1.10 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
Contingent liability is disclosed in the case of:
- a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.
- a present obligation arising from past events, when no reliable estimate is possible.
Contingent assets are neither recognised nor disclosed in the Financial Statements.
1.11 Equity, Reserves and Dividend Payments
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in eq u ity as a d ed u cti on, net of tax, fro m th e proceeds.
Retained earnings include current and prior period retained profits. All transactions with owners of the Company are recorded separately within equity.
Dividend distributions payable to equity shareholders is included in other liabilities when the dividends have been approved in a general meeting priorto the reporting date.
1.12 Earnings PerShare
Basic earnings per equity share is calculated by dividing the net profit after tax for the year attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the year.
Diluted earnings per equity share is computed by dividing adjusted net profit aftertax by the aggregate of weighted average number of equity shares and dilutive potential equity shares during the year.
1.13 Cash and Cash Equivalents
Cash and cash equivalents include cash and cheques in hand, bank balances, demand deposits with banks and other shortterm highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value where original maturity is three months or less.
1.14 Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease transaction. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee:
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
Finance leases that transfer substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement ofthe lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and a reduction ofthe lease liability so as to achieve a constant rate of interest on the remaining balance ofthe liability. Finance charges are recognised in Finance Costs in the Statement of Profit and Loss.
A leased asset is depreciated over the useful life ofthe asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end ofthe lease term, the asset is depreciated over the shorter of the estimated useful life ofthe asset and the lease term.
Company as a lessor:
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term ofthe relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount ofthe leased asset and recognised over the lease term on the same basis as rental income.
1.15 Standards issued but not yet effective. There is no such notification applicable from 1 ’'April, 2024.
v) Risk exposure
Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:
Interest rate risk:
The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
Salary inflation risk:
Higher than expected increases in salary will increase the defined benefit obligation.
Demographic risk:
This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a long service employee.
37 Financial risk management objectives and policies Financial Risk Management Framework
The Company's principal financial liabilities, otherthan derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.
The Company is exposed primarily to Credit Risk, Liquidity Risk and Market risk (interest rate), which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.
A. 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. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analyzing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, cash and cash equivalents, bank deposits and otherfinancial assets. None of the financial instruments of the Company result in material concentration of credit risk.
Exposure to credit risk:
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is as follows:
Trade receivables:
Ind AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each date of statements of financial position whether a financial asset or a Company of financial assets is impaired. Expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses ifthe credit risk on the financial asset has increased significantly since initial recognition. The company is not expecting any credit loss allowance which is calculated on life time expected credit losses for trade receivables. Credit loss provision on security deposits is taken as 12 months expected credit loss and no loss is expected as at 31“ March, 2024,31“ March, 2023
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 counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s Board of Directors on an annual basis, and may be updated throughout the year subject to approval of the authorised person. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.
B. Liquidity Risk
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments
C. Market Risk
Market risk is the risk that the fair value orfuture cash flows ofafinancial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk and other price risk, such financial instruments affected by market risk include loans and borrowings, deposits etc.
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 market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company’s long term and short term borrowings. The company has borrowed funds on fixed rate of interest, there is no impact on the entity due to any interest fuluctuations.
38 Capital Management
A. Capital Management and gearing Ratio:
For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves. The primary objective of the Company's capital management is to maximise the shareholder value.
Capital includes equity attributable to the equity holders. The primary objective of the Company's capital management is to ensure that it maintains an efficient capital structure 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 or its business requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
Segment revenue and expenses:
The Company has an established basis of allocating Joint/Corporate expenses to the segments, which is reasonable, and followed consistently. All other segment revenue and expenses are attributable to the segments.
Segment assets and liabilities:
Segment assets include all operating assets used by a segment and consist principally of operating cash, debtors, inventories and fixed assets, net of allowances and provisions that are reported as direct offsets in the balance sheet. While most assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. In such cases, the entire revenue and expenses of these assets including depreciation are also allocated to the same segments. Segment liabilities include all operating liabilities and consist principally of creditors and accrued liabilities. Segment assets and liabilitiesdo not include deferred income taxes.
Inter segment transfers:
The Company accounts for inter segment sales and transfer at average Market price.
43 Code on Security, 2020:
The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13,2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.
44 The Financial Statements were approved and authorised for issue by the Board of Directors of the Company on 23rd May, 2024.
45 No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the funding party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
46 The accounting software that is being used by the Company for maintaining its books of account does not have the feature of audit trail (edit log) facility both at the application level and database level.
The accompanying notes are an integral part of the financial statements.
As per our Report of even date on behalf of the Board of Directors
For M. ANANDAM & CO.
Chartered Accountants P.Veeraiah
(Firm Registration Number: 000125S) Chairman & Managing Director
A.V. Sadasiva DIN: 00276769
Partner
Membership Number:018404 M.Bhavani Dattu V. Sesha Sayee
Chief Financial Officer Company Secretary
Place: Hyderabad (PAN:AECPM1280L) (M.No.: A9827)
Date : 23.05.2024
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