1.2.16PROVISIONS AND CONTINGENCIES
The Company creates a provision when there exists a
present obligation as a result of a past event that probably
requires an outflow of resources and a reliable estimate
can be made of the amount of the obligation.
A disclosure for 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
in respect of which likelihood of outflow of resources is
remote no provision or disclosure is made.
The expenses relating to a provision is presented in the
Statement of Profit & Loss net of any reimbursement.
1.2.17TAXATION
Current Income Tax
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted
or substantively enacted at the reporting date in the
countries where the Company operates and generates
taxable income.
Current income tax relating to items recognised outside
profit or loss is recognised outside profit or loss (either
in other comprehensive income or in equity). Current
tax items are recognised in correlation to the underlying
transaction either in Other Comprehensive Income (OCI)
or directly in equity. Management periodically evaluates
positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject
to interpretation and establishes provisions where
appropriate.
The Company has adopted and effected the reduced
corporate tax rate permitted under section 115BAA
of the Income Tax Act, 1961 as per the Taxation Laws
(Amendment) Ordinance, 2019. The tax calculations
for the year ended 31st March 2024 have been made
accordingly.
Deferred Tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the Standalone Financial Statements and the
corresponding tax bases used in the computation of
taxable profit.
Deferred tax assets are recognised to the extent it is
probable that taxable profit will be available against
which the deductible temporary differences and the carry
forward of unused tax losses can be utilised.
Deferred tax liabilities and assets are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset realised based on tax rates
(and tax laws) that have been enacted or substantively
enacted by the end of the reporting period. The carrying
amount of Deferred tax liabilities and assets are reviewed
at the end of each reporting period.
1.2.18FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
Financial Assets
Initial Recognition and Measurement
All financial assets are initially recognised at fair value.
Transaction costs that are directly attributable to the
acquisition or issue of financial assets, which are not at
Fair Value Through Profit or Loss, are adjusted to the fair
value on initial recognition. Purchases or sales of financial
assets that require delivery of assets within a time frame
established by regulation or convention in the marketplace
(regular way trades) are recognised on the trade date i.e.
the date that the Company commits to purchase or sell
the asset.
However, Trade Receivables that do not contain significant
financing components are measured at transaction price.
Subsequent Measurement
For purposes of subsequent measurement financial
assets are classified in four categories
(i) Debt instruments at amortised cost
(ii) Debt instruments at fair value through other
comprehensive income (FVTOCI)
(iii) Debt instruments derivatives and equity instruments
at fair value through profit or loss (FVTPL)
(iv) Equity instruments measured at fair value through
other comprehensive income (FVTOCI)
Debt Instruments at Amortised Cost
A 'debt instrument' is measured at the amortised cost if
both the following conditions are met
a) The asset is held within a business model whose
objective is to hold assets for collecting contractual
cash flows and
b) Contractual terms of the asset give rise on specified
dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount
outstanding. This category is the most relevant
to the Company. After initial measurement such
financial assets are subsequently measured at
amortised cost using the Effective Interest Rate
(EIR) method.
Equity Investments
All equity investments in scope of Ind AS 109 are measured
at fair value. Equity instruments which are held for trading
and contingent consideration recognised by an acquirer in
a business combination to which Ind AS 103 applies are
classified as at FVTPL. For all other equity instruments the
Company may make an irrevocable election to present in
other comprehensive income subsequent changes in
the fair value. The Company makes such election on an
instrument by - instrument basis. The classification is
made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument
as at FVTOCI then all fair value changes on the instrument
excluding dividends are recognised in the OCI. There is no
recycling of the amounts from OCI to P&L even on sale
of investment. However, the Company may transfer the
cumulative gain or loss within equity.
Derecognition
A financial asset (or where applicable a part of a financial
asset or part of a group of similar financial assets) is
primarily derecognised when
(i) The rights to receive cash flows from the asset have
expired or
(ii) The Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a 'pass¬
through' arrangement; and either
(a) The Company has transferred substantially all
the risks and rewards of the asset or
(b) The Company has neither transferred nor
retained substantially all the risks and rewards
of the asset but has transferred control of the
asset.
Impairment of Financial Assets
In accordance with Ind AS 109 the Company uses expected
credit loss model for evaluating impairment of financial
assets other than those measured at sale value through
profit and loss. Expected credit losses are measured
through a loss allowance at an amount equal to
- The twelve months expected credit losses (expected
credit losses that result from those default events
on the financial instrument but are possible within
twelve months after the reporting date): or
- Full lifetime expected credit losses (expected credit
losses that result from those default events over the
life of the financial instrument).
For trade receivables the Company applies a simplified
approach which requires expected lifetime losses to
be recognised from initial recognition of the receivables
at every reporting date the existing trade receivables
are reviewed and accordingly the required credit loss is
recognised in books.
For other assets (other than trade receivables) the
Company uses twelve months expected credit loss to
provide for impairment loss where there is no significant
increase in credit risk. If there is a significant increase in
credit risk full life time expected credit loss is used.
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities are classified at initial recognition as
financial liabilities at fair value through profit or loss loans
and borrowings payables or as derivatives designated as
hedging instruments in an effective hedge as appropriate.
All financial liabilities are recognised initially at fair value
and in the case of loans and borrowings and payables net
of directly attributable transaction costs.
The Company's financial liabilities include trade and other
payables loans and borrowings including bank overdrafts
financial guarantee contracts and derivative financial
instruments.
Subsequent Measurement
The measurement of financial liabilities depends on their
classification as described below
Loans and Borrowings
This is the category most relevant to the Company. After
initial recognition interest-bearing loans and borrowings
are subsequently measured at amortised cost using the
Effective Interest Rate (EIR) method. Gains and losses
are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation
process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is
included as finance costs in the statement of profit and
loss.
Derecognition
A financial liability is derecognised when the obligation
under the liability 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 or loss.
Derivative Financial Instrument and Hedge Accounting
The Company uses derivative financial instruments
such as forward exchange contracts and interest rate
risk exposures to hedge its risk associated with foreign
currency fluctuations and changes in interest rates.
Fair Value Measurement
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
regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating
the fair value of an asset or a liability The Company takes
into account the characteristics of the asset or liability
if market participants would take those characteristics
into account when pricing the asset or liability at the
measurement date. Fair value for measurement and
/ or disclosure purposes in these standalone financial
statements is determined on such basis except for
measurements that have some similarities to fair value
but are not fair value such as net realisable value in
Ind AS 2.
Levels of Risk in Fair Value Measurement
Level 1 - The fair value of financial instruments quoted
in active markets is based on their quoted closing price at
the balance sheet date.
Level 2 - The fair value of financial instruments that are
not traded in an active market is determined by using
valuation techniques using observable market data. Such
valuation techniques include discounted cash flows,
standard valuation models based on market parameters
for interest rates, yield curves or foreign exchange
rates, dealer quotes for similar instruments and use of
comparable arm's length transactions.
Level 3 - The fair value of financial instruments that are
measured on the basis of entity specific valuations using
inputs that are not based on observable market data
(unobservable inputs).
1.2.19EXCEPTIONAL ITEM
Exceptional items are disclosed separately in the
standalone financial statements where it is necessary
to do so to provide further understanding of the financial
performance of the Company. These are material items
of income or expense that have to be shown separately
due to their nature or incidence.
1.2.20GOVERNMENT GRANT
Government grants including any non-monetary grants
are recognised where there is reasonable assurance that
the grant will be received, and all attached conditions will
be compiled with. Government grants are recognised in
the statement of profit and loss on a systematic basis
over the periods in which the related costs, which the
grants are intended to compensate, are recognised as
expenses. Government grants related to property, plant
and equipment are presented at fair value and grants are
recognised as deferred income.
Grants from government authorities relating to income
are recognised in the profit or loss as other Income when
the reasonable assurance is established as per the terms
of the Scheme.
Securities premium
The amount received in excess of face value of the equity shares is recognised in Securities Premium.
The utilisation of Securities Premium will be as per Provisions of the Act.
Capital reserve
A Capital Reserve amounting to ' 12,055.29 lakhs has been created pursuant to the amalgamation of Pitti Castings Private Limited
and Pitti Rail and Engineering Components Limited with the Company, in accordance with the scheme of amalgamation approved by
the Hon'ble National Company Law Tribunal (NCLT).
General reserve
General reserve is created through an annual transfer of net profit in accordance with applicable regulations.
Retained earnings
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.
C) Employee share-based payment plans
The Company has established the Pitti ESOP Scheme 2024, which was approved by the shareholders through a Special
Resolution dated 13th June 2024. The objective of the scheme is to reward and motivate employees for their performance,
enhance their contribution to the growth and profitability of the Company, and promote long-term talent retention. The
scheme is administered through the Pitti Engineering Limited Employee Welfare Trust, which has been set up specifically
for this purpose.
Under the Pitti ESOP Scheme 2024, the Nomination and Remuneration Committee has been authorised to grant up to
13,00,000 stock options to eligible employees, in one or more tranches, each option conferring a right to apply for one fully
paid-up equity share of the Company having a face value of ' 5/-. The total number of options that may be granted to any
individual employee during the tenure of the scheme shall not exceed 2,00,000 options, in accordance with applicable laws
and regulatory requirements.
In accordance with the terms of the scheme, the minimum vesting period of an option shall not be less than 12 months
from the date of grant, or such other period as prescribed under the Companies Act, 2013 and SEBI (Share Based Employee
Benefits and Sweat Equity) Regulations. A minimum of 25%, and up to a maximum of 50%, of the granted options shall
vest based on the satisfactory performance of the option grantee, as determined by the Nomination and Remuneration
Committee at the time of grant. The remaining options shall vest over a period of 8 years from the date of grant, with a cliff
period of 2 years. The vested options may be exercised by the grantee from the date of vesting up to a period of 5 years
from the vesting of the final tranche.
Pursuant to the scheme, the Nomination and Remuneration Committee granted 7,47,500 stock options to eligible
employees of Pitti Engineering Limited as on 13th March 2025, at an exercise price of ' 736.72 per option. In addition,
17,500 options were granted to employees of Pitti Industries Private Limited (PIPL) and 22,500 options to employees of
Dakshin Foundry Private Limited (DFPL) on the same date and at the same exercise price.
The eligible employees of the Company receive remuneration in the form of share-based payments in consideration of the
services rendered. Under the equity settled share-based payment, the fair value of the options is determined on the grant
date and is recognised as employee benefit expenses over the vesting period with a corresponding increase in equity. The
fair value of the options at the grant date is determined by an independent valuer using the Black Scholes valuation model.
At the end of each reporting period, apart from the non-market vesting conditions, the expense is reviewed and adjusted
to reflect changes to the level of options expected to vest.
The expenditure recognised under the Scheme for the year ended 31st March 2025 is ' 55.54 lakhs (Previous Year - Nil).
25.5 Disclosure as per Section 186 of the Companies Act, 2013
The details of loans guarantees and investments under Section 186 of the Companies Act, 2013 read with the Companies
(Meetings of Board and its Powers) Rules, 2014 are as follows:
(i) Details of investment & loans made are given in Note 3A & 25.7
(ii) There are no guarantees issued by the Company in accordance with section 186 of the Companies Act, 2013 read with
rules issued there under
25.6 Financial Instruments
(A) Fair Values Hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into
three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the
measurement as follows
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation
techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates.
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Note:
1) As per Regulation 2(1)(ZC) (ii) SEBI LODR Regulations Dividend paid by Listed entity to related party as
part of Corporate Action is not a related party transaction, accordingly dividend paid to related party
is not included in the above statement.
2) Remuneration paid to the Key Management Personnel does not include the sitting fee amount of
' 28.75 lakhs to the Independent Directors.
Terms & Conditions for Related Party Transactions
a) The Company has been entering into transactions with related parties for its business purposes. The
related party transactions are entered in the ordinary course of business and on an arm's length basis,
with the approval of the Audit Committee, Board of Directors and Shareholders, as applicable
b) Transactions with Related Parties are shown net of taxes
c) The remuneration to the key managerial personnel does not include the provisions made for gratuity,
leave benefits, as they are determined on an actuarial basis for the Company as a whole.
NOTE 25 (CONTD.)
25.16. The previous year figures have been regrouped/rearranged to the extent necessary to be in line with the current period's
classification. All the numbers have been rounded off to the nearest lakh.
25.17. Business Combinations
Scheme of Amalgamation
The Board of Directors, at its meeting held on 15th June 2023, approved a Scheme of Amalgamation involving Pitti Castings
Private Limited (PCPL), Pitti Rail and Engineering Components Limited (PRECL), and Pitti Engineering Limited (the Company),
along with their respective shareholders and creditors, under Sections 230 to 232 of the Companies Act, 2013 (“the Scheme").
The Scheme provided for the amalgamation of PCPL and PRECL with the Company. The objective of amalgamating PCPL was
to achieve vertical integration, strengthen the Company's position across the supply chain, and improve operating margins
and profitability. The amalgamation of PRECL aimed to simplify the corporate structure, reduce duplication in administrative
functions, and generate cost efficiencies.
The share exchange ratio approved for the amalgamation of PCPL was as follows
"1 (One) equity share of ' 5/- each fully paid-up in Pitti Engineering Limited for every 55 (Fifty-Five) equity shares of ' 10/-
each fully paid-up held in PCPL."
As PRECL was a wholly owned subsidiary, no consideration was payable upon its amalgamation.
The Scheme was approved by the Hon'ble National Company Law Tribunal (NCLT), Hyderabad Bench, vide its order dated
3rd October 2024, and became effective upon filing with the Registrar of Companies on 24th October 2024. The appointed date
of the Scheme is 1st April 2023.
In accordance with Ind AS 103 - Business Combinations, other applicable accounting standards, and the Ministry of Corporate
Affairs General Circular No. 9/2019 dated 21st August 2019, the impact of the amalgamation has been given effect from 1st April
2023, being the appointed date as per the Scheme and the financial results for the relevant periods have been restated to reflect
the accounting treatment prescribed in the Scheme.
The difference between the net assets of PCPL (after adjustment for inter-company transactions) and the aggregate value of
shares issued has been recorded as Capital Reserve, amounting to ' 12,055.29 lakhs under “Other Equity"
Acquisition
The Company had entered into a Share Purchase Agreement dated 11th March 2024 with Shri Chaitra Sundaresh and Smt Ronak
Bagadia (Sellers) for the acquisition of 100% of the equity share capital of Pitti Industries Private Limited (PIPL) (formerly Bagadia
Chaitra Industries Private Limited). The acquisition was completed on 6th May 2024, and with effect from 6th May 2024, PIPL has
become a Wholly Owned Subsidiary of the Company.
The Company had entered into a Share Purchase Agreement dated 25th July 2024 with Shivangini Bhartia Family Trust, Shivangini
Properties Private Limited (Sellers) for the acquisition of 100% of the equity share capital of Dakshin Foundry Private Limited
(DFPL). The acquisition was completed on 25th July 2024, and with effect from that date, DFPL has become a Wholly Owned
Subsidiary of the Company.
Note 1
(a) The decrease in the Debt-to-Equity ratio is primarily attributable to the increase in equity, mainly resulting from the
issuance of share capital through a Qualified Institutional Placement during the year.
(b) The increase in the Net Capital Turnover Ratio is primarily due to higher utilisation of working capital limits and an increase
in lease liabilities.
Definitions
(a) Current Assets = Total Current Assets
(b) Current Liabilities = Total Current Liabilities
(c) Debt = Long term and short-term borrowings as per Note 10A and Note 13A respectively of the Balance Sheet
(d) Average Equity = (Opening Total Equity Closing Total Equity)/2
(e) Earnings available for debt service (EBDIT) = Profit Before Tax Depreciation Interest on Term Loans Interest on working
capital borrowings
(f) Earnings before interest and taxes (EBIT) = Profit before tax -Interest on investment income/ICD's - (Profit)/Loss on Sale
of PPE and Lease modification Interest Cost (all interest cost except Ind AS)
(g) Interest = Total Interest cost on Borrowings (Term Loans and Working Capital Borrowings)
(h) Revenue from Operations: Revenue from sales & Service Other operating revenue
(i) Average Inventory = (Opening Inventory Closing Inventory)/2
(j) Average Receivables = (Opening Receivables Closing Receivables)/2
NOTE 25 (CONTD.)
(k) Average Payables = (Opening Payables Closing Payables)/2
(l) Working Capital = Current Assets - Current Liabilities
(m) Capital Employed = Total Equity - Noncurrent Investment Longterm and Short term Borrowings Interest accrued
(n) Earnings from Investor Funds= Earnings from Investment
(o) Average Investment Funds = (Opening Investments Closing Investments)/2
25.19. Other Statutory Information
(i) The Company does not have any Benami property where any proceeding has been initiated or pending against the Company
for holding any Benami property.
(ii) The quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in
agreement with the books of accounts.
(iii) The Company has not been declared willful defaulter by any Bank or Financial Institution or Government or any Government
Authority.
(iv) The Company does not have any transactions with companies struck off.
(v) The Company does not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond
the statutory period.
(vi) The Company has complied with the requirements of the number of layers prescribed under clause (87) of section 2 of the
Companies (Restriction on number of Layers) Rules, 2017.
(vii) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies) including foreign entities
(Intermediaries) with the understanding that the Intermediary shall
(a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the Company (Ultimate Beneficiaries) or
(b) Provide any guaranteed security or the like to or on behalf of the Ultimate Beneficiaries.
(viii) The Company has not received any funds from any person(s) or entity(ies) including foreign entities (Funding Party) with the
understanding (whether recorded in writing or otherwise) that the Group shall
(a) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of
the Funding Party (Ultimate Beneficiaries) or
(b) Provide any guaranteed security or the like on behalf of the Ultimate Beneficiaries.
(ix) The Company has not entered into any such transaction which is not recorded in the books of accounts that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as search
or survey or any other relevant provisions of the Income Tax Act, 1961).
(x) Corporate Social Responsibility (CSR)
As per Section 135 of the Companies Act, 2013, the Company has formed a Corporate Social Responsibility (CSR)
Committee. The Company is liable to incur CSR expense as per the requirement of Section 135 of Companies Act, 2013.
(a) Gross amount to be spent as per section 135 of the Companies Act, 2013: ' 158.70 lakhs (Previous year - ' 130.63
lakhs)
(b) Amount contributed during the year: ' 215.50 lakhs (Previous year - ' 134.65 lakhs)
(c) Amount spent during the year on
(i) Construction / acquisition of any assets: Nil (Previous year - Nil)
(ii) Other than Construction / acquisition of any assets: ' 215.50 lakhs (Previous year - ' 134.65 lakhs)
(xi) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
As per our report of even date For and on behalf of the Board of Directors of
Pitti Engineering Limited
CIN : L29253TG1983PLC004141
For Talati & Talati LLP Akshay S Pitti S Thiagarajan Y B Sahgal
Chartered Accountants Managing Director & Director Director
Firm's Registration Number: Chief Executive Officer DIN: 02721001 DIN: 01622420
110758W/W100377 DIN:00078760
Amit Shah M Pavan Kumar Mary Monica Braganza
Partner Chief Financial Officer Company Secretary &
M.No: 122131 M. No: F216936 Chief Compliance Officer
M.No: F5532
Place : Hyderabad Place : Hyderabad
Date : 21st April 2025 Date : 21st April 2025
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