1.12. PROVISION FOR WARRANTY FOR SALE AND SERVICES RENDERED
Provision for warranties is recognized when products are sold and services are rendered with warranty as per the contract. These provisions are estimated by using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise or incurred. The initial estimate of warranty-related costs is revised annually.
As per the terms of the contracts, the Company provides post-contract services /warranty support to some of its customers. The Company accounts for the post-contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past estimates.
1.13. LEASES:-COMPANY AS A LESSEE
The Company’s leased asset primarily consists of leases for land and buildings.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over lease term.
The right-of-use assets are initially recognized at cost. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability.
The right-of-use assets are depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of- use assets are determined on the same basis as those of property, plant and equipment.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
1.14.LEASES:-COMPANY AS A LESSOR
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rental income is recognized on a straight line basis/systematic basis over the lease term. However, reimbursable under the contract are accounted for on accrual basis. Initial direct cost are added to the carrying amount of the leased assets and recognized as an expense over the lease term.
1.15 FINANCIAL INSTRUMENTS
1.15.1 Initial Recognition
Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and financial liabilities are recognized at fair value on initial recognition except for trade receivables/ trade payables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit and loss are added or deducted to/from the fair value on initial recognition.
1.15.2 Subsequent Measurement
(a) Financial assets are subsequently measured at amortised cost if these are held within a business model whose objective is to hold the assets in order
to collect contractual cash flows and the contractual terms of the financial assets give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding using the Effective Interest Rate (EIR) method. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss.
(b) Financial assets at fair value through profit or loss.
The financial assets are measured at fair value through profit or loss unless it is classified at amortised cost.
(c) Financial liabilities
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
All other financial liabilities are subsequently measured at amortised cost using EIR method. Gains and losses are recognised in Statement of Profit and Loss when the liabilities are de-recognised as well as through the EIR amortisation process.
1.15.3 De-recognition of Financial Instruments
A financial asset is de-recognised when:
• The rights to receive cash flows from the asset have expired, or
• the Company has transferred substantially all the risks and rewards of the asset, or the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
A financial liability or a part of financial liability is derecognised from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
1.16. GOVERNMENT GRANT
The Company is getting Government Grant as export incentive under Foreign Trade Policy (FTP) of the Government of India. The same is recognized/presented following Income Approach as other operating income when there is a reasonable assurance that the incentive will be received, and all the attached conditions have been complied with and the same will be received.
20.7 FULLY PAID-UP AGGREGATE NUMBER OF EQUITY SHARES ALLOTTED BY WAY OF BONUS SHARES DURING THE YEAR OF FIVE YEARS IMMEDIATELY PRECEEDING BALANCE SHEET DATE
Company issued 5 crore bonus shares of ' 10 each during 2019-20 amounting to ' 50 crore.
20.8 FULLY PAID-UP AGGREGATE NUMBER OF EQUITY SHARES BUY-BACK DURING THE YEAR OF FIVE YEARS IMMEDIATELY PRECEEDING BALANCE SHEET DATE
The company has bought back 96,98,113 fully paid-up equity shares of ' 10 each from the shareholders on 18th November, 2020, on proportionate basis by way of tender offer at a price of ' 265 per equity share for an aggregate amount of ' 257 crore. Consequent to the said buy-back, the equity share capital of the company has been reduced by ' 9.70 crore and capital redemption reserve of an equivalent amount has therefore been created as per the extant provision of the companies act, 2013.
VII) The significant actuarial assumptions for the determination of the defined obligations are discount rate and expected salary increase. The sensitivity for actuarial assumptions has been computed by varying respective actuarial assumption used for valuation of the defined benefit obligation by 1%, while holding all other assumptions constant.
If the discount rate increases/decreases by 1%, the defined obligations would decrease by ^9.66 crore / increase by ^ 10.38 crore as on 31st March, 2024 and if the expected salary growth increases /decreases by 1%, the defined benefit obligations would increase by ^ 4.01 crore/ decrease by ^ 4.16 crore as on 31st March, 2024.
However, the actual change in assumptions would not necessarily behave in isolation to each other. The defined benefit obligations would change accordingly.
The company is expected to contribute ^14.16 crore to defined benefit plan obligations towards Gratuity during the year 2024-25.
Remeasurement (gain)/loss of defined employee benefit plans in Other Comprehensive Income (OCI) for the year ended 31.03.2024 and 31.03.2023 are ^ (9.00) crore and ^ (8.60) crore respectively.
VII) The significant actuarial assumptions for the determination of the defined obligations are discount rate and expected salary increase. The sensitivity for actuarial assumptions has been computed by varying respective actuarial assumption used for valuation of the defined benefit obligation by 1%, while holding all other assumptions constant.
If the discount rate increases /decreases by 1%, the defined obligations would decrease by 7 0.73 crore /increase by 7 0.80 crore as on 31st March, 2024 and if the expected salary growth increases /decreases by 1%, the defined benefit obligations would increase by 7 0.82 crore/ decrease by 7 0.76 crore as on 31st March, 2024.
However, the actual change in assumptions would not necessarily behave in isolation to each other. The defined benefit obligations would change accordingly.
The Company is expected to contribute 7 1.47 crore to defined benefit plan obligations towards gratuity during the year 2024-25. Remeasurement (gain)/loss of defined employee benefit plans in Other Comprehensive Income (OCI) for the year ended 31.03.2024 and 31.03.2023 are 70.59 crore and 7 0.85 crore respectively.
iii) Provident Fund (Funded)
The Company pays fixed contribution to provident fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The Company has an obligation to ensure minimum rate of return to the members as specified by GOI. Accordingly, the Company has obtained report of the actuary, based on which overall interest earnings and cumulative surplus is more than the statutory interest payment requirement for all the periods presented. Further, contribution to employees pension scheme is paid to the appropriate authorities.
As per the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Company has no right to the benefits either in the form of refund from the plan or lower future contribution to the plan towards the net surplus of 71.67 crore (previous year 7 3.27 crore) determined through actuarial valuation. Accordingly, Company has not recognized the surplus as assets as it pertains to the provident fund trust and not to the Company.
The Company contributed 7 26.15 crore and 7 24.63 crore to the provident fund during the year ended 31st March, 2024 and 31st March, 2023 respectively.
b) Defined Contribution Plans
i) Post Retirement Benefits (Pension & Medical):
All eligible employees are entitled to benefit under defined contribution plans towards pension under EPFO scheme, post retirement pension fund and medical schemes as defined contribution plans. The Company has no obligations other than the contribution payable to such funds/schemes. The Company recognizes such contributions as expenses when an employee renders the related service.
During the year, Company contributed/ provided 7 20.92 crore (previous year 7 20.07 crore) towards post retirement pension fund, 7 2.32 crore (previous year 73.27 crore) towards pension under EPFO and 7 1.98 crore (previous year 7 5.62 crore) towards medical schemes.
ii) Performance Related Pay:
Eligible employees are entitled to benefit of performance related pay. The provision for performance related pay is of short-term nature and has been recognized as per the procedure laid by management based on the guidelines of the Department of Public Enterprises.
c) Foreign Service Contribution
Foreign Service Contribution is recognized on accrual basis in the Statement of Profit and Loss Account as per the deputation terms with parent organizations in respect of officers taken on deputation from other organizations.
41. INDIAN ACCOUNTING STANDARD (IND AS-20), DISCLOSURES ON ACCOUNTING FOR GOVERNMENT GRANTS AND DISCLOSURE OF GOVERNMENT ASSISTANCE ARE AS FOLLOWS:
The Company is receiving government grant in the form of export incentive on export of Rolling Stock and Spare parts. There are two types of export incentive i.e. duty drawback and RoDTEP (Remission of Duties & Taxes on Exported Products). The Company has recognized/presented 7 1.69 crore (previous year 7 23.57 crore) as export incentive. The export incentive receivable at the end of the year is 7 0.32 crore (previous year 7 0.50 crore).
42. INDIAN ACCOUNTING STANDARD (IND AS) 21, DISCLOSURES ON THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES ARE AS FOLLOWS:
The amount of exchange differences (net) credited to the statement of profit and loss account during the Financial Year is 7 8.86 crore (Previous Year 7 40.64 crore)
e) Key Management Personnel
• Chairman & Managing Director (Chief Executive Officer)
Shri Rahul Mithal (DIN: 07610499)
• Whole Time Directors
Shri Arun Kumar Singh (DIN: 09747776) - Director (Projects)
Dr. Deepak Tripathi (DIN: 10090267) - Director (Technical)
Shri Krishna Gopal Agarwal (DIN: 10239667) - Director (Finance) (w.e.f. 01.08.2023)
Shri Bibhu Prasad Nayak (DIN: 08197975)- Director (Finance) (upto 31.07.2023)
• Government Nominee Directors Shri Sandeep Jain (DIN: 09435375)
Shri Raj Kumar Mangla (DIN: 09533985) (upto 29.02.2024)
Shri Shailendra Singh (DIN: 07083410) (w.e.f. 27.03.2024)
• Non-Executive (Independent) Directors
Shri Laxman Tammanna Tapashi (DIN: 01838521)
Dr. Godawari Mishra (DIN: 09394545)
Dr. Dineshananda Goswami (DIN: 09394294)
Shri Likha Togu (DIN: 09470640)
• Chief Financial Officer
Shri Krishna Gopal Agarwal (w.e.f. 01.08.2023)
Shri Bibhu Prasad Nayak (upto 31.07.2023)
• Company Secretary
Shri Ashok Mishra (w.e.f. 28.02.2024)
Shri Nikhil Agarwal (from 12.09.2023 to 28.02.2024)
Shri Joshit Ranjan Sikidar (upto 11.09.2023)
f) Transactions and Balances with Related Parties
Outstanding balances from the related parties are unsecured and considered good which are due towards ordinary course of business and are being realized within reasonable time.
46. INDIAN ACCOUNTING STANDARD (IND AS) 36, DISCLOSURES ON IMPAIRMENT OF ASSETS ARE AS FOLLOWS:
The Company has carried out the assessment on impairment of assets in terms of Indian Accounting standard (Ind AS) 36, Impairment of Assets and management does not perceive any impairment in the value of the carrying amount of assets.
However, during the financial year Management has decided to liquidate investment in M/s. Metro Management Group Ltd (MMG) and entire equity investment of ' 0.60 crore has been provided for in Books of Accounts.
47. INDIAN ACCOUNTING STANDARD (IND AS) 37, DISCLOSURES ON PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS ARE AS FOLLOWS:
a) Provisions include mainly towards warranty which has been made for fulfillment of warranty obligation after export sale of rolling stocks/ locomotives & spares. Estimation of such provision is based on experience, nature of rolling stock exported to various clients and period specified in the agreements with them. Actual expenditure may vary during the warranty period as per the requirements.
b) Contingent liabilities and Commitments to the extent not provided for include:
i) Contingent Liabilities
I) Claims (excluding interest) against the Company not acknowledged as debts are ' 27.15 crore (previous year ' 27.06 crore).
II) In one of the Building Projects, which the company did as a Project Management Consultant (PMC), The building is declared unsafe based on third-party evaluation and is required to reconstructed. Cost of Reconstruction is estimated at ' 99.23 Crore (including GST & Contingencies). The contractor, who constructed the said building, has undergone Insolvency Proceedings under the Insolvency and Bankruptcy Code (IBC).
The likely availability of the amount from insurance claim, Bank Guarantee encashment proceeds, and other amounts available under the contract is estimated to be ' 60.12 crore. Since the project is handled by the company as PMC, the company does not foresee any outflow from its account. However, as an abundant precaution, ' 39.11 crore (including GST & Contingencies) is being disclosed as contingent liabilities on this account.
MI) The Company is subject to legal/arbitration proceeding and claims, which have arisen in the ordinary course of business. Management does not reasonably expect that when these cases ultimately conclude and determined, will have any material and adverse effect on the Company’s results of operations or financial conditions.
IV) Disputed taxes and duty:
A) Demand on account of income tax includes of 7 6.66 crore (excluding interest) (previous year 76.66 crore) which are being contested by the Company. This excludes 7 4.51 crore (previous Year 7 4.51 crore) relating to cases where Company has already won at different appellate authorities during earlier years, against which income tax department has gone for appeal at higher appellate authorities. In similar cases of past years, the appeal of the income tax department has been dismissed.
B) Demand on account of Service Tax, VAT etc. amounting to 7 11.04 crore (previous year 7 8.87 crore) is being contested by the Company at different forums.
V) The company has entered into a contract with the Ministry of Housing & Urban Affairs for purchase of commercial built up in the complex at Nauroji Nagar New Delhi through NBCC. The company has paid GST under reverse charge from third demand onward along with the GST on earlier demand excluding interest of ' 1.40 crore on delay payment of GST under reverse charge prior to third demand. Company is of the view that liability to pay GST is with NBCC under Sec 9(1) of CGST Act. AAR (Authority for Advance Ruling) under Sec 37 (1) and Delhi Appellate Authority also held the same view. As such, the company does
not foresee any liability of interest as on 31.03.2024. However, as an abundant precaution, the same is being disclosed as Contingent Liability.
VI) A number of cases are lying for adjudication at various forums or under arbitration, which Company is contesting on behalf of Clients. The Company is not subject to any liability that may result pursuant to adjudication / arbitral award.
VII) The above contingent liabilities do not include contingent liabilities on account of pending cases in respect of service matters & others where amount cannot be quantified.
ii) Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for amounting to 7 94.17 crore (previous year 7 104.19 crore).
c) Contingent Assets
i) In a pre-closed contract in the year 2005-06, Company invokes arbitration for a claim of 7 233.93 crore (previous year 7 233.93 crore) against a client. Client also submits counter claims of 7 469.10 crore (previous year 7 469.10 crore) before arbitrator. The sole arbitrator awarded 788.31 crore in favour of the Company against the claim of 7233.93 Crore, while rejecting the counter claims of the client. Since the awarded amount is less than the claimed amount, Company appealed against the aforesaid award. Appellate authority awarded 7 231.68 crore with applicable interest in favour of the Company. Client filed a petition in the Civil Court for setting aside the aforesaid award, which was dismissed by the Court on 22.11.2017 and preliminary objections of Company are allowed. Thereafter the Company filed writ petition before Hon’ble Jharkhand High Court on 05.07.2018 to issue the direction to client to pay the awarded amount. The said petition was disposes on 16.02.2024 in favour of company by appointing sole arbitrator i.e. Honb’le Justice(Retd.) from Supreme Court of India to adjucate the dispute between the parties.Thereafter, the client filed an appeal before Jharkhand High Court on 21.03.2024 to challenge the appointment of Sole Arbitrator, the same is also dismissed on 07.05.2024. Next date of proceeding before Sole Arbitrator is awaited.
ii) In the above contract, executing agency also raised claims (excluding interest) of 7184.41crore (previous year7184.41 crore) against the Company before the arbitration tribunal. The Company also submitted a counter claim of 7 644.53 crore (previous year 7 644.53 crore) against the executing agency. Both the parties had concluded their arguments before the Tribunal and award was published on 18th October 2016 in favour of the Company. As per the award, Company was to get 7 63 crore from executing agency effective from the date of publication of award i.e. 18th October 2016. The executing agency had filed two petitions i.e. arbitration appeal before hon’ble Jharkhand High Court on 25.05.2017 and commercial revocation to set aside the award before the Commercial Court, Ranchi on 06.01.2018. The arbitration appeal has already been dismissed by hon’ble Jharkhand High Court on 11.03.2019. The commercial revocation has also been dismissed on 29.06.2019. Now RITES limited filed the commercial execution case no. 03 of 2020 on 16.01.2020 before Commercial Court Ranchi to execute the award amount. Same is pending and next date of hearing is fixed on 31.05.2024. In view of above, the Company has not recognized the award amount in the books of account.
iii) In July 2021, a Locomotive meant for export to Mozambique was damaged prior to shipment. Insurance claim towards loss of locomotive has been assessed at ' 24.69 crores approx (net of ' 30 lakhs received thorough auction of damaged goods) by the Insurance Surveyor and same has been advised to Insurance Company. Cost of damaged goods amounting to ' 12.47 Crore has been written off during the year, insurance claim has not been recognized in the books of accounts pending approval of claim by Insurance Company.
b) Fair value hierarchy & valuation techniques
To provide an indication about the reliability of method used in determining fair value, the Company has classified its financial instruments into three levels prescribed under the Indian Accounting Standard (Ind AS-113) on fair value measure.
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Fair value of financial instruments that are not traded in an active market is determined using valuation techniques and observable inputs for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
Level 3: Inputs for the assets or liabilities that are not based on observable market data (observable inputs).
Fair value hierarchies of assets and liabilities as on 31stMarch, 2024 are as follows:
c) Financial Risk Management
The Company’s activities are exposed to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from few customers.
i) Market Risk
The Company operates internationally and a considerable portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk for its sales and services in the Middle East, Africa and South Asian countries. The exchange rates between the rupee and foreign currencies have changed substantially in recent years which may also fluctuate substantially in the future. However, Company has currency risk management policy and exchange fluctuations are regularly monitored by the risk management committee to mitigate this risk. Policy covers various aspects of currency risk management, benchmarking, hedging and risk appetite, permissible instruments, hedging policy, structure of the risk management committee and treasury group, reporting procedures etc.
For the year ended 31st March, 2024 and 31st March, 2023, every percentage increase/decrease in the exchange rate between the INR & US Dollar has affected the Company’s incremental margins by approximately 0.74% (previous year 0.45%) each. For the year ended 31stMarch, 2024 and 31st March, 2023, every percentage increase/decrease in the exchange rate between the INR & MUR has an insignificant affect on the Company’s incremental margins.
Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting year and the current reporting year.
The above foreign currency exposure is unhedged as these are covered through foreign currency risk management policy.
ii) Credit Risk
Credit Risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. Primarily exposure to the credit risk is from trade receivables amounting to 7 1007.12 crore (previous year 7 993.65 crore) and unbilled revenue amounting to 7 141.36 crore (previous year 7 99.35 crore) which are typically unsecured. Credit risk is being managed by continuously monitoring the outstanding dues from the customers. Trade Receivables towards export sales are generally managed by establishing Letter of Credit with the clients. Further, most of the clients of the Company are Government or Government Undertakings; hence credit risk is bare minimum and Company also does not foresee any impact on credit risk of the Company. Company has impaired, as a prudent measure, the trade receivables and unbilled revenue towards expected credit loss as per Company accounting policy to the extent of 7 126.46 crore (previous year 7 124.73 crore). Keeping in view the nature of business expected credit loss is provided for on case-to-case basis as per the policy on impairment of financial assets.
No significant credit risk on cash and bank balances including clients’ funds amounting to 7 3071.05 crore (previous year 7 3481.46 crore) is expected as Company parks surplus funds with Schedule Banks having good capital adequacy ratio and least NPA as determined by RBI and guidelines of the Company. Company has parked its owned funds in fixed deposits of 7 690.11 crore (previous year 7 803.60 crore) with Schedule banks with negligible credit risks.
Non-Strategic Investments primarily include investments in tax-free bonds of 7 20 crore (previous year 7 45 crore) and liquid mutual fund units of 7 NIL (previous year 7 NIL) issued by Public Sector Undertaking where risk is minimal.
The Company has given House building, multi-purpose loans etc. to the employees which are insured and house properties/ other assets are mortgaged / hypothecated against these loans in line with the policies of the Company. The risk of default in respect of these loans is considered negligible.
iii) Liquidity Risk
Company’s principal sources of liquidity are “cash and bank balances” and the cash flow that is generated from operations. The Company has no outstanding borrowings. The Company has a working capital of 7 1672.05 crore (previous year 7 1769.45 crore) including cash and bank balance (owned funds) of 7 698.49 crore (previous year 7 837.83 crore) and current investment 7 NIL crore (previous year 7 25 crore). Company believes that the working capital is sufficient to meet its requirements, accordingly no liquidity risk is perceived by the Company.
50. INDIAN ACCOUNTING STANDARD (IND AS) 108, DISCLOSURES ON OPERATING SEGMENTS ARE AS FOLLOWS:
Operating segments are defined as components of an enterprise for which discrete financial information is available which is being evaluated regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker is the Chairman & Managing Director who is also Chief Executive Officer.
a) Company has identified four operational reportable segments based on operations being carried out which are as under:-
Ý Consultancy Services
Ý Leasing of railway rolling stock & equipments
Ý Export of rolling stock, equipments and spares
Ý Turnkey Construction Projects
b) Geographical wise revenue segment is disclosed as under:-
i) Revenue within India from consultancy includes quality assurance & project management services, turnkey construction projects and domestic lease rental services to clients located inside India.
ii) Revenue from outside India includes services rendered and export sales of rolling stock & spare parts to the clients located outside India.
c) The accounting principles used in the preparation of the financial statements are consistently applied to record revenue & expenditure in individual segment, as set out in the note of material accounting policies.
d) Revenue and expenses directly attributable to segments are reported under each reportable segment. Expenses which are not directly identifiable to each reporting segment have been allocated on the basis of attributed direct cost. All other expenses which are not attributable or allocable to the segments have been disclosed as unallocable expenses.
e) Assets and liabilities used in the Company’s business are not identified to the reportable segments as these are used interchangeably between segments. Depreciation, amortization & impairment on Property, Plant & Equipment and Intangible Assets cannot be allocated to a specific segment. Company believes that it is currently not practicable to provide segmental disclosure relating to total assets, total liabilities and depreciation, amortization & impairment since a meaningful segregation of the available data could be onerous.
51. INDIAN ACCOUNTING STANDARD (IND AS) 115, DISCLOSURES ON REVENUE FROM CONTRACTS WITH CUSTOMERS ARE AS FOLLOWS:
a) Significant management judgments on Revenue Recognition:
Recognised amounts of contract revenues and related receivables reflect management’s best estimate of each contract’s outcome and stage of completion which is determined based on physical progress, efforts, cost incurred to date bear to the total estimated cost of the transaction, time spent, service performed or any other method that management considered appropriate. For more complex contracts in particular, costs to complete and contract profitability are subject to significant estimation and uncertainty.
b) Company has contracts with customers for different services which are given below:-
Ý Consultancy Services
Ý Export of rolling stock, equipments and spares
Ý Turnkey Construction Projects
Beside above, Company has contracts with customers for wet leasing which are covered under Indian Accounting Standard (Ind AS) 116, Leases
c) Company has recognized revenue either on the basis of over time or point in time depending upon satisfaction of performance obligation on transferring control of goods or services to customers. Revenue has been recognized by the Company over time basis if any one of the following condition is met:
Ý Customer simultaneously receives and consumes the benefits
Ý Company’s performance creates or enhances an assets that the customer controls as the assets is created or enhanced
Ý Company’s performance does not create with alternative use and Company has enforceable right to payment for performance completed to date.
In case, none of the above condition is met, revenue recognized by the Company on the basis of point in time.
e) Company is rendering many project management consultancy services for and on behalf of clients where fee is due to Company for professional services.
f) In most of the cases, payments from customers are linked with performance obligations. Wherever on the reporting date work has been performed and payment is not due as per the contract, in such cases contract assets have been created. However, where payment has been received including advance but performance has not been completed, in such cases contract liabilities have been created. Advances received by the Company for execution of work are in the nature of security i.e a source of protection and are not for financing the project.
g) Company provides warranty in the nature of assurance for which provisions are made as per the Indian Accounting Standard (Ind AS) 37, Provisions, Contingent Liabilities and Contingent Assets.
h) During the year, impairment of amount receivable from client for services rendered/goods supplied charged to Statement of Profit and Loss amounting to 7 8.63 crore (previous year 7 24.11 crore), which includes impairment for lease services amounting to 7 1.14 crore (previous year 70.22 crore).
j) During the year ended March 31, 2024, 7 94.28 crore and March 31 2023, 7 45.84 crore of unbilled revenue as of April 1st, 2023 and April 1st 2022 respectively has been reclassified to Trade receivables upon billing to customers on completion of milestones.
k) During the year ended March 31, 2024 7 12.45 crore and March 31, 2023 7 59.45 crore of contract liabilities as of April 1, 2023 and April 1,2022 has been recognized as revenue after completion of milestones.
l) The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31, 2024 is 7 5399 crore which pertains to various segment of the Company. Company is likely to recognize this revenue over a period ranging from one year to three years. The aggregate value of performance obligations that was completely or partially unsatisfied as at March 31, 2023 was 75543 crore which pertains to various segment of the Company.
m) Company has not incurred any cost for obtaining contracts except administrative cost required for preparation of offers and the same is charged to statement of Profit and Loss.
n) Company has recognized unamortized contract assets of 7 Nil crore (previous year 7 Nil crore) on account of costs incurred in fulfilling the contract.
52. INDIAN ACCOUNTING STANDARD (IND AS-116): DISCLOSURES ON LEASES ARE AS FOLLOWS:
a) Company as Lessee:-
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability. The right-of-use assets are depreciated using the straight-line method from the commencement date over the term of useful life of right-of-use asset.
The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. Company has no borrowing, as such 3 year SBI MCLR rate 8.70% and 7.30% has been considered as weighted average incremental borrowing rate for calculation of present value of lease liability for the FY- 2023-24 and 2022-23 respectively.
The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.
i) The following is the summary of practical expedients applied:
I) The Company has used a single discount rate to a portfolio of leases with similar characteristics.
II) Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application
III) Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.
57. OTHER DISCLOSURES:
a) Ministry of Railway (MoR) vide letter dated 18.10.2021 has decided in principle for closure of Indian Railway Station Development Corporation Limited (IRSDC), in which Company has an investment of 148 Crore. Closure activities are underway and Board of IRSDC has decided to transfer the assets & liabilities of IRSDC to Rail Land Development Authority on slump sale basis (excluding investment in Subsidiary & Associate of IRSDC) for consideration not less than book value. Financial statement of IRSDC has been prepared on liquidation basis. As at 31.03.2024, IRSDC has reported a net worth of 1231.89 Crore, out of which 24% share i.e. 155.65 crore belongs to RITES, therefore management does not perceive any impairment in the value of investment in IRSDC.
b) Assets and liabilities are classified between current and non-current considering 12 months period as operating cycle.
c) Information on CSR expenditure:
i) Gross amount required to be spent including advances given during the year 2023-24 1 13.30 crore (previous year 2022-23 1 14.10 crore).
ii) Expenditure incurred including advance on CSR during the year on:
k) Balances shown under trade receivable, advances and trade payables including Indian Railway are subject to confirmation / reconciliation/adjustment, if any. The Company has been sending letters for confirmation to parties. However, the Company does not expect any material dispute w.r.t. the recoverability/payment of the same.
In the opinion of the management, the value of current assets, loans and advances on realization in the ordinary course of business, will not be less than the value at which these are stated in the balance sheet.
l) Information as regard to loans, investments made as required under section 186(4) of the Companies Act, 2013 have been given vide note no.7,8, & 16.
m) 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, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
n) No funds have been received by the company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
o) The Code on Social Security, 2020 (“the Code”) relating to employee benefits during employment and postemployment 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. 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.
p) During the year company invested of ' 0.60 Cr. as equity in an Associate namely MMG-Metro Management Group Ltd. in Israel with 24.50% share. The other two joint venture partners are Poran Shrem Engineering and Appraisal Ltd (Israel company) with 51% share and DMRC Limited with 24.50% share. Management has decided to liquidate investment in M/s Metro Management Group Ltd (MMG) and entire equity investment of ' 0.60 crore has been provided for in books of Accounts.
q) Recent pronouncements
Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
For and on behalf of the Board of Directors
Rahul Mithal Krishna Gopal Agarwal Ashok Mishra
Chairman & Managing Director Director (Finance) & Chief Financial Officer Company Secretary
and Chief Executive Officer DIN: 10239667 M.No.FCS 6411
DIN:07610499
As per our report of even date attached
For Pawan Puri & Associates
Chartered Accountants
Firm Registration No.005950N
Ashish Anand
Partner
Place : Gurugram Membership No.532897
Dated : 28.05.2024 UDIN: 24532897BKGWPF5597
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