p. Provisions, Contingent Liabilities and Contingent Assets
Provisions
Provisions represent liabilities for which the amount or timing is uncertain. Provisions are recognized 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 will be required to settle such an obligation and the amount can be estimated reliably. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows to net present value using an appropriate pre-tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Unwinding of the discount is recognized in statement of profit and loss as a finance cost. Provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate.
Contingent Liabilities
Contingent liabilities are possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that arises from past events is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. Contingent Liabilities are not recognized but disclosed in the financial statements when the possibility of an outflow of resources embodying economic benefits is more.
Contingent Assets
Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised. However, when the realization of income is virtually certain, then the related asset is not a contingent asset and is recognised.
q. Earnings per share
Basic EPS is calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. Partly paidup shares are included as fully paid equivalents according to the fraction paid-up.
Diluted earnings per share are computed by dividing the profit after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on conversion of all dilutive potential equity shares .
r. Dividends
Dividends paid are recognised in the period in which the dividends are approved by the Board of Directors, or in respect of the final dividend when approved by shareholders and is recognised directly in other equity.
s. Segment Reporting
Operating segment is reported in a manner consistent with the internal reporting provided to Chief Operating Decision Maker (CODM). The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Inter-segment revenues have been accounted for based on prices normally negotiated between the segments with reference to the costs, market prices and business risks, within an overall optimization objective for the Company. Revenue and expenses are identified with segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, will be included under "Unallocated/ Others".
t. Exceptional items
Exceptional items are those items that management considers, by virtue of their size or incidence should be disclosed separately to ensure that the financial information allows an understanding of the underlying performance of the business in the year, so as to facilitate comparison with prior periods. Such items are material by nature or amount to the year's result and require separate disclosure in accordance with Ind AS.
u. Key Accounting Estimates and Judgments
The preparation of the financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses, and disclosures of contingent assets and liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed in the paragraphs that follow.
(i) Useful Economic Lives and Impairment of Other Assets
The estimated useful life of property, plant and equipment (PPE) and intangible asset is based on a number of factors including the effects of obsolescence, usage of the asset and other economic factors (such as known technological advances).
The Company reviews the useful life of PPE and intangibles at the end of each reporting date and any changes could affect the depreciation rates prospectively.
The Company also reviews its property, plant and equipment for possible impairment if there are events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable. In assessing the property, plant and equipment for impairment, factors leading to significant reduction in profits, such as the Company's business plans and changes in regulatory environment are taken into consideration.
(ii) Contingencies and Commitments
In the normal course of business, contingent liabilities may arise from litigation, taxation and other claims against the Company. Where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the dispute can be made based on management's assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such liabilities are disclosed in the notes but are not provided for in the financial statements.
Although there can be no assurance regarding the final outcome of the legal proceedings, the Company does not expect them to have a materially adverse impact on the Company's financial position or profitability.
(iii) Actuarial Valuation
The determination of Company's liability towards defined benefit obligation to employees is made through independent actuarial valuation including determination of amounts to be recognized in the Statement of Profit and Loss and in Other Comprehensive Income. Such valuation depend on assumptions determined after taking into account inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
(iv) Fair Value Measurements and Valuation Processes
Some of the Company's assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engages third party valuers, where required, to perform the valuation. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in the notes to the financial statements.
(v) Recognition of Deferred Tax Assets For Carried Forward Tax Losses
The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Company's future taxable income against which the deferred tax assets can be utilised. In addition, significant judgement is required in assessing the impact of any legal or economic limits.
(vi) Assessment of Impairment of investments in subsidiaries
The Company reviews its carrying value of investments in subsidiaries, associates and joint ventures annually, or more frequently when there is indication for impairment.
If the recoverable amount is less than its carrying amount, the impairment loss is accounted for. Determining whether the investment in subsidiaries, associates and joint ventures is impaired requires an estimate in the value in use of investments. The Management carries out impairment assessment for each investment by comparing the carrying value of each investment with the net worth of each company based on audited financials, comparable market price and comparing the performance of the investee companies with projections used for valuations, in particular those relating to the cash flows, sales growth rate, pre-tax discount rate and growth rates used and approved business plans.
Capital Reserve*
This reserve represents the difference between value of the net assets transferred and consideration paid for such assets in the course of amalgamation and also relates to forfeiture of shares.
Capital Reserve on Demerger*
This reserve represents the aggregate of excess assets over liabilities amounting to ' 45.44 Cr. relating to the Real Estate and Ancillary Business of Ma Kalyaneshwari Holdings Private Limited was transferred to Anjaney Land Assets Private Limited and the cancellation of the equity shares held by Ma Kalyaneshwari Holdings Private Limited in the paid-up capital of Anjaney Land Assets Private Limited was debited to Capital Reserve ("Capital Reserve due to Demerger") w.e.f. January 01, 2024, being the Appointed date as per the NCLT Order. As a result of this demerger a Capital Reserve having a debit balance of ' 45.44 Cr. was created in Ma Kalyaneshwari Holdings Private Limited on January 01, 2024. Upon amalgamation of Ma Kalyaneshwari Holdings Private Limited with Maithan Alloys Limited, this reserve has been transferred to Maithan Alloys Limited.
Capital Reserve ( Amalgamation adjustment deficit account)*
Upon Amalgamation of Ma Kalyaneshwari Holdings Private Limited with Maithan Alloys Limited, the difference between the asset, liabilities, reserves including amalgamation adjustment account are recorded as Capital Reserve ( Amalgamation adjustment deficit account) having debit balance of ' 1,440.32 Cr. in the books of the Company.
Securities Premium*
This reserve represents the premium on issue of shares and can be utilized in accordance with the provisions of the Companies Act, 2013.
Statutory Reserve Fund*
Statutory Reserve represents the Reserve Fund created under Section 45 IC of the Reserve Bank of India Act, 1934. Accordingly an amount representing 20% of Profit for the period is transferred to the fund. Upon amalgamation of Ma Kalyaneshwari Holdings Private Limited with Maithan Alloys Limited, this reserve has been transferred to Maithan Alloys Limited.
Amalgamation Adjustment Reserve*
Upon amalgamation of Ma Kalyaneshwari Holdings Private Limited with Maithan Alloys Limited, this reserve has been transferred to Maithan Alloys Limited. This reserve is the corresponding debit balance of the statutory reserves of the transferor companies which was recorded in the Books of Ma Kalyaneshwari Holdings Private Limited.
Retained Earnings*
This reserve represents the cumulative profits of the Company and effects of remeasurement of defined benefit obligations. This reserve can be utilized in accordance with the provisions of the Companies Act, 2013.
Other items of other comprehensive income*
Other items of other comprehensive income consist of re-measurement of net defined benefit liability.
Equity Instruments through Other Comprehensive Income*
This reserve represents the cumulative gains (net of losses) arising on the revaluation of equity instruments measured at fair value through Other Comprehensive Income, net of tax. The same shall be transferred to retained earnings when those instruments are disposed off.
48. Financial Risk Management
The Company has a system-based approach to risk management, anchored to policies & procedures and internal financial controls aimed at ensuring early identification, evaluation and management of key financial risks (such as market risk, credit risk and liquidity risk) that may arise as a consequence of its business operations as well as its investing and financing activities.Accordingly, the Company’s risk management framework has the objective of ensuring that such risks are managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulations. It also seeks to drive accountability in this regard.
The Company's financial liabilities includes Borrowings, Trade Payables and Other Financial Liabilities. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include Investment, Trade Receivables, Cash and Cash Equivalents and Other Financial Assets that are derived directly from its operations.
The Board of Directors reviewed policies for managing each of these risks which are summarised below:-(a) Market Risk
(i) Commodity Price Risk
Alloy industry being cyclical in nature, realisations gets adversely affected during downturn. Higher input prices or higher production than the demand ultimately affects the profitability. The Company has mitigated this risk by well integrated business model.
(ii) Price Risk
The Company's exposure to equity securities price risk arises from investments held by the Company and classified in the balance Sheet either at fair value through other comprehensive income or at fair value through profit and loss. Having regard to the nature of securities, intrinsic worth, intent and long term nature of securities held by the Company, fluctuation in their prices are considered acceptable and do not warrant any management.
(iv) 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 the Company's foreign currency denominated Borrowings, Creditors and Debtors. This foreign currency risk is covered by using foreign exchange forward contracts.Since the Company has both imports as well as exports (exports are more than imports) the currency fluctuation risk is largely mitigated by matching the export inflows with import outflows. Surplus exports are hedged using simple forward exchange contracts depending on the market conditionsThe hedge mechanisms are reviewed periodically to ensure that the risk from fluctuating currency rates is appropriately managed. The following analysis is based on the gross exposure as at the reporting date which could affect the Profit or Loss. The exposure summarised below is mitigated by some of the derivative contracts entered into by the Company as disclosed under the section on “Derivative financial instruments". The Company does not hold derivative financial instruments for speculative purposes.
(b) Credit Risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties, where appropriate, as a means of mitigating the risk of financial loss from defaults. Credit risk on receivables is limited as almost all domestic sales are against advance payment or letters of credit (except sale made to PSU's) and export sales are on the basis of documents against payment or letters of credit.Financial instruments and cash deposits Credit risk from balances with banks and investments is managed by the Company’s finance department in accordance with the Company’s policy. Investments of surplus fund in portfolio management services, mutual funds, alternate investment funds and direct equity are made only with approved counterparties and within credit limits assigned to each counterparty, if any. 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 Company’s Board of Directors. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments. Balances with banks and deposits are placed only with highly rated banks/financial institution.
i) Financial Instruments and Deposits
For current investments, counterparty limits are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for the Company's mutual fund investments.
With respect to the Company's investing activities, counter parties are shortlisted and exposure limits determined on the basis of their credit rating (by independent agencies), financial statements and other relevant information. Taking into account the experience of the Company over time, the counter party risk attached to such assets is considered to be insignificant.
None of the Company’s Cash and Cash Equivalents, including Time Deposits with banks, are past due or impaired. Regarding Loans and Other Financial Assets (both current and non-current), there were no indications as at 31 March 2024, that defaults in payment obligations will occur .
ii) Trade Receivables
Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally carrying 30 days credit terms. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically. The risk related to trade receivable is presented in note no. 15.
The credit quality of the Company’s customers is monitored on an ongoing basis and assessed for impairment where indicators of such impairment exist. The Company uses simplified approach for impairment of financial assets. If credit risk has not increased significantly, 12-month expected credit loss is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime expected credit loss is used. The solvency of the debtor and their ability to repay the receivable is considered in assessing receivables for impairment. Where receivables have been impaired, the Company actively seeks to recover the amounts in question and enforce compliance with credit terms.
(c) Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the underlying business, the Company maintains sufficient cash and liquid investments available to meet its obligation.
Management monitors rolling forecasts of the Company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. The management also considers the cash flow projections and level of liquid assets necessary to meet these on a regular basis.
(i) Fair Value Hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standards.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices as at the reporting date.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
(ii) Valuation Methodology
Specific valuation techniques used to value financial instruments include:
• the fair value of investment in quoted equity shares, mutual funds and Non convertible debenture is measured at quoted price or NAV
• the fair value of investment in unquoted equity shares is measured by using Comparable Companies Multiple (CMM) Method under market approach.
• the fair value of level 3 instruments is valued using inputs based on information about market participants assumptions and other data that are available.
• the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date.
• All foreign currency denominated assets and liabilities are translated using exchange rate at reporting date.
The Company assessed that fair value of trade receivables, cash and cash equivalent, bank balances, loans, trade payable and other financial assets and liabilities except derivative financial instruments approximate their carrying amounts largely due to the short term maturities of these instruments. The Company’s borrowings have been contracted at market rates of interest. Accordingly, the carrying value of such borrowings approximate fair value.
(iv) Significant Estimates
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. For details of the key assumptions used and the impact of changes to these assumptions see (ii) above.
(57) Composite Scheme of Arrangement
The Board of Directors of Maithan Alloys Limited (“Company" or “MAL" or “Transferee Company"), at its meeting held on May 05, 2021 had considered and approved the Composite Scheme of Arrangement ("Scheme") amongst Ma Kalyaneshwari Holdings Private Limited ("MKH" or "Demerged Company" or "Transferor Company") and Anjaney Land Assets Private Limited ("ALAPL" or "Resulting Company") and the Company and their respective shareholders and creditors under Sections 230 to 232 read with Section 66 and other applicable provisions of the Companies Act, 2013. Subsequently the Board of Directors of the Company at its meeting held on November 11, 2021 had modified the Scheme to fix the 'Appointed Date' of the Scheme as November 01, 2021 and related consequential changes thereof.
Hon’ble National Company Law Tribunal, Kolkata Bench, (Hon’ble NCLT) vide its Order dated February 01, 2024 has approved the said Scheme with the Appointed Date’ as January 01, 2024. Consequent upon filing of the said Scheme with Registrar of Companies, West Bengal, the Scheme has become effective from March 08, 2024 with an Appointed Date’ i.e., January 01, 2024 in terms of the Order of Hon’ble NCLT. Accordingly, the effect of the scheme which is a common control transaction has been taken in the books of the Company.
Upon the scheme coming into effect, assets and liabilities relating to the Real Estate and Ancillary Business of MKH demerged into ALAPL (“Part II of the Scheme"). The aggregate of excess assets over liabilities amounting to ' 45.44 Cr. relating to the Real Estate and Ancillary Business of MKH was transferred to ALAPL and the cancellation of the equity shares held by MKH in the paid-up capital of ALAPL was debited to Capital Reserve (“Capital Reserve due to Demerger") w.e.f. January 01, 2024, being the Appointed date as per the NCLT Order. As a result of this demerger a Capital Reserve having a debit balance of ' 45.44 Cr. was created in MKH on January 01, 2024.
Post Demerger the remaining business undertaking of MKH is amalgamated with MAL (“Part III of the Scheme") and recorded for in the books of account of MAL as per “Pooling of Interest Method" as described in Appendix C of Indian Accounting Standard (Ind AS) 103- “Business Combinations" prescribed under Section 133 of the Companies Act 2013 read with relevant rules thereunder.
The Company has issued and alloted 1,72,70,176 fully paid-up equity shares of the face value of ' 10/- each in the proportion of the number of equity shares held by the shareholders of Transferor Company in the Transferor Company during the year.
"Further, pursuant to the Scheme existing shares of the Company held by the Transferor Company i.e. 1,72,70,176 fully paid-up equity shares of ' 10/- each, were cancelled/extinguished."
Upon Amalgamation, the difference between the asset, liabilities, reserves including amalgamation adjustment account are recorded as Capital Reserve ( Amalgamation adjustment deficit account) having debit balance of ' 1,440.32 Cr. in the books of the Company.
(58) Additional Regulatory Disclosures as per Schedule III of Companies Act, 2013:
i) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
ii) There are no transactions with the Companies whose name are struck off under Section 248 of The Companies Act, 2013 or Section 560 of the Companies Act, 1956 during the year ended 31 March 2024.
iii) All applicable cases where registration of charges or satisfaction is required to be filed with Registrar of Companies have been filed. No registration or satisfaction is pending at the year ended 31 March 2024.
iv) The Company has complied with the number of layers prescribed under clause (87) of Section 2 of the Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017.
v) The Company has not advanced or loaned or invested funds 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 beneficiary
vi) The Company has not operated in any crypto currency or Virtual Currency transactions.
vii) During the year the Company has not disclosed or surrendered, any income other than the income recognised in the books of accounts in the tax assessments under Income Tax Act, 1961.
(59) Disclosure as per Regulation 34 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 186 of the Companies Act, 2013
(I) Disclosure relating particulars of the loan given as required under Section 186(4)
(60) 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.
(61) With effect from April 1, 2023, the Ministry of Corporate Affairs (MCA) has made it mandatory for every company, which uses accounting software for maintaining its books of account, to use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.The Company uses accounting software for maintaining its books of account for the financial year March 31, 2024 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 at the database level for accounting software and payroll software. This is being taken up with the vendor and subsequently it has been enabled on May 14, 2024. Further, no audit trail feature was tampered with in respect to the accounting software including payroll software.
(62) (i) The figures appearing in financial statements has been rounded off to the nearest Crore, as required by general instruction for preperation of financial statements
in Division II of Schedule III of the Companies Act, 2013.
(ii) "0.00" represent the figure below ' 50,000 because of rounding off the figures in Crore.
(63) The financial statement for the year ended 31 March 2024 were approved by the Board of Directors on 29 May 2024.
(64) Figures for the previous period/year have been regrouped and / or reclassified to conform to the classification of current period/year’s figures, wherever necessary.
The accompanying notes 1 to 64 are an integral part of the financial statements.
In terms of our report attached
For Singhi & C0. For and on behalf of the Board of Directors
Chartered Accountants
FRN.: 302049E S. C. Agarwalla Subodh Agarwalla
Chairman & Managing Director Whole-time Director & CEO
Shrenik Mehta DIN: 00088384 DIN: 00339855
Partner
Membership No.: 063769
Sudhanshu Agarwalla Rajesh K. Shah
Datee29oMay 2024 President & CFO Company Secretary
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