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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 532805ISIN: INE891D01026INDUSTRY: Mining/Minerals

BSE   ` 208.20   Open: 203.20   Today's Range 203.20
211.40
+2.95 (+ 1.42 %) Prev Close: 205.25 52 Week Range 136.25
221.75
Year End :2023-03 

39. CONTINGENCIES AND COMMITMENTS

' in Crores

Particulars

2022-23

2021-22

a. Claims against the Company not acknowledged as debts

b. Disputed tax demands

9.51

6.62

Direct tax

0.43

0.43

Indirect taxes

121.05

121.58

Other than the information disclosed above, the Company is involved in disputes, proceedings etc. that arose from time to time in the ordinary course of business. The Company is of the view that there would be no material adverse effect, arising out of such disputes/proceedings, on the standalone financial statements. Show cause notices are not considered as contingent liabilities unless converted into demand.

c. Capital commitments

Estimated value of contracts remaining to be executed on capital account and not provided for (net of advances) is '6.44 Crores (previous year: '36.96 Crores).

Leases as a lessor Operating leases

The Company leases out certain assets and 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. Rental income recognised by the Company during year ended March 31,2023 was '4.69 Crores (March 31,2022: '4.26 Crores). The rental income pertaining to Investment Property, which was subsequently transferred to asset held for sale during the year, amounting to '4.25 Crores (March 31,2022: '4.25 Crores) is disclosed as part of other operating revenue under Revenue from operations (Refer note 32) and other rental income amounting to '0.44 Crores (March 31,2022: '0.01 Crores) is disclosed as rental income under Other income (Refer note 33). Depreciation expense incurred towards such investment property is disclosed as part of depreciation and amortisation expense (refer note 36). The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date:

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity, and other market changes. The Company's exposure to market risk is primarily on account of foreign currency risk.

a. 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 is primary on account of payment in foreign exchange for purchase of goods.

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions.

The Company's activities expose it to a variety of financial risks such as foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Company's focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance. The primary market risk of the Company is credit and foreign exchange risk.

The Company's senior management oversees 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 governance framework for the Company. The financial risk committee provides assurance to the Company's senior management that the Company's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured, mitigated and managed in accordance with the Company's policies and risk objectives.

The un-hedged balances as at the reporting dates are primarily on account of purchase of goods where the Company is in the process of hedging and the balance in vendor account which to a larger extent have natural hedge.

Sensitivity analysis

Sensitivity analysis is carried out for un-hedged foreign exchange risk as at the reporting dates. For every 1% strengthening of Indian Rupees against all relevant uncovered foreign currency transactions profit before tax would be impacted by gain of '1.24 Crores (previous year gain of '0.40 Crores). Similarly, for every 1% weakening of Indian Rupee against these transactions, there would be an equal and opposite impact on the profit before tax.

b. 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 borrows funds to meet its short-term requirements which are at fixed interest rates. Hence, the Company is not exposed to any significant interest rate risk.

c. Credit risk

Credit risk is a risk of financial loss to the Company, if a customer or counterparty to a financial instrument fails to meet its contractual obligations, arises principally from the Company's receivables from customers, loans, and other financial assets. The carrying value of financial assets represents the maximum amount of credit risk.

The Company mitigates credit risk by strict receivable management, procedures and policies. The Company

has a dedicated independent team to review credit and monitor collection of receivables on a pan India basis. Credit insurance is resorted to most of the receivable and in such cases the credit risk is restricted to 15 % of the receivable value.

The concentration of credit risk is limited due to the customer base being large and unrelated. Further, the Company constantly evaluates the quality of trade receivable and provides allowance towards impairment of trade receivables.

I n addition to the historical pattern of credit loss, the Company closely monitors its customers and assesses conditions such as change in payment terms, inability of the customer to pay etc. depending on severity of each case. Basis this assessment, the allowance for impairment of trade receivables as at the reporting dates is considered adequate.

d. 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 has built an appropriate liquidity risk management framework for its short, medium, and longterm funding and liquidity requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and un-availed borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial liabilities.

c. Debt service coverage ratio = (Profit before tax - Dividend income Finance cost) / (Finance cost Repayment of longterm loans during the year)

d. I nventory turnover ratio = (Purchase of traded goods Changes in inventories of traded goods)/ Average inventories

e. Trade receivables turnover ratio = Revenue from operations/ Average trade receivables

f. Trade payables turnover ratio = (Purchase of traded goods Changes in inventories of traded goods)/ Average trade payables

g. Net capital turnover ratio = Revenue from operations/ (Average inventories Average trade receivables - Average trade payables)

h. Net profit % = (Net profit after tax - Dividend income

- Tax expenses in respect of earlier years)/ Revenue from operations

i. Return on equity % = Profit after tax/ (Average equity -Investments in subsidiaries)

j. Return on capital employed (Net of cash) % = (Profit before tax Finance costs)/ (Average capital employed

- Investment in subsidiaries - cash and cash equivalents) where Capital employed = Equity Borrowings.

k. Return on capital employed (Gross) % = (Profit before tax Finance costs)/ (Average capital employed - Investment in subsidiaries)

l. Return on investment % = Income generated from invested funds/ Average invested funds in treasury investments.

As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. A CSR committee has been formed by the company as per the Act. The CSR funds were primarily utilised throughout the year on activities which are specified in Schedule VII of the Companies Act, 2013 through the 'Foundation for CSR @ Redington' trust formed to carry out the Company's CSR activities.

47. SEGMENT REPORTING

Since the Company prepares consolidated financial statements, segment information has been disclosed in the consolidated financial statements as per Ind AS-108 "Operating Segment".

48. STOCK APPRECIATION RIGHTS

Details of Stock Appreciation Rights

The Company had formulated 'Redington Stock Appreciation Right Scheme 2017' ("SAR Scheme 2017") with an intent to reward the employees of the Company and its subsidiaries for their performance and to motivate them to contribute to the growth and profitability of the Company. The maximum number of shares to be issued against the Stock Appreciation Rights (SARs) shall not exceed 86,81,681 equity shares of '2/- each as adjusted for any changes in the capital structure of the Company. Pursuant to the approval of SAR Scheme 2017 by the members of the Company, the Nomination and Remuneration Committee of the Board of Redington Limited on December 30, 2017 approved the grant of 81,79,000 SARs to the employees of the Company and its subsidiaries.

Each SAR entitles the eligible employees and directors to receive equity shares of the Company equivalent to the increase in value of one equity share ('Appreciation'). Appreciation is calculated by reducing the issue price / base price from the reported closing price of the equity shares in the NSE / BSE where there is highest trading, on the day prior to the date of exercising of these SARs and multiplying the resultant with the number of SARs exercised.

These SARs vest over a period of 3 years from the date of the grant in the following manner:

10% of the SARs vest after a period of one year from the grant date, 20% of the SARs vest after a period of two years from the grant date and 70% of the SARs vest after a period of three years from the grant date. These SARs are exercisable within a period of three years from the respective date of vesting.

Certain SARs granted to the members of senior management team as identified by the Nomination and Remuneration committee have an associated performance condition. Of the total SARs granted to senior management team, 35% of the SARs that would vest at the end of 3 years from the date of the grant are subject to the performance conditions. As the Company has not met the performance condition, all the performance linked SAR lapsed during the previous year. The Company has used the Black-Scholes Option Pricing Model to determine the fair value of the SARs based on which the compensation cost for the previous year has been computed.

The variables / assumptions used at the time of the grant for calculating the fair value using the above model and their rationale are as follows:

i. Stock price

The closing market price of the Company's share on the date prior to the date of grant as quoted on the National Stock Exchange (NSE) has been considered for the purposes of right valuation.

ii. Volatility

Volatility is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes right pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time.

In determining volatility, the Company considers the historical volatility of the stock over the most recent period that is generally commensurate with the expected life of the right being valued. Volatility has been calculated based on the daily closing market price of the Company's stock price on NSE over these years.

is the minimum period before which the SAR cannot be exercised. The maximum life is the period after which the SAR cannot be exercised.

The expected life of rights is calculated as the average of the minimum life (vesting period) and the maximum life (i.e. vesting period exercise period).

vi. Expected dividend yield

Expected dividend yield has been calculated based on the final dividend declared during the preceding financial year.

iii. Risk free interest rate

The risk-free interest rate considered for the calculation is the interest rate applicable for maturity equal to the expected life of the rights based on the zero-coupon yield curve for Government Securities

iv. Exercise / base price

Exercise / base price of '148.50 is considered in the original valuation.

v. Expected Life of SAR’s

Expected Life of SAR is the period over which the Company expects the SAR to be exercised. The minimum life of SAR

f. Expense recognised in Statement of profit and loss

The Company has recognised costs with respect to those SARs which were issued to the employees and directors of the Company in the statement of profit and loss under employee benefit expenses.

g. Amount recognised as cost of investments in subsidiaries

The Company has recognised the cost of those SARs which were issued to the employees and directors of the subsidiaries as the cost of investments.

51. OTHER MATTERS

The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions made by the company towards Provident fund and gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess and give appropriate impact in its financial statements in the period in which the Code becomes effective and the related rules are published.

52. EVENTS AFTER THE REPORTING PERIOD

a) The Board has recommended dividend of '7.20 (360%) per equity share of '2/- each for the year ended March 31,2023, subject to the approval of shareholders of the company at the ensuing Annual General Meeting ('AGM'). The dividend will be paid within 30 days from the date of the ensuing AGM of the Company. The Record date for payment of dividend, as recommended by the Board, is fixed as Friday, July 7, 2023.

b) Subsequent to the year ended March 31, 2023, the company transferred ADC (Automated Distribution Centre) at Chennai to Proconnect Supply Chain Solutions Limited, a wholly owned subsidiary of the Company on April 26,2023 for '39.50 Crores (Includes Land, Building & other assets).

52. These standalone financial statements were approved for issue by the Board of Directors on May 16, 2023.

50. ADDITIONAL REGULATORY INFORMATION

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 II 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