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36. OTHER NOTES:
36.1.1 Contingent Liabilities
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(Rs. in Lakhs)
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Particulars
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As at
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As at
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31st March,
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31st March,
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2024
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2023
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Bank Guarantee
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53.88
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53.88
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Claims against the Company not acknowledged as debts:
The Central Excise and Service Tax department has raised demand (including penalty) vide Show Cause Notice dated 4th February, 2014 on the Company for an amount of Rs. 360 lakhs pertaining to the period from 01-042010 to 31-03-2011.
The said demand was contested by the Company before the Commissioner, Central Excise and Customs who vide Orders dated 21st August, 2014 and 28th August, 2014 reduced the total demand to a sum of Rs. 90.49 lakhs (including penalty).
The Company challenged the aforesaid Orders dated 21st August, 2014 and 28th August, 2014 by preferring an Appeal before the Hon’ble CESTAT Tribunal thereby, challenging the demand and penalty sought to be levied.
The Hon’ble Tribunal has vide Order dated 2nd August, 2023 held that the demand raised by the Department is not sustainable and accordingly, quashed the demand so raised and allowed the Company’s Appeal.
36.1.2 Commitments Capital commitments
Capital expenditure contracted for at the end of the reporting period but not recognized as liabilities is Rs. Nil (Previous year: Rs. Nil).
36.1.3 Proposed Dividend
The Board of Directors in their meeting held on May 18, 2024 recommended dividend of Rs. 1.00 at the rate of 10% (Previous year : Rs. 1.5 at the rate of 15%) per equity share for the financial year ended 31st March, 2024. This payment is subject to the approval of shareholders in the Annual General Meeting (AGM) of the company and approved would result in a net cash outflow of approximately Rs. 39.44 lakhs (Previous year : Rs. 59.16 lakhs).
The company declares and pays dividends in Indian rupees. Companies are required to pay / distribute dividend after deducting applicable withholding income taxes wherever applicable.
36.1.4 Trade Payables
On the basis of intimation received from the vendors, the company has identified micro and small enterprise. There are no overdue amounts payable to these Micro and Small Enterprises registered under Micro, Small and Medium Enterprises Development Act; 2006 (‘MSMED Act’) as at 31st March, 2024. There is no interest payable under MSMED Act for the year ended 31st March, 2024.
36.3 Leases
The Company has incurred expenditure on short term leases of Rs. 11.46 Lakhs (Previous year: Rs. 0.57 lakhs) during the year. There are Rs. Nil (Previous year: Rs. Nil) commitments relating to such leases as on 31st March, 2024.
36.4 Fair Value Measurement
Financial Instrument by Category
Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial assets and liabilities that are recognized in the financial statements.
Fair valuation techniques used to determine fair value
The following assumptions were used to estimate the fair values:
1. The fair value of the financial assets and liabilities is included at the amount at which the instrument is exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
2. Fair value of quoted financial instruments are derived from quoted market prices in active market.
3. Investment in Equity and Bonds are measured at amortized cost.
Fair value hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique
1. Level 1 - Quoted prices in active markets / published NAV for financial instruments like mutual funds for which net assets value (NAV) is published by mutual fund operator at the balance sheet date.
2. Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
3. Company has financial instruments that falls in the category of Level 1 and Level 3 hence categorization for Level 2 is not applicable.
The following table provides hierarchy of the fair value measurement of Company’s financial instruments/assets, grouped into Level 1 (Quoted prices in active market) as described below:
The Financial risk management is practices and procedures that a Company uses to optimize the amount of risk it handles with financial interest. The Risk management is done to identify how risks associated with the Company will be identified, analyzed, and managed. It outlines how risk management activities will be performed, recorded, and monitored by the Company. The basic objective of risk management plan is to implement an integrated risk management approach to ensure all significant areas of risks are identified, understood and effectively managed, to promote a shared vision of risk management and encourage discussion on risks at all levels of the organization to provide a clear understanding of risk/ benefit trade-offs, to deploy appropriate risk management methodologies and tools for use in identifying, assessing, managing and reporting on risks.
Credit Risk
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of credit worthiness as well as concentration of risks. Credit risk is controlled by analyzing credit limits and credit worthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, loans, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets.
Inter-corporate deposits are primarily with financial institutions having high credit-rating assigned by credit-rating agencies and short term loans to companies also with sound ratings. Bank deposits are held with different banks.
The other exposure to the credit risk at the reporting date is primarily from trade receivables. Trade receivables are typically unsecured. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of the customers to which the Company grants credit terms in the normal course of business. Credit is normally extended to very limited number of domestic customers having dealings of over two decades with the company and huge conglomerates in the international market.
The Company’s credit period generally ranges from 0-45 days. Counterparty credit limits are reviewed by the Company’s Directors handling operations. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments or repay the deposits.
Commodity risk
The company is partly impacted by the price volatility of commodities towards contracts already entered into and delivery is pending. Company manufacture PP (Polypropylene) Fibre for which PP (Polypropylene) Resin is the key raw material for its manufacture. Due to significant volatility of the price of PP (Polypropylene) Resin, the company has developed and enacted risk management strategy of procuring the materials from domestic market as well as international market. Generally, the company has pending deliveries of up to one month. The company has also entered into MOU with the designated vendor for supply of materials to mitigate commodity price risk.
Market Risk
PP (Polypropylene) Fibre is used primarily in India for three applications - in the manufacture of Filter Fabrics used for almost all kinds of liquid filtration, in the manufacture of automotive and exhibition carpets and for the construction and geo-textile sector.
Due to its inherent properties, PP fibre is the primary requirement for the filtration application and is more or less irreplaceable by any other synthetic fibre.
As long as automotive vehicles will be produced and as long as marriages and exhibitions will take place, there will always be the requirement of carpets. Quantity requirement will always fluctuate depending upon various market criterion.
There is varied demand for PP Fibre in the construction and geo-textile sector. Depending upon technical requirements, PP Fibre is applied but wherever the specifications are not very stringent, some other synthetic fibres are also used. Similar is the case in the geo-textile sector.
Foreign Currency Exchange Rate Risk
The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the trade receivables and derivative assets/liabilities. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company.
The company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.
The following table demonstrates the sensitivity to a reasonably possible change in US dollars 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 Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.
The fluctuation in foreign currency exchange rates does not have significant potential adverse impact on the statement of profit and loss and other comprehensive income and equity, accordingly does not hedge foreign currency risks using derivative financial instruments.
Liquidity Risk
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time.
The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding borrowings. The Company believes that the working capital is sufficient to meet its current requirements.
As at 31st March, 2024, the Company had a cash and cash equivalent of Rs. 1781.47 lakhs and as at 31st March, 2023 Rs. 1466.68 lakhs.
For the purpose of the Company’s capital management, capital includes issued equity capital, security premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximize the shareholder value.
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 does not have any debt, interest bearing loans and borrowings.
36.7 Employee Benefits
As per Ind AS 19 ‘Employee Benefits’, the disclosure of Employee benefits as defined in the Ind AS are given below:
(a) Defined Contribution Plan - Provident Fund
During the year, the company has recognized the Company’s Contribution to Employees Provident Fund amounting to Rs. 13.35 lakhs (Previous year : Rs. 14.18 lakhs) as part of Remuneration and other benefits to the employees.
(b) Defined Benefit Plan
The benefit of gratuity is Funded Defined Benefit Plan. For this purpose, the company has obtained qualifying insurance policy from Life Insurance Corporation of India.
The company provides leave availed benefit of accumulated leave to the credit of the employees.
The following table sets out the funded status of the gratuity plan. The amount recognized in the company’s financial statement as at 31st March, 2024.
The Company funds the cost of gratuity expected to be earned on a yearly basis to Life Insurance Corporation of India, which manages the plan asset. The actual return on plan asset is Rs.6.28 lakhs (Previous year : Rs. 4.15 lakhs).
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate and expected salary increase. The sensitivity analysis below has been determined based on reasonably possible changes of the respective assumption occurring at the end of the reporting period.
Management expects that the entire transaction price allotted to the unsatisfied contract as at the end of the reporting period will be recognized as revenue during the next financial year.
36.10 Additional Regulatory Information:
(a) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(b) The Company did not have any transactions with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956 during the financial years 2023-24 and 2022-23.
(c) The Company does not have any charges or satisfaction which is yet to be registered with Registrar of Companies (ROC) beyond the statutory period.
(d) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(e) 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:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(f) 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.
(g) The Company has not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961)
Reasons for major variations in ratios as compared to previous year:
- Variation in current ratio is mainly due to decrease in the advances given shown under other current asset and increase in trade payable and other current liabilities.
- Variation in debt-equity ratio is mainly due to decrease of lease liabilities and increase in equity on account of retained profit.
- Variation in return on equity ratio is mainly due to decrease in net profit after tax and increase in other equity on account of retained profit.
- Variation in inventory turnover ratio is mainly due to decrease in sales in revenue from operation and increase of average value of inventories held in current assets.
- Variation in trade payable turnover ratio is mainly due to increase in the average trade payables while the cost of raw materials has decreased.
- Variation in net capital turnover and net profit ratio is mainly due to decrease in sales in revenue from operation.
- Variation in return on capital employed is mainly due to decrease in profit before tax and financial cost while the capital employed has increased on account of retained profit.
- Variation in return on investment ratio is mainly due to decrease in income from investment funds.
36.13 Segment Reporting
The Company has identified the following business segments as reportable segments based on nature of products, risks, returns and the internal business reporting system.
(1) Manufacturing of ‘Manmade Fibre’(2) Power Generation - Wind Turbine
Revenue and expenses directly attributable to segments are reported under each reportable segment. Exceptional items and other expenses which are not attributable or allocable to segments are separately disclosed. Assets and liabilities that are directly attributable or allocable to segments are disclosed under each reportable segment. All other assets and liabilities are disclosed as un-allocable assets and liabilities. Common costs attributable to Wind Mill are insignificant and hence not allocated to this unit.
Power generated through the Wind Mill is transferred to the Madhya Gujarat Vij Company Limited which sells the power units and gives credit for such units either in the power bills for units consumed by the Manmade Fibre Unit or make the payment for unutilized units sold in the market.
36.14 Figures for the comparative periods have been regrouped wherever necessary in conformity with present classification.
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