Valuation technique used to determine fair value:
Specific valuation techniques used to value financial instruments include:
- Company has invested in equity share of “The Gandhinagar Urban Co-op Bank Ltd.” as it is requirement for bank account operation. Therefore, the amount invested is considered as fair value.
Fair Value of Financial Assets & Liabilities measured at amortised cost
- The carrying amounts of trade receivables, trade payables, capital creditors and cash and cash equivalents are considered tobe the same as their fair values, due to their short-term nature.
- The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They areclassified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk. They are subsequently measured at amortised cost at balance sheet date.
. Financial Risk Management
The Company's activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of
risk which the entity is exposed to.
Credit Risk Management
Company assesses and manages credit risk based on internal credit rating system. The finance function consists
of a separate team who assesses and maintains an internal credit rating system. Internal credit rating is performed
on for each class of financial instruments with different characteristics.
The company is making no provision on Trade Receivables based on Expected Credit Loss Model (ECL).
Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at local level in the operating companies of the Company in accordance with practice and limits set by the Company. These limits vary by location to take into account the liquidity of the market in which the entity operates. In addition, the Company's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
Market Risk Management 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 does not exposure outstanding on receivables or payables at the end of the reporting period but is exposed to foreign exchange risk as investment in subsidiary. Investment in subsidiary is measured at cost, so no impact on profit or loss and total equity.
Price Risk
The Company's exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet at fair value through profit or loss.
To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.
Cash flow and fair value interest rate risk
The Company's main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. During 31 March 2021 and 31 March 2020, the Company's borrowings at variable rate were mainly denominated in INR.
The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
. Segment information
In line with Ind AS 108 operating segments and basis of the review of operations being done by the senior management, the operations of the group fall under civil construction business which is considered to be the only reportable segment by the management. The Company is principally engaged in a single business segment viz., “civil construction” which is also the major revenue generating product.
. Contingent Liabilities and Assets
(a) Contingent Liabilities not provided for are Rs. 2500Lacs (Previous year-Rs. 3700 Lacs), being bank guarantees issued by Punjab National Bank, Gandhinagar on behalf of the company.
(b) The company has been claiming Income Tax benefit under section 80IA(4) of the Income Tax Act,1961 from year to year. The Income Tax Assessing officer has disallowed the company's such claim from assessment year 2003-04 to 2011-12 till date. The company preferred appeals against the said disallowance and the appeals for AY 2003.04 to AY 2007.08 are pending with ITAT Ahmedabad.
For assessment year 2008-09 to 2013-14 the company's claim u/s 80IA(4) is allowed by the Income Tax department.
Further, the Company has paid the entire tax liabilities for A.Y. 2003.04 to 2007.08 due to such disallowance.
(c) In continuation with our note No. 2(c) of the Schedule of notes to the Accounts for the earlier year 2017-18 with regard to rent and interest of Rs 2,30,77,329/- demand raised by the Ahmedabad Muncipal Corporation (AMC) - the company has denied this claims of the AMC and between the legal passe the H'ble Gujarat High Court had appointed Shri H.B. Antony as Arbitrator. However due to his sad demise the Court has appointed Shri S. I. Patel in his place and proceedings are underway at present and company is expecting favorable award in its favor. Looking to this the company has still not provided for the said Rent, Interest thereon.
(d) There are certain disputes with AMC with regards to the quality of road construction and this has resulted in overdue payment of Rs 26.53 Crores from AMC. The Company however treats these as good, though overdue on the basis of proceedings going on at present.
(e) Company has available as MAT Credit under Income tax rules. However, company has recognized assets only when it availed. MAT Available for ended AY 21-22 of Rs 2,82,32,739/-.
f) The Company had made a petition (vide Petition No.177 of 2018) under Arbitration Act as per the guidelines of H'ble Gujarat High Court against GIDC., Modasa for the work “Upgradation of existing road, Approach,SWD, slab culvert and water supply at GIDC., Modasa Industrial Estate under A.I.I. Scheme” for not releasing the work order and work even after Company has given necessary security deposit and Bank Guarantee.
The Arbitrator Shri K.S. Jhaveri had given award in favor of the Company for Rs. 49,37,049/- on 31.05.2021 as has been appointed by Gujarat High Court after the First arbitrator late Shri H.B. Antani passed away on 24.08.2020.
The Company’s management has booked the above amount as income in the year under review
i.e.FY 2020-21 considering the following facts.
i. Had the said work order was not cancelled, we could have completed the work within one year as per the tender condition and booked the income in 2019-20
ii. Had the First Arbitrator not expired, he could have awarded the same in FY 2020-21
iii. On the date of award, the audit for FY 2020-21 was not completed.
Impact of the CoVID-19 pandemic on the business
All the operations were disrupted since mid of March, 2021 and were partially resumed from early May, 2021. The condition is estimated to come back to normalcy by First half of the Financial year 2021-22.
Ability to maintain operations including the factories/units/office spaces functioning and closed down.
The operations at project site and Corporate Office has been resumed and the company is adhering to the safety norms prescribed by the Government of India, related to Social Distancing, mandatory wearing of face mask, face cover, proper sanitization of work place and working with the reduced work force to maintain social distancing. Amidst the crisis, the safety of our employees has been our top-most priority and the Company has taken several measures to ensure their well-being. All employees have been instructed to download the Aarogyasetu app launched by the Government of India. We have curtailed the number of employees working at the plants. At the Registered office of the Company also limited number of employees is called for carrying out operations. Schedule, if any, for restarting the operations:
As stated above, the Company has partially commenced the operation. Based on the availability of raw material at regular level and migrating back labourers from other states, the Company will commence the operations at other sites also.
However, we expect that all the plants would be operative by July 2021.
Steps taken to ensure smooth functioning of operations:
All the locations/plants/ office spaces, where the Company is operating, have been sanitized to ensure safety of the work force of the Company. All safety protocols such as temperature checking, maintaining social distancing, sanitizing and washing hands at regular intervals are being adhered very stringently.
Estimation of the future impact of COVID-19 on its operations:
Considering the fact that the situation is exceptional and is changing dynamically, the Company is not in a position to gauge with certainty, the future impact on its operations. However, the Company is confident about adapting to the changing business environment and respond suitably to fulfill the needs of its customers. While the urgent reverse migration of the migrant work force poses challenges, the Company is quite confident that the demand situation will pick up progressively.
Details of impact of CoVID-19 on listed entity’s:
• Capital and financial resources - The Company has availed for Working Capital Term Loan (WCTL) under Government of India's guaranteed Emergency credit line. The Company has also implemented stringent cost control measures across the organization to conserve cash to address any evolving situation resulting from the pandemic.
• Profitability—It is not effected as the company had taken necessary measures in cost reduction.
• Liquidity position- the Company has confident to meet its commitments for maintaining Liquidity position.
• Ability to service debt and other financing arrangements: The Company has sufficient cash funds to meet up the debt obligations on timely basis.
• Assets: The Company does not foresee any challenge in realizing/recovering its assets.
• Internal financial reporting and control: There is no material impact on internal financial reporting and control.
• Supply chain: The Company is also in constant touch with its key vendors and is working with them to mutually partner each other to propel the business forward.
• Demand for its products/services: It will continue at netural.
Existing contracts/agreements where non-fulfillment of the obligations by any party will have significant impact on the listed entity’s business:
The Company is well positioned to fulfill its obligations and existing contracts/arrangements. At present, we do not foresee any contract/agreements which will have significant impact on the business in case of non-fulfilment of obligations by any party.
44. Previous year's figures have been rearranged and reclassified wherever necessary to correspond with the current year. The statement of financial position as disclosed for the quarter ended 31st March, 2021 financial results have been reclassified or rearranged due to changes in financial reporting requirements arising from the new or revised standards or interpretations or change in the use of one or more optional exemptions from full retrospective application as permitted under Ind AS 101.
45. Authorization of Financial statements
The financial statements for the year ended 31st March, 2021 were approved by the Board of Directors on 30th June, 2021.
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