A. Carrying value of vehicles includes equipment offered to customers for trials on No Cost No Commitment (NCNC) basis ?318.28 Lakhs (Previous Year - ?510.76 Lakhs).
B. Property, Plant and Equipment
i) Book Value of Land ?636.58 Lakhs and Buildings ?327.89 Lakhs have been transfered to M/s BEML Land Assets Ltd (BLAL), a Govt. Company, as per MCA
approved Scheme of Arrangement for demerger filed with ROC on the appointed date i.e., 25.08.2022. The same has been adjusted against retained earnings. Summary of the Land and buildings transferred is as under:
Details of Demerged assets:
Land Assets at Bengaluru, Mysore, New Delhi, Ranchi, Asansol & Bilaspur: '636.58 Lakhs.
Building Assets at Bengaluru, Mysore, New Delhi, Ranchi, Kolkata, Goa, Bhopal, Mumbai, Chennai & Kochi:
'327.89 Lakhs.
ii) Buildings include carrying value of building at Ranchi pending registration / khatha transfer at '10.49 Lakhs (Previous Year '10.87 lakhs)
iii) The Company has taken land measuring 1109 acres and two workshops on lease for a period of 10 years vide Lease Agreement dated 5th May 2004, w.e.f. 28.04.2004 from M/s Bharat Gold Mines Limited (BGML) (A Company under orders of winding up by BIFR), and a sum of '100 Lakhs was paid as nonrefundable deposit, (included under Other non-current assets (Note no.11)). As per the terms of the Lease agreement, this deposit shall be adjusted against the outright sale/transfer of ownership that may be fixed for the property and lessee shall be free to construct new building/alter the existing building/ lay roads/fence the land in the interest of furthering its business to suit its use and on expiry of the lease the said building shall vest with the lessor on payment of consideration
based on value prevailing on the date of handing over of the property. The Company had incurred on the above land a sum of '1452.95 Lakhs (with carying value - '769.48 Lakhs) on Buildings (Previous Year - '814.27 Lakhs) included in Property, Plant and Equipment as at year end.
Vide order dated 09.07.2013, the Hon'ble Supreme Court of India upheld the decision of the Union Government to float a global tender of BGML assets with an observation about the existence of sub-lease of a portion of the land to BEML Ltd expiring on 28.04.2014 to be included in the tender documents. The Company filed an Interlocutory application before the Hon'ble Supreme Court of India, praying for exclusion of land leased to BEML from the purview of global tender, which was dismissed. Since the lease agreement provides for the continuation of the lease even after the expiry of lease period on 28.04.2014 till the final decision of the Company / Government in this regard, the operations of the company on the above land is continued. Appropriate accounting action will be considered based on the outcome of the tender process.
Meanwhile, since BEML is under strategic Disinvestment, BEML has proposed to surrender 1080.65 Acres out of 1109 Acres of land to BGML and to enter into a fresh lease agreement for the balance operational area of 28.35 Acres. However, BGML has offered BEML to outrightly purchase the land of 28.35 acres at mutually agreed price. The modalities of completeing the surrender &
purchase/ transfer process of the aforesaid land parcels are under consideration by BEML & BGML.
iv) Lease-hold Land includes 147.95 acres at Palakkad under lease from Kerala Industrial Infrastructure Development Corporation (KIIDC). During the current year, land measuring 226.21 acres out of 374.16 acres has been surrended to KIIDC against consideration of ? 2759.02 Lakhs. The book value of Lease hold land has been adjusted accordingly.
v) Lease Hold Land includes land measuring 101175.92 Sq. Mtrs taken on perpetual lease from KIADB (Bangalore Aerospace, SEZ Park) at a cost of ?5126.00 Lakhs (Previous Year - ?5126.00 Lakhs).
vi) No Provision considered necessary for impairment of assets as the realizable value of assets technically assessed is more than the carrying cost of these assets.
vii) Free Hold Land measuring 3.647 acres of land, surrendered to BBMP against TDR (at cost) is ?4.58 Lakhs. Free Hold Land measuring 1.937 acres of land surrendered to BBMP for
which TDR yet to be received (at cost) is ?2.43 Lakhs.
Above TDR will be utilised for further construction.
viii) Company has taken action to obtain title documents in respect of flat at Ashadeep, New Delhi - ?2.80 Lakhs.
ix) For information on estimated capital contracts pertaining to the acquisition of property, plant and equipment, refer Note no. 39 D II a.
x) Free hold at KGF does not include 114 Acres which is under reconciliation with DC,Kolar.
xi) Non current assets held for demerger
not included in PPE: (?in Lakhs)
2022-23 2021-22
1) Land carrying value - 304.39
2) Building carrying value - 45.78
Total - 350.17
C. Amount of borrowing cost capitalised on addition of assets during the year: Nil.
D. Since there is no investment property in the Company as on 31.03.2023, fair value of investment property is Nil (Previous Year - Nil).
a. BEML along with Midwest Granite Private Limited formed a joint venture company in 2007 to conduct excavation and extraction of mineral resources. The agreement was signed in September 2005 whereby BEML has a 45% share in the operations of the joint venture and the remaining 55% is held by Midwest Granite Private Limited.
b. The Joint Venture Company BEML Midwest Ltd has not prepared its financial statements as at 31st March, 2023 due to litigation pending before National Company Law Tribunal. Hence, disclosure requirements under Ind AS-28 (Investments in Associates and Joint Ventures) could not be complied with. In the absence of financial statements of the JV, the same has not been consolidated with BEML financial statements.
c. For demerger of surplus assets of BEML, a wholly owned subsidiary- BEML Land Assets Limited (BLAL), was incorporated on 15-07-2021. MCA approved Scheme of Arrangement for demerger has been filed with ROC. The effective date of demerger was 25-08-2022 (the appointed date). M/s BLAL has ceased to be a subsidiary of BEML from the appointed date. As per the scheme of arrangement of demerger the Equity share capital of ?1 Lakh of BLAL has been cancelled and the corresponding investment of ? 1 Lakh in BEML books has been written off.
d. As per CCEA approval dtd 8th September 2021, M/s Vignyan Industries Ltd, a subsidiary of BEML is under Voluntary Liquidation and Official Liquidator has been appointed on 11-10-2021. Movable assets have been disposed off and disposal of immovable assets is in progress. Dues of employees of VIL have been settled. As on 31-03-2023 there are no employees on the rolls of M/s VIL.
In respect of BEML Brazil Industrial Ltda , an associate the company has written to RBI through authorized dealer SBI, Overseas Branch, Bangalore for closure of Unique Identification Number (UIN) issued in respect of BBIL.
A) Adoption of Income Tax Rates
The Ministry of Law & Justice, Govt. of India vide Gazette notification dated 20.09.2019 introduced section 115BAA with an option to choose Revised Tax Structure applicable w.e.f 01.04.2019 to Domestic Companies without claiming specific deductions u/s 35(2AB), deduction under Chapter-VIA, MAT Credit benefits, Carry Forward Business Losses, Additional Depreciation u/s 32(1)(iia) and other deductions as specified in the said section.
Based on the internal assessment, the Company has decided to adopt the Revised Tax Structure u/s 115BAA w.e.f FY 2022-23. Accordingly, the tax liability for the current year and deferred tax assets/liabilities have been restated in line with the new tax structure. The impact due to adoption of new tax regime is ?2180.69 Lakhs savings in current tax and tax expenses of ?4206.00 Lakhs due to restatement of deferred tax assets at lower tax rates.
a. The Company has entered into a Consortium Agreement (MAMC Consortium) with M/s. Coal India Limited (CIL) and M/s. Damodar Valley Corporation (DVC) on 08.06.2010 for acquiring specified assets of M/s. Mining and Allied Machinery Corporation Limited (under liquidation). The agreement, inter-alia, provided for formation of a Joint Venture company with a shareholding pattern of 48:26:26 among BEML, CIL and DVC respectively. The Company has paid the proportionate share of ?4800.00 Lakhs towards the total bid consideration of ?10000.00 Lakhs towards the said acquisition, based on the order passed by the Hon'ble High Court of Calcutta. The said assets are taken possession by the MAMC Consortium. Further, the Company has incurred a sum of ?2397.10 Lakhs (Previous Year - ?2027.18 Lakhs) towards maintenance, security and other related expenditure. The expenditure incurred by CIL and DVC on account of this proposal is not ascertained. The total sum of ?7197.10 Lakhs (Previous Year -?6827.18 Lakhs) is disclosed as 'Advance to MAMC consortium', pending allotment of equity shares in the capital of the JV company. Since the company intends to treat this as a long term investment, no independent valuation of the assets taken over has been done and the diminution in value of investments, if any, can be ascertained only after the formulation of business plan and approval of shareholders' agreement from MOD which is being pursued.
Further, a company in the name of 'MAMC Industries Limited' (MIL) was formed and incorporated as a wholly-owned subsidiary company for the intended purpose of JV formation. Shareholders' agreement, as duly approved by the Boards of all the three members of the consortium, has been submitted to Ministry of Defence for necessary approval. After obtaining the said approval, MIL, would be converted into a JV Company. The Company has advanced a sum of ?603.97 Lakhs (Previous Year - ?603.66 Lakhs) on account of MIL, which is included under the head 'Advances to related parties'.
a. Raw materials & Components include materials lying with sub contractors ?2612.23 Lakhs (Previous Year - ?2783.11 Lakhs). Out of these, confirmation from the parties is awaited for ?226.54 Lakhs (Previous Year ?214.86 Lakhs).
b. Raw materials in transit include ?1962.66 Lakhs (Previous year ?751.82 Lakhs) of materials received in the factory/depot for which quality clearance is pending.
c. The closing stock of work-in-progress and finished goods are stated at lower of standard cost, which approximates to actuals and net realisable value. The difference between the actual cost of production and the standard cost is not material.
d. Variances arising on account of difference between standard cost and the actual cost, on account of change in the nature of inputs from bought-out to internally manufactured or vice versa, timing difference between standard cost and actual occurrence during the financial period and fluctuations in the material prices, is adjusted in the cost of production in order not to carry forward the period variances to subsequent financial period.
e. Allowance towards obsolescence is made as per the Board approved provisioning norms and is based on ageing of inventory.
a. The Company earns no interest on balances with banks in current accounts.
b. Balances with bankers includes the following on which on which there were restrictions placed on use and / or held onbehalf of third parties:
(i) ESCROW account balance to be distributed among consortium members '532.01 Lakhs (Previous Year '341.74 Lakhs).
c. Out of the Cash Credit Limit of '120000 Lakhs sanctioned to the company by Consortium Bankers, the amount drawn by the company as on 31st March 2023 is '32183.68 Lakhs (Previous Year '54324.40 Lakhs)
d. FDRs include '133.63 Lakhs being proceeds from surrender of 4706 Sqm of lease hold land at Hyderabad to TSIIC, '2759.02 Lakhs from surrender of 226.21 acres of Leasehold Land to M/s. KIIDC (KINFRA) Kerala and '50.31 Lakhs against vendor dues forming part of Short Term Deposits.
Rights and restrictions attached to equity shares
The company has only one class of share, i.e., equity shares having the face value of '10 per share. Each holder of equity share is entitled to one vote per share. Dividend is paid in Indian Rupees. The dividend recommended by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting. In the event of liquidation of the Company, equity shareholders will be entitled to receive remaining assets of the Company after distribution of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.
No shares of the Company is held by its subsidiaries. The Company does not have any holding company.
No shares of the Company is reserved for issue under options and contracts/commitments for the sale of shares / disinvestment.
The Board of Directors have approved payment of an Interim Dividend of ?5.00 per equity share
i.e., 50% on equity shares of ?10 each on 10.02.2023 which was paid to Government of India on 15.02.2023 and to other eligible shareholders.
Secured Redeemable Non-convertible Debentures :
During May'22, the last tranche of '10000 lakhs of Non-Convertible Debentures were redeemed by the Company. With this the entire amounts of NCDs have been fully redeemed.
The company has utilised the borrowings from banks and financial institutions for the purpose for which it was been taken.
1. For movement in the provisions during the year refer Note no. 28
2. The provision for employee benefits represents annual leave and vested long service entitlements accrued.
3. Warranty provisions are recognised on a contract-by-contract basis for goods sold over the warranty period. The provision is based on estimates of probable likelihood of product failure and returns based on current sales level and past experience.
4. Provision for unexpired obligations is towards supply of Backup Spares against guaranteed availability contracts.
Micro and Small Enterprises (MSE)
The information under MSMED Act, 2006 has been disclosed to the extent such vendors have been identified by the company. The details of amounts outstanding to them based on available information with the Company is as under :
A. 1. Revenue from operations does not include GST on sale of products and services up to
March 2023 amounting to ?71,013.46 Lakhs (Previous Year ?65326.05 Lakhs).
2. Revenue from sale of products include ?540.00 Lakhs (Previous Year ?1014.00 Lakhs) on account of Sale of 2 Nos. of equipment and ?2064.42 Lakhs for spares (previous year ?NIL) on "Bill and hold " basis recognised in accordance with Ind AS-115. This does not bear any custodian charges.
3. Revenue from sale of products and services include ?83013.14 (Previous Year ?56474.04 Lakhs) towards export sales (including deemed exports).
B. 1. Revenue is recognized "over the period of time" on the contracts wherever transfer
of control on goods/services and performance obligation satisfied over time. All other revenue is recognized at a point in time when control transfers.
2. Revenue from sale of products and services include ?78442.64 Lakhs, ?15663.66 Lakhs and ?5.42 lakhs (Previous Year - ?91651.13 Lakhs, NIL and ?122.47 Lakhs) recognised "over the period of time" in respect of (a) Contracts entered with Metro Corporations for design, manufacture, supply, testing & commissioning of metro cars, (b) Contract with M/s LORAM for supply of Rail Grinding Machines and
(c) in respect of ARV Overhauling Contracts in Defence business, respectively due to adoption of Ind AS 115 effective from 01-04-2018.
3. In case of Metro supply contracts, Rail Grinding Machine and Equipment Rehabilitation, Mining Aggregates Repairs and overhauling contract, for determination of transaction price for the purpose of recognizing revenue "over the period of time", Input Cost Method has been considered.
4. Following are the closing and opening balances of Receivables, Contract Assets and Contract liabilities (which are measured under Input Cost Method);
5. Payments under the Metro Supply Contracts and Rail Grinding Machine Contract are released by customers upon completion of milestones of cost centers identified in the contracts.
6. Payments are released by customers under Equipment Rehabilitation and Aggregates Repairs Contracts upon completion of Repair/Rehabilitation, delivery and acceptance of the items at Customer site as indicated in the Contract.
7. Warranties: In respect of Metro Contracts, Defect Liability periods are applicable from the date of taking over of Train sets by the Customers. Comprehensive warranty is provided for a period of 24 months from the date of acceptance for Defence Equipment.
8. Standard Warranty is provided for a period of 12 months or 4000 hours of satisfactory performance of Equipment (Mining & Construction) after delivery and commissioning. However, warranty for Electrical items is for 12 months/3000 hrs from the date of commissioning whichever is earlier.
9. ?150278.84 Lakhs for Metro and Rail Grinding Machine contracts and ?37.76 Lakhs for Defence Equipment (Previous Year - ?204734.69 Lakhs and ?43.19 Lakhs respectively) are the aggregate amount of transaction price allocated to the performance obligations that are unsatisfied as of end of the reporting period and Company expects to recognize this revenue in subsequent years.
A. Indian Accounting standard (Ind AS) 19, Disclosures on Employee Benefits are as follows:
a. Leave Salary
This is an unfunded employee benefit plan categorized under other long term employee benefits in terms of Ind AS 19. The obligation for compensated absence has been actuarially valued and liability provided accordingly.
b. Post Retirement Medical Scheme 1. Employees
(i) The company has a post retirement defined benefit medical scheme where an insurance policy is taken by the company for providing mediclaim benefits to the superannuated employees who opt for the scheme. The Company pays 90% insurance premium and the balance 10% is paid by superannuated employees.
The estimates of future salary increases considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors.
2. Officers
For officers, from the year 2015-16 a new Post-Retirement Medical Scheme was introduced where a percentage of Basic salary and DA of officers will be contributed to a separate fund and the fund arrange to provide medical insurance to retired officers. Company has contributed 3% of the Basic and DA of officers amounting to ' 751.81 Lakhs during FY 2022-23 (Previous year ? 718.57 Lakhs) for the scheme. Company has no further liability other than the contribution to the fund. Hence the scheme is a defined contribution plan and no actuarial valuation is done.
c. Interest Rate Guarantee on Provident Fund
Provident Fund Trust of the Company has to declare interest on Provident Fund at a rate not less than that declared by the Employees' Provident Fund Organisation. In case the Trust is not able to meet the interest liability, Company has to make good the shortfall. This is a defined benefit plan and the Company has got the same actuarially valued and there is no additional liability that needs to be provided for the year.
d. Officers Pension Scheme
Based on the guidelines of Ministry of Defence, Company has implemented "BEML Executive Superannuation (Pension) Scheme" for Officers of the Company. The Scheme is a defined contribution plan and the contribution made is being charged off in the year of contribution. Being a defined contribution plan no actuarial valuation is done.
e. Gratuity
(i) The employees' gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method.
B. In terms of Notification No. S.O.802(E) dated 23-02-2018 of the Ministry of Corporate Affairs, the Board at its meeting held on 27.05.2016 has given consent with regard to non-disclosure of information as required under paragraphs 5(ii) (a) (1), 5(ii) (a) (2), 5(iii) and Para 5(viii) (a), (b), (c) and (e) of Part II to Schedule III of the Companies Act, 2013, in the Annual accounts for the Financial Year 2015-16 onwards.
C. Indian Accounting standard (Ind AS) 24 - Related Party Disclosures
In accordance with the requirements of Ind AS 24, following are details of the transactions during the year with related parties.
4. Considering the wide scope of the definition of Related Party under section 2(76), Relative under section 2(77) and Key Managerial Personnel under section 2(51) of Companies Act, 2013 and the requirement under Ind AS 24 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the disclosure with respect to Related Party transactions has been restricted to Subsidiary / Joint Venture / Associate companies and to any other Related Party as declared by Directors and Key Managerial Personnel. Accordingly, the compliance with Related Party Transactions under section 188, Ind AS 24 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been made to the extent data is available with the Company.
D. Indian Accounting standard (Ind AS) 37 - Provisions, Contingent Liabilities and
Contingent Assets
I. Contingent liabilities
a. Claims against the Company not acknowledged as debts:
i Disputed statutory demands (Customs Duty, Central Excise, Service Tax, Sales tax/vAT,etc.,) ?51432.35 Lakhs (Previous Year ?63048.13 Lakhs).
ii Other claims-legal cases etc., ?14936.45 Lakhs (Previous Year ?14196.86 Lakhs).
b. Other money for which the company is contingently liable - ?Nil (Previous Year - ?Nil).
II. Commitments
a. Estimated amount of contracts remaining to be executed on capital accounts and not provided for ?1838.33 Lakhs (Previous Year ?625.95 Lakhs).
b. Uncalled liability on shares and other investments partly paid - ?Nil (Previous Year - ? Nil ).
c. Other commitments (specify nature) - ?Nil (Previous Year - ?Nil ).
NOTES
1. The company does not expect any cash outflow in respect of above contingent Liabilities.
2. It is not practicable to estimate the timing of cash flows, if any, in respect of matters referred in I (a) above pending resolutions of the arbitration / appellate proceedings.
F. Indian Accounting standard (Ind AS) 108 - Operating Segments
Vide Notification No. S.O.802(E) dated 23-02-2018 issued by Ministry of Corporate Affairs, exempted companies engaged in Defence Production from segmental disclosure as required under Ind AS 108 (Operating Segments), accordingly the disclosure requirements under Ind AS 108 has not been made.
G. Advances, Balances with government departments, Trade Payables and receivables, Other loans and advances and deposits classified under non current and current are subject to confirmation. There are certain old balances pending review / adjustment. The management does not expect any significant impact upon such reconciliation.
H. Figures of previous year have been regrouped/ reclassified/ recast wherever necessary to conform to current year's presentation.
J. Indian Accounting standard (Ind AS) 116 - Leases a) The Company as a lessee
The Company's significant leasing arrangements are in respect of operating leases and leased office premises. These lease arrangements, run for a period of 3 Years to 10 Years and are generally renewable by mutual consent.
b) The Company as a lessor
The Company provides cars to employees who are eligible and enroll into such a scheme after completion of a specific period of service. Such leases are non-cancellable in nature and have been classified as operating leases.
Below are the details of carrying amounts of such vehicles recorded as property, plant and equipment:
d) Transfers between the fair value hierarchy
There were no transfers in either direction in the fair value hierarchy during the year 2022-23.
L. Financial risk management
The Company is broadly exposed to credit risk, liquidity risk and market risk as a result of financial instruments.
The Company's Board of Directors has the overall responsibility for the establishment, monitoring and supervision of the Company's risk management framework. Treasury Management Team in the company takes appropriate steps to mitigate financial risks within the framework set by the top management. Derivative transactions are undertaken by a specialist team with appropriate skills and experience. Company do not trade in derivatives for speculation.
(i) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from credit exposures from customers, cash and cash equivalents held with banks and current and non-current debt investments.
The Company regularly follow up the receivable to minimise losses arising from credit exposure from credit customers. Credit control assesses the credit quality of the customers, their financial position, past experience in payments and other relevant factors. Deposits and cash balances are placed with reputable scheduled banks.
The carrying amount of financial assets represents the Company's maximum exposure to credit risk. No other financial assets carry a significant exposure to credit risk.
Trade receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, the management also considers the factors that may influence the credit risk of its customer base. Major Customers of the company are from Government Sector and Public Sector Companies, where credit risk is relatively low.
The management has established a system under which each new customer is analysed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, if they are available, and in some cases bank references.
The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables based on factual information as on the Balance sheet date.
At 31 March 2023, the Company's most significant customer, accounted for '28603.00 Lakhs of the trade receivables carrying amount (31 March 2022: '30682 Lakhs).
The movement in the loss allowance for impairment of trade receivables are disclosed in Note No. 14
Any past due from Government Customers and those fully covered by guarantees or collaterals received are not tested for impairment.
The credit quality of the financial assets is satisfactory, taking into account the allowance for doubtful trade receivables.
The Company has not received any collaterals for receivables as at reporting date.
The impairment loss allowance at 31 March 2023 related to several customers that have indication that they may not pay their outstanding balances. The Company believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on the fact that major customers are Government department, PSUs and historical payment behaviour and extensive analysis of customer credit risk, including underlying customers' credit ratings if they are available.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset, or the risk that the Company will face difficulty in raising financial resources required to fulfill its commitments. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
Liquidity risk is maintained at low levels through effective cash flow management, low borrowings and availability of adequate cash. Cash flow forecasting is performed internally by forecasts of the Company's liquidity requirements to ensure that it has sufficient cash to meet operational needs, to fund scheduled investments and to comply with loan covenants.
To ensure continuity of funding, the Company primarily uses short-term bank facilities in the nature of bank overdraft facility, cash credit facility and short-term borrowings to fund its ongoing working capital requirements needs. The Company has also availed various noncurrent facilities in the form of secured redeemable debentures, secured term loans, intercorporate loans against the Company's guarantee and soft loans from the Government for expansion projects and construction and development of capital assets.
Exposure to liquidity risk
The table below details the Company's remaining contractual maturity for its financial liabilities and derivative financial liabilities. The contractual cash flows reflect the undiscounted cash flows of financial liabilities and derivative financial liabilities based on the earliest date on which the Company can be required to pay.
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity / commodity prices - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Company uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by the management.
The Company's activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rate movements (refer to notes below on currency risk and interest risk). The Company enters into forward derivative contracts to manage risks of loss arising due to foreign exchange exposure. During the year ended 31 March 2023, there was no change to the manner in which the Company managed or measured market risk.
Foreign currency risk is the risk arising from exposure to foreign currency movement that will impact the Company's future cash flows and profitability in the ordinary course of business. The Company's exposure to the risk of changes in foreign exchange rates relates primarily to its operating activities from procuring or selling in foreign currencies and obtaining finance in foreign currencies.
The Company is exposed to currency risk on account of its borrowings and other payables in foreign currency. The functional currency of the Company is Indian Rupee. The Company uses forward exchange contracts to hedge its currency risk, mostly with a maturity of less than one year from the reporting date.
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing instruments will fluctuate because of fluctuations in market interest rates.
Exposure to interest rate risk
The Company's interest rate risk arises from borrowings and loans made. Borrowings availed at fixed rates expose the Company to fair value interest rate risk. The interest rate profile of the Company's interest-bearing financial instruments as reported to the management of the Company is as follows.
Fair value sensitivity analysis for fixed-rate instruments
The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss, and the Company does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
(vi) Equity and commodity price risk
Price risk is the risk of fluctuations in the value of assets and liabilities as a result of changes in market prices of investments. The Company has no exposure to changes in the quoted equity securities price risk as it has investments in unquoted equity instruments only. The Company does not invest in commodities and is not exposed to commodity price risk.
M. Capital Management
The Company strives to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders. The board of directors seeks to maintain a balance between the higher returns and levels of borrowings and the advantages and security afforded by a sound capital position.
!Total borrowings comprises of long-term borrowings, short-term borrowing and bank overdraft facilities.
2Cash and bank balances comprises of cash in hand, cash at bank and term deposits with banks excluding consortium member balances in ESCROW account, as disclosed under Note 15 (b) and balances with bank as unclaimed dividend.
N. Derivatives
Derivatives not designated as hedging instruments
The Company uses foreign currency forward contracts to manage its exposure to foreign currency fluctuations. These forward contracts are used to hedge foreign currency payables and other future transactions. However, these foreign exchange forward contracts are not designated as qualifying hedge instruments and are entered into for periods consistent with foreign currency exposure of the underlying transactions, and are generally for a term of 3 months to 12 months.
The Company has following outstanding forward contracts as on:
31 March 2023: JPY Nil (INR Nil) [Previous Year - JPY Nil (INR Nil)]
31 March 2023: EUR Nil (INR Nil) [Previous Year - EUR Nil (INR Nil)]
31 March 2023: USD Nil (INR Nil) [Previous Year: USD Nil (INR Nil)]
O. Additional Disclosures :
i. The company does not hold any benami property held under the Benami Transaction (prohibition ) Act, 1988 (clause 45), hence the reporting clause on benami property in not applicable.
ii. The company does not fall under the willful defaulter category, hence the reporting clause on willful defaulter in not applicable.
iii. The company has not transacted with struck off companies in MCA during the year.
iv. The Company has complied with creation of charge and satisfaction of charge within the due dates and hence there are no non compliances to report.
vi. There are no charges or satisfaction pending to be registered with ROC beyond statutory period.
vii. Company has complied with the number of layers as prescribed under section 2(87) of Companies Act read with the companies (Restriction on number of layers).
viii. During the current year as well as previous year, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries. During the current year as well as previous year, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
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