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Notes to Accounts of Voltas Ltd.
Mar 31, 2025
N. Provisions and Contingent Liabilities
Provisions
Provisions are recognised when the Company has a
present obligation (legal or constructive) as a result of
past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of
the amount of the obligation. The expense relating to a
provision is presented in the statement of profit and loss.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present
obligation at the end of the reporting period, taking
into account the risks and uncertainties surrounding the
obligation.
If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
Warranties
The estimated liability for product warranties is recorded
when products are sold / project is completed. These
estimates are established using historical information on
the nature, frequency and average cost of warranty claims,
Management estimates for possible future incidence
based on corrective actions on product failures. The
timing of outflows will vary as and when warranty claims
arise being typically up to five years.
Contingent Liabilities
Contingent liabilities exist when there is a possible
obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non¬
occurrence 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
or the amount cannot be reliably estimated. Contingent
liabilities are appropriately disclosed unless the possibility
of an outflow of resources embodying economic benefits
is remote.
Environment Liabilities
E-Waste (Management) Rules 2022, as amended,
requires the Company to complete the Extended
Producer Responsibility targets (EPR) measured based
on sales made in the preceding 10th year. Accordingly,
the obligation event for e-Waste obligation arises only
if Company participate in the markets in such years and
based on the Company participation in markets in such
years, liability for e-waste obligation is recognised.
O. Financial Instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial Assets
⢠Initial Recognition and Measurement
Financial assets are classified, at initial recognition,
and subsequently measured at amortised cost, fair
value through other comprehensive income (OCI),
and fair value through profit or loss.
The classification of financial assets at initial
recognition depends on the financial asset''s
contractual cash flow characteristics and the
Company''s business model for managing them. With
the exception of trade receivables that do not contain
a significant financing component or for which the
Company has applied the practical expedient, the
Company initially measures a financial asset at its
fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs.
Trade receivables that do not contain a significant
financing component or for which the Company
has applied the practical expedient are measured
at the transaction price determined under Ind AS
115. Refer to the accounting policies in section (B)
Revenue.
In order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are ''solely
payments of principal and interest (SPPI)'' on the
principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an
instrument level. Financial assets with cash flows
that are not SPPI are classified and measured at
fair value through profit or loss, irrespective of the
business model.
The Company''s business model for managing financial
assets refers to how it manages its financial assets in order
to generate cash flows. The business model determines
whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both. Financial assets
classified and measured at amortised cost are held within a
business model with the objective to hold financial assets in
order to collect contractual cash flows while financial assets
classified and measured at fair value through OCI are held
within a business model with the objective of both holding
to collect contractual cash flows and selling.
⢠Subsequent Measurement
For purposes of subsequent measurement, financial
assets are classified in four categories:
⢠Financial assets at amortised cost (debt
instruments)
⢠Financial assets at fair value through other
comprehensive income (FVTOCI) with
recycling of cumulative gains and losses (debt
instruments)
⢠Financial assets designated at fair value
through OCI with no recycling of cumulative
gains and losses upon derecognition (equity
instruments)
⢠Financial assets at fair value through profit or
loss
⢠Financial Assets at Amortised Cost (Debt
Instruments)
A ''financial asset'' is measured at the amortised cost if
both the following conditions are met:
(a) The asset is held within a business model
whose objective is to hold assets for collecting
contractual cash flows, and
(b) Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI) on
the principal amount outstanding.
This category is the most relevant to the Company.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method and are subject to
impairment as per the accounting policy applicable
to ''Impairment of financial assets.'' Amortised cost is
calculated by taking into account any discount or
premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is
included in other income in the profit or loss. The
losses arising from impairment are recognised in the
statement profit and loss. The Company''s financial
assets at amortised cost includes trade receivables,
loans and other financial assets.
⢠Financial Assets at Fair Value Through Other
Comprehensive Income (FVTOCI) (Debt
Instruments)
A ''financial asset'' is classified as at the FVTOCI if both
of the following criteria are met:
(a) The objective of the business model is
achieved both by collecting contractual cash
flows and selling the financial assets, and
(b) The asset''s contractual cash flows represent
SPPI.
Debt instruments included within the FVTOCI
category are measured initially as well as at each
reporting date at fair value. For debt instruments,
at fair value through OCI, interest income, foreign
exchange revaluation and impairment losses or
reversals are recognised in the statement profit
and loss and computed in the same manner as for
financial assets measured at amortised cost. The
remaining fair value changes are recognised in
OCI. Upon derecognition, the cumulative fair value
changes recognised in OCI is reclassified from the
equity to profit or loss.
⢠Financial Assets at Fair Value Through Other
Comprehensive Income (FVTOCI) (Equity
Instruments)
Upon initial recognition, the Company can elect to
classify irrevocably its equity investments as equity
instruments designated at fair value through OCI
when they meet the definition of equity under
Ind AS 32 ''Financial Instruments: Presentation'' for the
issuer and are not held for trading. The classification
is determined on an instrument-by-instrument
basis. Equity investment which are held for trading
are classified as at FVTPL.
Gains and losses on these financial assets are never
recycled to profit or loss. Dividends are recognised
as other income in the statement of profit and loss
when the right of payment has been established,
except when the Company benefits from such
proceeds as a recovery of part of the cost of
the financial asset, in which case, such gains are
recorded in OCI. Equity instruments designated at
fair value through OCI are not subject to impairment
assessment.
The Company elected to classify irrevocably its
listed and non-listed equity investments under this
category.
⢠Financial Assets at Fair Value Through Profit Or
Loss (FVTPL)
Financial assets in this category are those that are
held for trading and have been either designated
by management upon initial recognition or are
mandatorily required to be measured at fair value
under Ind AS 109 i.e. they do not meet the criteria
for classification as measured at amortised cost or
FVOCI. Management only designates an instrument
at FVTPL upon initial recognition, if the designation
eliminates, or significantly reduces, the inconsistent
treatment that would otherwise arise from
measuring the assets or liabilities or recognising
gains or losses on them on a different basis. Such
designation is determined on an instrument-by¬
instrument basis. For the Company, this category
includes derivative instruments, certain investments
in bonds and investment in mutual funds.
Financial assets at fair value through profit or loss
are carried in the balance sheet at fair value with net
changes in fair value recognised in the statement of
profit and loss.
⢠Investments in Subsidiaries, Joint Ventures and
Associates
A subsidiary is an entity that is controlled by another
entity.
An associate is an entity over which the Company
has significant influence. Significant influence is the
power to participate in the financial and operating
policy decisions of the investee but is not control or
joint control over those policies.
A joint venture is a type of joint arrangement
whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint
venture. Joint control is the contractually agreed
sharing of control of an arrangement, which exists
only when decisions about the relevant activities
require unanimous consent of the parties sharing
control.
Investment in subsidiaries, joint ventures and
associates are carried at cost less impairment in the
financial statements.
⢠Derecognition
A financial asset (or, where applicable, a part of
a financial asset or part of a Company of similar
financial assets) is primarily derecognised (i.e
removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset
have expired or
⢠The Company has transferred its rights to
receive cash flows from the asset or has
assumed an obligation to pay the received
cash flows in full without material delay
to a third party under a ''pass-through''
arrangement; and either (a) the Company
has transferred substantially all the risks and
rewards of the asset, or (b) the Company has
neither transferred nor retained substantially
all the risks and rewards of the asset, but has
transferred control of the asset.
When the Company has transferred its rights to
receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates
if and to what extent it has retained the risks
and rewards of ownership. When it has neither
transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred
control of the asset, the Company continues
to recognise the transferred asset to the extent
of the Company''s continuing involvement.
In that case, the Company also recognises an
associated liability. The transferred asset and
the associated liability are measured on a basis
that reflects the rights and obligations that the
Company has retained.
Continuing involvement that takes the form
of a guarantee over the transferred asset is
measured at the lower of the original carrying
amount of the asset and the maximum
amount of consideration that the Company
could be required to repay.
⢠Impairment of Financial Assets
The Company recognises an allowance for expected
credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based
on the difference between the contractual cash
flows due in accordance with the contract and all
the cash flows that the Company expects to receive,
discounted at an approximation of the original
effective interest rate.
For all financial assets other than trade receivables,
expected credit losses are measured at an amount
equal to the 12-month expected credit loss (ECL)
unless there has been a significant increase in credit
risk from initial recognition in which case those
are measured at lifetime ECL. For trade receivables
and contract assets, the Company applies a
simplified approach in calculating ECLs. Therefore,
the Company does not track changes in credit risk,
but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Company
has established a provision matrix that is based
on its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and
the economic environment.
Financial Liabilities
⢠Initial recognition, measurement and presentation
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit or
loss, loans and borrowings, payables, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction
costs.
The Company''s financial liabilities include trade
payables, loans and borrowings including bank
overdrafts, other financial liabilities, financial
guarantee contracts and derivative financial
instruments.
⢠Subsequent Measurement
For purposes of subsequent measurement, financial
liabilities are classified in two categories:
⢠Financial liabilities at fair value through profit
or loss
⢠Financial liabilities at amortised cost (loans and
borrowings)
⢠Financial Liabilities at Fair Value Through Profit or
Loss
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.
Financial liabilities are classified as held for trading if
they are incurred for the purpose of repurchasing in
the near term. This category also includes derivative
financial instruments entered into by the Company
that are not designated as hedging instruments in
hedge relationships as defined by Ind AS 109. Gains
or losses on liabilities held for trading are recognised
in the profit or loss.
Financial liabilities are designated upon initial
recognition as at fair value through profit or loss
only if the criteria in Ind AS 109 are satisfied. For
liabilities designated as FVTPL, fair value gains/
losses attributable to changes in own credit risk
are recognised in OCI. These gains/ losses are not
subsequently transferred to P&L. However, the
Company may transfer the cumulative gain or loss
within equity. All other changes in fair value of such
liability are recognised in the statement of profit and
loss.
⢠Financial Liabilities at Amortised Cost
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortised cost using the EIR method. Gains and
losses are recognised in the statement of profit and
loss when the liabilities are derecognised as well as
through the EIR amortisation process.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the
statement of profit and loss.
⢠Financial Guarantee Contracts
Financial guarantee contracts issued by the
Company are those contracts that require a payment
to be made to reimburse the holder for a loss it
incurs because the specified debtor fails to make a
payment when due in accordance with the terms of
a debt instrument. Financial guarantee contracts are
recognised initially as a liability at fair value, adjusted
for transaction costs that are directly attributable to
the issuance of the guarantee.
Subsequently, the liability is measured at the higher
of the amount of loss allowance determined as
per impairment requirements of Ind AS 109 and
the amount recognised less cumulative amount
of income recognised in accordance with the
principles of Ind AS 115.
⢠Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. 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 derecognition 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 and loss.
⢠Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and
the net amount is reported in the Balance Sheet if
there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to
settle on a net basis, to realise the assets and settle
the liabilities simultaneously.
P. Derivative Financial Instruments:
The Company uses derivative financial instruments,
such as forward currency contracts to hedge its foreign
currency risks. Such derivative financial instruments are
initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as
financial assets when the fair value is positive and as
financial liabilities when the fair value is negative. Any
gains or losses arising from changes in the fair value of
derivatives are taken directly to profit or loss.
Q. Impairment of Non-Financial Assets
The Company assesses, at each reporting date, whether
there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for
an asset is required, the Company estimates the asset''s
recoverable amount. An asset''s recoverable amount is
the higher of an asset''s or cash-generating unit''s (CGU)
fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
In determining fair value less costs of disposal, recent
market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed
budgets and forecast calculations, which are prepared
separately for each of the Company''s CGUs to which the
individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. For
longer periods, a long-term growth rate is calculated and
applied to project future cash flows after the fifth year. To
estimate cash flow projections beyond periods covered
by the most recent budgets/forecasts, the Company
extrapolates cash flow projections in the budget using
a steady or declining growth rate for subsequent years,
unless an increasing rate can be justified. In any case,
this growth rate does not exceed the long-term average
growth rate for the products, industries, or country or
countries in which the Company operates, or for the
market in which the asset is used.
I mpairment losses including impairment on inventories
are recognised in the statement of profit and loss.
For assets, an assessment is made at each reporting
date to determine whether there is an indication that
previously recognised impairment losses no longer exist
or have decreased. If such indication exists, the Company
estimates the asset''s or CGU''s recoverable amount. A
previously recognised impairment loss is reversed only
if there has been a change in the assumptions used to
determine the asset''s recoverable amount since the last
impairment loss was recognised. The reversal is limited
so that the carrying amount of the asset does not exceed
its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset in
prior years. Such reversal is recognised in the statement of
profit and loss.
For contract assets, the Company has applied the simplified
approach for recognition of impairment allowance as
provided in Ind AS 109 which requires the expected
lifetime losses from initial recognition of the contract
assets. Refer to accounting policies on impairment of
financial assets in section O ''Financial Instruments''.
R. Cash and Cash Equivalents
Cash and cash equivalent in the balance sheet comprise
cash at banks and on hand and short-term deposits with
an original maturity of three months or less, that are
readily convertible to a known amount of cash and which
are subject to an insignificant risk of changes in value.
S. Earnings Per Share (EPS)
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. Diluted EPS is determined by adjusting
the profit or loss attributable to equity shareholders
and the weighted average number of equity shares
outstanding for the effects of all dilutive potential equity
shares.
T. Segment Reporting
Segments are identified based on the manner in which
the chief operating decision-maker (CODM) decides
about the resource allocation and reviews performance.
Segment revenue, segment expenses, segment assets
and segment liabilities have been identified to segments
on the basis of their relationship to the operating activities
of the segment.
Inter-segment revenue is accounted on the basis of
transactions which are primarily determined based on
market / fair value factors. Revenue, expenses, assets and
liabilities which relate to the Company as a whole and are
not allocable to segments on reasonable basis have been
included under "unallocated revenue / expenses / assets/
liabilities".
Segment information has been presented in the
Consolidated Financial Statements as permitted by Ind AS
108 ''Operating Segments.
U. Dividend
The Company recognises a liability to pay dividend to
equity shareholders when the distribution is authorised
and the distribution is no longer at the discretion of the
Company. As per the corporate laws in India, a distribution
is authorised when it is approved by the shareholders. A
corresponding amount is recognised directly in equity.
V. Borrowing Costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale (qualifying assets) are capitalised as
part of the cost of the asset. All other borrowing costs are
expensed in the period in which they occur. Borrowing
costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing costs.
W. Government Grants
Government grants are recognised where there is
reasonable assurance that the grant will be received,
and all attached conditions will be complied with. When
the grant relates to an expense item, it is recognised as
income on a systematic basis over the periods that the
related costs, for which it is intended to compensate,
are expensed. When the grant relates to an asset, it is
recognised as income in equal amounts over the expected
useful life of the related asset.
When the Company receives grants of non-monetary
assets, the asset and the grant are recorded at fair value
amounts and released to profit or loss over the expected
useful life in a pattern of consumption of the benefit of
the underlying asset i.e. by equal annual instalments.
X. Events after the Reporting Period
I f the Company receives information after the reporting
period, but prior to the date of approved for issue, about
conditions that existed at the end of the reporting period,
it will assess whether the information affects the amounts
that it recognises in its separate financial statements.
The Company will adjust the amounts recognised in its
financial statements to reflect any adjusting events after
the reporting period and update the disclosures that
relate to those conditions in light of the new information.
For non-adjusting events after the reporting period, the
Company will not change the amounts recognised in its
separate financial statements but will disclose the nature
of the non-adjusting event and an estimate of its financial
effect, or a statement that such an estimate cannot be
made, if applicable.
Y. Operating Cycle
The operating cycle is the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents. A portion of the Company''s activities (primarily
long-term project activities) have an operating cycle that
exceeds one year. Accordingly, assets and liabilities related
to these long-term contracts, which will not be realised/
paid within one year, have been classified as current. For all
other activities, the operating cycle is twelve months.
Z. Current Versus Non-Current Classification
The Company segregates assets and liabilities into
current and non-current categories for presentation in
the balance sheet after considering its normal operating
cycle and other criteria set out in Ind AS 1 ''Presentation
of Financial Statements''. For this purpose, current assets
and liabilities include the current portion of non-current
assets and liabilities respectively. Deferred tax assets and
liabilities are always classified as non-current.
2A. RECENT ACCOUNTING PRONOUNCEMENTS ISSUED
BUT NOT YET EFFECTIVE
There are no standards that are notified and not yet
effective as on the date.
2B. CLIMATE - RELATED MATTER
The Company considers climate-related matters in
estimates and assumptions, where appropriate and based
on its overall assessment, believes that the climate-related
risks might not currently have a significant impact on the
Company. However, the Company will continue to closely
monitor relevant changes and developments, such as any
new climate-related legislation as and when they become
applicable
3. SIGNIFICANT ACCOUNTING, JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
The preparation of the Company''s Standalone financial
statements requires management to make judgements,
estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities,
and the accompanying disclosures, and the disclosure
of contingent liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of
assets or liabilities affected in future periods.
Judgements
In the process of applying the Company''s accounting
policies, management has made the following
judgements, which have the most significant effect on
the amounts recognised in the standalone financial
statements
Other Long-term Employee Benefits - Long-term
Incentive Scheme
The Company provides long-term employee benefits
to its employees in the form of Long-Term Incentive
Scheme (''the Scheme''). The Scheme provides benefits
in the form of Incentive to be paid in cash to certain
category of employees upon achievement of certain
performance criteria, whereby employee renders services
as consideration for the incentive amount while continue
to remain in employment with the Company during the
tenor of the Scheme. The Company has considered that
it will achieve the performance criteria as defined in the
Scheme, accordingly the liability towards Long-Term
Incentive Scheme is determined using the Project Unit
Cost Method, with actuarial valuation being carried out at
the end of the reporting period.
Estimates and Assumptions
The key assumptions concerning the future and other key
sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the
next financial year, are described below. The Company
based its assumptions and estimates on parameters
available when the financial statements were prepared.
Existing circumstances and assumptions about future
developments, however, may change due to market
changes or circumstances arising that are beyond the
control of the Company. Such changes are reflected in the
assumptions when they occur.
The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty at
the reporting date, that have a significant risk of causing a
material adjustment to the carrying amount of assets and
liabilities within the next financial year:
Cost to Complete on Construction Contracts
Management estimates the costs to complete for each
project for the purpose of revenue recognition and
recognition of anticipated losses on projects, if any. In the
process of calculating the cost to complete, Management
conducts regular and systematic reviews of actual results
and future projections with comparison against budget.
This process requires monitoring controls including
financial and operational controls and identifying
major risks facing the Company and developing and
implementing initiatives to manage those risks. The
Company''s Management is confident that the costs to
complete the project are fairly estimated.
Percentage of Completion on Construction Contracts
Management''s estimate of the percentage of completion
on each project for the purpose of revenue recognition is
through conducting some weight analysis to assess the
actual quantity of the work for each activity performed
during the reporting period and estimate any future
costs for comparison against the initial project budget.
This process requires monitoring of financial and
operational controls. Management is of the opinion that
the percentage of completion of the projects is fairly
estimated.
As required by Ind AS 115, in applying the percentage
of completion on its long-term projects, the Company
is required to recognise any anticipated losses on it
contracts.
Impairment of Financial Assets and Contract Assets
The Company''s Management reviews periodically items
classified as receivables and contract assets to assess
whether a provision for impairment should be recorded
in the statement of profit and loss. Management
estimates the amount and timing of future cash flows
when determining the level of provisions required. Such
estimates are necessarily based on assumptions about
several factors involving varying degrees of judgement
and uncertainty. Details of impairment provision on
contract assets and trade receivable are given in Note 14
and Note 15.
The Company reviews its carrying value of investments
annually, or more frequently when there is indication for
impairment. If the recoverable amount is less than it''s
carrying amount, the impairment loss is accounted for.
Fair Value Measurement of Financial Instruments
Some of the Company''s assets are measured at fair value for
financial reporting purposes. The Management determines
the appropriate valuation techniques and inputs for fair
value measurements. In estimating the fair value of an
asset, the Company uses market-observable data to the
extent it is available. Where Level 1 inputs are not available,
the Company engages third party qualified valuers to
perform the valuation. The Management works closely with
the qualified external valuers to establish the appropriate
valuation techniques and inputs to the model.
Information about valuation techniques and inputs used
in determining the fair value of various assets is disclosed
in Note 50.
Litigations
From time to time, the Company is subject to legal
proceedings the ultimate outcome of each being always
subject to many uncertainties inherent in litigation. A
provision for litigation is made when it is considered
probable that a payment will be made, and the amount
of the loss can be reasonably estimated. Significant
judgement is made when evaluating, among other
factors, the probability of unfavourable outcome and the
ability to make a reasonable estimate of the amount of
potential loss. Litigation provisions are reviewed at each
Balance Sheet date and revisions made for the changes
in facts and circumstances. Provision for litigations and
contingent liabilities are disclosed in Note 46 (C).
Defined Benefit Plans
The cost of the defined benefit plans and the present value
of the defined benefit obligation are based on actuarial
valuation using the projected unit credit method. An
actuarial valuation involves making various assumptions
that may differ from actual developments in the future.
These include the determination of the discount rate,
future salary increases and mortality rates. Due to the
complexities involved in the valuation and its long-term
nature, a defined benefit obligation is highly sensitive
to changes in these assumptions. All assumptions are
reviewed at each reporting date.
The calculation is most sensitive to changes in the
discount rate. In determining the appropriate discount
rate, the management considers the interest rates of
government bonds where remaining maturity of such
bond correspond to expected term of defined benefit
obligation.
The mortality rate is based on publicly available mortality
tables. Those mortality tables tend to change only at
interval in response to demographic changes. Future
salary increases and gratuity increases are based on
expected future inflation rates.
Further details about defined benefits plans are disclosed
in Note 47.
Useful Lives of Property, Plant and Equipment
The Company has estimated useful life of each class of
assets based on the nature of assets, the estimated usage
of the asset, the operating condition of the asset, past
history of replacement, anticipated technological changes,
etc. The Company reviews the useful life of property, plant
and equipment as at the end of each reporting period.
This reassessment may result in change in depreciation
and amortisation expense in future periods.
Warranty Provisions
The Company provides warranties for its products,
undertaking to repair or replace the product that fail
to perform satisfactory during the warranty period.
Provision made at the year-end represents the amount of
expected cost of meeting such obligations of rectification
/ replacement which is based on the historical warranty
claim information as well as recent trends that might
suggest that past cost information may differ from
future claims. Factors that could impact the estimated
claim information include the success of the Company''s
productivity and quality initiatives. Provision towards
warranty is disclosed in Note 35.
Mar 31, 2024
(i) Borrowing Cost:
The amount of borrowing cost capitalised during the year ended 31 March, 2024 was '' 2.62 crores (31 March, 2023: Nil). The rate used to determine the amount of borrowing cost eligible for capitalisation was 7.65% which is effective interest rate of the specific borrowing.
(ii) Capitalisation of Expenses
During the year, the Company capitalised pre-operative expenses of '' 0.32 crore (31 March, 2023: '' 0.40 crore) of revenue nature to capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amounts capitalised by the Company.
8 (a) Under a loan agreement for '' 0.60 crore (fully drawn and outstanding) entered into between Agro Foods Punjab Ltd. (AFPL)
and the Punjab State Industrial Development (PSIDC), the Company has given an undertaking to PSIDC that it will not dispose off its shares in AFPL till the monies under the said loan agreement between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During 1998-99, the Company had transferred its beneficial rights in the shares of AFPL.
8 (b) For these unquoted investments categorised under Level 3, their respective cost has been considered as an appropriate
estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
8 (c) In respect of the Company''s investment in 2,640 equity shares of Reliance Industries Ltd., there is an Injunction Order passed
by the Honourable High Court of Kanpur restraining the transfer of these shares. The share certificates are, however, in the possession of the Company. Pending disposal of the case, dividend and fair value of these shares have not been recognised.
8 (d) I nvestments at Fair Value Through Other Comprehensive Income (FVTOCI) reflect investment in quoted and unquoted
equity securities. These equity shares are designated as FVTOCI as they are not held for trading purpose and are not in similar line of business as the Company, thus disclosing their fair value change in profit and loss will not reflect the purpose of holding.
(2) Trade receivables has increased mainly on account of increase in operation of Unitary cooling products segment during the current year.
(3) No Trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivables due from firms or private companies respectively in which any director is a partner, a director or a member.
(4) Trade receivables are non interest bearing and are generally on terms of 7 to 60 days in case of sale of products and in case of long term construction contracts, payment is generally due upon completion of milestone as per terms of contract. In certain contracts, short term advances are received before the performance obligation is satisfied.
(5) The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on trade receivables and contract assets. The Company follows the simplified approach for recognition of impairment allowance on trade receivables and contract assets. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment allowance based on lifetime ECLs at each reporting date. ECL impairment loss allowance (or reversal) recognised during the period is recognised in the Statement of Profit and Loss. This amount is reflected under the head ''other expenses'' in the Statement of Profit and Loss.
Footnotes : Nature and purpose of reserves Capital Reserve :
Capital Reserve was created from capital surplus on sale of assets and on amalgamation of subsidiary.
Capital Redemption Reserve is created out of profit available for distribution towards redemption of Preference shares. This reserve can be used for the purpose of issue of Bonus shares.
Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares.This reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.
Equity instruments fair value through other comprehensive income :
The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVTOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
Retained Earnings :
Retained earnings are the profit/ (loss) that the Company has earned/ incurred till date less any transfer to general reserve, dividends or other distribution paid to Shareholders. Retained earnings include re-measurement loss/ (gain) on defined benefit plans (net of taxes) that will not be reclassified to Statement of Profit and Loss.
(1) Term loan with outstanding balance as at 31 March, 2024''21.47 crores (31 March, 2023 : '' 120.18 crores) is repayable in monthly equal installments over the period of 12 months and one bullet payment on the maturity date of loan i.e. April 2024. The said loan carries an interest rate of 7.00% - 7.40% p.a. (31 March, 2023 : 7.00% p.a.). The amount payable in next 12 months of '' 21.47 crores (31 March, 2023 : '' 99.03 crores) has been shown under the head Borrowings - Current as Current maturity of long term borrowings.
(2) Term loan with outstanding balance as at 31 March, 2024''240.00 crores (31 March, 2023: Nil) is payable in structured annual installments over the period of 5 years starting December 2024. The loan carries an interest rate of 7.80% p.a. (31 March, 2023 : NA). The amount payable in next 12 months of '' 12.00 crores (31 March, 2023 : Nil) has been shown under the head Borrowings -Current as Current maturity of long term borrowings.
(i) The Board of Directors of Voltas Limited at its meeting held on 12 February, 2021, have approved the transfer of domestic B2B businesses relating to Projects business comprising Mechanical Electrical and Plumbing (MEP), Heating, Ventilation and Air Conditioning (HVAC) and Water projects, Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) business to its wholly owned subsidiary viz. Universal MEP Projects & Engineering Services Limited (''UMPESL'') via slump sale through a Business Transfer Agreement (''BTA''). The BTA transaction has been consummated on 1 August, 2022, being the closing date for the transfer of business for a consideration of '' 1,190 crores and resultant gain on said transaction of '' 1,049.04 crores has been disclosed as an Exceptional Item. (Refer Note 57).
(ii) During previous year, the Company had conducted its annual impairment assessment of Investment in its wholly owned subsidiary Universal MEP Projects & Engineering Services Limited (UMPESL). The operations of UMPESL have improved pursuant to the business transfer agreement. The Company had obtained a fair valuation report from an independent valuer incorporating transferred business under BTA, Accordingly, management has reversed balance impairment provision recorded earlier.
(iii) I n respect of one of the overseas projects, the main contractor had unilaterally terminated the contract with Voltas and also encashed the underlying bank guarantee pursuant to the termination of the main contractor''s contract by their customer. The Company had considered a provision towards outstanding dues and encashed performance guarantee on the said project. The Company has initiated legal proceedings against the main contractor for recovery of the proceeds of bank guarantee and due amounts from them.
Reconciliation of tax expense and the accounting profit multiplied by India''s domestic tax rate for the year ended 31 March, 2024 and 31 March, 2023.
(ii) As per the E-Waste (Management) Rules, 2022, as amended, the Company has an obligation to complete the Extended Producer Responsibility (EPR) targets. The obligation for a financial year is measured based on sales made in the preceding 10th year and the Company has fulfilled its obligation for the current financial year. Based on the legal advice obtained, the Company believes that it will have an e-waste obligation for future years, only if it participate in the market in such years.
The Company had entered into a sub-contract along with a consortium partner with a Main Contractor, through its branch in Qatar in the year 2010. The Main Contract between the Ultimate customer and the Main Contractor was terminated closer to the completion of the contract in 2014 citing delays and defects in execution and non-compliance of contractual terms by the Main Contractor leading to arbitration between the Main Contractor and the Ultimate customer, in which final award is pending. The Company had performed a comprehensive assessment of the losses arising on account of such termination of the Main contract and cessation of work and accounted for all probable losses on the sub-contract in the earlier years.
The Company had issued bank guarantees amounting to '' 381 crores (QAR 166.6 million) to its Main Contractor which was being disclosed as a contingent liability over the years. In June 2023, the Company was intimated of a request received by the bank from the Main Contractor for encashment of the said bank guarantee, which due to certain deficiencies was not paid by the bank to the Main contractor and the matter is under litigation. Further, the Company and the Main Contractor have filed claims and counter claims against each other with Investment and Trade Court (Qatar) and a panel of experts has been appointed to independently assess the claims. In view of the claim lodged for encashment of the bank guarantees and related developments in the current year, the Company has re-assessed its liability under the sub-contract. Basis such internal assessment on technical merits of the case and a report submitted by an independent technical expert including legal opinion by an independent lawyer on the contractual aspects, the Company is confident that it has good grounds to successfully defend any claims that may arise. Accordingly, no further provision has been considered in the financial statements. The Company has taken all necessary steps, including legal remedies to safeguard and defend itself. The matter is sub-judice and the Company is closely monitoring the developments as they arise.
The Company has defined benefit Gratuity, Post retirement medical benefits, Pension plans and Trust managed Provident fund plan as given below:
Every employee who has completed five years of services, is entitled to Gratuity benefits. The Gratuity plan for Indian employees is governed by the Payment of Gratuity Act, 1972. The Gratuity plan provides lumpsum payments to vested employees at retirement, death while in employment, or termination of employment being an amount eguivalent to 15 days salary for each completed year of service. The Company also provides similar Gratuity benefits to overseas employee. The Gratuity plan for Indian employees is funded and for overseas employees is unfunded.
(ii) Post Retirement Medical Benefits (PRMB)
PRMB scheme is eligible for all those employees who are above management staff grade and have joined on or before 31 December, 2015.The scheme is non-funded.
Pension plan benefit are provided to past Executive Directors and their specified relatives after completion of the services with the Company or Tata Group. The scheme is non-funded.
(a) The following table summaries the components of net benefit expenses recognised in Statement of Profit or Loss, other comprehensive income, the funded status and amount recognised in the Balance Sheet for the respective plans as on the reporting dates:
Contribution to Provident Fund is made to trusts administered by the Company. In terms of guidance note issued by the Institute of Actuaries of India, the Actuary has provided a valuation of Provident fund liability based on the assumptions listed and determined that there is no shortfall as at 31 March, 2024.
The Company is exposed to the following Risks in the defined benefits plans :
Investment Risk: The present value of the defined benefit obligation is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan assets is below this rate, it will create a plan deficit.
I nterest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by increase in the return on the plan''s debt investments.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary growth risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan''s liability.
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instrument by valuation
techniques:
(i) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
(ii) Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
(iii) Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
- The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties.
The following methods and assumptions were used to estimate the fair values:
- The fair value of quoted equity investment and mutual funds are based on price quotations at the reporting date.
- The fair value of unquoted equity investments are based on Market multiple approach. Market multiple of EV/EBITDA are
considered after applying suitable discounts for size, liquidity and other company specific discounts.
- The Company enters into derivative financial instruments with various counterparties, principally with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The model incorporates various inputs including the credit quality of counter parties, foreign exchange spot and forward rates.
There were no transfers between Level 1 and 2 during the period.
52. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company''s financial liabilities include borrowings, lease liabilities, trade and other payables. The Company''s financial assets include investments, loans, trade and other receivables, cash and cash equivalents and other bank balances. The Company also holds FVTPL and FVTOCI investments.
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors of the Company oversee the management of these financial risks through its Risk Management Committee as per Company''s existing policy.
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 comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include borrowings, lease liabilities, investments, trade payables and other payables, trade receivables and other receivables, loans and derivative financial instruments.
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. During the year, the Company has availed benchmark linked, short term and long term debt from Banks both in India and overseas. Therefore the Company has exposure to the risk of changes in market interest rates towards the debt availed during the year. It is estimated that an increase in 25 bps change in benchmark rate would result in a loss of approximately '' 0.04 crore whereas a decrease in 25 bps change in benchmark rate would result in a profit of approximately '' 0.04 crore.
Given the portfolio of investments in debt mutual funds, the Company has exposure to interest rate risk with respect to returns realised. It is estimated that an increase in 25 bps change in 10 year Govt. bond yield would result in a loss of approximately '' 4.04 crores (31 March, 2023: '' 4.12 crores) whereas a decrease in 25 bps change in 10 year Govt. bond yield would result in a profit of approximately '' 4.04 crores (31 March, 2023: '' 4.12 crores). This estimate is based on key assumption with respect to seamless transition of rates across debt instruments in the market and also basis the duration of debt instruments in turn held by mutual funds that the Company has invested in.
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 operating activities (when revenue or expense is denominated in a foreign currency). Foreign currency risks are managed by utilising foreign exchange forward contracts within the approved policy parameters.
The Company''s listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company''s Board of Directors reviews and approves all equity investment decisions.
The following table summarises the sensitivity to change in the NSE index on the Company''s Equity and OCI. These changes would not have an effect on profit or loss.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk for trade receivables, contract asset, cash and cash equivalents, investments, other bank balances, loans and other financial assets. The Company only deals with parties which have good credit rating/ worthiness given by external rating agencies or based on Company''s internal assessment.
Credit risk on trade receivables and contract assets are managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Moreover, given the diverse nature of the Company''s businesses, trade receivables and contract assets are spread over a number of customers with no significant concentration of credit risk. No single customer accounted for 10% or more of the trade receivables and contracted assets in any of the years presented.
For trade receivables and contract assets, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and contract assets and is adjusted for forward-looking estimates.
For Mutual Fund Investments, counterparty risk are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for Company''s mutual fund investments.
Credit risk from cash and cash equivalents and balances with banks is managed by the Company''s treasury department in accordance with the Company''s treasury policy.
The Credit risk on mutual fund investments, cash and cash equivalents, and other bank balances are limited as the counterparties are banks and fund houses with high-credit ratings assigned by credit rating agencies.
The carrying value of the financial assets represents the maximum credit exposure. The Company''s maximum exposure to Credit risk is disclosed in Note 50 Financial Instruments. The maximum credit exposure on financial guarantees given by the Company for various financial facilities is disclosed in Note 46 Commitments and Contingencies.
(iii) Liquidity risk management:
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that the funds are available for use as per the requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company consistently generates sufficient cash flows from operations to meet its financial obligations as and when they fall due.
Maturities of financial liabilities: The table below summarises the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.
The amount included in Note 46(B) for financial guarantee contracts are the maximum amounts that the Company may be liable to settle under the respective arrangements for the full guaranteed amount if that amount is claimed by the counterparty for the guarantee. Based on the expectations as at the end of reporting period, the Company considers that it is more likely than not that such amount shall not be payable under the respective arrangements. However, this estimate is subject to change depending upon the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
* Maturity amount of borrowings is including the interest that will be paid on these borrowings.
The Company has lease contracts for its office premises and storage locations with lease term between 1 year to 5 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets.
The Company also has certain leases of office premises and storage locations with lease terms of 12 months or less. The Company applies the ''short-term lease'' recognition exemptions for these leases.
(c) Details of carrying amount of right-of-use assets and movement during the period is disclosed under Note 6 Footnotes:
(a) The maturity analysis of lease liabilities are disclosed in Note 52 (iii) Liquidity Risk Management.
(b) The effective interest rate for lease liabilities is 9%, with maturity between 2023-2028.
(c) Expense relating to short-term leases are disclosed under the head rent and clearing charges in other expenses (Refer Note 42).
(d) The Company had total cash flows for leases of '' 17.51 crores on 31 March, 2024 (31 March, 2023 : '' 9.51 crores).
The Company has entered into operating leases on its investment property portfolio consisting of land and office premises. These leases have lease terms between 1 year to 5 years. The Company has the option under some of its leases to lease the assets for additional periods. An amount of '' 34.13 crores is recognised as lease income in the statement of profit and loss account for the year ended 31 March, 2024 (31 March, 2023: '' 29.27 crores).
The capital structure of the Company consists of net debt and total equity of the Company. The Company manages its capital to ensure that the Company will be able to continue as going concern while maximising the return to stakeholders through an optimum mix of debt and equity within the overall capital structure. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, less cash and cash equivalents.
56. OTHER STATUTORY INFORMATION :
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any transactions with companies struck off.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(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 Beneficiaries
(vi) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
(vii) The Company has no such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
(viii) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
(ix) The Company is maintaining its books of account in electronic mode and these books of account are accessible in India at all times and the back-up of books of account has been kept in servers physically located in India on a daily basis from the applicability date of the Companies (Accounts) Rules, 2014, i.e. 05 August, 2022 onwards.
(x) The Company has not been declared as wilful defaulter by any Bank, Financial Institution or any other lender.
(xi) The Company has used accounting software for maintaining its books of account 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 software, except that audit trail feature is not enabled at the database level in relation to SAP accounting software. Further no instance of audit trail feature being tampered with was noted in respect of the accounting software.
57. The Board of Directors of Voltas Limited (''Holding Company'') at its meeting held on 12 February, 2021, have approved the transfer of domestic B2B businesses of the Holding Company relating to Projects business comprising Mechanical Electrical and Plumbing (MEP)/ Heating, Ventilation and Air Conditioning (HVAC) and Water projects, Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) business to its wholly owned subsidiary viz. Universal MEP Projects & Engineering Services Limited (''UMPESL'') via slump sale through a Business Transfer Agreement (''BTA''). The BTA transaction has been consummated on 01 August, 2022, being the closing date for the transfer of business for a consideration of '' 1,190 crores and resultant gain on said transaction of '' 1,049.04 crores has been disclosed as an Exceptional Item.
Further, as the transaction was consummated w.e.f. 01 August, 2022, the financial statements for the year ended 31 March, 2023 includes the results of transferred business and are not strictly comparable to the financial statements for the year ended 31 March, 2024.
59. EVENTS OCCURRING AFTER BALANCE SHEET :
(i) The Board of Directors have proposed dividend of '' 5.50 per share after the balance sheet date which is subject to approval by the shareholders at the annual general meeting.
(ii) The Board of Directors have approved an amount of '' 20.00 crores to be transferred to General Reserve from Retained Earnings after the balance sheet date.
Mar 31, 2023
The fair value of the investment properties have been derived using the market comparable approach (market value method / sale comparison technique) based on recent market prices without any significant adjustments being made to the market observable data. The valuation was carried out by an independent registered valuer as defined under Rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. Accordingly, fair value estimates for investment properties are classified as level 3.
The Company has no restriction on the realisability of its Investment properties and no contractual obligation to construct and develop investment properties.
Footnotes:
8 (a) Under a loan agreement for '' 0.60 crore (fully drawn and outstanding) entered into between Agro Foods Punjab Limited
(AFPL) and the Punjab State Industrial Development (PSIDC), the Company has given an undertaking to PSIDC that it will not dispose off its shares in AFPL till the monies under the said loan agreement between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During 1998-99, the Company had transferred its beneficial rights in the shares of AFPL.
8 (b) For these unquoted investments categorised under Level 3, their respective cost has been considered as an appropriate
estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
8 (c) In respect of the Company''s investment in 2,640 equity shares of Reliance Industries Limited., there is an Injunction Order
passed by the Honourable High Court of Kanpur restraining the transfer of these shares. The share certificates are, however, in the possession of the Company. Pending disposal of the case, dividend and fair value of these shares have not been recognised.
8 (d) Investments at Fair Value Through Other Comprehensive Income (FVTOCI) reflect investment in quoted and unquoted equity
shares. These equity shares are designated as FVTOCI as they are not held for trading purpose and are not in similar line of business as the Company, thus disclosing their fair value change in profit and loss will not reflect the purpose of holding.
8 (e) The Company has conducted its annual impairment assessment of the investment in wholly owned subsidiary Universal
MEP Projects & Engineering Services Limited and obtained a valuation report from an independent registered valuer. The fair value amount has been determined using the value in use method and calculated based on future cashflows for next five years after considering the order book position, current and anticipated economic conditions and trends, estimated future operating results and growth rates. The cash flows beyond five years are extrapolated using a steady growth rate of 5% per annum. Key assumptions for the value in use calculations includes discount rate of 11.74% per annum (PY : 12.49% per annum) applied to arrive at present value of the cash flows. The discount rate represents the weighted average cost of capital adjusted for the risk specific to the Investment and appropriate industrial beta has been applied (based on the comparative companies data) to arrive at the discount rate. Based on the assessment, the investment impairment of '' 32.57 crores has been reversed during the current year.
8 (f) During the previous year, Lakshmi Automatic Loom Works Limited had consolidated the face value of equity shares from
'' 10/- each to face value of '' 100/- each.
8 (g) During the current year, Voltas Water Solutions Private Limited, a dormant joint venture of the Company, had been struck
off from Registrar of Companies records w.e.f. 26 July, 2022 and accordingly investment had been written off by utilising impairment allowance.
8 (h) During the current year, shares of Lakshmi Ring Travellers (Coimbatore) Limited were tendered pursuant to the Buy Back offer
received by the Company.
8 (i) Fair value has been determined basis offer of issuance of equity shares on preferential basis.
8 (j) Fair value has been determined basis right issue offer announced.
(2) Trade receivables has decreased mainly on account of transfer of Domestic Project Business (DPG), Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) business to Universal MEP Projects & Engineering Services Limited (UMPESL) (Refer Note 57).
(3) Trade receivables are non interest bearing and are generally on terms of 7 to 30 days in case of sale of products and in case of long term construction contracts, payment is generally due upon completion of milestone as per terms of contract. In certain contracts, short term advances are received before the performance obligation is satisfied.
(4) The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on trade receivables and contract assets. The Company follows the simplified approach for recognition of impairment allowance on trade receivables and contract assets. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment allowance based on lifetime ECLs at each reporting date. ECL impairment loss allowance (or reversal) recognised during the period is recognised in the Statement of Profit and Loss. This amount is reflected under the head ''other expenses'' in the Statement of Profit and Loss.
Terms / Rights attached to equity shares
(a) The Company has one class of equity shares having a par value of '' 1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding and are subject to preferential rights of the Preference Shares (if issued).
(b) A reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period :
Capital Reserve was created from capital surplus on sale of assets and on amalgamation of subsidiary.
Capital Redemption Reserve is created out of profit available for distribution towards redemption of Preference shares. This reserve can be used for the purpose of issue of Bonus shares.
Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares. This reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.
Equity instruments fair value through other comprehensive income :
The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVTOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
The balance in the Retained Earnings primarily represents the surplus after payment of dividend and transfer to reserves.
(i) The Board of Directors of Voltas Limited (''Holding Company'') at its meeting held on 12 February, 2021, have approved the transfer of domestic B2B businesses relating to Projects business comprising Mechanical Electrical and Plumbing (MEP)/ Heating, Ventilation and Air-Conditioning (HVAC) and Water projects, Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) business to its wholly owned subsidiary viz. Universal MEP Projects & Engineering Services Limited (''UMPESL'') via slump sale through a Business Transfer Agreement (''BTA''). The BTA transaction has been consummated on 1 August, 2022, being the closing date for the transfer of business for a consideration of '' 1,190 crores and resultant gain on said transaction of '' 1,049.04 crores has been disclosed as an Exceptional Item.
(ii) I n respect of one of the overseas projects, the main contractor had unilaterally terminated the contract with Voltas and also encashed the underlying bank guarantee pursuant to the termination of the main contractor''s contract by their customer. The Company had considered a provision towards outstanding dues and encashed performance guarantee on the said project. The Company has initiated legal proceedings against the main contractor for recovery of the proceeds of bank guarantee and due amounts from them.
44 INCOME TAX
Reconciliation of tax expense and the accounting profit multiplied by India''s domestic tax rate for the year ended 31 March, 2023 and 31 March, 2022
(iv) Provident Fund
Contribution to Provident Fund is made to trusts administered by the Company. In terms of guidance note issued by the Institute of Actuaries of India, the Actuary has provided a valuation of Provident fund liability based on the assumptions listed and determined that there is no shortfall as at 31 March, 2023.
Risk Analysis
The Company is exposed to the following Risks in the defined benefits plans :
Investment Risk: The present value of the defined benefit obligation is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan assets is below this rate, it will create a plan deficit.
Interest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by increase in the return on the plan''s debt investments.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary growth risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan''s liability.
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instrument by valuation
techniques:
(i) Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
(ii) Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
(iii) Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
- The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in
a current transaction between willing parties.
The following methods and assumptions were used to estimate the fair values:
- The fair value of quoted equity investment and mutual funds are based on price quotations at the reporting date.
- The fair value of unquoted equity investments are based on Market multiple approach. Market multiple of EV/EBITDA are
considered after applying suitable discounts for size, liquidity and other company specific discounts.
- The Company enters into derivative financial instruments with various counterparties, principally with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The model incorporates various inputs including the credit quality of counter parties, foreign exchange spot and forward rates.
There were no transfers between Level 1 and 2 during the period.
52 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company''s financial liabilities include borrowings, lease liabilities, trade and other payables. The Company''s financial assets include investments, loans, trade and other receivables, cash and cash equivalents and other bank balances. The Company also holds FVTPL and FVTOCI investments.
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors of the Company oversee the management of these financial risks through its Risk Management Committee as per Company''s existing policy.
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 comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include borrowings, lease liabilities, investments, trade payables and other payables, trade receivables and other receivables, loans and derivative financial instruments.
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. Interest rate change does not affect the short term borrowing significantly and the Company has very limited long term borrowings, therefore the Company''s exposure to the risk of changes in market interest rates relates primarily to the investment in debt mutual funds.
Given the portfolio of investments in debt mutual funds, the Company has exposure to interest rate risk with respect to returns realised. It is estimated that an increase in 25 bps change in 10 year Government bond yield would result in a loss of approximately '' 4.12 crores (31 March, 2022: '' 4.98 crores) whereas a decrease in 25 bps change in 10 year Government bond yield would result in a profit of approximately '' 4.12 crores (31 March, 2022: '' 4.98 crores). This estimate is based on key assumption with respect to seamless transition of rates across debt instruments in the market and also basis the duration of debt instruments in turn held by mutual funds that the Company has invested in.
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 operating activities (when revenue or expense is denominated in a foreign currency). Foreign currency risks are managed by utilising foreign exchange forward contracts within the approved policy parameters.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk for trade receivables, contract asset, cash and cash equivalents, investments, other bank balances, loans and other financial assets. The Company only deals with parties which have good credit rating/ worthiness given by external rating agencies or based on Company''s internal assessment.
Credit risk on trade receivables and contract assets are managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Moreover, given the diverse nature of the Company''s businesses, trade receivables and contract assets are spread over a number of customers with no significant concentration of credit risk. No single customer accounted for 10% or more of the trade receivables and contracted assets in any of the years presented.
For trade receivables and contract assets, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and contract assets and is adjusted for forward-looking estimates.
For Mutual Fund Investments, counterparty risk are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for Company''s mutual fund investments.
Credit risk from cash and cash equivalents and balances with banks is managed by the Company''s treasury department in accordance with the Company''s treasury policy.
The Credit risk on mutual fund investments, cash and cash equivalents, and other bank balances are limited as the counterparties are banks and fund houses with high-credit ratings assigned by credit rating agencies.
The carrying value of the financial assets represents the maximum credit exposure. The Company''s maximum exposure to Credit risk is disclosed in Note 50 Financial Instruments. The maximum credit exposure on financial guarantees given by the Company for various financial facilities is disclosed in Note 46 Commitments and Contingencies.
(iii) Liquidity risk management:
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that the funds are available for use as per the requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company consistently generates sufficient cash flows from operations to meet its financial obligations as and when they fall due.
The amount included in Note 46(B) for financial guarantee contracts are the maximum amounts that the Company may be liable to settle under the respective arrangements for the full guaranteed amount if that amount is claimed by the counterparty for the guarantee. Based on the expectations as at the end of reporting period, the Company considers that it is more likely than not that such amount shall not be payable under the respective arrangements. However, this estimate is subject to change depending upon the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
* Maturity amount of borrowings is including the interest that will be paid on these borrowings.
53 LEASES
Company as a lessee
The Company has lease contracts for its office premises and storage locations with lease term between 1 year to 5 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets.
The Company also has certain leases of office premises and storage locations with lease terms of 12 months or less. The Company applies the ''short-term lease'' recognition exemptions for these leases.
(c) Details of carrying amount of right-of-use assets and movement during the period is disclosed under Note 6 Footnotes:
(a) The maturity analysis of lease liabilities are disclosed in Note 52 (iii) Liquidity Risk Management
(b) The effective interest rate for lease liabilities is 9%, with maturity between 2023-2028.
(c) Expense relating to short-term leases are disclosed under the head rent and clearing charges in other expenses (Refer Note 42).
(d) The Company had total cash flows for leases of '' 9.51 crores on 31 March, 2023 (31 March, 2022 : '' 6.16 crores). Company as a lessor
The Company has entered into operating leases on its investment property portfolio consisting of land and office premises. These leases have lease terms between 1 year to 5 years, The Company has the option under some of its leases to lease the assets for additional periods. An amount of '' 29.27 crores is recognised as lease income in the statement of profit and loss account for the year ended 31 March, 2023 (31 March, 2022: '' 24.70 crores).
(D) Performance obligation
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 March, 2023 is of '' 701.18 crores (31 March, 2022: '' 2,988.14 crores), out of which, majority is expected to be recognised as revenue within a period of one year.
55 CAPITAL MANAGEMENT :
The capital structure of the Company consists of net debt and total equity of the Company. The Company manages its capital to ensure that the Company will be able to continue as going concern while maximising the return to stakeholders through an optimum mix of debt and equity within the overall capital structure. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, less cash and cash equivalents.
56 OTHER STATUTORY INFORMATION :
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any transactions with companies struck off.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(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 Beneficiaries
(vi) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
(vii) The Company has no such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
(viii) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
(ix) The Company is maintaining its books of account in electronic mode and these books of account are accessible in India at all times and the back-up of books of account has been kept in servers physically located in India on a daily basis from the applicability date of the Companies (Accounts) Rules, 2014, i.e. 5 August, 2022 onwards.
57 The Board of Directors of Voltas Limited at its Meeting held on 12 February, 2021, have approved the transfer of domestic B2B businesses relating to Projects business comprising Mechanical Electrical and Plumbing (MEP)/ Heating, Ventilation and AirConditioning (HVAC) and Water projects, Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) business to its wholly owned subsidiary viz. Universal MEP Projects & Engineering Services Limited (''UMPESL'') via slump sale through a Business Transfer Agreement (''BTA''). The BTA transaction has been consummated on 1 August, 2022, being the closing date for the transfer of business for a consideration of '' 1,190 crores and resultant gain on said transaction of ''1,049.04 crores has been disclosed as an Exceptional Item.
58 RESTRUCTURING OF OVERSEAS BUSINESS OPERATIONS :
(i) The Board of Directors of the Company at its Meeting held on 26 April, 2023, approved the proposal for transfer of overseas branch offices of the Company at Dubai, Abu Dhabi, Sharjah in the United Arab Emirates (UAE), Doha in Qatar, Bahrain and Singapore to Universal MEP Projects Pte Limited (UMPPL), Singapore, a wholly-owned subsidiary of Voltas Netherlands B.V., which is a direct 100% wholly-owned subsidiary of Voltas Limited. The transfer would be on slump sale basis through execution of Business Transfer Agreement (BTA) for each branch separately, subject to satisfactory completion of conditions precedent, including novation of existing contracts of Voltas in favour of UMPPL by the Main Contractors/Clients and such other compliances or procedures necessary or applicable in the respective local jurisdictions.
(ii) The Board of Directors have also approved transfer of Voltas direct investments in overseas subsidiary companies -Weathermaker FZE (100%), UAE, Saudi Ensas Company for Engineering Services W.L.L., Kingdom of Saudi Arabia (92%) and Lalbuksh Voltas Engineering Services & Trading L.L.C., Sultanate of Oman (20%) to UMPPL through Share Purchase Agreement (SPA) for each Company respectively, subject to requisite approvals as may be required in that behalf.
(iii) Upon consummation of the aforesaid transactions, the international business operations would get housed in the Singapore entity - UMPPL.
59 EVENTS OCCURRING AFTER BALANCE SHEET :
(i) The Board of Directors have proposed dividend of '' 4.25 per share after the balance sheet date which is subject to approval by the shareholders at the annual general meeting.
(ii) The Board of Directors have approved an amount of '' 20.00 crores to be transferred to General Reserve from Retained Earnings after the balance sheet date.
61 Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/ disclosure.
Mar 31, 2022
8 (a) Under a loan agreement for '' 0.60 crore (fully drawn and outstanding) entered into between Agro Foods Punjab Ltd. (AFPL)
and the Punjab State Industrial Development (PSIDC), the Company has given an undertaking to PSIDC that it will not dispose off its shares in AFPL till the monies under the said loan agreement between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During 1998-99, the Company had transferred its beneficial rights in the shares of AFPL.
8 (b) For these unquoted investments categorised under Level 3, their respective cost has been considered as an appropriate
estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
8 (c) In respect of the Company''s investment in 2,640 equity shares of Reliance Industries Ltd., there is an Injunction Order passed
by the Court in Kanpur restraining the transfer of these shares. The share certificates are, however, in the possession of the Company. Pending disposal of the case, dividend and fair value of these shares have not been recognised.
8 (d) Investments at Fair Value Through Other Comprehensive Income (FVTOCI) reflect investment in quoted and unquoted equity
securities. These equity shares are designated as FVTOCI as they are not held for trading purpose and are not in similar line of business as the Company, thus disclosing their fair value change in profit and loss will not reflect the purpose of holding.
8 (e) During the year, on account of corporate actions including the announcement of fresh issue by Terrot GmbH, to which
Company had not made any subscription and accordingly, the Company shareholding has reduced to Nil. Therefore, Terrot GmbH is no longer an associate of the Company.
8 (f) The Company has conducted its annual impairment assessment of the investment in wholly owned subsidiary Universal MEP
Projects & Engineering Services Limited (formerly known as Rohini Industrial Electricals Limited). The recoverable amount has been determined using the value in use method and calculated based on future cashflows for next five years after considering
the order book position, current and anticipated economic conditions and trends, estimated future operating results and growth rates. The cash flows beyond five years are extrapolated using a steady growth rate of 5% per annum. Key assumptions for the value in use calculations includes discount rate of 12.49% per annum (PY : 11.20% per annum) applied to arrive at present value of the cash flows. The discount rate represents the weighted average cost of capital adjusted for the risk specific to the Investment and appropriate industrial beta has been applied (based on the comparative companies data) to arrive at the discount rate.
8 (g) During the curent year, Auto Aircon (India) Limited, a dormant wholly-owned subsidiary of the Company, has been struck off
from Registrar of Companies records w.e.f. 8 September, 2021 and accordingly investment has been written off by utilising impairment allowance.
8 (h) During the year, Tata Projects Limited has split the face value of equity shares from ''100/- each to face value of '' 5/- each.
Further, the Company has received 54,00,000 shares as bonus shares. Additionally, the Company has subsribed to the Rights issue of 29,62,170 equity shares at designated Rights issue price.
(2) Trade receivables has increased mainly on account of higher sales made in the month of March 2022 in unitary cooling for comfort and commercial use segment compared to sales made in comparative month of March 2021.
(3) Trade receivables are non interest bearing and are generally on terms of 7 to 30 days in case of sale of products and in case of long term construction contracts, payment is generally due upon completion of milestone as per terms of contract. In certain contracts, short term advances are received before the performance obligation is satisfied.
(4) The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on trade receivables and contract assets. The Company follows the simplified approach for recognition of impairment allowance on trade receivables and contract assets. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment allowance based on lifetime ECLs at each reporting date. ECL impairment loss allowance (or reversal) recognised during the period is recognised in the Statement of Profit and Loss. This amount is reflected under the head ''other expenses'' in the Statement of Profit and Loss.
Capital Reserve was created from capital surplus on sale of assets and on amalgamation of subsidiary.
Capital Redemption Reserve is created out of profit available for distribution towards redemption of Preference shares. This reserve can be used for the purpose of issue of Bonus shares.
Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares.This reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.
Equity instruments fair value through other comprehensive income :
The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVTOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
The balance in the Retained Earnings primarily represents the surplus after payment of dividend and transfer to reserves.
As per the E-Waste (Management) Rules, 2016, as amended, the Company has an obligation to complete the Extended Producer Responsibility targets, only if it is a participant in the market during a financial year. The obligation for a financial year is measured based on sales made in the preceding 10th year and the Company has fulfilled its obligation for the current financial year. In accordance with Appendix B of Ind AS 37, ''Provisions, Contingent Liabilities and Contingent Assets'', the Company will have an e-waste obligation for future years, only if it participates in the market in those years.
Contribution to Provident Fund is made to trusts administered by the Company. In terms of guidance note issued by the Institute of Actuaries of India, the Actuary has provided a valuation of Provident fund liability based on the assumptions listed and determined that there is no shortfall as at 31 March, 2022.
The Company is exposed to the following Risks in the defined benefits plans :
I nvestment Risk: The present value of the defined benefit obligation is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan assets is below this rate, it will create a plan deficit.
Interest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by increase in the return on the plan''s debt investments.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary growth risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan''s liability.
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instrument by valuation techniques:
(i) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
(ii) Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
(iii) Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
- The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties.
The following methods and assumptions were used to estimate the fair values:
- The fair value of quoted equity investment and mutual funds are based on price quotations at the reporting date.
- The fair value of unquoted equity investments are based on Market multiple approach. Market multiple of EV/EBITDA are considered after applying suitable discounts for size, liquidity and other company specific discounts.
- The Company enters into derivative financial instruments with various counterparties, principally with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The model incorporates various inputs including the credit quality of counter parties, foreign exchange spot and forward rates.
There were no transfers between Level 1 and 2 during the period.
|50.| FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company''s financial liabilities include borrowings, lease liabilities, trade and other payables. The Company''s financial assets include investments, loans, trade and other receivables, cash and cash equivalents and other bank balances. The Company also holds FVTPL and FVTOCI investments.
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors of the Company oversee the management of these financial risks through its Risk Management Committee as per Company''s existing policy.
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 comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include borrowings, lease liabilities, investments, trade payables and other payables, trade receivables and other receivables, loans and derivative financial instruments.
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. Interest rate change does not affect the short term borrowing significantly, therefore the Company''s exposure to the risk of changes in market interest rates relates primarily to the investment in debt mutual funds.
Given the portfolio of investments in debt mutual funds. the Company has exposure to interest rate risk with respect to returns realised. It is estimated that an increase in 25 bps change in 10 year Govt. bond yield would result in a loss of approximately '' 4.98 crores (31 March, 2021: '' 4.31 crores) whereas a decrease in 25 bps change in 10 year Govt. bond yield would result in a profit of approximately '' 4.98 crores (31 March, 2021: '' 4.31 crores). This estimate is based on key assumption with respect to seamless transition of rates across debt instruments in the market and also basis the duration of debt instruments in turn held by mutual funds that the Company has invested in.
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 operating activities (when revenue or expense is denominated in a foreign currency). Foreign currency risks are managed by utilising foreign exchange forward contracts within the approved policy parameters.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk for trade receivables, contract asset, cash and cash equivalents, investments, other bank balances, loans and other financial assets. The Company only deals with parties which have good credit rating/ worthiness given by external rating agencies or based on Company''s internal assessment.
Credit risk on trade receivables and contract assets are managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Moreover, given the diverse nature of the Company''s businesses, trade receivables and contract assets are spread over a number of customers with no significant concentration of credit risk. No single customer accounted for 10% or more of the trade receivables and contracted assets in any of the years presented.
For trade receivables and contract assets, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and contract assets and is adjusted for forward-looking estimates.
For Mutual Fund Investments, counterparty risk are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for Company''s mutual fund investments.
Credit risk from cash and cash equivalents and balances with banks is managed by the Company''s treasury department in accordance with the Company''s treasury policy.
The Credit risk on mutual fund investments, cash and cash equivalents, and other bank balances are limited as the counterparties are banks and fund houses with high-credit ratings assigned by credit rating agencies.
The carrying value of the financial assets represents the maximum credit exposure. The Company''s maximum exposure to Credit risk is disclosed in Note 48 "Financial Instruments". The maximum credit exposure on financial guarantees given by the Company for various financial facilities is disclosed in Note 44 "Commitments and Contingencies."
(iii) Liquidity risk management:
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that the funds are available for use as per the requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company consistently generates sufficient cash flows from operations to meet its financial obligations as and when they fall due.
The amount included in Note 44(B) for financial guarantee contracts are the maximum amounts that the Company may be liable to settle under the respective arrangements for the full guaranteed amount if that amount is claimed by the counterparty for the guarantee. Based on the expectations as at the end of reporting period, the Company considers that it is more likely than not that such amount shall not be payable under the respective arrangements. However, this estimate is subject to change depending upon the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
* Maturity amount of borrowings is including the interest that will be paid on these borrowings.
51. LEASES Company as a lessee
The Company has lease contracts for its office premises and storage locations with lease term between 1 year to 5 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets.
The Company also has certain leases of office premises and storage locations with lease terms of 12 months or less. The Company applies the ''short-term lease'' recognition exemptions for these leases.
(c) Details of carrying amount of right-of-use assets and movement during the period is disclosed under Note 6
Footnotes:
(a) The maturity analysis of lease liabilities are disclosed in Note 50 (iii) ''Liquidity Risk Management''
(b) The effective interest rate for lease liabilities is 9%, with maturity between 2022-2027
(c) Expense relating to short-term leases are disclosed under the head rent and clearing charges in other expenses (Refer Note 40)
(d) The Company had total cash flows for leases of '' 6.16 crores as on 31 March, 2022 (31 March, 2021 : '' 4.73 crores)
Company as a lessor
The Company has entered into operating leases on its investment property portfolio consisting of land and office premises. These leases have lease terms between 1 year to 5 years, The Company has the option under some of its leases to lease the assets for additional periods. An amount of '' 24.70 crores is recognised as lease income in the statement of profit and loss account for the year ended 31 March, 2022 (31 March, 2021: '' 32.81 crores).
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 March, 2022 is of '' 2,988.14 crores (31 March, 2021: '' 4,363.81 crores), out of which, majority is expected to be recognised as revenue within a period of one year.
Footnote :
Effective 1 April, 2021, the Company has re-organised Commercial Air-conditioner (CAC) and Customer Care business from Segment - B ( Electro - Mechanical Projects and Services ) to Segment - A ( Unitary Cooling Products for Comfort and Commercial use ) to align with business objectives and accordingly, segment information for previous year have been restated.
The capital structure of the Company consists of net debt and total equity of the Company. The Company manages its capital to ensure that the Company will be able to continue as going concern while maximising the return to stakeholders through an optimum mix of debt and equity within the overall capital structure. The Company''s Risk Management Committee reviews the capital structure of the Company considering the cost of capital and the risks associated with each class of capital.
|54j OTHER STATUTORY INFORMATION :
(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) The Company do not have any transactions with companies struck off.
(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company have 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 Beneficiaries
(vi) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
(vii) The Company have no such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
(viii) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017.
|55.| The Code on Social Security, 2020 (''Code'') has been notified in the Official Gazette in September 2020 which could impact the contribution by the Company towards certain employment benefits. The effective date from which the changes and rules would become applicable is yet to be notified. Impact of the changes will be assessed and accounted in the relevant period of notification of relevant provisions.
|56.| The Board of Directors of the Company at its meeting held on 12 February, 2021, have approved the transfer of domestic B2B businesses of the Company relating to Projects business comprising Mechanical, Electrical and Plumbing (MEP)/ Heating, Ventilation and Air-Conditioning (HVAC) and Water projects, Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) business to its wholly owned subsidiary viz. Universal MEP Projects & Engineering Services Limited (''UMPESL'') (formerly Rohini Industrial Electricals Limited) by slump sale through a Business Transfer Agreement (''BTA'' ). The Company has executed the BTA on 24 March, 2021 and the transaction is expected to be consummated by such date as mutually agreed between the Company and UMPESL.
|57.| EVENTS OCCURRING AFTER BALANCE SHEET :
(i) The Board of Directors have proposed dividend of '' 5.50 per share after the balance sheet date which is subject to approval by the shareholders at the annual general meeting.
(ii) The Board of Directors have approved an amount of '' 20.00 crores to be transferred to General Reserve from Retained Earnings after the balance sheet date.
|59j Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/ disclosure.
Mar 31, 2021
Under a loan agreement for '' 0.60 crore (fully drawn and outstanding) entered into between Agro Foods Punjab Limited. (AFPL) and the Punjab State Industrial Development (PSIDC), the Company has given an undertaking to PSIDC that it will not dispose off its shares in AFPL till the monies under the said loan agreement between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During 1998-99, the Company had transferred its beneficial rights in the shares of AFPL.
) For these unquoted investments categorised under Level 3, their respective cost has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
In respect of the Company''s investment in 2,640 equity shares of Reliance Industries Limited, there is an Injunction Order passed by the Court in Kanpur restraining the transfer of these shares. The share certificates are, however, in the possession of the Company. Pending disposal of the case, dividend and fair value of these shares have not been recognised.
) Investments at Fair Value Through Other Comprehensive Income (FVTOCI) reflect investment in quoted and unquoted equity securities. These equity shares are designated as FVTOCI as they are not held for trading purpose and are not in similar line of business as the Company, thus disclosing their fair value change in profit and loss will not reflect the purpose of holding.
i The Company has created lien against the Mutual Fund of '' 75 crores towards various fund and non-fund based credit facilities availed by the Company.
The Company has conducted its annual impairment assessment of the investment in wholly owned subsidiary Universal MEP Projects & Engineering Services Limited (formerly known as Rohini Industrial Electricals Limited). The recoverable amount has been determined using the value in use method and calculated based on future cashflows for next five years after considering the order book position, current and anticipated economic conditions and trends, estimated future operating results and growth rates. The cash flows beyond five years are extrapolated using a steady growth rate of 5% per annum. Key assumptions for the value in use
calculations includes discount rate of 11.20% per annum (PY 14% per annum) applied to arrive at present value of the cash flows. The discount rate represents the weighted average cost of capital adjusted for the risk specific to the Investment and appropriate industrial beta has been applied (based on the comparative companies data) to arrive at the discount rate.
j) During the current year, the Company has subscribed to the rights issue of 15,00,00,000 equity shares of '' 10 each of Universal MEP Projects & Engineering Services Limited (formerly known as Rohini Industrial Electricals Limited) (''UMPESL'') of '' 150 crores. Further, UMPESL has made early repayment of 0.01% Cumulative Redeemable Preference Shares (''CRPS'') and the difference between carrying value of CRPS as on repayment date of '' 86.10 crores and redemption amount of '' 127 crores amounting to '' 40.79 crores has been adjusted against the investment in equity shares of UMPESL considering return of capital contribution made in earlier period by the Company.
i) During the current year, the Company has subscribed to the rights issue of 5,000 equity shares at the designated rights issue price.
There is no significant movement in trade receivaible balances as compared to 31 March, 2020.
Trade receivables are non interest bearing and are generally on terms of 7 to 30 days in case of sale of products and in case of long term construction contracts, payment is generally due upon completion of milestone as per terms of contract. In certain contracts, short term advances are received before the performance obligation is satisfied.
The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on trade receivables and contract assets. The Company follows the simplified approach for recognition of impairment allowance on trade receivables and contract assets. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment allowance based on lifetime ECLs at each reporting date. ECL impairment loss allowance (or reversal) recognised during the period is recognised in the Statement of Profit and Loss. This amount is reflected under the head ''other expenses'' in the Statement of Profit and Loss.
The changes in liabilities arising from financing activities is on account of cash flow changes only except for lease liabilities. For details of change in lease liabilities arising from financing activities refer note 51 (a).
At 31 March, 2021, the Company had available '' 342.96 crores (31 March, 2020: '' 696.96 crores) of undrawn committed borrowing facilities.
The Company has one class of equity shares having a par value of '' 1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding and are subject to preferential rights of the Preference Shares (if issued).
Capital Reserve was created from capital surplus on sale of assets and on amalgamation of subsidiary.
Capital Redemption Reserve :
Capital Redemption Reserve is created out of profit available for distribution towards redemption of Preference shares. This reserve can be used for the purpose of issue of Bonus shares.
Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares. This reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.
Equity instruments fair value through other comprehensive income :
The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVTOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
Retained Earnings :
The balance in the Retained Earnings primarily represents the surplus after payment of dividend (including tax on dividend) and transfer to reserves.
The Company has recognised an impairment provision of '' Nil (31 March, 2020: '' 2.16 crores) towards investment in Olayan Voltas Contracting Company, a Joint Venture (JV) of the Company and '' Nil (31 March, 2020: '' 1.56 crores) towards investment in Terrot GmbH, an associate company considering losses incurred by respective entities.
During the previous year, the Company has announced a Voluntary Retirement Scheme (''the scheme'') for all permanent employees of the Company in the general cadre category and accordingly, the related impact of the scheme of '' 51.19 crores was disclosed as an exceptional item.
During the previous year, the Company exercised the option of lower tax rate under section 115BAA of Income Tax Act, 1961 as introduced by the Taxation Laws (Amendment) Act, 2019 to pay corporate tax at reduced rate effective 1 April, 2019. The change in tax rate has resulted in a reversal of deferred tax assets of '' 32.92 crores on account of remeasurement of deferred tax balances as at 31 March, 2019 and was recognised in the financial statements for the year ended 31 March, 2020.
As per the E-Waste (Management) Rules, 2016, as amended, the Company has an obligation to complete the Extended Producer Responsibility targets, only if it is a participant in the market during a financial year. The obligation for a financial year is measured based on sales made in the preceding 10th year and the Company has fulfilled its obligation for the current financial year. In accordance with Appendix B of Ind AS 37, ''Provisions, Contingent Liabilities and Contingent Assets, the Company will have an e-waste obligation for future years, only if it participates in the market in those years.
The Company has defined benefit Gratuity, Post retirement medical benefits, Pension plans and Trust managed Provident fund plan as given below:
Gratuity
Every employee who has completed five years of services, is entitled to Gratuity benefits. The Gratuity plan for Indian employees is governed by the Payment of Gratuity Act, 1972. The Gratuity plan provides lumpsum payments to vested employees at retirement, death while in employment, or termination of employment being an amount equivalent to 15 days salary for each completed year of service. The Company also provides similar Gratuity benefits to overseas employee. The Gratuity plan for Indian employees is funded and for overseas employees is unfunded. The gratuity plan pertaining to employees of Universal Comfort Products Limited (''UCPL'') which has been amalgamated with the Company from 1 April, 2019 was unfunded in FY 2019-20.
Post Retirement Medical Benefits (PRMB)
PRMB scheme is eligible for all those employees who are above management staff grade and have joined on or before 31 December, 2015. The scheme is non-funded.
Pension plans
Pension plan benefit are provided to past Executive Directors and their specified relatives after completion of the services with the Company or Tata Group. The scheme is non- funded.
Contribution to Provident Fund is made to trusts administered by the Company. In terms of guidance note issued by the Institute of Actuaries of India, the Actuary has provided a valuation of Provident fund liability based on the assumptions listed and determined that there is no shortfall as at 31 March, 2021.
The Company is exposed to the following Risks in the defined benefits plans :
Investment risk: The present value of the defined benefit obligation is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan assets is below this rate, it will create a plan deficit.
Interest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by increase in the return on the plan''s debt investments.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary growth risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan''s liability.
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instrument by valuation
techniques:
(i) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
(ii) Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
(iii) Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current
transaction between willing parties.
The following methods and assumptions were used to estimate the fair values:
- The fair value of quoted equity investment and mutual funds are based on price quotations at the reporting date.
- The fair value of unquoted equity investments are based on Market multiple approach. Market multiple of EV/EBITDA are considered after applying suitable discounts for size, liquidity and other company specific discounts.
- The Company enters into derivative financial instruments with various counterparties, principally with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The model incorporates various inputs including the credit quality of counter parties, foreign exchange spot and forward rates.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company''s financial liabilities include borrowings, trade and other payables. The Company''s financial assets include loans, trade and other receivables, cash and cash equivalents and other bank balances. The Company also holds FVTPL and FVTOCI investments.
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors of the Company oversee the management of these financial risks through its Risk Management Committee as per Company''s existing policy.
(i) 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 comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include borrowings, investments, trade payables and other payables, trade receivables and other receivables, loans and derivative financial instruments.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate change does not affect the short term borrowing significantly, therefore the Company''s exposure to the risk of changes in market interest rates relates primarily to the investment in debt mutual funds.
Given the portfolio of investments in debt mutual funds. the Company has exposure to interest rate risk with respect to returns realised. It is estimated that an increase in 25 bps change in 10 year Govt. bond yield would result in a loss of approximately '' 4.31 crores (31 March, 2020: '' 3.53 crores) whereas a decrease in 25 bps change in 10 year Govt. bond yield would result in a profit of approximately '' 4.31 crores 31 March, 2020: '' 3.53 crores). This estimate is based on key assumption with respect to seamless transition of rates across debt instruments in the market and also basis the duration of debt instruments in turn held by mutual funds that the Company has invested in.
(b) 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 operating activities (when revenue or expense is denominated in a foreign currency). Foreign currency risks are managed by utilising foreign exchange forward contracts within the approved policy parameters.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk for trade receivables, contract asset, cash and cash equivalents, investments, other bank balances, loans and other financial assets. The Company only deals with parties which have good credit rating/ worthiness given by external rating agencies or based on Company''s internal assessment.
Credit risk on trade receivables and contract assets are managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Moreover, given the diverse nature of the Company''s businesses, trade receivables and contract assets are spread over a number of customers with no significant concentration of credit risk. No single customer accounted for 10% or more of the trade receivables and contract assets in any of the years presented.
For trade receivables and contract assets, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and contract assets and is adjusted for forward-looking estimates.
For Mutual Fund Investments, counterparty risk are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for Company''s mutual fund investments.
Credit risk from cash and cash equivalents and balances with banks is managed by the Company''s treasury department in accordance with the Company''s treasury policy.
The Credit risk on mutual fund investments, cash and cash equivalents, and other bank balances are limited as the counterparties are banks and fund houses with high-credit ratings assigned by credit rating agencies.
The carrying value of the financial assets represents the maximum credit exposure. The Company''s maximum exposure to Credit risk is disclosed in Note 48 "Financial Instrumentsâ. The maximum credit exposure on financial guarantees given by the Company for various financial facilities is disclosed in Note 44 "Commitments and Contingenciesâ
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that the funds are available for use as per the requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company consistently generates sufficient cash flows from operations to meet its financial obligations as and when they fall due.
The amount included in Note 44(B) for financial guarantee contracts are the maximum amounts that the Company may be liable to settle under the respective arrangements for the full guaranteed amount if that amount is claimed by the counterparty for the guarantee. Based on the expectations as at the end of reporting period, the Company considers that it is more likely than not that such amount shall not be payable under the respective arrangements. However, this estimate is subject to change depending upon the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
* Maturity amount of borrowings is including the interest that will be paid on these borrowings.
Company as a lessee
The Company has lease contracts for its office premises and storage locations with lease term between 1 year to 6 years. The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets.
The Company also has certain leases of office premises and storage locations with lease terms of 12 months or less. The Company applies the ''shortterm lease'' recognition exemptions for these leases.
Details of carrying amount of right-of-use assets and movement during the period is disclosed under Note 6
Footnotes :
(a) The maturity analysis of lease liabilities are disclosed in Note 50 (iii) ''Liquidity Risk Management''
(b) The effective interest rate for lease liabilities is 9%, with maturity between 2020-2027
(c) Expense relating to short-term leases are disclosed under the head rent and clearing charges in other expenses (Refer Note 40)
(d) The Company had total cash flows for leases of '' 4.73 crores on 31 March, 2021 (31 March, 2020 : '' 4.93 crores)
Company as a lessor
The Company has entered into operating leases on its investment property portfolio consisting of land and office premises. These leases have lease terms between 1 year to 6 years, The Company has the option under some of its leases to lease the assets for additional periods. An amount of '' 32.81 crores is recognised as lease income in the statement of profit and loss account for the year ended 31 March, 2021 (31 March, 2020: '' 38.65 crores).
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 March, 2021 is of '' 4,363.81 crores (31 March, 2020: '' 5,205.06 crores), out of which, majority is expected to be recognised as revenue within a period of one year.
The capital structure of the Company consists of net debt and total equity of the Company. The Company manages its capital to ensure that the Company will be able to continue as going concern while maximising the return to stakeholders through an optimum mix of debt and equity within the overall capital structure. The Company''s Risk Management Committee reviews the capital structure of the Company considering the cost of capital and the risks associated with each class of capital.
The Company has considered the possible impact of COVID-19 pandemic on its operations, liquidity position and recoverability of its asset balances at 31 March, 2021 based on the internal and external information upto the date of approval of these financial statements. The impact of COVID-19 may be different from that estimated as at the date of approval of these financial statements and management will continue to monitor any material changes arising due to the impact of this pandemic on financial and operational performance of the Company and take necessary measures to address the situation.
AMALGAMATION OF UNIVERSAL COMFORT PRODUCTS LIMITED (WHOLLY OWNED SUBSIDIARY COMPANY)
(a) Pursuant to the Scheme of merger by absorption (''the Scheme)'' of erstwhile Universal Comfort Products Limited with the Company under Sections 230 to 232 of the Companies Act, 2013 sanctioned by National Company Law Tribunal, Mumbai on 11 September, 2020 all assets and liabilities of Universal Comfort Products Limited were transferred and vested in the Company with appointed date of 1 April, 2019.
(b) The amalgamation has been accounted in the books of account of the Company in accordance with Ind AS 103 ''Business Combination'' read with Appendix C to Ind AS 103 specified under Section 133 of the Act, read with the Companies (Accounting Standards) Amendment Rules, 2016. Accordingly, the accounting treatment has been given as follows:
(i) The assets, liabilities and reserves of Universal Comfort Products Limited have been incorporated in the financial statements at the carrying values.
(ii) The balance of the retained earnings and general reserve appearing in the financial statements of Universal Comfort Products Limited have been aggregated with corresponding balance appearing in the financial statements of the Company.
(iii) Inter-Company balances and transactions have been eliminated and resultant adjustment of '' 11.85 crores (net of deferred tax of '' 6.23 crores) has been adjusted in retained earnings.
(iv) 2,76,42,000 equity share of '' 10 each fully paid in Universal Comfort Products Limited, held as investment by the Company stands cancelled and the difference between book value of investments and face value of such shares amounting to '' 10.69 crores has been adjusted to capital reserve of the Company.
i. The Code on Social Security, 2020 (''Code'') has been notified in the Official Gazette in September 2020 which could impact the contribution by the Company towards certain employment benefits. The effective date from which the changes and rules would become applicable is yet to be notified. Impact of the changes will be assessed and accounted in the relevant period of notification of relevant provisions.
''. The Board of Directors of the Company at its meeting held on 12 February, 2021, have approved the transfer of domestic B2B businesses of the Company relating to Projects business comprising Mechanical, Electrical and Plumbing (MEP)/ Heating, Ventilation and Air-Conditioning (HVAC) and Water projects, Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) business to its wholly owned subsidiary viz. Universal MEP Projects & Engineering Services Limited (''UMPESL'') (formerly Rohini Industrial Electricals Limited) by slump sale through a Business Transfer Agreement (''BTA'' ). The Company has executed the BTA on 24 March, 2021 and the transaction is expected to be consummated by end of September 2021 or such other date as may be mutually agreed between the Company and UMPESL. t. EVENTS OCCURRING AFTER BALANCE SHEET
(i) The Directors have recommended final dividend of '' 165.44 crores at '' 5.00 per share on equity shares which is subject to the approval of shareholders. This dividend payable has not been recognised as a liability.
(ii) Further, an amount of '' 20.00 crores is proposed to be transferred to General Reserve which is approved in the Board Meeting held subsequent to the year end and thus has not been recognised as transferred during the year.
c Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/ disclosure.
(v) The financial information in the financial statements in respect of prior period have been restated as if business combination had occurred from the beginning of the preceding period in the financial statements irrespective of actual date of combination in accordance with Ind AS 103.
Mar 31, 2019
1. CORPORATE INFORMATION
Voltas Limited (the âCompanyâ) is a public limited company domiciled in India. The address of its registered office is Voltas House âAâ, Dr. Babasaheb Ambedkar Road, Chinchpokli, Mumbai 400033.
The Company belongs to the Tata Group of companies and was established in the year 1954. The Company is engaged in the field of air conditioning, refrigeration, in the business of electro - mechanical projects as an EPC contractor both in domestic and international geographies (Middle East and Singapore), and also in the business of engineering product services for mining, water management and treatment, construction equipments and textile industry.
The financial statements for the year ended 31st March, 2019 were approved by the Board of Directors and authorised for issue on 9th May, 2019.
The fair value of the investment properties have been derived using the market comparable approach (market value method / sale comparison technique) based on recent market prices without any significant adjustments being made to the market observable data. The valuation was carried out by an independent valuer registered with the authority which governs the valuers in India. Accordingly, fair value estimates for investment properties are classified as level 3.
The Company has no restriction on the realisability of its Investment properties and no contractual obligation to purchase, construct and develop investment properties.
2 (a) Under a loan agreement for Rs. 0.60 crore (fully drawn and outstanding) entered into between Agro Foods Punjab Ltd. (AFPL) and the Punjab State Industrial Development, the Company has given an undertaking to PSIDC that it will not dispose off its shares in AFPL till the monies under the said loan agreement between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During 1998-99, the Company had transferred its beneficial rights in the shares of AFPL.
2 (b) For these unquoted investments categorised under Level 3, their respective cost has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
2 (c) In respect of the Companyâs investment in 2,640 equity shares of Reliance Industries Ltd., there is an Injunction Order passed by the Court in Kanpur restraining the transfer of these shares. The share certificates are, however, in the possession of the Company. Pending disposal of the case, dividend on these shares has not been recognised.
2 (d) The Company had invested in 0.01% cumulative redeemable preference shares (âCRPSâ) of Rohini Industrial Electricals Limited (subsidiary), aggregating Rs.127 crores (Rs. 25 crores in 2011-12, Rs. 37 crores in 2012-13 and Rs. 65 crores in 2016-17), for a period of 7 years. The investment was accounted at amortised cost and the difference between the Investment and the amortised cost amounting to Rs. 54.69 crores was included as Investment in Equity instrument in subsidiary. During the year, the subsidiary modified a portion of CRPS which were due for redemption on 29th March, 2019 and 1st October, 2020 amounting Rs. 25 crores and Rs. 37 crores respectively and extended the repayment for a further period of 7 years from respective due dates. Accordingly, the difference between the original amortised cost and revised amortised cost amounting to Rs. 27.75 crores for the portion of CRPS which are extended is included as Investment in Equity instrument in subsidiary.
2 (e) Investments at Fair Value Through Other Comprehensive Income (FVTOCI) reflect investment in quoted and unquoted equity securities. These equity shares are designated as FVTOCI as they are not held for trading purpose and are not in similar line of business as the Company, thus disclosing their fair value change in profit and loss will not reflect the purpose of holding.
(3) Contract assets are initially recognised for revenue earned from electro mechanical projects contracts as receipt of consideration that is conditional on successful completion of project milestone. Upon completion of milestone and acceptance/certification by the customer, the amounts recognised as contract assets are reclassified to trade receivables. There is no significant variance in the contract assets balances as compared to 1st April, 2018.
(4) As the Company has adopted modified retrospective approach, no reclassification have been made for contract assets as at 31st March, 2018 and the corresponding balances as at 31st March, 2018 are shown under âOther current assetsâ as âAmount due from customers under construction contractsâ.
(5) At 31st March, 2019, trade receivable have increased on account of increased business operations as compared to March, 2018.
(6) Trade receivables are non interest bearing and are generally on terms of 7 to 30 days credit in case of sale of products and in case of long term construction contracts, payment is generally due upon completion of milestone as per terms of contract. In certain contracts, short term advances are received before the performance obligation is satisfied.
(7) The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on trade receivables and contract assets. The Company follows the simplified approach for recognition of impairment allowance on trade receivables and contract assets. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment allowance based on lifetime ECLs at each reporting date. ECL impairment loss allowance (or reversal) recognized during the period is recognized in the Statement of Profit and Loss. This amount is reflected under the head âother expensesâ in the Statement of Profit and Loss.
Terms / Rights attached to equity shares
(a) The Company has one class of equity shares having a par value of Re.1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding and are subject to preferential rights of the Preference Shares (if issued).
(b) A reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period :
(d) As per the records of the Company, no calls remained unpaid by the Directors and Officers of the Company as on 31st March, 2019 (31st March, 2018 : Nil).
Footnotes : Nature and purpose of reserves Capital Reserve :
Capital Reserve was created from capital surplus on sale of assets and on amalgamation of subsidiary.
Capital Redemption Reserve :
Capital Redemption Reserve is created out of profit available for distribution towards redemption of Preference shares. This reserve can be used for the purpose of issue of Bonus shares.
Securities Premium :
Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares. This reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
General Reserve :
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.
Equity instruments fair value through other comprehensive income :
The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVTOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
Retained Earnings :
The balance in the Retained Earnings primarily represents the surplus after payment of dividend (including tax on dividend) and transfer to reserves.
(1) The outstanding balances of the contract liabilities as at 31st March, 2018 were higher on account of higher advance received from electro mechanical projects, the revenue for which was recognised during the year on execution of projects.
(2) As the Company has adopted modified retrospective approach, no reclassification have been made for contract liabilities as at 31st March, 2018 and the corresponding balances as at 31st March, 2018 are shown under âOther current liabilitiesâ as âAdvances received from customersâ âUnexpired service contractsâ and âBilling in excess of contract revenueâ.
Footnotes :
(I) Borrowings are secured against assignment of Contract dues on overseas projects and lien on Term deposits.
(ii) Term loans are repayable within a period of 90 days.
(iii) Term loans from banks carry an average interest rate of 4.40% (31st March, 2018 : 4.40% to 6.50%)
(iv) Working capital loans from banks are repayable on demand.
(v) Working capital loans from banks carry an average interest rate of 3.00% to 6.50% (31st March, 2018 : 8.75%).
(a) Sales for the year ended 31st March, 2019 is net of Goods and Service Tax (GST). However, sales for the previous year is gross of Excise Duty.
(b) Sales, net of GST / Excise Duty for year ended 31st March, 2019 has increased by 15.34%, in comparison to the previous year.
(i) The Company has conducted its annual impairment assessment of Investment in its wholly owned subsidiary Rohini Industrial Electricals Limited (RIEL). The operations of RIEL have revived owing to the new electrification projects received under the various government electrification schemes and executed in the last two years. The subsidiary has turned profitable due to these new projects. As on 31st March, 2019, the subsidiary has an order book of more than Rs. 830 crores. Further, considering the impetus by Government on the rural electrification schemes, the Company is confident that they would be able to achieve sustainable profitability in the future. The Company has obtained a fair valuation report from an independent valuar basis the financial projections approved by Management. Basis such valuation report, the Management is confident of recovering the value of the investment. Accordingly, Management has reversed 50% of impairment provision recorded earlier resulting in a net investment value of Rs. 148.65 crores as at 31st March, 2019.
(ii) The Company has recognised an impairment provision of Rs. 6.35 crores (31st March, 2018 : Rs. 5.98 crores) towards investment in Olayan Voltas Contracting Company, a Joint Venture (JV) of the Company, considering the losses incurred by the JV.
(iii) The Company has recognised an impairment provision of Rs. 0.65 crore towards investment in Auto Aircon (India) Limited on account of diminution in value of investment.
The Company has defined benefit Gratuity, Post retirement medical benefits, Pension plans and Trust managed Provident fund plan as given below:
(i) Gratuity
Every employee who has completed five years of services, is entitled to Gratuity benefits. The Gratuity plan for Indian employees is governed by the Payment of Gratuity Act, 1972. The Gratuity plan provides lumpsum payments to vested employees at retirement, death while in employment, or termination of employment being an amount equivalent to 15 days salary for each completed year of service. The Company also provides similar Gratuity benefits to overseas employee. The Gratuity plan for Indian employees is funded and for overseas employees is unfunded.
(ii) Post retirement medical benefits
Benefits under these plan are payable for actual domiciliary treatment/hospitalisation for employees and their specified relatives. The scheme is non-funded.
(iii) Pension plans
Pension plan benefit are provided to past Executive Directors and their specified relatives after completion of the services with the Company or Tata Group. The scheme is non- funded.
(a) The following table summaries the components of net benefits expenses recognised in Statement of Profit and Loss, Other Comprehensive Income and the funded status and amount recognised in the Balance Sheet for the respective plans:
Risk Analysis
The Company is exposed to the following Risks in the defined benefits plans :
Investment Risk: The present value of the defined benefit obligation is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan assets is below this rate, it will create a plan deficit.
Interest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by increase in the return on the planâs debt investments.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the planâs liability.
Salary growth risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants.
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instrument by valuation techniques:
(i) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
(ii) Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
(iii) Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties.
The following methods and assumption were used to estimate fair values:
- The fair value of quoted equity investment and mutual funds are based on price quotations at the reporting date.
- The fair value of unquoted equity investments are based on Market multiple approach. Market multiple of EV/EBITDA are considered after applying suitable discounts for size, liquidity and other company specific discounts.
- The Company enters into derivative financial instruments with various counterparties, principally with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The model incorporates various inputs including the credit quality of counter parties, foreign exchange spot and forward rates.
There were no transfers between Level 1 and 2 during the period.
8. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Companyâs financial liabilities comprise borrowings, trade and other payables. The Companyâs financial assets include loans, trade and other receivables, cash and cash equivalents and other bank balances. The Company also holds FVTPL and FVTOCI investments.
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors of the Company oversee the management of these financial risks through its Risk Management Committee as per Companyâs existing policy.
(i) 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 comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include Borrowings, Investments, Trade payables, Trade receivables, Other financial assets, Other financial liabilities, Loans and Derivative financial instruments.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate change does not affect significantly short term borrowing, therefore the Companyâs exposure to the risk of changes in market interest rates relates primarily to the investment in debt mutual funds.
Given the portfolio of investments in debt mutual funds, etc. the Company has exposure to interest rate risk with respect to returns realised. It is estimated that an increase in 25 bps change in 10 year Government bond yield would result in a loss of approximately Rs. 3.14 crores (31st March, 2018: Rs. 4.66 crores) whereas a decrease in 25 bps change in 10 year Government bond yield would result in a profit of approximately Rs. 3.14 crores (31st March, 2018: Rs. 4.66 crores). This estimate is based on key assumption with respect to seamless transition of rates across debt instrument in the market and also basis the duration of debt instruments in turn held by mutual funds that the Company has invested in.
(b) 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 Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency). Foreign currency risks are managed within the approved policy parameters utilising foreign exchange forward contracts.
(c) Equity price risk
The Companyâs listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Companyâs Board of Directors reviews and approves all equity investment decisions.
(ii) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk for trade receivables, contract assets, cash and cash equivalents, investments, other bank balances, loans and other financial assets. The Company only deals with parties which have good credit rating/ worthiness given by external rating agencies or based on Companyâs internal assessment.
Credit risk on trade receivables and contract assets are managed by each business unit subject to the Companyâs established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Moreover, given the diverse nature of the Companyâs businesses, trade receivables are spread over a number of customers with no significant concentration of credit risk. No single customer accounted for 10% or more of the trade receivables in any of the years presented.
For trade receivables and contract assets, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates.
For Mutual Fund Investments, counterparty risk are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for Companyâs mutual fund investments.
Credit risk from cash and cash equivalents and balances with banks is managed by the Companyâs treasury department in accordance with the Companyâs treasury policy.
The Credit risk on mutual fund investments, cash and cash equivalents, and other bank balances are limited as the counterparties are banks and fund houses with high-credit ratings assigned by credit rating agencies.
The carrying value of the financial assets represents the maximum credit exposure. The Companyâs maximum exposure to Credit risk is disclosed in Note 45 âFinancial Instrumentsâ. The maximum credit exposure on financial guarantees given by the Company for various financial facilities is disclosed in Note 41 âCommitments and Contingencies.â
(iii) Liquidity risk management
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that the funds are available for use as per the requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
The amount included in Note 41(B) for financial guarantee contracts are the maximum amounts the Company could be forced to settle under respective arrangements for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such amount will not be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.
9. OPERATING LEASE : COMPANY AS A LESSEE
The Company has entered into operating lease agreements for its office premises and storage locations with lease term between 1 year to 30 years. The Company has the option under some of its leases to lease the assets for additional periods. There are no exceptional/restrictive covenants in the lease agreements. Lease rental expenses debited to Statement of Profit and Loss is Rs. 42.75 crores (31st March, 2018 : Rs. 38.96 crores)
Operating Lease : Company as a Lessor
The Company has entered into operating leases on its investment property portfolio consisting of land and office premises. These leases have lease terms between 1 year to 9 years. The Company has the option under some of its leases to lease the assets for additional periods. An amount of Rs. 39.56 crores (31st March, 2018: Rs. 37.55 crores) is recognised as lease income in the Statement of Profit and Loss account for the year ended 31st March, 2019.
(D) Perfomance obligation
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 March, 2019 is of Rs. 3,631.32 crores, out of which, majority is expected to be recognised as revenue within a period of one year.
10. CAPITAL MANAGEMENT
The capital structure of the Company consists of net debt and total equity of the Company. The Company manages its capital to ensure that the Company will be able to continue as going concern while maximising the return to stakeholders through an optimum mix of debt and equity within the overall capital structure. The Companyâs Risk Management Committee reviews the capital structure of the Company considering the cost of capital and the risks associated with each class of capital.
11. EVENTS OCCURRING AFTER BALANCE SHEET:
(i) The Directors have recommended final dividend of Rs. 132.35 crores at Rs. 4.00 per share on equity shares which is subject to the approval of shareholders at the ensuing Annual General Meeting. This dividend and tax thereon has not been recognised as a liability.
(ii) Further, an amount of Rs. 20.00 crores is proposed to be transferred to General Reserve which is approved in the Board Meeting held subsequent to the year end and thus has not been recognised as transferred during the year.
(iii) The Company has announced a scheme of voluntary retirement (âschemeâ) for all permanent employees in the general cadre category on 16th April, 2019. The scheme has been approved by the Board of Directors. As the scheme was announced subsequent to the balance sheet date, no adjustment has been made in the financial statements.
12. Previous yearâs figures have been regrouped / reclassified wherever necessary to correspond with the current yearâs classification/ disclosure.
Mar 31, 2018
1. CORPORATE INFORMATION
Voltas Limited (the âCompanyâ) is a public limited company and is incorporated in India. The address of its registered office is Voltas House âAâ, Dr. Babasaheb Ambedkar Road, Chinchpokli, Mumbai-400033.
The Company belongs to the Tata Group of companies and was established in the year 1954. The Company is engaged in the field of air conditioning, refrigeration, in the business of electro-mechanical projects as an EPC contractor both in domestic and international geographies (Middle East and Singapore), and also in the business of engineering product services for mining, water management and treatment, construction equipments and textile industry.
The financial statements for the year ended 31st March, 2018 were approved by the Board of Directors and authorised for issue on 17th May, 2018.
2A. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Companyâs accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The 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 if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year:
Construction contracts
Cost to complete
The Companyâs Management estimates the costs to complete for each project for the purpose of revenue recognition and recognition of anticipated losses on projects, if any. In the process of calculating the cost to complete, Management conducts regular and systematic reviews of actual results and future projections with comparison against budget. This process requires monitoring controls including financial and operational controls and identifying major risks facing the Company and developing and implementing initiatives to manage those risks. The Companyâs Management is confident that the costs to complete the project are fairly estimated.
Percentage of completion
Managementâs estimate of the percentage of completion on each project for the purpose of revenue recognition is through conducting some weight analysis to assess the actual quantity of the work for each activity performed during the reporting period and estimate any future costs for comparison against the initial project budget. This process requires monitoring of financial and operational controls. Management is of the opinion that the percentage of completion of the projects is fairly estimated.
As required by Ind AS 11 in applying the percentage of completion on its long-term projects, the Company is required to recognize any anticipated losses on it contracts. In light of the above, Management is of the opinion that based on the current facts, future losses on contract has been adequately provided for.
Contract variations and claims
Contract variations and claims are recognized as revenue to the extent that it is probable that they will result in revenue which can be reliably measured and it is probable that the economic benefits associated will flow to the Company. This requires exercise of judgement by Management based on prior experience, application of contract terms, manner and terms of settlement and relationship with the customers, etc.
Impairment of financial assets
The Companyâs Management reviews periodically items classified as receivables to assess whether a provision for impairment should be recorded in the Statement of Profit or Loss. Management estimates the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgement and uncertainty.
The Company reviews its carrying value of investments 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.
Fair value measurement of financial instruments
Some of the Companyâs assets are measured at fair value for financial reporting purposes. The Management determines the appropriate valuation techniques and inputs for fair value measurements. In estimating the fair value of an asset, the Company uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engages third party qualified valuers to perform the valuation. The Management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model.
Information about valuation techniques and inputs used in determining the fair value of various assets is disclosed in Note 42. Litigations
From time to time, the Company is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavourable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each Balance Sheet date and revisions made for the changes in facts and circumstances.
Defined benefit plans
The cost of the defined benefit plans and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. All assumptions are reviewed at each Balance Sheet date.
Useful lives of property, plant and equipment and intangible assets
The Company has estimated useful life of each class of assets based on the nature of assets, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, etc. The Company reviews the useful life of property, plant and equipment and intangible assets as at the end of each reporting period. This reassessment may result in change in depreciation and amortisation expense in future periods.
Warranty provisions (trade guarantees)
The Company gives warranties for its products, undertaking to repair or replace the product that fail to perform satisfactory during the warranty period. Provision made at the year-end represents the amount of expected cost of meeting such obligations of rectification / replacement which is based on the historical warranty claim information as well as recent trends that might suggest that past cost information may differ from future claims. Factors that could impact the estimated claim information include the success of the Companyâs productivity and quality initiatives.
2B. RECENT ACCOUNTING PRONOUNCEMENTS:
Standards issued but not yet effective
The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Companyâs financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.
The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and Companies (Indian Accounting Standards) Amendment Rules, 2018 amending the following standard:
Ind AS 115 - Revenue from Contracts with Customers
Ind AS 115 - Revenue from Contracts with Customers notified on 28th March, 2018 is effective from 1st April, 2018 and will supersede all current revenue recognition requirements. While an initial assessment of the standard does not indicate a significant impact, except for the disclosure requirements, a reliable estimate of the impact can be concluded only upon completion of the ongoing evaluation process.
Amendments to Ind AS 112 - Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in Ind AS 112
The amendments clarify that the disclosure requirements in Ind AS 112, other than those in paragraphs B10-B16, apply to an entityâs interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale.
The requirements of the amendment have no impact on the financial statements as there are no subsidiary, joint venture or an associate that has been classified as held for sale.
Amendments to Ind AS 12 - Recognition of Deferred Tax Assets for Unrealised Losses
The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.
Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.
These amendments are effective for annual periods beginning on or after 1st April 2018. These amendments are not expected to have any impact on the Company as the Company has no deductible temporary differences or assets that are in the scope of the amendments.
Transfers of Investment Property â Amendments to Ind AS 40
The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in managementâs intentions for the use of a property does not provide evidence of a change in use.
Entities should apply the amendments prospectively to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. An entity should reassess the classification of property held at that date and, if applicable, reclassify property to reflect the conditions that exist at that date. Retrospective application in accordance with Ind AS 8 is only permitted if it is possible without the use of hindsight.
The amendments are effective for annual periods beginning on or after 1st April 2018. The Company will apply amendments when they become effective. However, since Companyâs current practice is in line with the clarifications issued, the Company does not expect any effect on its financial statements.
Ind AS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice
The amendments clarify that:
- An entity that is a venture capital organisation, or other qualifying entity, may elect, at initial recognition on an investment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss.
- If an entity, that is not itself an investment entity, has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associateâs or joint ventureâs interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which: (a) the investment entity associate or joint venture is initially recognised; (b) the associate or joint venture becomes an investment entity; and (c) the investment entity associate or joint venture first becomes a parent.
The amendments should be applied retrospectively and are effective from 1st April 2018. These amendments are not applicable to the Company.
Appendix B to Ind AS 21 Foreign Currency Transactions and Advance Consideration
The Appendix clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration.
Entities may apply the Appendix requirements on a fully retrospective basis. Alternatively, an entity may apply these requirements prospectively to all assets, expenses and income in its scope that are initially recognised on or after:
(i) The beginning of the reporting period in which the entity first applies the Appendix, or
(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the Appendix.
The Appendix is effective for annual periods beginning on or after 1st April, 2018. However, the Company does not expect any significant effect on its financial statements.
The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on trade receivables. The Company follows the simplified approach for recognition of impairment loss allowance on trade receivables. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date. ECL impairment loss allowance (or reversal) recognized during the period is recognized in the Statement of Profit and Loss. This amount is reflected under the head âother expensesâ in the Statement of Profit and Loss.
Capital Redemption Reserve :
Capital Redemption Reserve is created out of profit available for distribution towards redemption of Preference shares. This reserve can be used for the purpose of issue of Bonus shares.
Securities Premium :
Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares. General Reserve :
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit or loss.
Retained Earnings :
The balance in Retained Earnings primarily represents the surplus after payment of dividend (including tax on dividend) and transfer to reserves.
(i) Borrowings are secured against assignment of Property, Plant & Equipment, Inventory, Book debts, Contract dues and lien on Term deposits.
(ii) Term loans are repayable within a period of 90 days.
(iii) Term loans from banks carry an average interest rate of 4.40% to 6.50% (31st March, 2017 : 4.40% to 6.50%)
(iv) Working capital loans from banks carry an average interest rate of 8.75% (31st March, 2017 : 8.75%).
(ii) As per the E-Waste (Management) Rules, 2016, as amended, (âthe Rulesâ) issued by Ministry of Environment, Forest and Climate Change (MoEF & CC) Government of India, the Company has a commitment to complete the Extended Producer Responsibility (EPR) targets, calculated based on sales made in the preceding 10th year, through channelization of e-waste to an authorised dismantler/recycler. The Company has fulfilled its commitment for the financial year 2017-18. The Company expects further clarifications to evolve overtime, particularly with respect to the various mechanism of fulfilling the environmental obligation. The cost of obligation, if any, for the preceding nine year sales can be estimated, once appropriate clarifications are received from the Ministry.
Financial Guarantee
The Company has issued financial guarantees to banks on behalf of and in respect of credit facilities availed by its subsidiary and joint venture companies
3. Employee Benefits
The Company has defined benefit Gratuity, Post retirement medical benefits, Pension plans and Trust managed Provident fund plan as given below:
(i) Gratuity
Every employee who has completed five years of services, is entitled to Gratuity benefits. The Gratuity plan for Indian employees is governed by the Payment of Gratuity Act, 1972. The Gratuity plan provides lumpsum payments to vested employees at retirement, death while in employment, or termination of employment being an amount equivalent to 15 days salary for each completed year of service. The Company also provides similar Gratuity benefits to overseas employee. The Gratuity plan for Indian employees is funded and for overseas employees is unfunded.
(ii) Post retirement medical benefits
Benefits under these plan are payable for actual domiciliary treatment/hospitalisation for employees and their specified relatives. The scheme is non-funded.
(iii) Pension plans
Pension plan benefit are provided to Executive Directors and their specified relatives after completion of the services with the Company or Tata Group. The scheme is non- funded.
(a) The following table summaries the components of net benefits expenses recognised in statement of profit or loss, other comprehensive income and the funded status and amount recognised in the balance sheet for the respective plans:
Risk Analysis
The Company is exposed to the following Risks in the defined benefits plans :
Investment Risk: The present value of the defined benefit obligation is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan assets is below this rate, it will create a plan deficit.
Interest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by increase in the return on the planâs debt investments.
Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the planâs liability.
Salary growth risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the planâs liability.
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instrument by valuation techniques:
(i) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
(ii) Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;
(iii) Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties. The following methods and assumptions were used to estimate the fair values:
- The fair value of quoted equity investment and mutual funds are based on price quotations at the reporting date.
- The fair value of unquoted equity investments are based on Market multiple approach. Market multiple of EV/EBITDA are considered after applying suitable discounts for size, liquidity and other company specific discounts.
- The fair value of redeemable preference shares are based on observable price of securities based on transactions undertaken recently.
- The Company enters into derivative financial instruments with various counterparties, principally with banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The model incorporates various inputs including the credit quality of counter parties, foreign exchange spot and forward rates.
There were no transfers between Level 1 and 2 during the period.
4. Financial risk management objectives and policies
The Companyâs financial liabilities comprise borrowings, trade and other payables. The Companyâs financial assets include loans, trade and other receivables, cash and cash equivalents and other bank balances. The Company also holds FVTPL and FVTOCI investments.
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors of the Company oversee the management of these financial risks through its Risk Management Committee as per Companyâs existing policy.
(i) 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 comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk. Financial instruments affected by market risk include borrowings, investments, trade payables, trade receivables, loans and derivative financial instruments.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate change does not affect significantly short term borrowing, therefore the Companyâs exposure to the risk of changes in market interest rates relates primarily to the investment in debt mutual funds.
Given the portfolio of investments in debt mutual funds, etc. the Company has exposure to interest rate risk with respect to returns realised. It is estimated that a 25 bps change in 10 year Govt. bond yield would result in a profit and loss impact of approximately Rs.4.66 crores (31-3-2017: Rs.4.19 crores). This estimate is based on key assumption with respect to seamless transition of rates across debt instrument in the market and also basis the duration of debt instruments in turn held by mutual funds that the Company has invested in.
(b) 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 Companyâs exposure to the risk of changes in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in a foreign currency). Foreign currency risks are managed within the approved policy parameters utilising foreign exchange forward contracts.
As at the end of the reporting period, the carrying amounts of the material foreign currency denominated monetary assets and liabilities are as follows:
Foreign currency sensitivity
The following tables demonstrate the sensitivity of outstanding foreign currency denominated monetary items to a reasonably possible change in exchange rates, with all other variables held constant. The impact on the Companyâs profit before tax is due to changes in the fair value of financial assets and liabilities:
(c) Equity price risk
The Companyâs listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Companyâs Board of Directors reviews and approves all equity investment decisions.
(ii) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk for trade receivables, cash and cash equivalents, investments, other bank balances, loans and other financial assets. The Company only deals with parties which have good credit rating/ worthiness given by external rating agencies or based on Companyâs internal assessment.
Credit risk on receivables is managed by each business unit subject to the Companyâs established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Moreover, given the diverse nature of the Companyâs businesses, trade receivables are spread over a number of customers with no significant concentration of credit risk. No single customer accounted for 10% or more of the trade receivables in any of the years presented.
For trade receivables, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates.
For Mutual Fund Investments, counterparty risk are in place to limit the amount of credit exposure to any one counterparty. This, therefore, results in diversification of credit risk for Companyâs mutual fund investments.
Credit risk from cash and cash equivalents and balances with banks is managed by the Companyâs treasury department in accordance with the Companyâs treasury policy.
The Credit risk on mutual fund investments, cash and cash equivalents, and other bank balances are limited as the counterparties are banks and fund houses with high-credit ratings assigned by credit rating agencies.
The carrying value of the financial assets represents the maximum credit exposure. The Companyâs maximum exposure to Credit risk is disclosed in Note 42 âFinancial Instrumentsâ. The maximum credit exposure on financial guarantees given by the Company for various financial facilities is disclosed in Note 38 âCommitments and Contingencies.â
(iii) Liquidity risk management:
Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that the funds are available for use as per the requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
Maturities of financial liabilities: The table below summarises the maturity profile of the Companyâs financial liabilities based on contractual undiscounted payments.
5. Operating Lease : Company as a Lessee
The Company has entered into operating lease agreements for its office premises and storage locations. There are no exceptional/ restrictive covenants in the lease agreements. Lease rental expenses debited to Statement of Profit and Loss is Rs.38.96 crores (31-3-2017 : Rs.34.57 crores)
Operating Lease : Company as a Lessor
The Company has entered into operating lease agreements. An amount of Rs.37.55 crores (31-3-2017: Rs.39.09 crores) is recognised as lease income in the statement of profit & loss account for the year ended 31st March, 2018. All lease are cancellable, thus there are no future minimum rentals receivable under non-cancellable operating leases.
6. Capital Management
The capital structure of the Company consists of net debt and total equity of the Company. The Company manages its capital to ensure that the Company will be able to continue as going concern while maximising the return to stakeholders through an optimum mix of debt and equity within the overall capital structure. The Companyâs Risk Management Committee reviews the capital structure of the Company considering the cost of capital and the risks associated with each class of capital.
7. Events occurring after Balance Sheet:
(i) The Directors have recommended final dividend of Rs.132.35 crores at Rs.4 per share on equity shares which is subject to the approval of shareholders at the ensuing Annual General Meeting. This dividend and tax thereon has not been recognised as a liability.
(ii) Further, an amount of Rs.20.00 crores is proposed to be transferred to General Reserve which is approved in the Board Meeting held subsequent to the year end and thus has not been recognised as transferred during the year.
8. Previous yearâs figures have been regrouped / reclassified wherever necessary to correspond with the current yearâs classification/ disclosure.
Mar 31, 2017
(a) Fair value of equity investments through Other Comprehensive Income (OCI)
Under previous GAAP, current investments were measured at lower of cost or fair value and long-term investments (quoted and unquoted) were measured at cost less diminution in the value which is other than temporary. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of investments in mutual funds were recognized in Statement of Profit and Loss and that of investments in equity (which is strategic in nature as not held for trading) were recognized in equity. Consequently, the gain on sale of such investments previously recognized in Statement of Profit and Loss is now recognized in OCI and such realized gain is transferred to retained earnings.
(b) Allowance for bad and doubtful debts based on Expected Credit Loss (ECL)
Under previous GAAP, the allowance for bad and doubtful debts were accounted based on incurred loss model. Whereas, under Ind AS, this provision is created based on Expected Credit Loss Model (ECL). Consequently, Rs. 3,678.52 lakhs as at 1st April, 2015 has been recognized as additional allowance with a charge to transition reserves. Also, Rs.460.52 lakhs during the year ended 31st March, 2016 has been recognized as a reversal of allowance.
(c) Remeasurement of defined benefit plans
Under Ind AS, remeasurements of defined benefit plans i.e. actuarial gains and losses and the return on plan assets excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of the Statement of Profit and Loss. Under the previous GAAP, these remeasurements were accounted in the Statement of Profit and Loss for the year. As a result of this change, the profit before tax for the year ended 31st March, 2016 increased by '' 255.32 lakhs. There is no impact on the total equity as 31st March. 2016.
(d) Investment in preference shares of a subsidiary
Under previous GAAP, 0.01% cumulative redeemable preference shares subscribed were classified as part of investment in preference shares. However, under Ind AS, preference shares are discounted and the difference between face value and discounted value is classified as an investment in subsidiary as in substance it is a debt instrument. The resultant interest income is recognized in the Statement of Profit and Loss. The effect of this change is increase in total equity of Rs.390 lakhs as at 31st March, 2016 ('' Nil as at 1st April, 2015), and increase in profit before tax as well as net profit of Rs.389.55 lakhs for the year ended 31st March, 2016.
(e) Income on financial guarantees provided
Under Ind AS financial guarantee income is recognized in Statement of Profit and Loss based on fair value measurement. Accordingly, Rs.48 lakhs as at 31st March, 2016 (Nil as at 1st April, 2015) has been increased in the cost of investments. The effect of this change is an increase in total equity of Rs.48 lakhs as at 31st March, 2016 (Nil as at 1st April, 2015), increase in profit before tax and net profit of Rs.48 lakhs for the year ended 31st March, 2016.
(f) Tax adjustments
Tax adjustments include deferred tax impact on account of differences between previous GAAP and Ind AS. These adjustments have resulted in decrease in net profit by Rs.328 lakhs for the year ended 31st March, 2016.
(g) Reversal of Proposed Dividend and transfer to General Reserve
Under the previous GAAP, transfer to General Reserves and dividends proposed by the Board of Directors after the Balance Sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the General Meeting. This has resulted in an increase in other equity by Rs.10,354.37 lakhs as at 31st March, 2016 (Rs. 8,960.52 lakhs as at 1st April, 2015).
(h) Reclassification in cash flow statement
- Cash flow from rental income of investment properties have been reclassified from operating activities to investing activities in line with requirements of Ind AS.
- Cash in hand balance as at 31st March, 2016 under the previous GAAP included closing balance of imprest advance with the employees, which have been treated as other current assets under Ind AS.
1A. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company''s accounting policies, which are described in Note 2, Management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The 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 if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year:
Construction contracts
Cost to complete
The Company''s Management estimates the costs to complete for each project for the purpose of revenue recognition and recognition of anticipated losses on projects, if any. In the process of calculating the cost to complete, Management conducts regular and systematic reviews of actual results and future projections with comparison against budget. This process requires monitoring controls including financial and operational controls and identifying major risks facing the Company and developing and implementing initiatives to manage those risks. The Company''s Management is confident that the costs to complete the project are fairly estimated.
Percentage of completion
Management''s estimate of the percentage of completion on each project for the purpose of revenue recognition is through conducting some weight analysis to assess the actual quantity of the work for each activity performed during the reporting period and estimate any future costs for comparison against the initial project budget. This process requires monitoring of financial and operational controls. Management is of the opinion that the percentage of completion of the projects is fairly estimated.
As required by Ind AS 11 in applying the percentage of completion on its long-term projects, the Company is required to recognize any anticipated losses on it contracts. In light of the above, Management is of the opinion that based on the current facts, future losses on contract has been adequately provided for.
Contract variations and claims
Contract variations and claims are recognized as revenue to the extent that it is probable that they will result in revenue which can be reliably measured and it is probable that the economic benefits associated with flow to the Company. This requires exercise of judgement by Management based on prior experience, application of contract terms, manner and terms of settlement and relationship with the customers, etc.
Impairment of financial assets
The Company''s Management reviews periodically items classified as receivables to assess whether a provision for impairment should be recorded in the Statement of Profit or Loss. Management estimates the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgement and uncertainty.
The Company reviews its carrying value of investments 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.
Some of the Company''s assets are measured at fair value for financial reporting purposes. The Management determines the appropriate valuation techniques and inputs for fair value measurements. In estimating the fair value of an asset, the Company uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engages third party qualified valuers to perform the valuation. The Management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model.
Information about valuation techniques and inputs used in determining the fair value of various assets is disclosed in Note 42. Valuation of deferred tax assets
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. The Policy for the same has been explained in Note 2(m).
Litigations
From time to time, the Company is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each Balance Sheet date and revisions made for the changes in facts and circumstances.
Defined benefit plans
The cost of the defined benefit plans and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. All assumptions are reviewed at each Balance Sheet date.
Useful lives of property, plant and equipment and intangible assets
The Company has estimated useful life of each class of assets based on the nature of assets, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, etc. The Company reviews the useful life of property, plant and equipment and intangible assets as at the end of each reporting period. This reassessment may result in change in depreciation and amortisation expense in future periods.
Warranty provisions (trade gurantees)
The Company gives warranties for its products, undertaking to repair or replace the product that fail to perform satisfactory during the warranty period. Provision made at the year-end represents the amount of expected cost of meeting such obligations of rectification / replacement which is based on the historical warranty claim information as well as recent trends that might suggest that past cost information may differ from future claims. The assumptions made in current year are consistent with those in prior year. Factors that could impact the estimated claim information include the success of the Company''s productivity and quality initiatives.
1B. RECENT ACCOUNTING PRONOUNCEMENTS
Standards issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ''Statement of cash flows'' and Ind AS 102, ''Share-based payment.'' These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ''Statement of Cash Flows'' and IFRS 2, ''Share-based payment,'' respectively. The amendments are applicable from 1st April, 2017.
Amendment to Ind AS 7
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated. Amendment to Ind AS 102
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the ''fair values'', but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that includes a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.
The requirements of the amendment have no impact on the financial statements as the standard is not applicable to the Company.
2 (a) Under a loan agreement for Rs.60 lakhs (fully drawn and outstanding) entered into between Agro Foods Punjab Ltd. (AFPL) and the Punjab State Industrial Development Corporation Ltd. (PSIDC), the Company has given an undertaking to PSIDC that it will not dispose off its shares in AFPL till the monies under the said loan agreement between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During 1998-99, the Company had transferred its beneficial rights in the shares of AFPL.
2 (b) For these unquoted investments categorized under Level 3, their respective cost has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
2 (c) In respect of the Company''s investment in 2,640 equity shares of Reliance Industries Ltd., there is an Injunction Order passed by the Court in Kanpur restraining the transfer of these shares. The share certificates are, however, in the possession of the Company. Pending disposal of the case, dividend on these shares has not been recognized.
2 (d) Redeemable preference shares were issued to Rohini Industrial Electricals Limited (RIEL) in 2016-17 Rs. 6,500 lakhs, in 2012-13 Rs.3,700 lakhs and in 2011-12 Rs.2,500 lakhs for a period of 7 years, respectively and are cumulative with dividend of 0.01%. This investment is accounted at amortized cost and the difference between the investment value and the amortised cost is treated as additional capital contribution and included in value of equity investment in Rohini.
2 (e) During 2016-17, the Company has participated in buy-back offer from Lakshmi Machine Works Ltd and sold 20328 shares for a total consideration of Rs. 902.33 lakhs. The Company has received dividend of Rs. 8.13 lakhs (2015-16 : Rs.8.13 lakhs) on the shares sold during the year. During 2015-16, the Company has sold its shareholding in Rujuvalika Investments Limited and Industrial Estates Private Limited for consideration aggregating Rs.1,204.16 lakhs.
3(a) Equity Shares: The Company has one class of equity shares having a par value of Re.1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding and are subject to preferential rights of the Preference shares (if issued).
Footnotes : Nature and purpose of reserves
Capital Reserve:
Capital Reserve was created from capital surplus on sale of assets and on amalgamation of subsidiary.
Capital Redemption Reserves:
Capital Redemption Reserve is created out of profit available for distribution towards redemption of Preference shares. This reserve can be used for the purpose of issue of Bonus shares.
Securities Premium:
Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares.
General Reserve:
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit or loss.
Retained Earnings:
The balance in the Retained Earnings primarily represents the surplus after payment of dividend (including tax on dividend) and transfer to reserves.
(d) Except for matters included in the estimate above, the Company is unable to reasonably estimate a range of possible loss for certain proceedings or disputes, including where:
(i) plaintiffs / parties have not claimed an amount of money damages, unless Management can otherwise determine an appropriate amount;
(ii) the proceedings are in early stages;
(iii) there is uncertainty as to the outcome of pending appeals, matters under arbitration or negotiations;
(iv) there are significant factual issues to be resolved; and / or there are legal issues presented
Based on currently available information, the outcomes of the above matters will not have a materially adverse effect on the Company''s financial statements, though the outcomes could be material to the Company''s operating results for any particular period, depending, in part, upon the operating results for such period. Accordingly, an estimate of the timings of cash flows, if any, in respect of the above is not available.
4. Employee Benefit Plans
(a) In accordance with Indian Law or based on Gratuity Scheme, the Company provides for the lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 to 30 days salary payable for each completed year of service. Vesting occurs upon completion of five continuous years of service. Certain overseas branch of the Company also provide for retirement benefit plan in accordance with the local laws.
(b) The most recent acturial valuation of plan assets and the present values of the defined benefit obligations were carried out as at 31st March, 2017. The present value of the defined benefit obligation and the related current service costs and past service cost, are measured using the projected unit credit method.
(c) These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
B. Financial value measurements:
This note provides information about how the Group determines fair values of various financial assets and financial liabilities. that are measured at fair value on a recurring basis.
Some of the Company''s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique (s) and inputs used).
Footnotes:
(1) These investments in equity investments are not held for trading, Instead, they are held for medium or long-term strategic purpose. Upon the application of Ind AS 109, the Company has chosen to designate these investments in equity instruments as at FVTOCI as the Directors believe that this provides a more meaningful presentation for medium or long-term strategic investments, than reflecting changes in fair value immediately in profit or loss.
(2) There were no transfers between Level 1 and 2 during the period.
(3) The carrying amount of financial assets and financial liabilities measured at amortized cost in the financial statements are a reasonable approximation of their fair value since the Company does not anticipate that the carrying amount would be significantly different from the value of that would eventually be received or settled.
5. Finance Risk Management Objectives
The Company''s financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company''s financial assets comprise mainly of investments, cash and cash equivalents, other balances with banks, loans, trade receivables and other receivables. The Company is exposed to Credit risk, Liquidity risk and Market risk. The Board of Directors (''Board'') oversee the Management of these financial risks through its Risk Management Committee. The Risk Management Policy of the Company formulated by the Risk Management Committee and approved by the Board, states the Company''s approach to address uncertainties in its endeavour to achieve its stated and implicit objectives. It prescribes the roles and responsibilities of the Company''s Management, the structure for managing risks and the framework for Risk Management. The framework seeks to identify, assess and mitigate financial risks in order to minimize potential adverse effects on the Company''s financial performance. The following disclosures summarize the Company''s exposure to financial risks and information regarding use of derivatives employed to manage exposures to such risks. Quantitative sensitivity analysis have been provided to reflect the impact of reasonably possible changes in market rates on the financial results, cash flows and financial position of the Company.
(i) Credit risk management:
Credit risk refers to the risk of a financial loss arising from a counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default, the risk of deterioration of creditworthiness as well as concentration of risks.
The major exposure to credit risk at the reporting date is primarily from trade receivables. Trade receivables (typically unsecured) consists of a large number of customers, spread across diverse industries and geographical areas. Credit risk is controlled by analysing credit limits and creditworthiness on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. For trade receivables, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates.
The concentration of credit risk is limited due to the fact that the customer base is large. There is no customer representing more than 5% of the total balance of trade receivables. More than 75% of the trade receivables are concentrated in India. The credit risk on liquid funds, bank balances, deposits with banks and derivative financial instruments is limited because the counterparties are banks and fund houses with high credit-ratings assigned by credit-rating agencies.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks. For details refer Note 38B - Contingent liabilities.
(ii) Liquidity risk management:
Liquidity risk refers to the risk that the Company cannot meets its financial obligations. The objective of the liquidity risk management is to maintain sufficient liquidity and ensure that the funds are available for use as per the requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.
Maturities of financial liabilities:
The table below analyze the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities:
The amounts disclosed in the table are the contractual undiscounted cash flows. Balance due within 12 months is equal to their carrying balances as the impact of discounting is not significant.
(iii) Market risk:
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks: currency risk, interest rate risk and other price risk. Financial instruments affected by market risk includes borrowings, investments, trade payables, trade receivables, loans and derivative financial instruments.
(a) Foreign currency risk:
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilizing forward foreign exchange contracts.
The carrying amounts of the Company''s foreign currency denominated monetary assets and monetary liabilities including overseas branches at the end of the reporting period are as follows.
The line-items in the Balance Sheet that include the above hedging instruments are "Other financial assets" and "Other financial liabilities".
At 31st March, 2017, the aggregate amount of losses under forward foreign exchange contracts relating to the exposure on these anticipated future transactions is Rs.163.60 lakhs (As at 31-3-2016: Rs.Nil; As at 1-4-2015: Rs.Nil).
The Company has entered into contracts to purchase raw materials from overseas suppliers. The Company mainly enters into forward foreign exchange contracts (for terms not exceeding 6 months) to hedge the exchange rate risk arising from these purchases.
Foreign currency sensitivity analysis:
The Company is mainly exposed to the currency of USD, GBP and EUR.
The following table details the Company''s sensitivity to a 5% increase and decrease in the INR against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to Key Management Personnel and represents Management''s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only material outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 5% change in foreign currency rates.
(b) Interest rate risk:
Interest rate risk is the risk that changes in interest rates will affect the Company''s income or value of its holdings of financial instruments. The Company''s exposure to interest rate risk relates to its bank loan and bank balances. Management believes that risk related to variation in interest rate on the bank loan and bank balances is very minimal.
(c) Other price risk:
The Company is exposed to other price risks arising from quoted equity investments. Some of the Company''s equity investments are held for strategic rather than trading purposes.
Exposure:
The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the Balance Sheet as fair value through OCI. (Refer Note 7)
Sensitivity:
The table below summarizes the impact of increases/decreases of the index on the Company''s equity and OCI for the year. The analysis is based on the assumption that the equity index had increased by 5% or decreased by 5% with all other variables held constant, and that all the Company''s equity instruments moved in line with the index.
There is no market price readily available for unquoted investments. The fair values of these investments are determined based on the valuations obtained from independent valuer and such fair values are dependent on various factors which affect such fair values.
6. Capital Management
The Company''s objective for capital management is to maximize shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met mainly through equity and operating cash flows generated. The Company is not subject to any externally imposed capital requirements.
7. Events occurring after Balance Sheet:
i) The Directors have recommended final dividend of Rs.11,580.97 lakhs at Rs.3.50/- per share on equity shares which is subject to the approval of shareholders in the ensuing Annual General Meeting. This dividend and the tax thereon has not been recognized as a liability.
ii) Further, the amount of Rs.5,000 lakhs is proposed to be transferred to General Reserve which is approved in the Board Meeting subsequent to the year end and thus has not been recognized as transferred during the year.
Mar 31, 2014
1. NATURE OF BUSINESS
Voltas Limited, a premier Air-Conditioning and Engineering company was
established intheyear1954.lt is aTata Group company in the field of air
conditioning, refrigeration, in the business of electro-mechanical
projects as an EPC contractor both in domestic and international
geographies (Middle East and Singapore), and also in the business of
engineering product services for mining, water management and
treatment, construction equipments and textile industry.
2. (a) Estimated amount of contracts remaining to be executed on
capital account and not provided for Rs. 2132.26 Lakhs
(31-3-2013: Rs. 2257.46 Lakhs). [Tangible assets : Rs. 1975.16 Lakhs
(31-3-2013: Rs. 2230.73 Lakhs) and Intangible assets of Rs. 157.10 Lakhs
(31-3-2013: Rs. 26.73 Lakhs)]. Advance paid against such contracts: Rs.
61.95 Lakhs (31-3-2013: Rs. 90.85 Lakhs).
(b) On account of Other Commitments :
(i) Foreign currency exposures (Refer note 30)
(ii) Minimum future lease rental payable (Refer note 31)
3. Contingent liabilities not provided for
(a) Guarantees on behalf of other companies :
Limits Rs. 26989.72 Lakhs (31-3-2013: Rs. 22829.48 Lakhs) against which
amount outstanding was Rs. 16589.98 Lakhs (31-3-2013: Rs. 14995.39 Lakhs).
(b) Claims against the Company not acknowledged as debts :
In respect of various matters aggregating Rs. 21470.41 Lakhs (31-3-2013:
Rs. 23592.38 Lakhs), net of tax Rs. 14172.62 Lakhs (31-3-2013: Rs. 15937.83
Lakhs) against which a provision has been made for contingencies Rs. 1125
Lakhs (31-3-2013: Rs. 1125 Lakhs). In respect of a contingent liability
of Rs. 1889.93 Lakhs (31-3-2013: Rs. 1841.62 Lakhs), the Company has a
right to recover from third party.
(d) Income tax demands :
In respect of matters decided in Company''s favour by appellate
authorities where the department is in further appeal Rs. 1568.42 Lakhs
(31-3-2013: Rs. 1115.73 Lakhs).
In respect of matters decided against the Company and where Company has
appealed amounted to Rs. 1564.04 Lakhs ( 31-3-2013: Rs. 2017.97 Lakhs).
(e) Staf demands under adjudication : Amount indeterminate.
(f) Liquidated damages, except to the extent provided, for delay in
delivery of goods / execution of projects : Amount indeterminate.
4. In respect of guarantees aggregating Rs. 141156.74 Lakhs (31-3-2013:Rs.
137745.05 Lakhs) issued by Banks at the request of the Company in
favour of third parties, the Company has given security by way of
hypothecation of a part of tangible movable assets, trade receivables
and inventories.
5. Derivative Instruments
The Company has entered into the following derivative instruments:
(a) Forward Exchange Contracts (being derivative instruments), which
are not intended for trading or speculative purposes but for hedge
purposes to establish the amount of reporting currency required or
available at the settlement date of certain payables and receivables.
6. Assets under Operating Leases
(a) The Company has taken on operating lease certain assets. The total
lease rent paid on the same amounts to Rs. 4119.33 Lakhs (2012-13: Rs.
4636.82 Lakhs).
(c) The Company has given on operating lease certain assets. The total
lease rent received on the same amounts to Rs. 3197.19 Lakhs (2012-13: Rs.
3332.49 Lakhs) and is included under Other Income.
7. Employee benefits expenses
(a) The Company makes contribution towards provident funds, defined
benefit retirement plans, and towards superannuation fund.These funds
are administered by the trustees appointed by the Company. Under the
schemes, the Company is required to contribute a specified percentage
of salary to the retirement benefit schemes to fund the benefits.
(b) The Company makes annual contributions to Gratuity Funds, which are
funded defined benefit plans for qualifying employees. The schemes
provide for lumpsum payment to vested employees at retirement, death
while in employment, or on termination of employment as per the
Company''s Gratuity Scheme. Vesting occurs upon completion of 5 years of
service.
The Company is also providing post retirement medical benefits to
qualifying employees.
The most recent actuarial valuations of plan assets and the present
values of the defined benefit obligations were carried out as at 31st
March, 2014. The present value of the defined benefit obligation and
the related current service cost and past service cost, are measured
using the projected unit credit method.
The following tables set out the the position of and the amounts
recognised in the Company''s financial statements as at 31 st March,
2014 for Defined Benefit / Contribution Plans :
8. Segmental Reporting
Segment information has been presented in the Consolidated Financial
Statements as permitted by Accounting Standard (AS-17) on Segment
Reporting, notified under the Companies (Accounting Standards) Rules,
2006.
9. Related Party Disclosures
(a) List of Related Parties and Relationships
Party Relation
A. Simto Investment Company Ltd. (upto 31-8-2012) Subsidiary Auto
Aircon (India) Ltd .
Voltas Netherlands B.V.
Lalbuksh Voltas Engineering Services &Trading LLC.
Voice Antilles N.V. (upto 14-9-2012)
Weathermaker Ltd.
Saudi Ensas Company for Engineering Services W.L.L.
Rohini Industrial Electricals Ltd.
Universal Comfort Products Ltd.
Voltas Oman L.L.C.
Agro Foods Punjab Ltd. (Under liquidation)
Westerwork Engineers Ltd. (Under liquidation)
B. Brihat Trading Private Ltd. Associate Voltas Material Handling
Private Ltd. (w.e.f. 1 -5-2011 and upto 2-11-2012)
C. Universal Voltas L.L.C. JointVenture Naba Diganta Water Management
Ltd.
Olayan Voltas Contracting Company Ltd. (w.e.f. 8-2-2012) Universal
Weathermaker Factory L.L.C. Voltas Qatar W.L.L. (w.e.f. 2-4-2012) AVCO
Marine S.a.S. (Under liquidation) Agrotech Industries Ltd. (Under
closure)
D. Tata Sons Ltd. Promoter holding together with its
subsidiary more than 20%
E. Mr. Sanjay Johri - Managing Director Key Management Personnel
10. Previous year''s figures have been regrouped / reclassified wherever
necessary to correspond with the current year''s classification /
disclosure.
Mar 31, 2013
1. NATURE OF BUSINESS
Voltas Limited, a premier Air-Conditioning and Engineering company was
established in the year 1954. It is a Tata Group company in the field
of air conditioning, refrigeration, in the business of
electro-mechanical projects as an EPC contractor both in domestic and
international geographies (Middle East and Singapore), and also in the
business of engineering product services for mining, water management
and treatment, construction equipments and textile industry.
2.(a) In the previous year, due to significant upward revision in
estimated cost of a major project in Qatar, Sidra Medical and Research
Centre, the Company accounted for the estimated costs on the project in
accordance with the requirement of Accounting Standard (AS) 7. During
the current year, the Main Contractor has instructed a revised schedule
of completion, expected to end on 31st March, 2014, including
additional time for Testing and Commissioning. The cost to come for the
extended duration of the project along with the possible enhancement of
revenue from variations have been estimated based on current technical
data. In view of continuing uncertainties in the process of approval of
variations and the complex nature of the project, additional net cost
overruns of Rs. 9555.08 Lakhs have been accounted for, while the
Company continues to pursue its entitlements vigorously.
3. (a) Estimated amount of contracts remaining to be executed on
capital account and not provided for Rs. 2257.46 Lakhs (31-3-2012: Rs.
4748.18 Lakhs) [Tangible assets : Rs. 2230.73 Lakhs (31-3-2012: Rs.
4690.28 Lakhs) and Intangible assets of Rs. 26.73 Lakhs (31-3-2012: Rs.
57.90 Lakhs)]. Advance paid against such contracts: Rs. 90.85 Lakhs
(31-3-2012: Rs. 666.72 Lakhs).
(b) On account of Other Commitments :
(i) Foreign currency exposures (refer note 30)
(ii) Minimum future lease rental payable (refer note 31)
4. Contingent liabilities not provided for
(a) Guarantees on behalf of other companies :
Limits Rs. 22829.48 Lakhs (31-3-2012 : Rs. 22639.29 Lakhs) against
which amount outstanding was Rs. 14995.39 Lakhs (31-3-2012 : Rs.
14621.44 Lakhs).
(b) Claims against the Company not acknowledged as debts :
In respect of various matters aggregating Rs. 23592.38 Lakhs
(31-3-2012: Rs. 26898.56 Lakhs), net of tax Rs. 15937.83 Lakhs
(31-3-2012: Rs. 18171.32 Lakhs) against which a provision has been made
for contingencies Rs. 1125 Lakhs (31-3-2012: Rs. 1125 Lakhs). In
respect of a contingent liability of Rs. Nil (31-3-2012: Rs. 5086.36
Lakhs), the Company has a right to recover the same from a third party.
(c) Contractual matters under arbitration : Amount indeterminate.
(d) Income tax demands :
In respect of matters decided in Company''s favour by appellate
authorities where the department is in further appeal Rs. 1115.73 Lakhs
(31-3-2012: Rs. 1350.36 Lakhs).
In respect of matters decided against the Company and where Company has
appealed amounted to Rs. 2017.97 Lakhs (31-3-2012: Rs. 517.51 Lakhs)
and in respect of others Rs. Nil (31-3-2012: Rs. 941.03 Lakhs).
(e) Staff demands under adjudication : Amount indeterminate.
(f) Liquidated damages, except to the extent provided, for delay in
delivery of goods : Amount indeterminate.
5. In respect of guarantees aggregating Rs. 137745.05 Lakhs
(31-3-2012: Rs. 147616.29 Lakhs) issued by Banks at the request of the
Company in favour of third parties, the Company has given security by
way of hypothecation of a part of tangible movable assets, trade
receivables and inventories.
6. Derivative Instruments
The Company has entered into the following derivative instruments :
(a) Forward Exchange Contracts (being derivative instruments), which
are not intended for trading or speculative purposes but for hedge
purposes to establish the amount of reporting currency required or
available at the settlement date of certain payables and receivables.
The following are the outstanding Forward Exchange Contracts entered
into by the Company :
7. Assets under Operating Leases
(a) The Company has taken on operating lease certain assets. The total
lease rent paid on the same amounts to Rs. 4636.82 Lakhs (2011-12: Rs.
5226.26 Lakhs).
(i) The minimum future lease rentals payable in respect of
non-cancellable leases are as under:
(b) The Company has given on operating lease certain assets. The total
lease rent received on the same amounts to Rs. 3332.49 Lakhs (2011-12:
Rs. 3595.29 Lakhs) is included under Other Income.
(i) The minimum future lease rentals receivable in respect of
non-cancellable leases are as under:
(ii) The Original Cost, Depreciation for the year and Written Down
Value are Rs. 2940.22 Lakhs, Rs. 24.82 Lakhs and Rs. 2425.07 Lakhs
(2011-12: Rs. 1415.66 Lakhs, Rs. 27.76 Lakhs and Rs. 938.69 Lakhs),
respectively.
8. Remittance in foreign currencies for dividends
The Company has not remitted any amount in foreign currencies on
account of dividends during the year and does not have information as
to the extent to which remittances, if any, in foreign currencies on
account of dividends have been made by / on behalf of non-resident
shareholders. The particulars of dividends paid to non-resident
shareholders which were declared during the year, are as under :
9. Employee benefits expenses
(a) The Company makes contribution towards provident funds, defined
benefit retirement plans, and towards superannuation fund. These funds
are administered by the trustees appointed by the Company. Under the
schemes, the Company is required to contribute a specified percentage
of salary to the retirement benefit schemes to fund the benefits.
(b) The Company makes annual contributions to Gratuity Funds, which are
funded defined benefit plans for qualifying employees. The schemes
provide for lumpsum payment to vested employees at retirement, death
while in employment, or on termination of employment as per the
Company''s Gratuity Scheme. Vesting occurs upon completion of 5 years of
service.
The Company is also providing post retirement medical benefits to
qualifying employees.
The most recent actuarial valuations of plan assets and the present
values of the defined benefit obligations were carried out as at 31st
March, 2013. The present value of the defined benefit obligation and
the related current service cost and past service cost, are measured
using the projected unit credit method.
The following tables set out the funded status and the amounts
recognised in the Company''s financial statements as at 31st March, 2013
for the Defined Benefit Plans :
10. Segmental Reporting
Segment information has been presented in the Consolidated Financial
Statements as permitted by Accounting Standards (AS-17) on Segment
Reporting as notified under the Companies (Accounting Standards) Rules,
2006.
11. Previous year''s figures have been regrouped / reclassified
wherever necessary to correspond with the current yearss
classification/disclosure.
Mar 31, 2012
1. (a) Equity Shares: The Company has one class of equity shares
having a par value of Rs. 1 per share. Each shareholder is eligible for
one vote per share held. The dividend proposed by the Board of
Directors is subject to the approval of the shareholders in the ensuing
Annual General Meeting, except in case of interim dividend. In the
event of liquidation, the equity shareholders are eligible to receive
the remaining assets of the Company after distribution of all
preferential amounts, in proportion to their shareholding and are
subject to preferential rights of the Preference shares (if issued).
2. Investments (contd.)
Footnotes :
2 (a) Under a loan agreement for Rs. 60 Lakhs (fully drawn and
outstanding) entered into between Agro Foods Punjab Ltd. (AFPL) and the
Punjab State Industrial Development Corporation Ltd. (PSIDC), the
Company has given an undertaking to PSIDC that it will not dispose off
its shares in AFPL till the monies under the said loan agreement
between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During
1998-99, the Company had transferred its beneficial rights in the
shares of AFPL.
2 (b) In respect of the Company's investment in 2,640 equity shares of
Reliance Industries Ltd., there is an Injunction Order passed by the
Court in Kanpur restraining the transfer of these shares. The share
certificates are, however, in the possession of the Company. Pending
disposal of the case, dividend on these shares has not been recognised.
abortive engineering/rework. An extensive Techno Commercial review was
carried out to assess the costs incurred/ to be incurred till
completion of the project, and as per the requirements of Accounting
Standard (AS) 7, the Company has accounted for the estimated costs on
this project. However, uncertainties exist on variations to be claimed
and costs to come till the completion of the project due to the complex
nature of the 'design and build' project, changes in the designs still
being made by the Client and delay in the completion of an evolving
world-class hospital facility.
3. (a) Estimated amount of contracts remaining to be executed on
capital account and not provided for: Rs. 4748.18 Lakhs.
(31-3-2011: Rs. 3511.10 Lakhs). Advance paid against such contracts: Rs.
666.72 Lakhs (31-3-2011: Rs. 233.99 Lakhs).
(b) On account of Other Commitments : (i) Foreign currency exposures
(refer note 30)
(ii) Minimum future lease rental payable (refer note 31)
4. Contingent liabilities not provided for
(a) Guarantees on behalf of other companies :
Limits Rs. 22639.29 Lakhs (31-3-2011: Rs. 22024.65 Lakhs) against which
amount outstanding was Rs. 14621.44 Lakhs (31-3-2011 : Rs. 10435.87 Lakhs).
(b) Claims against the Company not acknowledged as debts :
In respect of various matters aggregating Rs. 26898.56 Lakhs (31-3-2011 :
Rs. 25691.90 Lakhs), net of tax Rs. 18171.32 Lakhs (31-3-2011 : Rs. 17157.05
Lakhs) against which a provision has been made for contingencies Rs. 1125
Lakhs (31-3-2011 : Rs. 1125 Lakhs). In respect of a contingent liability
of Rs. 5086.36 Lakhs (31-3-2011 : Rs. 4928.10 Lakhs), the Company has a
right to recover the same from a third party.
2010-11
Rs. in Lakhs Rs. in Lakhs
Taxes, Cess and Duties (other
than income tax) 18396.58 17260.62
Contractual matters in the course of
business 4347.31 4615.31
Real Estate Disputes and Demands 3519.76 3519.76
Ex-employees matters 248.63 248.63
Others 386.28 47.58
26898.56 25691.90
(c) Contractual matters under arbitration : Amount indeterminate.
(d) Income tax demands :
In respect of matters decided in Company's favour by appellate
authorities where the department is in further appeal Rs. 1350.36 Lakhs
(31-3-2011 : Rs. 1055.04 Lakhs).
In respect of matters decided against the Company and where Company has
appealed amounted to Rs. 517.51 Lakhs (31-3-2011 : Rs. Nil) and in respect
of others Rs. 941.03 Lakhs (31-3-2011 : Rs. Nil).
(e) Staff demands under adjudication : Amount indeterminate.
(f) Liquidated damages, except to the extent provided, for delay in
delivery of goods : Amount indeterminate.
5. In respect of guarantees aggregating Rs. 147616.29 Lakhs (31-3-2011
: Rs.140683.39 Lakhs) issued by Banks at the request of the Company in
favour of third parties, the Company has given security by way of
hypothecation of a part of tangible movable assets, book debts and
stocks.
6. Derivative Instruments
The Company has entered into the following derivative instruments :
(a) Forward Exchange Contracts (being derivative instruments), which
are not intended for trading or speculative purposes but for hedge
purposes to establish the amount of reporting currency required or
available at the settlement date of certain payables and receivables.
7. Remittance in foreign currencies for dividends
The Company has not remitted any amount in foreign currencies on
account of dividends during the year and does not have information as
to the extent to which remittances, if any, in foreign currencies on
account of dividends have been made by / on behalf of non-resident
shareholders. The particulars of dividends paid to non-resident
shareholders which were declared during the year, are as under :
8. Employee benefits expenses
(a) The Company makes contribution towards provident funds, defined
benefit retirement plans, and towards superannuation fund. These funds
are administered by the trustees appointed by the Company. Under the
schemes, the Company is required to contribute a specified percentage
of salary to the retirement benefit schemes to fund the benefits.
(b) The Company makes annual contributions to Gratuity Funds, which are
funded defined benefit plans for qualifying employees. The schemes
provide for lumpsum payment to vested employees at retirement, death
while in employment, or on termination of employment as per the
Company's Gratuity Scheme. Vesting occurs upon completion of 5 years of
service.
The Company is also providing post retirement medical benefits to
qualifying employees.
The most recent actuarial valuations of plan assets and the present
values of the defined benefit obligations were carried out as at 31st
March, 2012. The present value of the defined benefit obligation and
the related current service cost and past service cost, are measured
using the projected unit credit method.
The following tables set out the funded status and the amounts
recognised in the Company's financial statements as at 31st March, 2012
for the Defined Benefit Plans :
9. Segmental Reporting
Segment information has been presented in the Consolidated Financial
Statements as permitted by Accounting Standards (AS-17) on Segment
Reporting as notified under the Companies (Accounting Standards) Rules,
2006.
Mar 31, 2011
1. SHARE CAPITAL
Equity Share Capital includes :
(a) 9,76,61,300 shares of Rs 1 each allotted as fully paid bonus shares
by capitalising Rs 80.82 Lakhs out of the Securities Premium Account, Rs
100 Lakhs from Capital Reserve and Rs 795.79 Lakhs out of General
Reserve.
(b) 1,77,29,040 shares of Rs 1 each allotted to the erstwhile
shareholders of Tata-Merlin & Gerin Ltd. (TMG), The National Electrical
Industries Ltd. (NEI), Volrho Ltd., Wandleside National Conductors Ltd.
(WNC) and Hyderabad Allwyn Ltd. (HAL) consequent upon the amalgamation
of these companies with the Company.
(c) 11,97,84,000 shares of Rs 1 each allotted to the holders of
Convertible Part RsA' of Rs 60 of the 14% Secured Redeemable Partly
Convertible Debentures 1992-99 on compulsory conversion thereof into
equity shares.
2. INVESTMENTS
(a) Under a loan agreement for Rs 60 Lakhs (fully drawn and outstanding)
entered into between Agro Foods Punjab Limited (AFPL) and the Punjab
State Industrial Development Corporation Limited (PSIDC), the Company
has given an undertaking to PSIDC that it will not dispose of its
shares in AFPL till the monies under the said loan agreement between
PSIDC and AFPL remain due and payable by AFPL to PSIDC. During 1998-99,
the Company had transferred its benefcial rights in the shares of AFPL.
(b) In respect of the Company's investment in 2,640 equity shares of
Reliance Industries Limited, there is an Injunction Order passed by the
Court in Kanpur restraining the transfer of these shares. The share
certificates are, however, in the possession of the Company. Pending
disposal of the case, dividend on these shares has not been recognised.
Note :
Loans and Advances shown in (a) and (b) above to subsidiaries fall
under the category of "Loans and Advances" in nature of Loans in terms
of Clause 32 of the Listing Agreement. There is no repayment schedule
and no interest is payable.
3. CURRENT LIABILITIES AND PROVISIONS
(a) According to information available with the Management, on the
basis of the intimations received from suppliers regarding their status
under the Micro, Small and Medium Enterprises Development Act, 2006,
the Company has the following amounts due to Micro and Small
Enterprises under the said Act.
The provision for Trade Guarantee is expected to be utilised for
warranty expenses / settlement of claims within a period of 1 to 10
years depending on the contractual obligation.
Note : Figures in brackets are of the previous year.
4. SALES AND SERVICES
With regard to long term Construction Contracts undertaken, the amount
of net revenue recognised is Rs 239094.45 Lakhs (2009-10 : Rs 243858.40
Lakhs).
5. COST OF SALES, SERVICES AND EXPENSES
(i) (a) The Company makes contribution towards provident funds, defned
benefit retirement plans, and towards superannuation fund, a defned
contribution retirement plan for qualifying employees. These funds are
administered by the trustees appointed by the Company. Under the
schemes, the Company is required to contribute a specifiedpercentage of
salary to the retirement benefit schemes to fund the benefits.
(b) The Company makes annual contributions to Gratuity Funds, which are
funded defned benefit plans for qualifying employees. The schemes
provide for lumpsum payment to vested employees at retirement, death
while in employment or on termination of employment as per the
Company's Gratuity Scheme. Vesting occurs upon completion of 5 years of
service.
The Company is also providing post retirement medical benefits to
qualifying employees.
The most recent actuarial valuations of plan assets and the present
values of the defned benefit obligations were carried out as at 31st
March, 2011. The present value of the defned benefit obligation and the
related current service cost and past service cost are measured using
the Projected Unit Credit Method.
The following tables set out the funded status and the amounts
recognised in the Company's financial statements as at 31st March, 2011
for the Defned benefit Plans other than Provident Fund. According to the
Management, the Actuary has opined that actuarial valuation cannot be
applied to reliably measure provident fund liabilities in the absences
of guidance from the Actuarial Society of India. Accordingly, the
Company is currently not in a position to provide other related
disclosures as required by AS 15 read with the Accounting Standards
Board Guidance. However, having regard to the position of the Fund, the
shortfall, if any, between the earnings guaranteed by the statute and
the actual earnings of the Fund is provided for by the Company and
contributed to the Fund.
(a) The Actuarial calculations used to estimate defned benefit
commitments and expenses are based on the above assumptions which if
changed would afect the defned benefit commitment's size, the funding
requirement and expenses.
(c) The details of the Company's Defned benefit Plans for its employees
given above arecertifiedby the actuary and relied upon by the
auditors.
(d) Expected contribution of Rs 589.25 Lakhs (2009-10: Rs 784.65 Lakhs)
to Defned benefits (other than Provident Fund) for the next year.
(e) The Company has recognised the following amounts in the profit and
Loss Account under the head Company's Contribution to Provident Fund
and Other Funds :
6. Derivative Instruments :
The Company has entered into the following derivative instruments :
(a) Forward Exchange Contracts (being a derivative instrument), which
are not intended for trading or speculative purposes but for hedge
purposes to establish the amount of reporting currency required or
available at the settlement date of certain payables and receivables.
7. Estimated amount of contracts remaining to be executed on capital
account and not provided for : Rs 3511.10 Lakhs (31-3-2010 : Rs 1208.10
Lakhs). Advance paid against such contracts : Rs 233.99 Lakhs (31-3-2010
: Rs 642.02 Lakhs).
8. Contingent liabilities not provided for :
(a) Guarantees on behalf of other companies :
Limits Rs 22024.65 Lakhs (31-3-2010: Rs 7599.18 Lakhs) against which
amount outstanding was Rs 10435.87 Lakhs (31-3-2010: Rs 5648.60 Lakhs)
against which a provision has been made for contingencies Rs Nil
(31-3-2010: Rs Nil ).
(b) Claims against the Company not acknowledged as debts :
In respect of various matters aggregating Rs 25691.90 Lakhs (31-3-2010:
Rs 25139.01 Lakhs), net of tax Rs 17157.05 Lakhs (31-3-2010: Rs 16594.26
Lakhs) against which a provision has been made for contingencies Rs 1125
Lakhs (31-3-2010: Rs 1125 Lakhs). In respect of a contingent liability
of Rs 4928.10 Lakhs (31-3-2010: Rs 4513.74 Lakhs), the Company has a
right to recover the same from a third party.
(c) Income tax demands :
In respect of matters decided in Company's favour by Appellate
Authorities where the Department is in further appeal - Rs 1055.04 Lakhs
(31-3-2010 : Rs 1295.63 Lakhs).
(d) Staf demands under adjudication : Amount indeterminate.
(e) Liquidated damages, except to the extent provided, for delay in
delivery of goods : Amount indeterminate.
9. In respect of guarantees aggregating Rs 140683.39 Lakhs (31-3-2010
: Rs 87905.05 Lakhs) issued by Banks at the request of the Company in
favour of third parties, the Company has given security by way of
hypothecation of a part of tangible movable assets, book debts and
stocks.
10. In respect of certain property transactions, conveyance deed are
pending, as under:
(a) In terms of agreement dated 30th September, 1998, Company's
Refrigerators manufacturing facility at Nandalur was transferred on a
running business / going concern basis to Electrolux Voltas Limited
(EVL) on the close of the business hours on 31st March, 1999. In
respect of land for the Nandalur Plant, Deed of Conveyance is pending
completion.
(b) The Company had accounted in 1999-2000, the profit on transfer of
development rights of Rs 734.12 Lakhs in respect of property at Lalbaug,
Mumbai for which agreement for assignment was executed and clearance
from the Income Tax Department under Section 269 UC of the Income Tax
Act, 1961 was received but for which conveyance formalities are pending
completion.
(c) The Company had accounted in 2003-04, the profit on transfer of
development rights of Rs 1735.95 Lakhs in respect of property at Thane
and Rs 2145.53 Lakhs in respect of property at Pune for which agreements
were executed and consideration received but for which conveyance
formalities are pending completion.
(d) The Company had accounted in 2004-05, the profit on transfer of
development rights of Rs 505.53 Lakhs in respect of property at Thane
for which agreement was executed and consideration received but for
which conveyance formalities are pending completion.
(e) The Company had accounted in 2006-07, the profit on transfer of
development rights in respect of Upvan land and Henkel Switchgear
Limited approach land at Thane for which agreements were executed and
consideration received (Rs 2070 Lakhs and Rs 223.40 Lakhs, respectively)
but for which conveyance formalities are pending completion.
(f) The Company had accounted in 2007-08, the profit on transfer of
development rights in respect of land adjoining Simtools at Thane for
which an Agreement was executed and consideration received (Rs 919.96
Lakhs) but for which conveyance formalities are pending completion.
(g) The Company had accounted in 2009-10, the profit on transfer of
development rights in respect of Nala land at Thane for which an
Agreement was executed and consideration received Rs 238.18 Lakhs but
for which conveyance formalities are pending completion.
11. Remittance in foreign currencies for dividends:
The Company has not remitted any amount in foreign currencies on
account of dividends during the year and does not have information as
to the extent to which remittances, if any, in foreign currencies on
account of dividends have been made by / on behalf of non-resident
shareholders. The particulars of dividends paid to non-resident
shareholders which were declared during the year, are as under :
Notes:
(i) As per the Industrial Policy declared in July 1991 and as amended
in April 1993, no licenses are required for the products manufactured
by the Company.
(ii) Installed capacities are ascertifiedby the Management and relied
upon by the Auditors. These are alternative and not cumulative and as
such production is not strictly comparable with the same.
(iii) Production includes for captive consumption.
* As the accounting year of these companies ends on 31st December,
2010, the fgures are as of that date.
Notes : (i) Lalbuksh Voltas Engineering Services & Trading L.L.C.
ceased to be a joint venture company on acquisition of additional 11%
shareholding on 31-3-2011. (ii) Figures in the brackets are of the
previous year.
12. Segmental Reporting:
Segment information has been presented in the Consolidated Financial
Statements as permitted by Accounting Standards (AS-17) on Segment
Reporting as notifed under the Companies (Accounting Standards) Rules,
2006.
13. Discontinuing Operations
The Board of Directors of the Company has, at its Meeting held on 19th
March, 2011, approved the proposal for formation of a joint venture
with KION Group, Germany for the Materials Handling (MH) business,
which forms part of the Engineering Products and Services segment of
the Company. The transfer of MH business is subject to
fulfllment/satisfaction of certain conditions precedent to closing of
the transaction. Subsequent to close of the financial year, the Company
has on 1st May, 2011, upon satisfaction/deferral of the precedent
conditions, which were agreed to by the concerned partners, transferred
the MH business to an afliate of KION group.
On the efective date of the Scheme of Arrangement, all identifed
tangible assets, including current assets, liabilities, movable assets
(excluding immovable assets), intangible assets, business contracts,
certain employees, etc. of the MH business would be transferred to JVC.
14. Figures for the previous year have been regrouped, wherever
necessary.
Mar 31, 2010
1. SHARE CAPITAL
Equity Share Capital includes :
(a) 9,76,61,300 shares of Re.1 each allotted as fully paid bonus shares
by capitalising Rs.80.82 Lakhs out of the Securities Premium Account,
Rs.100 Lakhs from Capital Reserve and Rs.795.79 Lakhs out of General
Reserve.
(b) 1,77,29,040 shares of Re.1 each allotted to the erstwhile
shareholders of Tata-Merlin & Gerin Ltd. (TMG), The National Electrical
Industries Ltd. (NEI), Volrho Ltd., Wandleside National Conductors Ltd.
(WNC) and Hyderabad Allwyn Ltd. (HAL) consequent upon the amalgamation
of these companies with the Company.
(c) 11,97,84,000 shares of Re.1 each allotted to the holders of
Convertible Part `A of Rs.60 of the 14% Secured Redeemable Partly
Convertible Debentures 1992-99 on compulsory conversion thereof into
equity shares.
2. INVESTMENTS
(a) Under a loan agreement for Rs.60 Lakhs (fully drawn and
outstanding) entered into between Agro Foods Punjab Limited (AFPL) and
the Punjab State Industrial Development Corporation Limited (PSIDC),
the Company has given an undertaking to PSIDC that it will not dispose
off its shares in AFPL till the monies under the said loan agreement
between PSIDC and AFPL remain due and payable by AFPL to PSIDC. During
1998-99, the Company had transferred its beneficial rights in the
shares of AFPL.
(b) In respect of the Companys investment in 2640 equity shares of
Reliance Industries Limited, there is an Injunction Order passed by the
Court in Kanpur restraining the transfer of these shares. The share
certificates are, however, in the possession of the Company. Pending
disposal of the case, dividend on these shares has not been recognised.
3. SALES AND SERVICES
With regard to long term Construction Contracts undertaken, the amount
of net revenue recognised is Rs.243858.40 Lakhs (2008-09: Rs.212332.80
Lakhs).
4. COST OF SALES, SERVICES AND EXPENSES
(i) Opening and Closing Stock - In - Trade excludes WIP for Long Term
Contracts Rs.476378.73 Lakhs (1-4-2008 : Rs.268742.82 Lakhs) and Rs
593388.31 Lakhs (31-3-2009 : Rs.476378.73 Lakhs), respectively.
(ii) (a) The Company makes contribution towards provident funds, a
defned beneft retirement plan, and towards superannuation fund, a
defned contribution retirement plan for qualifying employees. These
funds are administered by the trustees appointed by the Company. Under
the schemes, the Company is required to contribute a specifed
percentage of salary to the retirement beneft schemes to fund the
benefts.
(b) The Company makes annual contribution to Gratuity Funds, which are
funded defned beneft plans for qualifying employees. The scheme
provides for lumpsum payment to vested employees at retirement, death
while in employment or on termination of employment as per the
Companys Gratuity Scheme. Vesting occurs upon completion of 5 years
of service. The Company is also providing post retirement medical
benefts to qualifying employees.
The most recent actuarial valuations of plan assets and the present
values of the defned beneft obligations were carried out as at 31st
March, 2010. The present value of the defned beneft obligation and the
related current service cost and past service cost are measured using
the Projected Unit Credit Method.
The following tables set out the funded status and amounts recognised
in the Companys fnancial statements as at 31st March, 2010 for the
Defned Beneft Plans other than Provident Fund. According to the
Management, the Actuary has opined that actuarial valuation cannot be
applied to reliably measure provident fund liabilities in the absence
of guidance from the Actuarial Society of India. Accordingly, the
Company is currently not in a position to provide other related
disclosures as required by AS 15 read with the Accounting Standards
Board Guidance. However, having regard to the position of the Fund, the
shortfall if any, between the guaranteed by the statute and actual
earnings of the Fund is provided for by the Company and contributed to
the Fund.
(a) The Actuarial calculations used to estimate defned beneft
commitments and expenses are based on the above assumptions which if
changed would afect the defned beneft commitments size, the funding
requirement and expenses.
(b) The estimates of future salary increases, considered in the
Actuarial valuation, take account of infation, seniority, promotion and
other relevant factors, such as supply and demand in the employment
market.
(d) The details of the Companys Defned beneft plans for its employees
are given above which is certifed by the actuary and relied upon by the
auditors.
(e) Expected contribution of Rs.784.65 Lakhs (2008-09 : Rs. 782 Lakhs)
to Defned Benefts (other than Provident Fund) for the next year.
(f) The Company has recognised the following amounts in the Proft and
Loss Account under the head Companys Contribution to Provident Fund
and Other Funds :
5. Derivative Instruments :
The Company has entered into the following derivative instruments :
(a) Forward Exchange Contracts (being a derivative instrument), which
are not intended for trading or speculative purposes, but for hedge
purposes, to establish the amount of reporting currency required or
available at the settlement date of certain payables and receivables.
6. Estimated amount of contracts remaining to be executed on capital
account and not provided for : Rs.1208.10 Lakhs (31-3-2009 : Rs.1544.54
Lakhs). Advance paid against such contracts : Rs.642.02 Lakhs
(31-3-2009 : Rs.706.25 Lakhs).
7. Contingent liabilities not provided for :
(a) Guarantees on behalf of other companies :
Limits Rs.7599.18 Lakhs (31-3-2009 : Rs.4692.93 Lakhs) against which
amount outstanding was Rs.5648.60 Lakhs (31-3-2009 : Rs.2076.26 Lakhs)
against which a provision has been made for contingencies Rs. Nil
(31-3-2009 : Rs.583.59 Lakhs).
(b) Claims against the Company not acknowledged as debts :
In respect of various matters aggregating Rs.25139.01 Lakhs (31-3-2009
: Rs.22615.80 Lakhs), net of tax Rs.16594.26 Lakhs (31-3-2009 :
Rs.14928.69 Lakhs) against which a provision has been made for
contingencies Rs.1125 Lakhs (31-3-2009 : Rs.1125 Lakhs). In respect of
a contingent liability of Rs.4502.84 Lakhs (31-3-2009 : Rs.4502.84
Lakhs) the Company has a right to recover the same from a third party.
(c) Income tax demands :
In respect of matters decided in Companys favour by Appellate
Authorities where the Department is in further appeal - Rs.1295.63
Lakhs (31-3-2009 : Rs.350.06 Lakhs).
(d) Staf demands under adjudication : Amount indeterminate.
(e) Liquidated damages, except to the extent provided, for delay in
delivery of goods : Amount indeterminate.
8. In respect of guarantees aggregating Rs. 87905.05 Lakhs (31-3-2009
: Rs. 88991.07 Lakhs) issued by Banks at the request of the Company in
favour of third parties, the Company has given security by way of
hypothecation of a part of tangible movable assets, book debts and
stocks.
9. Amounts paid by the Company to Directors as remuneration for
services rendered in any capacity (See Schedule ÃO for Computation of
Net Proft in accordance with Sections 198 and 309 of the Companies Act,
1956):
10. In respect of certain property transactions, conveyance deed are
pending, as under:
(a) In terms of agreement dated 30th September, 1998, Companys
Refrigerators manufacturing facility at Nandalur was transferred on a
running business / going concern basis to Electrolux Voltas Limited
(EVL) on the close of the business hours on 31st March, 1999. In
respect of land for the Nandalur Plant, Deed of Conveyance is pending
completion.
(b) The Company had accounted in 1999-2000, the proft on transfer of
development rights of Rs.734.12 Lakhs in respect of property at
Lalbaug, Mumbai for which agreement for assignment was executed and
clearance from the Income Tax Department under Section 269 UC of the
Income Tax Act, 1961 was received but for which conveyance formalities
are pending completion.
(c) The Company had accounted in 2003-04, the proft on transfer of
development rights of Rs.1735.95 Lakhs in respect of property at Thane
and Rs.2145.53 Lakhs in respect of property at Pune for which
agreements were executed and consideration received but for which
conveyance formalities are pending completion.
(d) The Company had accounted in 2004-05, the proft on transfer of
development rights of Rs.505.53 Lakhs in respect of property at Thane
for which agreement was executed and consideration received but for
which conveyance formalities are pending completion.
(e) The Company had accounted in 2006-07, the proft on transfer of
development rights in respect of Upvan land and Henkel Switchgear
Limited approach land at Thane for which agreements were executed and
consideration received (Rs. 2070 Lakhs and Rs.223.40 Lakhs,
respectively) but for which conveyance formalities are pending
completion.
(f) The Company had accounted in 2007-08, the proft on transfer of
development rights in respect of land adjoining Simtools at Thane for
which an Agreement was executed and consideration received (Rs.919.96
Lakhs) but for which conveyance formalities are pending completion.
(g) The Company has accounted in 2009-10 the proft on transfer of
development rights in respect of Nala land at Thane for which an
Agreement was executed and consideration received Rs.238.18 Lakhs but
for which conveyance formalities are pending completion.
11. Figures for the previous year have been regrouped, wherever
necessary.
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