i) Terms / rights attached to equity shares:
The Company has only one class of equity shares having a par value of H 1 per share. Each holder of equity shares is entitled to one vote per share.
In 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.
Each equity shareholder is entitled to dividends as and when the Company declares and pays dividend after obtaining shareholders’ approval.
During the previous year, the Company had completed its Initial Public Offer (I PO) of 47,575,326 equity shares of face value of H 1 each at an issue price of H 1,125 per share (including a share premium of H 1,124 per share). A discount of H 100 per share was offered to eligible employees bidding in the employee’s reservation portion of 250,000 equity shares. The issue comprised of a fresh issue and allotment of 5,602,666 equity shares aggregating to H 6,300 Mn and offer for sale of 41,972,660 equity shares by selling shareholders aggregating to H 47,197 Mn.
vi) Shares issued for consideration other than cash:
a) The Company has issued 2,373,563,075 bonus shares of face value of H 1 each during the year vide shareholders’ approval dated November 02, 2022 in the ratio of 5 bonus shares for every 1 share held.
b) The Company had issued 311,357,900 bonus shares of face value of H 1 each during the year 2022 vide shareholders’ approval dated July 16, 2021 in the ratio of 2 bonus shares for every 1 share held.
As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
iv) Shares reserved for issue under employee stock option
The Company has reserved issuance of 210,000,000 (Previous year 198,000,000) Equity Shares of H 1 each for offering to Eligible Employees of the Company and its subsidiaries under Employees Stock Option Scheme (ESOS). During the year ended March 31, 2023 the Company has granted 3,109,600 options (March 31, 2022: 3,651,000). Cumulative number of equity shares granted under Employee Stock Option Scheme (ESOS) is 59,448,400 equity shares as at March 31, 2023. (March 31, 2022: 56,338,800).
Nature and purpose of reserves
(i) Securities premium: Where the Company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares is transferred to Securities Premium.
(ii) Retained earnings: Retained Earnings are the profits / (losses) that the Company has earned till date, less any dividends or other distributions paid to shareholders.
(iii) Other Comprehensive Income: This represents the cumulative gains and losses arising on remeasurement of defined employee benefit plan.
(iv) Share application money pending allotment: This represents the share application money received in previous year for Employee Stock Option Scheme for which shares are allotted during the current financial year.
(v) Employee Share Options Scheme Reserve: The fair value of the equity-settled share based payment transactions with employees is recognised in Employee Share Options Scheme Reserve.
(vi) Capital Reserve: Capital reserve is on account of forfeiture of partly paid up OCRPS and security premium thereon.
Notes:
(i) Working Capital/Cash Credit Facilities from Bank is secured by hypothecation of book debts, current assets and movable Property, plant and equipment both present and future.
(ii) Loan is payable on demand. Interest payable on working capital loan is MCLR/ Repo/ T-Bill adjusted with the risk spread mutually agreed between the parties.
(iii) Maximum amount of loan outstanding during the year was H 835.79 Mn (March 31, 2022: H 669.47 Mn).
(iv) Bank loan contain certain financial covenants and the Company has satisfied all covenants as per the terms of bank loan.
(v) As at March 31, 2023, the Company had undrawn committed funded and non-funded borrowing facilities of H 470.32 Mn (March 31, 2022: H 381.60 Mn).
(vi) Quarterly statements of current assets filed by the Company with banks are in agreement with the audited/unaudited books of accounts.
The number of shares at the beginning of the previous year have been restated to give effect of share split of equity shares of face value of H 10 each sub-divided into equity shares of face value of H 1 each.
The number of shares at the beginning of the year have been restated to give effect of and bonus shares allotted in the ratio of 5 bonus shares for every 1 share held vide shareholders’ approval dated November 02, 2022.
42 Leases
The Company as lessee
The Company has lease contracts for premises obtained for offices, warehouse etc. Leases of premises generally have lease terms between 3 to 5 years.
The Company’s obligations under its leases are secured by the lessor’s title to the leased assets.
The Company has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Company’s business needs. Management exercises significantjudgement in determining whether these extension and termination options are reasonably certain to be exercised.
43 Defined Benefit Plan and Other Long Term Employee Benefit Plan:
I) Defined Contribution Plan
During the year, the Company has made contribution/provision to provident fund stated under defined contribution plan amounting to H 12.45 Mn (March 31, 2022: H 9.64 Mn) and the same has been recognised as an expense in the Statement of Profit and Loss.
II) Defined Benefit Plans
The Company operates a defined benefit gratuity plan for its employees. The gratuity benefits payable to employees are based on the employee’s service and last drawn salary at the time of leaving. The Company has provided for gratuity based on actuarial valuation done as per projected unit credit method.
The discount rate is based on the prevailing market yields of Government of India Bonds as at the Balance Sheet date for the estimated terms of the obligations.
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.
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period and assuming there are no other changes in the market conditions. There have been no changes from the previous periods in the methods and assumptions used in preparing the sensitivity analysis.
These plans typically expose the Company to actuarial risks such as: interest risk, longevity risk and salary risk.
a) Interest risk - A decrease in the discount rate will increase the plan liability.
b) Longevity risk - The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
c) Salary risk - The present value of the defined plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.
The Company do not have any other transaction with key managerial person than that is disclosed above.
*Remuneration includes amount of perquisite value towards ESOP based on exercise of options.
Amount paid to KMP do not include the provisions made for gratuity as it is determined on an actuarial basis for the Company as a whole. Similarly, expenses for compensated absences are not included in the above table as the same is also determined on an actuarial basis for the Company as a whole.
The total offer expenses were estimated to be H 2,423.44 Mn (inclusive of taxes) which were proportionately allocated between the selling shareholders (including a related party) and the Company in the proportion of equity shares sold by the selling shareholders and the Company. As at March 31, 2022 amount of H 226.42 Mn payable to selling shareholders (Refer note 28) out of the IPO proceeds was withheld pending final settlement of IPO proceeds and included amount payable to a related party. In the current year the same has been settled.
A Commitments
The Company does not have any contract remaining to be executed on capital account and not provided for (net off advances) H Nil as at March 31, 2023 (March 31, 2022 - Nil).
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B Contingent liabilities (not provided for)
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Particulars
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As at
March 31, 2023
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As at
March 31, 2022
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i) Claims against the Company, not acknowledged as debts
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|
|
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Disputed Indirect tax matters (including interest up to the date of demand, if any) [Refer note (i) below]
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26.64
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26.64
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ii) Corporate guarantees given to banks [Refer note (ii) below]
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6,390.00
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3,540.00
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Total
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6,416.64
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3,566.64
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Notes:
i. The Company has received VAT assessments order for financial years 2016-17 with demands amounting to H 32.02 Mn on account of certain input disallowances/adjustment made by VAT department. Out of the total demand amount, the Company has paid H 5.38 Mn to tax authorities during the financial year 2021-2022 and for the balance H 26.64 Mn the management believes that the position taken by it on the matter is tenable and hence, no adjustment has been made to the financial statements.
ii. Corporate guarantees given to banks with respect to borrowings taken by the subsidiary companies to a maximum amount of H 6,390 Mn (March 31, 2022: H 3,540 Mn), carrying amounts of the related financial guarantee contracts at March 31, 2023 were H Nil (March 31, 2022: H 24.18 Mn) (Refer note 28).
The carrying values of the financial assets and liabilities measured at amortised cost are reasonable approximation of their fair values. Accordingly, the fair values of such financial assets and liabilities have not been disclosed separately.
Valuation methodology:
The fair values of assets and liabilities are included at the amount at which the instrument can be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
The valuation techniques used to determine the fair values of financial assets and financial liabilities classified as level 2 include use of quoted market prices or dealer quotes for similar instruments and generally accepted pricing models based on a discounted cash flow analysis using rates currently available for debt on similar terms, credit risk and remaining maturities.
The Company enters into derivative financial instruments such as forward contracts with various counterparties. The fair value of such derivatives instruments are determined using forward exchange rates, currency basis spreads between respective currencies, etc.
48 Financial Risk Management Objectives and Policies:
The Company’s principal financial liabilities comprise borrowings from banks, trade and other payables. The main purpose of these financial liabilities is to finance and support the Company’s operations. The Company’s principal financial assets comprise cash and bank balance, trade and other receivables that derive directly from its operations.
The Company is exposed to various financial risks such as market risk, credit risk and liquidity risk. The Company’s senior management team oversees the management of these risks. The Board ofDirectors review and agree policies for managing each of these risks, which are summarised below:
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 mainly comprises currency risk, product price risk and interest risk.
The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2023 and March 31, 2022.
b) 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 denominated in foreign currency and thus the risk of changes in foreign exchange rates relates primarily to trade payables.
Since the business of the Company doesn’t involves material foreign currency transactions, its exposure to foreign currency changes is not material.
c) Product price risk
In a potentially inflationary economy, the Company expects periodical price increases across its product lines. Product price increases which are not in line with the levels of customers’ discretionary spends, may affect the business/ sales volumes. In such a scenario, the risk is managed by offering judicious product discounts to customers to sustain volumes. The Company negotiates with its vendors for purchase price rebates such that the rebates substantially absorb the product discounts offered to the customers. This helps the Company to protect itself from significant product margin losses. This mechanism also works in case of a downturn in the retail sector, although overall volumes would get affected.
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).
a) Trade receivables
The Company has adopted a policy of dealing with only credit worthy counterparties in case of institutional customers and the credit risk exposure for institutional customers is managed by the Company by credit worthiness checks. The Company’s experience of delinquencies and customer disputes have been minimal. Also, the Company has a simplified approach to determine impairment loss allowance on the portfolio of trade receivables. This is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. Accordingly, the credit risk is covered by the Company (Refer accounting policy 2(g) for expected credit loss on trade receivable).
b) Security deposit
The Company also carries credit risk on lease deposits with landlords for properties taken on leases, for which agreements are signed and property possessions are taken for operations. The risk relating to refunds after vacating the premises is managed through successful negotiations or appropriate legal actions, where necessary.
Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s Board of Directors on an annual basis and may be updated throughout the year subject to approval of the Company’s Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure to make payments.
Liquidity risk
Liquidity risk is a risk that the Company may not be able to meet its financial obligations on a timely basis through its cash and cash equivalents, and funds available by way of committed credit facilities from banks. Management manages the liquidity risk by monitoring rolling cash flow forecasts and maturity profiles of financial assets and liabilities. This monitoring includes financial ratios and takes into account the accessibility of cash and cash equivalents and additional undrawn financing facilities.
51 Employee Share Based Payment:
The Company has granted stock options under the employee stock option scheme- ESOS 2012, ESOS 2017 and ESOP 2022 respectively, as approved by the Board of Directors of the company, to the eligible employees of the Company or its subsidiaries. These options would vest in 3 or 4 equal annual installments from the date of grant based on the vesting conditions as per letter of grant executed between the Company and the employee of the Company or its subsidiaries. The maximum period for exercise of options is 4 years from the date of vesting. Each option when exercised would be converted into one fully paid-up equity share of H 1 each of the Company. The options granted under ESOS 2012, ESOS 2017 and ESOP 2022 scheme carry no rights to dividends and no voting rights till the date of exercise.
The Company has recognised an expense of H 21.35 Mn (March 31, 2022: H 35.82 Mn) arising from equity settled share based payment transactions for employee services received during the year. The carrying amount of Employee stock options outstanding reserve as at March 31, 2023 is H 169.26 Mn (March 31, 2022: H 155.91 Mn)
49 Segment information:
The Company has identified Board of directors and CEO as Chief Operating Decision Maker (‘CODM’) who reviews and allocates resources based on Omni business and Omni channel strategy, which in terms of Ind AS 108 on “Operating Segments” constitutes a single reporting segment.
i) The Company operates in a single geographical environment i.e. in India.
ii) No single external customer (other than related party) contributed 10% or more to Company’s revenue.
50 Capital management:
The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to its shareholders. For the purpose of the Company’s capital management, capital includes issued equity capital, convertible preference shares, securities premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise the shareholder value. The capital structure of the Company is based on management’s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The Company consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. The Company’s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The volatility is based on annualised standard deviation of the continuously compounded rates of return based on the peer companies and competitive stocks over a period of time. The Company has determined the market price on grant date based on latest equity valuation report available with the company preceding the grant date.
The weighted average share price at the date of exercise of options exercised during the year was H 187 (March, 2022 H 153**)
**The movement of options & the fair value assumptions have been restated to give effect of the bonus shares allotted by the company wide shareholders’ approval dated November 02, 2022 in proportion of 5:1, i.e., 5 (five) bonus equity shares of H 1 each for every 1 (one) fully paid-up equity share held as on the record date.
53 Utilisation of IPO funds
During the previous year, the Company had completed its Initial Public Offer (I PO) of 47,575,326 equity shares of face value of H 1 each at an issue price of H 1,125 per share (including a share premium of H 1,124 per share). A discount of H 100 per share was offered to eligible employees bidding in the employee’s reservation portion of 250,000 equity shares. The issue comprised of a fresh issue of 5,602,666 equity shares aggregating to H 6,300 Mn and offer for sale of 41,972,660 equity shares by selling shareholders aggregating to H 47,197 Mn. Pursuant to the IPO, the equity shares of the Company were listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) on November 10, 2021.
The Company is executing certain multiyear ongoing projects namely, “Project Rangeet” and “Nykaa Chair in Consumer Technology implemented by IIM-A”. Due to such ongoing projects and plan of spending funds in multi years, the Company was not able to spend two per cent of the average net profit as per section 135(5) in the current financial year. Unspent CSR amount pertaining to the commitments made by the Company towards multi-year ongoing projects has been transferred to a separate Unspent CSR account of the Company. The amount transferred to the aforesaid Unspent CSR account will be spent for the said projects within the permissible time limit.
Accordingly, the Company has duly complied with section 135 of the Act read with rules thereunder and the CSR policy of the Company.
The amount during the year has been spent towards promoting research & education, upskilling and health care.
‘Contribution of H 3 Mn has been given to Nykaa foundation which is a section 8 company engaged in doing CSR activities. The amount has been contributed to Sambhav Foundation through Nykaa Foundation for CSR activity.
55 Other Statutory Information
i. The Company does not have any transactions with companies struck off.
ii. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
iii. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
iv. The Company did not have any 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)
v. 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, whether, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
vi. No funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
56 Previous year figures have been regrouped and
reclassed wherever required to conform to those of the current year.
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