m. Provisions (other than employee benefits)
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, 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. Expected future operating losses are not provided for.
Where the Company expects some or all of the expenditure required to settle a provision will be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
Warranties
A provision for warranties is recognised when the underlying products or services are sold, based on historical warranty data and a weighting of possible outcomes against their associated probabilities.
n. Leases
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
i. As a lessee
At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Company recognised a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently amortised using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be amortised over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company presents right-of-use assets that do not meet the definition of investment property in 'property, plant and
equipment' and lease liabilities separately in the Standalone Balance Sheet within 'Financial Liabilities'.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Company recognised the lease payments associated with these leases as an expense in profit or loss on a straightline basis over the lease term.
ii. As a lessor
At inception or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Company applies Ind AS 115 to allocate the consideration in the contract.
The Company applies the derecognition and impairment requirements in Ind AS 109 to the net investment in the lease. The Company further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Company recognised lease payments received under operating leases as income on a straight-line basis over the lease term as part of 'other income'.
o. Borrowing costs
Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are recognised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.
p. Contingent liabilities
Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. The Company does not recognise a contingent liability but discloses its existence in the standalone financial statements.
Provisions and contingent liabilities are reviewed at each standalone balance sheet date.
q. Earnings per share
i. Basic Earnings Per Share
Basic earnings per share is calculated by dividing the profit (or loss) attributable to the owners of the Company by the weighted
average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares).
ii. Diluted Earnings Per Share
Diluted earnings per share is computed by dividing the profit (considered in determination of basic earnings per share) after considering the effect of interest and other financing costs or income (net of attributable taxes) associated with dilutive potential equity shares by the weighted average number of equity shares considered for deriving basic earnings per share adjusted for the weighted average number of equity shares that would have been issued upon conversion of all dilutive potential equity shares.
r. Investment in subsidiaries
Investment in subsidiaries (under Ind AS 27) are carried at cost, less any impairment in the value of investment, in these standalone financial statements.
s. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is considered to be the Chairman and Managing Director and Executive Director who makes strategic decisions and is responsible for allocating resources and assessing performance of the operating segments.
t. Cash and cash equivalents
Cash and cash equivalents comprises of cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
u. Dividend distribution
Dividends paid are recognised in the period in which the interim dividends are approved by the Board of Directors of the Company, or in respect of the final dividend when approved by shareholders of the Company.
v. Recent pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
d) During the financial year 2019-20 pursuant to the provisions of Sections 68, 69, 70 and all other applicable provisions of the Companies Act, 2013, the provisions of the SEBI (Buy Back of Securities) Regulations, 2018, Article 62 of the Articles of Association of the Company and pursuant to the resolutions passed by the Board of Directors of the Company at their meeting held on May 16, 2019, the Company had bought back 3,839,804 equity shares of ' 2 each in electronic form.
e) During the financial year 2021-22, the Qualified Institutions Placement Committee ("QIP Committee") in its meeting held on September 24, 2021 had approved the allotment of 56,00,000 Equity Shares of face value of ' 2 each to eligible qualified institutional buyers at the issue price of ' 242 per Equity Shares (including a premium of ' 240 per Equity Share) against the Floor Price of ' 254.55 per Equity Shares , aggregating to ' 13,552.00 lakhs pursuant to the issue in accordance with the SEBI ICDR Regulations, 2018.
f) Rights, preferences and restrictions attached to equity shares
The Company has only one class of shares referred to as equity shares having a par value of ' 2/-. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the 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 shareholders. The equity shareholders are entitled to receive dividend as declared from time to time.
Nature and purpose of reserves and surplus
a) General reserve
General reserve are free reserves of the Company which are kept aside out of the Company's profit to meet the future requirements as and when they arise.
b) Capital redemption reserve
In accordance with Section 69 of the Companies Act, 2013, the Company created a capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from the general reserve.
c) Securities premium
Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.
d) Treasury Shares
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity and presented as treasury shares. The Company holds 73,791 (Nil as at March 31, 2023) number of its shares.
e) Share options outstanding reserve
The share option outstanding account is used to record value of equity-settled share based payment transactions with employees. The amount recorded in this account are transferred to retained earnings upon exercise of stock options by employees.
f) Retained earnings
Retained earnings comprises of accumulated balance of profits/(losses) of current and prior years including transfers made to / from other reserves from time to time. The reserve can be utilised or distributed by the Company in accordance with the provisions of the Companies Act, 2013.
g) Dividends
The following dividends were declared and paid by the Company during the year.
30. Employee benefit expenses A. Defined Benefit Plans
In accordance with the Payment of Gratuity Act, 1972, the Company provides for gratuity, as defined benefit plan. The gratuity plan provides for a lump sum payment to the employees at the time of separation from the service on completion of vested year of employment i.e. five years. The liability of gratuity plan is provided based on actuarial valuation as at the end of each financial year based on which the Company contributes the ascertained liability to Life Insurance Corporation of India by whom the plan assets are maintained. Employees are not required to contribute to the plan.
These plans typically expose the Company to actuarial risks such as: investment risk, inherent interest rate risk , longevity risk and salary risk.
Investment Risk
The present value of the defined benefit plan liability (denominated in Indian Rupee) is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.
Interest Rate Risk
The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit obligation will tend to increase.
Longevity Risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan's liability.
Salary Risk
Higher than expected increases in salary will increase the defined benefit obligation.
The present value of the defined benefit obligation, and the related current service cost, were measured using the projected unit credit method.
# Investment in bonds and debenture are measure at amortised cost. Fair value of quoted bonds and debentures has been determined on the basis of quoted market rate as on reporting date. Fair value of unquoted bonds and debenture is determined based on market prices that are directly observable in unlisted market place.
*The carrying amounts of trade receivables, cash and cash equivalents, bank balances other than cash and cash equivalents, loans, other current financial assets which comprise of finance lease receivables, security deposits receivable, receivable from banks on account of maturity of bank deposits, rental income receivable and trade payables, short term borrowings and other current financial liabilities which comprise of unclaimed dividends, security deposits payables, capital creditors and employee related payables approximates the fair values, due to their short-term nature. The other non current financial assets represents finance lease receivables, bank deposits (due for remaining maturity after twelve months from the reporting date), and security deposits receivables, the carrying values of which approximates the fair values as on the reporting date. The valuation technique used is discounted cash flow with no significant unobservable inputs.
**The lease liabilities represent non-current and current lease liabilities the carrying value of which approximates the fair values as on the reporting date.
Valuation process and technique used to determine fair value
The fair value of mutual fund units is based on the net asset value (NAV) as stated by the issuers of these mutual fund units in the published statement as at the Balance Sheet date.
The valuation of portfolio management service and alternative investment fund is based on the underlying assets wherein investments have been made. The investments are made either in listed securities or fixed deposits, therefore the fair value is based on the quoted price of underlying investment in case of listed security and carrying amount in case of fixed deposit.
The valuation of investment in unquoted shares is determined based on market prices that are directly observable in unlisted market place.
The fair value of investments in infrastructure investment trust has been determined on the basis of quoted market rate as on reporting date.
Transfers between Levels 1, Level 2 and Level 3
There has been no transfer between level 1, level 2 and level 3 for the years ended March 31, 2024 and March 31, 2023.
C) Financial Risk Management
The Company's activities expose it to market risk, liquidity risk and credit risk. This note explains the source of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.
The Company's Board of Directors has overall responsibility for the establishment and oversight of the company's risk management framework.
The Company has exposure to the following risks arising from financial instruments:
- credit risk
- liquidity risk
- market risk
The Company's risk management is carried out by a treasury department under the supervision of Chief Financial Officer of the Company. The treasury department identifies and evaluates financial risks. The board of directors provides written principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, liquidity risk etc.
The Risk management Committee of the Company oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
Expected credit losses for financial assets other than trade receivables and finance lease receivables
The Company maintains its cash and cash equivalents and bank deposits with reputed banks. The credit risk on these instruments is limited because the counterparties are bank with high credit ratings assigned by domestic credit rating agencies. Hence, the credit risk associated with cash and cash equivalent and bank deposits is relatively low
Loan comprises loans given to employees, which would be adjusted against salary of the employees and hence credit risk associated with such amount is also relatively low.
The Company maintains its investment in bonds and debentures with reputed financial institutions and corporates. The credit risk on these instruments is limited because the counterparties are financial institutions and corporates with high credit ratings assigned by domestic credit rating agencies. Hence, the credit risk associated with these investments is relatively low. Investments in Mutual funds, Alternative Investment Fund, Shares, Portfolio Management Service, Investment in Infrastructure Investment Trust and limited liability Partnership firm are measured at mark to market hence, the credit risk associated with these investments already considered in valuation as on reporting date.
Security deposits are given for operational activities of the Company and will be returned to the Company as per the contracts with respective vendors. The Company monitors the credit ratings of the counterparties on regular basis. These security deposits carry very minimal credit risk based on the financial position of parties and Company's historical experience of dealing with the parties.
Receivable from banks on account of maturity of bank deposits is limited because the counterparties are bank with high credit ratings assigned by domestic credit rating agencies. Hence, the credit risk associated with receivable from banks on account of maturity of bank deposits is relatively low.
Impairment loss on financial lease receivables is not recognised since the same is not material considering size and nature of financial lease receivables.
Expected credit losses for trade receivables and finance lease receivable
Credit risks related to receivables is managed by each business unit subject to the Company's policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored.
An impairment analysis is performed at each reporting date on trade receivables and finance lease receivable by using lifetime expected credit losses as per simplified approach wherein the weighted average loss rates are analysed from the historical trend of defaults relating to each business segment. Such provision matrix has been considered to recognise lifetime expected credit losses on trade receivables and finance lease receivable (other than those where defaults criteria are met).
The Company evaluates the concentration of risk with respect to trade receivables and finance lease receivable as low, since its customers are from various industries, jurisdictions and operate in independent markets. These receivables are written off when there is no reasonable expectation of recovery.
The Company considers the probability of default upon initial recognition of asset and whether there has been significant increase in credit risk on an on-going basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. The Company considers reasonable and supportive forward-looking information by calculating forward looking loss rate based upon Vasicek methodology. For the same, the Company has identified India Gross Domestic Product as an appropriate factor based on qualitative criteria.
C.2) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities. The investment philosophy of the Company is capital preservation and liquidity in preference to returns. The Company consistently generates sufficient cash flows from operations and has access to multiple sources of funding to meet the financial obligations and maintain adequate liquidity for use. The Company manages liquidity risk by maintaining adequate reserve, 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.
Maturity profile of financial liabilities
The table below provides details regarding the remaining contractual maturities of financial liabilities at the reporting date based on contractual undiscounted payments.
C.3) Market risk
Market risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk namely : currency risk and interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Price risk
The Company invests in mutual funds, alternative investment fund, equity shares, portfolio management service, infrastructure investment trust and limited liability partnership firm, bonds and debentures, which are susceptible to market price risk arising from uncertainties about future values of the investment securities. In order to manage its price risk arising from investments, the Company diversifies its portfolio in accordance with the limits set by the risk management policies.
39. Segment information
The Company has presented segment information in the consolidated financial statements. Accordingly, in terms of paragraph 4 of Ind AS 108 'Operating Segments', no disclosures related to segments are presented in these standalone financial statements.
40. Revenue from operations
a) Disaggregation of revenue from contracts with customers
In the following table, revenue from contracts with customers is disaggregated by major products and timing of revenue recognition. The Company has performed a disaggregated analysis of revenues considering the nature, amount, timing and uncertainty. The table also includes a reconciliation of the disaggregated revenue with the Company's reportable segments. Invoices raised for credit sales are usually payable within 30 days.
46. Additional regulatory information pursuant to the requirement in Division II of Schedule III to the Companies Act 2013
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) 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) or
b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
(iii) 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.
(iv) The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(v) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vi) The Company has not 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).
(vii) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(viii) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(ix) The Company does not have any charges or satisfaction of charges which is yet to be registered with Registrar of Companies beyond the statutory period.
(x) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(xi) The Company has not granted any loans to the promoters, directors, Key Managerial Person's and the related parties (as defined under Companies Act, 2013), either severally or jointly with any other person which are repayable on demand or without specifying any terms or period of repayments as at March 31, 2024 (as at March 31, 2023: Nil).
(xii) The Group (as per the provisions of the Core Investment Companies (Reserve Bank) Directions, 2016) does not have Core Investment Company (CIC).
(xiii) 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, except as below :
47. In accordance with requirement of rule 3(1) of Companies (Accounts) Rules, 2014, the Company has used an accounting software for maintaining its books of account, however, the feature of recording audit trail (edit log) facility has not been enabled during the current year ended 31 March 2024.
As per our report of even date attached
For B S R & Co. LLP For and on behalf of the Board of Directors of
Chartered Accountants Action Construction Equipment Limited
Firm Registration Number: 101248W/W-100022 CIN: L74899HR1995PLC053860
Sd/ Sd/ Sd/
Kunal Kapur Vijay Agarwal Sorab Agarwal
Partner Chairman and Managing Director Whole Time Director
Membership No : 509209 DIN : 00057634 DIN: 00057666
Place: Faridabad Place: Faridabad Place: Faridabad
Date: May 21, 2024 Date: May 21, 2024 Date: May 21, 2024
Sd/ Sd/
Anil Kumar Rajan Luthra
Company Secretary Chief Financial Officer
Membership No.: 37791 Place: Faridabad
Place: Faridabad Date: May 21, 2024
Date: May 21, 2024
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