13.1 Nature and purpose of each reserve within equity is as follows:
A) Capital Reserve
Capital Reserve is mainly the reserve created by transferring the capital Subsidy received from Government in earlier years in accordance with applicable accounting standards on that date.
B) Capital Redemption Reserve
Capital Redemption Reserve has been created for redemption of Preference Share Capital.
C) Securities Premium
Security Premium Account was created on issue of shares at premium. These reserves can be utilised in accordance with Section 52 of Companies Act 2013.
D) Debenture Redemption Reserve
Debenture Redemption Reserve has been created for redemption of Debentures.
E) Retained Earnings
Retained earnings represents undistributed earning after taxes of the company which can be distributed to its equity shareholders in accordance with the requirement of Companies Act, 2013.
i. Working Capital Facilities from Bank
a. Working Capital Borrowings from UCO Bank is secured by hypothecation of all type of Stocks of raw material, stock in process finished Goods and receivables of the company both present and future.
It is also secured by way of equitable mortgage on Industrial Property of plot land measuring 150 bigha situated at khasra no. 2702, 2703,705, 2707, 2708, 2709, 2710, 2711, 27192704, 4025/2706, 4021/2697 of Vill Raila & Khasra no 3123/1516,3124/1514 of Vill Lambia Kalan, National Highway -48 Vill Raila along with hypothecation of Plant and Machinery at the above land and building.
b. Working capital facilities repayable on demand and it carry interest at the rate 8.75% per annum.
ii. Bank Overdraft
a. Bank Overdraft from HDFC bank is secured by way of lien on FDR of Rs. 260.00 lakhs for a period of 550 days.
b. It carry interest at the rate 7.25% per annum.
15.1 Balances of trade payables are subject to reconciliation, confirmation and consequential adjustments, if any.
15.2 Disclosures relating to amounts payable as at the year end together with interest paid / payable to Micro and Small Enterprises have been made in the accounts, as required under the Micro, Small and Medium Enterprises Development Act, 2006 ('MSMED Act') to the extent of information available with the Company determined on the basis of intimation received from suppliers regarding their status and the required disclosure is
16.1 Share Application Money Rs. 1450 Lakhs has been raised pursuant to restructuring/settlement scheme submitted to BIFR. Consequent to enactment
of Sick Industrial Companies (Special Provision) Repeal Act, 2003 (SICA Repeal Act) with effect from 1/12/2016, it became refundable.
16.2 Preference Share Capital
a. Preference Shares Rs. 225 Lakhs were redeemable in F.Y. 2001-02 Rs. 6.25 Lakhs, F.Y. 2002-03 Rs. 72.92 Lakhs F.Y. 2003-04 Rs. 72.92 Lakhs and F.Y. 2004-05 Rs. 72.91 Lakhs. Consequent to enactment of Sick Industrial Companies (Special Provision) Repeal Act, 2003 (SICA Repeal Act) with effect from 1/12/2016, the company is in process of settlement with respective Preference Shareholders.
b. Interest on cumulative redeemable preference shares amounting to Rs. 36.13 Lakhs for the year and Rs. 1047.74 Lakhs cumulative up to 31-032025 (Previous year Rs. 36.13 Lakhs & cumulative up to 31-03-2024 Rs. 1011.61 Lakhs) has not been provided as the company is in process of settlement of remaining redeemable preference share capital.
c. The Cumulative Redeemable Preference Share holders are entitled to cumulative interest at the rate specified. Each share holder of Cumulative Redeemable Preference Shares is entitled to one vote per share only on resolution placed before the company, which directly affects the right attached to cumulative redeemable preference share. Since the interest in respect of cumulative preference share holders has not been paid for more than two years, cumulative redeemable preference share holder have right to 10 votes per share on every resolution placed before the company in a meeting.
d. In the event of liquidation of the company, the holder of cumulative redeemable preference share will have priority over equity share holders in the payment of interest and re-payment of capital.
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31 CONTINGENT LIABILITIES AND COMMITMENTS
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(A) CONTINGENT LIABILITIES
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i.
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Bank Guarantees
(amount paid their against by way of FDR Rs. 58.98 lakhs, Previous year Rs. 70.13 lakhs)
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45.11
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54.64
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ii.
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Disputed demands of GST /Sales Tax/Entry Tax Cases (amount paid Rs. Nil, Previous year Rs. 0.77 Lakhs)
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-
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0.77
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iii.
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Disputed Income Tax Demand
(amount paid Rs. 11.71 Lakhs, Previous year Rs. 11.71 Lakhs)
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11.71
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11.71
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iv.
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Disputed demands of Excise cases under appeal (amount paid Rs. Nil, Previous year Rs. 0.63 Lakhs)
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-
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0.63
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v.
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Other disputed demands by Government departments (amount paid Rs. 22.99 Lakhs, Previous year Rs. 7.77 Lakhs)
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111.93
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159.45
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vi.
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Disputed liabilities and claim not acknowledged as debts
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48.58
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104.95
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(B) COMMITTMENT
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(a)
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Estimated amount of Contracts remaining to be executed on capital account and not provided for.
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463.58
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42.87
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(b)
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Advance paid their against
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118.17
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1.00
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34 EMPLOYEE BENEFITS
i) Defined benefits plan a) Gratuity
In accordance with the provisions of payment of Gratuity Act, 1972 the company has a defined benefits plan which provides for gratuity payments. Every employee who has completed continuous service of 5 years or more gets a gratuity on retirement/termination at 15 days salary (last drawn) for each completed year of service. Liabilities in respect of gratuity plan are determined by an actuarial valuation. Based on the actuarial valuation obtained in this respect, the following table sets out the details of the employees benefits obligation as at balance sheet date.
Risk exposure
Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow- Salary Increase- Actual salary increase will increase the plan’s liability. Increase in salary increase rate assumption in future valuations which also increase the liability.
- Investment Risk - If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.
- Discount Rate- Reduction in discount rate in subsequent valuations can increase the plan’s liability.
- Mortality & disability - Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities.
- Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact liability.
b Compensated Absences:
The Company permits encashment of compensated absence accumulated by their employees on retirement, separation and during the course of service. The liability in respect of the Company, for outstanding balance of leave at the balance sheet date is determined and provided on the basis of actuarial valuation as at the balance sheet date performed by an independent actuary. The Company doesn’t maintain any plan assets to fund its obligation towards compensated absences.
35 SEGMENT INFORMATION
a Based on the management approach as defined in Ind AS 108 - Operating Segments, the Chief Operating Decision Maker (CODM) evaluates the company's performance and allocates resources based on an analysis of various performance indicators of business segment/s in which the company operates. The Company is primarily engaged in the business of textile manufacturing which the management and CODM recognise as the sole business segment. Hence, disclosure of segment-wise information is not required and accordingly not provided.
Financial Instruments measured at amortised cost
The carrying amount of financial assets and financial liabilities measured at amortised cost in the Financial Statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled. ii. Fair Value Hierarchy
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are whether observable or unobservable and consists of the following three levels:
Level 1 : Inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 : Inputs are other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly. Level 3 : Inputs which are not based on observable market data.
The fair value of investments in equity/liquid mutual funds is based active market.
Note 38 : A wholly owned subsidiary Modern Woollens UK Ltd has been incorporated on 18.11.2024 with the Registrar of Companies for England and Wales. Modern Threads (India) Limited has agreed to subscribe 1 share of GBP 1 of Modern Woollens UK Ltd and subscription amount is yet to be paid. Modern Woollens UK Ltd is yet to commence business operations, hence Consolidated Financial Results have not been prepared.
40 Wilful Defaulter
The company has been declared as wilful defaulter by banks and Financial Institutions from 31.03.2002 to 31.03.2010 but all the borrowings have settled and paid and default is not continuing, hence other details are not furnished.
41 Capital and Financial Risk Management A Capital Management
The Company’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and maintain an optimal capital structure to reduce the cost of capital.
The Company’s adjusted net debt to equity ratio is as follows.
B Financial Risk Management
The Company’s activities are exposed market risk (including foreign currency risk, interest rate risk and commodity price risk), credit risk and liquidity risk. The company's financial risk management is an integral part of how to plan and excute its business strategies. In order to minimise any financial performance of the company, derivaties financial instruments are entered. The company's financial risk management policy is set by the Manading Director and governed by overall direction of Board of Directors of the company. i) Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The Company is exposed to credit risk mainly from its operating activities (primarily trade receivables) and investing activities including deposits placed with banks, mutual funds and other financial assets. The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of financial assets. A default on a financial asset is when there is a significant increase in the credit risk which is evaluated based on the business environment. The assets are written off when the Company is certain about the non-recovery.
Trade Receivables: Customer credit risk is managed based on company’s established policy, procedures and controls. The company assesses the credit quality of the counterparties taking into account their financial position, past experience and other factors.
Credit risk is reduced by receiving pre-payments and export letter of credit to the extent possible. The Company has a well "defined sales policy to minimize its risk of credit defaults. Outstanding customer receivables are regularly monitored and assessed/"'
Impairment analysis is performed based on historical data at each reporting date on an individual basis.
Deposits with Bank and investments:
The credit risk of fixed deposits with banks and mutual funds are considered negligible, since the counterparties are reputable banks with high quality external credit ratings and the company is in the process of constantly evaluating the risks associated with the investment.
Other financial assets
Other financial assets mainly comprises of security deposits which are given to customers or other governmental agencies, are assessed by the Company for credit risk on a continuous basis.
ii) Liquidity Risk
Liquidity risk is the risk, where the company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The company’s approach is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due.
The table summarizes the maturity profile of Company's financial liabilities based on contractual payments.
iii) Market Risk:
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises mainly three types of risk: interest rate risk, currency risk and other price risk such as commodity price risk. a. Foreign currency risk
The company operates internationally and portion of the business is transacted in several currencies and consequently the company is exposed to foreign exchange risk through its sales in overseas and purchase from overseas suppliers in various foreign currencies viz. Euro, GBP, USD, AUD, JPY etc.
During the year, the Company has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign currency exposure on highly probable forecasted transactions. Hedge effectiveness is determined at inception and periodic prospective effectiveness testing is done to ensure the relationship exist between the hedged items and hedging instruments, including whether the hedging instruments is expected to offset changes in cash flows of hedge items.
c. Commodity Risk
Commodity risk is defined as the possibility of financial loss as a result of fluctuation in price of Raw Material/Finished Goods and change in demand of the product and market in which the company operates. The Company is exposed to the movement in price of key raw materials in domestic and international markets. The Company has in place policies to manage exposure to fluctuations in the prices of the key raw materials used in operations. The company forecast annual business plan and execute on monthly business plan. Raw material procurement is aligned to its monthly/annual business plan and inventory position is monitored in accordance with future price trend.
43 Figures for previous year have been regrouped/rearranged/restated wherever considered necessary to make them comparable with the figures for the current year and for compliance of Ind AS.
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