Note i : Prior to approval of Scheme of Arrangement approved by the Hon’ble National Company Law Tribunal on January 25, 2022 (Refer Note 29(VII)) for detailed description of the Scheme), Shapoorji Pallonji and Company Private Limited were holding 100% of the shares of the Company through erstwhile Eureka Forbes Limited.
Note ii : Pursuant to the Share Purchase Agreement dated September 19, 2021 (“SPA”) executed between inter alia erstwhile Forbes Enviro Solutions Limited and now renamed Eureka Forbes Limited, Lunolux Limited (“Acquirer”), Shapoorji Pallonji and Company Private Limited (“Seller”), Forbes Campbell Finance Limited (“FCFL”), Forbes & Company Limited and erstwhile Eureka Forbes Limited for the acquisition by the Acquirer of a majority stake in the Health, Hygiene, Safety products and services represented by up to 72.56% of the total issued and paid-up share capital of the Company from the Seller, the Acquirer has acquired 12,35,55,843 equity shares representing 63.86% of the total issued and paid-up share capital of the Company on April 25, 2022 and 1,68,33,552
equity shares representing 8.70% of total issued and paid-up share capital of the Company on July 12, 2022.
Consequent to such transfer, the Acquirer has become the promoter of the Company with effect from April 25, 2022. In furtherance of the SPA, as a result of the acquisition of the equity shares by the Acquirer, changes in the Board of Directors of the Company has taken place.
V For the period of five years immediately preceding the date as at which the Balance Sheet is prepared:
(a) Aggregate number and class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash:
19,34,79,240 Equity shares of H10 each allotted as fully paid-up pursuant to Scheme of Arrangement approved by the Hon’ble National Company Law Tribunal on January 25, 2022 (Refer Note 29(VII)) for detailed description of the Scheme without payment being received in cash
(b) Aggregate number and class of shares allotted as fully paid up by way of bonus shares: Nil
(c) Aggregate number and class of shares bought back: Nil
Summary of borrowing arrangements
Note a. Rupee Term loan (RTL) from ICICI Bank amounting to H 10,000.00 Lakhs (Outstanding as on 31st March 2023 H 5,000.00 Lakhs (Previous Year H 7,500.00 Lakhs) carries interest rate of 1 year MCLR and secured against pari pasu charge on tangible assets (Excluding vehicles and two wheelers purchased under Employee Benefit Scheme). The outstanding amount is payable 8 equal quarterly instalment starting from June 18, 2023.
Note b. Unsecured short term borrowing from banks carries interest @ 8.95 % p.a.
Note c. Secured Short term borrowing from banks is secured by pari-passu charge on hypothecation of stock-in-trade and book debts and carries interest @ 7.70 % to 10.60 % p.a.
Note d. No amount are pending to be utilised from the borrowings outstanding as on March 31, 2023
Note e. The Company has not been declared wilful defaulter by any bank or financial institution or other lender.
Description of nature and purpose of reserves
1) Retained Earnings
This reserve represents the cumulative profits of the Company and the effects of remeasurement of defined benefit obligations. The reserve can be utilised in accordance with the provision of the Companies Act, 2013
2) Capital Reserve
The Capital reserve has been created on cancellation of shares held by then existing shareholders of the Company as per the composite scheme of arrangement approved by the national Company Law tribunal on January 25, 2022
3) Securities premium
Securities premium is used to record the premium on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act , 2013
29. Additional information to the financial statements
I Contingent liabilities and commitments ( to the extent not provided for )
(a) Contingent liabilities:
(i) Disputed Income Tax demands1 - H 1,706.29 lakhs (previous year H 1,706.29 lakhs)
(ii) Disputed Central Excise demands - H 1,442.81 lakhs(previous year H 1,442.81 lakhs)
(iii) Disputed Sales Tax demands -H 3,374.56 lakhs (previous year H 3,692.88 lakhs)
(iv) Disputed Service Tax demands - H 1,945.68 lakhs (previous year H 1,945.68 lakhs)
(v) Disputed civil suit - H 33.73 lakhs (previous year - H 33.73 lakhs )
(vi) Disputed claims against the Company not acknowledged as debt H 42.85 lakhs (Previous Year H 42.85 lakhs)
(vii) Disputed Goods and Services Tax demand - H 877.39 lakhs (previous year H 486.33 lakhs)
(viii) Disputed claims against the Company for certain Labour Law & related matters estimated at H 42.50 lakhs (previous year H Nil lakhs)
b) The Company has given commercial premises under cancellable operating lease. Lease rental income included in the statement of profit and loss for the year is H 39.68/- Lakhs (Previous Year H 6.80/- Lakhs) for Premises.
III The Company is primarily engaged in the business of Health, Hygiene, Safety products and Services. Information reported to and evaluated regularly by chief operating decision maker for the purpose of resource allocation and assessing performance focuses on the business as a whole. Accordingly there is no other separate segment as per Indian Accounting Standard 108 dealing with “Operating Segment” . The geographical segmentation is insignificant as the export turnover is less than 10% of the total turnover and also Company’s Non Current assets (other than Financial Instrument, deferred tax, post employment benefits and rights arising under insurance contracts) are located in India.
Revenue from transactions with a single external customer did not amount to 10% or more of the Company’s revenue from external customers for current and previous year.
IV The Company did not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956 during the current year and previous year.
V 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 entites identfied 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.
VI 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 entites identified in any manner whatsoever by or on behalf of the funding party (ultimate beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
VII The Board of Directors of Eureka Forbes Limited (Formerly known as Forbes Enviro Solutions Ltd) (“the Company”) and erstwhile Eureka Forbes Ltd at their Board Meeting held on September 08, 2020, had inter alia, approved the Composite Scheme of Arrangement (“the scheme”) under Section 230 to 232 and other applicable provisions of the Companies Act, 2013 and the rules and regulations made thereunder.
The Scheme, inter alia, provided for amalgamation and vesting of erstwhile Aquaignis Technologies Private Limited (“ATPL”), erstwhile Eureka Forbes Limited and erstwhile Euro Forbes Financial Services Limited (“EFFSL”) with and into erstwhile Eureka Forbes Limited. Further, upon the above part of the scheme becoming effective, amalgamation and vesting of Erstwhile Eureka Forbes Limited with and into Forbes and Company Limited (FCL).
Further, upon the above part of the scheme becoming effective, demerger and vesting of Demerged Undertaking (Health, Hygiene, Safety Products and Services Undertaking, as defined in the scheme) of FCL into the Company on a going concern basis.
The Hon’ble National Company Law Tribunal (“the NCLT”), Mumbai vide its order dated January 25, 2022 approved/sanctioned the aforesaid Composite Scheme of Arrangement. Upon receipt of the certified copy of the order, the scheme was made effective by filing Form INC 28 with the Registrar of Companies on February 1, 2022. Further, the name of the Company has been changed to Eureka Forbes Ltd, vide Fresh Certificate of Incorporation dated February 11, 2022.
Pursuant to the Share Purchase Agreement dated September 19, 2021 (“SPA”) executed between inter alia the Company Lunolux Limited (“Acquirer”), Shapoorji Pallonji and Company Private Limited (“Seller”), Forbes Campbell Finance Limited (“FCFL”), Forbes & Company Limited and erstwhile Eureka Forbes Limited for the acquisition by the Acquirer of a majority stake in the health and safety solutions business represented by up to 72.56% of the total issued and paid-up share capital of the Company from the Seller, the Acquirer has acquired 12,35,55,843 equity shares representing 63.86% of the total issued and paid-up share capital of the Company on April 25, 2022 and 1,68,33,552 equity shares representing 8.70% of total issued and paid-up share capital of the Company on July 12, 2022
Consequent to such transfer, the Acquirer has become the promoter of the Company with effect from April 25, 2022. In furtherance of the SPA, as a result of the acquisition of the equity shares by the Acquirer, changes in the Board of Directors of the Company has taken place.
VIII As required under Indian Accounting Standard 24 on “Related Party Disclosures” the list of related parties and their transactions is attached. (Annexure ‘A’ & ‘B’).
IX H 955.34 Lakhs (Previous year H 300.98 lakhs) revenue expenses incurred during the year on Research and Development has been charged to the respective heads of accounts.
X There are no scheme of arrangements which have been approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013 during the current year.
B) Warranty provision
The Company gives warranty on certain products, towards satisfactory performance of products during the warranty period. Warranty provisions are made for expected future outflows where no reimbursements are expected and estimated based on using historical information on the nature frequency and average cost of warranty claims. The table given below gives information about movement in warranty provisions:
XII Disclosures required under Indian Accounting Standard 116 on “Leases” refer attached Annexure ‘C’.
XIII Remaining performance obligation towards rendering of maintenance contracts as at the year end is recognized as “Income received in advance” and presented in “Other liabilities”. This obligation pertains to maintenance services that would be carried out over the contract period for which Company has received the advance. The service period ranges from 1 year to 4 years. Management believes that 77% pertaining to remaining obligation as of the year ended 31 March 2023 will be recognised as revenue during the next financial year, 20% will be recognized as revenue in FY 24-25 and 3% will be recognised in FY 25-26.
XVI The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year or previous financial year.
XVII The Company does not have any benami property, where any proceeding has been initiated or pending against the Company for holding any benami property.
XVIII The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.
XIX The Company does not have any investment property during any reporting period, the disclosure related to fair value of investment property is not applicable.
XX The Company is not covered under Section 8 , thus related disclosure is not applicable.
XXI The Code on Social Security, 2020 (‘Code’) relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come in to effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period when the Code becomes effective.
XXII The Company does not have 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).
XXIII The comparative financial information of the Company for the year ended March 31, 2022 included in these standalone financial statements have been audited by the predecessor auditor. The report of the predecessor auditor on the comparative financial information dated May 30, 2022 expressed an unmodified opinion.
XXIV Impairment testing of goodwill and intangible assets with indefinite useful life
The Group has identified its business of Health, Hygiene, Safety Products and Services as a single Cash Generating Unit (CGU).
The recoverable amount of the CGU has been calculated based on its value in use, estimated as the present value of projected future cash flows.
The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources. Market related information and estimates are used to determine the recoverable amount.
Key assumptions on which management has based its determination of recoverable amount include estimated long-term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent management’s best estimate about future developments.
The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was determined based on management’s estimate of the longterm EBITDA growth rate, consistent with the assumptions that a market participant would make. Budgeted EBITDA was estimated taking into account past experience, adjusted for future expectations.
The Company has performed a sensitivity analysis and has concluded that there are no reasonably possible changes to key assumptions that would cause the carrying amount of a CGU to exceed its recoverable amount.
XXV Exceptional items for the year ended March 31, 2023 amounting to H 4,001.80 lakhs pertains to the following:
(a) An amount of H 2,501.80 lakhs for the year ended March 31, 2023, which is charged to Statement of Profit & Loss, on account of phasing out of certain non-moving models and product including its raw material and components, due to change in economic conditions and technological obsolescence.
(b) An amount of H 1,500.00 lakhs for the year ended March 31, 2023 which represents stamp duty paid / payable for transfer of title of immovable property in the name of the Company pursuant to the Scheme of Arrangement for merger of Aquaignis Technologies Private Limited and Euro Forbes Financial Services Limited into erstwhile Eureka Forbes Limited, followed by the merger of erstwhile Eureka Forbes Limited into Forbes & Company Limited and demerger of demerged undertaking (as defined in the scheme) of Forbes & Company Limited into the Company.
XXVI Figures for the previous year are re-arranged/regrouped, wherever necessary, to correspond with the current year disclosure . Further on account of the acquisition of the Health, Hygiene, Safety Products and Services (Refer Note 30), the figures for the previous year are not comparable.
XXVII The Financial Statements for the year ended March 31, 2023 were approved for issue by Company’s Board of Directors on May 29, 2023.
Rental expense recorded for short-term leases was H 717.92 Lakhs for the year ended March 31,2023. (Previous Year: H 148.66 Lakhs)
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to the Company’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the Company has concluded that no changes are required to lease period relating to the existing lease contracts
30 Acquisition of Health, Hygiene, Safety Products and Services Undertaking
Under the scheme approved by the NCLT as described in Note 29(VII), the basis of accounting used for the merger of the Health, Hygiene, Safety Products and Services Undertaking is “acquisition method” of accounting under Ind AS 103 (Business combination). Fair Value consideration amounting to H 406,596.62 Lakhs has been allocated to the respective fair values of tangible, intangible assets and all liabilities and residual value has been recognised as goodwill.
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, 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 method as applied in calculating the defined benefit obligation as recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
(B) Impact of acquisition on the Financial Statements:
The acquired business contributed revenue of H 37,013.67 Lakhs, Earning before Interest, tax depreciation and Amortisation (EBITDA) of H 2,215.53 Lakhs and Earning Before interest and tax (EBIT) of H 903.85 Lakhs for the period from the date of acquisition till 31st March, 2022. If the acquisition had taken place from 1st April, 2021 the acquired business would have contributed an additional turnover of H 1,65,500.92 Lakhs. With this the total turnover of the Company for the year ended 31st March, 2022 would have been H 2,03,601.05 Lakhs.
The acquired goodwill has been further adjusted to the effect of deferred tax liabilities recognised on acquisition in respect of recognising identified intangibles assets
31 Financial instruments
Capital management
The Company’s objectives when managing capital are to:
- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
- Maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with the industry, the Company, primarily, uses the gearing ratio to monitor and maintain the capital structure which is as follows:
Net debt (total borrowings net of cash and cash equivalents) divided by total ‘equity’ (as shown in the balance sheet).
Valuation techniques and significant unobservable inputs
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments.
- All of the resulting fair value estimates are included in level 1 except for unlisted equity securities where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.
- The carrying amount of Trade receivables, Trade payables, cash and Cash Equivalents are considered to be the same as their Fair Values, due to their short term in nature.
- The Fair value of financial Instrument that are not traded in an active market is determined using valuation technique. The Company uses its Judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.
34 Financial instruments - Financial risk management
The Company’s activities expose it to market risk , liquidity risk and credit risk. In order to minimise any adverse effects on the financial
performance of the Company , such as foreign exchange forward contracts are entered to hedge certain foreign currency risk exposure.
The Company’s risk management is carried out by a Finance committee and Treasury team under policies approved by the board of directors. Treasury team identifies, evaluates and hedges financial risks in close co-operation with subject matter experts . The Board of directors periodically monitors the risk assessment.
(a) Credit risk
Credit risk arises from cash and cash equivalents, investments and deposits with banks, as well as credit exposures to customers including outstanding receivables.
(b) 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. 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.
The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the company’s:
i) profit for the year ended March 31, 2023 would decrease/increase by H 25.43/- lakhs (2022: decrease/increase by H 6.06/- lakhs). This is mainly attributable to the company’s exposure to interest rates on its variable rate borrowings;
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
a The calculation for above ratios is in accordance with formula prescribed by Guidance note on Schedule III issued by the Institute of Chartered Accountants of India.
b The Company is trying to improve its Net debt position by driving operating efficiencies
c *The above ratios for the year ended 31st March, 2022 include the impact of the business combination (refer Note 30) and hence
are not comparable with Current Financial year.
d Capital employed = Tangible Net Worth# Total Debt Deferred Tax Liability
#In order to derive to the tangible net worth, goodwill and other intangibles assets has been reduced from the total net worth.
1
In calculating the tax expense for the current year, the Company has considered taxability of certain income and allowability of certain expenditure for tax purpose based on the orders/judgments passed in further appeals in its own assessment of earlier years. Based on the same, no additional provision is envisaged necessary as on 31 March 2023 in respect of earlier years and current year.
(b) Commitments:
(i) Estimated amount of contracts remaining to be executed on capital account and not provided for - H 172.81 lakhs (previous year H 163.06 lakhs).
(ii) Towards product performance H 272.69 lakhs (previous year H 359.65 lakhs)
(iii) Towards service performance H145.09 lakhs (previous year H 373.30 lakhs)
In respect of all items mentioned in (a) above, till the matter are finally decided, the timing of outflow of economic benefit cannot be ascertained.
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