37 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions, as described below, that affect the reported amounts and the disclosures. The Company based its assumptions and estimates on parameters available when the financial statements were prepared and are reviewed at each Balance Sheet date. Uncertainty about these assumptions and estimates could result in outcomes that may require a material adjustment to the reported amounts and disclosures. Information about critical judgements in applying accounting policies, as well as estimates and assumptions that have the most significant effect on the financial statements is as follows:

(a) Estimation of uncertainty due to COVID-19 pandemic

The Company has considered the possible risk that may result from the pandemic relating to COVID-19 on the carrying amounts of assets including inventories, receivables, investments and other financial and non-financial assets. As per the assessment carried out by the management based on the internal and external information available upto the date of approval of these standalone financial statements, the Company does not foresee any uncertainty related to recoverability or liquidation of the aforesaid assets and also about the ability of the nonfinancial assets to generate future economic benefits.

However, the impact assessment of COVID-19 is a continuing process given the uncertainties associated with its nature and duration. The impact of the global health pandemic may be different from that estimated as at the date of approval of these standalone financial statements and the Company will continue to closely monitor any material changes to future economic conditions.

(b) Employee benefit plans

The cost of the employment benefit plans and their present value are determined using actuarial valuations which involves making various assumptions that may differ from actual developments in the future. For further details refer note 38.

(c) Fair value measurement of investments

The fair value of unquoted investments are determined using valuation methods which involves making various assumptions that may differ from actual developments in the future. For further details refer note 43.

(d) Customer’s loyalty programme

Judgement is required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts and incentives. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer.

The Company estimates the fair value of points/awards accrued under the incentive schemes based on application of budgeted incentive payout rate or based on the fair value of the products against which such points/awards could be redeemed. Refer notes 25 and 26 for further details.

(e) Warranty provisioning

The Company estimates the provision for warranty based on past trend of actual issues of batteries under warranty. As at 31 March 2023, the estimated liability towards warranty amounted to approximately H 222.74 crs (PY: H 207.65 crs). For further details refer note 27.

The provision towards warranty is not discounted as the management, based on past trend, expects to use the provision within twelve months after the Balance Sheet date.

(f) Provision for litigations and tax disputes

The likelihood of outcome of litigations and tax disputes are estimated by the management based on past experiences, legal advice, other public information etc. For further details, refer note 27.

38 Gratuity and Other Post Employment Benefit Plans

The Company provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan’) covering eligible employees of Company. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment with the Company. Gratuity is funded through a Group managed trust. Trustees administer contributions made to the Trust and contributions are invested in a scheme with the Life Insurance Corporation of India.

The Company operates defined benefit pension plan for certain categories of employees. These plans are managed through a group managed trust. The Company also operates post retirement medical benefit plan, a defined benefit plan which is unfunded.

Other retirement benefit plans include contribution to provident fund and pension fund (for certain categories of employees).

The trustees of the trust fund are responsible for the overall governance of the plan and to act in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. Each year, the Board of Trustees reviews the level of funding in the respective plans. Such a review includes the asset-liability matching strategy and investment risk management policy. The Board of Trustees decides its contribution based on the results of this annual review.

VIII In 2023-24 the Company expects to contribute H 10 crs (2022-23: H 8.09 crs) to gratuity and H NIL (2022-23: NIL) to Pension funds.

IX Healthcare cost trend rates have no effect on the amounts recognised in the Statement of Profit and Loss, since the benefit is in the form of a fixed amount as per the various grades, which is not subject to change.

X The estimates of future salary increases considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

XI The Company makes contribution to provident fund, superannuation fund and employees’ state insurance schemes, which are defined contribution plans. Total contribution to the aforesaid funds during the year aggregated to H 32.68 crs (2021-22 - H 30.71 crs).

The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its standalone financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its standalone financial statements. The company does not expect the impact to be material.

42 Segment Reporting

The Company has identified two operating segments viz, Automotive and Industrial. As per Ind AS - 108, due to similar nature of products, production process, customer types, etc., the two operating segments have been aggregated as single operating segment of “storage batteries and allied products” during the year. The analysis of geographical segments is based on the areas in which customers of the Company are located.

A. Measurement of fair values

A number of the accounting policies and disclosures require the measurement of fair values of assets and liabilities.

The Company has an established control framework with respect to the measurement of fair values. The Management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Management assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

The Company’s financial liabilities comprise capital creditors and trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s financial assets include trade and other receivables, cash and cash equivalents and investment.

The Company has a Risk Management Committee that ensures that risks are identified, measured and managed in accordance with Risk Management Policy of the Company. The Board of Directors also review these risks and related risk management policy.

The market risks and credit risks are further explained below:

I) 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 two types of risk: currency risk and other price risk, such as commodity price risk and equity price risk. Financial instruments affected by market risk include investments, trade payables, trade receivables, etc.

(i) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities. Such foreign currency exposures are not hedged by the Company. The Company has a treasury department which monitors the foreign exchange fluctuations on the continuous basis and advises the management of any material adverse effect on the Company.

(ii) Securities price risk

The Company’s listed and non-listed securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company manages the securities price risk through diversification and by placing limits on individual and total securities. Reports on the investment portfolio are submitted to the Company’s management on a regular basis. The Company’s Board of Directors reviews and approves all investment decisions.

(iii) Commodity price risk

The Company is affected by the price volatility of certain commodities. Its operating activity is manufacturing of batteries and therefore requires supply of lead. Due to significant volatility in the lead price, the Company enters into purchase contract with vendors wherein the prices are linked to the quoted London Metal Exchange rates. Similarly, the Company’s selling price of batteries to OEM/institutional customers is linked to such rates. Further, the Company also uses recycled lead which is not directly exposed to LME price movement, thereby reduces the risk of lead price volatility to some extent.

II) Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables). The maximum exposure to credit risk is equal to the carrying value of financial assets.

Trade receivables

A significant part of the Company’s sales are under the ‘cash and carry’ model which entails no credit risk. For others, an impairment analysis is performed at each reporting date on an individual basis for all the customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on historical data of credit losses. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables disclosed in Note 5 and 11 as the Company does not hold collateral as security. The Company has evaluated the concentration of risk with respect to trade receivables as low, as its customers are from several industries.

The Company’s historical experience of collecting receivables and the level of default indicate that credit risk is low and generally uniform across markets; consequently, trade receivables are considered to be a single class of financial assets. All overdue customer balances are evaluated taking into account the age of the dues, specific credit circumstances, the track record of the counterparty etc. Loss allowances and impairment is recognised, where considered appropriate by responsible management.

III) Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company’s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring 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 31 March 2023 and 31 March 2022. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis.

The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest bearing term deposits and mutual funds with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

The following table shows the maturity analysis of the Company’s financial liabilities based on contractually agreed undiscounted cash flows along with its carrying value as at the Balance Sheet date.

45 Capital Management

The Company’s objective when managing capital (defined as net debt and equity) is to safeguard the Company’s ability to continue as a going concern in order to provide returns to shareholders and benefit for other stakeholders, while protecting and strengthening the balance sheet through the appropriate balance of debt and equity funding. The Company manages its capital structure and makes adjustments to it, in light of changes to economic conditions and strategic objectives of the Company.

46 Leases

A. Leases as lessor

The Company leases out its investment property and some machinery. The Company has classified these leases as operating leases, because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Note 3 sets out information about the operating leases of investment property.

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be paid after the reporting date.

B. Leases as lessee

i. Short-term / Low-value leases

The Company leases warehouses, office premises and guest houses which are considered to be short-term leases. The Company has elected not to recognise right-of-use assets and lease liabilities for these leases.

The Company leases office and IT equipment which are of low-value. The Company has elected not to recognise right-of-use assets and lease liabilities for the same.

Lease payments for short-term leases and leases of low-value assets not included in the measurement of the lease liability are classified as cash flows from operating activities.

ii. Right-of-use and lease liabilities recognised in the financial statements represents the Company’s lease of solar power plant facilities for obtaining solar power in its factories. The lease is for a period of 25 years. The consideration for use of solar power plant is variable based on the electricity units generated by the plants and consumed by the Company. Lease liability has been recognised for the minimum guaranteed payment, as set out in the respective power purchase agreements. The future cash outflows to which the lessee is potentially

exposed that are not reflected in the measurement of lease liabilities pertaining to variable payments for such power purchase agreements are not expected to be significant.

50 No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the funding party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

51 Scheme of Amalgamation

Amalgamation of Chloride Power Systems & Solutions Limited (CPSSL) with Exide Industries Limited (EIL):

The National Company Law Tribunal at Kolkata Bench has, vide order dated February 17, 2023 read with subsequent corrigendum order dated February 22, 2023, sanctioned a Scheme of Arrangement (“the Scheme”) with respect to merger of Chloride Power Systems & Solutions Limited (CPSSL) (wholly owned subsidiary of the Company) with the Company w.e.f. the appointed date i.e. April 01,2022. The aforesaid order was filed with the Registrar of Companies, Kolkata on March 29, 2023. In accordance with the requirements of Para 9(iii) of Appendix C of IND AS 103, the audited standalone financial results of the Company in respect of prior periods have been restated.

52 The Board of Directors of the Company in their meeting held on September 3, 2021, and the members of the Company, in the Extraordinary General Meeting held on September 29, 2021, had approved divestment of entire equity shareholding held by the Company in Exide Life Insurance Company Limited (ELIC), a material wholly-owned subsidiary of the Company, in favour of HDFC Life Insurance Company Limited (HLIC), subject to necessary approvals from relevant regulatory/governmental authorities.

The Board of Directors of HLIC, in its meeting held on September 3, 2021, and the members of the HLIC, in the Extraordinary General Meeting held on September 29, 2021, had accorded their approval for acquisition of entire equity shareholding of ELIC, subject to requisite regulatory approvals.

Post receipt of such requisite regulatory approvals, the aforesaid transaction was completed on January 1,2022, and the Company divested its entire equity shareholding in ELIC in favour of HLIC on that date for the agreed consideration. Resulting net gain on disposal of investments in ELIC has been disclosed as exceptional item in these standalone financial statements.