The fair value of apartments included in investment property is H1,553.44 lakhs (31 March 2022: Nil) as against the cost amounting to H1,282.36 lakhs, and the same has been determined by an external independent registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. The fair value measurement for investment property has been categorised as Level 2 fair value based on the inputs to the valuation technique used. The valuation techniques used for determining the fair value of the property was based on the prevailing market price of similar property in the same locality. The above investment property includes an asset that has been sub-leased and rental income of H2.36 lakhs (31 March 2022: Nil) has been recognised in the Statement of Profit and Loss (rental income - Refer Note 24).
Fair value hierarchy disclosures for investment properties have been provided in Note 41(b).
The Company has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance and enhancements.
(C) Evaluation of indicators for impairment of investment
The evaluation of applicability of indicators of impairment of investment requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the investment. In assessing impairment, management estimates the recoverable amount of the investment or cash generating units based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate.
(b) Terms and rights attached to equity shares
The Company has only one class of equity shares having a par value of H10 per share. Each equity share is entitled to one vote per share. The dividend, if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting and shall be payable in Indian rupees. In the event of liquidation of the Company, the shareholders 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.
(c) During the year ended 31 March 2019, the Company had issued 9,000,000 fully paid equity shares of face value H10 each pursuant to a bonus issue approved by the shareholders through e-voting and physical ballot. The bonus shares were issued by capitalization of profits transferred from its reserves. In the period of five years immediately preceding the Balance Sheet date, the Company has not bought back any shares.
(d) The Board of Directors, in its meeting held on 29 May 2023, proposed a final dividend of H0.80 per equity share. The proposal is subject to the approval of shareholders at the upcoming Annual General Meeting and if approved would result in a cash outflow of H96.
General reserve:
General reserve represents appropriation of profits.
Retained earnings:
All the profits made or losses incurred by the Company are transferred to Retained earnings from the Statement of Profit and Loss. Capital Reserve
Capital Reserve has been created on account of merger of Yuflow Engineering Private Limited in the current year (Refer Note 48).
Details of security given State Bank of India (SBI)
(i) Primary security : Hypothecation on stocks, receivables and other current assets- paripassu charge with HDFC Bank Limited
(ii) Collateral security details:
(a) Equitable mortgage on freehold rights on land and building- Doddanekundi industrial area, Mahadevapura, Bengaluru.
(b) Equitable mortgage of freehold rights on factory land and building located in Peenya, Bengaluru.
(c) Hypothecation of unencumbered fixed assets of the Company HDFC Bank Limited
(i) First pari pasu charge on stocks, book debts and other current assets with SBI Bank
(ii) First charge by way of extension of mortgage of factory land and building located in Hedegabanahalli Village, Malur.
(iii) Exclusive charge by way of equitable mortgage on land and building located in Koppathimmanahalli Village, Malur.
(iv) First charge on all movable fixed assets of the company - first paripassu charge with SBI Bank Sumitomo Mitsui Banking Corporation (SMBC)
(i) Corporate Guarantee given by Yuken Kogyo Co Limited amounting to H5,000.
Mizuho Bank Limited
(i) Corporate Guarantee given by Yuken Kogyo Co Limited amounting to H3,000.
Note:
The Company has filed quarterly statements of inventory and trade receivables with banks from whom borrowings have been obtained by pledging these assets. The Company has carried out a reconciliation between these statements filed with the books of account which did not result in any material discrepancy.
Sale of Company's share of residential units:
During the year, the Company fulfilled its performance obligation with respect to the sale of certain Company's share of residential units by registering the said units in the name of the unit owner due to which the control over these units were transferred to the unit owner. Accordingly the Company recorded the revenue from sale of such units in accordance with Ind AS 115. All the flats have been registered during the year and a gain to the extent of H238.57 has been recognized.
Others
The Hon'ble Supreme Court of India had passed a judgement relating to definition of wages under the Provident Fund Act, 1952 on 28 February 2019. However, considering that there are numerous interpretative issues related to the judgement and in the absence of reliable measurement of the provision for the earlier period, the Company had made provision for provident fund contribution from the date of order. The Company will evaluate its position and update provision, if required, after receiving further clarity in this regard.
Note 36: Dues to micro, small and medium enterprises
The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the 'Micro, Small and Medium Enterprises Development Act, 2006' ('the Act'). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2023 has been made in the financial statement based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the Balance Sheet date.
Note 38: Capital management
For the purpose of the Company's capital management, capital includes issued capital, additional paid in capital and all other equity reserves attributable to the equity shareholders of the Entity having significant influence. The primary objective of the Company's capital management is to maximise the shareholder value.
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 borrowings in the current period.
The Company manages its capital structure and makes adjustments 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 includes within net debt, interest bearing loans and borrowings, trade payables, less cash.
Note 40: Defined benefit obligations
The Company has provided for the gratuity liability and leave encashment (defined benefit plan), as per actuarial valuation carried out by an independent actuary on the Balance Sheet date.
A Defined benefit contributions
The Company makes contributions to statutory provident fund as per the Employees Provident Fund and Miscellaneous Provision Act, 1952 and superannuation fund which are defined contribution plans as per Ind AS 19, Employee benefits. The Company recognised H229.61 (31 March 2022: H193.38) for provident fund contributions and H48.70 (31 March 2022: H42.07) for superannuation fund contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
B Defined benefit plans
The Company has provided for gratuity and leave encashment liability, for its employees as per actuarial valuation carried out by an independent actuary on the balance sheet date. The valuation has been carried out using the Projected Unit Credit Method as per Ind AS 19 to determine the present value of defined benefit obligations and the related current service cost. This is a defined benefit plan as per Ind AS 19.
The gratuity plan is governed by the provisions of the Payment of Gratuity Act, 1972 (as amended from time to time). Employees are entitled to all the benefits enlisted under this act.
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary overtime. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:
a Interest rate risk
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability as shown in financial statements.
b Liquidity risk
This is the risk that the Company is not able to meet the short-term gratuity payouts. This may arise due to non availability of enough cash/ cash equivalents to meet the liabilities or holding of illiquid assets not being sold in time.
c Salary escalation risk
The present value of the defined benefit plan is calculated with the assumption of salary increase rate of employees in future. Deviation in the rate of interest in future for employees from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.
d Demographic risk
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
e Regulatory risk
Gratuity benefits are paid in accordance with the requirements of the Payment of Gratuity Act,1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts
f Asset liability mismatching or market risk
The duration of the liability is longer compared to duration of assets, exposing the company to market risk for volatilities/fall in interest rate.
g Investment risk
The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
b Details of fund assets which are managed by an insurance company have not been disclosed since the details have not been provided by them.
c The assumptions were developed by management with the assistance of independent actuaries. Discount factors are determined close to each year-end by reference to market yields of government bonds that have terms to maturity approximating to the terms of the gratuity obligation. Other assumptions are based on current actuarial benchmarks and management's historical experience.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
There is no change in the method of valuation for the prior periods.
Effect of plan on entity's future cash flows
The Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. The weighted average duration of the plan is estimated to be 9 years. Following is a maturity profile of the defined benefit obligation:
The management assessed that the fair value of cash and cash equivalents, trade receivables, loans, other financial assets, trade payables, working capital loans and other financial liabilities approximate the carrying amount largely due to short-term maturity of this instruments.
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.
(ii) Fair value of financial assets and liabilities measured at amortised cost
The management assessed that for amortised cost instruments, fair value approximate largely to the carrying amount.
(iii) Fair value hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for financial instruments.
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 rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Note 42: Financial risk management
The Company's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company's focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on it's financial performance. The primary market risk to the Company is foreign exchange exposure risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company's exposure to credit risk is influenced mainly by the individual characteristic of each customer.
The Company's risk management activity focuses on actively securing the Company's short to medium-term cash flows by minimising the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns.
The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Company is exposed are described below.
(A) Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge an obligation to the Company, resulting in a financial loss. The Company is exposed to this risk for various financial instruments. The Company's maximum exposure to credit risk is limited to the carrying amount of financial assets, as summarised below:
A1 Trade and other receivables
Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company's exposure to customers is diversified and no single customer contributes to more than 10 percent of outstanding trade receivables. On account of adoption of Ind AS 109, Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain. The provision for expected credit loss takes into account available external and internal credit risk factors and Company's historical experience for customers.
The Company measures the expected credit loss of trade receivables based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on atual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.
A2 Cash and cash equivalents
The credit risk for cash and cash equivalents, and derivative financial instruments is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
Financial assets that are neither past due nor impaired
Cash and cash equivalents, advances recoverable, loans and advances to employees, security deposit and other financial assets are neither past due nor impaired.
Financial assets that are past due but not impaired
There is no other class of financial assets that is past due but not impaired.
(B) Liquidity risk
Liquidity risk is that the Company might be unable to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, usually on a month on month basis. Long-term liquidity needs for a 360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.
The Company's objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
The Company's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised
below:
(C) Market risk
The Company is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk, which result from both its operating and investing activities.
Foreign currency sensitivity
The Company operates internationally and a significant portion of the business is transacted in USD, JPY, GBP and EURO currencies and consequently the Company is exposed to foreign exchange risk through its sales and purchases from overseas suppliers in various foreign currencies. The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company's operations are adversely affected as the rupee appreciates/ depreciates against these currencies.
Sensitivity
The following table details the Company's sensitivity to a 1% increase and decrease in the H against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 1% change in foreign currency rates, with all other variables held constant. A positive number below indicates an increase in profit or equity where H strengthens 1% against the relevant currency. For a 1% weakening of H against the relevant currency, there would be a comparable impact on profit or equity, and the balances below would be negative.
Interest rate risk Liabilities
The Company's policy is to minimise interest rate cash flow risk exposures on long-term financing. At 31 March 2023, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates.
Trade Receivables- The credit period on sale of goods ranges from 45 to 120 days with or without security (dealer deposits).
Contract liabilities include advances received from customers. The outstanding balances of these accounts has increased primarily on account of satisfaction of performance obligation subsequent to year-end against which the advances were received.
Contract liabilities - Advance from customers include the advances received from customers on the booking of residential units.
iii) Performance obligation
Information about the Company's performance obligations are summarised below:
Sale of goods
The performance obligation is satisfied upon shipment of the goods and transfer of control. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price is allocated.
Sale of services
The performance obligation is satisfied over-time or point in time based on the nature of services and payment is generally due upon completion of services.
Sale of residential units
The performance obligation is satisfied at a point in time when the obligation of transferring the control of residential units is fulfilled.
Note 45: Segment information
The Managing Director of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108-Operating Segments. The CODM evaluates the Company performance and allocates resources based on Single Segment - Hydraulics
Notes
1 Reasons for variance has been provided for ratios that have a % change of more than 25%
2 Net profits after taxes considered is after including other comprehensive income/loss
3 Equity Share Capital and Other Equity has been used to derive Average Shareholder's Equity
4 Average Shareholder's Equity, Average Inventory, Average Trade Receivable and Average Trade Payables for the year ended 31 March 2023 have been arrived at using the average values as at 31 March 2023 and 31 March 2022 and for 31 March 2022 have been arrived at using the restated average values as at 31 March 2022 and 31 March 2021.
5 Ratios that are Nil or Not applicable have not been disclosed
Note 48: Scheme of Amalgamation of Yuflow Engineering Private Limited with the Company
Pursuant to Scheme of Amalgamation (the "scheme") u/s 230 to 232 of the Companies Act 2013, duly approved by the Honourable National Company Law Tribunal, Bengaluru Bench via order dated 28 February 2023, erstwhile wholly owned subsidiary company, Yuflow Engineering Private limited ('the Transferor Company') has been merged with the Company. Accordingly all the assets, liabilities and reserves of Yuflow Engineering Private Limited were transferred to and vested in the Company on a going concern basis with effect from 01 April 2021 being appointed Date ("Appointed Date").
Note 50: Other statutory information
1. The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
i) 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
ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
2. 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:
i) 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
ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
3. The Company has reviewed transactions to identify if there are any transactions with struck off companies. To the extent information is available on struck off companies, there are no transactions with struck off companies.
4. There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
5. The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
6. The creditors covered by Micro, Small and Medium Enterprises Development Act, 2006 ("the MSMED Act, 2006") have been identified on the basis of information available with the Company.
7. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.
8. The Company has not been declared wilful defaulter by any bank or financial Institution or other lender.
9. No charges or satisfaction yet to be registered with ROC beyond the statutory period.
10. No proceeding have been initiated on or is pending against the Company for holding benami property under the Benami Transactions Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
Note 51: Previous period comparatives
Prior year amounts have been regrouped/reclassified wherever necessary, to conform to the current years' presentation. The impact of such reclassification/regrouping is not material to the financial statements.
|