Terms/Rights attached to equity shares

The company has one class of Equity shares having par value of Rs. 2 per share. Each shareholder is entitled to one vote per share. All equity shareholders are having right to get dividend in proportion to paid up value at each equity shares as and when declared. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all the preferential amounts, in proportion to their shareholding.

Nature and purpose of Reserves

(a) Securities Premium: The amount of difference between the issue price and the face value of the share is recognized in Securities Premium.

(b) General Reserve: General reserve is the accumulation of the portions of the net profits transferred by the Company in the past years. This reserve is available for distirbution to the shareholders.

(c) Retained Earnings: Retained earnings comprise of the profits of the Company earned till date net of distributions and other adjustments.

(d) Other Items of Other Comprehensive Income: Other Items of Other Comprehensive Income represents recognized remeasurement gains/ (loss) on defined benefit plans.

20.1 Nature of Security & Terms of Repayments

Term Loans are secured by first pari-passu charge over Company’s immovable properties and plant and machinery, both present and future, situated at Bhiwadi and second pari-passu charge on all movable assets, both present and future, of the company.These loans are further secured by personal guarantee of the Chairman of the Company.

20.2 Non-current borrowings shown above are net of current maturities of 491 lakhs (March 31,2023 - Nil) as shown under Note 23.

20.3 Borrowings amount is net of processing fee of Rs. 3 lakhs (March 31,2023 - Rs. 4 lakhs) to be amortised in future.Processing fee of Rs.2 lakhs (March 31, 2023 Nil) is adjusted against current maturities of Non-Current Borrowings shown under Note 23.

20.4 There is no default in repayment of principal or payment of interest to the lenders by the Company during the year.

20.5 The term loans taken by the Company during the year have been applied for the purposes for which they are taken.

20.6 Rs.34 lakhs (March 31,2023 - Rs. 644 lakhs) is pending for disbursement from HDFC Bank against the sanctioned limit of Rs. 1,100 lakhs, repayable in 15 quarterly instalment of Rs. 2.24 lakhs each.

23.1 Working Capital loans from banks are repayable on demand and are secured by hypothecation of Inventories and book debts and second pari passu charge on all the immovable properties and plant and machinery of the Company, both present and future. These loans are further secured by the personal guarantee of the Chairman of the Company. The loans are carrying current floating interest rate of 8.56% p.a.based on 1.71% above 3 months Treasury Bill in case of HDFC Bank and 9.05% based on 0.50% above 6 months MCLR in case of State Bank of India as at March 31, 2024 payable on last day of the month.

23.2 The Company has utilised Rs. 1,307 lakhs as at March 31,2024 (March 31,2023 - Rs. 1,367 lakhs) against total sanctioned limit aggregating to Rs. 3,000 lakhs by two banks.

23.3 Quarterly Returns/ Statements filed by the Company with the banks as per terms of the sanction letters of working capital limit of the concerned bank are in agreement with the books of account.

(c) Performance Obligation is satisfied at a point in time when the control of the goods is tranferred to the customer as per contract.The amounts receivable from customers are generally due after expiry of the credit period as per the relevant agreement terms.There is no significant financing component in the transactions with the customers.

(f) There was no contract where revenue was to be recognised over period of time during the year.

(g) During the year, the Company is engaged in only one Business Segment i.e. Yarn Manufacturing, hence no business segment disclosure is required.

The above sensitivity analysis has been determined based on reasonably possible changes of the respective assumption occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the method (Projected Unit Credit Method) used to calculate the liability recognized in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous year.

46. FINANCIAL RISK MANAGEMENT AND POLICIES

46.1 Capital Risk Management

(a) Risk Management

The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to the shareholders.

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. We 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 future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary, adjust, its capital structure.

The gearing ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus all other reserves attributable to equity shareholders of the Company.

(b) The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants.

46.2 Financial Risk Management

The Company’s principal financial liabilities comprise loans and borrowings, 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 and security deposits.

The risk management policies of the Company are established to identify and analysis the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Company is exposed to market risk, credit risk, liquidity risk and operational and business risk. The Company’s management oversees the management of these risks to ensure the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company’s policies and risk objectives. The major risks are summarized below:

a) Market Risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the value of financial instruments. The value of financial instruments may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including security deposits, payables and loans and borrowings.

The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The treasury department recommend risk management objectives and policies, which are approved by Senior Management and the Audit Committee. The activities of this department include management of cash resources, borrowing strategies and ensuring compliance with market risk limits and policies.

a)(i) 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 interest rates. The loan taken from the banks by the Company are linked to MCLR/Treasury Bills rate of the respective bank which are variable.

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 import of machinery, store and spare and other materials. The Company’s foreign currency risks are identified, measured and managed at periodic intervals in accordance with the Company’s policies. However, there is no foreign currency risk as at March 31,2024.

c) Credit Risk

Credit risk is the risk that counterparty will default on its contractual obligations resulting in financial loss to the company. The Company has adopted a policy of dealing with creditworthy customers.

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 through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as actual or expected significant adverse changes in business, operating results, financial or economic conditions and third-party collateral guarantees or credit.

Financial assets are written off when there is no reasonable expectation of recovery, such as a customer failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized as income in the statement of profit and loss.

The Company measures the expected credit loss of trade receivables based on historical trend, available external and internal credit risk factors such as financial condition, ageing of accounts receivable etc., industry practices and the business environment in which the entity operates.

As at March 31,2024, the company did not consider there to be any significant concentration of credit risk, which had not been adequately provided for. The carrying amount of the financial assets recorded in the financial statements, grossed up for any allowances for losses, represents the maximum exposure to credit risk.

d) Liquidity Risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of credit facilities to meet obligations when due. The Company’s treasury team is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company’s liquidity position through rolling forecasts on the basis of expected cash flows.

(ii) The following methods and assumptions were used to estimate the fair values:

1. Fair value of cash and short-term deposits, trade and other short-term receivables, trade payables, other current liabilities, short term loans from banks and others approximate their carrying amounts largely due to short term maturities of these instruments.

2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.

3. For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

55. SEGMENT REPORTING

The Company’s primary business segment is reflected based on principal business activities carried on by the Company. Chairman and Managing Director have been identified as being the Chief Operating Decision Maker (‘CODM’) and evaluates the Company’s performance and allocates resources based on analysis of the various performance indicators of the Company as a single unit. Therefore, there are no separate reportable business segments as per Ind AS 108-Operating Segments. The Company operates in one reportable business segment i.e., manufacturing of Yarn.

56. OTHER DISCLOSURES/INFORMATION

56.1 Additional information required as per Schedule III of the Companies Act, 2013

(i) Details of benami property held

No proceedings have been initiated or are pending against the Company as at March 31,2024 for holding benami property under the Prohibition of Benami Property Transactions Act, 1988 (as amended in 2016), as amended and rules made thereunder.

(ii) Wilful defaulter

The company has not been declared wilful defaulter by any bank, financial institution or lender as at March 31,2024.

(iii) Relationship with struck off companies

There is no transaction during the year with or outstanding balance of the struck off companies as at March 31,2024.

(iv) Compliance with number of layers of companies

The Company does not have any subsidiary or Associate or Joint Venture company during the year.

(v) Compliance with approved scheme(s) of arrangements

During the year, no scheme of arrangements in relation to the Company has been approved by the competent authority in terms of Section 232 to 237 of the Companies Act, 2013.

(vi) Utilisation of borrowed funds and share premium

During the year the Company has not advanced or lend or invested funds (either from the borrowed funds or share premium or any other sources or kind of funds) to any person or entity, including foreign entity (Intermediaries) with the understanding (whether recorded in writing or otherwise) 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

The Company has not received any fund from any person or entity, including foreign entity (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

(vii) Undisclosed income

The Company does not have any unrecorded transactions in the books of account which have been surrendered or disclosed as Income during the year in the tax assessment under the Income Tax Act, 1961.

(viii) Transactions in crypto currency or virtual currency

The Company has not traded or invested in crypto currency or virtual currency during the year ended March 31,2024.

(ix) Revaluation of property, plant & equipment and intangible asset

The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the year ended March 31,2024.

(x) Registration of charges or satisfaction with Registrar of Companies

There are no charges or satisfaction which are pending to be registered with the Registrar of Companies as on March 31, 2024.

56.2 Other Statutory information

(i) The Company has no long-term contracts including derivative contracts having material foreseeable losses as at March 31,2024.

(ii) The Company has not received any whistleblower complaint during the year ended March 31,2024.

(iii) There is no Core Investment Company within the group as defined in the regulations made by the Reserve Bank of India.

(iv) There is neither any fraud by the Company nor on the company noticed or reported during the year.

(v) There is no amount outstanding for transfer to the Investor Education and Protection Fund by the Company under Section 125 of Companies Act, 2013 as at March 31,2024.

(vi) The Company has not given any loans or advances in the nature of loans to promoters, directors, KMPs and/ or related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are repayable on demand, or without specifying any terms or period of repayment.

Definitions:

(a) Earnings available for debt services = Profit after tax non-cash items Interest on Term Loans Interest on lease liabilities^ other items like gain on sale of assets etc.

(b) Debt (outstanding Liabilities) = Borrowings

(c) Debt service = Principal Repayments of term loans and lease liabilities due within one year Interest payable on term loans and lease liabilities.

(d) Average inventory = (Opening inventory Closing inventory)/ 2

(e) Net sales = Gross sales minus Sales return.

(f) Average trade receivables = (Opening trade receivables Closing trade receivables) / 2

(g) Net purchase = Gross purchases minus Purchase return

(h) Average trade payables = (Opening trade payables Closing trade payables)/ 2

(i) Working capital = Current assets - Currents liabilities

(j) Earnings before interest and taxes = Profit before tax Finance costs

(k) Capital Employed = Tangible Net Worth Total Debt Deferred Tax Liability

(l) Profit after tax = Profit after tax before OCI

(m) Income from Investments = Income from Investments Fair value changes on Investments.

(n) Investments = Opening Investments Investments made during the year

58. DIVIDEND

The Board of Directors in their meeting held on May 24, 2024 have recommended a dividend @ Re 0.50 per Equity share of face value of Rs.2 each (i.e.25%) for the financial year 2023-24 (Rs.1.60 per Equity share for the financial year 2022-23) in accordance with the provisions of section 123 of the Act subject to approval of the shareholders of the Company at the ensuing General Meeting. The proposed dividend of Rs 108.06. lakhs will be recognized as liability in the books of account after approval of the shareholders.

60. The Company is using ERP software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the accounting software. However, the audit trail feature is not enabled when using administrative access right to the ERP application for direct data changes which is restricted to limited set of users who necessarily require this access for maintenance and administration of the database. Further, no instance of audit trail feature being tempered with has been noticed during the year in respect of the accounting software.

61. All amounts in the financial statements and notes have been rounded off to the nearest lakh as per requirement of Schedule III except per share data and as otherwise stated. Figures in brackets represent corresponding previous year figures. Previous year figures have been regrouped / reclassified wherever considered necessary.