's expected inflationary cost increases, in which case the same are recognised as an expense in line with the contractual term.
RECENT AMENDMENTS
Ministry of Corporate Affairs ('MCA') notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31st March, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
25. CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES
(a) Contingent Liabilities
(i) Claims against the Company not acknowledged as debts ' 628.20 Lakhs (2023 - ' 647.03 Lakhs) These Comprise -Excise duty, service tax and customs duty matters ' 123.95 Lakhs (2023 - ' 142.78 Lakhs)
Other matters including employees/ex-employees, etc.' 504.25 Lakhs (2023 - ' 504.25 Lakhs).
(ii) I n addition to the above, the Company is subject to certain other litigations, in the ordinary course of business and the
industry in which it operates in, which are pending.
(iii) It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash outflows and estimate of financial effect, if any, in respect of the above as its determinable only on occurrence of uncertain future events/receipt of judgements pending at various forums.
(b) Commitments
Estimated amount of contracts remaining to be executed on Capital Account, net of advances (not provided for) - ' 1915.18 Lakhs (2023 - ' 9480.70 Lakhs).
(c) Disclosure under Section 186(4) of the Companies Act, 2013
Details of Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013, as applicable are provided in Notes 3, 4 and 9.
26. FUTURE LEASE OBLIGATIONS
The Company has entered into various short-term and low value operating lease agreements and the amounts paid under such agreements have been charged to revenue as Rent under Note 23. All these agreements are cancellable in nature.
27. SEGMENT REPORTING
The Chief Operating Decision-Maker (CODM) has been identified as Management Committee which evaluates the Company's performance and allocates resources at an overall level considering the business and industry it operates in. Accordingly, the Company's business activity primarily falls within a single operating segment viz. Tobacco and related products. Therefore, the disclosures as per Ind AS 108 - 'Operating Segments' is not applicable.
Geographical segments considered for disclosure mainly consists of sales within India and sales outside India, information in respect thereof is as under:
A CAPITAL MANAGEMENT
The Company's financial strategy aims to provide adequate capital to its business for growth on a going concern basis thereby creating sustainable stakeholder value. The Company funds its operations mainly through internal accruals.
B CATEGORIES OF FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT AND FAIR VALUE HIERARCHY
The fair value of the financial assets and liabilities is defined as the price 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. Methods and assumptions used to estimate the fair value are consistent with those used for the earlier period.
Financial assets and liabilities are measured at fair value as at Balance Sheet date as under:
i) The fair value of investment in government securities and quoted investment in equity shares are based on the current bid price of respective investments as at the Balance Sheet date.
ii) The fair value of investments in mutual fund units is based on the net asset value ('NAV') as stated by the issuers of these mutual fund units in their published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund as well as the price at which issuers will redeem such units for the investors.
iii) The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs such as foreign exchange spot rates and forward rates as at end of reporting period, interest yield curves, volatility, etc., as applicable.
iv) Cash and cash equivalents (except for investments in units of mutual fund), other bank balances, trade receivables, trade payables and other current financial assets and liabilities (except derivative financial instruments), have fair value that approximates to their carrying amount due to their short-term nature.
Fair value of the financial instruments have been classified into various fair value hierarchies respective three levels as under: Level 1 - Quoted prices for identical assets or liabilities in an active market.
Level 2 - Directly or indirectly observable market inputs, other than Level 1 inputs; and
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing model based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of the counterparty.
The following table shows the carrying amount and fair value of financial assets and liabilities, including their levels in the fair value hierarchy:
C FINANCIAL RISK MANAGEMENT OBJECTIVES
The Company's risk management framework anchored in its policies and procedures and internal financial controls aim to ensure that the Company's business activities that are exposed to a variety of financial risks namely liquidity risk, market risks, credit risk and foreign currency risk are identified at an early stage and managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company's approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring any unacceptable losses. In doing this, Management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2024 and 31st March, 2023.
On the reporting date, the Company's Current assets (excluding Asset held for sale) aggregate to ' 83947.44 Lakhs (2023 - ' 83196.76 Lakhs) including Current investments, Cash and cash equivalents and Other bank balances of ' 28217.26 Lakhs (2023 - ' 39537.53 Lakhs) against an aggregate Non-Current liabilities of ' 2164.24 Lakhs (2023 - ' 2153.10 Lakhs) and Current liabilities of ' 44603.33 Lakhs (2023 - ' 45242.61 Lakhs) and also there are no difference in value as per contracts and its carrying value as at the Balance Sheet date and are due within a year. Further, the Company's total equity stood at ' 125241.37 Lakhs (2023 - ' 117969.78 Lakhs). Accordingly, liquidity risk or the risk that the Company may not be able to settle its dues as they become due does not exist. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
The Company does not trade in equity instruments; it continues to hold certain investments in equity for long-term value accretion which are measured at fair value through Other Comprehensive Income. The value of investment in such equity instruments as at 31st March, 2024 is ' 291.93 Lakhs (2023 - ' 292.75 Lakhs).
The Company's investments are predominantly held in fixed deposits and debt schemes of mutual funds. The decision-making is centralised and administered under a set of approved policies and procedures guided by the principles of safety, liquidity and returns. This ensures that investments are only made within acceptable risk parameters after due evaluation.
Fixed deposits are held with highly rated banks and companies and have a short to medium tenure and accordingly, are not subject to interest rate volatility. Investment in debt schemes of mutual funds are susceptible to market price risk that arise mainly from change in interest rate from time to time which may impact the return and value of such investments. However, given the relatively short tenure of the underlying portfolio of such mutual fund schemes in which the Company has invested, such price risk is not significant. Investment in Government Securities are primarily fixed rate interest bearing investments. Hence, the Company is not significantly exposed to interest rate risk.
As the Company is debt-free and its liabilities do not carry interest, the exposure to interest rate risk from the perspective of Financial Liabilities is negligible.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Company's customer base is large and diverse and credit is extended in business interest in accordance with well laid out guidelines issued centrally. Exceptions, if any, are approved by appropriate authority after due consideration of the customers credentials and financial capacity, trade practices and prevailing business and economic conditions. Our historic experience of collecting receivables is high and accordingly, the credit risk is low. Hence, all trade receivables together are considered to be a single class of financial assets. The value of Trade Receivables as at 31st March, 2024 is ' 4639.52 Lakhs (2023 - ' 4317.80 Lakhs)
Further, the Company maintains exposure in cash and cash equivalents, term deposits with banks, government securities, debt schemes of mutual funds and derivative instruments with financial institution. The Company has set counter-parties limits based on multiple factors including credentials, financial capacity, credit rating, etc. The Company's credit period generally ranges from 0-180 days. The Company's maximum exposure to credit risk as at 31st March, 2024 and 31st March, 2023 is the carrying value of each class of financial assets.
Foreign Currency Risk
The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Euro and Pound Sterling) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency, arising out of such transactions, are also subject to reinstatement risk.
The Company has an established risk management policy to hedge the volatility arising from exchange rate fluctuation in respect of firm commitments and highly probable forecast transactions, through foreign exchange forward contracts. The proportion of forecast transactions that are to be hedged is decided based on the size of the forecasted transaction and market conditions. As the counterparty for such transactions are Scheduled banks, the risk of their non-performance is considered to be insignificant. The use of these foreign exchange forward contracts are intended to reduce the risk or cost to the Company and are not intended for trading or speculation purpose.
(i) The Company, to the extent possible, has considered the risks that may result from the uncertainties and its impact on the carrying amounts of trade receivables, investments, financial instruments and effectiveness of its hedges. Based on the Company's analysis of the current indicators of the future economic condition on its business and the estimates used in its financial statements, the Company does not foresee any material impact in the recoverability of the carrying value of the assets. The risk assessment is a continuous process and the Company will continue to monitor the impact of the changes in future economic conditions on its business.
(ii) Code on Social Security 2020 - Update
The Indian parliament has passed and approved the Code on Social Security 2020, however, the effective date of the code and complete clarity on the rules/interpretations are still awaited. The Company will evaluate the subject rules once they are notified and recognise the consequent impact, if any, in its financial statements in the period in which, the Code becomes effective.
(iii) Satisfaction of Charges
The Company has no outstanding borrowing amount since year 2005 and accordingly appropriate form for satisfaction of charges was filed on time before Registrar of Companies, Hyderabad and the Company has been continuously pursuing with the authorities to reflect the same on their website.
30. EMPLOYEE BENEFIT PLANS
Employee Retirement Benefit Plans of the Company include Provident fund, Retirement Allowances, Gratuity, Pension and Leave Encashment. These plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines within the applicable statutory framework, for allocation of assets to different classes with the objective of maintaining the right balance between risks and long-term returns. Further, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
Description of Plans (i) Provident Fund
Eligible employees of the Company receive benefits under the Provident Fund which are defined contribution/benefit plans wherein both the Company and the employees make monthly contributions equal to a specified percentage of the covered employees' salary. These contributions are made to the Funds administered and managed by the Govt. of India/Company's own Trust. The Company's own trust plan envisages guarantee of interest at the rate notified by the Provident Fund authority. The Company's contributions along with interest shortfall, if any, are charged to revenue in the year they are incurred. Expenditure for the year amounted to ' 356.74 Lakhs ( 2023 - ' 338.00 Lakhs).
(ii) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme for its employees in the workmen category. Liability with regard to such scheme is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and charged to revenue in the period determined - ' 386.87 Lakhs; (2023-' 336.8 Lakhs). Consequently, Liability recognised in the Balance sheet as at 31st March, 2024'2471.53 Lakhs; (2023-' 2363.92 Lakhs) including ' 318.22 Lakhs (2023 - ' 221.18 Lakhs) payable within 12 months shown under 'Accrued Payroll'.
(iii) Gratuity
In accordance with 'the Payment of Gratuity Act, 1972' of India, the Company provides for gratuity, a defined retirement benefit plan ( the 'Gratuity Plan') covering eligible employees. Liabilities with regard to such Gratuity Plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. The Gratuity Plan is a funded Plan administered by Company's own Trust which has subscribed to " Group Gratuity Scheme" of Life Insurance Corporation of India.
(iv) Pension Fund
The Company has a defined contribution pension scheme to provide pension to the eligible employees . The Company makes monthly contributions equal to a specified percentage of the covered employees' salary to a notified pension scheme under National Pension Scheme of the Government of India. The Company's contributions are charged to revenue in the period they are incurred -' 113.26 Lakhs ( 2023 -' 117.87 Lakhs).
In addition to the above, the Company has a funded defined benefit pension scheme for its employees in the workmen category. Liability with regard to such defined benefit plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. This plan is administered by the Company's own Trust which has subscribed to "Group Pension Scheme " of Life Insurance Corporation of India.
(v) Leave Encashment
The Company has a leave encashment scheme whereunder, leaves are both accumulating and nonaccumulating in nature. The expected cost of accumulating leaves expected to be paid/availed as a result of the unused entitlement that has accumulated as at the balance sheet date is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. The Scheme is fully funded by way of subscription to the "Leave Encashment' of Life Insurance Corporation of India.
Compensation, if any, for non-accumulating leaves is charged to revenue in the period in which the absences occurs.
G Investment details of the Plan Assets
In the absence of detailed information regarding plan assets which are funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount of each category to the fair value of plan assets is not disclosed.
H Basis used to determine the Expected Rate of Return on Plan Assets
The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.
I Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation and the asset value changes may offset the impact to some extent. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
This is the Statement of Cash Flows referred to in our report of even date.
For B S R & Associates LLP On behalf of the Board,
Firm Registration No.: 116231W/W - 100024 NARESH KUMAR SETHI Chairman
Chartered Accountants DIN: 08296486
ADITYA DEB GOOPTU Managing Director
DIN: 07849104
ARPAN JAIN ANISH GUPTA Chief Financial Officer
Partner
PHANI K. MANGIPUDI Company Secretary
Membership No.: 125710
Hyderabad, 26th April, 2024 Hyderabad, 26th April, 2024
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