C.17. Provisions, Contingent Liabilities and
Contingent Assets
Provisions are recognized at present value
when the Company has a present obligation
(legal or constructive) as a result of a past
event, it is probable that an outflow of
resources embodying economic benefits
will be required to settle the obligation and a
reliable estimate can be made of the amount
of the obligation. The expense relating to a
provision is presented in the statement of
profit and loss net of any reimbursement.
Provision for decommissioning costs are
provided at the present value of expected
costs to settle the obligation using estimated
cash flows and are recognized as part of the
cost of PPE. The cash flows are discounted
at a current pre-tax rate that reflects the risk
specific to the decommissioning liability.
The unwinding of discount is expensed as
incurred and recognized in the statement
of profit and loss as a finance cost. The
estimated future costs of decommissioning
are reviewed annually and adjusted as
appropriate. Changes in the estimated
future costs or in the discount rate applied
are added to or deducted from the cost of
the asset.
Contingent liabilities are not provided
for, if material, are disclosed by way of
notes to accounts, until such time that the
liabilities arising out of these outstanding
litigations have been crystallized by virtue
of a final order being passed by the relevant
regulatory authority or court or forum.
Contingent assets are not recognized in
financial statements. However, the same
is disclosed, where an inflow of economic
benefit is probable.
C.18. Business Combinations
Business Combinations (other than
common control business combinations)
In accordance with Ind AS 103, the Group
accounts for these business combinations
using the acquisition method when
control is transferred to the Group. The
consideration transferred for the business
combination is generally measured at fair
value as at the date the control is acquired
(acquisition date), as are the net identifiable
assets acquired. Any goodwill that arises
is tested annually for impairment. Any gain
on a bargain purchase is recognized in
OCI and accumulated in equity as capital
reserve if there exists clear evidence of
the underlying reasons for classifying the
business combination as resulting in a
bargain purchase; otherwise the gain is
recognized directly in equity as capital
reserve. Transaction costs are expensed as
incurred, except to the extent related to the
issue of debt or equity securities.
The consideration transferred does not
include amounts related to the settlement of
pre-existing relationships with the acquiree.
Such amounts are generally recognized in
profit or loss.
Any contingent consideration is measured
at fair value at the date of acquisition. If an
obligation to pay contingent consideration
that meets the definition of a financial
instrument is classified as equity, then
it is not re-measured subsequently
and settlement is accounted for within
equity. Other contingent consideration is
remeasured at fair value at each reporting
date and changes in the fair value of the
contingent consideration are recognized
in the consolidated statement of profit and
loss.
If a business combination is achieved in
stages, any previously held equity interest in
the acquiree is re-measured at its acquisition
date fair value and any resulting gain or loss
is recognized in the consolidated statement
of profit and loss or OCI, as appropriate.
Common Control Transactions
Business combinations involving entities
that are controlled by the Group in which
all the combining entities or businesses are
ultimately controlled by the same party or
parties are accounted for using the pooling
of interests method as follows :
1. The assets and liabilities of the
combining entities are reflected at their
carrying amounts.
2. No adjustments are made to reflect
fair values, or recognize any new
assets and liabilities. Adjustments are
only made to harmonies accounting
policies.
3. The financial information in the
financial statements in respect of prior
periods is restated as if the business
combination had occurred from the
beginning of the preceding period in
the financial statements, irrespective
of the actual date of the combination.
However, where the business
combination had occurred after that
date, the prior period information is
restated only from that date.
4. The balance of the retained earnings
appearing in the financial statements
of the transferor is aggregated with
the corresponding balance appearing
in the financial statements of the
transferee or is adjusted against
general reserve.
5. The identity of the reserves are
preserved and the reserves of the
transferor become reserves of the
transferee.
6. The difference, if any, between
the amounts recorded as share
capital issued plus any additional
consideration in the form of cash or
other assets and the amount of share
capital of the transferor is transferred
to capital reserve and is presented
separately from other capital reserves.
Wherever any business combination is
governed by the Scheme approved by the
Hon’ble High Court/ National Company Law
Tribunal [NCLT], the business combination
is accounted for as per the accounting
treatment sanctioned in the Scheme.
C.19. Events after reporting date
Where events occurring after the Balance
Sheet date provide evidence of conditions
that existed at the end of the reporting period,
the impact of such events is adjusted within
the financial statements. Otherwise, events
after the Balance Sheet date of material size
or nature are only disclosed.
C.20. 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. During the year
ended March 31, 2025, MCA has notified
amendments to Ind AS 116 - Leases
relating to sale and lease back transactions,
applicable from April 01,2024. The Company
has reviewed the new amendments and
based on evaluation there is no significant
impact on its financial statements.
On May 09, 2025, MCA notifies the
amendments to Ind AS 21 - Effects of
Changes in Foreign Exchange Rates.
These amendments aim to provide
clearer guidance on assessing currency
exchange ability and estimating exchange
rates when currencies are not readily
exchangeable.
The amendments are effective for the year
beginning from April 01,2025. The Company
has reviewed the new amendments and
based on evaluation there is no significant
impact on its financial statements.
Nature and purpose of reserves:
A Capital Reserves/Merger Reserve: The Company has recognized Capital Reserves/Merger Reserve for difference between
consideration paid and net assets acquired under common control business combination transaction (Arising pursuant to
the Scheme of Amalgamation). This can be utilized in accordance with the provisions of the Companies Act, 2013.
B Security Premium: The amount received in excess of face value of the equity shares is recognized in Securities premium. It
is utilized in accordance with the provisions of the Companies Act, 2013.
C General Reserve: The General Reserve is used from time to time to transfer profits from retained earnings for appropriation
purposes. General Reserve is created by the transfer from one component of equity to another and is not an item of other
comprehensive income. This can be utilized in accordance with the provisions of the Companies Act, 2013.
D Retained Earnings: Retained earnings represents accumulated profit of the Company as on reporting date. The reserve can
be utilized in accordance with the provision of the Companies Act, 2013.
E Other Comprehensive Income -Cashflow Hedge Reserve: This represents the cumulative effective portion of gains or
losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges.
The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are
recognized and accumulated under the heading of effective portion of cash flow hedges will be reclassified to statement of
profit and loss only when the hedged items affect the profit and loss or upon discontinuation of hedge relationship.
Security for Current Borrowings
(1) State Bank of India :
Engineering Segment -HEIL - Secured by hypothecation of entire current assets of the Engineering Division on first
ranking pari passu basis with Citibank N.A., Yes Bank Ltd., RBL Bank Ltd., HSBC Ltd and HDFC Bank Ltd.
(2) Citi Bank :
Engineering Segment -HEIL 1) Working capital Secured by hypothecation of entire current assets of the Engineering
Division on first ranking pari passu basis with State Bank of India, Yes Bank Limited, RBL Bank Limited , HSBC Ltd and
HDFC Bank Limited, and secured by demand promissory note and letter of continuity for the facility amount 2) SBLC
extended to Citibank, China secured by demand promissory note and letter of continuity for the facility amount 3) SBLC
extended to Citibank, Romania secured by first charge on inventory and receivables of Harsha Engineers Europe SRL,
Romania in favor of Citibank, Romania and first charge on plant and machinery Harsha Engineers Europe SRL, Romania
in favor of Citibank, Romania and secured by demand promissory note and letter of continuity for the facility amount.
(3) YES Bank Ltd :
Engineering Segment -HEIL - Secured by hypothecation of entire current assets of the Engineering Division first ranking
pari passu with State Bank of India, Citibank NA., RBL Bank Limited , HSBC Ltd and HDFC Bank Limited and
Solar Segment Demand loans from banks are secured by first pari passu charge with RBL Bank Ltd. by hypothecation
of the Solar Division's assets including stock of Raw Materials, Semi-Finished, Finished Goods, Consumable Stores and
spares and other such movables, book debts, bill whether documentary or clean, outstanding monies, receivables, plant
and machineries and all other current assets both present and future excluding project specific charge.
(4) RBL Bank Ltd :
Engineering Segment -HEIL - Secured by hypothecation of entire current assets of the Engineering Division first ranking
pari passu with State Bank of India, Citibank NA., Yes Bank Limited, HSBC Ltd and HDFC Bank Limited and
Solar Segment Demand loans from banks are secured by first pari passu charge with YES Bank Ltd by hypothecation
of the Solar Division's assets including stock of Raw Materials, Semi-Finished, Finished Goods, Consumable Stores and
spares and other such movables, book debts, bill whether documentary or clean, outstanding monies, receivables, plant
and machineries and all other current assets both present and future.
(5) HDFC Bank Ltd :
Engineering Segment -HEIL - Secured by hypothecation of entire current assets of the Engineering Division first ranking
pari passu with State Bank of India, Citibank NA., Yes Bank Limited, HSBC Ltd and RBL Bank Limited.
The Company has obtained various borrowings from banks on the basis of security of current assets wherein the quarterly
returns/ statements of current assets as filed with banks are in agreement with the books of accounts.
Note : 2. Some of the current Income tax litigation pertaining to merger entities tax credit linkage system not available with the
department & Some are based on interpretation of the income tax law & rules. Management has been opined by its counsel
that many of the issues raised by revenues will not be sustainable in law as they are covered by judgments of respective judicial
authorities which supports its contention. As such no material impact on the financial of the Company is envisaged.
34.2. Corporate Social Responsibility (CSR) Expenses
Based on the guidance note on Accounting for Expenditure on Corporate Social Responsibility Activities (CSR) issued by the
Institute of Chartered Accountants of India and Section 135 of the Companies Act, 2013, read with rules made thereunder, the
Company has incurred the following expenditure on CSR activities for the financial year 2024-25.
# It includes ' 1500 lakhs of the City Civil Court, Bengaluru case filed by Orchestrate Systems Pvt Ltd. (OSPL) against the
Company. This matter was filed by OSPL after the winding up petition was filed by the Company against OSPL at Karnataka
High Court. later the Company had withdrawn the winding up petition at Karnataka High court against OSPL, with permission
of court to pursue the matter under MSMED Act. Thereafter, the Company had filed MSME case against OSPL for recovery of
' 686 lakhs and on conciliation fail at MSMEFC the matter was refer to Arbitration. After completion of arbitration, arbitrator
has passed necessary order in favor of the Company for recovery of ' 686 lakhs plus interest as per the said order dated May
04, 2019. The Company has filed execution petition at commercial court Raipur for above arbitration order as assets of OSPL
are located in Chhattisgarh. The same matter is pending with commercial court, Raipur. OSPL has challenged this arbitration
at Gujarat High court and the same matter is also pendingm with Gujarat High court. Against, civil court case at Bengaluru by
OSPL, Counter Claim Revival Application has been submitted by the Company, Hearing on revival application is pending.
Note : 1. All of the issue of litigation pertaining to Income tax are based on interpretation of the income tax law & rules,
Management has been opined by its counsel that many of the issues raised by revenues will not be sustainable in law as they
are covered by judgments of respective judicial authorities which supports its contention. As such no material impact on the
financial of the Company is envisaged.
34.3. Segment Reporting:
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision
Maker [CODM] of the Company.
Ind AS 108 "Operating Segment" establishes standards for the way that public business enterprises report information about
operating segments and related disclosures about products and services, geographic areas. Accordingly, information has been
presented both along business segments and geographic segments.
A : BUSINESS SEGMENTS INFORMATION
The Chief Operating Decision Maker [CODM] reviews the Company as (i) "Engineering & Others" and (ii) "Solar-EPC and O&M"
segment .
The CODM reviews revenue, results, total assets and total liabilities as the performance indicator of an operating segment.
34.5. Termination of the HASPL Americas Corporation:
In the previous year, M/s HASPL Americas Corporation, Wholly Owned Subsidiary of the Company had been terminated in
accordance with applicable laws, as per certificate issued by State Corporation Commission, Virginia on February 29, 2024. The
necessary accounting treatment had been given accordingly in in the previous financials.
34.6. Sale of Investment of the Sunstream Green Energy One Pvt. Ltd.:
In the previous year, the Company had transferred equity investment of 32,97,050 shares representing 25.9999% of Sunstream
Green Energy One Private Limited ("SGEOPL"), Associates of the Company to the Sunstream Green Energy Pvt Ltd at ' 10/- per
share in accordance with Agreement for Sale of Shares dated January 25, 2024 (Share Purchase Agreement) . On account of
this transfer the Company’s stake had been reduced to 10 equity shares in SGEOPL. Further the Company has also transferred
remaining 10 equity shares during current financial year. The necessary accounting treatment had been given accordingly in
the financials.
34.7. Additional Regulatory Information :
1) The Company does not have any investment property. Hence, comment related to revaluation is not made.
2) The Company has not granted any Loans or Advances in the nature of loans to promoters, directors, KMPs and the related
parties (as defined under the Companies Act, 2013), either severally or jointly with any other person, that are: (a) repayable
on demand; or (b)without specifying any terms or period of repayment.
3) No proceedings have been initiated during the year or are pending against the Company as at reporting date for holding any
benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.
4) The Company has not been declared as wilful defaulter (by virtue of Section 477 & 488 of the Companies Act, 2013) by any
bank or financial institution or government or any government authority.
5) The Company had transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560
of the Companies Act, 1956. and having outstanding balance at the year end as per below details.
9) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
10) 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 Act, 1961 (such as, search or survey or
any other relevant provisions of the Income Tax Act, 1961).
34.8. Dividends Proposed to be Distributed
The Board of Directors, at its meeting held on May 08, 2025, recommended the final dividend of Re. 1.00 per equity share
of ' 10/- each for the year 2024-25, which will result in a total outflow of ' 910.44 lakhs. The recommended dividend is
subject to the approval of the shareholders at the Annual General Meeting and hence not recognized as a liability as at
March 31,2025.
34.9. Maintenance of Books of Accounts with Audit Trail
The Ministry of Corporate Affairs (MCA) has prescribed a 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 use accounting software for maintaining its books of account, to 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 have used multiple accounting software for maintaining books of account which have a feature of recording
audit trail (edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in
the software, except for instances mentioned below -
a) The Company has used accounting software for maintaining its books of accounts which has a feature of recording
audit trail [edit log] facility and the same has been operational throughout the year for all relevant transactions
recorded in the software except that no audit trail has been enabled at the database level for accounting software to
log any direct data changes.
Further, no instance of audit trail feature being tampered with was noted in respect of the accounting software.
Presently, the log has been activated at the application and the privileged access to HANA database continues to
be restricted to limited set of users who necessarily require this access for maintenance and administration of the
database.
b) One segment of the Company has used an accounting software Tally for maintaining its books of account which has
a feature of recording audit trail (edit log) facility.
6) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory
period.
7) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the
Companies (Restriction on number of Layers) Rules, 2017
8) (A) 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:
(i) 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
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(B) 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 :
(i) 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
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
Reason for change more than 25% :
* Current Ratio (Times) : Improve due to decrease in Current Borrowings
** Debt-Equity Ratio (Times) : Improve due to decrease in Current Borrowings
*** Debt Service Coverage Ratio (Times) : Decline due to decrease in PAT (with reference to ' 9,501 lakhs Impairment in
carrying value of Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts
Write Off / Net Sundry Balances write off pertains to Solar-EPC and O&M Segment.)
# Return on Equity Ratio (%) : Decline due to decrease in PAT (with reference to ' 9,501 lakhs Impairment in carrying value
of Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts Write Off / Net
Sundry Balances write off pertains to Solar-EPC and O&M Segment.)
## Net profit ratio (%) : Decline due to decrease in PAT (with reference to ' 9,501 lakhs Impairment in carrying value of
Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts Write Off / Net
Sundry Balances write off pertains to Solar-EPC and O&M Segment.)
### Return on Capital Employed (%) : Decline due to decrease in PBIT (with reference to ' 9,501 lakhs Impairment in carrying
value of Investment of wholly owned subsidiary, Harsha Engineers Europe SRL-Romania & ' 2,060 lakhs Bad Debts Write Off /
Net Sundry Balances write off pertains to Solar-EPC and O&M Segment.)
# Investments in Subsidiaries, Joint venture & Associates have been accounted at historical cost (Net of Impairment). Since
these are out of scope of Ind AS 109 for the purposes of measurement, the same have not been disclosed in the above table.
Fair value of financial assets and liabilities measured at amortized cost is not materially different from the amortized cost.
Further, impact of time value of money is not significant for the financial instruments classified as current. Accordingly, the fair
value has not been disclosed separately.
Types of inputs are as under:
Input Level 1 (Directly Observable) which includes quoted prices in active markets for identical assets such as quoted price for
an equity security on Security Exchanges.
Input Level 2 (Indirectly Observable) which includes prices in active markets for similar assets such as quoted price for similar
assets in active markets, valuation multiple derived from prices in observed transactions involving similar businesses etc.
Input Level 3 (Unobservable) which includes management's own assumptions for arriving at a fair value such as projected
cash flows used to value a business etc.
The Company's principal financial liabilities comprises of loans & borrowings and trade & other payables. The main purpose
of these financial liabilities is to finance the Company operations and to provide guarantees to support its operations. The
Company's principal financial assets include trade & other receivables, cash & cash equivalents and investments that are
derived directly from its operations. The Company has exposure to the following risks arising from financial instruments:
i. Credit risk
ii. Liquidity risk
iii. Market risk
(i) Credit risk
Credit risk is the risk that a customer or counterparty to a financial instrument will fail to perform or fail to pay amounts
due causing financial loss to the Company. The potential activities where credit risks may arise include from cash and cash
equivalents, derivative financial instruments and security deposits or other deposits and principally from credit exposures to
customers relating to outstanding receivables. The maximum credit exposure associated with financial assets is equal to the
carrying amount. Details of the credit risk specific to the Company along with relevant mitigation procedures adopted have
been enumerated below:
Trade receivables
The Company's exposure to credit risk is the exposure that Company has on account of goods & services rendered to a
contractual counterparty or counterparties, whether with collateral or otherwise for which the contracted consideration is yet
to be received. The Company's customer base are Industrial and Commercial.
The Company provides for allowance for impairment that represents its estimate of expected losses in respect of trade and
other receivables.
The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on
a provision matrix, Consequently, the Company has taken Life time expected credit losses approach (simplified approach) and
loss allowance was determined based on loss rate at 0 % for note due & ageing less than 6 months, 2.5 % for ageing between 6
to 12 months, 5 % for ageing between 1-2 years, 10 % for ageing between 2-3 years, 25 % for ageing more than 3 years.
Other financial assets comprise of cash and cash equivalents, Bank fixed deposits, loans provided to employees and investments
in equity shares of companies other than subsidiaries, associates and joint ventures as well as derivative instruments.
- Cash and cash equivalents and Bank deposits are placed with banks having good reputation and past track record with
adequate credit rating. The Company reviews their credit-worthiness at regular intervals.
- Investments are made in credit worthy Asset Management Companies or Instruments.
- Derivative instrument comprises cross currency interest rate swaps, forward contracts, options etc. where the counter
parties are banks with good reputation, and past track record with adequate credit rating. Accordingly no default risk is
perceived.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial
liabilities that are proposed to be settled by delivering cash or other financial asset. The Company’s financial planning has
ensured, as far as possible, that there is sufficient liquidity to meet the liabilities whenever due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross /
undiscounted values and include estimated interest payments and exclude the impact of netting agreements.
(iii) Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will
affect the Company’s income or the value of its holdings of financial instruments.
Interest rate risk :
Interest rate risk is the risk that the fair value of future cashflows of the financial instruments will fluctuate because of changes
in market interest rates. In order to maximize the Company’s position with regards to interest expenses and to manage the
interest rate risk, treasury performs a comprehensive corporate interest rate risk management by time to time evaluating and
utilizing the favorable financial instrument. There are certain fixed interest rate barring investment instruments, which are
excluded to derive interest rate risk. As at the year end, the Company is exposed to changes in market interest rates through
investment and bank borrowings at variable interest rates, to derive sensitivity it has been net out.
Sensitivity
A change of 50 bps in interest rates would have following impact on profit before tax.
C. Capital Management
The Company’s objectives when managing capital are to:
- safeguard their ability to continue as a going concern so that they can continue to provide return for shareholders and
benefits for other stakeholders.
- maintain an optimal capital structure to reduce the cost of capital.
The Company monitors capital on the basis of the following debt equity ratio:
*Debt includes Current and Non-current Borrowings & Lease liabilities.(including current maturities of long term debt)
Company believes in conservative leverage policy. Company’s capital expenditure plan over the medium term shall be largely
funded through internal accruals.
Notes to Financial Statements 1 to 36
As per our report of even date attached
For Pankaj R. Shah & Associates For and on behalf of the Board of Directors
Chartered Accountants Harsha Engineers International Limited
FRN No.: 107361W (CIN: L29307GJ2010PLC063233)
Chintan Shah Rajendra Shah Harish Rangwala
Managing Partner Chairman & Whole-time Director Managing Director
M. No.: 110142 DIN: 00061922 DIN: 00278062
Maulik Jasani Kiran Mohanty
VP Finance & Group CFO Company Secretary & Chief Compliance Officer
M. No.: F9907
Date: May 08, 2025 Date: May 08, 2025
Place: Ahmedabad Place: Ahmedabad
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