1. Company Overview

JMT Auto Limited incorporated as Public Limited Company is into the business of manufacturing of Auto Components. The core competency of the Company is into manufacturing of Gear and Transmission parts. The Manufacturing facilities are located in Jamshedpur, Jharkhand and Dharwad, Karnataka. The shares of the Company are listed on National Stock Exchange and Bombay Stock Exchange.

Company has its Registered Office at 3, Local Shopping Centre, Pamposh Enclave, G.K.-1, New Delhi

Note : 2.1 Rights, preferences and restrictions attached to shares

The company has one class of equity shares having a par value of Rs. 1 per share. Each shareholder is eligible for one vote per share held. The dividend, if proposed by the Board of Directors, is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

Note : All long term loans are secured by first pari passu charge over entire fixed assets of the Company both present and future along with second pari passu charge on entire current assets of the Company.

Fair value hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Inputs are other than quoted prices included within 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 are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

The financial instruments included in Level 2 of fair value hierarchy have been valued using quotes available for similar assets and liabilities in the active market. The investments included in Level 3 of fair value hierarchy have been valued using the cost approach to arrive at their fair value. The cost of unquoted investments approximate the fair value because there is a range of possible fair value measurements and the cost represents estimate of fair value within that range.

The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):

Note : 3 Financial risk Management objectives and policies

The Company’s principal financial liablities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to support its operations. The Company’s financial assets include investment, loans, trade and other receivables, and cash & cash equivalents that derive directly from its operations. The Company is exposed to market risk, credit risk and liquidity risk, Considering on-going CIRP process, quantum of these risks are not ascertainable.

The company is exposed to market risk, credit risk and liquidity risk, The Company’s senior management overseas the management of these risks. The Company’s senior management is supported by a financial risk committee that advises on financial risks and the appropriate financial risk goverance framework for the company. This financial risk committee provides assurance to the Company’s senior management that the Company’s financial risk activities are governed by appropriate policies and procedure and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each risk, which are summarised as below:

(A) 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 three types of risk: Interest rate risk and currency risk. Financial instruments affected by market risk include loans and borrowings, deposits and payables/ receivables in foreign currencies.

a) 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 interset rates. The Company is carrying its borrowings primarily at variable rate. The Company expects the variable rate to decline, accordingly the company is currently carrying its loans at avriable interest rates.

Interest Rate Sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interset rates on that portion of loans and borrowings affected. With all other variable held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:

b) Foreign currency risks

Foreign risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure in foreign currency is in Trade payable and receivable denominated in foreign currency. The Company is not restricting its exposure of risk in change in exchange rates.

Natural Hedging - We are availing PCFC limit as a sub limit to our CC limits wherein on the basis of our export POs we get our INR loan converted into USD loan under the same overall credit limit. On the other hand we have USD receivable against our exports. Thus both these acts as a natural hedge wherein our dollar collection covers for our dollar loan repayment.We try to keep our PCFC loan and Export receivable at even level in order to have full coverage.

Foreign currency sensitivity

The following table demonstrate the sensitivity to a reasonably possible change in foreign currency exchange rates. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.

(B) 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) and from its financing activites, including loans to related parties, deposits with banks and financial institutions and other financial instruments.

Credit risk management

The Company assesses and manages credit risk based on internal credit rating system. Internal credit rating is performed for each class of ‘financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based ‘on the assumptions, inputs and factors specific to the class of financial assets.

(i) Low credit risk on reporting date

(ii) Moderate credit risk

(iii) High credit risk

Cash & Cash Equivalents and Bank Deposits

Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.

Trade Receivables

The company closely monitors the credit-worthiness of debtors through internal system that are configured to define credit limits of customers, thereby, limiting the credit risk to pre-calculated amounts.

(C) Liquidity risk

The Company monitors its risk of a shortage of funds by estimating the future cash flows. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, cash credit facilities and bank loans. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding and debt maturity within 12 months can be rolled over with existing lenders. The Company had access to the following undrawn borrowing facilities at the end of the reporting periods.