14 B Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of ' 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

I n 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.

(a) The Company had transferred forfeited share application money to Capital reserve in accordance with the provision of the Companies Act, 1956. The reserve will be utilized in accordance with the provisions of the Companies Act, 2013.

(b) Securities premium reserve is used to record the premium on issue of shares. The reserve is utilized in accordance with the provisions of the Companies Act, 2013.

(c) General Reserves are free reserves of the Company which are kept aside out of Company’s profits to meet the future requirements as and when they arise. The Company had transferred a portion of the profit after tax (PAT) to general reserve pursuant to the earlier provisions of Companies Act, 1956. Mandatory transfer to general reserve is not required under the Companies Act, 2013.

(d) Retained earnings are the accumulated profits earned by the Company till date, less transfer to general reserves, dividend and other distributions made to the shareholders.

C. Capital Management

The Company’s objectives when managing capital are to:

• safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders; and

• maintain an optimal capital structure to reduce the cost of capital.

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt, consistent with others in the industry. The Company monitors capital using a gearing ratio, which is calculated as:

(a) Provision for warranties

A provision is recognised for expected warranty claims on products sold in past year, based on past experience of the level of repairs and returns. It is expected that all of these costs will be incurred in the next financial year after the reporting date. Assumptions used to calculate the provision for warranties were based on current sales levels and information available about warranty. The table below gives information about movement in warranty provisions.

31.2 Corporate Social Responsibility (CSR)

As per the provisions of section 135 of the Companies Act, 2013, the Company had to spend at least 2% of the average profits of the preceding three financial years towards CSR which amounts to ' 128.87 Lakhs (31 March 2021: ' 163.81 Lakhs). Accordingly, a CSR committee had been formed for carrying out the CSR activities as per Schedule VII of the Companies Act, 2013. The Company has spent an amount of ' 134.45 Lakhs (31 March 2021'163.81 Lakhs(including unutilized amount of ' 46.54 Lakhs pertaining to ongoing projects)} and has accordingly charged the same to the Statement of Profit and Loss.

(a) The operations of the Company were severely affected in the last year due to COVID-19 resulting in significant decline in net sales and profits. Despite second and Third wave of COVID-19 in the current year, Net sales and Net profits have improved significantly.

(b) The variance is on account of increase in fair value gain on Investment in Caparo Power Limited and PNB Gilt Limited in the current year vis-a-vis previous year

B. Leases as lessor

The Company is not required to make any adjustments on transition to Ind AS 116 for leases in which it acts as a lessor. The Company has leased out portions of its buildings under operating lease arrangements. These leases may be renewed for a further period based on mutual agreement of the parties. During the year, an amount of ' 26.84 Lakhs (previous year ' 20.41 Lakhs) was recognised as rental income in the Statement of Profit and Loss.

35 Segment

An operating segment is a component that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the other components, and for which discrete financial information is available. The Company is engaged in the business of auto components, mainly automotive lighting systems for four wheeler and two wheeler applications and related activities. The Company’s activities/business is regularly reviewed by the Company’s Managing Director assisted by an executive committee from an overall business perspective, rather than reviewing its products/services as individual standalone components. Thus, the Company has only one operating segment, and no reportable segments in accordance with Ind AS - 108 Operating Segments.

A. Information about the Defined contribution plans

The Company’s approved Superannuation Scheme, Employee Provident Fund and Employee State Insurance Scheme are defined contribution plans. A sum of ' 1,099.23 Lakhs (previous year ' 950.95 Lakhs) has been recognised as an expense in relation to these schemes and shown under Employee benefits expense in the Statement of Profit and Loss.

B. Information about the Defined benefit plan and Funding arrangements

The Company has a defined benefit gratuity plan governed by the Payment of Gratuity Act, 1972. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

These defined benefit plan expose the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk. The plan is funded with an insurance company in the form of a qualifying insurance policy. The Company expects to pay ' 379.64 Lakhs in contributions to its defined benefit plans in 2022-23.

Reconciliation of the net defined benefit (asset) liability

The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit (asset) liability and its components.

1. Fair value of cash and cash equivalents, other bank balances, trade receivables, loans, other financial assets, trade payables, lease liabilities, other financial liabilities and borrowings approximate their carrying amount, largely due to the short-term nature of these instruments.

2. I nterest rates on long-term borrowings are equivalent to the market rate of interest . Accordingly, the carrying value of such long-term debt approximates fair value.

(ii) Transfers between level 1 and level 2

There have been no transfers between Level 1 and Level 2 during the year ended 31 March 2022 and 31 March 2021.

(iii) Level 3 fair values

There have been no transfers to and from Level 3 during the year ended 31 March 2022 and 31 March 2021. c) Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk

- Liquidity risk

- Market risk

- Interest rate risk

(i) Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. The Company’s risk management is carried out by a central treasury team department under policies approved by the board of directors.

The Company’s audit committee oversees how management monitors compliance with Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to risk faced by the Company.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial asset fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers, loans and other deposits etc. The carrying amounts of financial assets represent the maximum credit risk exposure.

Trade receivables

The Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivable. It recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from initial recognition.

Credit risk arising from trade receivables is managed in accordance with the Company’s established policy with regard to credit limits, control and approval procedures. The Company provides for expected credit losses on trade receivables based on a simplified approach as per Ind AS 109. Under this approach, expected credit losses are computed basis the probability of defaults over the lifetime of the asset. This allowance is measured taking into account credit profile of the customer, geographical spread, trade channels, past experience of defaults, estimates for future uncertainties etc.

Loans and other financial assets

a) The Company has given security deposits to Government departments and vendors for securing services from them. As these are well established organizations and have strong capacity to meet the obligations, risk of default is negligible or nil.

b) The Company provides loans to employees and recovers the same by deduction from the salary of the employees. Loans are given only to those employees who have served a minimum period as per the approved policy of the Company. The expected probability of default is negligible or nil.

Cash and cash equivalents

Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with international and domestic banks with high repute.

Derivatives

Derivatives are entered into with banks and financial institution counterparties, as per the approved guidelines for entering derivative contracts. The Company considers that its derivatives have low credit risk as these are taken with international and domestic banks with high repute.

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Long term cash flow requirement is monitored through long term plans. In the line of long term planning, short term plans are reviewed on quarterly basis and compared with actual position on monthly basis to assess the performance of the Company and liquidity position.

The Company monitors the level of expected cash inflows on trade receivables and loans together with expected cash outflows on trade payables and other financial liabilities. In addition to this, the Company maintains the following line of credit to meet the short term funding requirement:

- Short term loans/cash credit/working capital limit of ' 20,000 Lakhs.

- Vendor and customer finance facility limit of ' 15,800 Lakhs.

- Credit/bank guarantee limit of ' 13,500 Lakhs.

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company uses derivative to manage market risks. All such transactions are carried out within the guideline as prescribed in the Company’s risk management policy.

Currency risk

The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated. The functional currency for the Company is INR. The currencies in which these transactions are primarily denominated are US dollars and Euro.

Sensitivity analysis

A reasonably possible strengthening (weakening) of USD, JPY and other currencies against INR (?) at the end of the year, would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

(v) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates. The Company tries to manage the risk partly by entering into fixed-rate instruments and partly by borrowing at a floating rate:

*The Company is of the firm belief that above demands are not tenable and are unlikely to be retained and is therefore not carrying any provision in its books in respect of such demands.

Additionally, the Company is involved in other disputes, lawsuits, claims, governmental and/ or regulatory inspections, inquiries, investigations and proceedings, including commercial matters that arise from time to time in the ordinary course of business. The Company believes that none of these matters, either individually or in aggregate, are expected to have any material adverse effect on its financial statements.

During the previous year, the Directorate of Revenue Intelligence (‘DRI’) conducted an inquiry at the Head office and Gurugram plant of the Company. Based on its inquiry, DRI contended that the design fee paid to Stanley for the past 5 years, in respect of moulds imported by the Company, is chargeable to custom duty and GST and demanded ' 500.00 Lakhs which was duly deposited under protest by the Company on 1 February 2021. As at 31 March 2022, the Company has received the show cause cum demand notices amounting to ' 1,132.26 Lakhs and is awaiting notices amounting to ' 183.31 Lakhs from the authorities . Based on its assessment, it believes any demand as per above mentioned contentions shall not be tenable.

#Outstanding export obligations are to be fulfilled over a period of 6 years from the date of respective licenses under the EPCG scheme against import of plant and machinery and the related customs duty of ' 931.58 Lakhs (31 March 2021: ' 753.27 Lakhs).

I n February 2019, the Supreme Court of India in its judgement, clarified the applicability of allowances that should be considered to measure the contribution payable under Employees Provident Fund Act, 1952. The Company is of the view that, since there are many interpretative challenges on the retrospective application of the judgement, accordingly, the probable obligation relating to the earlier periods cannot be reliably estimated. Hence, the Company made provision for provident fund contribution from the date of Supreme Court Order.

44 Disclosure required by Ind AS 115

1. The aggregate amount of transaction price allocated to the unsatisfied performance obligations as at 31 March 2022 amounts to ' Nil (31 March 2021: ' 116.57 Lakhs). This will be recognised as revenue when the moulds will be sold to the customer, which is expected to occur post March 31, 2023*.

*The above amount does not include the value of performance that have an original expected duration of one year or less, as required by Ind AS 115.

2. Revenue from contracts with customers is disaggregated by major products and service lines and is disclosed in Note no. 23 to the standalone financial statements. Further, the revenue is disclosed in the said note is gross of ' 799.37 Lakhs (31 March 2021: ' 616.94 Lakhs) representing cash discount to customers.

45 On 1 April 2019, the Company purchased certain assets from Lumax Auto Technologies Limited at a consideration of ' 2,245.41 Lakhs, pursuant to which, the Company has setup in-house Electronic facility at Manesar on 1 April 2019 for designing and manufacturing of Electronics Printed Circuit Boards Assembly (‘PCB’). The said acquisition was primarily done to optimize cost by indigenization of Printed Circuit Board (‘PCB’).

The abovementioned purchase of assets has been accounted as Business Combination in accordance with Ind AS 103. The consideration for above transaction was transferred through Bank. Further, the Company incurred acquisition-related costs of ' 9.00 Lakhs on legal fees and due diligence costs. These costs have been included in legal and professional fees under other expenses. The fair values of assets (i.e. Property, plant and equipment and other intangible assets) acquired amounts to ' 1,267.83 Lakhs. Further, Goodwill arising from the acquisition amounts to ' 977.58 Lakhs which is attributable to synergies expected to be achieved from integrating PCB into the Company’s existing business. The Goodwill is not deductible for income tax purposes vide Finance Act 2021.

For the purpose of impairment testing, Goodwill is allocated to the Company as a whole since the performance of the Company is monitored at that level for internal management purposes. The recoverable amount of the CGU was based on its value in use and was determined by discounting the future cash flows to be generated from the continuing use of the CGU. These calculations use cash flow projections over a period of five years, based on next year financial budgets estimated by management, with extrapolation for the remaining period, and an average of the range of assumptions as mentioned below. The key assumptions used in the estimation of value in use were as follows:

The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate and EBITDA margins were determined based on management’s estimate. Budgeted EBITDA margin was based on expectations of future outcomes taking into account past experience. The estimation of value in use reflects numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding expected growth rates and operating margin, expected length and severity of the impact from the COVID-19 pandemic and the shape and timing of the subsequent recovery, as well as other key assumptions with respect to matters outside of the Company’s control. It requires significant judgments and estimates, and actual results could be materially different than the judgments and estimates used to estimate value in use.

The Company has used a discount rate of 17% for the current year and previous year which is based on the Weighted Average Cost of Capital (WACC) of comparable market participant, adjusted for specific risks. These estimates are likely to differ from future actual results of operations and cash flows. Based on the above, no impairment was identified as at 31 March 2022 and 31 March 2021 as the recoverable value of the CGU exceeded the carrying value. No reasonably possible change in any of the above key assumptions would cause the carrying amount of these CGU to exceed their recoverable amount.

46 The Company has considered the possible effects that may result from the pandemic relating to COVID-19 on the carrying amounts of property, plant and equipment, Investments, Inventories, receivables and other current assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Company, as at the date of approval of these financial results has used internal and external sources on the expected future performance of the Company. The Company has performed sensitivity analysis on the assumptions used and based on current estimates expects the carrying amount of these assets will be recovered. The impact of COVID-19 on the Company’s financial statements may differ from that estimated as at the date of approval of these financial statements.

47 Additional information pursuant to changes in Schedule III

(i) No proceeding has been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

(ii) The Company has not been declared as willful defaulter by any bank or financial Institution or other lender.

(iv) There are no transaction which has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.

(v) There are no charges or satisfaction yet to be registered with ROC beyond the statutory period.

(vi) There are no funds which 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 persons or entities, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:

a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Company or

b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(vii) There are no funds which have been received by the Company from any persons or entities, including foreign entities (“Funding Parties”), 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 (“Ultimate Beneficiaries”) by or on behalf of the Funding Party or

b) provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries.

(viii) The Group (as per the provisions of the Core Investment Companies (Reserve Bank) Directions, 2016) does not have CIC as part of the Group.