2.17 Provisions and contingent liabilities
Provisions are recognised when there is a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligations at the balance sheet date and are not discounted to its present value. These are reviewed at each balance sheet date and adjusted to reflect the best current estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligations or a reliable estimate of the amount cannot be made.
2.18 Operating Cycle/ Current and Non-Current Classification
Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/non-current classification of assets and liabilities.
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification. An asset is current when it is:
• Expected to be realised or intended to be sold or consumed in normal operating cycle.
• It is held primarily for the purpose of trading
• Expected to be realised within twelve months after the reporting period, or
• Cash or Cash Equivalent.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle.
• It is held primarily for the purpose of trading.
• It is due to be settled within twelve months after the reporting period, or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as noncurrent. Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
(c) Rights, preferences and restrictions attached to equity shares
The Company has only one class of equity shares having a par value of ' 10/- per share. The holder of the equity share is entitled to dividend right and voting right in the same proportion as the capital paid-up on such equity share bears to the total paid-up equity share capital of the Company. The dividend, if any, proposed by Board of Directors is subject to approval of the shareholders in the ensuring Annual General Meeting, except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in the same proportion as the capital paid-up on the equity shares held by them
(d) Details of equity shareholders holding more than 5% equity shares in the Company
(f) During the year ended 31 March 2023, pursuant to section 62 of the Companies Act 2013, the Company has issued 67,226 and 50,420 equity shares of the company on right basis to the eligible shareholders at ' 119 each including premium of ' 109 per share on 31 October 2022 and 22 December 2022 respectively.
(g) During the year ended 31 March 2024, on 22 July 2023 , the Company allotted 65,08,551 equity shares of ' 10/- each as fully paid up bonus shares by utilising securities premium, capital redemption reserve and free reserves amounting to ' 534.08 lakhs, 58.54 lakhs and 58.24 lakhs, respectively, pursuant to a resolution passed by shareholders in Extra Ordinary General Meeting held on 21 July 2023.
(h) During the year ended 31 March 2024, on 07 August 2023, pursuant to section 42 and other relevant provisions of the companies act 2013, the Company has issued 4,58,715 equity shares of the company on preferential allotment basis at ' 119 including premium of ' 109 per share having face value of ' 10 each. The company has also incurred ' 758 lakhs towards Share issue expense for the aforementioned preferential allotment.
(i) During the year ended March 31,2024, the Company has initiated its initial public offer (IPO) of 34,06,800 equity shares of face value of '10 each at an issue price of '119 per share as fresh issue. The issue has been closed for subscription on 02 April 2024. Subsequently, Company has allotted equity shares to the successful bidders on 04 April 2024 and shares of the company got listed on National Stock Exchange of India Limited (NSE emerge) on 08 April 2024. Further, the Company has received '1,315.19 lakhs as share application money from Anchor Investors as part of IPO.
(c) Rights, preferences and restrictions attached to preference shares
The Company has only one class of compulsory convertible preference shares having a par value of ' 10/- per share. The CCPS do not have any fixed dividend. In the event of liquidation of the Company, the holders of CCPS will be entitled to receive remaining assets of the company in preference to the equity shareholders. These CCPS are having term of 3 years.
(d) During the year ended 31 March 2023, the Company has issued compulsory convertible preference shares (CCPS) at face value i.e. ' 10 to Mr Neeraj Kumar Bansal on 8 July 2022 for the period of three years. These CCPS were convertible/ redeemable at the option of company or Mr Neeraj Kumar Bansal. Mr Neeraj Kumar Bansal shall be entitled to opt for conversion of CCPS into equity shares on any date after 1 year from the date of allotment. As per the management, the preference shares were issued with intent of redemption at a later date and not conversion. However, inadvertently in each of the regulatory filings, approvals and documents including the agreement with preference shareholders the term used is either Compulsory Convertible Preference Shares or CCPS. Hence, to remove this ambiguity the management has filed the necessary compounding application to change the nomenclature from Compulsory Convertible Preference Shares or CCPS to Redeemable Preference Shares (RPS).
(e) During the year ended 31 March 2023, the Company has redeemed 4,00,000 and 1,85,444 compulsory convertible preference shares (CCPS) mentioned above at face value i.e. ' 10 each issued to Mr Neeraj Kumar Bansal on 10 February 2023 and 24 March 2023 respectively under the provision of section 55 of companies act 2013. The Company has created the capital redemption reserve of ' 58.54 lakhs on these preference shares.
36. Contingent liabilities and capital commitments
Contingent Liability
a) The Company has pending litigation with Public Works Department Rajasthan relating to rehabilitation work for which matter is to be decied by Honble High Court. The amount involved ' 83.48 lakhs as on 31 March 2024 and 31 March 2023.
b) The Company has pending litigation with Public Works Department Rajasthan relating to rehabilitation work for which matter is to be decied by Honble High Court. The amount involved ' 11.98 lakhs as on 31 March 2024 and 31 March 2023.
Based on legal advice, management believes that they have a strong case and no provision is required to be made. Capital Commitment
Based on the information available with the Company, the capital committment as at 31 March 2024 is ' 2.18 lakhs. (As at 31 March 2023-Nil).
37 Employee benefits
The disclosures required under Ind AS 19 “employee Benefits” notified in the Companies (Indian Accounting Standards) Rules, 2015 are given below:-
i) Defined contribution plans
The Company makes contributions, determined as specified percentage of employee salaries in respect of qualifying employees towards provident fund, employees state insurance and labour welfare fund, which are defined contribution plans. The Company has no obligation other than to make the specified contributions. The contributions are charged
to statement of profit and loss as they accrue. The amount recognised as expense during year ended 31 March 2024 towards contribution to provident fund, state insurance and labour welfare fund aggregated to ' 13.49 lakhs (31 March 2023'8.97 lakhs).
ii) Defined benefit plans
The Gratuity amount has been computed based on respective employee’s salary and the years of employment with the Company. Gratuity has been accrued based on actuarial valuation as at the balance sheet date, carried by an independent actuary.
The following table sets forth the status of the gratuity plan of the Company and the amounts recognised in the Balance Sheet and the Statement of Profit and Loss.
VII. Risk exposure
Interest Rate risk: The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
Liquidity Risk: This is the risk that the Company is not able to meet the short-term gratuity payouts.This may arise due to non availabilty of enough cash/cash equivalent to meet the liabilities or holding of liquid assets not being sold in time.
Salary Escalation Risk: The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan’s liabilty.
Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
Regulatory Risk: Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act,1972 (as amended from time to time).There is a risk of change in regulations requiring higher gratuity payouts (e.g.Increase in the maximum limit on gratuity of ' 20 lacs).
38. Disclosure as required under Ind AS 116 Leases
The Company’s leases primarily consists of leases for building, fit-outs and vehicles. Generally, the contracts are made for fixed period and does not have a purchase option at the end of lease term. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets. The Company applies the ‘short-term lease’ recognition exemptions for these leases with lease terms of 12 months or less.
(c) Terms and conditions of transactions with related parties
The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year end are unsecured and settlement occurs in cash.This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
(d) The related party transactions disclosed are as per management certification and includes the transactions which were not included in the audited standalone financial statements for the year ended 31 March 2023 of the Company prepared in accordance with Accounting Standards prescribed under Companies (Accounting Standards) Rules 2006.
** Includes salary, bonus and contribution to provident fund and excludes provision of gratuity, since these are based on actuarial valuation carried out for the Company as a whole.
40. Financial risk management objectives and policies
The Company’s principal financial liabilities comprises of borrowings, trade payables, lease liabilities, other financial liabilities and financial assets includes investments, trade receivables, cash and cash equivalents, bank balances, other financial assets that derive directly from its operations. The Company’s financial risk management is an integral part of business plan and execution of business strategies. The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized 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 of currency risk and interest rate risk. Financial instruments affected by market risk include future commercial transactions, borrowings, investments, trade payables and trade receivables.
i) Foreign exchange risk
There is no foreign exchange risk on the company as no transaction has been done by the company in foreign currency, ii) Interest rate risk
I nterest 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 borrowings with floating interest rates.
B. Credit risk
Credit risk arises from the possibility that the counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from trade receivables for construction contracts and contract asset relating to construction contracts. The carrying amount of all financial assets represents the maximum credit exposure.
(i) Trade receivables
The Company periodically assesses the financial reliability of customers, taking into account the financial conditions, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. The Company considers the probability of default upon initial recognition of assets and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. The Company does not hold collateral as security. The Company has not experienced any significant impairment losses in respect of trade receivables in the past years.
(ii) Cash and bank balances including fixed deposits
The Company held cash and bank balance including fixed deposits of as at 31 March 2024'2,210.88 lakhs, 31 March 2023'485.99 lakhs, and 01 April 2022'14795 lakhs. These cash and bank balances are held with high rated banks/institutions and short term in nature and therefore does not carry any significant credit risk.
C. Liquidity risk
Liquidity risk is defined as the risk that Company will not be able to settle or meet its obligation on time or at a reasonable price. The Company’s objective is to all time maintain optimum level of equity to meet its cash and liquidity requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. In addition, processes and policies related to such risk are overseen by senior management. Management monitors the Company’s net liquidity position through rolling forecast on the basis of expected cash flows. Below is the maturity profile of financial liabilities on undiscounted basis.
41. Capital management
The Company’s objective for managing capital is to ensure as under:
i) To ensure the company’s ability to continue as a going concern.
ii) Maintaining a strong credit rating and healthy debt equity ratio in order to support business and maximize the shareholders’ value.
iii) Maintain an optimal capital structure.
iv) Compliance financial covenants under the borrowing facilities.
For the purpose of capital management, capital includes issued equity capital, and all other equity reserves attributable to the equity holders of the Company. The Company manages its capital structure keeping in view of:
i) Compliance of financial covenants of borrowing facilities.
ii) Changes in economic conditions.
In order to achieve this overall objective of capital management, amongst other things, the Company aims to ensure that it meets financial covenants attached to the borrowings facilities defining capital structure requirements, where breach in meeting the financial covenants may permit the lender to call the borrowings. There have been no breach in the financial covenants of any borrowing facilities in the current period. There is no change in the objectives, policies or processes for managing capital over previous year. To maintain the capital structure, the Company may vary the dividend payment to shareholders.
43. Key accounting changes
Impact of First time adoption of Ind AS
43.1 First-time adoption of Ind-AS
a. The standalone financial statement of the Company have been prepared in accordance with recognition and measurement principles prescribed under Section 133 of the Companies Act, 2013 read with the rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (Indian Accounting Standards) (Amendment) Rules 2016 issued thereunder, and other accounting principles generally accepted in India (“IndAS”).
b. The Company’s Management had issued the Audited Standalone Financial Statements of the Company for the year ended 31 March 2023 and 31 March 2022 on 14 July 2023 and 30 September 2022 respectively, that were prepared in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Companies Act, 2013 read with paragraph 7 of the Companies (Accounts) Rules, 2014 (‘Indian GAAP’).
c. The transition to IndAS was carried out from the accounting principles generally accepted in India (‘Indian GAAP’) which is considered as “Previous GAAP” as defined in Ind AS 101, “First Time Adoption’.’ An explanation of how the transition to IndAS has impacted the Company’s equity and profits/loss is provided in the Reconciliation of Equity as at April 1 2022 to March 31 2023 and Reconciliation of statement of profit/loss for the year ended March 31,2023. The preparation of these Ind AS Financial Statements resulted in changes to the accounting policies as compared to most recent annual financial statements prepared under Indian GAAP. The impact arising from the adoption of IndAS on the date of transition (01 April 2022) has been adjusted in other equity.
d. This note explains the principal adjustments made by the Company in transition from previous Indian GAAP to Ind AS.
43.2 Exemptions and exceptions applied
A. Exemptions
I nd AS 101 First-Time Adoption allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. For transition to Ind AS, the Company has applied the following exemptions:
(i) Derecognition of financial assets and financial liabilities
The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after 01 April 2022 (the transition date).
B. Exceptions
I nd AS 101 First-Time Adoption provides first-time adopters certain exceptions from the retrospective application of certain requirements under Ind AS. For transition to Ind AS, the Company has applied the following exceptions:
(i) Recognition of financial assets and liabilities
The Company has recognised financial assets and liabilities on transition date which are required to be recognised by IndAS and were not recognised under previous GAAP.
(ii) Classification and measurement of financial assets
I nd AS 101 requires that an entity should assess the classification of its financial assets on the basis of facts and circumstances exist on the date of transition. Accordingly, in its Opening Ind AS Balance Sheet, the company has classified all the financial assets on basis of facts and circumstances that existed on the date of transition, i.e. 01 April 2022.
I ndAS estimates as at 01 April 2022 are consistent with the estimates as at the same date made in conformity with previous GAAP except for the following items where application of Indian GAAP did not require estimation:
43.6. Notes to Reconciliation
1 Measurement of Security Deposit at amortised cost
Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of lease term) are recorded at transaction price. Under Ind AS All financial assets are required to be recognised at fair value. Accordingly, the Company has fair valued the security deposits and the difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent. Under Ind AS 116, such prepaid lease rental have been form part of ROU not the lease liability. Accordingly, the difference between the fair value and the transaction value of the security deposit has been recognised as prepaid rent.
2 Actuarial gain/(loss) on Defined Benefit Scheme
Under the previous GAAP, cost relating to post employment benefit obligations including actuarial gain/losses were recognised in Profit & Loss. Under Ind AS, actuarial gain/losses on the net defined benefit liability are recognised in other comprehensive income instead of profit & loss.
3 Lease Liability
i) On 01 April 2022, the Company adopted Ind AS 116. On account of adoption of IND AS 116, existing prepaid lease rentals and advances have been reclassified as right-of-use assets.
ii) Under Previous GAAP, lease payments are recognised as an expense in the statement of profit and loss on a straight line basis over lease term in respect of asset taken on operating lease . On application of Ind AS 116, the nature of expenses has changed from lease rent in previous periods to depreciation cost for the right-of-use asset, and finance cost for interest accrued on lease liability. Interest expense on the lease liability is a component of finance cost that requires to be presented separately in the statement of profit and loss. ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.
4 Expected Credit Loss
Under the previous GAAP, provision for doubtful debt has been made based on company’s credit policy. Under Ind AS impairment allowance has been determined based on Expected Credit Loss. Due to this company has estimated an impairment loss on account of estimated credit loss and for significant credit deterioration in respect of its trade receivable.
5 Deferred taxes
Under previous GAAP, deferred taxes were recognised based on Profit & loss approach i.e. tax impact on difference between the accounting income and taxable income. Under Ind AS, deferred tax is recognised by following balance sheet approach i.e. tax impact on temporary difference between the carrying value of asset and liabilities in the books and their respective tax base.
6 Borrowings
Ind AS 109 requires transaction costs incurred towards borrowings to be deducted from the transaction value on initial recognition. These cost are recognised in profit & loss over the tenure of borrowings as a part of the interest expense by applying effective interest rate method.
47.1. Provision for gratuity
Company had accounted gratuity on cash basis, the Company has complied with the requirement of AS-15 “Employee Benefits” under the previous GAAP and Ind AS -19 (Revised) “Employee Benefits’.’ Accordingly Gratuity expenses has been booked on the basis of actuarial valuation report.
47.2. Accounting of Construction Contracts
Company had accounted revenue from construction contracts as per AS-9 “Revenue Recognition’’ The company has complied with the requirement of AS-7 “Construction Contracts” under the previous GAAP and Performance obligations satisfied over time as presecribed under IndAS-115 “Revenue from Contracts with Customers”
47.3. Accounting of Prior Period Errors
Expense booking has been reconsidered basis of the year to which expenses is pertaining to and accordingly all prior period expenses has been charged to Statement of Profit and Loss account of respective years. It also includes sundry balances written off, excess booking of expenses.
47.4. Regrouping adjustments
For Assets and Liabilities, the grouping of items has been considered basis of nature those balances pertains and accordigly figures have been regrouped.
48. Corporate social responsibility (CSR)
a) CSR is applicable on the company for FY 2023-24. Company creates CSR liability for the year and consider the expenditure amount as and when incurred.
49. There were no amounts which are required to be transferred to the Investor Education and Protection Fund by the Company during the year ended 31 March 2024 and 2023.
50. Segment Reporting
As permitted by paragraph 4 of Ind AS 108, “Operating Segments, notified under section 133 of the Companies Act, 2013, read together with the relevant rules issued thereunder, if a single financial report contains both consolidated financial statements and the standalone financial statements of the parents, segment information need to be presented only on the basis of the consolidated financial statements. Thus, disclosures regarding Operating segment is presented in Consolidated Financial Statements.
51. The Company did not enter into any transactions which are not recorded in the books of accounts and has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 during the year ended 31 March 2024 and 2023.
52. During the year ended 31 March 2024 and 2023, 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 (whether recorded in writing or otherwise) that the Intermediaries 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.”
53. During the year ended 31 March 2024 and 2023, the Company has not received any funds 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 Company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.”
54. No proceedings have been initiated or pending against the Company for holding any benami property under Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder during the year ended 31 March 2024 and 2023.
55. The Company has not traded or invested in Crypto currency or Virtual currency anytime during the year ended 31 March 2024 and 2023.
56. The Company does not have any transaction/balances with struck off companies during the year ended 31 March 2024 and 2023.
57. The Company has not registered charges with the Registrar of Companies (ROC) amounting to ' 7725 lakhs and ' 243.58 lakhs beyond the statutory period for the year ended 31 March 2024 and 31 March 2023 respectively. Further, the Company is in process of filling charge satisfaction with ROC for the loans amounting to ' 1,504.18 lakhs for the year ended 31 March 2024.
58. The Company is in compliance with the number of layers prescribed under clause (87) of section 2 of the Companies Act read with the Companies ( Restriction on number of Layers) Rules, 2017 *The company has transferred inventory amounting to ' 546.66 Lakhs as on 31 March 2024, and ' 282.95 Lakhs as on 31 March 2023 to the statement of profit and loss due to the application of Ind AS 115 - Revenue from Contract with Customers with respect to recognition of revenue and associated cost over the period of time.
60. During the year ended 31 March 2024 and 2023, the Company has used the borrowings from banks and financial institutions for the specific purpose for which it was taken at the balance sheet date.
61. The Company has not revalued any of its property, plant and equipment during the year ended 31 March 2024 and 2023. Hence, the amount of change in gross and net carrying amount due to revaluation and impairment losses/reversals is nil.
62. The Company has not been declared as a wilful defaulter by any bank or financial institution or other lender in the year ended 31 March 2024 and 2023.
63. During the year ended 31 March 2024 and 2023, no loans or advances in the nature of loans have been granted to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013,) either severally or jointly with any other person, that are:
(a) repayable on demand, or,
(b) without specifying any terms or period of repayment.
64. The Company did not have any long-term contracts including derivatives contracts for which there were any material foreseeable losses.
65. On 7 August 2023, the Board of Directors of the Company have approved to convert the Company from Private Limited Company to Public Company. The necessary approvals from registrar of company received and accordingly, status of the Company changed to Public Limited from Private Limited w.e.f. 6 November 2023.
66. As at 31 March 2024 and 31 March 2023, the Company has taken interest free loan amounting to ' 28.95 lakhs ' 84.68 lakhs, respectively from the directors. As confirmed by directors, these loans are not provided out of borrowed fund.
67. The Company has used an accounting software for maintaining its books of account for the financial year ended 31 March 2024, which does not have a feature of recording audit trail (edit log) facility.
68. Previous years figures has been reclassified/regrouped whenever necessary to correspond with current year classifications and disclosures.
For S.N. Dhawan & CO LLP For and on behalf of the Board of Directors
Chartered Accountants K2 Infragen Limited (Previously Known as K2 Infragen Private Limited)
Firm Registration No.000050N/N500045
Rahul Singhal Pankaj Sharma Priya Sharma
Partner Managing Director Director
Membership No.096570 DIN: 03318951 DIN: 02743915
Priyanka Pareek Jyoti Lakra
Place: Gurugram CFO Company Secretary
Date: 27th May 2024 Membership No.: 424961 Membership No.: 37300
|