n) Provisions and Contingent Liabilities:
I. Provision
Provision is recognized when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
These provisions are reviewed at the end of each reporting period and are adjusted to reflect the current best estimates.
II. Contingent Liabilities:
The Company uses significant judgements to assess contingent liabilities. Contingent liabilities are recognized when there is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognized because
(a) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(b) the amount of the obligation cannot be measured with sufficient reliability a disclosure is made by way of contingent liability.
Contingent assets are neither recognised nor disclosed in the standalone financial statements.
o) Segment Reporting:
As the Company is operating in only one segment (i.e) in the business of manufacturing and sale of automotive components, there is no disclosure to be provided under IND AS 108 "Operating Segments." The Company primarily operates in India and there are no other significant geographical segments.
p) Cash and Cash Equivalents:
For the purpose of presentation in the statement of cash flows, cash comprises cash on hand and cash equivalents are short- term, highly liquid investments that are readily convertible to known amounts of cash which include, deposits held with financial institutions with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown under borrowings in current liabilities in the balance sheet.
q) Financial Instruments:
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognized when the company becomes a party to the contractual provisions of the relevant instrument and are initially measured at fair value except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability.
I. Financial Assets:
Classification:
The company classifies its financial assets in the following categories:
• Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
• Those measured at amortized cost
The classification depends on the entity's business model for managing the financial assets and the contractual term of the cash flow.
Measurement:
All financial assets are initially recognized at fair value and are subsequently measured at amortized cost or fair value based on their classification.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding and selling financial assets. The Company has made an irrevocable election to present subsequent changes in the fair value of equity investments not held for trading in other comprehensive income.
Financial assets at fair value through profit or loss
Financial assets are measured at fair value through profit or loss unless they are measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in statement of profit and loss.
Transaction costs arising on acquisition of a financial asset are accounted as below:
Debt Instruments:
Subsequent measurement of debt instruments depends on the company's business model for managing the asset and the cash flow characteristics of the asset. The following are the measurement categories into which the company classifies its debt instruments.
Amortized cost:
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on debt instrument that is subsequently measured at amortized cost and is not a part of a hedging relationship is recognized in profit or loss when the asset is de-
recognized or impaired. Interest income on these financial assets is included in finance income using effective interest rate method.
Fair Value through Other Comprehensive Income and Fair Value through profit/loss:
Assets that do not meet the criteria for measurement at amortized cost are measured at Fair value through other comprehensive income unless the company elects the option to measure the same at fair value through profit or loss to eliminate an accounting mismatch.
Equity Instruments:
The company subsequently measures all investments in equity instruments other than investments in subsidiary companies at fair value. Gain/Loss arising on fair value is recognized in the statement of profit and loss. Dividend from such investments are recognized in profit or loss as other income when the company's right to receive payments is established.
Investment in Subsidiary Companies:
Investments in subsidiary companies are measured at cost less provision for impairment, if any.
Trade receivables:
Trade receivables are measured at amortized cost and are carried at values arrived after deducting allowances for expected credit losses and impairment, if any.
Impairment:
The company accounts for impairment of financial assets based on the expected credit loss model. The company measures expected credit losses on a case to case basis.
Derecognition and write-off:
A financial asset is derecognized only when:
a) The contractual right to receive the cash flows of the financial asset expires or
b) The company has transferred the rights to receive cash flows from the financial asset or
c) The company retains the contractual rights to receive the cash flows of the financial asset but assumes a contractual obligation to pay the cash flows to one or more recipients.
Further a financial asset is derecognized only when the company transfers all risks and rewards associated with the ownership of the assets.
The gross carrying amount of a financial asset is directly reduced and an equal expenditure is recognized when the entity has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. A write-off constitutes a derecognition event.
II. Financial Liabilities:
Financial Liabilities are initially recognised at fair value, net of transaction cost incurred. Financial Liabilities are subsequently measured at amortised cost (unless the entity elects to measure it at Fair Value through Profit and Loss Statement to eliminate any accounting mismatch). Any difference between the proceeds (net of transaction cost) and the redemption amount is recognised in profit or loss over the period of the liability, using the effective interest method. Financial Liabilities are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled, or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other gain / (loss). Financial Liabilities are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
r) Borrowing cost:
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs (net of interest earned on temporary investments) directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. Interest is computed using respective rates of interest of loans taken for acquisition of specific assets (i.e. qualifying assets) for which the loans have been granted. All other borrowing costs are expensed in the year in which they occur
31. Investment in Equity:
The company has equity investment aggregating to ' 20,877.28 lakhs in UCAL Holdings Inc., USA (previously Amtec Precision Products Inc.,) a wholly owned subsidiary. The management carried out an impairment test of this investment and concluded that a provision for impairment was necessary. Accordingly, a provision of ' 10,509 lakhs has been created towards impairment of this investment during the year 2019-20. The company is awaiting RBI approval for the said impairment provision.
32. Windmill Power Generation:
Electricity charges debited to Profit & Loss account is net of '128.17 Lakhs (Previous year ' 118.03 lakhs) being the electricity generated through company owned Wind Turbine Generators.
33. Managerial Remuneration:
Managerial Remuneration provided/ paid for the year ended 31st March 2024 based on the approval of the shareholders in the AGM held on 30th September 2021 stands at ' 447.51 lakhs.
34. Deferred Tax
During the year ended 31st March 2024, the company has created a deferred tax liability of ' 2311.18 lakhs including the remeasurement of deferred tax mentioned below.
Significant component of Deferred Tax asset is the set off benefits likely to accrue on account of unabsorbed depreciation / business loss under the Income Tax Act, 1961 towards trade receivables & loan due from wholly owned foreign subsidiary written off in FY 2017-18, and provision for impairment of investment in the said subsidiary created in the FY 2019-20.
Other components of deferred tax Asset and deferred tax liability are furnished under Note No.5. Based on the orders on hand and expected improvements in the performance of the company as a whole, in the view of the Management, the company will have adequate taxable income in future to utilize the carried forward tax losses.
The Company has elected to exercise the option given under section 115BAA of the Income Tax Act,1961 as introduced by the Taxation Laws (Amendment) Ordinance, 2019 (since replaced by the Taxation Laws (Amendment) Act, 2019) to avail a tax rate of 22% plus surcharge of 10% and cess of 4%. Consequently, the Company has become ineligible to carry forward MAT Credit which has resulted in write-off of MAT Credit amounting to ' 1,563.80 Lakhs. Further, Deferred Tax Asset (DTA) has been reduced by '707.07 Lakhs as a result of the combined effect of not being eligible to utilise the tax credits relating to carried forward additional depreciation and change in tax rates. Thus, the tax charge for the year has increased by ' 2,270.88 Lakhs. On account of the Company exercising the said option, no tax needs to be paid on book profit under section 115JB (MAT Tax) of the Income Tax Act, 1961 and based on the tax workings, no provision for tax is considered necessary for the year under audit. Accordingly, the provision for MAT Tax created during the year until December 31, 2023 has been written back
Fair Value Hierarchies as per Indian Accounting Standard 113 - Fair Value measurement:
Level 1: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. The assets included in this hierarchy are listed equity shares that are carried at fair value using the closing prices of such instruments as at the close of the reporting period.
Level 2: Level 2 hierarchy uses inputs that are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. As on the balance sheet date there were no assets or liabilities for which the fair values were determined using Level 2 hierarchy.
Level 3: Level 3 hierarchy uses inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
There were no transfers between fair value hierarchies during the reported years. The company's policy is to recognize transfers in and transfers out of fair value hierarchy levels as at the end of the reporting period.
38. Financial Risk Management:
The company is exposed primarily to risks in the form of Market Risk, Foreign Currency Risk, Liquidity Risk, Interest Rate Risk, Equity Price Risk and Credit Risk. The risk management policies of the company are monitored by the board of directors. The focus of the management is to assess the unpredictability of the financial environment and to mitigate potential adverse effects on the financial performance of the Company.
The nature and extent of risks have been disclosed in this note.
a) Market Risk
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company's Market risk is primarily on account of: currency risk, interest rate risk and other price risk.
i. Currency Risk:
The company has foreign currency receivable and payables denominated in currency other than INR exposing the company to currency risk. The company's significant foreign currency exposures at the end of the reporting period expressed in INR is as below:
b) Credit Risk:
Credit Risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The management evaluates the Credit Risk of individual financial assets at each reporting date. An expected credit loss is recognized if the Credit Risk has increased significantly since the initial recognition of the financial instrument. In general, the Company assumes that there has been a significant increase in Credit Risk since initial recognition if the amounts are 30 days past due from the initial or extended due date. However, in specific cases the Credit Risk is not assessed to be significant even if the asset is due beyond a period of 30 days depending on the credit history of the customer with the Company and business relation with the customer. A default on a financial asset is when the counter party fails to make contractual payments within 1 year from the date they fall due from the initial or extended due date. The definition of default is adopted given the industry in which the entity operates.
Write off of Financial Assets:
To the extent a financial asset is irrecoverable, it is written off by recognizing an expense in the statement of profit and loss. Such assets are written off after obtaining necessary approvals from appropriate levels of management when it is estimated that there is no realistic probability of recovery and the amount of loss has been determined. Subsequent recoveries, if any of amounts previously written off are recognized as an income in the statement of profit and loss in the period of recovery.
The company considers the following to be indicators of remote possibility of recovery:
a) The counterparty is in continuous default of principal or interest payments
b) The counterparty has filed for bankruptcy
c) The counterparty has been incurring continuous loss during its considerable number its past accounting periods
The company assesses changes in the credit risk of a financial instrument taking into consideration ageing of bills outstanding on the reporting date, responsiveness of the counterparty towards requests for payment, forward looking information including macroeconomic information and other party specific information that might come to the notice of the company. In general, it is assumed that the counterparty continues his credit habits in future.
During the year 2017-18, the company wrote off ' 2,854.06 Lakhs of Trade Receivables and '12,337.79 Lakhs of loan receivable from Ucal Holding Inc., (USA) (Previously Amtec Precision Products Inc), wholly owned subsidiary. The company is awaiting approval from RBI for the said write off.
The company does not hold any security/collateral against its trade receivables, lease receivables, loans, and deposits. Overview of Expected Credit Loss (ECL) principles:
In accordance with Ind AS 109, the Company uses ECL model, for evaluating impairment of financial assets other than those measured at fair value through profit and loss (FVTPL).
An expected credit loss is recognized if the Credit Risk has increased significantly since the initial recognition of the financial instrument. In general, the Company assumes that there has been a significant increase in Credit Risk since initial recognition if the amounts are 30 days past due from the initial or extended due date. However, in specific cases the Credit Risk is not assessed to be significant even if the asset is due beyond a period of 30 days depending on the credit history of the customer with the Company and business relation with the customer. A default on a financial asset
is when the counter party fails to make contractual payments within 1 year from the date they fall due from the initial or extended due date. The definition of default is adopted given the industry in which the entity operates.
Trade receivables:
Trade receivables are measured at amortized cost and are carried at values arrived after deducting allowances for expected credit losses and impairment, if any. Purchase orders are released by customers after due verification from companies end in line with the discussion and development undertaken with individual customers. The Invoices are raised after PO is received from individual customers.
The company has no instances of credit loss or receivable becoming non-recoverable based on the practices followed by the company. There are certain deductions in the invoices raised from the customers which are in respect of (i) Shortage of quantity received, (ii) Price differentials, (iii) Warranty debits, and (iv) line rejections as and when reported.
All the above reported instances except for the warranty deduction are related to certain procedural laps at and in some cases customer end and it can be addressed only after occurrence of loss and company cannot forecast the same. Internal controls have been strengthened to avoid such recurrences and also the extent of such recoveries have reduced during the current financial year.
In respect of warranty deduction, company has already documented guidelines for accounting expected credit loss.
As the company follows the practice of raising purchase orders based on the customer requirements and producing the desired quantities based on customers' orders in hand the customer deduction and rejections are properly been accounted in the books of account as and when the same arises and the same are adjusted against future receipts and invoices with customer. The risk of expected credit loss on this front is NIL except for warranty recoveries.
Investments:
Investments of surplus funds are made only with approval of Board of Directors. Investments primarily include investments in equity instruments of various listed entities and power generation companies. The Company does not expect significant credit risks arising from these investments.
Impairment of other financial assets:
The company accounts for impairment of financial assets based on the expected credit loss model. The company measures expected credit losses on a case to case basis.
The company categories the financial assets into following classes based on credit risk:
39. Capital Management:
The company manages its capital to ensure the continuation of going concern, to meet the funding requirements and to maximize the return to its equity shareholders. The company is not subject to any capital maintenance requirement by law. Capital budgeting is being carried out by the company at appropriate intervals to ensure availability of capital and optimization of balance between external and internal sources of funding. The capital of the company consists of equity shares and accumulated internal accruals. Changes in the capital have been disclosed with additional details in the Statement of Changes in Equity.
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 benefit for other stakeholders, and
• Maintain an optimal capital structure to reduce the cost of capital.
The company monitors capital on the basis of the following gearing ratio: Net Debt (Total borrowings net of cash and cash equivalents) divided by Total 'Equity' (as shown in the balance sheet). The company strategy is to maintain an optimum gearing ratio. The gearing ratios were as follow:
Risk Exposure:
Valuations of defined employee benefit obligations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary over time. Thus, the company is exposed to various risks in providing the above gratuity benefit which are as follows:
In addition to Interest Rate risk and liquidity risk explained in the Note No. 33 the company is also exposed to the below risks on account of valuation of defined benefit obligations:
a) Salary Escalation Risk: The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.
b) Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The company is exposed to the risk of actual experience turning out to be worse compared to the assumptions.
c) Regulatory Risk: Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (e.g. Increase in the maximum limit on gratuity payout).
d) Investment Risk: The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
53. Other statutory information :
a) The title deeds (including those that have been deposited with banks whose duplicate deeds are held by the Company) of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) are held in the name of the Company as at the Balance Sheet date.
b) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
c) The company has not revalued any of its property plant and equipment, intangible assets during the year.
d) The Company has not traded or invested in Crypto currency or virtual currency during the financial year.
e) The Company has not advanced or loaned or invested funds to any persons or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
• 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
f) The Company has not received any fund from any persons or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
• 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.
g) 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) There are no previously unrecorded income and related assets in the books of accounts during the year.
h) The Company does not have any transactions with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956.
i) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
54. The Company is operating in only one segment (i.e) in the business of manufacturing and sale of automotive components. The Company primarily operates in India and there are no other significant geographical segments. Hence, there is no disclosure to be provided under IND AS 108 "Operating Segments.
55. In the absence of confirmation of balances pertaining to Trade Receivables and Trade Payables, the book balances of the same have been adopted.
56. The Company is not declared as a willful defaulter by any bank or financial institution or other lender.
57. There are no charge or satisfaction yet to be registered with Registrar of Companies beyond the statutory period.
58. Previous year's figures have been regrouped wherever necessary to conform to current year's grouping.
The accompanying notes are an integral part of these financial statements
As per our Report Attached of even date For and on behalf of the Board of Directors
For M/s R. Subramanian and Company LLP RAM RAMAMURTHY JAYAKAR KRISHNAMURTHY
Chartered Accountants WHOLE-TIME DIRECTOR CHAIRMAN AND MANAGING DIRECTOR
ICAI Regd. No. 004137S/S200041 DIN: 06955444 DIN: 00018987
KUMARASUBRAMANIAN R ABHAYA SHANKAR S. NARAYAN M. MANIKANDAN
Partner WHOLE-TIME DIRECTOR AND COMPANY SECRETARY CHIEF FINANCIAL OFFICER
Membership No.021888 CHIEF EXECUTIVE OFFICER Membership No. A15425 Membership No. 231640
Place: Chennai DIN: 00008378
Date: 29th May 2024
UDIN : 24021888BKAJZK9672
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