Note 4 : Goodwill

Goodwill acquired through business combination has been allocated to the CGUs Plant 3300 - Bangalore [earlier known as Team Concepts Private limited ('TCPL')- merged with the Company in FY 2020-21] for impairment testing .

Carrying amount of goodwill allocated TCPL - CGUs as at March 31, 2025 and March 31, 2024 is H 183.90 million.

The Company performed its annual impairment test for years ended March 2025 and March 2024 on March 31, 2025 and March 31, 2024 respectively. The Company considers the relationship between the fair value (based on DCF) of each CGU and its book value, among other factors, when reviewing for indicators of impairment.

The recoverable amount of the CGU, has been determined based on a value in use calculation using cash flow projections from financial budget approved by senior management. As a result of the analysis, management did not identify impairment.

Note 6 - Right of use assets

The Company has lease contract for premises/building used for its operations with lease terms of 2-10 years, and for lease hold land with lease term of 30-99 years The Company's obligations under its leases are secured by the lessor's title to the leased assets. The Company is restricted from assigning and subleasing the leased assets.

The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (mainly Laptops) (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option).

The Company had total cash outflows for leases of H 471.09 million for the year ended March 31, 2025 (previous year : H 413.95 million). The company does not have non-cash additions to right-of-use assets and lease liabilities for the year ended March 31, 2025

(iii) Extension and termination options

As at March 31, 2025, the Company has no potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term.

Credit risk

There are no trade receivables which have significant increase in credit risk as at March 31, 2025 and March 31, 2024 other than disclosed above.

Credit period

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

No trade or other receivable are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member, except as disclosed in note 47.

Pursuant to an arrangement with certain banks, the company has sold to the banks certain of its trade receivable on a non-recourse basis. The receivables sold were mutually agreed upon with the respective bank after considering the creditworthiness and contractual terms with the customers. The company has transferred substantially all the risks and rewards of ownership of such receivables sold to the bank, and accordingly, the same were derecognized in the Balance-sheet. As at March 31, 2025, the amount of trade receivable derecognized to the aforesaid arrangement H 6,993.36.mn (March 31, 2024 : H 6,139.71.mn)

Note (a): KTM AG, one of the customer of the Company, filed for insolvency and the Court admitted restructuring with self administration in Austria. Considering these developments, the Company has recognised a provision for the expected credit loss of trade receivables as exceptional item amounting to H12.10 million for the year ended March 31, 2025.

(b) Rights, preferences and restrictions attached to equity shares

The Company has equity shares having a par value of H 1 per share (previous year Re.1 per share). In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.

Nature and purpose of reserves General reserve

General reserve is the retained earning of the Company which is kept aside out of the Company's profits to meet future (known or unknown) obligations.

Capital reserve

Capital reserve is not available for distribution as dividend.

Securities premium

Securities premium is used to record the premium on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

Note 20A Proposed dividend on equity shares

Proposed dividend for the year ended March 31, 2025 Of H 152.79 million at H 1 per share (March 31,2024 Nil). Proposed dividend is subject to approval at annual general meeting and is not recognised as a liability at March 31, 2025.

Nature of Security

1) Rupee Term Loans from Banks are secured by:

(a) HSBC BANK

(i) Working Capital Term Loan (WCTL) of H 400 Million and INR 435 Million having outstanding balance of H 100.00 Million and H200.00 Million respectively, by way of Guaranteed Emergency Credit Line (GECL) under ECLGS scheme of National Credit Guarantee Trustee Company Ltd. (NCGTC) are secured by way of second pari-passu charge on current assets of the Company along with other banks. Further secured by second charge on movable fixed assets of the Company situated at:

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industria Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industria Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttarakhand

(ii) Term Loan of H 1,000 Million availed in November 2023 outstanding balance as on March 31, 2025. H 906.25 million

(1) Varroc Engineering Limited, Plant IV - Plot No. M-140-141, MIDC Industrial Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(2) Varroc Engineering Limited, Corporate Office, Plot No. L-4, MIDC Industrial Area, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) 431 136, Maharashtra

(3) Varroc Engineering Limited, Pant Nagar - Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttarakhand

(b) ICICI BANK

(i) ICICI BANK Rupee Term Loan of of H 1250 Million having outstanding balance of H747.62 million is secured on exclusive charge basis by way of mortgage of immovable properties situated at:

(1) B-3020 & 3040, Marvel Edge, Viman Nagar, Pune, Maharashtra

(2) Plot No. 35-A, Udyog Vihar, Greater Noida, Uttar Pradesh

(3) 58th Mile Stone, Opp. Mittal Orchards, Village Binola, Dist. Gurgaon, Haryana State

(4) Plot No. 136-B, Harohalli Industrial Area, Kanakapura Taluk, Ramanagara Distt. Karnataka

(5) Plot No. 271 & 272(P), Nara Sapura Industrial Area, Nara Sapura, Dist. Kolar - 563133 Karnataka State"

(c) Induslnd Bank

(i) IndusInd Bank Ltd Rupee Term loan of H 1,000 Million (balance as on 31st March 2025 H468.75 million) is secured on exclusive first charge by way of Hypothecation of Fixed Assets of the following plants of Company situated at :

(1) Plot No. E-4, MIDC, Waluj, Aurangabad - 431136 (M.S.) : Movable Fixed Assets

(2) Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501 (M.S.) : R&D Centre Movable Fixed Assets

(3) Gat No. 12/1 and Gat No. 12/2 situated at Village Shivaji Nagar , Tal. Sakri, Dist. Dhule (M.S.) : Movable Fixed Assets

(4) Plot No. 103/4, Maswad, GIDC, Expansion Estate, Halol-II, Dist. Panchmahal, Gujarat - 389 350 : Movable and Immovable Fixed Assets

(5) Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune : Movable Fixed Assets

(6) Plot No. K - 103, MIDC, Waluj, Chhatrapati Sambhaji Nagar (Aurangabad) - 431136 (M.S.)

(ii) IndusInd Bank Ltd Rupee Term loan of H 1250 Million (balance as on 31st March 2025 H 125.00 million) is secured on exclusive first charge by way of Hypothecation on Movable and Immovable Fixed Assets of the following plants of Company situated at :

(1) Gut No. 390, Takve Bk, Tal. Maval, Dist. Pune - 412106 (M.S.) : Immovable Fixed Assets

(2) Plot No. E-88, MIDC, Ranjangaon, Tal. Shirur, Dist. Pune (M.S.) : Movable Fixed Assets

(3) Gut No. 99, Village Pharola, Tal. Paithan, Dist. Aurangabad - 431105 : Immovable Fixed Assets

(iii) IndusInd Bank Ltd Rupee Term loan of H 750 Million (balance as on 31st March 2025 H 300.00 million) is secured on exclusive first charge by way of Hypothecation on Immovable Fixed Assets of the following plants of Company situated at :

(1) Survey No 154/1, 154/3 And 155/2, Karsanpura, Mandal, Ahmedabad, Gujarat, 382130.

(2) Plot No. 601-A&B Sector-III, Industrial Area, Pithampur, Dist. Dhar - 454775.

(3) Survey No. 128-1B & 129-1B, Ezhichur Village, Sriperambudur taluk, Kancheepuram Dist. (Chennai) 603 204

(d) Saraswat Co. Operative Bank

(i) Saraswat Co. operative Bank Ltd. Term loan of H 750 million (balance as on March 31, 2025. H 291.67 million is secured on exclusive charge by way of mortgage of immovable properties situated at:-

(1) Plot no E-88 ,MIDC,Ranjangaon, Tal.Shirur, Dist Pune Maharashtra.

(2) Plot No M-165-167, MIDC, Waluj Aurangabad 431136 Maharashtra.

2) 8.60% Non-convertible debentures of J 100,000 each (Balance as on March 31,2025 H2,187.50 Million) are Secured by:

Exclusive charge by way of Hypothecation on the specific identified movable properties of the Company situated at:

(1) Varroc Engineering Limited, VEL III, Plot No. B-24 & 25, MIDC, Chakan, Pune - 410501, Maharashtra

(2) Varroc Engineering Limited, VEL VII (Valves), Plot No. L-4, MIDC, Waluj, Aurangabad - 431136, Maharashtra

(3) Varroc Engineering Limited, VEL VII (Forging), Plot No. L-4, MIDC, Waluj, Aurangabad -431136, Maharashtra

(4) Varroc Engineering Limited, Lighting Plant, Plot No. B-14, MIDC, Chakan, Pune - 410501, Maharashtra

(5) Varroc Engineering Limited, Lighting Plant, Plot No. 1(P), Gut No. 51 to 59, Village Bhambholi, Tal. Khed, Dist. Pune- 410501, Maharashtra

3) Borrowings pertaining to following charges have been repaid, however Company is in process of filing charge satisfaction documents as at March 31, 2025

a. Tata Capital: Immovable fixed assets located at Plot No.20 Sector 9, Integrated Industrial Area, Pant Nagar, Dist. Udhamsingh Nagar, Uttrakhand

b. ICICI Bank

(1) Immovable fixed assets located at Plot No. C-3 in the Chakan Industrial Area, Phase-II and within village limits of Bhamboli Taluka, sub-district Khed, district Pune

(2) Movable Fixed assets located at:

(i) Plot No. 271 and 272 Part, Narasapara, Industrial Area, Yandrakayipura, Kolar, Karnataka, 563133

(ii) 136 B, Harohalli Industrial Area, Phase - 2, Kanakapura Tal. Dist. Ramanagara, Bengaluru Karnataka, 562112

(iii) Survey No. 128-1B & 129-1B, Ezhichur Village, Sriperambudur taluk, Kancheepuram Dist. 603 204 (Chennai)

(iv) Plot No. 601-A&B Sector-III, Industrial Area, Pithampur, Dist. Dhar - 454775

4) Debt covenants :

Bank loans contain certain debt covenants relating to limitation on indebtedness, debt-equity ratio, net borrowings to EBITDA ratio and debt service coverage ratio. Company is in compliance with these debt covenants as at March 31, 2025.

The asset cover in respect of the Non-Convertible Debentures of the Company as on March 31,2025 is 1.57 times of the total due amount which is greater than the requirement of 1.1 times of the said Secured Non-Convertible Debentures.

Cash credit facilities have been sanctioned from Standard Chartered Bank, HDFC Bank Limited, ICICI Bank Limited, IDBI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited, The Hongkong and Shanghai Banking Corporation Ltd. and IDFC First Bank Ltd. and are secured by first paripassu charge by way of hypothecation of stocks of raw materials, work in progress, finished goods, consumable, stores and spares, packing materials and receivables of the Company both present and future.

The Company has borrowings from banks or financial institutions on the basis of security of current assets, and quarterly returns or statements of current assets filed by the Company during the current and previous year with banks or financial institutions are in agreement with the books of accounts except as mentioned in Note 22(a) & 22(b).

Note 1 Includes 'Provision on Inventory' added back to the net inventory balance and 'Material in transit' not considered as part of total stock.

Note 2 Difference primarily includes intercompany debtors, provision for customer rate increase/decrease and debtors of ageing more than 90 days, and export customer balance revaluation. Further, factoring balance has been disclosed separately in the statement which is netted off in the financial statements.

Note 3 Difference is on account of export cut off sales reversal as per Ind AS 115. Also includes some external customer which were identified as intercompany at the time of reporting to banks.

Note 4 Re-classification entry pertaining to netting off of receivables against payables.

Note 5 Mainly includes inter company creditors and provision for expenses and import vendor revaluation.

Note 6 Includes Post closure entries posted at the time of finalisation of quarterly financial statement.

Notes to the Standalone Financial Statements

for the year ended March 31, 2025

3. Trade Payables ₍H _{in MiNion)}

Note 1 Includes 'Provision on Inventory' added back to the net inventory balance.

Note 2 Includes post closure entries posted at the time of finalisation of quarterly financial statement.

Note 3 Majorly includes exchange rates revaluations & provision for customer rate increase/decrease.

Note 4 Majorly includes provision for expenses including GST payable, provision for vendor rate increase/ decrease, pending GRIR accounts, and forex restatement.

Vearrocz

Note 23 Non-current provisions

i. Deferred tax assets and deferred tax liabilities have been offset as at March 31,2025 they relate to the same governing taxation laws and Company has legally enforceable right to set-off. As at March 31, 2024 deferred tax asset of H 1913.74 million pertaining to Varroc Engineering Limited and deferred tax liabilities of H 251.55 million pertaining to Varroc Polymers Limited (Wholly owned subsidiary, now merged with Varroc Engineering Limited with appointed date of April 01, 2024 ) have not been set-off against each other, as the Company did not have legally enforceable right to set-off as at March 31, 2024.

ii. During the year ended March 31, 2024, the Company derecognised (written-off) loans given to VarrocCorp Holding BV ('VCHBV'), Netherlands including interest on such loans aggregating to H 13,533.33 million (including H 1,736.89 million by Varroc Polymers Limited ('VPL'), wholly owned subsidiary, now merged with the Company as explained in Note 55(b)) after making requisite submissions to AD Bank. The Company claimed this write-off on loans as an allowable business loss, considering that these loans extended to VCHBV were in the nature of trade investments to derive benefits for the Company's businesses rather than for earning dividend/capital appreciation. The Company obtained legal opinions from two independent senior counsels who have supported their view on claiming this write-off of loans as an allowable business loss. Accordingly, VPL considered this loss as tax deductible for computation of current tax provision to the extent of H 437.14 million and the Company recognised deferred tax asset of H 2,968.93 million on such loss during the year ended March 31, 2024. These loans pertained to funding of Varroc Lighting Systems ('VLS') entities (erstwhile subsidiaries of VCHBV) which were fully provided for during the

period ended September 30, 2022 when the VLS business was sold to Compagnie Plastic Omnium SE, France. Further, the Company shifted to new tax regime under section 115BAA of Income Tax Act, 1961 from financial year ended March 31, 2024. As a result, MAT credit of H 265.34 million was written off and deferred tax liability to the extent of H 254.54 million was reversed on account of lower tax rate under new regime, which were included in the total tax expense for the year ended March 31, 2024.

‘Deferred government grant

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.

Government grants relating to purchase of property, plant and equipment are included in current and non-current liabilities as deferred income and are credited to profit or loss on straight-line basis over the expected lives of the related assets and presented within other operating revenue.

Trade receivables are non-interest bearing and are generally on payment terms of 30 to 120 days.

A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.

Contract liabilities include advances received from customers for delivery of goods, engineering design and development of tools.

D Performance obligation

Revenue from contracts with customers include revenue from finished goods, tooling, engineering services and Job work. Finished goods / tooling / engineering services

For the sale of finished goods the performance obligation is generally satisfied upon its delivery or as per the terms of the customer contract and payment is generally due within 30 to 120 days from delivery.

For sale of toolings, the performance obligation is considered satisfied on billing after approval of the part(s) by the customer. The Company generally receives advance for toolings contracts ranging from 30 % to 50% of the contracted price. The revenue is recognised at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

Product development/engineering services are considered as related to sale of parts rather than a separate performance obligation. As a result, revenue from engineering services is recognised over the period of production from the date of start of production. Costs incurred in respect of providing engineering services are recognised as intangible assets and amortised over the period of production from the date of start of production. Payments received from customers in respect of product development/engineering services are presented as contract liabilities.

For supply of engineering services to group companies, performance obligation is generally satisfied on the basis of time/work completed as per the contract with the group companies and payment is generally due within 30-60 days.

Development of toolings for the customers has been identified by the Company to be a separate performance obligation. Further, the Company has determined that the performance obligation in respect of development of toolings is satisfied at a point in time. The revenue is recognised at an amount that reflects the consideration to which the Company expects to be entitled in exchange for supply of tooling

The Company provides normal warranty provisions on some of its products sold, in line with the industry practice. The Company considers that the contractual promise made to the customer in the form of warranties for the parts supplied does not meet the definition of separate performance obligation as it does not give rise to additional service.

Job work revenue is recognised when the work is completed and billed to customer.

In the previous year, the Company received eligibility certificates (ECs) in respect of three plants in Aurangabad/ Pune under the Maharashtra Electronic Policy 2016 effective from April 1, 2022 and valid for 10 years. Under these ECs, the Company is eligible to claim incentive in the form of taxes payable under SGST on finished goods eligible for incentives from the respective plants. The Company has considered these as grants related to income under Ind AS 20 by recognizing the same as income in profit and loss based on SGST collected for the period/year. The amount of income recognised in the previous year in respect of the aforesaid ECs is H 989.71 million pertaining to the period April 1, 2022 to March 31, 2024.

B Defined benefit plan (Gratuity)

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employees last drawn basic salary plus dearness allowance per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.

The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:

Notes to the Standalone Financial Statements

for the year ended March 31, 2025

(a)

(c)

Vearrocz

Expenses to be recognized in the Statement of Profit and Loss under employee benefit expenses

(H in Million)

Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by 1%, keeping all other actuarial assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method

(present value of defined benefit obligation calculated with the Projected Unit Credit method at the end of reporting period) has been applied while calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Expected contributions for the next year

The Company intends to contribute H100.60 million towards its gratuity fund during the year ending March 31, 2026. During the year ended March 31, 2025, the Company has contributed H79.18 million to its gratuity fund.

Risk Exposure and Asset Liability Matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed here under as companies take on uncertain long-term obligations to make future benefit payments.

1) Liability Risks

Asset-Liability mismatch risk-

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence, companies are encouraged to adopt asset-liability management.

Discount rate risk-

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

Future salary escalation and inflation risk -

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management's discretion may lead to uncertainties in estimating this increasing risk.

2) Asset risks

All plan assets are maintained in a trust fund managed by a public sector insurer viz. LIC of India. LIC has a sovereign guarantee and has been providing consistent and competitive returns over the years.

The Company has opted for a traditional fund wherein all assets are invested primarily in risk averse markets. The Company has no control over the management of funds but this option provides a high level of safety for the total corpus. A single account is maintained for both the investment and claim settlement and hence 100% liquidity is ensured. Also, interest rate and inflation risk are taken care of.

(ii) Valuation technique used to determine fair value

The following methods and assumptions were used to estimate the fair value of the financial instruments included in the above tables:

- The Company enters into derivative financial instruments with financial institutions with investment grade credit ratings. Foreign exchange forward contracts, interest rate swaps are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing model, using present value calculations. The models incorporate various inputs including the credit quality counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spread between the respective currencies, interest rate curves etc. The changes in counterparty credit risk had no material effect on financial instruments recognised at fair value through profit and loss.

Commentary

The carrying amounts of trade receivables, loans, other financial assets, cash and bank balances, trade payables/ acceptances and other financial liabilities are considered to be the same as their fair values due to their shortterm nature. The fair values of non-current financial assets and non-current financial liabilities also approximate their carrying values.

The borrowings which are at floating rate of interest, fair values as at March 31,2025 approximate their carrying values.

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

Investment in equity instruments fair valued at Level 3 pertains to investment in equity shares of various special purpose vehicle (SPV) entities under solar power generation agreements with AMP Energy . These investments have been made in current and previous financial years and are expected to generate benefits in the form of savings in energy costs over the contracted period.

As at March 31, 2025, project for AMP Energy C&I Twenty Pvt Ltd and AMP Energy C&I Twenty one Pvt Ltd are operational. The underlying project of other SPVs is under construction. Management has assessed that based on the present value of estimated future cash flows from the said project, the carrying value approximates its fair value.

Note 44 - Financial risk management

The Company's principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables, and lease liabilities and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company's operations and to provide guarantees to support its operations.The Company's principal financial assets include Investment, loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company's senior management oversees the management of these risks. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company's policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

A 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: currency risk, interest rate risk and other price risk such as equity price risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, receivables, payables, deposits, investments and derivative financial instruments.

(a) Foreign currency risk

The Company operates internationally and the business is transacted in several currencies. Consequently, the Company is exposed to foreign exchange risk through its sale and purchase of goods and services, mainly in the North America and Europe .The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company's operations are affected positively/adversely as the rupee appreciates /depreciates against these currencies. The Company evaluates exchange rate exposure arising from these transactions and enters into foreign exchange forward contracts,to mitigate the risk of changes in exchange rates on foreign currency exposures. The Company follows established risk management policies, to hedge forecasted cash flows denominated in foreign currency. The Company has designated certain derivative instruments as cash flow hedges to mitigate the foreign exchange exposure.

Sensitivity Analysis

For the year ended March 31, 2025 and March 31, 2024, every 5% percentage point appreciation/ depreciation in the exchange rate between the Indian rupee and U.S. Dollar, would have affected the Company's incremental operating margins by approximately H4.31 million and H 16.05 million respectively. And for Euro, every 5% percentage point appreciation/depreciation in the exchange rate would have affected the Company's incremental operating margin by approximately H 50.77 million, previous year H 60.36 million. The sensitivity for net exposure in JPY and in other currencies does not have material impact to Statement of Profit and Loss.

Sensitivity analysis is computed based on the changes in the receivables and payables in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.

(b) 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 change in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long term debt obligations with floating interest rates.

(c) Other price risk

The Company does not have material investments in equity securities other than investments in its subsidiaries. Hence, equity price risk is considered to be low. Further, the Company's operating activities require the ongoing purchase of various commodities for manufacture of automotive parts. However, the movement is commodity prices are substantially adjusted through price differences as per customer contracts and hence commodity price risk for the Company is also considered to be low.

B Credit risk management

Credit risk arises when a customer or counterparty does 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) and from its investing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The Company only deals with parties which have good credit rating/worthiness given by external rating agencies or based on the Company's internal assessment.

Trade receivables

Customer credit risk is managed by the Company's established policy, procedures and control relating to customer credit risk management. Further, Company's customers includes marquee OEMs and Tier I companies, having long standing relationship with the Company. Outstanding customer receivables are regularly monitored and reconciled. At March 31, 2025, receivable from Company's top 5 customers accounted for approximately 43.48 % (March 31, 2024: 57.92%) of all the receivables outstanding. An impairment analysis is performed at each reporting date on an individual basis based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables disclosed in Note 13. The Company does not hold collateral as security.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company's corporate treasury department in accordance with the Company's policy. Investments of surplus funds are made only with approved counterparties. Credit limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty's potential failure to make payments.

The Company's maximum exposure to credit risk for the components of the balance sheet at March 31, 2025 and March 31,2024 is the carrying amounts as disclosed in note 14 and 15 except for financial guarantees. The Company's maximum exposure relating to financial guarantees is disclosed in note 51 (B).

C 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 a reasonable price. The Company's corporate treasury department is responsible for liquidity and 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 net liquidity position through rolling forecasts on the basis of expected cash flows. As at March 31, 2025, cash and cash equivalents are held with major banks.

Maturities of financial liabilities

The table below summarises the maturity profile of the Company's financial liabilities based on contractual payments.

Note 45 - Capital management

(a) Risk management

The Company's capital comprises equity share capital, securities premium, retained earnings and other equity attributable to shareholders.

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 for other stakeholders, and

- Maintain an optimal capital structure to reduce the cost of capital.

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 .

Loan covenants

The Company's capital management aims to ensure that it meets financial covenants attached to the interestbearing loans and borrowings that define capital structure requirements. Refer note 21 for details.

(b) Dividends not recognised at the end of the reporting period

Directors have recommended the payment of a final dividend of H 152.79 million at H 1 per equity share (March 31, 2024 H Nil ). This proposed dividend is subject to the approval of shareholders in the ensuing annual general meeting.

(i) The Company is contesting Excise, Service Tax and Goods and Service Tax & Income tax related demand/notices and the management, including its tax advisors, believe that it's position will likely be upheld in the appellate process. No expense has been accrued in the financial statements for the tax demands/notices raised. The management believes that the ultimate outcome of the proceedings will not have a material adverse effect on the Company's financial position and results of the operations. The Company has deposited H 49.47 million (previous year H 48.45 million) with the tax authorities against the above matters to comply with the order of the tax authorities.

(ii) There are numerous interpretative issues relating to the Supreme Court (SC) judgement on Provident Fund dated February 28, 2019. As a matter of caution, the company has made a provision on a prospective basis from the date of the SC order. The company will update its provision, on receiving further clarity on the subject.

B) Contingent liabilities disclosed above include the following litigations:

(i) On November 5, 2024, the Company received a GST Order from Additional Commissioner of CGST & Central Excise for appropriation of GST dues amounting to H 629 million along with equivalent penalty and applicable interest relating to inappropriate classification of certain goods supplied during the period from July 1, 2017 to September 30, 2023. The Company has paid the principal demand, however, considering merits of the case, management believes that it has grounds to successfully defend and litigate the GST Order with respect to applicable interest and penalty for the aforementioned period. The Company has initiated appellate proceedings against this GST Order, pending conclusion of which no adjustments have been made in respect of this matter in the financial statements for the year ended March 31, 2025.

(ii) On January 03, 2025, Varroc Polymers Limited ('VPL') (wholly owned subsidiary, now merged with the Company as explained in Note 55(b)) received a GST Order from Commercial Tax Officer (Divisional GST office, Karnataka) consisting of demand for GST dues amounting to H 0.03 million along with interest of H 302.67 million and penalty of H 564.19 million relating to inappropriate classification of certain goods supplied during the period from July 1, 2017 to September 30, 2023. VPL has paid the principal demand, however, considering merits of the case, management believes that it has grounds to successfully defend and litigate the GST Order with respect to the interest and penalty for the aforementioned period. The Company has initiated appellate proceedings against this GST Order, pending conclusion of which no adjustments have been made in respect of this matter in the financial statements for the year ended March 31, 2025.

The loans taken by the subsidiaries against the above guarantees/standby letter of credit have been utilised by them for setting up of manufacturing facilities, working capital requirements and/or repayment of external loans.

(D) Code on Social Security, 2020

The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Note 52- Loss on equity investments and loans given to VLS

Varroc Engineering Limited ('the Company') and VarrocCorp Holding BV, Netherlands ('VCHBV', wholly owned subsidiary of VEL) (together referred to as 'Sellers') entered into a Securities Purchase Agreement dated April 29, 2022 as amended dated July 01,2022, October 05, 2022 and May 12, 2023 (collectively referred to as 'SPA') with Compagnie Plastic Omnium SE, France (referred to as 'Buyer'), to divest the Sellers 4-Wheeler lighting business in the Americas and Europe ('VLS Business'). In the previous year, both the Buyer and the Sellers have entered into Settlement Agreement on July 14, 2023 whereby both the parties agreed to settle the disagreements on closing adjustments and the final equity value agreed under the Settlement Agreement was Eur 54.5 million. Accordingly VCHBV has received the remaining consideration amount of Eur 13 million on July 17, 2023 pursuant to this final settlement with Buyer. Exceptional item of H45 million for the year ended March 31, 2024 pertains to expenses directly related to sale of investment in VLS business.

Formulae for calculation of ratios are as follows:

(i) Current ratio = [Current Assets / Current Liabilities]

(ii) Debt-Equity Ratio = [Total Debt / Total Equity]

(iii) Debt service coverage ratio = [(Earning before Interest Tax & Depreciation & amortization and exceptional items)/ (Interest Expense Principal repayments of long term loan made during the period, including pre-payments)]

(iv) Return on Equity ratio = [(Net Profits after taxes - Preference Dividend)/(Average Shareholder's Equity)]

(v) Inventory Turnover ratio= [(cost of goods sold)/(Average Inventory)]

(vi) Trade Receivable Turnover Ratio = [(Revenue from Operation)/(Average Trade receivable)]

(vii) Trade Payable Turnover Ratio = [(Purchases)/(Average Trade payable)]

(viii) Net Capital Turnover Ratio = [(Net Annual Sales)/( Average Working Capital)]

(ix) Net Profit ratio = [ (Net Profit after taxes)/ (Revenue from Operation)]

(x) Return on Capital Employed = [(Earning Before Interest and taxes (EBIT))/(Capital employed)]

(xi) Return on Investment = [(Income generated from invested funds in bank FDs and mutual funds)/ (Average invested funds in bank FDs and mutual funds)]

(xii) Capital Employed = Tangible Net worth Total Debt Deferred Tax Liability

(xiii) Working capital = (Current assets - Current liabilities )

Commentary

A) Decrease in the ratio due to reduced balance of borrowing at the end of the current year as compared to previous year

B) Increase in the ratio due to lower repayment of long term borrowings during the current year

C) Decrease in the ratio due to lower net profit during the current year

D) Decrease in the ratio due to lower net profit during the current year as well as increase in shareholder's equity due to accumulated profits

E) Decrease in the ratio due to decrease in average investment in fixed deposit and liquid/ overnight Mutual funds during the current year

F) Increase in the ratio due to increase in average working capital during the current year

The Company has complied with the relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and the Companies Act for the above transactions and the transactions are not violative of the Prevention of MoneyLaundering Act, 2002 (15 of 2003)

The Company has not advanced or loaned or invested funds, apart from those disclosed above, to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding 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(s) or entity(ies), including foreign entities (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

The Company has complied with the relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and the Companies Act for the above transactions and the transactions are not violative of the Prevention of MoneyLaundering Act, 2002 (15 of 2003)

The Company has not advanced or loaned or invested funds, apart from those disclosed above, to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding 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(s) or entity(ies), including foreign entities (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,

Note 55 (a) - Audit Trail

The Company uses SAP ECC R6 as the accounting software. SAP ensures an audit trail, providing standard functionality and logging in all changed data in the system. This functionality and audit trail feature in SAP has been operational throughout the year for all relevant transactions recorded through the application in the Company. Further, there were no instances of the audit trail feature being tampered with in respect of the accounting software during the year.

Normal / regular users are not granted nor have direct SAP back-end database (DB) or super user level access which would allow them to make any changes to financial documents directly which have already been posted through the application. However, changes to the database by a super user specifically does not carry the feature of a concurrent real time audit trail.

Additionally, the audit trail of prior year has been preserved by the Company as per the statutory requirements for record retention to the extent it was enabled and recorded in the respective year.

The Company has used an accounting software which is operated by a third-party software service provider, for maintaining its payroll records. In the absence of necessary evidence regarding audit trail in the Service Organisation Controls report received by us, management is unable to comment whether the audit trail feature was enabled and operated throughout the year for all relevant transactions recorded in the payroll processing software or whether there were any instances of the audit trail feature being tampered with. Additionally, management is also unable to comment whether the audit trail has been preserved by the Company as per the statutory requirements for record retention.

Note 55 (b) - Amalgamation of Varroc Polymers Limited with the Company

Pursuant to provisions of Section 230-232 of the Companies Act, 2013, the Board of Directors of the Company on May 17, 2024 had approved the scheme of amalgamation of Varroc Polymers Limited ('VPL') (a wholly owned subsidiary of the Company) with Varroc Engineering Limited ('VEL') with appointed date of April 01, 2024 ('the Scheme'). National Company Law Tribunal ('NCLT') approved the above scheme vide its order dated January 10, 2025 and the merger became effective on February 01, 2025 on filing of the NCLT order with the Registrar of Companies. The merger has been accounted as business combination of entities under common control as per Appendix C to Ind AS 103 - Business Combinations. Accordingly, the comparative period for the year ended March 31, 2024 presented in these financial statements has been restated to include the effects of this merger.

Exceptional items for the year ended March 31, 2025 includes an amount of H 196.02 million pertaining to estimated expenses directly attributable to merger of VPL with the Company.

Note 56 - Other Statutory Information

(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

(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 does not have any transactions with companies struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.

(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(v) The Company does 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).

(vi) The Company has not been declared as wilful defaulter by any bank or financial institution or any other lender.