2.14 Provisions
A Provision is recognised when the Company has a
present obligation (legal or constructive) as a result
of a past event and 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 amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at the end of the reporting period,
taking into account the risks and uncertainties
surrounding the obligation. When a provision is
measured using the cash flows estimated to settle
the present obligation, its carrying amount is the
present value of those cash flows (when the effect
of the time value of money is material).
2.15 Contingent Liabilities
Contingent liability is disclosed for (i) Possible
obligation which will be confirmed only by the future
events not wholly within the control of the company
or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources
will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be
made.
Contingent Assets
Contingent assets are not recognised in the financial
statements. A contingent asset is disclosed where an
inflow of economic benefits is probable. Contingent
assets are assessed continually and , if it is virtually
certain that an inflow of economic benefits will arise,
the asset and related income are recognised in the
period in which the change occurs.
2.16 Financial 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.
(a) Financial assets
Financial assets include cash and cash
equivalents, trade and other receivables,
investments in securities and other eligible
current and non-current assets.
At initial recognition, all financial assets are
measured at fair value. Such financial assets
are subsequently classified under one of
the Following three categories according to
the purpose For which they are held. The
classification is reviewed at the end of each
reporting period.
Financial assets at amortised cost: At the
date of initial recognition, are held to collect
contractual cash flows of principal and interest
on principal amount outstanding on specified
dates. These financial assets are intended to
be held until maturity. ThereFore, they are
subsequently measured at amortised cost
by applying the Effective Interest Rate (EIR)
method to the gross carrying amount oF the
financial asset. The EIR amortisation is included
as interest income in the profit or loss. The
losses arising from impairment are recognised
in the profit or loss.
Financial assets at fair value through other
comprehensive income: At the date of initial
recognition, are held to collect contractual
cash flows of principal and interest on principal
amount outstanding on specified dates, as
well as held for selling. Therefore, they are
subsequently measured at each reporting
date at fair value, with all fair value movements
recognised in Other Comprehensive Income
(OCI). Interest income calculated using
the Effective Interest Rate (EIR) method,
impairment gain or loss and foreign exchange
gain or loss are recognised in the Statement of
Profit and Loss. On derecognition of the asset,
cumulative gain or loss previously recognised
in Other Comprehensive Income is reclassified
from the OCI to Statement of Profit and Loss.
Financial assets at fair value through profit
or loss: At the date of initial recognition,
financial assets are held for trading, or which
are measured neither at Amortised Cost nor
at Fair Value through OCI. Therefore, they
are subsequently measured at each reporting
date at fair value, with all fair value movements
recognised in the Statement of Profit and Loss.
Investment in Equity shares of subsidiaries and
associates are valued at cost.
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire or it transfers
the financial asset and the transfer qualifies for
derecognition under Ind AS 109.
The company assesses impairment based on
the expected credit losses (ECL) model to all its
financial assets measured at amortised cost.
(b) Financial liabilities
Financial liabilities include long-term and short¬
term loans and borrowings, trade and other
payables and other eligible current and non¬
current liabilities.
All financial liabilities are recognised initially
at fair value and, in the case of loans and
borrowings and other payables, net of directly
attributable transaction costs. After initial
recognition, financial liabilities are classified
under one of the following two categories:
Financial liabilities at amortised cost: After
initial recognition, such financial liabilities
are subsequently measured at amortised
cost by applying the Effective Interest Rate
(EIR) method to the gross carrying amount of
the financial liability. The EIR amortisation is
included in finance expense in the profit or loss.
Financial liabilities at fair value through profit
or loss: which are designated as such on initial
recognition, or which are held for trading. Fair
value gains / losses attributable to changes in
own credit risk is recognised in OCI. These gains
/ losses are not subsequently transferred to
Statement of Profit and Loss. All other changes
in fair value of such liabilities are recognised in
the Statement of Profit and Loss.
The Company derecognises a financial liability
when the obligation specified in the contract is
discharged, cancelled or expires.
2.17 Revenue Recognition
Revenue from contracts with customer
Revenue from contract with customers is recognised
when the Company satisfies performance obligation
by transferring promised goods and services to the
customer. Performance obligations are satisfied
at the point of time when the customer obtains
controls of the asset. Revenue is measured based
on transaction price, which is the fair value of the
consideration received or receivable, stated net
of discounts, returns and goods & service tax.
Transaction price is recognised based on the price
specified in the contract, net of the estimated sales
incentives/ discounts if any.
Rental income
Rental income From investment property is
recognised as part oF revenue From operations in
profit or loss on a straight-line basis over the term of
the lease.
Dividend and interest income
Dividend income from investments is recognised
when the shareholder's right to receive payment has
been established (provided that it is probable that
the economic benefits will flow to the Company and
the amount of income can be measured reliably).
Interest income from a financial asset is recognised
when it is probable that the economic benefits will
flow to the Company and the amount of income can
be measured reliably. Interest income is accrued on a
time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is
the rate that exactly discounts estimated future cash
receipts through the expected life of the financial
asset to that asset's net carrying amount on initial
recognition.
Receipts from insurance claims are accounted after
the same is approved by the insurance company.
2.18 Earnings per share
Basic earnings per share are calculated by dividing
the profit for the period attributable to equity
shareholders by the weighted average number
of equity shares outstanding during the period
adjusted for treasury shares held. For the purpose of
calculating diluted earnings per share, the profit for
the period attributable to equity shareholders and
the weighted average number of shares outstanding
during the period are adjusted for the effects of all
dilutive potential equity shares.
2.19 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. The CODM is responsible for allocating
resources and assessing performance of the
operating segments of the Company.
As a result of the Management review mechanism,
the Company has one segment "Welding
Fabrication Technology and Engineering" which
includes Manufacturing, Trading and Job Work
since compoany has only one segement separate
disclosure not given
2.20 Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet
comprise cash at banks, cash on hand and highly
liquid short-term deposits with an original maturity
of three months or less and bank balances with the
ESOP Trust, which are subject to an insignificant risk
of changes in value.
2.21 Statement of Cash Flows
Statement of Cash flows is reported using the
indirect method, whereby profit for the year is
adjusted for the effects of transactions of non¬
cash nature and any deferrals or accruals of past or
future cash receipts or payments. The cash flows
from operating, investing and financing activities of
the Company are segregated based on the available
information.
2.22 Operating Cycle
Based on the nature of products / activities of the
Company and the normal time between acquisition
of assets and their realisation in cash or cash
equivalents, the Company has determined its
operating cycle as 12 months for the purpose of
classification of its assets and liabilities as current
and non-current.
Rights, preferences and restrictions attached to the equity shares
The Company has issued only one class of equity shares having a Face value of ' 10/- per share. Each holder of equity
shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend
proposed by board of directors is subject to the approval of shareholders in the ensuing Annual General Meeting. In
the event of liquidation of the company, the holder of equity shares will be entitled to receive remaining assets of the
Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity
shares held by the share holders.
The Company has instituted an Employee Stock Option Plan ("ESOP Scheme") for eligible employees of the Company
through Diffusion ESOP Trust . Under the scheme, the Company granted 3,00,000 having face value of ' 10/- per
share employee stock options during the year, of which 1,00,000 options were accepted by eligible employees. These
equity shares are not entitled for dividend to employees or voting rights until issue/ transfer of shares..
Description of Reserves
Retained earnings
Retained earnings represents surplus/accumulated earnings of the Company and are available For distribution to
shareholders.
Securities premium
Securities premium is used to record the premium received on issue of shares.Issue Expenditure related to IPO has
been adjusted against the Securities Premium . It is utilised in accordance with the provisions of the Companies
Act, 2013.
Issue of Shares
The equity shares of the Company have been listed on National Stock Exchange of India Limited ("NSE") and on
BSE Limited ("BSE") on October 4, 2024 by completing Initial Public OFFer (''the IPO") of 93,55,000 equity shares
of face value of ' 10/-each at an issue price of ' 168/-per equity share (including share premium of ' 158/- per
equity share) aggregating to ' 1,571.64 million and 50,000 equity shares to employees of face value of ' 10 each
and an issue price of ' 160/- per equity shares (including share premium of ' 150/- per equity share) aggregating to
' 8 million. Total amount aggregating to ' 1,579.64 million. ' 750.07 million was received from Anchor investors on
September 25, 2024 and subsequently allotment was done on October 1, 2024.
In FY 2001-02 company completed the Buy-Back of 4,72,150 equity shares of ' 10/- each at a Premium of
' 25.62 per share. The total consideration paid was ' 1,68, 17,981/- out of which the Premium of ' 1.20,96,481/- was
paid by utlising the share premium account. The company has also transferred ' 47,21,500/- to the capital redemption
reserve account from General Reserve as a consequent to the Buy-Back of shares.
Capital Reserve
The company started creating the capital reserve For receipt of state subsidy From the year 1992-93.
ESOP Reserve
The Fair value of stock options (at grant date) is recognised as an expense in the Statement of Profit and Loss within
employee benefits as employee compensation cost over the vesting period, with a corresponding increase in ESOP
Reserve.
General reserves
General Reserve represents appropriation of retained earnings and are available for distribution to shareholders.
Treasury Share Reserve
The Company's equity shares held by a trust, which is consolidated as a part of the Company, are classified as
Treasury shares. Treasury shares are carried at acquisition cost and presented as a deduction from total equity as
"Treasury share reserve".
Defined Benefit Plan for Gratuity & for Leave Encashment :
(i) Actuarial gains and losses in respect of defined benefit plans are recognised in the Financial statements through
other comprehensive income.
(ii) Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are
detailed below:
(a) Asset Volatility :
(i) The plan liabilities are calculated using a discount rate; if plan assets under perform compared to the
discount rate, this will create or increase a deficit.
(ii) As the plans mature, the Company intends to reduce the level of investment risk by investing more in
assets that better match the liabilities.
(b) Life Expectancy :
The majority of the plan's obligations are to provide benefits for the service life of the member, so increases
in service life expectancy will result in an increase in the plan's liabilities. This is particularly significant in
the Company's defined benefit plans, where inflationary increases result in higher sensitivity to changes in
service life expectancy.
The following methods and assumptions were used to estimate the fair values:
Cash and short-term deposits, trade receivables, loans, trade payables, and other current financial assets and liabilities
approximate their carrying amounts largely due to the short-term maturities of these instruments.
Long-term receivables/payables are evaluated by the Company based on parameters such as interest rates, risk
Factors, individual creditworthiness of the counterparty and the risk characteristics of the financed project. Based on
this evaluation, allowances are taken into account for the expected credit losses of these receivables.
All foreign currency denominated assets and liabilities are translated using exchange rate at reporting date.
Fair Value Hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly; and
NOTE 40 FINANCIAL INSTRUMENTS (CONTD..)
B. Financial Risk Management
Diffusion engineers limited is exposed primarily to market risk (fluctuation in foreign currency exchange rates &
interest rate), credit, liquidity which may adversely impact the fair value of its financial instruments. The Company
assesses the unpredictability of the financial environment & seeks to mitigate potential adverse effects on the
financial performance of the Company.
1. Capital Management :
The company's capital management objectives are:
(i) The Board policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain Future development of the business. The board of directors monitors the return on capital
employed.
(ii) The Company manages capital risk by maintaining sound/optimal capital structure through monitoring of
financial ratios, such as debt-to-equity ratio and net borrowings-to-equity ratio on a monthly basis and
implements capital structure improvement plan when necessary.
(iii) The Company uses debt equity ratio as a capital management index and calculates the ratio as the net
debt divided by total equity. Net debts and total equity are based on the amounts stated in the financial
statements.
2. Credit Risk :
(i) Credit risk is the risk of financial loss arising From counter-party Failure to repay or service debt according
to the contractual terms or obligations. Credit risk encompasses both, the direct risk of default and the risk
of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing
credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted
after obtaining necessary approvals for credit.
(ii) Financial instruments that are subject to concentration of credit risk principally consists of trade receivables,
investments, derivative financial instruments and other financial assets. None of the financial instruments of
the Company results in material concentration of credit risk.
3. Liquidity Risk :
Liquidity Risk Management : Liquidity risk refers to the risk that the Company cannot meet its financial obligations.
The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available
for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking
facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and liabilities.
4. Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market prices. Such changes in the values of financial instruments may result from changes in
the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company's
exposure to market risk is primarily on account of foreign currency exchange rate risk.
a) Foreign Currency Exchange Rate Risk :
The fluctuation in Foreign currency exchange rates may have potential impact on the statement of profit
or loss and other comprehensive income and equity, where any transaction references more than one
currency or where assets / liabilities are denominated in a currency other than the Functional currency of the
respective entities. Considering the countries and economic environment in which the Company operates,
its operations are subject to risks arising From fluctuations in exchange rates in those countries. The risks
primarily relate to fluctuations in AED, US Dollar, Australian Dollar, Great Britain Pound, Euro, SGD against
the respective functional currencies of the Company. The Company, as per its risk management policy,
evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks
& uses derivative instruments primarily to hedge foreign exchange (if required).
NOTE 43 SHARE-BASED PAYMENT ARRANGEMENTS
43.1 Employee Stock Option Plan (ESOP)
The shareholders of the Company, by way of Postal Ballot through remote e-voting concluded on June 29, 2025,
approved the creation, offer, issue, grant and allotment of up to 7,00,000 (Seven Lakh) Employee Stock Options
("Options") to eligible employees of the Company and its subsidiaries under the Diffusion Engineers Limited -
Employee Stock Option Scheme 2025, and further approved the secondary acquisition of equity shares through
an employee welfare trust, namely "Diffusion ESOP Trust" ("Trust"), including the grant of a loan to the irrevocable
Trust to enable it to acquire equity shares of the Company by way of secondary acquisition for implementation of
the said Scheme.
The Company has instituted an Employee Stock Option Plan ("ESOP Scheme") for eligible employees of the
Company through Diffusion ESOP Trust . Under the scheme, the Company granted 3,00,000 employee stock
options during the year, of which 1,00,000 options were accepted by eligible employees, at an exercise price of
' 325 per equity share.
The options granted under the scheme vest in four tranches of 25% each, subject to satisfaction of
applicable vesting conditions. The vesting schedule set out in the valuation report provides for vesting on
December 27, 2026, December 27, 2027, December 27, 2028 and December 27, 2029 for Vest 1, Vest 2, Vest
3 and Vest 4 respectively, and vested options are exercisable within a maximum period of four years from the
respective vesting date, or such shorter period as may be prescribed by the competent committee at the time
of grant.
The option grantee does not have any right to receive dividend, vote or otherwise enjoy the benefits of a
shareholder in respect of the options granted until the underlying equity shares are issued or transferred upon
exercise of such options.
43.2 Basis of measurement and valuation
The fair value of options granted under the ESOP Scheme has been determined on the grant/valuation date using
the Black-Scholes-Merton option pricing model, as certified by an independent registered valuer. The valuation
report states that the model considered key inputs such as spot price, exercise price, expected life of the option,
expected volatility, risk-free interest rate and expected dividend yield.
The valuation report records the tranche-wise fair value per option as ' 99.73 for Vest 1, ' 116.93 for
Vest 2, ' 132.30 for Vest 3 and ' 146.80 for Vest 4 as at December 26, 2025.
43.7 Employee Benefit Expense recognised
The Company has recognised employee compensation expense in respect of the ESOP Scheme in the Statement
of Profit and Loss over the requisite vesting period based on the grant date Fair value of the options. The amount
recognised during the year is presented under employee benefits expense and the corresponding credit is
recognised in Employee Stock Options Reserve under Other Equity.
NOTE-44 PROPOSED DIVIDEND
Board of Directors proposes 15% Final Dividend on Equity shares subject to approval in AGM.
NOTE-45 OTHER AMENDMENTS WITH RESPECT TO SCHEDULE III
The Company does not have any Benami property, where any proceedings have been initiated or pending against the
company For holding any Benami property.
The company is not declared as wilful defaulter by any bank or financial Institution or other lender
The Company does not have any transactions with Companies struck oFF.
The Company has not traded or invested in Crypto currency or Virtual currency during the financial year.
The company has filed certain Adjudication/Regularization Applications before the Registrar of Companies, Mumbai
The Company has not given any advance or loan or invested funds to any other person / entities, 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.
The company have 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 Company (ultimate beneficiaries) or
(ii) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
The Company does not have any 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).
NOTE 46
Previous year's figures have been regrouped / rearranged wherever necessary, to conform to the current year's
classification / disclosure.
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