2.18 Provisions and Contingent Liabilities
Provisions are recognised when, as a result of a past event, the Company has a legal or constructive obligation; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. The amount so recognised is a best estimate of the consideration required to settle the obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
In an event when the time value of money is material, the provision is carried at the present value of the cash flows estimated to settle the obligation.
A disclosure of a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation and the likelihood of outflow of resources, is remote, no provision or disclosure of contingent liability is made.
2.19 Operating Segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM is responsible for allocating resources and assessing performance of the operating segments. Based on such the Company operates in one operating segment, viz. Materials Handling Solutions (MHS).
2.20 Earnings per Share
Basic earnings per share is calculated by dividing the profit and loss for the year attributable to shareholders by the weighted average number of shares outstanding during the year. For the purpose of calculating diluted earnings per share, the profit and loss for the year attributable to Shareholders and weighted average number of shares outstanding during the year is adjusted for the effects of all dilutive potential shares.
2.21 Cash and cash Equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at banks and on hand and short term deposits with an original maturity of three months or less, which are subject to an insignificant risk of change in value.
For the purpose of the statement of cash flows, cash and cash equivalents include cash on hand, term deposits and other short-term highly liquid investments, net of bank overdrafts as they are considered an integral part of the Company’s cash management. Bank overdrafts are shown within short term borrowings in the Balance Sheet.
2.22 The Company has adopted a norm to roundoff any amount below ' 0.5 Lakhs.
3. USE OF ESTIMATES AND JUDGEMENTS
The preparation of Financial Statements in conformity with Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Financial Statements and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements in Applying Accounting Policies
The preparation of the Company’s Standalone Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Key Sources of Estimation of Uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation of uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
3.1 Useful Lives of Property, Plant and Equipments and Intangible Assets
As described in the material accounting policies, the Company reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period.
3.2 Fair Value Measurements and Valuation Processes
Some of the Company’s assets and liabilities are measured at Fair Value for financial reporting purposes. Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the Fair Value measurements are observable and the significance of the inputs to the Fair Value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability. The Company engages third party valuers, where required, to perform the valuation.
Information about the valuation techniques and inputs used in determining the Fair Value of various assets and liabilities are disclosed in the notes to the Financial Statements.
3.3 Actuarial Valuation
The determination of Company’s liability towards defined benefit obligation to employees is made through independent actuarial valuation including determination of amounts to be recognised in the Statement of Profit and Loss and in other comprehensive income. Such valuation depend upon assumptions determined after taking into account inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. Information about such valuation is provided in notes to the Financial Statements.
3.4 Claims, Provisions and Contingent Liabilities
The Company has ongoing litigations with various regulatory authorities. Where an outflow of funds
is believed to be probable and a reliable estimate of the outcome of the dispute can be made based on management’s assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such accruals are by nature complex and can take number of years to resolve and can involve estimation uncertainty.
3.5 Inventory Obsolescence
The Company reviews the condition of its inventories and makes provision against obsolete and slow-moving inventory items which are identified as no longer suitable for sale or use. The Company estimates the net realisable value for such inventories based primarily on the latest invoice prices and current market conditions. The Company carries out an inventory review at each balance sheet date and makes provision against obsolete and slow-moving items. The Company reassesses the estimation on each Balance Sheet date.
3.6 Impairment of Financial Assets
The Company assesses impairment based on Expected Credit Losses (ECL) model on trade receivables. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At every reporting date, the historically observed default rates are updated and changes in the forward-looking estimates are analysed.
3.7 Impairment of Investment in Subsidiary
Determining whether the investments in subsidiaries are impaired requires an estimate in the value in use. In considering the value in use, the Management anticipates the future cash flows, discount rates and other factors of the underlying businesses/companies. In case, where the operations have stopped, the value in use is derived from the net asset value. Investment over and above the net book value is recognised as impairment.
3.8 Lease Liability
The period of lease in case of expired lease contract pending renewal, the best available data based on negotiations with the lessor and period of prior agreement is considered.
Income Tax (Benefits)/Expenses
The Company is subject to Income Tax in India on the basis of Standalone Financial Statements. As per the Income Tax Act, 1961, in the previous year, the Company was liable to pay income tax which is the higher of regular income tax payable and the amount payable based on the provisions applicable for Minimum Alternate Tax (MAT). However, from the current year, the Company has opted the option u/s 115 BAA of the Income Tax Act, 1961; introduced by the Taxation Laws (Amendment) Act, 2019, which gives irreversible option for payment of Income Tax at reduced rate subject to certain conditions.
In view of above, MAT Credit of ' 3,026 Lakhs accounted for in earlier years has been reversed during the current year. Further, Deferred Tax Assets/Liabilities also have been measured/re-measured at the rates specified under new regime and reversal of tax liabilities of ' 235 Lakhs for the period upto 31st March, 2023 has been accounted for in the current year.
Defined Benefit Plans
(A) Gratuity Fund
The Company makes periodic contributions to the Tractors India Limited Staff Gratuity Fund, a funded defined benefit-plan for qualifying employees administrated under a common Trust by the trustees of the said fund for the benefit of the employees of the Company.
Under the Gratuity plan, every employee is entitled to gratuity, being higher of the amount, calculated under the Company’s plan (based on average salary of last 36 months and number of years of service, restricted to a maximum of 40 years) or calculations as laid down under the Payment of Gratuity Act, 1972. Gratuity is payable on death/ retirement/termination and the benefit vests after 5 year of continuous service.
The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation was carried out as at 31st March, 2024.
(B) Superannuation Fund
(i) Certain eligible employees of the Company who had attained at least 45 years of age as on 1st April, 2009 are entitled to Superannuation benefit under the Superannuation scheme (a funded Defined Benefit Plan under a common Trust- ‘Tractors India Limited Superannuation Fund Scheme’, being administered by the trustees of the said fund for the benefit of employees of the Company). Under the aforesaid benefit scheme the Company makes periodic contribution to the Superannuation Fund Scheme and a predetermined
percentage of salary is paid as pension on retirement. The quantum of pension depends on the average basic salary of eligible employee during the last 36 months before retirement. The benefit vests to employees with 12 years of continuous service and attainment of 48 years of age on retirement/death/termination. The most recent actuarial valuation of plan assets and present value of the Defined Benefit Obligation of Superannuation Fund was carried out as on 31st March, 2024.
(ii) Employees who did not attain 45 years of age as on 1st April, 2009 are under the purview of ‘Defined Contribution Scheme’ in respect of service rendered from 1st April, 2009. The benefit of services rendered by these employees up to 31st March, 2009 come under the purview of ‘Defined Benefit Scheme’ as indicated which is frozen as on 31st March, 2009. Hence for this category of employees, the benefit of cessation of service will be:
a) amount accumulated by annual contribution of 15% of Basic Salary; and
b) amount frozen as on 31st March, 2009.
(C) Provident Fund
The Company has two separate Trusts for the administration of the Provident Fund. The Company has an obligation to fund any shortfall on the yield of the trust’s investments over the administered interest rates on annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors.
Risk Management
The Defined Benefit Plans expose the Company to risk of actuarial deficit arising out of investment risk, interest rate risk and salary cost inflation risk.
(a) Investment risk: The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to government/high quality bond yields; if the return on plan asset is below this rate, it will create a plan deficit.
(b) Interest risk: A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan’s debt investments.
(c) Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
(d) Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation was carried out as at 31st March, 2024.
28.3 The basis used to determine overall expected rate of return on assets and the effect on major categories of Plan Assets is as follows:
The major portions of the assets are invested in PSU Bonds, State and Central Government Securities. Based on the asset allocation and prevailing yield rates on these asset classes, the long term estimate of the expected rate of return on the fund assets have been arrived at. Assumed rate of return on assets is expected to vary from year to year reflecting the returns on matching Government Bonds.
28.4 The estimate of future salary increases takes into account inflation, seniority, promotion and other relevant reasons.
28.5 Sensitivity Analysis
The Sensitivity Analysis below has been determined based on reasonably possible change of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. These sensitivities show the hypothetical impact of a change in each of the listed assumptions in isolation. While each of these sensitivities holds all other assumptions constant, in practice such assumptions rarely change in isolation and the asset value changes may offset the impact to some extent. For presenting the sensitivities, the present value of the Defined Benefit Obligation has been calculated using the Projected Unit Credit Method at the end of the reporting period, which is the same as that applied in calculating the Defined Benefit Obligation presented above. There was no change in the methods and assumptions used in the preparation of the Sensitivity Analysis from previous year.
A. Land & Building situated at Sahibabad, Uttar Pradesh, was categorised as Asset Held for Sale during financial year 2022-23 subsequent to possession of the property by the lender under the provisions of the SARFAESI Act, 2002. The said property has been disposed off during the year ended 31st March, 2024 by the said lender and a net gain of ' 2,888 Lakhs has been disclosed as Exceptional Items in the Standalone Financial Statements.
B. The Lead Bank and other Banks in the consortium have approved the resolution plan for One Time Settlement (OTS) submitted by the Company and dues in terms of said OTS, as per RBI circular under Prudential Framework for Resolution of Stressed Assets dated 7th June, 2019 has also been paid to them. Pursuant to said OTS, write back of ' 13,990 Lakhs towards waiver has been accounted for during the year ended 31st March, 2024 and the same has been disclosed as Exceptional Item in these Standalone Financial Statements.
Further, ' 248 Lakhs and ' 5,213 Lakhs has been waived by a financial institution and a promoter group Company in terms of OTS and recasted loan agreement respectively during the year ended 31st March, 2024 and the same has been disclosed as Exceptional Item in these Standalone Financial Statements.
C. Fair value of outstanding interest free loan of ' 9,682 Lakhs from a promoter group Company namely Indocrest Transportation Private Limited which was assigned in their favour by the previous promoters/promoter’s
group of companies, has been carried out as required in terms of Ind AS-109 and gain on fair value of ' 7,916 Lakhs has been disclosed as Exceptional Item in these Standalone Financial Statements.
33. As reported earlier, pursuant to a complaint lodged against the Company with the Securities and Exchange Board of India (SEBI) alleging various accounting misstatements in the Audited Financial Statements of the Company for the year ended 31st March, 2021 and certain other matters, the "Corporation Finance Investigation Department” (CFID) of SEBI had sought information from the Company on various matters vide their letter dated 31st March, 2022. Later, based on the management audit report of an independent firm of Chartered Accountants on the Financial Statements for the financial year 2019-20 & 2020-21 and based on an internal enquiry by the management, certain accounting adjustments were carried out during the quarter ended/year ended 31st March, 2022 to rectify those accounting mistakes/misstatements made in the books of accounts in the previous financial years. The Company received a letter from SEBI dated 22nd December, 2022 seeking further information which has been replied by the Company on 9th January, 2023. Certain other clarifications and requests for historical data of the Company were sought by SEBI during February and March 2023, and these were duly provided. Subsequently a Notice has been received from the Adjudicating Officer, SEBI bearing Ref. SEBI/ EAD-1/SKS/LD/24833/1/2023 dated 16th June, 2023 addressed to the Company & three (3) other Noticees and the same has been replied by the Company on 24th July, 2023.
36. CAPITAL MANAGEMENT
The Company aims at maintaining a strong capital base maximising Shareholders’ wealth, safeguarding business continuity and augments its internal generations with a judicious use of borrowing facilities to fund spikes in working capital that arise from time to time as well as requirements to finance business growth.
The Company determines the amount of capital required on the basis of annual business plan coupled with long term and short term strategic investment and expansion plans. The funding needs are met through cash generated from operations, long term and short term borrowings from banks and financial institutions. On requirement, the Company also borrows from related and other parties to meet its financial needs.
The capital structure of the Company consists of net debt (borrowings as detailed in Note 17 offset by cash and cash equivalents in Note 14-A, other bank balances in Note 14-B and deposits with banks including earmarked balances in Note 9A) and total equity of the Company.
Net debt includes interest bearing borrowings less cash and cash equivalents, other bank balances (including non-current earmarked balances).
B) Financial Risk Management Objectives
The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company continues to focus on a system-based approach to business risk management. The Company’s financial risk management process seeks to enable the early identification, evaluation and effective management of key risks facing the business. Backed by strong internal control systems, the current Risk Management System rests on policies and procedures issued by appropriate authorities; process of regular reviews/audits to set appropriate risk limits and controls; monitoring of such risks and compliance confirmation for the same.
a) Market Risk
The Company’s Financial Instruments are exposed to market changes. The Company is exposed to the following significant market risks:
Foreign Currency Risk Interest Rate Risk Other Price Risk
Market Risk Exposures are measured using sensitivity analysis. There has been no change to the Company’s exposure to market risks or the manner in which these risks are being managed and measured.
Fair Value Hierarchy
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3, as described below:
Quoted prices in an active market (Level 1):
This level of hierarchy includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities. This category consists of investment in quoted equity shares and includes derivative contracts.
Valuation techniques with observable inputs (Level 2): This level of hierarchy includes financial assets and liabilities, measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Valuation techniques with significant unobservable inputs (Level 3): This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
Interest Rate Risk
Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The objectives of the Company’s interest rate risk management processes are to lessen the impact of adverse interest rate movements on its earnings and cash flows and to minimise counter party risks.
All the borrowings availed by the Company have a fixed interest rate throughout the respective financial year. Further, the Company operates with banks having superior credit rating in the market.
*The Company’s fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of changes in market interest rates.
Price Risk
Equity price risk is related to change in market reference price of investments in equity securities held by the Company. The fair value of quoted investments held by the Company exposes the Company to equity price risks. In general, these investments are not held for trading purposes. The fair value of quoted investments in equity, classified as fair value through Profit & Loss as at 31st March, 2024, is ' 15 Lakhs (31st March, 2023: ' 10 Lakhs)
b) Liquidity Risk
Liquidity risk is the risk that the Company may encounter difficulty in meeting its obligations. The Company mitigates its liquidity risks by ensuring timely collections of its trade receivables, close monitoring of its credit cycle and ensuring optimal movements of its inventories. The table below provides details regarding the remaining contractual maturities of significant financial liabilities at the reporting date:
The management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates.
The maturity analysis of undiscounted lease liabilities and secured borrowings are disclosed under Note 5.3 and 17.2 respectively.
c) Credit Risk
Credit risk is the risk that counter party will not meet its obligations leading to a financial loss. The Company has its policies to limit its exposure to credit risk arising from outstanding receivables. Management regularly assess the credit quality of its customers, on the basis which the terms of payment are decided. Credit limits are set for each customer which are reviewed at periodic intervals.
For trade receivables, as a practical expedient, the Company computes credit loss allowance based on a provision matrix. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates. The provision matrix at the end of the reporting period is given below:
42. The Central Government has published The Code on Social Security, 2020 and Industrial Relations Code, 2020 ("the Codes”) in the Gazette of India, inter alia, subsuming various existing labour and industrial laws which deals with employee related benefits including post - employment. The effective date of the code and the rules are yet to be notified. The impact of the legislative changes, if any, will be assessed and recognised post notification of the relevant provisions.
43. The Standalone Financial Statements were approved by the Board of Directors on 28th May, 2024.
44. The Company has used two accounting software(s) for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software(s) except:
i) for software capturing payroll records where audit trail feature was not enabled; and
ii) the feature of recording audit trail (edit log) facility was not enabled at the database level to log any direct changes to data when using certain access rights for software other than that mentioned in (i) above.
Further, during the year there were no instances of the audit trail feature being tampered with.
45. The previous year figures have been regrouped/reclassified wherever necessary, to conform the current period’s classification.
Signatures to Notes ‘1’ to ‘45’.
In terms of our report of even date attached.
For Singhi & Co. For and on behalf of Board of Directors of
Chartered Accountants TIL Limited
Firm’s Registration No. 302049E
Giridhari Lal Choudhary Sunil Kumar Chaturvedi Ayan Banerjee
Partner Chairman & Managing Director Whole-Time Director
Membership No. 052112 (DIN: 02183147) (DIN: 07563764)
Place: Kolkata Kanhaiya Gupta Sekhar Bhattacharjee
Date: 28th May, 2024 Chief Financial Officer Company Secretary
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