Rights, preferences and restrictions attached to equity shares
The Company has one class of equity shares having par value of '1 per share (31st March 2022: '1 per share). Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees.
The Company has paid final dividend of ' 0.40 per equity share of face value '1 each, which was declared during last year..
The Board of Directors at its Meeting held on 29 May 2023, has recommended a final dividend @ 75% i.e. '0.75 per equity share. The dates of the book closure for the entitlement of such final dividend and Annual General Meeting shall be decided and informed in due course of time. In the event of liquidation of the Company, the share holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the share holders.
Nature and purpose of other equity1. Capital reserve :
The same has been created in accordance with provision of the Act on forfeiture of shares and debentures in past and is not available for distribution to owners.
2. Capital redemption reserve:
The same has been created on redemption of share capital and shall be utilised in accordance with provision of the Act.
3. Securities premium:
Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.
4. General reserve
General reserve is created from time to time by way of transfer of profits from retained earnings for appropriation purpose.
5. Retained earnings
Retained earnings are the accumulated profits earned by earned by the Company till date, as adjusted for distribution to owners.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. The same is assessed every year basis business projections of taxable profits in future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
B Defined benefit plan GRATUITY
In accordance with The Payment of Gratuity Act, 1972, the company provides for gratuity, as defined benefit plan. The gratuity plan provides for a lump sum payment to the employees at the time of separation from the service on completion of vested year of employment i.e. five years. The liability of gratuity plan is provided based on actuarial valuation as at the end of each financial year based on which the Company contributes the ascertained liability to Life Insurance Corporation of India and Indiafirst Life Insurance Company Limited with whom the plan assets are maintained.
* DHBVN had demanded t 5.60 crores (31 March 2022 : t 5.60 crores) for overdrawing power as compared to approved load limit. DHBVN filed a writ petition before Hon’ble High Court of Punjab and Haryana which was dismissed on account of nonprosecution on February 15, 2016. Thereafter, DHBVN filed case against the Company with divisional bench of Honourable High Court of Punjab and Haryana. The Company has deposited t 3.60 crores with DHBVN. The case is presently pending and next hearing on July 18, 2023.
(ii) The Company has given comfort letters to banks for funds raised by its subsidiary companies, namely Rico Jinfei Wheels Limited t 20.76 crores (31 March 2022 : t 26.25 crores)
(iii) The Company has given corporate Guarantee for the funds raised by its subsidiary company AAN Engineering Industries Limited t NIL (31 March 2022 : t 0.39 crores).
The Company’s exposure arises mainly on import (of raw material and capital items), export (of finished goods) and foreign currency borrowings. The Company follows a policy of matching of import and export exposures (natural hedge) to reduce the net exposure in any foreign currency. Whenever the natural hedge is not available or is not fully covering the foreign currency exposure of the Company, management uses certain derivative instruments to manage its exposure to the foreign currency risk. Foreign currency transactions are managed within approved policy parameters. The Company uses forward contracts, cross currency swap and interest rate swaps to hedge its exposure to foreign currency and interest rate risk. Effective April 1,2019, these derivatives are designated as hedging instruments in respect of foreign currency risk and interest rate risk in cash flow hedges.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The economic relationship and hedge effectiveness are based on the qualitative factors and the use of a hypothetical derivative where appropriate. The Company has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk and notional amount of the hedging instruments are identical to the hedged items.
The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to support its operations. The Company’s principal financial assets other than derivatives comprise investments, loans given, trade and other receivables and cash and cash equivalents that derive directly from its operations. The Company also enters into foreign exchange derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the mitigation of these risks. The Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in foreign exchange derivatives for speculative purposes will be undertaken. The policies for managing each of these risks, which are summarized below:-
43A Market risk:
Market risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of two types of risks namely currency risk and interest rate risk. The objective of the market risk management is to manage and control market risk exposure within acceptable parameters while optimising the return. a. Foreign currency risk:
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency), investments & borrowing in foreign currency, etc.
The Company’s exposure arises mainly on import (of raw material and capital items), export (of finished goods) and foreign currency borrowings. The Company follows a policy of matching of import and export exposures (natural hedge) to reduce the net exposure in any foreign currency. Whenever the natural hedge is not available or is not fully covering the foreign currency exposure of the Company, management uses certain derivative instruments to manage its exposure to the foreign currency risk. Foreign currency transactions are managed within approved policy parameters.
Cash and cash equivalents and bank balances
Credit risk relating to cash and cash equivalents and restricted cash is considered negligible as counterparties are banks. The management considers the credit quality of deposits with such banks to be good and reviews the banking relationships on an on-going basis.
Trade Receivables
Trade receivables are unsecured in nature and are derived from revenue earned from customers. Trade receivable are non-interest bearing and are settled upto 30 to 180 days terms.
Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to whom the Company grants credit terms in the normal course of business. In accordance with Ind AS 109, the Company uses expected credit loss model to assess the impairment loss. The Company uses a provision matrix to compute the expected credit loss allowance of trade receivables. The provision matrix takes into account available external and internal credit risk factors such as default risk of industry, historical experience for customers, etc. However, the allowance for lifetime expected credit loss on customer balances for the year ended 31 March 2023 and 31 March 2022 is insignificant.
46 Business Combination (common control transaction with its wholly owned subsidiary company, Rico Investments Limited and step down subsidiary companies namely RASA Autocom Limited and Rico Aluminium and Ferrous Auto Components Limited.
The Board of Directors of the Company, based on the recommendation of Audit Committee, in its meeting held on 26 July 2021, have considered and approved the Scheme of Amalgamation (“Scheme”) for merger of its subsidiary company namely M/s. Rico Investments Limited and step down subsidiary companies namely M/s. RASA Autocom Limited and M/s. Rico Aluminium and Ferrous Auto Components Limited (“Transferor Companies”) with the Company, pursuant to Sections 230 to 232 of the Companies Act, 2013, with effect from Appointed Date i.e. 01 April 2021. The Scheme was filed with National Company Law Tribunal (“NCLT”) on 29 September 2021 and was approved by NCLT on 15 February 2023.
Pursuant to the Scheme, all the assets, liabilities, reserves and surplus of transferror companies have been vested in the Company with effect from 1 April 2021 at the carrying values in financial statements of transferor companies in accordance with IND AS 103.
47 Transfer pricing
The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income-tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation of the international transactions entered into with the associated enterprises from 1 April 2022 and expects such records to be in existence before the due date of filing of income tax return. The management is of the opinion that its international transactions are at arm’s length so that the aforesaid legislation will not have any impact on the Standalone Financial Statements, particularly on the amount of tax expense and that of provision for taxation.
48. Segment Reporting
The Company is engaged in the business of manufacturing and assembling of automotive components. The Chief Operating Decision Maker (CODM) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by industry classes. All operating segments’ operating results are reviewed regularly by CODM to make decisions about resources to be allocated to the segments and assess their performance. CODM believes that these are governed by same set of risk and returns hence CODM reviews as one balance sheet component. Further, the economic environment in which the company operates is significantly similar and not subject to materially different risk and rewards.
The operating segment of the Company is identified to be “Automotive components” as the CODM reviews business performance at an overall Company level as one segment.
Accordingly, as the company operates in a single business and geographical segment, the reporting requirements for primary and secondary disclosures under Indian Accounting Standard - 108 Operating Segment have not been provided in the standalone financial statements.
51 Capital Management
The Company’s capital management objectives are:
The capital structure of the Company consists of debt, cash and cash equivalents and equity attributable to equity shareholders of the Company which comprises issued share capital (including premium) and accumulated reserves disclosed in the Statement of Changes in Equity. The Company’s capital management objective is to achieve an optimal weighted average cost of capital while continuing to safeguard the Company’s ability to meet its liquidity requirements (including its commitments in respect of capital expenditure) and repay loans as they fall due. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is debt divided by total equity. The Company’s policy is to keep an optimum gearing ratio. The Company includes within debt, interest bearing loans and borrowings.
52 Events after Balance sheet date
There are no reportable subsequent events after the balance sheet date.
53 Additional regulatory information not disclosed elsewhere in the financial information
(i) No proceeding has been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.
(ii) The Company has not been declared as wilful defaulter by any bank or financial Institution or other lender.
(iii) The Company has not entered into any transactions with companies struck off under section 248 of the Companies Act, 2013
or section 560 of Companies Act, 1956.
(iv) The Company (as per the provisions of the Core Investment Companies (Reserve Bank) Directions, 2016) does not have more than one CIC (the same is not required to be registered with RBI as not being Systemically Important CIC ).
(v) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(vi) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(vii) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(viii) The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(ix) The Company does not have any charge which is yet to be registered with ROC beyond the statutory period.
(x) The Company has not advanced or provided loan to or invested funds in any entities including foreign entities (Intermediaries)
or to any other persons, with the understanding that the intermediary shall:
i. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (ultimate beneficiaries) or
ii. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
(xi) The Company has not received any fund from any persons or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
i. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (ultimate beneficiaries) or
ii. provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
(xii) The Company has not undertaken any transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
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