a) Terms /Rights attached to Equity shares
The Company has only one class of equity shares having par value of ? 10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the 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 shareholders.
b) Pursuant to resolution passed at the meeting of the Board of Directors on Company held on October 17, 2022, the members of the Company be and is hearby accorded to increase the eixsting Authorised share capital of the Company of ? 15,00 divided into 1,50,00,000 equity shares of face value of ?. 10 each to ? 17,50 divided into 1,75,00,000 equity shares of face value of ?. 10 each.
c) "Pursuant to resolution passed at the meeting of the Board of Directors on Company held on October 17, 2022, the Company had issued and allotted, on preferential basis 10,00,000 equity shares of face value of ? 10/- each at a price of ? 108/- (including securities premium of ? 98/- per equity share) to promoter and non-prometer group. The object of this preferential issue is to utilize the proceeds to meet working capital requirement and expansion of business, general corporate purpose and such other purpose as the Board may decide from time to time. Funds raised are utilised for working capital purpose and kept in fixed deposits."
Nature of reserves
a) General Reserve
The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General reserve will not be reclassified subsequently to the Statement of Profit and Loss.
b) Capital Reserve
The Capital reserve is created on account of forfeiture of share application money.
c) Securities Premium
Securities premium account comprises of premium on issue of shares. The reserve is utilised in accordance with the specific provision of the Companies Act, 2013.
d) Retained Earnings
Retained earnings represents surplus/accumulated earnings of the Company and are available for distribution to shareholders.
In accordance with IND AS 108 "Operating Segments", segment information has been given in the consolidated financial statements of the Company, and therefore, no separate disclosures on segment information is given in these financial statements.
40 Employee benefit obligationsi) Defined Contribution Plans
Provident Fund: Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
ii) Defined Benefits Plans
Gratuity: The Company provides for gratuity, a defined benefit plan (the “Gratuity Plan”) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. The Company’s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. The fair value of the plan assets of the trust administered by the Company, is deducted from the gross obligation.
The following table sets forth the status of the gratuity plan of the Company, and the amounts recognized in the Balance sheet and Statement of Profit and Loss.
Funding
The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC, a funded defined benefit plan for qualifying employees
Salary escalation rate: The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
Discount rate: The discount rate is based on the prevailing market yields of Indian government securities for the estimated term of the obligations.
Assumptions regarding future mortality experience are set in accordance with the statistics published by the Life Insurance Corporation of India.
The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to change in the market scenario.
Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by the amounts shown below;
42 Financial Instruments - Accounting Classifications and Fair Value Measurements
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced of liquidation sale.
The following methods and assumptions were used to estimate the fair values:
Fair value of cash and cash equivalent, bank balances other than cash and cash equivalent, trade receivables, trade payables, other current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
During the reporting period ended 31 March 2023 and 31 March 2022, there was no transfer between level 2 and level 3 fair value measurements.
43 Financial risk managementThe Group has exposure to the following risks arising from financial instruments:
- Credit risk;
- Liquidity risk; and
- Market risk
The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports to the board of directors on its activities.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed periodically to reflect changes in market conditions and the Company’s activities. The Company, through its training, standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The audit committee oversees how management monitors compliance with the company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.
Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.
The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk that company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:
i) Actual or expected significant adverse changes in business,
ii) Actual or expected significant changes in the operating results of the counterparty,
ii) Financial or economic conditions that are expected to cause a significant change to the counterparty's ability to meet its obligations,
iv) Significant increases in credit risk on other financial instruments of the same counterparty,"
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. Where receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
Trade and other receivablesThe Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. Credit terms are in line with industry trends.
Expected credit loss assessment for customers as at March 31,2022 and March 31,2023
Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue.
Cash and bank balance
The Company held cash and bank balance with credit worthy banks and financial institutions of ? 2,319 lacs and ? 1,125 lacs as at March 31,2023 and March 31,2022, respectively.The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.
ii) Liquidity risk
Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time. The Company's treasury department is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company's net liquidity position through rolling forecast on the basis of expected cash flows.
iii) Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruemtns. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables and payables.
The Company manages market risk through a treasury department, which evaluates and excercises independent control over the entire process of market risk management. The treasuy department recommends risk management objectives and policies, which are approved by Senior Management and the Audit Committee. The activities of this deparment include management of cash resources, implementing hedging strategies for foreign currency exposures and ensuring compliance with market risk limits and policies.
Interest rate risk is the risk that the fair value or future cashflows of a financial instrument will fluctuate because of changes in market interest rates. The Company main interest rate risk arises from long-term borrowings with fixed rates.
The company’s 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.
44 Capital management
For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to safeguard the Company’s ability to remain as a going concern and maximise the shareholder value. The Company manages its capital structure and makes adjustments in light of changes in economic conditions, annual operating plans, long term and other strategic plans and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust its dividend payment (refer note 18) ratio to shareholders, return capital to shareholders or issue fresh shares. The Company monitors capital using a ratio of 'adjusted net debt' to 'equity'. For this purpose, adjusted net debt is defined as liabilities, comprising interest-bearing loans and borrowings less cash and cash equivalents. Equity comprises all components of equity including share premium and all other equity reserves attributable to the equity share holders.
In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year.
No changes were made in the objectives, policies or processes for managing capital of the Company during the current and previous year.
46 Statement of right issue proceeds
On March 19, 2020 the Company has allotted 23,47,990 fully paid-up Equity Shares of face value ? 10 each (“Equity Shares”) at an issue price of ? 36/- (including a premium of ? 26/- per Equity Share) for cash to the existing equity shareholders in the ratio of 1 (One) fully paid up Equity Shares for every 5 (Five) fully paid Equity Shares held by the existing equity shareholders on Rights basis. There is no deviation in use of proceeds from the objects stated in the Offer document for rights issue. Pursuant to IND AS 33, basic and diluted earnings per share have been adjusted in respect of right issue made during the year ended 31st Mar 2020.
Explanation for variance exceeding 25% :
1 Performance of the Company has improved. So the Current ratio has also improved.
2 Debt - Equity ratio has improved with infusion of more equity as preferential allotment by promoter and non promoter group.
3 With good performance of the Company, the Company's EBITDA has increased considerably, which has resulted in improved Debt service Coverage ratio.
4 PAT has improved significantly due to increase in turnover of the Company, which has resulted in to increase in ratio.
5 Turnover of the Company has improved considerably. As a result, the inventory turnover ratio has decreased.
6 Turnover of the Company has improved considerably. As a result, Debtors turnover ratio has its effect.
7 Adjusted Expenses has increased with increase in turnover.Average Trade payables has come down with regular payment, hence payable turnover ratio has improved.
8 Improved performance in turnover has resulted in better capital turnover ratio,better return on capital & better profit ratio.
9 No dividend received from subsidiary in FY 22-23.
49 Loss by Fire
There was incidence of fire at one of the unit in factory of the Company located at Ankleshwar on October 30, 2019 in which certain property, plant and equipment and inventories were damaged and destroyed. The Company had duly filed its insurance claim. Pending finalisation of insurance claim, the Company had written off inventories and written down the value of property, plant and equipment of ? 295 and ? 349, respectively and recognised an insurance claim of ? 612. The Company had received amount of ? 363 on February 11,2022 and ? 12 towards salvage value of materials. Consequently, ? 224 was pending to be received from the insurance company as on March 31,2022, out of which the Company has accepted loss of claim of ? 82 and written off the same in the books of account on March 31, 2022. The Company had made application with insurance company on March 18, 2022 for considering the balance claim of ? 142, which was ex-parte rejected by the insurance company on April 29, 2022. The Company had re-lodged the claim with insurance company on May 6, 2022, hearing of which is under progress. The Company is confident of recovery of the balance claim of ? 142. However, on prudence basis, provision of ? 71 has been made.
50 Investment in Subsidiary company
The Company has made investment of ? 25 in Avery Pharmaceuticals Private Limited (Subsidiary Company) and granted loan (including interest) of ? 3,050 to said subsidiary company. Net worth of subsidiary company as at March 31,2023 is negative. The Company has obtained fair valuation of the said subsidiary company from the independent external valuer company as at March 31, 2023. Based on the fair valuation report and approved business operation plan, the management does not expect any major impairment in the value of investment in subsidiary as required under IND AS 27 "Separate Financial Statements". A provision of ? 74 for expected credit loss has however been provided as required under IND AS 109 "Financial instruments".
51 Additional regulatory information required by Schedule III to the Companies Act, 2013
(i) The Company does not have any benami property held in its name. No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.
(ii) The Company has not traded or invested in Crypto currency or Virtual Currency during the year.
(iii) The Company has not come across any transaction ocurred with struck-off companies under section 248 of the Companies Act, 2013 or section 560 of the Companies Act, 1956.
(iv) The Company has not been declared wilful defaulter by any bank or financial institution or other lender or government or any government authority.
(v) The Company does not have any charges or satisfaction of charges which is yet to be registered with the Registrar of the Companies beyond the statutory period.
(vi) Utilization of borrowed funds and share premium :
(I) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
(b) Provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
(II) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) Provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
(vii) There is no income surrendered or disclosed as income during the year in tax assessments under the Income Tax Act, 1961 (such as search or survey), that has not been recorded in the books of account.
viii) The Company has not revalued its Property,Plant and Equipment during the year.
ix) The Company has not revalued its intangible assets during the year
52 The Company has a process whereby periodically all long term contracts are assessed for material foreseeable losses. At the year-end, the Company has reviewed all such contracts and confirmed that no provision is required to be created under any law / accounting standard towards any foreseeable loss.
53 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 November 13, 2020, and invited suggestions from stakeholders which are under consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified. The Company will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published
54 The financial statements are approved for issue by the Audit Committee and the Board of Directors at their respective meetings conducted on May 27, 2023.
55 The Board of Directors have recommended a dividend of ? 1/- per Equity Share of ? 10/- each (10%) for the year ended March 31, 2023, which is subject to approval of shareholder's in ensuing Annual General Meeting.
56 Comparative previous year's figures have been reworked, regrouped and reclassified to the extent possible, wherever necessary to confirm to current year's classification and presentation
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