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Notes to Accounts of VST Industries Ltd.
Mar 31, 2025
25. CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES
(a) Contingent Liabilities
(i) Claims against the Company not acknowledged as debts '' 906.60 Lakhs (2024 - '' 628.20 Lakhs)
These Comprise -
Excise duty, GST, service tax and customs duty matters '' 402.35 Lakhs (2024 - '' 123.95 Lakhs)
Other matters including employees/ex-employees, etc.'' 504.25 Lakhs (2023 - '' 504.25 Lakhs)
(ii) In addition to the above, the Company is subject to certain other litigations, in the ordinary course of business and the industry in which it operates in, which are pending.
(iii) It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash outflows and estimate of financial effect, if any, in respect of the above as its determinable only on occurrence of uncertain future events/ receipt of judgements pending at various forums.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties.
(b) Commitments
Estimated amount of contracts remaining to be executed on Capital Account, net of advances (not provided for) - '' 1196.99 Lakhs (2024 - '' 1915.18 Lakhs)
(c) Disclosure under Section 186(4) of the Companies Act, 2013
Details of Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013, as applicable are provided in Notes 3 and 9.
The Company has entered into various short-term and low value operating lease agreements and the amounts paid under such agreements have been charged to the statement of profit and loss as Rent under Note 23. All these agreements are cancellable in nature.
The Chief Operating Decision-Maker (CODM) has been identified as Management Committee which evaluates the Company''s performance and allocates resources at an overall level considering the business and industry it operates in. Accordingly, the Company''s business activity primarily falls within a single operating segment viz. Tobacco and related products. Therefore, the disclosures as per Ind AS 108 - Operating Segments'' is not applicable.
No customer individually accounted for more than 10% of the revenues.
Note: Liability for Gratuity, Leave encashment and Group Health Premiums are provided either on actuarial valuation basis by an independent valuer or separately for the Company as a whole. Accordingly, amounts pertaining to key managerial personnel are not included above.
Terms and Conditions of transactions with related parties
All Related Party Transactions entered during the year were in the ordinary course of the business and at arm''s length basis.
Remuneration to directors and key managerial personnel is determined by the Nomination and Remuneration Committee of the Board having regard to individual performance and market trends.
29. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES A CAPITAL MANAGEMNET
The Company''s financial strategy aims to provide adequate capital to its business for growth on a going concern basis thereby creating sustainable stakeholder value. The Company funds its operations mainly through internal accruals.
B CATEGORIES OF FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT AND FAIR VALUE HIERARCHY
The fair value of the financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair value are consistent with those used for the earlier period.
Financial assets and liabilities are measured at fair value as at Balance Sheet date as under:
i) The fair value of investment in government securities and quoted investment in equity shares are based on the current bid price of respective investments as at the Balance Sheet date.
ii) The fair value of investments in mutual fund units is based on the net asset value (''NAV'') as stated by the issuers of these mutual fund units in their published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund as well as the price at which issuers will redeem such units for the investors.
iii) The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs such as foreign exchange spot rates and forward rates as at end of reporting period, interest yield curves, volatility, etc., as applicable.
iv) Cash and cash equivalents (except for investments in units of mutual fund), other bank balances, trade receivables, trade payables and other current financial assets and liabilities (except derivative financial instruments), have fair value that approximates to their carrying amount due to their short-term nature.
Fair value of the financial instruments have been classified into various fair value hierarchies respective three levels as under:
Level 1 - Quoted prices for identical assets or liabilities in an active market.
Level 2 - Directly or indirectly observable market inputs, other than Level 1 inputs; and
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing model based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of the counterparty.
The following table shows the carrying amount and fair value of financial assets and liabilities, including their levels in the fair value hierarchy:
There were no significant changes in the classification and no significant movements between the fair value hierarchy classifications of assets and liabilities during current financial year
C. FINANCIAL RISK MANAGEMENT OBJECTIVES
The Company''s risk management framework anchored in its policies and procedures and internal financial controls aim to ensure that the Company''s business activities that are exposed to a variety of financial risks namely liquidity risk, market risks, credit risk and foreign currency risk are identified at an early stage and managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring any unacceptable losses. In doing this, Management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2025 and 31st March, 2024.
On the reporting date, the Company''s Current assets (excluding Asset held for sale) aggregate to '' 93944.26 Lakhs (2024 - '' 83947.44 Lakhs) including Current investments, Cash and cash equivalents and Other bank balances of '' 34999.19 Lakhs (2024 - '' 28217.26 Lakhs) against an aggregate Non-Current liabilities of '' 2344.59 Lakhs (2024 - '' 2164.24 Lakhs) and Current liabilities of '' 46986.27 Lakhs (2024 - '' 44603.33 Lakhs) and also there are no difference in value as per contracts and its carrying value as at the Balance Sheet date and are due within a year. Further, the Company''s total equity stood at '' 132268.94 Lakhs (2024 - '' 125241.37 Lakhs). Accordingly, liquidity risk or the risk that the Company may not be able to settle its dues as they become due does not exist. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
Market Risk
The Company does not trade in equity instruments; it continues to hold certain investments in equity for longterm value accretion which are measured at fair value through Other Comprehensive Income. The value of investment in such equity instruments as at 31st March, 2025 is '' 384.57 Lakhs (2024 - '' 291.93 Lakhs).
The Company''s investments are predominantly held in fixed deposits and debt schemes of mutual funds. The decision-making is centralised and administered under a set of approved policies and procedures guided by the principles of safety, liquidity and returns. This ensures that investments are only made within acceptable risk parameters after due evaluation.
Fixed deposits are held with highly rated banks and companies and have a short to medium tenure and accordingly, are not subject to interest rate volatility. Investment in debt schemes of mutual funds are susceptible to market price risk that arise mainly from change in interest rate from time to time which may impact the return and value of such investments. However, given the relatively short tenure of the underlying portfolio of such mutual fund schemes in which the Company has invested, such price risk is not significant. Investment in Government Securities are primarily fixed rate interest bearing investments. Hence, the Company is not significantly exposed to interest rate risk.
As the Company is debt-free and its liabilities do not carry interest, the exposure to interest rate risk from the perspective of Financial Liabilities is negligible.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Company''s customer base is large and diverse and credit is extended in business interest in accordance with well laid out guidelines issued centrally. Exceptions, if any, are approved by appropriate authority after due consideration of the customers credentials and financial capacity, trade practices and prevailing business and economic conditions. Our historic experience of collecting receivables is high and accordingly, the credit risk is low. Hence, all trade receivables together are considered to be a single class of financial assets.
The value of Trade Receivables as at 31st March, 2025 is '' 6406.06 Lakhs (2024 - '' 4639.52 Lakhs)
Further, the Company maintains exposure in cash and cash equivalents, term deposits with banks, government securities, debt schemes of mutual funds and derivative instruments with financial institution. The Company has set counter-parties limits based on multiple factors including credentials, financial capacity, credit rating, etc.
The Company''s credit period generally ranges from 0-180 days.
The Company''s maximum exposure to credit risk as at 31st March, 2025 and 31st March, 2024 is the carrying value of each class of financial assets.
Foreign Currency Risk
The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Euro and Pound Sterling) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency, arising out of such transactions, are also subject to reinstatement risk.
The Company has an established risk management policy to hedge the volatility arising from exchange rate fluctuation in respect of firm commitments and highly probable forecast transactions, through foreign exchange forward contracts. The proportion of forecast transactions that are to be hedged is decided based on the size of the forecasted transaction and market conditions. As the counterparty for such transactions are Scheduled banks, the risk of their non-performance is considered to be insignificant.
The use of these foreign exchange forward contracts are intended to reduce the risk or cost to the Company and are not intended for trading or speculation purpose.
The information on such Derivative Instruments is as follows:
Foreign Currency Sensitivity
A 1% strengthening of the INR against key currencies to which the Company is exposed (net of hedges) would have led to the profit before tax for the year ended 31st March, 2025 to be lower by '' 55.26 Lakhs (2024 - '' 31.02 Lakhs) and total equity (pre-tax) as at 31st March, 2025 would change by '' 55.26 Lakhs (2024 - '' 31.02 Lakhs).
A 1% weakening of the INR against these currencies would have led to an equal but opposite effect.
General Risk Assessment
(i) The Company, to the extent possible, has considered the risks that may result from the uncertainties and its impact on the carrying amounts of trade receivables, investments, financial instruments and effectiveness of its hedges. Based on the Company''s analysis of the current indicators of the future economic condition on its business and the estimates used in its financial statements, the Company does not foresee any material impact in the recoverability of the carrying value of the assets. The risk assessment is a continuous process and the Company will continue to monitor the impact of the changes in future economic conditions on its business.
(ii) Code on Social Security 2020 - update
Hedges of foreign currency risk and derivative financial instrument
Foreign exchange forward contracts that are designated as cash flow hedges and qualify for hedge accounting are fair valued at each reporting date and the resultant gain or loss is recognised in "Other Equity" under Other Comprehensive Income: Cash Flow Hedge to the extent considered highly effective and are reclassified into the Statement of Profit and Loss upon occurrence of the hedged transactions. Gain or loss on derivative instruments that are either not designated as cash flow hedges or designated as cash flow hedges to the extent considered ineffective are recognised in the Statement of Profit and Loss.
The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident Fund and Gratuity. The Ministry of Labour and Employment had released draft rules for the Code on Social Security, 2020 on 13th November, 2020. The Company will evaluate the subject rules once they are notified and recognise the consequent impact, if any, in its financial statements in the period in which, the Code and related rules becomes effective.
(iii) Satisfaction of Charges
The Company has no outstanding borrowing amount since year 2005 and accordingly appropriate form for satisfaction of charges was filed on time before Registrar of Companies, Hyderabad and the Company has been continuously pursuing with the authorities to reflect the same on their website.
Employee Retirement Benefit Plans of the Company include Provident fund, Retirement Allowances, Gratuity, Pension and Leave Encashment. These plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines within the applicable statutory framework, for allocation of assets to different classes with the objective of maintaining the right balance between risks and long-term returns. Further, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
Description of Plans
(i) Provident Fund:
Eligible employees of the Company receive benefits under the Provident Fund which are defined contribution/ benefit plans wherein both the Company and the employees make monthly contributions equal to a specified percentage of the covered employees'' salary. These contributions are made to the Funds administered and managed by the Govt. of India/Company''s own Trust. The Company''s own trust plan envisages guarantee of interest at the rate notified by the Provident Fund authority. The Company''s contributions along with interest shortfall, if any, are charged to the statement of profit and loss in the year they are incurred. Expenditure for the year amounted to '' 358.26 Lakhs (2024 - '' 356.74 Lakhs).
(ii) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme for its employees in the workmen category. Liability with regard to such scheme is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and charged to the statement of profit and loss in the period determined - '' 361.22 Lakhs; (2024-'' 386.87 Lakhs). Consequently, Liability recognised in the Balance sheet as at 31st March, 2025''2514.43 Lakhs; (2024-'' 2471.53 Lakhs) including '' 203.03 Lakhs (2024 -'' 318.22 Lakhs) payable within 12 months shown under ''Accrued Payroll''.
(iii) Gratuity
I n accordance with ''the Payment of Gratuity Act, 1972'' of India, the Company provides for gratuity, a defined retirement benefit plan ( the ''Gratuity Plan'') covering eligible employees. Liabilities with regard to such Gratuity Plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to the statement of profit and loss in the period determined. The Gratuity Plan is a funded Plan administered by Company''s own Trust which has subscribed to " Group Gratuity Scheme" of Life Insurance Corporation of India.
(iv) Pension Fund
The Company has a defined contribution pension scheme to provide pension to the eligible employees . The Company makes monthly contributions equal to a specified percentage of the covered employees'' salary to a notified pension scheme under National Pension Scheme of the Government of India. The Company''s contributions are charged to the statement of profit and loss in the period they are incurred -'' 101.82 Lakhs ( 2024 - '' 113.26 Lakhs).
I n addition to the above, the Company has a funded defined benefit pension scheme for its employees in the workmen category. Liability with regard to such defined benefit plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to the statement of profit and loss in the period determined. This plan is administered by the Company''s own Trust which has subscribed to "Group Pension Scheme" of Life Insurance Corporation of India.
(v) Leave Encashment
The Company has a leave encashment scheme whereunder, leaves are both accumulating and non-accumulating in nature. The expected cost of accumulating leaves expected to be paid/availed as a result of the unused entitlement that has accumulated as at the balance sheet date is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to the statement of profit and loss in the period determined . The Scheme is fully funded by way of subscription to the "Leave Encashment'' of Life Insurance Corporation of India. Compensation, if any, for non-accumulating leaves is charged to the statement of profit and loss in the period in which the absences occurs.
The estimates of future salary increases between 6% - 9%, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
G Investment details of the Plan assets
In the absence of detailed information regarding plan assets which are funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount of each category to the fair value of plan assets is not disclosed.
H Basis used to determine the Expected Rate of Return on Plan Assets
The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.
I Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation and the asset value changes may offset the impact to some extent. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
For the year ended 31st March, 2025, the Company has accounted expense of '' 27.71 Lakhs (2024-'' 87.77 Lakhs) as employee benefit expenses (see note 22) on the aforesaid employee stock option plan. The balance in share-based payment reserve account is '' 172.35 Lakhs as of 31st March, 2025 (2024 - '' 330.35 Lakhs).
(b) Information in respect of Options granted under the Company''s Employee Phantom Stock Option Scheme (''Plan'')
The Phantom stock option plan creates an opportunity to link the employee reward to Company''s share price performance. Under this plan, the Company grants phantom stock option to select employees. Cash pay-out equivalent to the appreciation in the value of shares will be made when exercised after vesting period.
The fair value of the Phantom Option scheme was determined using the Black-Scholes model based on the following inputs:
During the current year ended 31st March, 2025, exceptional item comprise an amount '' 10048.81 Lakhs (net of tax '' 8688.29 Lakhs) on account of net gain realised on sale of one of its immovable property being land along with structures situated at Hyderabad, Telangana.
Mar 31, 2024
PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of the time value of money is material, provisions are discounted to reflect their present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or 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 to settle the obligation or a reliable estimate of the amount cannot be made.
REVENUE RECOGNITION
Revenue from sale of goods is recognised when control over goods is transferred to a customer as per the terms of the contract.
This is usually evidenced by a transfer of all the significant risks and rewards of ownership upon delivery of goods to the customer, which in terms of timing is not materially different to the date of shipping. Revenue is measured at the contracted (transaction) price received or receivable (includes Excise Duties and National Calamity Contingent
Duty which are payable on manufacture of goods) after deduction of any trade discount, incentive and other similar discounts and any taxes or duties collected on behalf of the Government which are levied on sales such as Goods and Service tax, etc.
Income from export incentives such as duty drawback is recognised on accrual basis.
Other Income
I nterest income is recognised using the effective interest rate (EIR) method.
Dividend income on investments is recognised when the right to receive dividend is established.
EXPENDITURE
Expenses are accounted on accrual basis.
EMPLOYEE BENEFITS Defined Contribution Plans
Contributions to defined contribution schemes such as employees'' state insurance, labour welfare fund, superannuation scheme, employee pension scheme etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. Provident fund contribution in respect of certain employees, who are members of constituted and approved trusts, the Company recognises contribution payable to such trusts as an expense including any shortfall in interest between the amount of interest realised from the investment and the interest payable to members at the rate declared by the Government of India. In respect of other employees, provident funds are deposited with the government administered fund and charged as an expense to the Statement of Profit and Loss.
The Company makes contribution to defined contribution pension plan. The contribution payable is recognised as an expense, when an employee renders the related service.
Defined Benefit Plans
The Company also makes contribution to defined benefit pension and gratuity plan. The cost of providing benefits under the defined benefit obligation is calculated by independent actuary using the projected unit credit method. Service
costs and net interest expense or income is reflected in the Statement of Profit and Loss. Gain or loss on account of remeasurements are recognised immediately through other comprehensive income in the period in which they occur.
Other Long-Term Employee Benefits
The employees of the Company are entitled to compensated leave for which the Company records the liability based on actuarial valuation computed using projected unit credit method. These benefits are funded.
Termination Benefits
Termination benefits, in the nature of voluntary retirement benefits or termination benefits arising from restructuring, are recognised in the Statement of Profit and Loss. The Company recognises termination benefits at the earlier of the following dates:
(a) when the Company can no longer withdraw the offer of those benefits; or
(b) when the Company recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits.
Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
Share-based Payments
Employees of the Company receive remuneration in the form of share-based payments in consideration for the services rendered.
For equity-settled share-based payment, fair value of the option/equity instruments at the grant date is determined by an independent valuer using Black Scholes Model and this is recognised in the Statement of Profit and Loss as ''Employee benefit expense'' on a systematic basis over the vesting period of the option, based on the Company''s estimate of option/equity instruments that will eventually vest with corresponding increase in Other Equity.
For cash-settled share-based payments, the fair value of the amount payable to employees is recognised as employee benefits expense with a corresponding increase in liabilities, over the vesting period. The liability is remeasured at each reporting period date including up to the settlement date, with changes in fair value recognised in employee benefits expense.
In case of forfeiture/lapse of stock options, which are not vested, amortised portion is reversed by credit to employee benefit expense.
Treasury Shares
The Company has created an Employee Benefit Trust (EBT) for providing share-based payment to its employees. The Company uses EBT as a vehicle for purchasing shares from the market and distributing them to employees under the Employee Stock Option Scheme. The Company treats EBT as its extension and the shares held by EBT are treated as treasury shares.
Own equity instruments that are re-acquired (treasury shares) are recognised at cost and deducted from Other Equity. No gain or loss is recognised in Statement of Profit and Loss on purchase, sale, issue or cancellation of the Company''s own equity instruments. Any difference between carrying amount and the consideration, if reissued or sold, is recognised in ''capital reserve''. Share options exercised during the reporting period are settled with treasury shares.
INCOME TAXES
Income tax expense for the year comprises of current tax and deferred tax. It is recognised in the Statement of Profit and Loss except to the extent it relates to a business combination or to an item which is recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable/ recoverable on the taxable income/loss for the year using applicable tax rates as at the Balance Sheet date, and any adjustment to taxes in respect of previous years. Interest income/expenses and penalties, if any, related to income tax are included in current tax expense.
Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
A deferred tax assets/liability is recognised based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantively enacted, by the end of the reporting period. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable the related tax benefit will be realised.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxing authority.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net profit for the period attributable to the equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity Shares.
DIVIDEND DISTRIBUTION
Dividend paid (including income tax thereon, if any) is recognised in the period in which the interim dividends are approved by the Board of Directors and in respect of final dividend when approved by shareholders.
LEASES
Leases which are short-term that have a lease term of 12 months and low value leases in which a substantial portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments and receipts under such leases are recognised to the Statement of Profit and Loss on a straight-line basis over the term of the lease unless the lease payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases, in which case the same are recognised as an expense in line with the contractual term.
RECENT AMENDMENTS
Ministry of Corporate Affairs (''MCA'') notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31st March, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
25. CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES
(a) Contingent Liabilities
(i) Claims against the Company not acknowledged as debts '' 628.20 Lakhs (2023 - '' 647.03 Lakhs) These Comprise -Excise duty, service tax and customs duty matters '' 123.95 Lakhs (2023 - '' 142.78 Lakhs)
Other matters including employees/ex-employees, etc.'' 504.25 Lakhs (2023 - '' 504.25 Lakhs).
(ii) I n addition to the above, the Company is subject to certain other litigations, in the ordinary course of business and the
industry in which it operates in, which are pending.
(iii) It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash outflows and estimate of financial effect, if any, in respect of the above as its determinable only on occurrence of uncertain future events/receipt of judgements pending at various forums.
(b) Commitments
Estimated amount of contracts remaining to be executed on Capital Account, net of advances (not provided for) - '' 1915.18 Lakhs (2023 - '' 9480.70 Lakhs).
(c) Disclosure under Section 186(4) of the Companies Act, 2013
Details of Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013, as applicable are provided in Notes 3, 4 and 9.
26. FUTURE LEASE OBLIGATIONS
The Company has entered into various short-term and low value operating lease agreements and the amounts paid under such agreements have been charged to revenue as Rent under Note 23. All these agreements are cancellable in nature.
27. SEGMENT REPORTING
The Chief Operating Decision-Maker (CODM) has been identified as Management Committee which evaluates the Company''s performance and allocates resources at an overall level considering the business and industry it operates in. Accordingly, the Company''s business activity primarily falls within a single operating segment viz. Tobacco and related products. Therefore, the disclosures as per Ind AS 108 - ''Operating Segments'' is not applicable.
Geographical segments considered for disclosure mainly consists of sales within India and sales outside India, information in respect thereof is as under:
A CAPITAL MANAGEMENT
The Company''s financial strategy aims to provide adequate capital to its business for growth on a going concern basis thereby creating sustainable stakeholder value. The Company funds its operations mainly through internal accruals.
B CATEGORIES OF FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT AND FAIR VALUE HIERARCHY
The fair value of the financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair value are consistent with those used for the earlier period.
Financial assets and liabilities are measured at fair value as at Balance Sheet date as under:
i) The fair value of investment in government securities and quoted investment in equity shares are based on the current bid price of respective investments as at the Balance Sheet date.
ii) The fair value of investments in mutual fund units is based on the net asset value (''NAV'') as stated by the issuers of these mutual fund units in their published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund as well as the price at which issuers will redeem such units for the investors.
iii) The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs such as foreign exchange spot rates and forward rates as at end of reporting period, interest yield curves, volatility, etc., as applicable.
iv) Cash and cash equivalents (except for investments in units of mutual fund), other bank balances, trade receivables, trade payables and other current financial assets and liabilities (except derivative financial instruments), have fair value that approximates to their carrying amount due to their short-term nature.
Fair value of the financial instruments have been classified into various fair value hierarchies respective three levels as under: Level 1 - Quoted prices for identical assets or liabilities in an active market.
Level 2 - Directly or indirectly observable market inputs, other than Level 1 inputs; and
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing model based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of the counterparty.
The following table shows the carrying amount and fair value of financial assets and liabilities, including their levels in the fair value hierarchy:
C FINANCIAL RISK MANAGEMENT OBJECTIVES
The Company''s risk management framework anchored in its policies and procedures and internal financial controls aim to ensure that the Company''s business activities that are exposed to a variety of financial risks namely liquidity risk, market risks, credit risk and foreign currency risk are identified at an early stage and managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring any unacceptable losses. In doing this, Management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2024 and 31st March, 2023.
On the reporting date, the Company''s Current assets (excluding Asset held for sale) aggregate to '' 83947.44 Lakhs (2023 - '' 83196.76 Lakhs) including Current investments, Cash and cash equivalents and Other bank balances of '' 28217.26 Lakhs (2023 - '' 39537.53 Lakhs) against an aggregate Non-Current liabilities of '' 2164.24 Lakhs (2023 - '' 2153.10 Lakhs) and Current liabilities of '' 44603.33 Lakhs (2023 - '' 45242.61 Lakhs) and also there are no difference in value as per contracts and its carrying value as at the Balance Sheet date and are due within a year. Further, the Company''s total equity stood at '' 125241.37 Lakhs (2023 - '' 117969.78 Lakhs). Accordingly, liquidity risk or the risk that the Company may not be able to settle its dues as they become due does not exist. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
The Company does not trade in equity instruments; it continues to hold certain investments in equity for long-term value accretion which are measured at fair value through Other Comprehensive Income. The value of investment in such equity instruments as at 31st March, 2024 is '' 291.93 Lakhs (2023 - '' 292.75 Lakhs).
The Company''s investments are predominantly held in fixed deposits and debt schemes of mutual funds. The decision-making is centralised and administered under a set of approved policies and procedures guided by the principles of safety, liquidity and returns. This ensures that investments are only made within acceptable risk parameters after due evaluation.
Fixed deposits are held with highly rated banks and companies and have a short to medium tenure and accordingly, are not subject to interest rate volatility. Investment in debt schemes of mutual funds are susceptible to market price risk that arise mainly from change in interest rate from time to time which may impact the return and value of such investments. However, given the relatively short tenure of the underlying portfolio of such mutual fund schemes in which the Company has invested, such price risk is not significant. Investment in Government Securities are primarily fixed rate interest bearing investments. Hence, the Company is not significantly exposed to interest rate risk.
As the Company is debt-free and its liabilities do not carry interest, the exposure to interest rate risk from the perspective of Financial Liabilities is negligible.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Company''s customer base is large and diverse and credit is extended in business interest in accordance with well laid out guidelines issued centrally. Exceptions, if any, are approved by appropriate authority after due consideration of the customers credentials and financial capacity, trade practices and prevailing business and economic conditions. Our historic experience of collecting receivables is high and accordingly, the credit risk is low. Hence, all trade receivables together are considered to be a single class of financial assets. The value of Trade Receivables as at 31st March, 2024 is '' 4639.52 Lakhs (2023 - '' 4317.80 Lakhs)
Further, the Company maintains exposure in cash and cash equivalents, term deposits with banks, government securities, debt schemes of mutual funds and derivative instruments with financial institution. The Company has set counter-parties limits based on multiple factors including credentials, financial capacity, credit rating, etc. The Company''s credit period generally ranges from 0-180 days. The Company''s maximum exposure to credit risk as at 31st March, 2024 and 31st March, 2023 is the carrying value of each class of financial assets.
Foreign Currency Risk
The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Euro and Pound Sterling) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency, arising out of such transactions, are also subject to reinstatement risk.
The Company has an established risk management policy to hedge the volatility arising from exchange rate fluctuation in respect of firm commitments and highly probable forecast transactions, through foreign exchange forward contracts. The proportion of forecast transactions that are to be hedged is decided based on the size of the forecasted transaction and market conditions. As the counterparty for such transactions are Scheduled banks, the risk of their non-performance is considered to be insignificant. The use of these foreign exchange forward contracts are intended to reduce the risk or cost to the Company and are not intended for trading or speculation purpose.
(i) The Company, to the extent possible, has considered the risks that may result from the uncertainties and its impact on the carrying amounts of trade receivables, investments, financial instruments and effectiveness of its hedges. Based on the Company''s analysis of the current indicators of the future economic condition on its business and the estimates used in its financial statements, the Company does not foresee any material impact in the recoverability of the carrying value of the assets. The risk assessment is a continuous process and the Company will continue to monitor the impact of the changes in future economic conditions on its business.
(ii) Code on Social Security 2020 - Update
The Indian parliament has passed and approved the Code on Social Security 2020, however, the effective date of the code and complete clarity on the rules/interpretations are still awaited. The Company will evaluate the subject rules once they are notified and recognise the consequent impact, if any, in its financial statements in the period in which, the Code becomes effective.
(iii) Satisfaction of Charges
The Company has no outstanding borrowing amount since year 2005 and accordingly appropriate form for satisfaction of charges was filed on time before Registrar of Companies, Hyderabad and the Company has been continuously pursuing with the authorities to reflect the same on their website.
30. EMPLOYEE BENEFIT PLANS
Employee Retirement Benefit Plans of the Company include Provident fund, Retirement Allowances, Gratuity, Pension and Leave Encashment. These plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines within the applicable statutory framework, for allocation of assets to different classes with the objective of maintaining the right balance between risks and long-term returns. Further, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
Description of Plans (i) Provident Fund
Eligible employees of the Company receive benefits under the Provident Fund which are defined contribution/benefit plans wherein both the Company and the employees make monthly contributions equal to a specified percentage of the covered employees'' salary. These contributions are made to the Funds administered and managed by the Govt. of India/Company''s own Trust. The Company''s own trust plan envisages guarantee of interest at the rate notified by the Provident Fund authority. The Company''s contributions along with interest shortfall, if any, are charged to revenue in the year they are incurred. Expenditure for the year amounted to '' 356.74 Lakhs ( 2023 - '' 338.00 Lakhs).
(ii) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme for its employees in the workmen category. Liability with regard to such scheme is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and charged to revenue in the period determined - '' 386.87 Lakhs; (2023-'' 336.8 Lakhs). Consequently, Liability recognised in the Balance sheet as at 31st March, 2024''2471.53 Lakhs; (2023-'' 2363.92 Lakhs) including '' 318.22 Lakhs (2023 - '' 221.18 Lakhs) payable within 12 months shown under ''Accrued Payroll''.
(iii) Gratuity
In accordance with ''the Payment of Gratuity Act, 1972'' of India, the Company provides for gratuity, a defined retirement benefit plan ( the ''Gratuity Plan'') covering eligible employees. Liabilities with regard to such Gratuity Plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. The Gratuity Plan is a funded Plan administered by Company''s own Trust which has subscribed to " Group Gratuity Scheme" of Life Insurance Corporation of India.
(iv) Pension Fund
The Company has a defined contribution pension scheme to provide pension to the eligible employees . The Company makes monthly contributions equal to a specified percentage of the covered employees'' salary to a notified pension scheme under National Pension Scheme of the Government of India. The Company''s contributions are charged to revenue in the period they are incurred -'' 113.26 Lakhs ( 2023 -'' 117.87 Lakhs).
In addition to the above, the Company has a funded defined benefit pension scheme for its employees in the workmen category. Liability with regard to such defined benefit plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. This plan is administered by the Company''s own Trust which has subscribed to "Group Pension Scheme " of Life Insurance Corporation of India.
(v) Leave Encashment
The Company has a leave encashment scheme whereunder, leaves are both accumulating and nonaccumulating in nature. The expected cost of accumulating leaves expected to be paid/availed as a result of the unused entitlement that has accumulated as at the balance sheet date is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. The Scheme is fully funded by way of subscription to the "Leave Encashment'' of Life Insurance Corporation of India.
Compensation, if any, for non-accumulating leaves is charged to revenue in the period in which the absences occurs.
G Investment details of the Plan Assets
In the absence of detailed information regarding plan assets which are funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount of each category to the fair value of plan assets is not disclosed.
H Basis used to determine the Expected Rate of Return on Plan Assets
The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.
I Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation and the asset value changes may offset the impact to some extent. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
This is the Statement of Cash Flows referred to in our report of even date.
For B S R & Associates LLP On behalf of the Board,
Firm Registration No.: 116231W/W - 100024 NARESH KUMAR SETHI Chairman
Chartered Accountants DIN: 08296486
ADITYA DEB GOOPTU Managing Director
DIN: 07849104
ARPAN JAIN ANISH GUPTA Chief Financial Officer
Partner
PHANI K. MANGIPUDI Company Secretary
Membership No.: 125710
Hyderabad, 26th April, 2024 Hyderabad, 26th April, 2024
Mar 31, 2023
(i) The Company has ongoing indirect tax and legal matters comprising of numerous cases/ proceedings under various Central and State Acts pending before various judicial forums.
(ii) The Company has reviewed all its pending litigations and proceedings and believes that it has valid basis for appeals and intends to defend all such pending disputes vigorously. However, pending disposal of such disputes, as a matter of prudence, it has adequately recognised a liability in the books wherever required and is reflected above under ''Statutory Liabilities'' - '' 9666.62 Lakhs (2022: '' 13169.04 Lakhs) - refer foot note below.
The then Government of Andhra Pradesh introduced a levy of luxury tax on cigarettes and its vires was challenged before the then High Court of Andhra Pradesh and before the Supreme Court which struck it down. The Commercial Tax department claimed that during the pendency of matter before the courts between 1999 - 2005, the Company had collected luxury tax amounting to '' 3486.38 Lakhs but not paid to the Government. While the Company has denied collecting any such sums, the dispute continued. Keeping in view long protracted litigation, during the year, the Company availed the benefit of an amensty scheme introduced by the Government of Telangana by settling the dispute. Accordingly, '' 1750.52 Lakhs has been written back and disclosed under head "Other Incomeâ in the Statement of Profit and Loss.
(iii) Contingent liabilities where applicable are disclosed under note 25(a) of the financial statements.
25. CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES
(a) Contingent Liabilities
(i) Claims against the Company not acknowledged as debts '' 647.03 Lakhs (2022 - '' 663.11 Lakhs)
These Comprise -
Excise duty, service tax and customs duty matters '' 142.78 Lakhs (2022 - '' 158.86 Lakhs)
Other matters including employees / ex-employees, etc.'' 504.25 Lakhs (2022 - '' 504.25 Lakhs)
(ii) I n addition to the above, the Company is subject to certain other litigations, in the ordinary course of business and the industry in which it operates in, which are pending.
(iii) It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash outflows and estimate of financial effect, if any, in respect of the above as its determinable only on occurrence of uncertain future events/ receipt of judgements pending at various forums.
(b) Commitments
Estimated amount of contracts remaining to be executed on Capital Account, net of advances (not provided for) - '' 9480.70 Lakhs (2022 - '' 14074.53 Lakhs)
(c) Disclosure under Section 186(4) of the Companies Act, 2013
Details of Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013, as applicable are provided in Notes 3, 4 and 9.
The Company has entered into various short-term and low value operating lease agreements and the amounts paid under such agreements have been charged to revenue as Rent under Note 23. All these agreements are cancellable in nature.
The Chief Operating Decision-Maker (CODM) has been identified as Management Committee evaluates the Company''s performance and allocates resources at an overall level considering the business and industry it operates in. Accordingly, the Company''s business activity primarily falls within a single operating segment viz. Tobacco and related products. Therefore, the disclosures as per Ind AS 108 - ''Operating Segments'' is not applicable.
Terms and Conditions of transactions with related parties
All Related Party Transactions entered during the year were in the ordinary course of the business and at arm''s length basis.
Remuneration to directors and key executives is determined by the Nomination and Remuneration Committee of the Board having
regard to individual performance and market trends.
29. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
A. CAPITAL MANAGEMENT
The Company''s financial strategy aims to provide adequate capital to its business for growth on a going concern basis thereby creating sustainable stakeholder value. The Company funds its operations mainly through internal accruals.
B. CATEGORIES OF FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT AND FAIR VALUE HIERARCHY
The fair value of the financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair value are consistent with those used for the earlier period.
Financial assets and liabilities are measured at fair value as at Balance Sheet date as under:
i) The fair value of investment in government securities and quoted investment in equity shares are based on the current bid price of respective investments as at the Balance Sheet date.
ii) The fair value of investments in mutual fund units is based on the net asset value (''NAV'') as stated by the issuers of these mutual fund units in their published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund as well as the price at which issuers will redeem such units for the investors.
iii) The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs such as foreign exchange spot rates and forward rates as at end of reporting period, interest yield curves, volatility, etc., as applicable.
iv) Cash and cash equivalents (except for investments in units of mutual fund), other bank balances, trade receivables, trade payables and other current financial assets and liabilities (except derivative financial instruments), have fair value that approximates to their carrying amount due to their short-term nature.
Fair value of the financial instruments have been classified into various fair value hierarchies respective three levels as under: Level 1 - Quoted prices for identical assets or liabilities in an active market.
Level 2 - Directly or indirectly observable market inputs, other than Level 1 inputs; and
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing model based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of the counterparty.
C. FINANCIAL RISK MANAGEMENT OBJECTIVES
The Company''s risk management framework anchored in its policies and procedures and internal financial controls aim to ensure that the Company''s business activities that are exposed to a variety of financial risks namely liquidity risk, market risks, credit risk and foreign currency risk are identified at an early stage and managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring any unacceptable losses. In doing this, Management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2023 and 31st March, 2022.
On the reporting date, the Company''s Current assets aggregate to '' 83196.76 Lakhs (2022 - '' 114202.90 Lakhs) including Current investments, Cash and cash equivalents and Other bank balances of '' 39537.53 Lakhs (2022 - '' 78301.84 Lakhs) against an aggregate Non-Current liabilities of '' 2153.10 Lakhs (2022 - '' 2296.11 Lakhs) and Current liabilities of '' 45242.61 Lakhs (2022 - '' 49336.79 Lakhs) and also there are no difference in value as per contracts and its carrying value as at the Balance Sheet date and are due within a year. Further, the Company''s total equity stood at '' 117969.81 Lakhs (2022 - '' 107429.61 Lakhs). Accordingly, liquidity risk or the risk that the Company may not be able to settle its dues as they become due does not exist. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
Market Risk
The Company does not trade in equity instruments; it continues to hold certain investments in equity for long-term value accretion which are measured at fair value through Other Comprehensive Income. The value of investment in such equity instruments as at 31st March, 2023 is '' 292.75 Lakhs (2022 - '' 264.52 Lakhs).
The Company''s investments are predominantly held in fixed deposits and debt schemes of mutual funds. The decision-making is centralised and administered under a set of approved policies and procedures guided by the principles of safety, liquidity and returns. This ensures that investments are only made within acceptable risk parameters after due evaluation.
Fixed deposits are held with highly rated banks and companies and have a short to medium tenure and accordingly, are not subject to interest rate volatility. Investment in debt schemes of mutual funds are susceptible to market price risk that arise mainly from change in interest rate from time to time which may impact the return and value of such investments. However, given the relatively short tenure of the underlying portfolio of such mutual fund schemes in which the Company has invested, such price risk is not significant. Investment in Government Securities are primarily fixed rate interest bearing investments. Hence, the Company is not significantly exposed to interest rate risk.
As the Company is debt-free and its liabilities do not carry interest, the exposure to interest rate risk from the perspective of Financial Liabilities is negligible.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Company''s customer base is large and diverse and credit is extended in business interest in accordance with well laid out guidelines issued centrally. Exceptions, if any, are approved by appropriate authority after due consideration of the customers credentials and financial capacity, trade practices and prevailing business and economic conditions. Our historic experience of collecting receivables is high and accordingly, the credit risk is low. Hence, all trade receivables together are considered to be a single class of financial assets.
The value of Trade Receivables as at 31st March, 2023 is '' 4,317.80 Lakhs (2022 - '' 3,330.43 Lakhs)
Further, the Company maintains exposure in cash and cash equivalents, term deposits with banks, government securities, debt schemes of mutual funds and derivative instruments with financial institution. The Company has set counter-parties limits based on multiple factors including creditionals, financial capacity, credit rating, etc.
The Company''s maximum exposure to credit risk as at 31st March, 2023 and 31st March, 2022 is the carrying value of each class of financial assets.
Foreign Currency Risk
The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Euro and Pound Sterling) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency, arising out of such transactions, are also subject to reinstatement risk.
The Company has an established risk management policy to hedge the volatility arising from exchange rate fluctuation in respect of firm commitments and highly probable forecast transactions, through foreign exchange forward contracts. The proportion of forecast transactions that are to be hedged is decided based on the size of the forecasted transaction and market conditions. As the counterparty for such transactions are Scheduled banks, the risk of their non-performance is considered to be insignificant.
The use of these foreign exchange forward contracts are intended to reduce the risk or cost to the Company and are not intended for trading or speculation purpose.
Hedges of foreign currency risk and derivative financial instrument
Foreign exchange forward contracts that are designated as cash flow hedges and qualify for hedge accounting are fair valued at each reporting date and the resultant gain or loss is recognised in Other Comprehensive Income under ''Cash Flow Hedge'' in Equity to the extent considered highly effective and are reclassified into the Statement of Profit and Loss upon occurrence of the hedged transactions. Gain or loss on derivative instruments that are either not designated as cash flow hedges or designated as cash flow hedges to the extent considered ineffective is recognised in the Statement of Profit and Loss.
Foreign Currency Sensitivity
A 1% strengthening of the '' against key currencies to which the Company is exposed (net of hedges) would have led to the profit before tax for the year ended 31st March, 2023 to be lower by '' 19.13 Lakhs (2022 - '' 18.36 Lakhs) and total equity (pre-tax) as at 31st March, 2023 would change by '' 19.13 Lakhs (2022 - '' 18.36 Lakhs).
A 1% weakening of the '' against these currencies would have led to an equal but opposite effect.
General Risk Assessment
(i) The Company, to the extent possible, has considered the risks that may result from the uncertainities and its impact on the carrying amounts of trade receivables, investments, financial instruments and effectiveness of its hedges. Based on the Company''s analysis of the current indicators of the future economic condition on its business and the estimates used in its financial statements, the Company does not foresee any material impact in the recoverability of the carrying value of the assets. The risk assessment is a continuous process and the Company will continue to monitor the impact of the changes in future economic conditions on its business.
(ii) Code on Social Security 2020 - update
The Indian parliament has passed and approved the Code on Social Security 2020, however, the effective date of the code and complete clarity on the rules/interpretations are still awaited. The Company will evaluate the subject rules once they are notified and recognise the consequent impact, if any, in its financial statements in the period in which, the Code becomes effective.
(iii) Satisfaction of Charges
The Company has no outstanding borrowing amount since year 2005 and accordingly appropriate form for satisfaction of charges was filed on time before Registrar of Companies, Hyderabad and the Company has been continuously pursuing with the authorities to reflect the same on there website.
Employee Retirement Benefit Plans of the Company include Provident fund, Retirement Allowances, Gratuity, Pension and Leave Encashment. These plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines within the applicable statutory framework, for allocation of assets to different classes with the objective of maintaining the right balance between risks and long-term returns. Further, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
(i) Provident Fund:
Eligible employees of the Company receive benefits under the Provident Fund which are defined contribution / benefit plans wherein both the Company and the employees make monthly contributions equal to a specified percentage of the covered employees'' salary. These contributions are made to the Funds administered and managed by the Govt. of India / Company''s own Trust. The Company''s own trust plan envisages guarantee of interest at the rate notified by the Provident Fund authority. The Company''s contributions along with interest shortfall, if any, are charged to revenue in the year they are incurred. Expenditure for the year amounted to '' 338.00 Lakhs (2022 - '' 314.20 Lakhs).
(ii) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme for its employees in the workmen category. Liability with regard to such scheme is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and charged to revenue in the period determined - '' 336.80 Lakhs; (2022- '' 384.94 Lakhs). Consequently, Liability recognised in the Balance sheet as at 31st March, 2023''2363.92 Lakhs; (2022- '' 2262.57 Lakhs) including '' 221.18 Lakhs payable within 12 months shown under ''Accrued Payroll''.
(iii) Gratuity
I n accordance with ''the Payment of Gratuity Act, 1972'' of India, the Company provides for gratuity, a defined retirement benefit plan ( the ''Gratuity Plan'') covering eligible employees. Liabilities with regard to such Gratuity Plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. The Gratuity Plan is a funded Plan administered by Company''s own Trust which has subscribed to " Group Gratuity Scheme" of Life Insurance Corporation of India.
(iv) Pension Fund
The Company has a defined contribution pension scheme to provide pension to the eligible employees . The Company makes monthly contributions equal to a specified percentage of the covered employees'' salary to a notified pension scheme under National Pension Scheme of the Government of India. The Company''s contributions are charged to revenue in the period they are incurred - '' 117.87 Lakhs (2022 - '' 107.65 Lakhs).
I n addition to the above, the Company has a funded defined benefit pension scheme for its employees in the workmen category. Liability with regard to such defined benefit plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. This plan is administered by the Company''s own Trust which has subscribed to "Group Pension Scheme " of Life Insurance Corporation of India.
(v) Leave Encashment
The Company has a leave encashment scheme whereunder, leaves are both accumulating and non-accumulating in nature. The expected cost of accumulating leaves expected to be paid/availed as a result of the unused entitlement that has accumulated as at the balance sheet date is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined . The Scheme is fully funded by way of subscription to the "Leave Encashment'' of Life Insurance Corporation of India.
G Investment details of the Plan assets
In the absence of detailed information regarding plan assets which are funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount of each category to the fair value of plan assets is not disclosed.
H Basis used to determine the Expected Rate of Return on Plan Assets
The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.
I Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation and the asset value changes may offset the impact to some extent. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
Mar 31, 2022
25. CONTINGENT LIABILITIES AND COMMITMENTS(a) Contingent Liabilities
(i) Claims against the Company not acknowledged as debts '' 663.11 Lakhs (2021 - '' 674.84 Lakhs) These Comprise -
Excise duty, service tax and customs duty matters '' 158.86 Lakhs (2021 - '' 170.59 Lakhs). Other matters including employees / ex-employees, etc. '' 504.25 Lakhs (2021 - '' 504.25 Lakhs).
(ii) In addition to the above, the Company is subject to certain other litigations, in the ordinary course of business and the industry in which it operates in, which are pending.
(iii) It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash outflows and estimate of financial effect, if any, in respect of the above as its determinable only on occurrence of uncertain future events/ receipt of judgements pending at various forums.
Estimated amount of contracts remaining to be executed on Capital Account, net of advances (not provided for) -'' 14074.53 Lakhs (2021 - '' 534.29 Lakhs).
The Company has entered into various short term and low value operating lease agreements and the amounts paid under such agreements have been charged to revenue as Rent under Note 23. All these agreements are cancellable in nature.
Note: Liability for Gratuity, Leave encashment and Group Health Premiums are provided on acturial valuation basis
/ separately for the Company as a whole. Accordingly, amounts pertaining to key managerial personnel are not included.
Terms and Conditions of transactions with related parties
All Related Party Transactions entered during the year were in the ordinary course of the business and at arm''s length basis.
Remuneration to directors and key executives is determined by the Nomination and Remuneration Committee of the Board having regard to individual performance and market trends.
The chief operating decision-maker (CODM) evaluates the Company''s performance and allocates resources at an overall level considering the business and industry it operates in. Accordingly, the Company''s business activity primarily falls within a single operating segment viz. Tobacco and related products. Therefore, the disclosures as per Ind AS 108 -''Operating Segments'' is not applicable.
29. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
A Capital Management
The Company''s financial strategy aims to provide adequate capital to its business for growth on a going concern basis thereby creating sustainable stakeholder value. The Company funds its operations mainly through internal accruals.
B Categories of Financial Instruments - Fair Value Measurement and Fair Value Hierarchy
The fair value of the financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair value are consistent with those used for the earlier period.
Financial assets and liabilities are measured at fair value as at Balance Sheet date as under:
i) The fair value of investment in government securities and quoted investment in equity shares are based on the current bid price of respective investments as at the Balance Sheet date.
ii) The fair value of investments in mutual fund units is based on the net asset value (''NAV'') as stated by the issuers of these mutual fund units in their published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund as well as the price at which issuers will redeem such units for the investors.
iii) The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs such as foreign exchange spot rates and forward rates as at end of reporting period, interest yield curves, volatility, etc., as applicable.
iv) Cash and cash equivalents (except for investments in units of mutual fund), other bank balances, trade receivables, trade payables and other current financial assets and liabilities (except derivative financial instruments), have fair value that approximates to their carrying amount due to their short-term nature.
Fair value of the financial instruments have been classified into various fair value hierarchies respective three levels as under:
Level 1 - Quoted prices for identical assets or liabilities in an active market.
Level 2 - Directly or indirectly observable market inputs, other than Level 1 inputs; and
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing model based on a discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of the counterparty.
C FINANCIAL RISK MANAGEMENT OBJECTIVES
The Company''s risk management framework anchored in its policies and procedures and internal financial controls aim to ensure that the Company''s business activities that are exposed to a variety of financial risks namely liquidity risk, market risks, credit risk and foreign currency risk are identified at an early stage and managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring any unacceptable losses. In doing this, Management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2022 and 31st March, 2021.
On the reporting date, the Company''s Current assets aggregate to '' 114202.90 Lakhs (2021 - '' 125073.01 Lakhs) including Current investments, Cash and cash equivalents and Other bank balances of '' 78301.84 Lakhs (2021 - '' 90526.22 Lakhs) against an aggregate Non - Current liabilities of '' 2296.11 Lakhs (2021 -'' 2207.88 Lakhs) and Current liabilities of '' 49336.79 Lakhs (2021 - '' 52326.82 Lakhs) and also there are no difference in value as per contracts and its carrying value as at the Balance Sheet date and are due within a year. Further, the Company''s total equity stood at '' 107429.61 Lakhs (2021 - '' 94044.27 Lakhs). Accordingly, liquidity risk or the risk that the Company may not be able to settle its dues as they become due does not exist. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
Market Risks
The Company does not trade in equity instruments; it continues to hold certain investments in equity for long term value accretion which are measured at fair value through Other Comprehensive Income. The value of investment in such equity instruments as at 31st March, 2022 is '' 264.52 Lakhs (2021 - '' 269.54 Lakhs).
The Company''s investments are predominantly held in fixed deposits and debt schemes of mutual funds. The decision making is centralised and administered under a set of approved policies and procedures guided by the principles of safety, liquidity and returns. This ensures that investments are only made within acceptable risk parameters after due evaluation.
Fixed deposits are held with highly rated banks and companies and have a short to medium tenure and accordingly, are not subject to interest rate volatility. Investment in debt schemes of mutual funds are susceptible to market price risk that arise mainly from change in interest rate from time to time which may impact the return and value of such investments. However, given the relatively short tenure of the underlying portfolio of such mutual fund schemes in which the Company has invested, such price risk is not significant. Investment in Government Securities are primarily fixed rate interest bearing investments. Hence, the Company is not significantly exposed to interest rate risk.
As the Company is debt-free and its liabilities do not carry interest, the exposure to interest rate risk from the perspective of Financial Liabilities is negligible.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Company''s customer base is large and diverse and credit is extended in business interest in accordance with well laid out guidelines issued centrally. Exceptions, if any, are approved by appropriate authority after due consideration of the customers credentials and financial capacity, trade practices and prevailing business and economic conditions. Our historic experience of collecting receivables is high and accordingly, the credit risk is low. Hence, all trade receivables together are considered to be a single class of financial assets.
The value of Trade Receivables as at 31st March, 2022 is '' 3330.43 Lakhs (2021 - '' 1521.28 Lakhs)
Further, the Company maintains exposure in cash and cash equivalents, term deposits with banks, government securities, debt schemes of mutual funds and derivative instruments with financial institution. The Company has set counter-parties limits based on multiple factors including creditionals, financial capacity, credit rating, etc.
The Company''s maximum exposure to credit risk as at 31st March, 2022 and 31st March, 2021 is the carrying value of each class of financial assets.
Foreign Currency Risks
The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Euro and Pound Sterling) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency, arising out of such transactions, are also subject to reinstatement risk.
The Company has an established risk management policy to hedge the volatility arising from exchange rate fluctuation in respect of firm commitments and highly probable forecast transactions, through foreign exchange forward contracts. The proportion of forecast transactions that are to be hedged is decided based on the size of the forecastedtransaction and market conditions. As the counterparty for such transactions are Scheduled banks, the risk of their non-performance is considered to be insignificant.
The use of these foreign exchange forward contracts are intended to reduce the risk or cost to the Company and are not intended for trading or speculation purpose.
Hedges of foreign currency risk and derivative financial instrument
Foreign exchange forward contracts that are designated as cash flow hedges and qualify for hedge accounting are fair valued at each reporting date and the resultant gain or loss is recognised in Other Comprehensive Income under ''Cash Flow Hedge'' in Equity to the extent considered highly effective and are reclassified into the Statement of Profit and Loss upon occurrence of the hedged transactions. Gain or loss on derivative instruments that are either not designated as cash flow hedges or designated as cash flow hedges to the extent considered ineffective is recognised in the Statement of Profit and Loss.
Foreign Currency Sensitivity
A 1% strengthening of the INR against key currencies to which the company is exposed (net of hedges) would have led to the profit before tax for the year ended 31st March, 2022 to be lower by '' 18.36 Lakhs (2021 - '' 8.57 Lakhs) and total equity (pre-tax) as at 31st March, 2022 would change by '' 18.36 Lakhs (2021 - '' 8.57 Lakhs).
A 1% weakening of the INR against these currencies would have led to an equal but opposite effect.
General Risk Assessment
The Company, to the extent possible, has considered the risks that may result from the uncertainity relating to COVID-19 pandemic and its impact on the carrying amounts of trade receivables, investments, financial instruments and effectiveness of its hedges. Based on the Company''s analysis of the current indicators of the future economic condition on its business and the estimates used in its financial statements, the Company does not foresee any material impact in
the recoverability of the carrying value of the assets. The risk assessment is a continuous process and the Company will continue to monitor the impact of the changes in future economic conditions on its business.
The Company has no outstanding borrowing amount since year 2005 and accordingly appropriate form for satisfaction of charges was filed on time before Registrar of Companies, Hyderabad and the Company has been continuously pursuing with the authorities to reflect the same on there website.
Employee Retirement Benefit Plans of the Company include Provident fund, Retirement Allowances, Gratuity, Pension and Leave Encashment. These plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines within the applicable statutory framework, for allocation of assets to different classes with the objective of maintaining the right balance between risks and long-term returns. Further, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.
Description of Plans
(i) Provident Fund :
Eligible employees of the Company receive benefits under the Provident Fund which are defined contribution / benefit plans wherein both the Company and the employees make monthly contributions equal to a specified percentage of the covered employees'' salary. These contributions are made to the Funds administered and managed by the Govt. of India / Company''s own Trust. The Company''s own trust plan envisages guarantee of interest at the rate notified by the Provident Fund authority. The Company''s contributions along with interest shortfall, if any, are charged to revenue in the year they are incurred. Expenditure for the year amounted to '' 314.20 Lakhs (2021 - '' 291.73 Lakhs).
(ii) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme for its employees in the workmen category. Liability with regard to such scheme is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and charged to revenue in the period determined - '' 384.94 Lakhs; (2021- '' 446.34 Lakhs). Consequently, Liability recognised in the Balance sheet as at 31st March, 2022''2262.57 Lakhs; (2021- '' 2181.59 Lakhs).
(iii) Gratuity :
In accordance with ''the Payment of Gratuity Act, 1972'' of India, the Company provides for gratuity, a defined retirement benefit plan (the ''Gratuity Plan'') covering eligible employees. Liabilities with regard to such Gratuity Plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined. The Gratuity Plan is a funded Plan administered by Company''s own Trust which has subscribed to " Group Gratuity Schemeâ of Life Insurance Corporation of India.
(iv) Pension Fund:
The Company has a defined contribution pension scheme to provide pension to the eligible employees. The Company makes monthly contributions equal to a specified percentage of the covered employees'' salary to a notified pension scheme under National Pension Scheme of the Government of India. The Company''s contributions are charged to revenue in the period they are incurred - '' 107.65 Lakhs (2021 - '' 99.54 Lakhs).
I n addition to the above, the Company has a funded defined benefit pension scheme for its employees in the workmen category. Liability with regard to such defined benefit plan are determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are
charged to revenue in the period determined. This plan is administered by the Company''s own Trust which has subscribed to "Group Pension Scheme " of Life Insurance Corporation of India.
(v) Leave Encashment
The Company has a leave encashment scheme whereunder, leaves are both accumulating and non-accumulating in nature. The expected cost of accumulating leaves expected to be paid/ availed as a result of the unused entitlement that has accumulated as at the balance sheet date is determined on actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method and are charged to revenue in the period determined . The Scheme is fully funded by way of subscription to the "Leave Encashment'' of Life Insurance Corporation of India.
The estimates of future salary increases between 6% - 9%, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
G Investment details of the Plan assets
In the absence of detailed information regarding plan assets which are funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount of each category to the fair value of plan assets is not disclosed.
H Basis used to determine the Expected Rate of Return on Plan Assets
The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are well diversified.
I Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation and the asset value changes may offset the impact to some extent. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
For the year ended 31st March 2022, the Company has accounted expense of '' 99.11 Lakhs (2021 - '' Nil) as employee benefit expenses (see note 22) on the aforesaid employee stock option plan. The balance in share based payment reserve account is '' 99.11 Lakhs as of 31st March, 2022 (2021 - '' Nil).
* Revenue growth with corresponding increase in year end trade receivables without change in customer credit terms.
Mar 31, 2018
1. CONTINGENT LIABILITIES AND COMMITMENTS
(a) Contingent Liabilities
(i) Claims against the Company not acknowledged as debts Rs.336.92 Lakhs (2017- Rs.498.38 Lakhs; 2016 - Rs.234.22 Lakhs) These Comprise - Excise duty, service tax and customs duty matters Rs.332.67 Lakhs (2017 - Rs.494.13 Lakhs; 2016 - Rs.229.97 Lakhs) Other matters related to employees/ex-employees, etc.Rs.4.25 Lakhs (2017 - Rs.4.25 Lakhs; 2016 - Rs.4.25 Lakhs)
(ii) The Companyâs pending litigations comprise of claims against the Company by employees and pertaining to proceedings pending with Income tax, Excise, Custom, Sales/VAT tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contigent liabilities where applicable, in its financial statements.
It is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash outflows and estimate of financial effect, if any, in respect of the above as its determinable only on occurance of uncertain future events/receipt of judgements pending at various forums.
(b) Commitments
Estimated amount of contracts remaining to be executed on Capital Account (not provided for) - Rs.2015.33 Lakhs (2017 - Rs.5198.96 Lakhs; 2016 - Rs.3248.41 Lakhs )
2. FUTURE LEASE OBLIGATIONS
The Company has entered into various operating lease agreements and the amounts paid under such agreements have been charged to revenue as Rent under Note 24. All these agreements are cancellable in nature.
3. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
A CAPITAL MANAGEMNET
The Companyâs financial strategy aims to provide adequate capital to its business for growth on a going concern thereby creating sustainable stakeholder value. The Company funds its operations mainly through internal accurals.
B CATEGORIES OF FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT AND FAIR VALUE HIERARCHY
The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used for the earlier periods.
Financial assets and liabilities are measured at fair value as at Balance Sheet date as under:
i) The fair values of investment in government securities, quoted investment in equity shares is based on the current bid price of respective investment as at the Balance Sheet date.
ii) The fair values of investments in mutual fund units is based on the net asset value (NAV) as stated by the issuers of these mutual fund units in the published statements as at Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund and the price at which issuers will redeem such units from the investors.
iii) The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs such as foreign exchange spot rates and forward rates at end of reporting period, yield curves, volatility, etc., as applicable.
iv) Cash and cash equivalents (except for investments in mutual funds), trade receivables, trade payables and other current financial assets and liabilities (except derivative financial instruments), have fair values that approximate to their carrying amounts due to their short-term nature.
Fair value of the financial instruments have been classified into various fair value hierarchies based on the following three levels:
Level 1 - Quoted prices for identical assets or liabilities in an active market.
Level 2 - Directly or indirectly observable market inputs, other than Level 1 inputs; and
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined using generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparty.
The following table shows the carrying amounts and fair value of financial assets and liabilities, including their levels in the fair value hierarchy:
C. FINANCIAL RISK MANAGEMENT OBJECTIVES
The Companyâs risk management framework anchored in its policies and procedures and internal financial controls aims to ensure that the Companyâs business activities that are exposed to a variety of financial risks namely liquidity risk, market risks, credit risk and foreign currency risk are identified at an early stage and managed within acceptable and approved risk parameters in a disciplined and consistent manner and in compliance with applicable regulations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Companyâs approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st March, 2018 and 31st March, 2017.
The Companyâs Current assets aggregate to Rs.80485.09 Lakhs (2017 - Rs.54788.31 Lakhs; 2016 - Rs.60342.85 Lakhs) including Current investments, Cash and cash equivalents and Other bank balances of Rs.3758.82 Lakhs (2017 - Rs.1994.16 Lakhs; 2016 - Rs.2123.40 Lakhs) against an aggregate Current liability of Rs.46789.11 Lakhs (2017 - Rs.24776.63 Lakhs; 2016 -Rs.31718.82 Lakhs); Non-current liabilities amounting to Rs.1415.15 Lakhs (2017 - Rs.1091.05 Lakhs; 2016 - Rs.927.56 Lakhs) on the reporting date. Further, the Companyâs total equity stood at Rs.58209.07 Lakhs (2017 - Rs.53897.11 Lakhs; 2016 -Rs.51883.34 Lakhs). Accordingly, liquidity risk or the risk that the Company may not be able to settle its dues as they become due does not exist. This excludes the potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
Market Risks
The Company does not trade in equity instruments; it continues to hold certain investments in equity for long term value accretion which are measured at fair value through Other Comprehensive Income. The value of investment in such equity instruments as at 31st March, 2018 is Rs.202.61 Lakhs (2017 - Rs.176.52 Lakhs; 2016 - Rs.139.99 Lakhs).
The Companyâs investments are predominantly held in fixed deposits and debt schemes of mutual funds. The decision making is centralised and administered under a set of approved policies and procedures guided by the principles of safety, liquidity and returns. This ensures that investments are only made within acceptable risk parameters after due evaluation.
Fixed deposits are held with highly rated banks and companies and have a medium tenure and accordingly, are not subject to interest rate volatility. Investment in debt schemes of mutual funds are susceptible to market price risk that arise mainly from change in interest rate from time to time which may impact the return and value of such investments. However, given the relatively short tenure of underlying portfolio of such mutual fund schemes in which the Company has invested, such price risk is not significant.
As the Company is debt-free and its liabilities do not carry interest, the exposure to interest rate risk from the perspective of Financial Liabilities is negligible.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its contractual obligations. The Companyâs customer base is large and diverse and credit is extended in business interest in accordance with well laid out guidelines issued centrally. Exceptions, if any, are approved by appropriate authority after due consideration of the customers credentials and financial capacity, trade practices and prevailing business and economic conditions. Our historic experience of collecting receivables is high and accordingly, the credit risk is low. Hence, trade receivables are considered to be a single class of financial assets.
The value of Trade Receivables as at 31st March, 2018 is Rs.2733.09 Lakhs (2017 - Rs.1204.13 Lakhs; 2016 - Rs.1237.54 Lakhs).
Further, the Company maintains exposure in cash and cash equivalents, term deposits with banks, government securities, money market liquid mutual funds and derivative instruments with financial institution. The Company has set counter-parties limits based on multiple factors including financial position, credit rating, etc.
The Companyâs maximum exposure to credit risk as at 31st March, 2018, 2017 and 1st April, 2016 is the carrying value of each class of financial assets.
Foreign Currency Risks
The Company undertakes transactions denominated in foreign currency (mainly US Dollar, Euro and Pound Sterling) which are subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency, arising out of such transactions, are also subject to reinstatement risks
The Company has established risk management policies to hedge the volatility arising from exchange rate fluctuations in respect of firm commitments and highly probable forecast transactions, through foreign exchange forward contracts. The proportion of forecast transactions that are to be hedged is decided based on the size of the forecast transaction and market conditions. As the counterparty for such transactions are highly rated banks, the risk of their non-performance is considered to be insignificant.
The use of these foreign exchange forward contracts are intended to reduce the risk or cost to the Company and are not intended for trading or speculation purpose.
The information on such Derivative Instruments is as follows:
Forward exchange contracts designated under Hedge Accounting that were outstanding on respective reporting dates:
Hedges of foreign currency risk and derivative financial instrument
Foreign exchange forward contracts that are designated as cash flow hedges and qualify for hedge accounting are fair valued at each reporting date and the resultant gain or loss is recognised in Other Comprehensive Income under âCash Flow Hedge Reserve Accountâ to the extent considered highly effective and are reclassified into the Statement of Profit & Loss upon occurrence of the hedged transactions. Gain or loss on derivative instruments that are either not designated as cash flow hedges or designated as cash flow hedges to the extent considered ineffective is recognised in the Statement of Profit and Loss.
The movement in the cash flow hedging reserve in respect of designated cash flow hedges is summarised below:
Foreign Currency Sensitivity
A 1% strengthening of the INR against key currencies to which the company is exposed (net of hedges) would have led to the profit before tax for the year ended 31st March, 2018 to be lower by Rs.23.10 Lakhs (2017 - Rs.6.99 Lakhs) and pre-tax total equity as at 31st March, 2018 would change by Rs.23.10 Lakhs [2017 - Rs.6.99 Lakhs; 2016 â Rs.(15.26) Lakhs]. A 1% weakening of the INR against these currencies would have led to an equal but opposite effect.
4. EMPLOYEE BENEFIT PLANS
Employee Retirement Benefit Plans of the Company include Providend Fund, Retirement Allowances, Gratuity, Pension and Leave Encashment. These plans expose the Company to a number of acturial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines within the applicable statutory framework, for allocation of assets to different classes with the objective of maintaining the right balance between risks and long-term returns. Further, investments are well diverisfied, such that the faliure of any single investment would not have a material impact on the overall level of assets.
Description of Plans
(i) Provident Fund
Eligible employees of the Company receive benefits under the Provident Fund which are defined contribution/benefit plans wherein both the Company and the employees make monthly contributions equal to a specified percentage of the covered employeesâ salary. These contributions are made to the Funds administered and managed by the Govt. of India/Companyâs own Trust. The Companyâs own trust plan envisages guarantee of interest at the rate notified by the Provident Fund authority. The Companyâs contributions along with interest shortfall, if any, are charged to revenue in the year they are incurred. Expenditure for the year amounted to Rs.252.24 Lakhs (2017 - Rs.262.83 Lakhs).
Major Category of Plan Assets as a % of the Total Plan Assets of the Companyâs Own Provident Fund Trust :
(ii) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme for its employees in the workmen category. Liability with regard to such scheme is determined by actuarial valuation and charged to revenue in the period determined -Rs.435.17 Lakhs; (2017 - Rs.427.84 Lakhs). Consequently, liability recognised in the Balance Sheet as at 31st March, 2018 Rs.1372.97 Lakhs; (2017 - Rs.1026.58 Lakhs; 2016 - Rs.770.22 Lakhs).
(iii) Gratuity
In accordance with âthe Payment of Gratuity Act, 1972â of India, the Company provides for gratuity, a defined retirement benefit plan ( the âGratuity Planâ) covering eligible employees. Liabilities with regard to such Gratuity Plan are determined by actuarial valuation and are charged to revenue in the period determined. The Gratuity Plan is a funded Plan administered by Companyâs own Trust which has subscribed to âGroup Gratuity Schemeâ of Life Insurance Corporation of India.
(iv) Pension Fund
The Company has a defined contribution pension scheme to provide pension to the eligible employees. The Company makes monthly contributions equal to a specified percentage of the covered employeesâ salary to a notified pension scheme under National Pension Scheme of the Government of India. The Companyâs contributions are charged to revenue in the period they are incurred - Rs.93.93 Lakhs (2017 - Rs.117.74 Lakhs).
In addition to the above, the Company has a funded defined benefit pension scheme for its employees in the workmen category. Liability with regard to such defined benefit plan are determined by actuarial valuation and are charged to revenue in the period determined. This plan is administered by the Companyâs own Trust which has subscribed to âGroup Pension Schemeâ of Life Insurance Corporation of India.
(v) Leave Encashment
The accrual for unutilised leave is determined for the entire available leave balance standing to the credit of the employees at period-end. The value of such leave balance eligible for carry forward, is determined by actuarial valuation and charged to revenue in the period determined. The scheme is fully funded by way of subscription to the âLeave Encashment Schemeâ of Life Insurance Corporation of India.
The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
G Investment details of the Plan Assets
In the absence of detailed information regarding plan assets which are funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount of each category to the fair value of plan assets is not disclosed.
H Basis used to determine the Expected Rate of Return on Plan Assets
The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.
I Net Asset/(Liability) recognised in Balance Sheet
J Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation and the asset value changes may offset the impact to some extent. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
5. With implementation of Goods & Service tax (GST) with effect from 1st July, 2017, the Companyâs main product is now subjected to GST and Compensation Cess in addition to Central Excise (currently only National Calamity Contingent Fund). Due to such restructuring of indirect taxes, the figures for ââRevenue from operationsââ (net of GST and Compensation Cess collected on behalf of govenrment) and ââExcise dutyââ for the year ended 31st March, 2018 are not comparable with the previous period.
6. FIRST TIME ADOPTION OF Ind AS
i The Company has adopted Indian Accounting Standards (Ind AS) with effect from 1st April, 2017, with a transition date of 1st April, 2016. These financial statements for the year ended 31st March, 2018 are the first financial statements, the Company has prepared under Ind AS. For all periods upto and including the year ended 31st March, 2017, the Company prepared its financial statements in accordance with the accounting standards notified under the section 133 of the Companies Act, 2013, read together with the Companies (Accounts) Rules, 2014 (âPrevious GAAPâ).
Ind AS 101 (First-time Adoption of Indian Accounting Standards) requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared financial statements which comply with Ind AS for year ended 31st March, 2018, together with the comparative information as at and for the year ended 31st March, 2017 and the opening Ind AS Balance Sheet as at 1st April, 2016.
ii Ind AS 101 permits first-time adopters certain exemptions from retrospective application of certain requirements under Ind AS. The Company has elected to apply the following exemptions/adjustments from retrospective application :
(a) Property, plant and equipment and intangible assets were carried in the Balance Sheet prepared in accordance with previous GAAP as at 31st March, 2016. Under Ind AS, the Company has elected to regard such carrying values as deemed cost on the date of transition. Further, the Company had revalued certain freehold land and buildings based on professional valuation as at 31st March, 1989 and had a balance of Rs.265 Lakhs in revaluation reserve on the date of transition. On transition, such revaluation reserve has been adjusted in retained earnings.
(b) Classification and measurement of financial assets: The classification of financial assets to be measured at amortised cost or fair value through other comprehensive income (FVOCI) is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.
(c) Under previous GAAP, non-current investments were stated at cost. Where applicable, provision was made to recognise a decline, other than temporary, in valuation of such investments. Under Ind AS, equity instruments have been classified as FVOCI through an irrevocable election on the date of transition.
(d) Under previous GAAP, current investments like investments in mutual fund schemes were stated at lower of cost and fair value. Under Ind AS, these financial assets have been classified as Fair Value through Profit or Loss (FVTPL) on the date of transition and fair value changes after the date of transition has been recognised in profit or loss.
(e) Under the previous GAAP, acturial gains and losses related to the defined benefit schemes for gratuity and pension plans and liabilities towards employee leave encashment were recognised in profit or loss. Under Ind AS, the acturial gains and losses form part of remeasurement of the net defined benefit liability/asset which is recognised in Other Comprehensive Income (OCI). Consequently, the tax effect of the same has also been recognised in OCI instead of profit or loss.
(f) Under previous GAAP, dividend payable on equity shares (including tax thereon) was recognised as a liability in the period to which it relates. Under Ind AS, dividends (including the tax thereon) to shareholders are recognised when declared by the members in a general meeting.
(g) Estimates: On assessment of the estimates made under the previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date.
iii The following reconciliations provide the explanations and quantification of the differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS 101:
7. COMPARATIVE FIGURES
The Comparative figures for the previous year have been re-arranged to conform with the current year presentation of the accounts.
Mar 31, 2017
1. CONTINGENT LIABILITIES AND COMMITMENTS
(a) Contingent Liabilities
Claims against the Company not acknowledged as debts Rs.498.38 Lakhs (2016 - Rs.234.22 Lakhs).
These comprise -
(i) Tax demands disputed by the Company relating to disallowances/additions of fiscal benefits, pending before various judicial forums, aggregating to Rs.494.13 Lakhs (2016 - Rs.229.97 Lakhs).
(ii) Other matters relating to Labour cases, etc. aggregating to Rs.4.25 Lakhs (2016 - Rs.4.25 Lakhs).
(b) Commitments
Estimated amount of contracts remaining to be executed on Capital Account (not provided for) - Rs.5198.96 Lakhs (2016 - Rs.3248.41 Lakhs).
2. FUTURE LEASE OBLIGATIONS
The Company has entered into various operating lease agreements and the amounts paid under such agreements have been charged to revenue as Rent under Note 25. All these agreements are cancellable in nature.
3. DISCLOSURES REGARDING DERIVATIVE INSTRUMENTS
The Company uses forward exchange contracts to hedge its foreign currency exposures related to the underlying transactions, firm commitments and highly probable forecasted transactions. The use of these foreign exchange forward contracts are intended to reduce the risk or cost to the Company and are not intended for trading or speculation purpose. The information on such derivative instruments is as follows:
(c) Hedges of highly probable forecasted transactions
Foreign exchange forward contracts that are designated as cash flow hedges and qualify for hedge accounting are fair valued at each reporting date and the resultant gain or loss is recognized directly in Shareholders'' Funds under âCash Flow Hedge Reserve Accountâ to the extent considered highly effective and are reclassified into the statement of profit & loss upon occurrence of the hedged transactions. Gain or loss on derivative instruments that are either not designated as cash flow hedges or designated as cash flow hedges to the extent considered ineffective is recognized in the statement of profit and loss.
In respect of the aforesaid hedges of highly probable forecasted transactions the Company has recorded, in Shareholders Funds under Cash Flow Hedge Reserve Account, a net gain/(loss) of Rs. (57.00) Lakhs (2016 - Rs.13.23 Lakhs). The Company also recorded a net gain/(loss) of Rs.164.65 Lakhs (2016 - Rs.61.62 Lakhs) in the statement of profit & loss against the hedged item.
The net carrying amount on Company''s âCash Flow Hedge Reserve Accountâ as at 31st March, 2017 was a gain of Rs.14.58 Lakhs (2016 - Rs.71.58 Lakhs).
4. EMPLOYEE BENEFITS
(a) The Employee Benefit Schemes are as under:
(i) Provident Fund
Eligible employees of the Company receive benefits under the Provident Fund which are defined contribution/benefit plans wherein both the Company and the employees make monthly contributions equal to a specified percentage of the covered employees'' salary. These contributions are made to the Funds administered and managed by the Government of India/ Company''s own Trust. The Company''s own trust plan envisages guarantee of interest at the rate notified by the Provident Fund authority. The Company''s contributions along with interest shortfall, if any, are charged to revenue in the year they are incurred. Expenditure for the year amounted to Rs.262.83 Lakhs (2016 - Rs.267.54 Lakhs).
Major Category of Plan Assets as a % of the Total Plan Assets of the Company''s Own Provident Fund Trust:
(ii) Gratuity
In accordance with the Payment of Gratuity Act, 1972 of India, the Company provides for gratuity, a defined retirement benefit plan (the âGratuity Planâ) covering eligible employees. Liabilities with regard to such Gratuity Plan are determined by actuarial valuation and are charged to revenue in the period determined. The Gratuity Plan is a funded Plan administered by Company''s own Trust which has subscribed to âGroup Gratuity Schemeâ of Life Insurance Corporation of India.
(iii) Pension Fund
The Company has a defined contribution pension scheme to provide pension to the eligible employees. The Company makes monthly contributions equal to a specified percentage of the covered employees'' salary at their option to either National Pension Scheme of the Government of India and/or to an approved Superannuation Fund. In case of the later, the contributions are administered by the Company''s own Trust which has subscribed to the âGroup Pension Schemeâ of Life Insurance Corporation of India. The Company''s contributions are charged to revenue in the period they are incurred Rs.117.74 Lakhs (2016 - Rs.109.39 Lakhs).
In addition to the above, the Company has a funded defined benefit pension scheme for its employees in the workmen category. Liability with regard to such defined benefit plan are determined by actuarial valuation and are charged to revenue in the period determined. This plan is also administered by the Company''s own Trust which has subscribed to âGroup Pension Schemeâ of Life Insurance Corporation of India.
(iv) Leave Encashment
The accrual for unutilized leave is determined for the entire available leave balance standing to the credit of the employees at period-end. The value of such leave balance eligible for carry forward, is determined by actuarial valuation and charged to revenue in the period determined. The scheme is fully funded by way of subscription to the ''Leave Encashment Scheme'' of Life Insurance Corporation of India.
(v) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme for its employees in the workmen category. Liability with regard to such scheme is determined by actuarial valuation and charged to revenue in the period determined Rs.427.84 Lakhs (2016 - Rs.327.55 Lakhs). Consequently, liability recognized in the Balance Sheet as at 31st March, 2017 is Rs.1026.58 Lakhs (2016 - Rs.770.22 Lakhs).
The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factor in the employment market.
Investment details of the Plan Assets
In the absence of detailed information regarding plan assets which are funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount of each category to the fair value of plan assets is not disclosed.
5. COMPARATIVE FIGURES
The Comparative figures for the previous year have been re-arranged to conform with the current year presentation of the accounts.
Mar 31, 2016
1. FUTURE LEASE OBLIGATIONS
The Company has entered into various operating lease agreements and the
amounts paid under such agreements have been charged to revenue as Rent
under Note 25. All these agreements are cancellable in nature.
2. DISCLOSURES REGARDING DERIVATIVE INSTRUMENTS
The Company uses forward exchange contracts to hedge its foreign
currency exposures related to the underlying transactions, firm
commitments and highly probable forecasted transactions. The use of
these foreign exchange forward contracts are intended to reduce the
risk or cost to the Company and are not intended for trading or
speculation purpose. The information on such derivative instruments is
as follows:
3. EMPLOYEE BENEFITS
(a) The Employee Benefit Schemes are as under:
(i) Provident Fund
Eligible employees of the Company receive benefits under the Provident
Fund which are defined contribution/benefit plans wherein both the
Company and the employees make monthly contributions equal to a
specified percentage of the covered employees'' salary. These
contributions are made to the Funds administered and managed by the
Government of India/ Company''s own Trust. The Company''s own trust plan
envisages guarantee of interest at the rate notified by the Provident
Fund authority. The Company''s contributions along with interest
shortfall, if any, are charged to revenue in the year they are
incurred. Expenditure for the year amounted to Rs.267.54 Lakhs (2015 -
Rs.230.70 Lakhs).
(ii) Gratuity
In accordance with the Payment of Gratuity Act, 1972, the Company
provides for gratuity, a defined retirement benefit plan (the ''Gratuity
Plan'') covering eligible employees. Liabilities with regard to such
Gratuity Plan are determined by actuarial valuation and are charged to
revenue in the period determined. The Gratuity Plan is a funded Plan
administered by Company''s own Trust which has subscribed to ''Group
Gratuity Scheme'' of Life Insurance Corporation of India.
(iii) Pension Fund
The Company has a defined contribution pension scheme to provide
pension to the eligible employees. The Company makes monthly
contributions equal to a specified percentage of the covered employees''
salary at their option to either National Pension Scheme of the
Government of India and/or to an approved Superannuation Fund. In case
of the latter, the contributions are administered by the Company''s own
Trust which has subscribed to the ''Group Pension Scheme'' of Life
Insurance Corporation of India. The Company''s contributions are charged
to revenue in the period they are incurred Rs.109.39 Lakhs (2015 -
Rs.101.71 Lakhs).
In addition to the above, the Company has a funded defined benefit
pension scheme for its employees in the workmen category. Liability
with regard to such defined benefit plan are determined by actuarial
valuation and are charged to revenue in the period determined. This
plan is also administered by the Company''s own Trust which has
subscribed to ''Group Pension Scheme'' of Life Insurance Corporation of
India.
(iv) Leave Encashment
The accrual for unutilised leave is determined for the entire available
leave balance standing to the credit of the employees at period-end.
The value of such leave balance eligible for carry forward, is
determined by actuarial valuation and charged to revenue in the period
determined. The scheme is fully funded by way of subscription to the
''Leave Encashment Scheme'' of Life Insurance Corporation of India.
(v) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme
for its employees in the workmen category. Liability with regard to
such scheme is determined by actuarial valuation and charged to revenue
in the period determined Rs.327.55 Lakhs (2015 - Rs.367.74 Lakhs).
Consequently, liability recognised in the Balance Sheet as at 31st
March, 2016 is Rs.770.22 Lakhs (2015 - Rs.571.58 Lakhs).
4. COMPARATIVE FIGURES
The Comparative figures for the previous year have been re-arranged to
confirm with the current year presentation of the accounts.
Mar 31, 2014
(a) Contingent Liabilities
Claims against the Company not acknowledged as debts Rs.2355.48 Lakhs
(2013 - Rs.3450.59 Lakhs).
These comprise -
(i) Tax demands disputed by the Company relating to
disallowances/additions of fiscal benefits, pending before various
judicial forums, aggregating to Rs.2351.23 Lakhs (2013 - Rs.3446.34 Lakhs).
(ii) Other matters relating to labour cases, etc. aggregating to Rs.4.25
Lakhs (2013 - Rs.4.25 Lakhs).
(b) Commitments
Estimated amount of contracts remaining to be executed on capital
account (not provided for) - Rs.329.06 Lakhs (2013 - Rs.4277.23 Lakhs).
2. FUTURE LEASE OBLIGATIONS
The Company has entered into various operating lease agreements and the
amounts paid under such agreements have been charged to revenue as Rent
under Note 26. All these agreements are cancellable in nature.
3. DISCLOSURES REGARDING DERIVATIVE INSTRUMENTS
The Company uses forward exchange contracts to hedge its foreign
currency exposures related to the underlying transactions, firm
commitments and highly probable forecasted transactions. The use of
these foreign exchange forward contracts are intended to reduce the
risk or cost to the Company and are not intended for trading or
speculation purpose. The information on such derivative instruments is
as follows:
(c) Hedges of highly probable forecasted transactions
Foreign exchange forward contracts that are designated as cash flow
hedges and qualify for hedge accounting are fair valued at each
reporting date and the resultant gain or loss is recognised directly in
Shareholders'' Funds under ''Cash Flow Hedge Reserve Account'' to the
extent considered highly effective and are reclassified into the
Statement of Profit and Loss upon occurrence of the hedged
transactions. Gain or loss on derivative instruments that are either
not designated as cash flow hedges or designated as cash flow hedges to
the extent considered ineffective is recognised in the Statement of
Profit and Loss.
In respect of the aforesaid hedges of highly probable forecasted
transactions, the Company has recorded in Shareholders'' Funds under
Cash Flow Hedge Reserve Account, a net gain of Rs.52.89 Lakhs (2013 -
Rs.67.27 Lakhs). The Company also recorded a net loss of Rs.23.89 Lakhs
(2013 - Rs.45.12 Lakhs) in the Statement of Profit and Loss.
The net carrying amount on Company''s ''Cash Flow Hedge Reserve Account''
as at 31st March, 2014 was a gain of Rs.120.16 Lakhs (2013 - Rs.67.27
Lakhs).
4. EMPLOYEE BENEFITS
(a) The Employee Benefit Schemes are as under:
(i) Provident Fund
Eligible employees of the Company receive benefits under the Provident
Fund which are defined contribution/benefit plans wherein both the
Company and the employees make monthly contributions equal to a
specified percentage of the covered employees'' salary. These
contributions are made to the Funds administered and managed by the
Government of India/ Company''s own Trust. The Company''s own trust plan
envisages guarantee of interest at the rate notified by the Provident
Fund authority. The Company''s contributions along with interest
shortfall, if any, are charged to revenue in the year they are
incurred. Expenditure for the year amounted to Rs.167.71 Lakhs (2013 -
Rs.173.85 Lakhs).
(ii) Gratuity
In accordance with the Payment of Gratuity Act, 1972 of India, the
Company provides for gratuity, a defined retirement benefit plan (the
''Gratuity Plan'') covering eligible employees. Liabilities with regard
to such Gratuity Plan are determined by actuarial valuation and are
charged to revenue in the period determined. The Gratuity Plan is a
funded plan administered by Company''s own Trust which has subscribed to
''Group Gratuity Scheme'' of Life Insurance Corporation of India.
(iii) Pension Fund
The Company has a defined contribution pension scheme to provide
pension to the eligible employees. The Company makes monthly
contributions equal to a specified percentage of the covered employees''
salary. These contributions are administered by the Company''s own Trust
which has subscribed to ''Group Pension Scheme'' of Life Insurance
Corporation of India. The Company''s contributions are charged to
revenue in the period they are incurred - Rs.97.65 Lakhs (2013 - Rs.
102.18 Lakhs).
In addition to the above, the Company has a funded defined benefit
pension scheme for its employees in the workmen category. Liability
with regard to such defined benefit plan are determined by actuarial
valuation and are charged to revenue in the period determined. The plan
is administered by the Company''s own Trust which has subscribed to
''Group Pension Scheme'' of Life Insurance Corporation of India.
(iv) Leave Encashment
The accrual for unutilised leave is determined for the entire available
leave balance standing to the credit of the employees at period-end.
The value of such leave balance eligible for carry forward, is
determined by actuarial valuation and charged to revenue in the period
determined. The scheme is fully funded by way of subscription to the
''Leave Encashment Scheme'' of Life Insurance Corporation of India.
(v) Retirement Allowance
The Company has an unfunded defined benefit retirement allowance scheme
for its employees in the workmen category. Liability with regard to
such scheme is determined by actuarial valuation and charged to revenue
in the period it is determined - Rs.303.29 Lakhs (2013 - Nil).
Consequently, asset/(liability) recognised in the Balance Sheet as at
31st March, 2014 is Rs.(303.29) Lakhs (2013 - Nil).
Mar 31, 2013
1. CONTINGENT LIABILITIES AND COMMITMENTS
(a) Contingent Liabilities
Claims against the Company not acknowledged as debts Rs.3450.59 Lakhs
(2012 - Rs.3188.08 Lakhs).
These comprise -
(i) Tax demands disputed by the Company relating to
disallowances/additions of fiscal benefits, pending before various
judicial forums, aggregating to Rs.3446.34 Lakhs (2012 - Rs.3174.71 Lakhs).
(ii) Other matters relating to labour cases, etc. aggregating to Rs.4.25
Lakhs (2012 - Rs.13.37 Lakhs).
(b) Commitments
Estimated amount of contracts remaining to be executed on capital
account (not provided for) - Rs.4277.23 Lakhs (2012 - Rs.2371.12 Lakhs).
2. FUTURE LEASE OBLIGATIONS
The Company has entered into various operating lease agreements and the
amounts paid under such agreements have been charged to revenue as rent
under Note 26. All these agreements are cancellable in nature.
3. DISCLOSURES REGARDING DERIVATIVE INSTRUMENTS
The Company uses forward exchange contracts to hedge its foreign
currency exposures related to the underlying transactions, firm
commitments and highly probable forecasted transactions. The use of
these foreign exchange forward contracts are intended to reduce the
risk or cost to the Company and are not intended for trading or
speculation purpose. The information on such derivative instruments is
as follows:
4. HEDGE ACCOUNTING
Effective 1st April, 2012, the Company has adopted Accounting Standard
(AS) 30, "Financial Instruments - Recognition and Measurement" issued
by the Institute of Chartered Accountants of India to the extent the
adoption does not contradict with existing Accounting Standards and
other authoritative pronouncements of the Company Law and other
regulatory requirements. Accordingly, change in fair value of
derivative financial instruments (comprising of foreign currency
forward contracts) that are designated as effective cash flow hedges,
is recognised directly in the shareholders'' fund and is reclassified in
the Statement of Profit and Loss upon occurance of the hedged
transaction. Had the Company not adopted the principles of hedge
accounting set out in AS 30, the net assets of the Company would have
been lower by Rs.67.27 Lakhs without impacting on the profits for the
year.
5. EMPLOYEE BENEFITS
(a) The Employee Benefit Schemes are as under:
(i) Provident Fund
Eligible employees of the Company receive benefits under the Provident
Fund which are defined contribution/benefit plans wherein both the
Company and the employees make monthly contributions equal to a
specified percentage of the covered employees'' salary. These
contributions are made to the Funds administered and managed by the
Government of India/ Company''s own Trust. The Company''s own trust plan
envisages guarantee of interest at the rate notified by the Provident
Fund authority. The Company''s contributions along with interest
shortfall, if any, are charged to revenue in the year they are
incurred. Expenditure for the year amounted to Rs.173.85 Lakhs (2012 -
Rs.178.52 Lakhs).
(ii) Gratuity
In accordance with ''the Payment of Gratuity Act, 1972'' of India, the
Company provides for gratuity, a defined retirement benefit plan (the
''Gratuity Plan'') covering eligible employees. Liabilities with regard
to such Gratuity Plan are determined by actuarial valuation and are
charged to revenue in the period determined. The Gratuity Plan is a
funded Plan administered by Company''s own Trust which has subscribed to
''Group Gratuity Scheme'' of Life Insurance Corporation of India.
(iii) Pension Fund
The Company has a defined contribution pension scheme to provide
pension to the eligible employees . The Company makes monthly
contributions equal to a specified percentage of the covered employees''
salary. These contributions are administered by the Company''s own Trust
which has subscribed to ''Group Pension Scheme'' of Life Insurance
Corporation of India. The Company''s contributions are charged to
revenue in the period they are incurred - Rs.102.18 Lakhs ( 2012 -
Rs.110.08 Lakhs).
In addition to the above, the Company has a funded defined benefit
pension scheme for its employees in the workmen category. Liabilities
with regard to such defined benefit plan are determined by actuarial
valuation and are charged to revenue in the period determined. The plan
is administered by the Company''s own Trust which has subscribed to
''Group Pension Scheme'' of Life Insurance Corporation of India.
(iv) Leave Encashment
The accrual for unutilised leave is determined for the entire available
leave balance standing to the credit of the employees at period-end.
The value of such leave balance eligible for carry forward, is
determined by actuarial valuation and charged to revenue in the period
determined. The scheme is fully funded by way of subscription to the
''Leave Encashment Scheme'' of Life Insurance Corporation of India.
6. COMPARATIVE FIGURES
The Comparative figures for the previous year have been re-arranged to
conform with the current year presentation of the accounts.
Mar 31, 2011
I Contingent Liabilities
Claims against the Company not acknowledged as debts Rs. 3907.77 Lakhs
(2010 - Rs. 267.19 Lakhs). These comprise -
a. Tax demands disputed by the Company relating to
disallowances/additions of fiscal benefits, pending at various stages
of appeal, aggregating to Rs. 3894.40 Lakhs (2010 - Rs. 149.00 Lakhs).
b. Land disputes representing claims towards land grabbing cases
pending before Honble Special Court aggregating to Rs. Nil (2010 - Rs.
103.16 Lakhs).
c. Other matters relating to labour cases etc. aggregating to Rs.
13.37 Lakhs (2010 - Rs. 15.03 Lakhs).
II Future lease obligations
The Company has entered into various operating lease agreements and the
amounts paid under such agreements have been charged to revenue as Rent
under Schedule 17. All these agreements are cancellable in nature.
III Disclosures regarding Derivative Instruments
The Company uses forward exchange contracts to hedge against its
foreign currency exposures relating to the underlying transactions and
firm commitments. The use of these foreign exchange forward contracts
reduces the risk or cost to the Company and the Company does not use
the foreign exchange forward contracts for trading or speculation
purposes.
IV Amalgamation of VST Distribution, Storage & Leasing Company Private
Limited (DSL) with the Company
Pursuant to the scheme of amalgamation of erstwhile wholly owned
subsidiary DSL with the Company, as sanctioned by the Honble High
Court of Andhra Pradesh on 16th March, 2011, the assets and liabilities
of the erstwhile DSL were transferred to and vested in the Company,
pending mutation, with effect from 1st April, 2010. The scheme has
accordingly been given effect to in these accounts.
The amalgamation has been accounted for under the pooling of interest
method prescribed by the Accounting Standard on Amalgamation (AS-14).
The assets and liabilities and other reserves of the erstwhile DSL as
at 1st April, 2010 have been taken over at their book values.
Consequently, the investment of the Company in DSL and the Equity Share
Capital of DSL stands cancelled.
In veiw of the aforesaid amalgamation with effect from 1st April, 2010,
the figures for the current year are not comparable to those of the
previous year.
V Micro and small scale business entities
There are no micro and small enterprises, to whom the Company owes
dues, which are outstanding as at 31st March, 2011. This information
as required to be disclosed under the Micro, Small and Medium
Enterprises Development Act, 2006 has been determined to the extent
such parties have been identified on the basis of information available
with the Company.
VI Employee Benefits
a. The Employee Benefit Schemes are as under:
i. Provident Fund
Eligible employees of the Company receive benefits under the Provident
Fund which are defined contribution/benefit plans wherein both the
employee and the Company make monthly contributions equal to a
specified percentage of the covered employees salary. These
contributions are made to the Funds administered and managed by the
Government of India/Companys own Trust. The Companys monthly
contributions are charged to revenue in the period they are incurred.
ii. Gratuity
In accordance with the Payment of Gratuity Act, 1972 of India, the
Company provides for gratuity, a defined retirement benefit plan (the
Gratuity Plan) covering eligible employees. Liabilities with regard
to such Gratuity Plan are determined by actuarial valuation and are
charged to revenue in the period determined. The Gratuity Plan is a
funded plan administered by Companys own Trust which has subscribed to
Group Gratuity Scheme of Life Insurance Corporation of India.
iii. Pension Fund
The Company has a defined contribution pension scheme to provide
pension to the eligible employees. The Company makes monthly
contributions equal to a specified percentage of the covered employees
salary. These contributions are administered by the Companys own Trust
which has subscribed to Group Pension Scheme of Life Insurance
Corporation of India. The Companys contributions of Rs. 103.66 Lakhs
(2010 - Rs. 100.64 Lakhs) are charged to revenue in the period they are
incurred.
In addition to the above, the Company has a funded defined benefit
pension scheme for its employees in the workmen category. Liabilities
with regard to such defined benefit plan are determined by actuarial
valuation and are charged to revenue in the period determined. The plan
is administered by the Companys own Trust which has subscribed to
Group Pension Scheme of Life Insurance Corporation of India.
iv. Leave Encashment
The accrual for unutilised leave is determined for the entire available
leave balance standing to the credit of the employees at period-end.
The value of such leave balance eligible for carry forward, is
determined by actuarial valuation and charged to revenue in the period
determined. The scheme is fully funded by way of subscription to the
Leave Encashment Scheme of Life Insurance Corporation of India.
(I) Directors Remuneration
(II) Exceptional items represents expense incurred under Voluntary
Retirement Scheme for employees for the year ended 31st March, 2010 -
Rs. 1241 Lakhs.
(V) Segment Reporting
The Companys business activity primarily falls within a single primary
business segment viz. Tobacco and related products and hence no
business segment information is provided.
The entire activity pertaining to sales outside India is carried out
from India, hence all segment assets are considered entirely to be in
India.
20. Additional Information pursuant to the provisions of Paragraphs 3,
4C and 4D of Part II of Schedule VI of the Companies Act, 1956
a. CLASS OF GOODS, CAPACITY AND PRODUCTION
* The figure of Registered/Licenced Capacity is as re-endorsed on the
Certificate of Registration as on 30th September, 1985 and is exclusive
of an additional 25 per cent of the approved Registered/Licenced
Capacity available to the Company under the Central Governments
Liberalised Industrial Policy.
Mar 31, 2010
I Contingent Liabilities
Claims against the Company not acknowledged as debts Rs.267.19 Lakhs
(2009 - Rs.242.62 Lakhs). These Comprise -
a. Tax demands disputed by the Company relating to
disallowances/additions of fiscal benefits, pending at various stages
of appeal, aggregating to Rs.149.00 Lakhs (2009 - Rs.Nil).
b. Land disputes representing claims towards land grabbing cases
pending before Honble Special Court aggregating to Rs.103.16 Lakhs
(2009 - Rs.227.59 Lakhs).
c. Other matters relating to labour cases etc. aggregating to Rs.15.03
Lakhs (2009 - Rs.15.03 Lakhs).
II Future lease obligations
The Company has entered into various operating lease agreements and the
amounts paid under such agreements have been charged to revenue as Rent
under Schedule 17. All these agreements are cancellable in nature.
Assets acquired by way of finance lease, are stated at the amount,
equal to the lower of their fair value and the present value of the
minimum lease payments.
III Disclosures regarding Derivative Instruments
The Company uses forward exchange contracts to hedge against its
foreign currency exposures relating to the underlying transactions and
firm commitments. The use of these foreign exchange forward contracts
reduces the risk or cost to the Company and the Company does not use
the foreign exchange forward contracts for trading or speculation
purposes.
IV Micro and small scale business entities
There are no Micro and Small Enterprises, to whom the Company owes
dues, which are outstanding as at 31st March, 2010. This information as
required to be disclosed under the Micro, Small and Medium Enterprises
Development Act, 2006 has been determined to the extent such parties
have been identified on the basis of information available with the
Company.
V Employee Benefits
a. The Employee Benefit Schemes are as under:
i. Provident Fund
Eligible employees of the Company receive benefits under the Provident
Fund which are defined contribution/benefit plans wherein both the
employee and the Company make monthly contributions equal to a
specified percentage of the covered employees salary. These
contributions are made to the funds administered and managed by the
Government of India/Companys own Trust. The Companys monthly
contributions are charged to revenue in the period they are incurred.
ii. Gratuity
In accordance with the Payment of Gratuity Act, 1972 of India, the
Company provides for gratuity, a defined retirement benefit plan (the
Gratuity Plan) covering eligible employees. Liabilities with regard
to such Gratuity Plan are determined by actuarial valuation and are
charged to revenue in the period determined. The Gratuity Plan is a
funded Plan administered by Companys own Trust which has subscribed to
Group Gratuity Scheme of Life Insurance Corporation of India.
iii. Pension Fund
The Company has a defined contribution pension scheme to provide
pension to the eligible employees . The Company makes monthly
contributions equal to a specified percentage of the covered employees
salary. These contributions are administered by the Companys own Trust
which has subscribed to Group Pension Scheme of Life Insurance
Corporation of India. The Companys contributions of Rs.100.64 Lakhs
(2009- Rs.93.57 Lakhs) are charged to revenue in the period they are
incurred.
In addition to the above, the Company has a funded defined benefit
pension scheme for its employees in the workmen category. Liabilities
with regard to such defined benefit plan are determined by actuarial
valuation and are charged to revenue in the period determined. The plan
is administered by the Companys own Trust which has subscribed to
Group Pension Scheme of Life Insurance Corporation of India.
iv. Leave Encashment
The accrual for unutilised leave is determined for the entire available
leave balance standing to the credit of the employees at period-end.
The value of such Leave balance eligible for carry forward, is
determined by actuarial valuation and charged to revenue in the period
determined. The scheme is fully funded by way of subscription to the
Leave Encashment Scheme of Life Insurance Corporation of India.
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