Note 3 (b) Assets held for sale
One of the plant and machinery was classified as held for sale based on the management decision to dispose off this asset in near future. This asset was not in active usage and was measured at the lower of its carrying amount or fair value less costs to sell. The fair value of this asset was determined using the market comparison approach. The same is transferred from Asset held for sale to Capital Work in Progress (CWIP) during 2023-24 due to change in management decision to use this asset in near future.
(IPO) of equity shares of the Company by way of fresh issue and an offer for sale by the existing shareholders. In relation to the IPO expenses incurred till date, except for listing fees which shall be solely borne by the Company, all other expenses will be shared between the Company and the Selling Shareholders on a pro-rata basis, in proportion to the Equity Shares issued and allotted by the Company in the fresh issue and the offered shares sold by the selling shareholders in the offer for sale. Accordingly, the Company will recover the expenses incurred in connection with the Issue on completion of Initial Public Offer (IPO). Third party is managing release of payment for these expenses to the Company and selling shareholders from a separate bank account maintained for this purpose under their control. Hence, the expenses relating to Company’s share of recovery is disclosed under this head.
- For terms and conditions relating to related parties receivables, refer Note 35.
- Trade receivables are non-interest bearing and are generally on terms of 30 to 120 days.
- The carrying amount of trade receivables includes receivables which are discounted with banks. The Company has transferred the relevant receivables to the discounting bank in exchange for cash. However, the Company has retained the late payment and credit risk. Accordingly, the Company continues to recognise the transferred assets in entirely in its balance sheet. Refer note 14A for information on trade receivables pledged as security by the Company.
- The Company’s exposure to credit and currency risk and loss allowance related to trade receivable are disclosed in note 37.
a) Rights, preferences and restrictions attached to equity shares
The Company currently has only one class of equity shares having a par value of 2/- per share (31st March, 2023: ' 2/-per share). Each holder of equity shares is entitled to one vote per share. The voting rights of an equity shareholder on show of hand or through proxy shall be in proportion to his share of the paid up capital of the Company. The Company declares and pays dividends in Indian Rupees. The Dividend proposed by the Board of Directors (Except for interim dividend) is subject to approval of shareholders in the ensuring Annual General Meeting
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining asset of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholder
As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
During the current year, a trust by the name "Garg Family trust" was formed and registered on 28th July, 2023. The settlor for the Trust is "Mrs. Suman Garg" and the trustees of the Trust are "Mr. Ashish Garg and Mr. Paritosh Kumar". On 7th August, 2023, 2,91,48,700 equity shares of ' 2/- each held by Mr. Paritosh Kumar (Promoter of the Company) were transferred to Mrs. Suman Garg (by way of Gift deed). On 7th August, 2023, Mrs. Suman Garg settled 3,80,47,000 equity shares of ' 2/-each to "Garg Family Trust" by way of settlor, post this "Garg Family Trust" is one of the Promoters of the Company.
13*| OTHER EQUITY (ALSO REFER TO STATEMENT OF CHANGES IN EQUITY)
Nature and purpose of reserves
(a) Securities premium
Securities premium represents the excess consideration received by the Company over the face value of the shares issued to the shareholders. This will be utilised in accordance with the provisions of the Companies Act, 2013.
(b) Retained earnings
Retained earnings are the profit that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to the Shareholders. Retained earning includes re-measurement (loss)/ gain on defined benefit plans, net of taxes that will not be reclassified to Statement of Profit and Loss. Retained earnings is a free reserve available to the Company and eligible for distribution to shareholders, in case where it is having positive balance representing net earnings till date.
(c) Share Based Payment Reserve
The share options-based payment reserve is used to recognise the grant date fair value of options issued to employees under Employee stock option plan. Refer Note no 43.
(d) Cash Flow Hedge Reserve
The Company uses hedging instruments as part of its management of exposure to risks associated with foreign currency. For hedging foreign currency, the Company uses foreign exchange forward contracts. To the extent these hedges are effective, the change in fair value of the hedging instrument is recognised in the cash flow hedge reserve. Amount recognised in the cash flow hedge reserve is reclassified to the statement of profit or loss when the hedged item affects profit or loss.
e) Distribution made and proposed
a) The final dividend on equity shares of ' 1.30 per amounting to ' 1,163.49 Lakhs (31st March, 2023: ' Nil, amounting to ' Nil) has been approved at the annual general meeting held on 8th August, 2023 and has been paid on 9th August, 2023 during the year ended 31st March, 2024.
b) The proposed dividend on equity shares of ' 4.00 per share amounting to ' 3,768.20 Lakhs (31st March, 2023: ' 1.30 per share, amounting to ' 1,163.49 Lakhs) are subject to approval at the annual general meeting and is not recognised as liability at the year end.
The Company has complied with the provisions of Section 123 of the Companies Act, 2013 related to dividend declared.
Code on Social Security
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 into effect has not been notified and the final rules/ interpretation have not yet been issued. the Company will assess the impact of the Code when it comes into effect and will record any related impact in the year the Code becomes effective.
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29.
Ý
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| CONTINGENT LIABILITIES AND COMMITMENTS
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Particulars
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For the Year ended 31st March, 2024
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For the Year ended 3lst March, 2023
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a. Contingent Liabilities
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Claims against the Company not acknowledged as debts:
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(i) Excise/Goods & service tax demands (demand that pertains to reversal of Cenvat credit on Job work, classification difference of parts of railway engine and credit claimed through TRAN-1 on capital goods)
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187.35
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187.35
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(ii) Income tax demands(Demands for Additions on account of unaccounted sales of stock/excess share premium received and for disallowance for late deposition of statutory dues)
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143.57
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173.11
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The above matters are subject to legal proceedings in the ordinary course of business. On the basis of the current status of the individual case and as per legal advice obtained by the Company, wherever applicable, along with the opinion of Management, when ultimately concluded will not have material effect on the results of the operations or financial position of the Company.
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b. Capital Commitments
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Estimated amount of contracts remaining to be executed on capital expenditure and not provided for (net of advances)
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14,037.47
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11,364.44
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c. EPCG Commitment
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The Company has export obligations to the extent ' 11,179.88, Lakhs (as at 31st March, 2023'4,597.57 Lakhs) of on account of concessional rates of import duties paid on capital goods under the Export Promotion Capital Goods Scheme enacted by the Government of India which is to be fulfilled over the next eight /six years. Due to the remote likelihood of the Company being unable to meet its export obligations, the Company does not anticipate a loss with respect to these obligations and hence has not made any provision in its financial statements.
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1,888.83
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766.27
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d. Outstanding Bank guarantees
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885.02
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176.43
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3t| LEASE
The Company incurred ' 29.55 Lakhs during the year ended 31st March, 2024 (31st March, 2023'25.31 Lakhs) towards expenses relating to short terms leases and leases of low value assets and the same is recognised under other expenses in statement of Profit and loss account. Leases mainly comprise of facilities taken for sales office and as warehouse facilities.
32*| SEGMENT INFORMATION
The Company business comprises only the Forging segment where the Company sells forged products comprising of forgings and machined components for the automotive and industrial sector. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The disclosure requirements of Ind AS 108- operating Segments" notified by the Companies (Accounting standard) Rules 2006 (as amended) is not applicable.
The Company’s Chairman and Managing Director is the Chief Operating Decision Maker (CODM) and monitors all operating segments’ operating results to make decisions about resources to be allocated to the segments and assess their performance. As the Cheif operating decision maker of the Company assesses the financial performance and position of the Company as a whole and maker strategic decision, the management considers manufacturing of forgings and related components as a single operating segment as per Ind As 108, hence separate segment disclosure, have not been furnished.
33*| EMPLOYEE BENEFITS OBLIGATION (I) Defined benefit schemes (A) Gratuity (Funded)
The Company operates a gratuity plan administered through Life Insurance Corporation of India (LIC) under its Group Gratuity Scheme. Every employee is entitled to a benefit equivalent to fifteen days’ salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier. The benefits vest after five years of continuous service. the Company pays contribution to Life Insurance Corporation of India to fund its plan.
The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting year. The sensitivity analyses are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation from one another.
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.
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India. The discount rate is based on the government securities yield.
The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards.
Terms and conditions of transactions with related parties
1. The Company’s principal related parties consist of its key managerial personnel. the Company’s related party transactions and outstanding balances are with related parties with whom the Company routinely enters into transactions in the ordinary course of business.
2. Key Managerial Personnel are entitled to short term employment benefits recognised as per Ind AS 19 '- 'Employee Benefits’ in the financial statements. As these employees benefits are lump sum amounts provided on the basis of actuarial valuation the same is not included above.
3. All transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions and within the ordinary course of business.
C Fair Value hierarchy:
The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:
(i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
(ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
(iii) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
~| FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s principal financial liabilities, other than derivatives, comprise borrowings and trade payables. The main purpose of these financial liabilities is to finance the Company’s working capital requirements. The Company has various financial assets such as trade receivable, short term deposits and cash & cash equivalents, which arise directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s Board of Directors oversees the management of these risks and also ensures that financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each of theses risks, which are summarised below:
A. Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, debt and equity investments and derivative financial instruments. The sensitivity analyses in the following sections relate to the position as at 31st March, 2024 and 31st March, 2023.
(i) Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities by way of direct imports/exports and long term foreign currency borrowings. The Company evaluates the exchange rate exposure arising from foreign currency transactions and follows established risk management policies. Foreign currency sensitivity The following table represents the sensitivity to a reasonably possible change in US$, GBP and EURO exchange rates, with all other variables held constant. The sensitivity analysis includes only outstanding foreign currency denominated monetary items as mentioned above and adjusts their translation at the year end for a 5% change in foreign currency rates. A positive number below indicates an increase in profit or equity and vice-versa.
(ii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company is exposed to interest rate risk on short-term and long-term floating rate instruments. The borrowings of the Company are principally denominated in Indian Rupees with a mix of fixed and floating rates of interest. The Company has a policy of selectively using interest rate swaps and other derivative instruments to manage its exposure to interest rate movements. These exposures are reviewed by appropriate levels of management on a regular basis. The exposure of company’s borrowing to interest rate changes as reported to the manangement at the end of reporting
(iii) Commodity price risk
The Company is affected by price volatility of certain commodities. The principal raw materials for the Company products are alloy and carbon steel in the form of rounds and billets which are purchased by the Company from the approved list of suppliers. Most of the input materials are procured from domestic vendors which is subject to price negotiations. Due to significant volatility in prices of steel, the Company has agreed with its customers for pass through of increase/decrease of prices of steel. There may be a lag effect in case of such pass-through arrangements.
(iv) Equity price risk
The Company’s non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company’s Board of Directors reviews and approves all equity investment decisions. At the reporting date, the exposure to unlisted equity securities at cost was '10.00 Lakhs (As at 31st March, 2023: Nil).
B. Credit Risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, and other financial instruments.
Trade receivables
Customer credit risk is managed subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored by Management & President Sales and corrective actions are taken. Any shipments to major customers are generally covered by letters of credit or other forms of credit insurance obtained from reputable banks and other financial institutions.
38*| CAPITAL RISK MANAGEMENT
For the purpose of the Company’s capital management, capital includes issued equity capital, security premium and all other equity, and reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, less cash and cash equivalents and other bank balances.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company’s finance & accounts department in accordance with the Company’s policy. Investments of surplus funds are made with banks in Fixed deposits.
C. 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 assets. The Company’s approach to manage liquidity is to have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed circumstances, without incurring unacceptable losses or risking damage to the Company’s reputation.
Management manages the liquidity risk by monitoring cash flow forecasts on a yearly basis and maturity profiles of financial assets and liabilities. This monitoring takes into account the accessibility of cash and cash equivalents and additional undrawn financing facilities. The Company will continue to consider various borrowings options to maximise liquidity and supplement cash requirements as necessary. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, cash credit facilities and buyers’ credit facilities. As at 31st March, 2024, the Company has available ' 23,649.26 Lakhs (31st March, 2023: ' 39,721.40 Lakhs) in form of undrawn committed borrowing limits.
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. Any breach in meeting the financial covenants would permit the bank to immediately call loans and borrowings. 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 during the year ended 31st March, 2024 and 31st March, 2023.
39. RECOGNITION OF GOVERNMENT GRANTS
a) Under Invest Punjab scheme, the Company is eligible for various incentives like 100% exemption of electricity duty and Infrastructure development fund and Net SGST Incentive calculated based on GST deposited and applicable GST Rate, 100% exemption/refund of stamp duty and Change of Land Use(CLU) fees and 50% exemption of property tax.
During the current year, the Company has recognised government grant in relation to exemption of electricity duty and Infrastructure development fund amounting to ' 547.06 Lakhs (31st March, 2023: ' 343.18 Lakhs). The grant amount is netted from the Power & Fuel Expenses under other expenses. As on 31st March, 2024, ' 16.78 Lakhs (31st March, 2023: ' 15.59 Lakhs) of grant amount is receivable under this scheme. Also, during the current year, the Company has recognised government grant in relation to refund of eligible Net SGST Incentive (which is calculated based on GST paid on eligible sales) amounting to ' 737.62 Lakhs (31st March, 2023: 3,235.65) under other operating revenue. This amount includes grant related to earlier years’ SGST incentive amounting to Nil ( 31st March,2023 ' 2,375.08 Lakhs) which was not recognised earlier as the Company did not have reasonable assurance for its ultimate realisation at that point. As at 31st March, 2024 ' 3,161.79 Lakhs (31st March, 2023, ' 2,244.09 Lakhs) of grant amount is
b) The Company has recognised export incentives under the Duty drawback Scheme and Remission of Duties or Taxes on Export of Products Scheme (RoDTEP) aggregating to ' 613.36 Lakhs (31st March, 2023: ' 323.56 Lakhs). The amount of incentive recognised has been disclosed as other operating revenue.
40*| HEDGING ACTVITIES AND DERIVATIVES
a) Derivatives not designated as hedging instruments:
The Company uses foreign exchange forward contracts to manage its exposure to risks associated with foreign currency. These derivative contracts are not designated as hedging instrument in cash flow hedge and are entered into for years consistent with foreign currency exposure of the underlying transactions, generally from one to twelve months.
b) Derivatives designated as hedging instruments:
Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in EURO; and thereafter as a fair value hedge for the resulting receivables. These forecast transactions are highly probable.
The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in foreign exchange forward rates.
The critical terms of the foreign currency forward contracts match the terms of the expected highly probable forecast sale transactions. As a result, no hedge effectiveness arise requiring recognition through profit or loss.
The cash flow hedges of the forecasted sale transactions during the year ended 31st March, 2024 were assessed to be highly effective and unrealised (loss) gain of ' 797.15 Lakhs (31st March, 2023: ' (1,102.63) Lakhs), with a deferred tax (liability) asset of ' (200.63) Lakhs (31st March, 2023: ' 277.51 Lakhs) relating to the hedging instruments, is included in OCI.
Valuation Technique
The Company enters into derivative financial instruments with Banks. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing models, using present value calculations. Where quoted market prices are not available, fair values are based on management’s best estimates, which are arrived at by the reference to market prices.
43*| EMPLOYEE STOCK OPTION SCHEME
Employee stock option plan namely HAPPY FORGINGS ESOP SCHEME 2023 (the "Plan") was adopted by the Board of Directors in their meeting held on 31st July, 2023. As per the Plan the Company, at its discretion, may grant share options to eligible employees, once the employee has completed one year of service. Vesting of the share options is dependent on the completion of a minimum year of employment with the Company and/ or fulfilment of performance conditions as may be specified in this regard. Employees have a graded option plan where in the fair value of share options granted is estimated at the date of grant using a Black Scholes Model of Valuation, taking into account the terms and conditions upon which the share options were granted.
44| INITIAL PUBLIC OFFER ( IPO)
During the year ended 31st March, 2024 the Company has completed its Initial Public Offer ('IPO') of 1,18,65,802 equity shares of face value of 2 each at an issue price of ' 850 per share (including a share premium of ' 848 per share). The issue comprised of a fresh issue of 47,05,882 equity shares aggregating to ' 40,000 Lakhs and offer for sale of 71,59,920 equity shares aggregating to ' 60,859.32 Lakhs.The equity shares of the Company were listed on the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) on 27th December, 2023.
Consequent to allotment of fresh issue, the paid-up equity share capital of the Company stands increased from ' 1,789.98 Lakhs consisting of 8,94,99,000 equity shares of '2 each to ' 1,884.10 Lakhs consisting of 9,42,04,882 equity Shares of ' 2 each.
The total offer expenses are estimated to the fresh issue are ' 2,217.67 Lakhs (including taxes). The utilisation of IPO proceeds from fresh issue (net of IPO related expense of ' 2,217.67 Lakhs) is summarised below:
46.| The Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software, except that audit trail feature is not enabled for certain changes made using privileged/ administrative access rights to the SAP application and the underlying HANA database. Further no instance of audit trail feature being tampered with was noted in respect of accounting software.
47| OTHER STATUTORY INFORMATION
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any transactions with companies struck off.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory year.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year/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 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.
(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 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 on behalf of the Ultimate Beneficiaries.
(vii) The Company does not have any such 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.
(viii) the Company is not declared as wilful defaulter by any bank or financial institution.
48*| EVENTS AFTER REPORTING DATE:
There are no events occurred after the reporting year which may impact the financial position as on March 31,2024.
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