Estimation of fair value
As at March 31, 2023 and March 31, 2022 the fair values of the property are based on valuations performed by Registered Valuer as defined under rule 2 of the Companies (Registered Valuers and Valuation) Rules 2017.
A valuation model used in determination of investment property fair values is in accordance with the recommended valuation techniques by the International Valuation Standards Committee.
The Company obtains independent valuations for its investment property at least annually. The best evidence of fair value is current prices in an active market for similar properties.
The valuation of investment property as at March 31, 2023 and March 31, 2022 is done based on market feedback on values of similar properties and hence considered under “’’Level 2”” of fair value measurement.
16.2 Rights, preferences and restrictions attached to the equity shares
The Company has only one class of Equity Shares having a par value of INR 2 per share. Each shareholder is eligible for one vote per share held. The dividend 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, which is approved by Board of Directors. 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.
Notes:-
(a) * The Composite Scheme of Merger and Arrangement (“Scheme”) consisting Demerger of Demerged Undertakings of Emtici Engineering Limited, Akaaish Mechatronics Limited, Wizard Fincap Limited, Speciality Wood Pack Private Limited, Prayas Engineering Limited, Elecon Information Technology Limited and Elecon Peripherals Limited (collectively referred to as “Demerged Companies”); and Merger of Devkishan Investments Private Limited and Bipra Investments and Trusts Private Limited (collectively referred to as “Transferor Companies”) into/with Aakaaish Investments Private Limited (collectively referred to as “Resulting Company” or “Transferee Company”) is approved by the National Company Law Tribunal, Ahmedabad Bench vide by an order dated 2nd November, 2022 (certified copy of said Order dated 4th November, 2022) in accordance with Sections 230 to 232 and other applicable provisions of the Companies Act, 2013.
(b) # Devkishan Investments Private Limited and Bipra Investments and Trusts Private Limited are merged into Akaaish Investments Private Limited vide above said NCLT Order and hence as on 31st December, 2022; there is no existance of these two merged companies.
17.3 Description of Reserves
General Reserve
General Reserve represents appropriation of retained earnings and are available for distribution to shareholders. Debenture Redemption Reserve
The Company had created Debenture Redemption Reserve out of the profits of the Company @ 25% of non-convertible redeemable debentures. On redemption of debentures during the previous year the said Reserve had been transferred to Retained Earnings.
Securities Premium
Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.
Capital Reserve
a) Capital reserve amounting to INR 4,258.41 lakhs is recorded in bargain purchase transaction of business combination in which the fair value of acquired net assets exceeded the purchase consideration. Capital reserve is not available for dividend distribution.
b) Capital Reserve amounting to INR 683.43 lakhs represent difference between book value of the net assets and reserves of Elecon Transmission International Limited (‘ETIL') and investment in equity shares of Elecon Transmission International Limited.
Retained Earnings
Retained earnings represents surplus/accumulated earnings of the Company and are available for distribution to shareholders.
Under the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”), certain disclosures are required to be made relating to MSME. On the basis of the information and records available with the Company's management, dues to MSME have been determined to the extent such parties have been identified on the basis of information collected till the reporting date and has been relied upon by the Statutory Auditors. The Management has not provided for interest due (if any) to these MSME parties basis, no claim being made for the same and management representation that the same would be waived. The disclosures as required by Section 22 of the MSMED Act are given above.
Refer 2.5 (k) of significant accounting policies.
Provision for contract liabilities - It includes provision for possible levy of liquidated damages and other estimated costs expected to be incurred by the Company on account of potential delays in meeting the contractual obligations of the Company with regard to agreed deliveries/commissioning.
Provision for warranties - A provision for warranties relates mainly to standard warranty on sale of the products manufactured by the Company. The provision is based on technical evaluation, historical warranty data and a weighting of all possible outcomes by their associated probabilities. The timing of the outflows is expected to be within a period of one year from the date of balance sheet.
Provision for onerous contracts - The Company has entered into various contracts primarily into material handling. Provision for onerous contract is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. The movement of onerous contracts is recognised in cost of material consumed (Refer note 29).
38. Financial instruments risk management objectives and policies
The Company's financial liabilities comprise mainly of borrowings, trade and other payables. The Company's financial assets comprise mainly of investments, cash and cash equivalents, other balances with banks, loans, trade receivables and other receivables.
The Company is exposed to Market risk, Credit risk and Liquidity risk. The Board of the Company has constituted a Risk Management Committee to frame, implement and monitor the risk management plan for the Company. The said committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls. It also covers policies on specific risk areas such as currency risk, interest rate risk, credit risk and investment of surplus funds.
The following disclosures summarize the Company's exposure to financial risks and information regarding use of derivatives employed to manage exposures to such risks. Quantitative sensitivity analysis have been provided to reflect the impact of reasonably possible changes in market rates on the financial results, cash flows and financial position of the Company.
(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 risks: interest rate risk, currency risk and other price risk. Financial instruments affected by market risk includes borrowings, investments, trade payables, trade receivables and loans. 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 seeks to mitigate such risk by maintaining an adequate proportion of floating and fixed interest rate borrowings. As at March 31, 2023, approximately 100% of the Company's borrowings are at fixed rate (March 31, 2022 : 99%). Summary of financial assets and financial liabilities has been provided below:
Equity price risk
The Company's investment consists of investments in equity shares of publicly traded companies held for purposes other than trading as well as investments in quoted mutual funds. Since these investments are insignificant, the exposure to equity price changes is minimal.
(b) Credit risk
Credit risk is the risk that a 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 primarily trade receivables and other financial assets including deposits with banks. The Company's exposure and credit ratings of its counterparties are continuously monitored and the aggregate value of transactions is reasonably spread amongst the counterparties. Security deposits mainly includes rental deposits, earnest money deposits which are given as per contractual agreement. Unbilled revenue pertains to one government contract where there has been no delay or default in the past periods.
Other financial assets
This comprises mainly of deposits with banks, investments in mutual funds and other group receivables. Credit risk arising from these financial assets is limited and there is no collateral held against these because the counterparties are group companies, banks and recognised financial institutions. Banks and recognised financial institutions have high credit ratings assigned by the credit rating agencies.
Trade receivables
Customer credit risk is managed by each business unit subject to the Company's established policy and procedures. Trade receivables are non-interest bearing and generally have a credit period not exceeding 90 days. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. The Company's objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including bilateral loans, debt and overdraft from both banks and financial institutions at an optimised cost.
(d) Commodity price risk
Commodity price risk arises due to fluctuation in prices of steel. The Company has a risk management framework aimed at prudently managing the risk arising from the volatility in the commodity prices and freight costs. The Company's commodity risk is managed through well-established control processes.
(e) Capital management
For the purpose of the Company's capital management, capital includes paid-up equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to ensure that it maintains a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as level of dividends to equity share holders.
The Company manages its capital structure and makes adjustments to it in the 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 monitors capital using Debt-Equity ratio, which is net debt divided by total equity. The Company's policy is to keep the net debt to equity ratio below 2. The Company includes within net debt, interest bearing loans and borrowings, less cash and short-term deposits.
39. Fair Value Measurements
A. Accounting classification and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Note 1 Investments in associates and subsidiaries have been accounted at historical cost. Since these are scoped out of Ind AS 109 for the purposes of measurement, the same have not been disclosed in the tables above. Investments in unquoted equity shares of entities other than subsidiaries and associates have been designated as FVTPL. However, investments in equity shares other than those of Eimco Elecon Electricals Limited (EEEL) on disposal will fetch only the principal amount invested and hence the company considers cost and fair value to be the same.
Fair value of financial assets and liabilities measured at amortised cost is not materially different from the amortised cost. Further, impact of time value of money is not significant for the financial classified as current. Accordingly, the fair value has not been disclosed separately.
B. Measurement of fair values
i) Valuation techniques and significant unobservable inputs
The carrying amounts of financial assets and liabilities other than those valued at Level 1 and Level 2 are considered to be the same as their fair values due to the current and short term nature of such balances and no material differences in the values. Fair value of borrowing is computed using the market comparison technique where information for the interest rate at which a borrowing can availed by company is used to arrive at fair value of borrowing. Further management measurement of fair value is not materially different from the amortised cost in these case significant unobservable inputs and inter relationship between significant unobservable inputs and fair value measurement is not applicable.
On account of materiality and in absence of sufficient information for determination of fair value of investments in equity shares of INR 0.15 lakhs (March 31, 2022: INR 0.15 lakhs), the Company has not fair valued the same.
ii) Levels 1, 2 and 3
Level 1 : It includes Investment in equity shares and mutual funds that have a quoted price and which are actively traded on the stock exchanges. It has been valued using the closing price as at the reporting period on the stock exchanges.
Level 2 : The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3 : If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
C. Fair value through profit and loss - in unquoted equity shares:
Investments in equity shares of Eimco Elecon Electricals Limited (EEEL) have been designated as FVTPL. Based on EEEL's future projections of 5 years, Discounted Cash Flow (DCF) valuation methodology has been used to determine the fair value as on March 31, 2023.
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42. Contingent liabilities and commitments
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(' in Lakhs)
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Particulars
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March 31, 2023
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March 31, 2022
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(a)
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Contingent liabilities:
Claims against the Holding Company not acknowledged as debt *
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(i)
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Disputed with Excise and Service tax authority
[FY 22-23 : Amount deposited : 342.22 Lakhs, Net 5,743.46 Lakhs]
[FY 21-22 : Amount deposited : 250.88 Lakhs, Net 5,943.29 Lakhs]
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6,085.67
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6,194.17
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(ii)
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Disputed with Sales tax authority
[FY 22-23 : Amount deposited : 9.75 Lakhs, Net 337.30 Lakhs] [FY 21-22 : Amount deposited : 9.75 Lakhs, Net 337.30 Lakhs]
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347.05
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347.05
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(iii)
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Disputed with GST tax Authority
[FY 22-23 : Amount deposited : 0.48 Lakhs, Net 8.79 Lakhs] [FY 21-22 : Amount deposited : NIL , Net NIL]
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9.27
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(iv)
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Disputed with Income tax authority
[FY 22-23 : Amount deposited : 1,174.13 Lakhs, Net 2,875.47 Lakhs] [FY 21-22 : Amount deposited : 2,158.89 Lakhs, Net 3,733.79 Lakhs]
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4,049.60
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5,892.69
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(v)
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Sales bills discounted under letter of credit with Banks
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244.39
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165.28
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(vi)
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Arbitration Proceedings of K.B. Mehta against the Company under direction of the Honourable Gujarat High Court.
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-
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172.32
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Guarantees
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(i)
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Corporate Guarantee provided to Swedish Pension Authority to the tune of SEK 30.00 Million (March 31, 2022: SEK 53.00 Million) as a security, in replacement of earlier guarantee given by erstwhile owner, for the purchase of pension insurances relating to the pension commitments on behalf of AB Benzlers Sweden, a step-down subsidiary of Radicon Transmission UK Limited, Uk, a Wholly-owned Subsidiary of the Company.
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2,375.48
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4,285.65
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* Future cash outflows are determinable only on receipt of judgements/ decisions pending with various forums/
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authorities. It is not practicable to disclose possibility of any reimbursement.
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(b)
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Commitments:
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Estimated amount of contracts remaining to be executed on capital account and not provided for (net of capital advance).
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4,334.98
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493.42
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43. Segment reporting
The Company publishes these Standalone financial statements along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated financial statements.
d. Unsatisfied performance obligations
The Company applies the practical expedient in Paragraph 121 of Ind AS 115 and does not disclose information about remaining performance obligations where the Company has a right to consideration from the customer in an amount that corresponds directly with the value to the customer of the Company's performance completed to date. Accordingly, the Company recognises revenue by an amount to which the Company has a right to invoice.
45. Lease Transactions
The Company has elected below practical expedients while applying Ind AS 116:
1. Applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
2. Applied the exemption not to recognise right of use assets and lease liabilities with less than 12 months of lease term on the date of initial application.
3. Excluded the initial direct costs from the measurement of right of use asset at the date of initial application. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified assets for a period of time in exchange for consideration.
The Company has elected not to apply the requirements of Ind AS 116 to short term leases of all the assets that have a lease term of twelve months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straight line basis over the lease term.
The incremental borrowing rate applied to lease liabilities as at 1st April, 2022 is 14.50% and 8.00% for Lease Arrangeents of current year.
47. Other Disclosures with respect to Schedule III
1. The company does not have any Benami property, where any proceeding has been initiated or pending against the company for holding any Benami property.
2. The company is not declared as wilful defaulter by any bank or financial Institution or other lender.
3. There is no Scheme of Arrangements approved by the Competent Authority in terms of sections 230 to 237of the Companies Act, 2013.
4. The company has no 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.
5. The company have not traded or invested in Crypto currency or Virtual Currency during the year.
7. The company does not have any charges or satisfaction which is yet to be registered with Registrars of Companies beyond the statutory period.
8. The company have 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.
9. The company have 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.
48. The Standalone financial statements were authorised for issue by board of director at their meetings held on April 25, 2023
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