Rights and preferences attached to equity shares
The Company has only one class of equity shares having a par value of H 5 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
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 preferential amount. The distribution will be in proportion to the number of equity shares held by the shareholders.
Description of the purposes of reserves within equity General Reserve
Under the erstwhile Indian Companies Act, 1956, a general reserve was created through an annual transfer of net income in accordance with applicable regulations.
Securities premium
The amount in the Securities premium account represents the additional amount paid by the shareholders for the issued shares in excess of the face value of those shares.
Share options outstanding account
The company offers ESOP, under which, options to subscribe for the Company's share have been granted to specified senior management employees. The Share options outstanding account balance represents fund created as per the companie's ESOP scheme.
Equity instruments through other comprehensive income
This represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income, under an irrevocable option, net of amounts reclassified to retained earnings when such assets are disposed off.
Capital reserve arising out of business combination
Capital reserve represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business combination transactions and the same is not available for distribution as dividends.
Capital reserve arising out of Merger
This represents capital reserve on business combination which arises on transfer of business between entities under common control.
The Company offsets the tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Security for Secured Loans
Working capital facilities with Banks (fund based and non fund based) are secured by first charge by way of hypothecation on the current assets both present and future.
Commercial Papers
During FY 2023-24, the following Commercial Papers have been issued :
a. On 27th Jul 2023 H 100 Crores issued at a discounted rate of 7.65% p.a. paid on 27th Mar 2024
b. On 11th August 2023 H 100 Crores issued at a discounted rate of 7.25% p.a. paid on 09th Nov 2023
c. On 08th Nov 2023 H 100 Crores issued at a discounted rate of 7.40% p.a. paid on 29th Dec 2023
d. On 29th Dec 2023 H 100 Crores issued at a discounted rate of 7.60% p.a. paid on 28th Mar 2024
e. On 06th Mar 2024 H 100 Crores issued at a discounted rate of 7.80% p.a. payable on 30th August 2024
During FY 2022-23, Commercial Papers of H 75 Crores issued at a discounted rate of 7.85% on 16th Mar 2023 paid on 12th Sep 2023.
The current assets and receivables have been hereby hypothecated as and by way of first charge and shall rank pari-pasu with charge created.
Registration of charges or satisfaction with ROC :
During FY 2023-24, modification of charges for enhancing the Working Capital Facilities from H 450 Crores to H 840 Crores has been registered with ROC.
# The constitutional validity of the provisions restricting the utilisation of Input tax credit on Works Contract Service for construction of Immovable property was challenged by Safari Retreats Private Limited before the Honourable Orissa High Court. The Honourable High Court of Orissa has held that restricting such credits would mean a very narrow interpretation of the law and hence not appropriate - that the credits are therefore allowable vide order dated 17 April 2019. The Government has however challenged this ruling and has filed an SLP before the Hon’ble Supreme Court of India - the matter is currently sub judice.
In this regard, the Comapny is placing reliance on the judgement of the Honourable High Court of Orissa and has availed an amount of H 6.72 Crores as eligible input credit, but has not utilised the same and shown as receivables from Government authorities. The Company has also filed from time to time intimations to the jurisdictional tax office informing about the said amounts having been claimed as input credits.
39.1 The Company and its Subsidiary Company, ISMT Enterprises S.A., Luxembourg has invested H 48.43 Crores in Structo Hydraulics AB, Sweden (SHAB). The Company has received approval from regulatory authorities for conversion into equity of an amount of H 33.33 Crores (USD 5 Million) due from SHAB, out of which H 16.75 Crores had been converted into equity.
SHAB's business was facing significant challenges due to the Eurozone crisis and ongoing slowdown in the European market, leading to a working capital crisis. After exploring various options including sale, revival, or liquidation, the management has decided to file bankruptcy liquidation for both SHAB and ISMT EUROPE. Accordingly, Liquidators were appointed on 12th Feb '24 and 5th Mar '24 respectively, following multiple rounds of internal and external discussions.
Based on bankruptcy liquidation filed by the company, H20.57 Crores has been provided towards net assets due to loss of control and disclosed as an exceptional item.
39.2 Tridem Port and Power Company Private Limited (TPPCPL), a wholly owned subsidiary, along with its subsidiaries had proposed to set up a thermal power project and captive port in Tamil Nadu. TPPCPL had obtained the approvals for the projects including acquisition of land, but no construction activity had commenced. The Government of Tamil Nadu had granted various permissions to TPPCPL for setting up the aforesaid port and power project. Subsequently, the Government had withdrawn permissions so given in earlier years which was challenged by the company in high court by way of writ petitions.
The Hon'ble Madras High Court had dismissed all the said Writ Petitions filed by TPPCPL & its subsidiaries. TPPCPL had challenged the above-mentioned Order by filing Writ Petitions before the Division Bench of the High Court, Madras on 06th October 2023. On further hearings, the bench had directed the Government to file the reply.
The Company after assessing the opportunities / business plan, after legal consultation, decided not to pursue the project. Therefore, during the current quarter the company has withdrawn the abovementioned writ petition filled in High Court.
In accordance with existing laws & regulations, land holding above permissible ceiling is ceased and compulsorily transferred to Government. Having regards to the no plan and considering the laws and regulations, the company does not expect any return and conservatively provided for impairment of H40.81 crores upto 31 st March 2024 and disclosed as an exceptional item.
39.3 Indian Seamless Inc. (IS Inc), Subsidary Company, was initially established to facilitate trading activities in the USA market. However, due to commencement of direct exports of tubes in USA. Market, the requirement of having intermediary entity was not required. Accordingly, our business activities in IS Inc. were ceased.
During the year, the management of the Group company evaluated prospects of all of its subsidiaries including IS Inc., considering the cessation of scope and other business aspects, management decided to liquidate the company. Consequently, voluntary liquidation was filed during the quarter ended March 24 and final closer was achieved on February 29, 2024.
Pursuant to the voluntary liquidation of IS Inc., The group has provided an amount of H1.95 Crores in IS Inc. towards liquidation of its subsidiary IS Inc.
40. LEASES
The Company have taken various premises and plants and machinery under operating lease. These are generally cancellable and ranges from 13 months to 10 years and are renewable by mutual consent on mutually agreeable terms. There are no restrictions imposed by these lease arrangements and there are no sub leases. There are no contingent rents.
a) Following are the changes in the carrying amount of Right-of-Use Assets for the year ended 31st March 2024 and 31st March 2023.
The Company has not performed a fair valuation of some of its investments in unquoted ordinary shares, which are classified as FVTOCI (refer Note No. 7, as the Company believes that impact of change on account of fair value is insignificant.
Fair value hierarchy
The following table presents the fair value measurement hierarchy of financial assets and liabilities measured at fair value on a recurring basis :
There have been no transfers among Level 1, Level 2 and Level 3 during the year.
Derivative financial assets / (liability) are valued based on inputs that are directly or indirectly observable in the market.
The Company has invested in unquoted equity shares of Kirloskar Management Services Private Limited which is measured subsequently at FVTOCI. Accordingly, the company has fair valued the investment using income approach under Ind AS 113 (Discounted Cash Flow method). Free cash flows, risk adjusted cost of equity and perpetual growth rate are the significant unobservable inputs considered in fair valuation of investment.
Sensitivity analysis of Level 3 Fair values
For the fair values of Investment in equity instruments, reasonably possible changes at the reporting date to one of the significant observable inputs, holding other inputs constant, would have the following effects:
Fair value of financial assets and financial liabilities measured at amortised cost :
The management believes that the fair values of non-current financial assets (e.g. loans and others), current financial assets (e.g., cash and cash equivalents, trade receivables, loans and others excluding other derivative assets), non-current liabilities and current financial liabilities (e.g. trade payables and other payables excluding derivative liabilities) approximate their carrying amounts.
43. FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's activities exposes it to market risks, credit risks and liquidity risks. In order to minimise any adverse effects on the financial performance of the Company, derivative financial instruments such as forward foreign exchange contract are entered to hedge the foreign currency risk exposures. Derivatives are used exclusively for hedging purposes and not as a trading or speculative purposes.
This note explains the source of risk which the entity is exposed to and how entity manages the risk in the financial statements
i. 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, currency risk and other price risk such as equity price risk and commodity risk. Financial instruments affected by market risk include borrowings, trade and other payables, foreign exchange forward contracts, security deposit, trade and other receivables, deposits with banks.
The sensitivity analysis in the following sections relate to the position as at reporting dates. The sensitivity of the relevant income statement item is the effect of the assumed changes in respective market risks. The analyses exclude the impact of movements in market variables on the carrying values of gratuity and other post retirement obligations and provisions.
The Companie's activities expose it to variety of market risks, including effect of changes in foreign currency exchange rate, interest rate and commodity price.
b. Foreign currency risk
Foreign currency risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rate. The Company transacts business in its functional currency and in different foreign currencies. The Companie's exposure to the risk of changes in foreign exchange rates relates primarily to the Companie's operating activities, where revenue or expense is denominated in a foreign currency. The Company manages its foreign currency risk by hedging foreign currency payables using foreign currency forward contracts. It negotiates the terms of those foreign currency forward contracts to match the terms of the hedged exposure.
c. Commodity price risk
Commodity price risk is a financial risk on the company's financial performance which is affected by the fluctuating prices on account of global and regional supply / demand. Fluctuations in the prices of commodities mainly depend on market conditions. The company is subject to fluctuations in prices for the purchase of metallurgical coke, coking coal and iron ore which are the major input materials for production of pig iron.
The company has an elaborate control procedure for finalising the prices of commodities through approval process from designated Company officials. Every month the price trend of the materials, demand and supply position and market intelligence report are reviewed and strategy is adopted before finalising the next consignment/quantities for subsequent months. The Commodity Price Risk is managed without any hedging of the commodities.
ii. 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 such as primarily trade receivables and from its investing activities, including deposits with banks and financial institutions, cash and cash equivalent and other financial instruments.
a. Trade receivables
Customer credit risk is managed by the Company's established policy, procedures and control relating to customer credit risk management. Credit exposure risk is mainly influenced by class or type of customers, depending upon their characteristics. Credit risk is managed through credit approval process by establishing credit limits along with continuous monitoring of credit worthiness of customers to whom credit terms are granted. Outstanding customer receivables are regularly monitored.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are combined into homogenous category and assessed for impairment collectively. The calculation is based on actual incurred historical data as well as futuristic information. The Company uses expected credit loss model to assess the impairment loss. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables. The provision matrix takes into account available external and internal credit risk factors.
b. Financial instruments and cash deposits
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 counter parties. The Company monitors rating, credit spreads and financial strength of its counter parties. Based on ongoing assessment the Company adjust it's exposure to various counter parties
c. Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its present and future cash flow and collateral obligations without incurring unacceptable losses. Company's objective is to, at all time 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 overdraft, debt from domestic and international banks at optimised cost. The Company has access to banks, capital and money market across debt, equity and hybrids.
44. CAPITAL MANAGEMENT
For the purpose of the Company's capital management, capital includes issued 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 credit rating and healthy capital ratios in order to support its business and maximise shareholder value.
The Company manages its capital structure and makes adjustments to it in 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.
No changes were made in the objectives, policies or processes for managing capital during the year ended 31st March, 2024 and 31st March, 2023.
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