3.11 Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions for onerous contracts, i.e. contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event based on a reliable estimate of such obligation.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
The disclosure of contingent liability is made when, as a result of obligating events, there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.
3.12 Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
3.13 Cash flow statement
Cash flows are reported using the indirect method, whereby net profit/ (loss) before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated.
3.14 Earnings per share
The basic earnings per share is computed by dividing the net profit/ (loss) attributable to owner's of the Company for the year by the weighted average number of equity shares outstanding during reporting period.
There are no potential dilutive equity shares with the Company.
3.15 Contributed equity
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(i) Secured, unlisted , redeemable non-convertible debentures issued to Credit Opportunities II Pte. Ltd. and India Special Situations Scheme I
? As at the year end, the paid up value of these debentures is Rs. 2,000 [31 March 2023: Rs.2,000 secured redeemable non convertible debentures of Rs.1 million each]
? Security
-Pledge of shares of CDGL where the aggregate amount shall be 2.5 times the benchmark amount.
? Personal guarantee of Late Mr. V. G. Siddhartha.
? 9.5% per year, payable quarterly and interest of 4% compounding quarterly
? Initial security cover ratio: 2.25x from CDGL shares and an additional 0.25x from CDEL shares within 45 days ("Initial Collateral Package"). Promoter shall have the right to alter the collateral to 1.00x cover from CDGL shares and an additional 1.00x cover from CDEL shares.
? The amount shall be paid on bullet repayment basis at the end of year three, 31 March 2022.
? During the FY 2020-21,the lender has recalled the entire amount outstanding
? Due to default in repayment of interest and principal. In view of the loan recall notices and pending onetime settlement with the lenders, the management has not recognised interest of Rs.294.61 millions for the period 1 April 2023 to 31 March 2024 (Rs.290.24 millions for the period 1 April 2022 to 31 March 2023)
? Lenders has filed an application with NCLT, Bangalore for recovery of its dues, on 7 September 2023.
(ii) From Axis Bank Limited [Principal amount of loan amounting to Rs. 1104.78 million (31 March 2023 - 1,104.78 million) - Secured by
? Security
- Listed shares of Sical Logistics Ltd./ Lakshmi Vilas Bank/ CDEL/ any other listed entity acceptable to the lender (65% of total security cover), held by promoter/ group covering 120% of exposure.
- Personal guarantee of Late Mr. V G Siddhartha
- Security cover by way of listed shares of at least 1.2x of the outstanding/ disbursed facility amount to be maintained during the tenor of the loan on MTM basis.
? The interest rate for the loan is as follows:
- 1 year MCLR 1% (Spread) p.a, payable monthly (First three years)
- 1 year MCLR 1.75% (Spread) p.a, payable monthly (subject to minimum effective rate of interest of 10.65% p.a) (Post three years)
? The lender can exercise the call option at the end of three years
? The Company has an option of voluntary prepayment with no penalty
? The loan amount shall be repaid in 4 half yearly instalments beginning from 42nd month of first disbursement (i.e., 28 June 2020)
? Amounts unpaid on due date will attract overdue interest at 2% p.a
? Due to default in repayment of interest and principal. In view pending onetime settlement with the lenders, the management has not recognised interest of Rs.118 millions for the period 1 April 2023 to 31 March 2024 (Rs.121.76 millions for the period 1 April 2022 to 31 March 2023)
(iii) From Rare Asset Reconstruction Limited (Rare ARC)- Rs. 478.82 million [31 March 2023: Principal amount of loan amounting to Rs. 792.22 million including current maturities of long-term borrowings - Secured by
? Security
- Pledge of a proportion of the shares of Mindtree Limited (released during the year), Coffee Day Global Limited, Sical Logistics Limited held by the Company;
- Personal guarantee of Late Mr. V. G. Siddhartha
? The loan carries an interest rate of 15.00% p.a. payable quarterly
? Any delay in repayment of interest entails payment of penal interest @ 24% p.a. for the period of delay.
? The Company has an option of voluntary prepayment under certain circumstances as set out in the arrangement. Further, the Company has an option to repay the loan in advance with a prepayment premium of 2% on the principal amount outstanding as on the date of prepayment.
? The repayment of the loan has been extended pursuant to the letter dated 24 September 2020 up to 31 March 2021 and During the FY 2021-22,the lender has recalled the entire amount outstanding amount and also initiated legal disputes.
? Due to default in repayment of interest and principal. In view of the loan recall notices, legal disputes and pending onetime settlement with the lenders, the management has not recognised interest of Rs.93.03 millions for the period 1 April 2023 to 31 March 2024(Rs.150.24 millions for the period 1 April 2022 to 31 March 2023).
? Aditya Birla Finance Limited assigned its debt as per the provisions of SARFAESI Act, in favour of Rare Asset Reconstruction Limited along with all the underlying securities, rights, title and interest through an Registered Assignment Agreement dated March 31, 2023
31 Leases
Effective April 1,2019, the company adopted Ind AS 116 “Leases” and applied to all lease contracts existing on April 1,2019 using the modified retrospective method and has taken the cumulative adjustment to retained earnings, on the date of initial application.
Consequently, the company recorded the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the right of use asset at its carrying amount as if the standard had been applied since the commencement date of the lease, but discounted at the lessee’s incremental borrowing rate at the date of initial application.
The company's lease assets primarliy consists of leases for land and buildings. The company has recognised right-of-use assets and lease liability in respect of these leases on adoption of Ind AS 116. The lease liability is secured by the respective security deposits. The lease liability terms varies between 2 to 20 years, and are payable in monthly installments.
The weighted average incremental borrowing rate applied to lease liabilities as at April 1, 2019 is 12.50%.
Effects on adoption of Ind AS 116:
i) On transition, the adoption of the new standard resulted in recognition of'Right of Use asset' of Rs.22.42 Million, and a lease liability of Rs.45.34 Millions. The cumulative effect of applying the standard of was adjusted with opening balance of retained earnings. The effect of this adoption is insignificant on the profit before tax, profit for the period and earnings per share. Ind AS116 will result in decrease in cash out flows from operating activities and an increase in cash out flows from financing activities on account of lease payments.
ii) On pre-mature termination of lease contract the related right-of-use asset and lease liability is de-recognised and the differential amount is recognised in profit and loss acccount.
iii) Rental expenses recognised in Profit & Loss statement, in respect of low value leases and short term leases, for which Ind AS 116 has not been applied, is Rs. 0.66 Million (Previous year Rs 0.17 million)
F air value hierarchy
Fair value hierarchy explains the judgement and estimates made in determining the fair values of the financial instruments that area) recognised and measured at fair value
b) measured at amortised cost and for which fair values are disclosed in the financial statements.
To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table:
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including
bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the counter derivatives) 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 notbased on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in
level 3
3 Measurement of fair values
i) Valuation techniques and significant unobservable inputs
The fair value of the financial assets and liabilities is included at the amount at which the instrument could 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 fair values of the Company’s interest-bearing debentures and loans are determined by using DCF method using discountrate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 March 2024 was assessed to be insignificant.
The following tables show the valuation techniques used in measuring Level 2 fair values. The significant unobservable inputs used have not been disclosed as no financial assets and liabilities have been measured at fair value:
C Financial risk management
The Company has exposure to the following risks arising from financial instruments:
- credit risk (see (b));
- liquidity risk (see (c)); and
- market risk (see (d)).
(a) 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 analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk managementpolicies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
Board oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. Board is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers; loans and investments in debt securities.
The carrying amounts of financial assets represent the maximum credit risk exposure.
i) Trade receivables and loans:
The Company's trade receivable primarily includes receivables from related parties and others from Customers. The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references.
The Company's loans include recoverable from loans given to wholly owned subsidiaries
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information.
Based on the above analysis, the Company does not expect any credit risk from its trade receivables and loans recoverable for any of the years reported in this financial statements.
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, which 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 optimising the return. i) Currency risk
The Company is not exposed to any currency risk. The currencies in which these transactions are denominated is INR.
As per our report of even date attached
for Venkatesh & Co for and on behalf of the Board of Directors of
Chartered Accountants Coffee Day Enterprises Limited
Firm registration number: 00463 6S
Sd/- Sd/- Sd/-
CA Desikan G Malavika Hegde S V Ranganath
Partner Director Director
Membership no.: 219101 DIN: 00136524 DIN: 00323799
Place: Bangalore
Date: 24 May 2024 Sd/- Sd/-
R Ram Mohan Sadananda Poojary
UDIN: 24219101BKAPMH5323 Chief Financial Officer Company Secretary
Place: Bangalore Place: Bangalore
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