(p) Provisions and contingencies
Provisions: A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. 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 time value of money is material). Contingent liabilities: Contingent liabilities are not recognised but are disclosed in notes to accounts.
(q) Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Financial assets and liabilities are initially recognised at fair value. Transaction costs that are directly attributable to financial assets and liabilities [other than financial assets and liabilities measured at fair value through profit and loss (FVTPL)] are added to or deducted from the fair value of the financial assets or liabilities, as appropriate on initial recognition. Transaction costs directly attributable to acquisition of financial assets or liabilities measured at FVTPL are recognised immediately in the statement of profit and loss.
a) Non-derivative Financial assets: All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets
Financial assets at amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met:
1) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
2) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
Effective interest method:
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is that which exactly discounts estimated future cash receipts through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets. Interest income is recognised in profit or loss and is included in the “Other income” line item.
b) Derecognition of financial assets: A financial asset is derecognised only when the Company:
- has transferred the rights to receive cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients. When the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. When the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
c) Foreign exchange gains and losses: The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in statement of profit and loss.
d) Financial liabilities: All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. Financial liabilities at FVTPL - Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in statement of profit and loss. The net gain or loss recognised in statement of profit and loss incorporates any interest paid on the financial liability and is included in the ‘Other income/ Other expenses’ line item.
Financial liabilities subsequently measured at amortised cost Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Foreign exchange gains and losses For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in the statement of profit and loss. The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognised in the statement of profit and loss.
Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
(r) Segment reporting
Operating segments are reported in the manner consistent with the internal reporting to the Managing director. The Company is reported at an overall level, and hence there are no separate reportable segments as per Ind AS 108.
(s) Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition) and highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
(t) Earnings per share (EPS)
Basic earnings per share are computed using the weighted average number of equity shares outstanding during the period. Diluted EPS is computed by dividing the profit or loss attributable to ordinary equity holders by the weighted average number of equity shares considered for deriving basic EPS and also weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares, as appropriate.
(u) 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.
(v) Capital work-in-progress
Capital work in progress includes, cost of assets not yet commissioned, and incidental expenses during the construction period. Certain directly attributable preoperative expenses during construction period are included under Capital Work in Progress. These expenses are allocated to the cost of Fixed Assets when the same are ready for intended use.
(w) Note on ESOP Trust
The company has created "SSKL EmployeesTrust" for providing share based payments to its employees. The company uses SSKL EmployeesTrust as a vehicle for distributing shares to employees under the employee remuneration schemes.
For the said purpose, the ESOP Trust borrowed funds from the Company and paid the same towards acquisition of shares of the Company for allocatting the same to the eligible employees.
Own Equity instruments that are acquired (Treasury Shares) are recognised at Cost and deducted from Equity. No gain or loss is recognised in profit and loss on the purchase, sale, issue or cancellation of the Group's own equity
instruments. Any difference between the Carrying amount and the consideration, if reissued / sold is recognised in Other Equity.
As the ESOP Trust carries out activities for the benefit of the employees of the Company, for appropriate presentation of the activity of the ESOP trust in the Standalone Financial Statements of the company, the Company has adopted the accounting policy to consolidate the ESOP Trust in the Standalone Financial Statements by treating the Trust as its extension.
Consequently, in the Standalone Financial Statements of the Company, the loan given to ESOP Trust is eliminated and the equity shares that are allotted to ESOP Trust (Treasury shares) are recognised at cost and disclosed as deduction from Equity.
Further, for the purpose of computation of Weighted Average Number of Equity shares outstanding for calculating Earnings per share, the weighted average number of Treasury shares outstanding are reduced from the number of shares at the end of the year.
(x) Basis for Accounting of invoices / Debit notes / Credit Notes towards procurement Goods / Services
We account the invoices / Debit notes / Credit Notes only after acceptance of the received goods / services related to that respective invoices / Debit notes / Credit Notes. And these goods becomes forming part of our
(iii) Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the company. These are used to maximise operational flexibility in terms of managing the assets used in the company’s operations. The majority of termination options held are exercisable only by the company and not by the respective lessor. In case the company wishes to extend the lease, the same can be done on mutually agreeable basis with the lessor.
Critical judgements in determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not to be terminated).
Also the company has used the discouting rate as 10% (the borrowing rate from the banks) for the purpose of arriving at present value.
For leases of retail stores, the following factors are normally the most relevant
(a) If any leasehold improvements are expected to have a significant remaining value, the company is typically reasonably certain to extend (or not to terminate).
(b) Most extension options in retail leases have been included in the lease liability, because the company only has the right to extend the lease (only with the approval of the lessor) and has incurred lease hold improvements in them.
(c) 'The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.
(d) If there are significant penalty payments to terminate (or not to extend), the company is typically reasonably certain to extend (or not to terminate).
(iv) The company is operating through 60 showrooms & 4 warehouses spread across the southern part of India and on evaluation of those rental agreements, 39 showrooms & 4 warehouses have come under the purview of Ind AS 116 and impact of the same has been provided in the financials (refer note 5). As per the terms and conditions stipulated in the lease deeds/ agreements of the remaining 21 showrooms, the termination option is available with both lessor and lessee leading to the same being treated as short term and the impact appears in the rental expenses (refer note 34).
2. The Company received two notices from Greater Hyderabad Municipal Corporation (GHMC) in the month of June 2022 for two showrooms located in Reddy Brothers Lane, Saroornagar, Hyderabad for using a residential property for non-residential use. The company filed replies to the above notices and the matter is currently pending with GHMC.
3. The company received a notice from Greater Hyderabad Municipal Corporation (GHMC) pursuant to a written complaint by residents alleging noise and traffic nuisance resulting from presence of our stores. The company filed response to such notice by providing clarifications and requesting relief in the matter. Consequently, a petition was preferred before the High Court of Telangana by the complainants to direct GHMC to stop the alleged activity against which an interim injunction was obtained by our company. Thereafter another contempt petition was filed by the complainants against the company and the matter is still pending.
4. A legal notice dated August 16, 2022 was received by the company and its directors, alleging that the company is playing various sound recordings, copyrights of which vests with Phonographic performance limited without an appropriate copyright license and paying a sum of ? 5 Crores as damages. The company filed a reply to the above notice stating that the complainant does not have a statutory right to raise the demands given in the notice. Consequently, a commercial suit was filed vide suit no.37964 of 2022 along with an interim application no.37970 of 2022, dated December 5, 2022 before the Hon’ble Bombay High court praying for an order of injunction restraining the company to use the above mentioned intellectual property. Consequently, the company made a statement before the Court that none of the Sound recordings for which the complainant claims to have copyright shall be played in the malls and stores run by the Company which was taken on record by the Court on December 19, 2022. The matter is currently pending before the Court.
5. Search and seizure operations under section 132 of the Income tax act:
Search and seizure of operations in the premises was conducted in the month of May 2023, by income tax department under section 132 of Income Tax Act,1961. Information and documents submitted to income tax department as per notices served from time to time. Scrutiny proceedings are in progress and as on date neither income tax demand determined nor levied consequent to such operations.
Note No. 43 Employee benefits
(a) Salaries and Wages
Compensatory absence which accrue to the employees which are expected to be availed or encashed within twelve months after the end of the period in which the employees render the related service are short-term in nature. These compensatory absences require measurement on an actual basis and not on actuarial basis.
As per the leave policy of the company, the compensatory absences are paid within the next month from the date they are due and there is no accrual benefit that needs to be accounted as per Ind AS 19. They are processed along with monthly payroll.
(b) Defined contribution plan
The Company makes provident and pension fund contributions, which is a defined contribution plan, for qualifying employees. Additionally, the Company also provides, for covered employees, health insurance through the Employee State Insurance scheme. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions payable to these plans by the Company are at rates specified in the rules of the Schemes. Expenses recognized against defined contribution plans:
(c) Defined benefit plans
The Company operates a gratuity plan covering qualifying employees. The benefit payable is calculated as per the Payment of Gratuity Act, 1972 and the benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The present value of the defined benefit obligation, and the related current service cost and paid service cost, were measured using the projected unit cost credit method. The company has obtained actuarial report from Mr. I. Sambasiva Rao (Membership No. 158 of Fellow of Institute of Actuaries of India) under Ind AS 19 for Mar 31,2024 and Mar 31, 2023 vide reports dated Apr 04, 2024 and Apr 11,2023 and respectively.
Company is being driven by the market forces, its businesses are subject to several risks and uncertainties including financial risks. The Company’s documented risk management policies act as an effective tool in mitigating the various financial risks to which the business is exposed to, in the course of their daily operations.
The risk management policies cover areas around all identified business risks including commodity price risk, foreign exchange risk etc., Risks are identified through a formal risk management programme with active involvement of senior management personnel and business managers. The Company has in place risk management processes in line with the Company’s policy. Each significant risk has an owner, who coordinates the risk management process.
The risk management framework aims to:
• Better understand our risk profile;
• Understand and better manage the uncertainties which impact our performance;
• Contribute to safeguarding Company value and interest of various stakeholders;
• Ensure that sound business opportunities are identified and pursued without exposing the business to an unacceptable level of risk;
• Improve compliance with good corporate governance guidelines and practices as well as laws & regulations; and
• Improve financial returns
Treasury management
The Company’s treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
Treasury management focuses on capital protection, liquidity maintenance and yield maximization. The treasury operates as per the delegation of authority from the Board. Day-to-day treasury operations are managed by Company’s finance team. Long-term fund raising including strategic treasury initiatives are handled by a Treasury team. The Company has a strong system of internal control which enables effective monitoring of adherence to Company’s policies.
Financial risk
The Company’s Board approved financial risk policies comprise liquidity, currency, interest rate and counterparty risk. The Company does not engage in speculative treasury activity but seeks to manage risk and optimize interest through proven financial instruments.
(i) Liquidity
The Company requires funds both for short-term operational needs as well as for long-term investment programmes mainly in growth projects. The Company generates sufficient cash flows from the current operations which together with the available cash and cash equivalents and short-term investments provide liquidity both in the short-term as well as in the long-term.
The Company has been rated by ""India Ratings"" for its banking facilities in line norms.
The Company remains committed to maintaining a healthy liquidity, gearing ratio, deleveraging and strengthening balance sheet. The maturity profile of the Company’s financial liabilities based on the remaining period from the date of balance sheet to the contractual maturity date is given in the table below. The figures reflect the contractual undiscounted cash obligation of the Company. The Company has hypothecated its trade receivables, inventory, advances and other current assets in order to fulfil the collateral requirements for the financial facilities in place. There are no other significant terms and conditions associated with the use of collateral.
(ii) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the other payables. The risks primarily relate to fluctuations in US Dollar, GBP against the functional currencies of the Company. The Company’s exposure to foreign currency changes for all other currencies is not material. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.
(iii) Credit risk
Credit risk is the risk that the counter party will not meet its obligation under a financial instrument, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments. The carrying amount of trade receivables, advances, deposits, cash and bank balances, bank deposits and interest receivable on deposits represents company’s maximum exposure to the credit risk. Credit risk from balances with banks is managed by the Company’s treasury department in accordance with Company’s policy. No other financial asset carry a significant exposure with respect to the credit risk. Bank deposits and cash balances are placed with reputable banks and deposits are with reputable government, public bodies and others. Since company operates on business model of primarily cash and carry, credit risk from receivable perspective is insignificant.
(b) Capital management and Gearing Ratio
For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the company’s capital management is to maximise the shareholder value. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is debt divided by total capital. The Company includes within debt, interest bearing loans and borrowings.
(ii) Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counter party.
(iii) 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 (unadjusted) prices in active markets for identical assets or liabilities
Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: Techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
Note No. 51
(a) Title deeds of immovable properties
Title deeds of immovable properties are held in the name of the Company.
(b) Valuation of Property Plant & Equipment, intangible asset
The Company has not revalued its fixed assets.
(c) Loans or advances to specified persons
No loans or advances in the nature of loans are granted to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013,) either severally or jointly with any other person, that are repayable on demand or without specifying any terms or period of repayment.
(d) Details of benami property held
The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company.
(e) Borrowing secured against current assets
The Company has borrowings from banks on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks are in agreement with the books of accounts.
(f) Wilful defaulter
The Company has not been declared as wilful defaulter by any bank or financial institution or other lender.
(g) Relationship with struck off companies
The Company does not have any transactions with companies struck off.
(h) Registration of charges or satisfaction with Registrar of Companies (ROC)
The Company does not have pending registration or satisfaction of charge to be registered with ROC beyond the statutory time period except in 2 instances of vehicle loans availed from ICICI Bank. The sanctioned limit of those loans of Rs. 0.16 Crores and it was filed on 22nd May, 2024.
Note No. 51 (Contd..)
(i) Compliance with number of layers of companies
The Section 2(87) of the Companies Act, 2013 read with Companies (Restriction on number of layers) Rules, 2017 is not applicable to the company.
(j) Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(k) Utilisation of borrowed funds and securities premium
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);
b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
The Company has 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:
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 guarantee, security or the like on behalf of the Ultimate Beneficiaries
(l) Undisclosed income
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).
(m) Details of crypto currency or virtual currency
The Company has not traded or invested in Crypto currency or Virtual Currency.
(n) Utilisation of borrowings availed from banks and financial institutions
The borrowings obtained by the Company from the Banks and Financial Institutions have been applied for the purposes for which such loans were taken.
The accompanying notes are an integral part of the financial statements
As per our audit report of even date For and on behalf of the board
For SAGAR & ASSOCIATES
Chartered Accountants Sd/- Sd/-
Ch.N.K.D.Prasad Annam Kalyan Srinivas
Managing Director Whole Time Director
CA. D. Manohar DIN : 01929166 DIN : 02428313
Partner
Membership No. 029644 F. No. 003510S
Sd/- Sd/-
Place: Hyderabad
Date: May 24 2024 K V L N Sarma M K Bhaskara Teja
udin: 24029644BKDHDU7510 Chief Financial Officer Company Secretary & Compliance Officer
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