1.10 PROVISIONS
Provisions for legal claims are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pretax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
1.11 CONTRIBUTED EQUITY
Equity shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
1.12 EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company
• by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares (see note 35).
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
• the after income tax effect of interest and other financing costs associated with dilutive potential equity shares
• the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
1.13 ROUNDING OFF AMOUNTS
All amounts disclosed in the financial statements and notes have been rounded off to the nearest crores as per the requirement of Schedule III, unless otherwise stated.
(i) The company has leased computer servers, warehouses, showrooms and furnitures & fixtures across the country, the lease period which ranges from 2-9 years, lease terms included is the non-cancellable period together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
(ii) Some showroom lease contain variable payment terms that are linked to sales generated from that store. Variable lease payments ranges from 12% to 15% of sales. Varible lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
(iii) Company has excercised the option of short term leases exemption.
(iv) Extension and termination options
Extension options has been included in a number of showroom leases. These are used to maximise operational flexibility in terms of managing the assets used in the Company's operations.
(v) 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 are only included in the lease term if the lease is reasonably certain to be extended.
For leases of retail stores, the following factors are normally the most relevant:
• If there are significant penalties to terminate or not extend, the Company is typically reasonably certain to extend.
• If the leasehold improvements expected to have a significant remaining value, the Company is typically reasonably certain to extend.
• Otherwise, the Company considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.
The lease term is reassessed if an option is actually exercised or not exercised, or the Company becomes obliged to exercise or not exercise. 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.
Expense relating to variable lease payments not included in the measurement of lease liabilities ' 3.37 crores
Expense relating to Short term lease payments - ' 3.03 crores
The total cash outflow for leases for the year ended 31st March, 2024 was ' 22.49 Crs
a) Timing of satisfaction of performance obligations. There are no significant judgements made by the Company in determining the timing of satisfaction of performance obligation. It is determined as per the terms of the contract.
b) Transaction price and the amounts allocated to performance obligations.
Sale of apparels and accessories
Revenue from sales is recognised based on the transaction price, adjusted for variable consideration in the form of volume discounts, loyalty points, penalty on delay in delivery of goods and marketing expenses. A liability is recognised for expected variable consideration payable to customers in relation to sales made until the end of the reporting period.
Customer loyalty Programme
The points provide a material right to customers that they would not receive without entering into a contract. Therefore, the promise to provide points to the customer is a separate performance obligation. The transaction price is allocated to the product and the points on a relative stand-alone selling price basis. Management estimates the stand-alone selling price per point on the basis of the discount granted when the points are redeemed and on the basis of likelihood of redemption, based on past experience. The stand-alone selling price of product sold is estimated on the basis of retail price.
(i) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.
There are no transfers between levels 1 and 2 during the year.
The company's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
(ii) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- the fair value of foreign currency option contracts is determined using Black Scholes valuation model.
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2
Fair value of financial assets (Mutual Funds) are measured at Fair Value Fair value of Other financial assets and liabilities held at amortised cost
The carrying amounts of trade receivables, trade payables, cash and cash equivalent, other financial liabilities, are considered to be the same as their fair values, due to their short-term nature.
The carrying value of borrowings, security deposits paid and received approximate to fair value.
The company's activities expose it to market risk, liquidity risk and credit risk.
(A) Credit risk
Company faces credit risk from cash and cash equivalents, deposits with banks and financial institutions and unsecured trade receivables. The company doesn't face any credit risk with other financial assets
Risk management
Credit risk on deposit is mitigated by the depositing the funds in reputed public sector bank.
For trade receivables, the primary source of credit risk is that these are unsecured. The Company sells the products to customers only when the collection of trade receivables is certain. Credit risk is monitored on an ongoing basis to identify any significant increase in the credit risk. As at the balance sheet date, based on the credit assessment, the historical trend of low default is expected to continue. Historical trends showed that the company had no significant credit risk.
(B) Liquidity risk
Objective of liquidity risk management is to maintain sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Management monitors rolling forecasts of the company's liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. The company's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal requirements.
The Company's liquidity position remains strong at '39.75 crores as at 31st March 2024, comprising '37.84 crores in the form of current investments, cash and cash equivalents and other balances with banks (including non-current earmarked balances) and '1.91 crores in committed undrawn bank lines.
ii) Maturities of financial liabilities
The tables below analyse the company's financial liabilities into relevant maturity groupings based on their contractual maturities
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months are equal to their carrying balances as the impact of discounting is insignificant.
(C) Market risk
The only risk that the company faces with respect to market risk is fluctuation in foreign currency movements against INR
Interest rate risk
Interest rate risk is the risk that the fair value or fauture cash flows of a financial instruments will fluctuate because of changes in the market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's debt obligations with floating interest rates.
40. Employee benefit plans
The Company operates a gratuity plan through a Trust wherein certain employees are entitled to benefit equivalent to fifteen days of salary last drawn for each completed year of service as per the Payment of Gratuity Act, 1972. The same is payable on termination of service or retirement, whichever is earlier. The benifit vests after five years of continuous service.
The Company is only making provisions for the entire Gartuity Liability on the valuation and follows a "pay as you go" system to meet the liabilities as when they fall due. Therefore the scheme is fully unfunded, and no assets are maintained by the company and asset values are taken as zero.
The following tables summarise the components of net benefit expense recognised in the Profit and Loss and Balance Sheet
Risk exposure
Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets under perform this yield, this will create a deficit.
Changes in bond: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an yields increase in the value of the plans' bond holdings.
Significant Estimates
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at intervals in response to demographic changes.
45. Additional Regulatory Information Required By Schedule lii
(i) DETAILS OF BENAMI PROPERTY HELD
No proceedings have been initiated on or are pending against the Company under the Prohibition of Benami Property Transactions Act, 1988 (as amended in 2016) (formerly theBenami Transactions (Prohibition) Act, 1988 (45 of 1988)) and Rules made thereunder.
(ii) COMPLIANCE WITH NUMBER OF LAYERS OF COMPANIES
The Company has complied with the number of layers prescribed under Section 2(87) of the Companies Act, 2013 read with Companies (Restriction of number of layers) Rules, 2017.
(iii) RELATIONSHIP WITH STRUCK OFF COMPANIES
The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.
(iv) BORROWINGS SECURED AGAINST CURRENT ASSETS
The Company has been sanctioned working capital limits in excess of ' 5 crores, in aggregate, from banks on the basis of security of current assets. The Company has filed quarterly return with such banks in compliance with loan covenants.
(v) WILFUL DEFAULTER
The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(vi) 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.
(vii) LOANS OR ADVANCES TO SPECIFIED PERSONS
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 / indirectly lend / invest in other persons / entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
(viii) UTILISATION OF BORROWED FUNDS AND SHARE PREMIUM
The Company has not received any funds from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
a. directly / indirectly lend / invest in other persons / 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.
(ix) UNDISCLOSED INCOME
There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
(x) DETAILS OF CRYPTO CURRENCY OR VIRTUAL CURRENCY
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year
(xi) VALUATION OF PROPERTY PLANT AND EQUIPMENT (INCLUDING RIGHT-OF-USE ASSETS) AND INTANGIBLE ASSETS
The Company has not revalued its Property, Plant and Equipment (including Right-of-use assets) and Intangible assets during the current or previous year. The Company did not have assets) and Intangible assets during the current or previous year. The Company did not have any Investment Property during the current or previous year.
(xii) REGISTRATION OF CHARGES OR SATISFACTION WITH REGISTRAR OF COMPANIES
There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.
(xiii) UTILISATION OF BORROWINGS TAKEN FROM BANKS AND FINANCIAL INSTITUTIONS FOR SPECIFIC PURPOSE
The borrowings obtained by the company from banks and financial institutions have been applied only for the purposes for which such loans were taken.
As per our report of even date For and on behalf of Board of Directors
For SRSV & Associates Indian Terrain Fashions Limited
sd/-
Chartered Accountants Venkatesh Rajagopal
ICAI Firm Reg No.015041S Chairman & Whole Time Director
(DIN:00003625)
sd/ -sd/ -sd/- sd/-
V. Rajeswaran Sainath Sundaram Sheikh Sahenawaz Charath Ram Narsimhan
Partner Company Secretary Chief Financial Officer Managing Director & CEO
Membership No.020881 Membership No.F12981 (DIN: 06497859)
Chennai, 29th May, 2024
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