ii. Provisions for liabilities and charges
The value of provisions recognized in the Financial Statements represent the best estimate to date made by management for a range of
issues. This estimate entails the adoption of assumptions which depend on factors that may change over time and which could therefore
have a significant impact on the current estimates made by management in preparing the Financial Statements.
iii. Useful life of Property, Plant & Equipment (PPE)
The Company reviews the estimated useful lives of PPE at the end of each reporting period.
g) Financial Instruments
1) Financial Assets -
a. Investment in subsidiaries and associates The Company records the investments in subsidiaries and associates at cost less
impairment loss, if any.
b. Other than investment in subsidiaries and associates Financial assets comprise investments in equity securities, trade receiv¬
ables, cash and cash equivalents, loans and other financial assets.
Initial recognition:
All financial assets are recognized initially at Fair value plus transaction costs that are attributable to the Acquisition of the financial
asset (In case of financial assets recorded at FVTPL, transaction costs are recognized immediately in statement of profit and loss).
Purchase or sales of financial assets within a time frame established by regulation or convention in the market place (regular way
trades) are recognized on the trade date. However, trade receivables that do not contain a significant financing component are
measured at transaction price.
Subsequent measurement:
i) Financial assets measured at amortized cost:
Financial assets held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding are measured at amortized cost using Effective Interest Rate (EIR) method. The EIR amortization
is recognized as finance income in the statement of profit and loss.
The Company while applying above criteria has classified the following at amortized cost
a) Trade receivable
b) Loans
c) Other financial assets
ii) Financial asset at FVTOCI
Financial assets that are held within a business model whose objective is achieved by both collecting contractual cash flow and selling
financial asset and the contractual terms of financial assets give rise on specified dates to cash flow that are solely payments of principal
and interest on the principal amount outstanding are subsequently measured at FVTOCI. Fair value movements in financial assets at
FVTOCI are recognized in other comprehensive income
Equity instruments held for trading are classified as FTVPL. For other equity instruments the Company classifies the same as FVTOCI.
The classification is made on initial recognition and is irrevocable. Fair value changes on equity instruments at FVTOCI excluding
dividends, are recognized in other comprehensive income (OCI).
iii) Financial asset at FVTPL
All fair value changes are recognized in the Statement of Profit and loss.
Derecognition of financial asset
Financial assets are derecognized when the contractual right to cash flows from the financial asset expires or the financial asset is
transferred, and the transfer qualifies for Derecognition. On Derecognition of a financial asset in its entirety, the difference between the
carrying amount (measured at the date of Derecognition) and the consideration received (including any new asset obtained less any
new liability Assumed) shall be recognized in the statement of profit and loss (except for equity instruments designated as FVTOCI).
Impairment of financial asset
Trade receivables, investments in subsidiaries and associates, loans and other financial assets are tested for impairment based on the
expected credit losses for their respective financial asset.
i) Trade receivable -
An impairment analysis is performed at each reporting date. The expected credit losses over lifetime of the asset are estimated by
adopting the simplified approach using a provision matrix which is based on historical loss rate reflecting future economic conditions.
In this approach, assets are grouped on the basis of similar credit characteristics such as industry, customer segment, past due status
and other factors which are relevant to estimate the expected cash loss from these assets.
ii) Investments in subsidiaries and associates -
Where an indication of impairment exists, the carrying amount of investment is assessed and written down immediately to its recoverable
amount
iii) Loans and other financial assets
Other financial assets are tested for impairment and expected credit losses are measured at an amount equal to 12 month expected
credit loss. If the credit risk on the financial asset has increased significantly since initial recognition, then the expected credit losses
are measured at an amount equal to life-time expected credit loss.
2) Financial liabilities
Initial recognition and measurement
Financial liabilities are initially recognized at fair value net of any transaction cost that are attributable to the acquisition of financial
liability except financial liabilities at fair value through profit and loss which are initially measured at fair value.
Subsequent measurement
The financial liabilities are classified for subsequent measurement into following categories
- at amortized cost
- at fair value through the statement of profit and loss
Financial liabilities at amortized cost
The Company is classifying the following under amortized cost;
a) Borrowings from banks
b) Borrowings from others
c) Trade payables
d) Other Financial Liabilities
Amortized cost for financial liabilities represents amount at which financial liability is measured at initial recognition minus the principal
repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount
and the maturity amount.
Financial liability at Fair Value through statement of profit and loss
Financial liabilities held for trading are measured at FVTPL.
Financial guarantee contracts (FGC)
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it
incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and are subsequently measured (if not
designated as at Fair value though profit or loss) at the higher of:
• the amount of impairment loss allowance determined in accordance with requirements of Ind AS 109; and
• the amount initially recognised less, when appropriate, the cumulative amount of income recognised.
De-recognition of financial liabilities
A financial liability is de-recognized when and only when, it is extinguished i.e. when the obligation specified in the contract is discharged
or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit
and Loss.
3) Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward and currency swap contracts to mitigate the risk
of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. This category
includes derivative financial assets or liabilities which are not designated as hedges.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge
accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated as a hedge or is so designated but is
ineffective as per Ind AS 109, is categorised as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognised initially at fair value and attributable transaction costs are recognised in the net
profit in the Statement of Profit and Loss when incurred. Subsequent to initial recognition, these derivatives re-measured at fair value
through profit or loss and the resulting exchange gains or losses are included in other income / other expenses. Assets / liabilities in
this category are presented as current assets / current liabilities if they are either held for trading or are expected to be realised within
12 months after the Balance Sheet Date.
Cash flow hedges
The Company designates certain foreign exchange forward contracts / other derivative instruments as cash flow hedges to mitigate
the risks of foreign exchanges exposure on highly probable forecast cash transactions.
When a derivative is designated as a cash flow hedge instrument, the effective portion of changes in the fair value of the derivative is
recognized in other comprehensive income and accumulated in the cash flow hedge reserve. Any ineffective portion of changes in the fair
value of the derivative is recognized immediately in the net profit in the Statement of Profit and Loss. If the hedging instrument no longer
meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold,
terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedge reserve till the period the
hedge was effective remains in cash flow hedge reserve until the forecasted transaction occurs. The cumulative gain or loss previously
recognized in the cash flow hedge reserve is transferred to the net profit in the Statement of Profit and Loss upon the occurrence of the
related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow
hedge reserve is reclassified to net profit in the Statement of Profit and Loss.
4) Offsetting of financial assets and liabilities
Financial assets and liabilities are offset, and the net amount is presented in Balance Sheet when, and only when, the Company has
a legal right to offset the recognized amounts and intends either to settle on a net basis or to realize the assets and settle the liability
simultaneously.
5) Reclassification of financial assets
The Company does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
h) Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation (except in case of freehold land which is not depreciated)
and where applicable, accumulated impairment losses. Cost includes expenditure that is directly attributable to acquisition of the asset.
The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the
asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which
they are located. For qualifying assets, borrowing costs are capitalised in accordance with Ind AS 23 - Borrowing costs.
When parts of an item of Property, Plant and equipment have different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as “Capital
work-in-progress”. Gains and losses on disposal of an item of property plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of Property, Plant and equipment and are recognized net within "other income/other expenses"
in the statement of profit and loss.
Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable
that the future economic benefit embodied within the part will flow to the Company and its cost can be measured reliably. The carrying
amount of the replaced part is de-recognized. The cost of day to day servicing of property, plant and equipment are recognized in
statement of profit or loss.
Depreciation
Depreciation is recognized in the Statement of profit and loss under straight line basis over the estimated useful lives of each part of an
item of property, plant and equipment. Leased asset are depreciated over the shorter of the lease term and their useful lives unless it is
reasonably certain that the company will obtain ownership by the end of the lease term. Assets costing Rs.5000 or below acquired
during the year considered not material are depreciated in full retaining Re.1 per asset. The Useful life has been considered in line with
schedule II except where based on technical estimates.
Estimated useful life in years.
The depreciation method, useful lives and residual value are reviewed at each of the reporting date.
i) Intangible assets
Intangible assets that are acquired by the Company, which have finite useful lives are measured at cost less accumulated amortization
and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the intangible asset.
Research costs are expensed as incurred. Development expenditures on an individual project / New Product Development are recognised
as an intangible asset when the Company can demonstrate:
a) The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
b) Its intention to complete and its ability and intention to use or sell the asset
c) How the asset will generate future economic benefits
d) The availability of resources to complete the asset
e) The ability to measure reliably the expenditure during development
Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally generated goodwill and brands, are recognized in the statement of
profit and loss.
Amortization of intangible asset with finite useful lives
Amortization is recognized in the statement of profit and loss on a straight line basis over the estimated useful lives of intangible assets
from the date that they are available to use based on the estimates made by the management w.r.t the useful life and residual value.
Estimated useful life:
a) Software License is amortised over 5 years
b) New Product Development is amortised over 6 years
Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted prospectively, if appropriate.
j) Leases
At the inception of a contract, the Company assesses whether the contract is a lease or not. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a time in exchange for a consideration.
The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to
extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease
if the Company is reasonably certain not to exercise that option.
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently
depreciated using the straight-line method from the commencement date to the end of the lease term.
The lease liability is initially measured at the present value of the remaining lease payments at the commencement date, discounted using
the Company's incremental borrowing rate.
Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may
not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e., the higher of the fair value less cost to sell and the
value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those
from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs. .
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months
or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense over the
lease term.
k) Inventories
Inventories consisting of stores and spares, raw materials, work in progress, and finished goods are valued at the lower of cost (determined
using Weighted average method) and net realizable value. Cost comprises the fair value of consideration for the purchase and all directly
attributable costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated costs of completion and estimated cost necessary to make the sale.
Cost includes direct material cost, direct labour cost, taxes, and duties (other than duties and taxes for which input credit is available),
freight, other direct expenses, and an appropriate proportion of variable and fixed overhead expenditure.
Cost of the purchased inventory is determined after deducting rebates and discounts. Provision is made for obsolete, non-moving &
defective stocks, wherever necessary.
l) Revenue recognition
Revenue is recognized on their accrual and when no significant uncertainty on measurability or collectability exists.
Revenue from the sale of goods is recognized when the performance obligations towards customers have been met at an amount
that reflects the consideration to which the Company believes it is entitled to in exchange for the transfer of goods to customers i.e.,
Transaction price, net of any sales returns and GST. Variable consideration in the form of trade discounts and volume rebates are Ý
netted off from revenue. Performance obligations are deemed to have been met when the control of goods has been transferred to the
customer, depending on the individual terms of the contract with customers.
Considering the general terms of sales, there is no significant financing element included in the sales consideration.
Subsidies on export and other incentives
Government Subsidies and incentives, in the nature of Business Support Subsidy and RODTEP (Remission of Duties and Taxes on Export
Products) are recognized when there is a reasonable assurance that the condition attaching to the incentive would be complied with and
incentives will be recognized. Government grant received relating to assets are treated as Deferred Revenue and are recognized over the
period in which the economic benefit is expected from such assets.
m) Employee benefits
Employee benefits are accrued in the period in which the associated services are rendered by employees of the Company, as detailed
below:
i. Defined contribution plan (including Provident fund)
In accordance with Indian law, eligible employees receive benefit from various defined contribution plans. The employee and / or
employer make periodic contributions to these plans. The Company has no further obligations under the plan beyond its contributions.
Obligations for contributions to these plans are recognized as employee benefit expenses in the statement of profit and loss when
incurred.
ii . Defined benefit plan (gratuity)
In accordance with applicable Indian laws, the Company provides for gratuity, which is a defined benefit retirement plan covering
eligible employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment,
an amount based on the respective employee's last drawn salary and the years of employment with the Company. The Company's net
obligation in respect of the gratuity plan is calculated by estimating the amount of future benefits that the employees have earned in
return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past
service cost and the fair value of plan assets are deducted. The discount rate is the yield at the reporting date on risk free government
bonds that have maturity dates approximating the terms of the Company's obligations. The calculation is performed annually by a
qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized
asset is limited to the total of any unrecognized past service costs and the present value of economic benefit available in the form of
any future refunds from the plan or reductions in the future contributions to the plan.
The Company recognizes all re-measurements of net defined benefit liability / asset directly in other comprehensive income and
presented within retained earning under equity. The Company has an employees' gratuity fund managed by the ICICI Prudential Life
Insurance Company Limited.
iii . Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognized for the amount expected to be paid under short term cash bonus or profit sharing plans if the Company has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can
be estimated reliably.
iv. Compensated absences
The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilized
accrued absence and utilize it in future periods or receive cash compensation at retirement or termination of employment for the
unutilized accrued compensated absence. The Company recognizes an obligation for compensated absences in the period in which
the employee renders the services. The Company provides for the expected cost of compensated absence in statement of profit or
loss as additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated based on
actuarial valuations carried out by an independent actuary at the balance sheet date.
v. Termination benefits
Termination benefits, in the nature of voluntary retirement benefits or termination benefits are recognized in the Statement of Profit and
Loss.
The Company recognises termination benefits at the earlier of the following dates:
i) When the Company can no longer withdraw the offer of those benefits; or
ii) When the Company recognises costs for a restructuring that is within the scope of Ind AS 37: Provisions, Contingent Liabilities and
Contingent Assets and involves the payment of termination benefits.
n) Finance Income and expense
Finance income comprises interest income on funds invested, dividend income, fair value gains on financial assets at fair value through
profit or loss. Interest income is recognized using effective interest method. Dividend income is recognized in statement of profit and loss
on the date when the Company's right to receive payment is established, which in the case of quoted securities is the ex-dividend date.
Finance expense comprises interest expense on loans and borrowings, bank charges, unwinding of discount on provision, fair value
losses on financial asset through FVTPL (if any) that are recognized in the statement of profit and loss.
o) Income taxes
Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of profit and loss except to
the extent it relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on
the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following
temporary differences:
(i) The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit or loss
(ii) Differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the
foreseeable future.
(iii) Arising due to taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax
purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the
laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority
on the same taxable entity.
A deferred tax asset is recognized to the extent it is probable that future taxable profits will be available against which the temporary
difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
Deferred taxation arising on investments in subsidiaries and associates is recognized except where the Company is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred
taxation on temporary differences arising out of undistributed earnings of the equity-method accounted investee is recorded based on
the management's intention. If the intention is to realize the undistributed earnings through sale, deferred tax is measured at the capital
gains tax rates that are expected to be applied to temporary differences when they reverse. However, when the intention is to realize the
undistributed earnings through dividend, the Company's share of the income and expenses of the equity-method accounted investee
is recorded in the statement of profit and loss after considering any taxes on dividend payable by equity-method accounted investee
or deferred tax is set up in the books if the tax liability is with the Company.
p) Foreign Currency Transactions and balances
Transactions in foreign currencies are initially recognized in the financial statements using exchange rate prevailing on the date of
transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the relevant functional currency at
the exchange rates prevailing at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are re-translated to the functional currency at the exchange rate prevailing on the date that the fair value was
determined. Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are translated at
the exchange rate prevalent at the date of transaction. Foreign currency differences arising on translation are recognized in statement
of profit and loss for determination of net profit or loss during the period.
q) Fair value measurements
Ind AS requires the determination of fair value for both financial and non-financial assets and liabilities. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market
for the asset or liability or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal
market or the most advantageous market must be accessible to the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using
the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure
fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value
hierarchy based on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described
as below:
Level 1 - Unadjusted quoted prices in active market for identical assets and liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable outputs for the assets and liabilities
For assets and liabilities that are recognized in the financial statement at fair value on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by reassessing categorization at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of fair value hierarchy.
Fair values have been determined for measurement and/or disclosures purposes based on the following methods. When applicable,
further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(i) Investments in equity securities
The fair value is determined by reference to their quoted price at the reporting period. In the absence of quoted price, the fair value of
the financial asset is measured using valuation techniques.
(ii) Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of
interest at the reporting date except trade receivables which do not contain a significant financing component (determined in accordance
with Ind AS 115 Revenue from Contracts with Customers) are measured at undiscounted invoice price (i.e., transaction price) and not at
fair value. However, in respect of such financial instruments , fair value generally approximates the carrying amount due to the short-term
nature of such assets.
(iii) Security Deposits
Any Security deposits paid by the Company are discounted to their fair value and thereafter accounted on amortised cost method over
the tenure of the deposits.
(iv) Derivatives
The fair value of forward exchange contracts is based on quoted price. Fair value reflects the credit risk of the instrument and includes
adjustments to take account of the credit risk of the Company and the counter party when appropriate.
(v) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash
flow discounted at the market rate of interest at the reporting date.
r) Current and non-current classification
An asset is classified as current if:
(a) it is expected to be realized or sold or consumed in the Company's normal operating cycle;
(b) it is held primarily for the purpose of trading;
(c) it is expected to be realized within twelve months after the reporting period; or
(d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for atleast twelve months after the
reporting period.
All other assets are classified as non-current.
A liability is classified as current if:
(a) it is expected to be settled in normal operating cycle;
(b) it is held primarily for the purpose of trading;
(c) it is expected to be settled within twelve months after the reporting period;
(d) it has no unconditional right to defer the settlement of the liability for atleast twelve months after the reporting period.
All other liabilities are classified as non-current.
s) Segment Reporting
Operating segments are identified and reported considering the different risks and returns, the organization structure and the internal
reporting system to the chief operating decision maker. The Company's business activity falls within a single reportable business segment,
viz, Automotive Tyres, Tubes and Flaps. Geographical segments are considered as India and rest of the world.
t) Warranty
Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period.
Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims
could differ from historical amounts.
15.4 Rights, preferences and restrictions attached to shares -
Equity shares - The company has one class of equity shares having a par value of ? 10/- each. Each share holder is eligible for one vote
per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual
General Meeting, except in case of interim dividend. Each shareholder also has a residual interest in the assets of the Company in
proportion to their shareholding.
15.5 The Company does not have any outstanding shares issued under options.
15.6 The Company does not have any bonus share issued, share issued for consideration other than cash and shares bought back during
the period of five years immediately preceding the reporting date (31st March, 2025).
Nature and purpose of other reserves
Securities Premium represents premium received on equity shares issued, which can be utilised only in accordance with the provisions of
the Companies Act 2013 for specified purposes.
General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the statement of profit and loss.
Mandatory transfer to general reserve is not required under the Companies Act 2013.
Capital reserve represents reserve of capital nature taken to this head under the erstwhile GAAP.
Reserve on amalgamation represents reserve created as a result of amalgamation
Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other
distributions paid to shareholders.
Equity Instrument through Other Comprehensive Income represents the fair value gain/loss which is not routed through statement of
P&L.
Cash flow hedge instrument through Other Comprehensive Income represents the fair value gain/loss which is routed through
statement of P&L.
Additional Information :
Details of Security for Secured Loans:
a) Term Loan availed from HDFC Bank - This is repayable over 5 years with an interest rate of 6.4% p.a., cross currency swap and interest
rate swap at interest rate of 1.4% p.a. Loan is secured by exclusive first charge on the Specific Fixed Assets/ Immovable property.
b) Term Loan Availed from Axis Bank: This is repayable over 8 years including 36 Months of Moratorium with an interest rate of 7.8%
p.a,cross currency swap and interest rate swap at interest rate of 1.44% p.a. Loan is secured by first charge over specific plant and
machinery or unencumbered land and building.
c) Term Loan Availed from ICICI Bank: This is repayable over 6 years including 14 Months of Moratorium with an interest rate of 8.75%
p.a,cross currency swap and interest rate swap at interest rate of 4.50% p.a. Loan is secured by first charge over specific assets
identified for this purpose.
d) Term Loan Availed from Axis Bank: This is repayable over 7 years including 18 Months of Moratorium with an interest rate of 8.19%
p.a,cross currency swap and interest rate swap at interest rate of 4.44% p.a Loan is secured by Exclusive charge on Plant & Machinery.
Interest rates risk
The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation
will tend to increase. Thus the plan exposes the Company to the risk of fall in interest rates. Sometimes, the fall can be permanent, due to
a paradigm shift in interest rate scenarios because of economic or fiscal reasons. A fall in interest rates will result in an increase in the
ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
Even for funded schemes, a paradigm downward shift in bond yields may affect the reinvestment yields and may increase ultimate costs.
Investment Risk
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of
instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in
wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
Salary risk
The present value of the defined benefit plan is calculated with the assumption of salary escalation rate (SER), which is applied to find the
salary of plan participants in future, at the time of separation Higher than expected increases in salary will increase the defined benefit
obligation and will have an exponential effect.
Demographic risks:
Demographic assumptions are required to assess the timing and probability of a payment taking place. This is the risk of volatility of results
due to unexpected nature of decrements that include mortality, attrition, disability and retirement. The effects of this decrement on the DBO
depend upon the combination salary increase, discount rate, and vesting criteria and therefore not very straight forward. It is important not
to overstate withdrawal rate because the cost of retirement benefit of a short serving employees will be less compared to long service
employees.
40. Financial risk management
The company has exposure to the following risks from its use of financial instruments
40.1 Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The
Company has adopted a policy of dealing only with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a
means of mitigating the risk of financial loss from defaults.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit
evaluation is performed on the financial condition of accounts receivable.
The management believes that the probability of any outflow on account of financial guarantees issued by the Company being called on is
remote and hence the same is not considered in the above assessment. Refer Note 38(b) for details of the financial guarantee issued as at
March 31,2025.
Credit risk is managed by the entity. Considering the credit risk assessment made by the management and based on past history, provision
for receivables amounting to ?1.55 crores (PY - ?1.05 crores) has been made under the simplified approach
40.2 Liquidity risk
The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
The following tables detail the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment
periods. The information included in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on
the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. The contractual
maturity is based on the earliest date on which the Company may be required to pay.
40.3 Market risk
Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of a business.
The major components of market risk are commodity price risk, foreign currency exchange risk and interest rate risk
40.3.1 Commodity Price Risk - The primary commodity price risks that the Company is exposed to include rubber prices that could
adversely affect the value of the Company's financial assets or expected future cash flows.
40.3.2 Foreign currency risk management - The Company imports raw materials from outside India as well as make export sales to
countries outside India. The Company is, therefore, exposed to foreign currency risk principally arising out of foreign currency movement
against the Indian Currency. Foreign currency exchange risks are managed by entering into forward contracts against firm purchase
commitment and receivables.
40.3.2.1 The carrying amounts of the Company's foreign currency denominated monetary assets and monetary liabilities at the end of the
reporting period are as follows.
In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end
of the reporting period does not reflect the exposure during the year.
40.3.2.3 Forward foreign exchange contracts
It is the policy of the Company to enter into forward exchange contracts based on the net exposures for the future periods evaluated on a
monthly basis, considering both existing exposures and potential forecast transactions.
40.3.3 Interest rate risk management
The Company is exposed to interest rate risk because of borrowal of short term funds at floating interest rates.
Interest rate sensitivity analysis
If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company's Profit for the year ended
March 31,2025 would decrease/increase by 34.25 Crores; as against 3.4.20 Crores for the year ended March 31,2024.
41. Capital Management
For the purpose of the Company's capital management, capital includes issued equity capital, securities premium, general reserve and all
other equity reserves attributable to the equity holders of the company. 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
borrowings and related covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to
shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt
divided by fund attributable to Equity Shareholders. The company includes within net debt, interest bearing loans and borrowings less cash
and cash equivalents, excluding discontinued operations.
47. Exceptional Item -
i. The company initiated a Voluntary Retirement Scheme for its employees in FY 2021-22. Under this scheme, the company has received
and approved applications for a sum of ?5.30 crores in the current year (PY ?1.37 crores).
ii. During the year, The Regional Provident Fund Commissioner, Madurai issued final orders under Section 7-A of the Employees' Provident
Funds and Miscellaneous Provisions Act, 1952, for provident fund applicability on certain salary/wages components for the period April
2012 to July 2017. Potential additional liability arising out of the aforesaid orders has been estimated and accounted for as exceptional
item amounting to ?6.10 crores during the year ended March 31,2025.
iii. On July 21, 2022, the Ministry of Environment, Forest and Climate Change issued notification containing Regulations on Extended
Producer Responsibility (EPR) for Waste Tyre applicable to Tyre manufacturers and Recyclers. As per the notification, during the year
2023-24, the Extended Producer Responsibility (EPR) obligation for the year 2022-23 and 2023-24 were estimated and accounted at
?7.58 crores. The obligation pertaining to FY 2024-25 amounted to ?12.05 crores and has been disclosed as part of "Other expenses"
under the head "Rates and Taxes". Refer Note 32.
48. Previous year figures: Previous year's figures have been regrouped/ reclassified wherever necessary, to conform to current year's
classification. Deposits with Government Authorities of ? 4.64 Crores pertaining to FY 2023-24 have been reclassified from other financial
assets to other non-current assets in line with current year classification.
49. Quarterly returns filed with Banks and Financial Institutions: The amounts as per the quarterly return of inventories and book debts
submitted to the banks were lower than the amounts as per the books of account and accordingly did not affect the drawing power and the
required security cover computed in accordance with the sanctioned terms.
50. Relationship with Struck off Companies (Where the Company has any transactions with companies struck off under Section 248 of
Companies Act,2013 or Section 560 of Companies Act,1956)
51. Utilisation of borrowings from Banks and Financial Institutions: During the year, company has not availed any new term loans.
52. The implementation of the Code on Social Security, 2020 is getting postponed. The Company will assess the impact thereof and give
effect in the Financial Statements when the date of implementation of the codes and the Rules / Schemes thereunder are notified.
53. The Board of Directors of the company recommended a dividend of ?16.89 (PY - ?47.34) per equity share of ?10/each (i.e.) for the
year ended March 31,2025, subject to the approval of shareholders at the ensuing Annual General Meeting of the company.
54. 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 person(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding,
whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company
(Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the
Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate
Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
55. The company does not have any transaction which is not recorded in the Books of accounts that has been surrendered, disclosed as
income during the year in tax assessments under the income tax act,1961 (such as search or survey or any relevant provisions of Income
Tax Act,1961).
56. The Company uses an ERP as books of accounts and the same was configured to maintain audit trail and audit logs at transaction level
and database level with the application layer from 9th July 2023. Post publication of ICAI implementation guide in February 2024, direct
database level changes was also included in the audit trial scope which however was not enabled. The Company shall evaluate the impact
on performance by enabling the database level audit trail and incorporate the recommendation as suggested by the ERP vendor. However,
access to direct database level changes is available only to the default System user provided by the ERP vendor.
For accounting software for which audit trail feature is enabled, the audit trail facility has been operating throughout the year for all relevant
transactions recorded in the software and audit trail feature has not been tampered with during the year
Additionally, other than the periods where audit trail was not enabled in the prior year, the audit trail has been preserved as per the statutory
requirements for record retention.
57.Other notes
i. The Company does not have any Benami property, where any proceeding has been initiated or pending against the company to holding
any benami property.
ii. The Company has not traded or invested in crypto currency or virtual currency during the financial year.
iii. The Company has in respect of the investments made, complied with no. of layers as defined under section 2(87) of the Companies
Act,2013.
iv. The Company has nothing to report on compliance with approved Scheme(s) of Arrangements.
v. The Company has not taken loans and borrowings from lenders (Other than banks and Financial Institutions).
vi. Details of Loans or advances to specified persons as defined under Companies Act, 2013 are as follows:
vii. Disclosure as required under section 186(4) of the Companies Act, 2013 -
a) Details of investments are disclosed in note 6 to the financial statements.
b) There are no loans / guarantees given by the Company (other than on behalf of wholly owned subsidiary) in accordance with Section
186 of the Act read with rules issued thereunder. Refer note 38 for details of loans/guarantees provided to wholly owned subsidiary.
viii. The Company has complied with the requirements of section 123 of the Companies Act, 2013 in respect of the final dividend for
previous year paid during the year.
* Exceptional items have been excluded for the purposes of ratio calculation.
For TVS Srichakra Limited As per our report of even date attached
For PKF Sridhar & Santhanam LLP
Chartered Accountants
x.. . .. Firm Registration No:003990S/S200018
Shobhana Ramachandhran R Naresh
Managing Director Executive Vice Chairman
DIN: 00273837 DIN: 00273609
Sd/- Sd/- Sd/-
B Rajagopalan Chinmoy Patnaik Ramanarayanan J
Chief Financial Officer Secretary Partner
Membership no: A14724 Membership No: 220369
Place: Chennai Place: Chennai
Date: 27th May 2025 Date: 27th May 2025
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