XVII Provisions and Contingent Liabilities
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognized 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).
Contingent liabilities are disclosed for:
(i) Possible obligations which will be confirmed only by 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.
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
Contingent Assets are not recognised in Financial Statements. If an inflow of economic benefits has become probable, contingent assets are disclosed.
Contingent Assets are assessed continually to ensure that developments are appropriately reflected in the Financial Statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognised in the Financial Statements of the period in which the changes occurs.
Provisions, contingent liabilities, contingent assets and commitments are reviewed at each Balance Sheet date..
XVIII Segment Reporting
The Chief Operational Decision Maker monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. The operating segments have been identified on the basis of nature of product / services.
The Board of Directors of the Company has appointed the Managing Director as the Chief Operating Decision Maker (CODM) who is assessing the financial performance and position of the Company and makes strategic decisions.
2b Use of Accounting Judgements, Assumptions and Estimates
In the application of the Company's accounting policies, management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized 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. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
Following are the key areas of judgements, assumptions and estimates which have significant effect on the amounts recognized in the financial statements:
a. Estimation of Net Realisable Value (NRV) for inventory (Refer Note 2(VIII) and 12)
Inventory is stated at the lower of cost and net realizable value (NRV).
NRV of completed or developed inventory is assessed by reference to market conditions, prices and trends existing at the reporting date and is determined by the company based on comparable transactions observed /identified for similar properties in the same geographical market serving the same real estate segment.
NRV in respect of inventory under development is assessed with reference to market prices and trends existing at the reporting date for similar completed property, less the estimated cost to complete construction and an estimate of the time value of money to the date of completion.
Estimated cost to complete is reviewed at each year end by considering cost escalation and overruns basis the progress
of the project.
b. Impairment of other Non-Financial Assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's fair value less costs of disposal and its value in use. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risk specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
c. Impairment of Financial Assets (Refer Note 2(VII), 7, 8 and 9)
The impairment provisions for financial assets are based on assumptions about the risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs for impairment calculation, based on
Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
d. Useful life and residual value of Property, Plant and Equipment (Refer Note 2(III) and 3)
Useful lives of Property, Plant and Equipment are based on the life prescribed in Schedule II of the Companies Act, 2013. In cases, where the useful lives are different from that prescribed in Schedule II, they are based on technical advice. Assumptions also need to be made when the Company assesses whether an asset may be capitalised and which components of the cost of the asset may be capitalised.
e. Recognition and Measurement of Defined Benefit Obligations (Refer Note 2(XI) and 41)
The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions include discount rate, expected return on plan assets, trends in salary escalation and attrition rate. The discount rate is determined by reference to market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post employment benefit obligations.
f. Fair Value Measurement of Financial Instruments (Refer Note 2(VII) and 37)
When the fair values of the financial assets and liabilities recorded in the Balance Sheet cannot be measured based on the quoted market prices in active markets, their fair value is measured using valuation technique. The inputs to these models are taken from the observable market wherever possible, but where this is not feasible, a review of judgement is required in establishing fair values. Any changes in assumptions could affect the fair value relating to financial instruments.
2c Recent Pronouncements
The Ministry of Corporate Affairs notifies new standard or amendments to existing standards. There is no such notification which would have been applicable from 1st April 2024
G Risk Management Framework
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board of Directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company's risk management policies. The Committee reports regularly to the Board of Directors on its activities.
The Company's risk management policies are established to identify and analyse the risks faced by the Company to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company through its training and management standards and procedures aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
a Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers, loans and investment in debt securities. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments and loans.
The Company's maximum exposure to credit risk is the carrying value of each class of financial assets.
(i) Trade and other receivables
Customer credit risk for realty sales is managed by entering into sale agreements in the case of sale of under-construction flats / premises which stipulate construction milestone based payments and interest clauses in case of delays and also by requiring customers to pay the total agreed sale value before handover of possession of the premises / flats, thereby substantially eliminating the Company's credit risk in this respect. In the case of sale of finished units, sale agreements are executed only upon / against full payment.
Credit risk on trade receivables in respect of realty rentals is limited as the customers of the Company mainly consists of Government authorities / group Companies. Based on the past history of payments received, there have been no defaults.
Credit risk on trade receivables in respect of other operating income is Nil since the terms of payment are 100% through advance billing and collections.
Based on the above factors and historical data, the Company has concluded that no ECL allowance needs to be recognised for overdue receivables.
* Financial guarantees issued by the Company on behalf of subsidiaries (including step down subsidiary) are with respect to borrowings raised by these subsidiaries. These amount will be payable on default by the Company. The Company has created provision amounting to ' Nil (31st March 2023'7,637 lakhs). Financial Guarantee obligation is included under other financial liabilities and is measured at expected outflow on account of this Guarantee.
c) 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. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. The Company is exposed to market risk primarily related to interest rate risk and the market value of the investments.
d) Currency Risk
The functional currency of the Company is Indian Rupee. Currency risk is not material, as the Company does not have significant exposure in foreign currency.
(i) Exposure to Currency Risk
The currency profile of Financial Assets and Financial Liabilities as at 31st March 2024 and 31st March 2023 is Nil.
(ii) Interest Rate Risk
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.
Exposure to interest rate risk
In order to optimize the Company's position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio. According to the Company interest rate risk exposure is only for floating rate borrowings. The interest rate profile of the Company's interest-bearing financial instruments as reported to the management of the Company is as follows.
(a) Fair value sensitivity analysis for fixed rate Instruments
The Company does not account for any fixed rate financial assets or financial liabilities at fair value through Profit or Loss. Therefore, a change in interest rates at the reporting date would not affect Profit or Loss.
(b) Cash flow sensitivity analysis for variable rate Instruments
A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.
A) In respect of tax matters
(i) The Company is of the view that it has a good case with likelihood of liability / any loss arising out of these tax matters being remote. Accordingly, pending settlement of the tax dispute, no adjustment has been made in the Standalone Ind AS Financial Statements for the year ended 31st March, 2024.
(ii) Contingent liability for VAT demand pertains to demand arising on grounds of land value deduction, turnover computation, sub contractors deduction and various other grounds. The Company has filed an appeal against the aforesaid order.
(iii) Contingent liability for service tax demand pertains to levy of service tax on transfer of development rights (TDR) and demand on account of non reversal of CENVAT credit pertaining to exempt service of construction of public parking lot for Municipal Corporation of Greater Mumbai (MCGM). The Company has filed reply to the show cause cum demand notices.
(iv) Contingent Liability for GST pertains to Disallowance of ITC claimed in Trans 1 for which appeal has been filed and SCN notice issued for disallowance of ineligible ITC under the erstwhile law claimed in TRAN-1 for which reply to department has been filed.
B) In respect of other matters
i) Disputed claims pertain to litigations with respect of Projects of the Company filed by the customers on account of delayed possession, poor quality of apartments and infrastructure, pending conveyance of property and various other matters. The Company has gone into appeal in respect of these matters in various forums.
ii) Financial guarantees issued by the Company on behalf of subsidiaries (including step down subsidiary) are with respect to borrowings raised by the respective entities. This amount will be payable on default by the concerned entity. The Company has created provision for financial guarantee obligation. The amount of contingent liability is NIL.
xii Risk Exposure
Through its defined benefit plans, the Company is exposed to number of risks, the most significant of which are detailed below
(i) Inflation rate risk:
Higher than expected increase in salary will increase the defined benefit obligation
(ii) Demographic Risk :
This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligations is not straight forward and depends on the combination of salary increase, discount rate and vesting criteria.
(iii) Interest Rate Risk:
The defined benefit obligation calculated uses a discount rate based on Government bonds. If the bond yields fall, the defined benefit obligation will tend to increase.
49 CAPITAL MANAGEMENT
The Company's 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. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Management expects the debt equity ratio to be less than 10 times.
The Company monitors capital using a ratio of 'adjusted net debt' to 'adjusted equity' (gearing ratio). For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings less cash and cash equivalents.
Formula for Computing financial Ratios
1. Current Ratio= Current Assets / Current Liability
2. Debt Equity Ratio= Total Debt including interest accrued/Total Equity
3. Debt Service coverage ratio= Net profit/loss before Tax Finance cost Depreciation and amortisation/Total long term borrowings repaid during the year Finance cost Lease Payments
4. Return on Equity Ratio= Net profit/loss after Tax /Average sharegholders equity fund
5. Inventory Turnover Ratio= COGS /Average Inventory
6. Trade Receivable turnover ratio=Revenue/Average trade receivable
7. Trade Payable Turnover Ratio=Realty cost incurred Employee benefit cost Other expenses/Average trade payable
8. Net Capital Turnover Ratio=Turnover/net working capital
9. Net Profit Ratio=Net profit/losses after tax/Turnover
10. Return on Capital Employed Ratio= Earning before interest and taxes/(Average equity Averge borrowing)
11. Return on Investments= Interest on loans Gain on redemption of investments Dividend Income /(Average Investment Average Loans)
58 In view of losses the disclosure under section 135 of the Companies Act 2013 on CSR activity (Corporate social responsibility) is not applicable.
59 The Code on Social Security 2020 has been notified in the Official Gazette on 29th September, 2020. The effective date from which the changes are applicable is yet to be notified and the rules are yet to be framed. Impact if any of the change will be assessed and accounted in the period in which said Code becomes effective and the rules framed thereunder are notified.
60 OTHER STATUTORY INFORMATION
Additional Regulatory Information/disclosures as required by General Instructions to Division II of Schedule III to the Companies Act, 2013 are furnished to the extent applicable to the Company.
a The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
b The Company do not have any transactions with companies struck off.
c The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
d The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.
e The Company have 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
f 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 Funding Party (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
g 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 Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
h The Company has not been declared wilful defaulter by any banks / Financial Institution.
61 The current liabilities are higher than current assets mainly on account of borrowings repayable to group companies. Basis the financial projections for next year Management is confident of servicing its liabilities as and when it falls due.
62 During the year ended March 31, 2024, Company has reassessed old provisions pertaining to property taxes and written back an amount Rs. 400 Lakhs which is included under the head 'Revenue from operation.
63 Revenue from operations and profits for the current year includes Rs.1,928 Lakhs from sale of residual area of a project, completed in earlier years, recognised pursuant to transfer of control in accordance with Ind-AS 115.
64 STANDARD NOTIFIED BUT NOT YET EFFECTIVE
There are no new standards that are notified, but not yet effective, upto the date of issuance of the Company's financial statements.
65 During the year ended March 31 , 2023, a wholly owned subsidiary of the Company had entered into a debt settlement agreement with a lender, in respect of dues of Rs.11,843 Lakhs The subsidiary has fully discharged the obligation as per this agreement on July 27, 2023 and obtained no dues letter from the lender. Basis this, the resultant gain on settlement was accounted during year ended March 31, 2024 and disclosed under exceptional items.
66 During the current year, the Company has commenced recognition of revenue in relation to plotted development projects basis completion of infrastructure and handing over of possession to the customers.
67 The Company has used accounting software 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, except that audit trail feature is not enabled at the database level and also for certain changes made using privileged/ administrative access rights in the software. However, no instance of audit trail feature being tampered with was noted in respect of software. The Company has used software for maintaining and processing of Payroll data, however, the feature of audit trail (edit log) facility is not available.
68 The Company has availed working capital facilities from Banks / Financial Institutions which are secured against rent receivables. The Company is not required to submit any quarterly returns / statements to the banks in relation to these working capital facilities.
69 There are no other significant events that would require adjustments or disclosures in the financial statements as at the Balance Sheet date..
As per our report of even date For and on behalf of the Board of Directors of Peninsula Land Limited
For S R B C & CO LLP Sd/- Sd/- Sd/-
Chartered fcrountams Urvi A. Piramal Rajeev A. Piramal Nandan A. Piramal
ICAI Firm registration number: Non Executive Chairperson Executive Vice Chairman & Whole Time Director
324982E/E300003 DIN 00044954 Managing Director DIN 00045003
Sd/- DIN 00044983
per Shyamsundar Pachisia Sd/- Sd/- Sd/- Sd/-
Partner Mahesh S Gupta Deepak Summanwar N. Gangadharan Mukesh Gupta
Membership No.: 049237 Director Director Chief Financial Officer Company Secretary
DIN 00046810 DIN 02017830
Place : Mumbai
Date: May 27, 2024
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