13.1 Nature and purpose of each reserve within equity is as follows:
A) Capital Reserve
Capital Reserve is mainly the reserve created by transferring the capital Subsidy received from Government in earlier years in accordance with applicable accounting standards on that date.
B) Capital Redemption Reserve
Capital Redemption Reserve lias been created for redemption of Preference Share Capital.
C) Securities Premium
Securities premium is credited when shares are issued at premium. The securities premium is utilised in accordance with the pi ovisionsof the Companies Act, 2013.
D) Debenture Redemption Reserve
Debenture Redemption Reserve lias been created for redemption of Debentures.
E) Retained Earnings
Retained earnings represents company's cumulative earnings and losses respectively.
17.1 Share Application Money Rs. 1450 Laths has been raised pursuant to restructuring / settlement scheme submitted to BIFR. Consequent to
enactment of Sick Industrial Companies (Special Provision) RepealAct, 2003 (SICA Repeal Act) with effect from 1/12/2016, it became refundable
17.2 Preference Share Capital
a. Preference Shares Rs. 225 Lakhs were redeemable m F.Y 2001-02 Rs. 6.25 Lakhs, F.Y. 2002-03 Rs. 72.92 Lakhs F.Y. 2003-04 Rs. 72.92 Lakhs and F.Y. 2004-05 Rs. 72.91 Lakhs. Consequent to enactment of Sick Industrial Companies (Special Provision) Repeal Act, 2003 (SICA Repeal Act) with effect horn 1/12/2016, the company is in process of settlement with respective Preference Share holders.
b. Interest on cumulative redeemable preference shares amounting to Rs. 36.13 Lakhs for the year and Rs. 1011.61 Lakhs cumulative up to 31-03-2024 (Previous year Rs. 36.13 Lakhs & cumulative up to 31-03-2023 Rs. 975.48 Lakhs) lias not been provided as the company is in process of settlement of remaining redeemable preference share capital.
c. The Cumulative Redeemable Preference Share holders are entitled to cumulative mterest at the rate specified. Each share holder of Cumulative Redeemable Preference Shares is entitled to one vote per share only on resolution placed before the company, winch directly affects the right attached to cumulative redeemable preference share. Since the mterest in respect of cumulative preference share holders has not been paid for more than two years, cumulative redeemable preference share holder' have right to 10 votes per share on every resolution placed before die company m a meeting.
d. In the event of liquidation of die company, the holder of cumulative redeemable preference share will have priority over equity share holders ill the payment of interest and re—payment of capital
32 LEASES
Effective April 1, 2019, the Company adopted Ind AS 116 “Leases” and applied the standard to all lease contracts existing onApnl 1,2019 using the modified retrospective method . Consequently, the Company recorded the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the light of use asset at an amount equal to the lease liability recognized. Ind AS 116 will result in an increase in cash inflows from operating activities and an increase in cash outflows from financing activities on account of lease payments.
Changes in the callying value of right to use assets are stated in Note No. 3C
The weighted average incremental borrowing rate applied to lease liabilities is 9.50 “op a
33 EMPLOYEE BENEFITS
i) Defined benefits plan a) Gratuity
In accordance with tile provisions of payment of Gratuity'Act, 1972 die company lias a defined benefits plan winch provides for gratuity'payments. Every'employee who lias completed continuous service of 5 years or more gets a gratuity on retirement tenmnation at 15 days salary (last drawn) lor each completed year of service. Liabilities m respect of gratuity plan are detenmned by an actuanal valuation. Based on the actuanal valuation obtained m this respect, the following table sets out the details of the employees benefits obligation as at balance sheet date
Risk exposure
Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow
- Salary Increase-Actual salary increase Mill increase the plan’s liability. Increase in salary increase rate assumption in future valuations which also increase the liability.
- Investment Risk - If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can unpact the liability.
- Discount Rate- Reduction in discount rate in subsequent valuations can increase the plan’s liability.
- Mortality & disability - Actual deaths & disability cases proving lower or higher than assumed m the valuation can unpact the liabilities.
- Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact liability.
b Compensated Absences:
The Company permits encashment of compensated absence accumulated by their employees on retirement, separation and during the course of set vice The liability- in respect of the Company, for outstanding balance of leave at die balance sheet date is determined and provided oil the basis of actuanal valuation as at the balance sheet date performed by an independent actuary. The Company doesn’t maintain any plan assets to hind its obligation towards compensated absences
34 SEGMENT INFORMATION
a Based oil the management approach as defined in Ind AS 108 - Operating Segments, the Chief Operating Decision Maker (CODM) evaluates the company's performance and allocates resources based on an analysis of various peifonnance indicators of business segment/s in which the company operates. The Company is primarily engaged in the business of textile manufacturing which the management and CODM recognise as the sole business segment. Hence, disclosure of segment-wise information is not required and accordingly not provided.
Financial Instruments measured at amortised cost
Tlie carrying amount of financial assets and financial liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fail' values since the Company does not anticipate that die carrying amounts would be sigmficandy different from the values that would eventually be received or settled, ii. Fair Value Hierar chy
The fail’ value hierarchy is based on inputs to valuation techniques that are used to measure fair value tiiat are whether observable or unobservable and consists of the following three levels:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2: Inputs are other than quoted prices included within level 1 that are observable forthe asset or liability either directly or indirectly.
Level 3: Inputs which are not based on observable market data.
The fair value of investments m equity/liquid funds is based on the price quotation at die reporting date derived from quoted maricet prices m active market.
38 Wilful Defaulter
The company lias been declared as wilful defaulter by banks andFmancial Institutions from 31.03 .2002 to 31.03.2010 but all the borrowings have settlled and paid and default is not continuing., hence other details are not furnished.
39 Capital and Financial Risk Management A Capital Management
The Company’s objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders and maintam an optimal capital structure to reduce the cost of capital
Adjusted Net debt to equity ratio is not calculated as and there is no debt as on 31.03.2024 and 31.03.2023.
B Financial Risk Management
The Company’s activities are exposed to a variety of financial risks from its operations. The key financial risks niclude maiket risk (including foreign cunency risk interest rate risk and commodity pnce risk), credit ride and liquidity risk i) Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The Company is exposed to credit risk mainly from its operating activities (primarily trade receivables).
Trade Receivables: Customer credit risk is managed based on company’s established policy, procedures and controls The cony any assesses the credit quality of the counterparties taking into account then' financial position, past experience and other factors.
Credit risk is reduced by receiving pie—payments and export letter of credit to the extent possible. Ilie Company has a well defined sales policy to minimize its risk of credit defaults. Outstanding customer receivables are regularly monitored and assessed Impanment analysis is performed based on histoncal data at each reporting date on an individual basis. However, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively
ii) Liquidity Risk
Liquidity nsk is the risk, where the company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled bv delivennp cash or another financial asset The company’s approach is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due.
iii) Market Risk:
Maiket risk is the risk that the fan value of future cash flows of a financial instrument will fluctuate because of changes in maiket prices. Market risk comprises mainly three types of nsk: interest rate risk, currency risk and other price nsk such as commodity price risk,
a. Foreign currency risk
The company operates internationally and portion of the business is transacted in several currencies and consequently the company is exposed to foreign exchange nsk through its sales in overseas and purchase from overseas suppliers in various foreign currencies viz Euro, GBP, USD, AUD, JPY etc.
b. Interest rate risk
Interest rate risk is the risk that changes in maricet interest rates will lead to change in interest income and expense for the Company, hi order to optimize the Company's position with regards to interest income & expense and to manage the interest risk, the Company performs comprehensive interest risk management by balancing the proportion of fix & variable rate financial instruments.
c. Commodity Risk
Commodity risk is defined as the possibility of financial loss as a result of fluctuation in price of Raw Material Finished Goods and change in demand of the product and market in which the company operates. The Company is exposed to the movement in price of key raw materials in domestic and international markets. The Company lias in place policies to manage exposure to fluctuations in the prices of the key raw materials used in operations. Tlie company forecast annual business plan and execute on monthly business plan. Raw material procurement is aligned to its monthly/annual business plan and inventory position is monitored in accordance with future pnee trend.
41 Figures for previous year have been regrouped rearranged1 restated wherever considered necessary to make them comparable with the figures for the current year and for compliance of Lid AS
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