2.18 Provisions and contingent liabilities

A provision is recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources is expected to settle the obligation, in respect of which a reliable estimate can be made.

If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Contingent liability is disclosed in case:

• a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation;

• present obligation arising from past events, when no reliable estimate is possible; or

• a possible obligation arising from past events where the probability of outflow of resources is not remote.

Provisions and contingent liabilities are reviewed at each standalone balance sheet date.

2.19 Provisions for employment benefits Defined contribution plans

Under defined contribution plan, the Company pays pre-defined amounts to separate funds and does not have any legal or informal obligation to pay additional sums. The Company has the following defined contribution plans: state governed provident fund scheme and employee state insurance scheme. The contributions paid and payable under the scheme are recognised in the period when the employee renders the related service.

Defined benefit plans

The employees’ gratuity fund scheme managed by the Life Insurance Corporation of India is the Company’s defined benefit plan. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields on government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the standalone balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

In case of funded plans, the fair value of the plan’s assets is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on net basis.

Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. Past service cost is recognised as expenses on a straight-line basis over the average period until the benefits become vested. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.

of Directors, or in respect of the final dividend when approved by shareholders.

2.22 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decision.

Segment accounting policies are in line with the accounting policies of the Company.

2.23 Recent accounting pronouncements

The Ministry of Corporate Affairs (‘MCA’) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules, as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.

Nature of CSR activities :

Agriculture and rural development, eradicating hunger and poverty, promoting education, vocational skills, and livelihood, gender equality and women empowerment, preventive healthcare, heritage art and culture, environmental sustainability, promoting sports, sanitation, hygiene and safe drinking water, animal welfare, support to differently abled, technology incubators, armed forces/veterans, contribution to river and beach cleaning.

34 Segment information

The Company is in the business of manufacturing PVC resin and PVC pipes and fittings. Therefore, as per Ind AS 108 “Operating Segments”, the Company has disclosed two segments i.e. PVC resin and PVC pipes and fittings.

The management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss that is measured consistently with profit or loss in the standalone financial statements. The Company’s financing (including finance costs and finance income) and income-taxes are not allocated to operating segments.

Risk exposure and asset liability matching

Provision of a defined benefit scheme poses certain risks, some of which are detailed hereunder, as companies take on uncertain long term obligations to make future benefit payments.

1. Liability risks

a. Asset-liability mismatch risk

Risk which arises if there is a mismatch in the duration of the assets relative to the liabilities. By matching duration with the defined benefit liabilities, the Company is successfully able to neutralize valuation swings caused by interest rate movements. Hence companies are encouraged to adopt asset-liability management.

b. Discount rate risk

Variations in the discount rate used to compute the present value of the liabilities may seem small, but in practice can have a significant impact on the defined benefit liabilities.

c. Future salary escalation and inflation risk

Since price inflation and salary growth are linked economically, they are combined for disclosure purposes. Rising salaries will often result in higher future defined benefit payments resulting in a higher present value of liabilities especially unexpected salary increases provided at management’s discretion may lead to uncertainties in estimating this increasing risk.

d. Withdrawal

Actual withdrawal providing higher or lower than assumed withdrawal and change of withdrawal rate at subsequent valuation can impact plan’s liablity.

Valuation techniques used to determine the fair value of each financial instrument:

Fair value of financial instruments classified at amortised cost:

The management assessed that the fair values of cash and bank, loans, trade receivables, other financial assets, borrowings, trade payables, lease liabilities and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Carrying value of non-current financial liabilities are considered to be same as their fair value due to discounting at rate which are an approximation of incremental borrowing rate.

Fair value of financial instruments classified at FVTPL:

These financial instruments consist of investments in quoted equity instruments and units of mutual funds. The fair value of quoted equity instruments is based on the respective quoted price in the active markets as at the measurement date and fair value of investments in mutual funds is determined using the quoted price Net Asset Value (‘NAV’) of the respective units in the active market at the measurement date.

Fair value of financial instruments classified at FVOCI:

These financial instruments consist of investments in equity instruments. The fair value of quoted equity instruments is based on the respective quoted price in the active markets as at the measurement date. The fair value of investments in unquoted equity shares has been estimated using the net asset method. The valuation requires to consider the cost of replacement of an asset as an indication of the fair market value of that asset.

During the year ended March 31, 2024 and March 31, 2023, there were no transfers between hierarchies of fair value measurements.

The Company maintains policies and procedures to value financial assets or financial liabilities using the best and most relevant data available. In addition, the Company internally reviews valuations, including independent price validation for certain instruments.

The Company’s principal financial liabilities comprise current borrowings, trade payables, lease liabilities and other financial liabilities. The Company’s principal financial assets include investments, trade receivables, cash and cash equivalents and other bank balances that arrive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s management oversees the management of these risks. The Company’s management is supported by a risk management committee that advises on financial risks and the appropriate financial risk governance framework. The risk management committee provides assurance to the Company’s management that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company’s policies appetite. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

i) 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 evaluates credit risk with respect to trade receivables as significantly low, as its payment terms are mostly advance basis.

a) Trade receivables

In respect of trade receivables, the Company is not exposed to any significant credit risk exposure to any single counter party or any group of counter parties having similar characteristics. Trade receivables consist of a large number of customers. The Company has very limited history of customer default, and considers the credit quality of trade receivables that are not past due or impaired to be good.

b) Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The Company monitors ratings, credit spread and financial strength of its counter parties. Based on ongoing assessment, the Company adjust it’s exposure to various counterparties. The Company’s maximum exposure to credit risk for the other components of balance sheet is the carrying amount as disclosed below:

ii) Liquidity risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash flow and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all time maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system.

The Company manages liquidity risk by maintaining adequate reserves, banking facilities and committed borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities and by monitoring rolling forecasts of its liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.

The following tables summarise the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

iii) 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 i.e. interest rate risk, currency risk and price risk such as equity price risk and commodity price risk. Financial instruments affected by market risk include borrowings, trade and other payables, trade receivables, investments, other financial liabilities.

The sensitivity analysis in the following sections relate to the position as at March 31, 2024 and March 31, 2023. The sensitivity of the relevant income statement item is the effect of the assumed changes in respective market risks. The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt, proportion of financial instruments in foreign currencies are all constant at March 31, 2024.

The analyses exclude the impact of movements in market variables on: the carrying values of gratuity, other post retirement obligations and provisions Company’s activities expose it to variety of financial risks, including effect of changes in foreign currency exchange rate and interest rate.

a) Foreign currency risk

Foreign currency risk is the risk that the future cash flows of a financial instrument 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 its operating activities on account of import of raw materials.

PVC pricing is on import parity and import parity value of sales of the Company exceeds the USD payables on a six monthly rolling basis and hence the Company does not generally need to resort to hedging by way of forward contracts, options, etc.

c) Price risk

i) Commodity price risk

The Company is affected by the volatility of prices of certain commodity chemicals [(Ethylene and PVC) and intermediate goods (Ethylene and Ethylene Dichloride (‘EDC’) and Vinyl Chloride Monomer (‘VCM’)]. Its operating activities involve the ongoing purchase of VCM, EDC, all being petrochemical products for manufacturing of PVC and pipes and fittings and therefore require a continuous supply of these materials. Prices of PVC manufactured by the Company are monitored by the Company’s management and are adjusted to respond to change in import parity price of PVC in Indian market. Market price of input and output, generally get adjusted over a period of time. Accordingly, the Company is exposed to the variation in prices over short term period.

44 Disclosure pursuant to Ind AS 116

(a) The Company as a lessee has obtained certain assets such as immovable properties on leasing arrangements for the purposes of a manufacturing unit. With the exception of short-term leases and leases of low value underlying assets, each lease is reflected on the balance sheet as a right-to-use asset and corresponding lease liability. Variable lease payment which do not depend on an index or a rate are excluded from the initial measurement of the lease liability and right-of-use assets. The Company has presented its right-of-use assets separately from other assets. Each lease generally imposes a restriction that unless there is a contractual right for the Company to sub-lease the asset to another party, the right-of-use asset can only be used by the Company. Some leases contain an option to extend the lease for a further term.

(b) Additional information on extension/ termination options: Extension and termination options are included in a number of property lease arrangements of the Company. These are used to maximise operational flexibility in terms of managing the assets used in the Company’s operations. The majority of extension and termination options held are exercisable based on consent of the Company.

45 Utilization of borrowed funds

During the years ended March 31, 2024 and March 31, 2023:

(i) 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, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(ii) No funds have been received by the Company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

46 Undisclosed income :

There are no transactions that have not been recorded in the books of accounts and have been surrendered or disclosed as income during the year in the tax assessments under the Income-tax Act, 1961

47 Details of Crypto Currency or Virtual currency :

The Company has not traded or invested in crypto currency or virtual currency during the current year and previous year.

48 Transactions with struck-off companies :

The Company does not have any transaction or outstanding balance with struck-off companies under section 248 of the Act or section 560 of Companies Act, 1956, during current and previous year.

49 Registration/satisfaction of charges with Registrar :

There are no charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period in the current as well as in the previous year.

50 Recording audit trail :

The Ministry of Corporate Affairs (MCA) has prescribed a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules 2021 requiring companies, which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.

The Company uses the accounting software SAP for maintaining its books of account. During the year ended 31 March 2024, the Company had not enabled the feature of recording audit trail (edit log) at the database level for the said accounting software to log any direct data changes on account of recommendation in the accounting software administration guide which states that enabling the same all the time consume storage space on the disk and can impact database performance significantly. The users of the Company do not have any access to database IDs with DML (Data Manipulation Language) authority which can make direct data changes (create, change, delete) at database level. Audit trail (edit log) is enabled at the application level.

51 Previous year comparatives

Previous year’s figures have been regrouped/ reclassified wherever necessary to correspond with the current year’s classifications / disclosures. The impact of such regroupings/ reclassifications are not material to the standalone financial statements.

The accompanying notes including a summary of material accounting policies and explanatory information form an integral part of these standalone financial statements.

As per our report of even date.

For Walker Chandiok & Co LLP For and behalf of the Board of Directors of

Chartered Accountants Finolex Industries Limited

Firm Registration No. 001076N/N500013

Prakash P. Chhabria Bhumika L. Batra Ritu P. Chhabria

Executive Chairman Director Director

DIN: 00016017 DIN: 03502004 DIN: 00062144

Place: Dubai Place: Mumbai Place: London

Rajni Mundra Saumya Chakrabarti Kanchan U. Chitale Saurabh S. Dhanorkar

Partner Director Director Director

Membership No.: 058644 DIN: 09594036 DIN: 00007267 DIN: 00011322

Place: Mumbai Place: Ratnagiri Place: Mumbai Place: Nagpur

Date: May 10, 2024

Deepak R. Parikh Pradeep R. Rathi Anami N. Roy

Director Director Director

DIN: 06504537 DIN: 00018577 DIN: 01361110

Place: Florida Place: Pune Place: Mumbai

Ajit Venkataraman Niraj Kedia Dakshinamurthy Iyer

Managing Director Chief Financial Officer Company Secretary

DIN: 07289950 Place: Pune M. No.: A13004

Place: Mumbai Place: Mumbai

Date: May 10, 2024