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Company Information

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CEAT LTD.

26 August 2025 | 12:00

Industry >> Tyres & Tubes

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ISIN No INE482A01020 BSE Code / NSE Code 500878 / CEATLTD Book Value (Rs.) 1,038.43 Face Value 10.00
Bookclosure 08/08/2025 52Week High 4044 EPS 116.85 P/E 26.01
Market Cap. 12294.00 Cr. 52Week Low 2343 P/BV / Div Yield (%) 2.93 / 0.99 Market Lot 1.00
Security Type Other

NOTES TO ACCOUNTS

You can view the entire text of Notes to accounts of the company for the latest year
Year End :2025-03 

a) The difference between Issued Share Capital and Subscribed and Paid-up share capital is 688 equity shares which were offered on right basis and kept in abeyance since 2006.

b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having face value of C 10 per share. Each holder of equity shares is entitled to one vote per equity share. Dividend is recommended by the Board of Directors and is subject to the approval of the members at the ensuing Annual General Meeting except interim dividend. The Board of Directors have a right to deduct from the dividend payable to any member, any sum due from him to the Company.

In the event of winding-up, the holders of equity shares shall be entitled to receive 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 shareholders. The shareholders have all other rights as available to equity shareholders as per the provision of the Companies Act, applicable in India read together with the Memorandum of Association and Articles of Association of the Company, as applicable.

c) Capital redemption reserve

Capital redemption reserve represents amount transferred from profit and loss account on redemption of preference shares during FY 1998-99.

d) Effective portion of cash flow hedges

It represents mark-to-market valuation of effective hedges as required by Ind AS 109.

e) General Reserve

The general reserve is used from time to time to transfer profits from retained earnings for appropriations purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income , items included in the general reserve will not be reclassified subsequently to the Statement of Profit and Loss.

f) Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to reserves, dividends or other distributions paid to shareholders.

Proposed dividends on equity shares which are subject to approval at the Annual General Meeting are not recognised as a liability in the year in which it is proposed.

The Company declares and pays dividend in Indian rupees. The Finance Act 2020 has repealed the Dividend Distribution Tax. Companies are now required to pay / distribute dividend after deducting applicable taxes. The remittance of dividends outside India is also subject to withholding tax at applicable rates.

Notes to Borrowings:

1. Non-Convertible Debentures ("NCDs”) C 10,000 lakhs as on March 31, 2025 (March 31, 2024: C 25,000 lakhs) allotted on October 13, 2020 (NCD Series 2) and September 19, 2022 (NCD Series 3) on private placement basis. First Tranche of NCD (allotted on October 07, 2020 (NCD Series 1)) is repaid on due date i.e. on October 06, 2023. Second tranche of NCD (NCD Series 2)is secured by way of first charge over movable and immovable fixed assets located at Ambernath plant and Third tranche of NCD (NCD Series 3) is un-secured. As at March 31, 2025, the NCDs carry an interest at 7.00% p.a. (NCD Series 2) and 7.99% p.a. (NCD Series 3) and is repayable as under:

a. NCD Series 2: C 10,000 lakhs (40% of the issue amount) repayable on October 13, 2025.

b. NCD Series 3: C 15,000 lakhs (60% of the issue amount) repayable on September 19, 2026.

2. Term loan from Kotak Mahindra Bank Limited C 18,000 lacs as on March 31,2025 (March 31,2024: C 22,800 lacs) is secured by first pari passu charge over the immovable and movable fixed assets situated at Halol, Nashik, Nagpur and Chennai Plant. It is repayable as under:

a) The Company had introduced VRS for employees across the Company. During the year, 119 employees (March 31, 2024, 29 employees) opted for the VRS.

b) On July 21, 2022, the Ministry of Environment, Forest and Climate Change issued notification containing Regulations on Extended Producer Responsibility (EPR) for Waste Tyre applicable to Tyre manufacturers and Recyclers. As per the notification, the Company has a present legal obligation as at March 31,2024 for FY 2023-24 (quantified basis the production in FY 21-22) and for FY 2022-23 (quantified basis the production in FY 20-21).

As at March 31, 2023 the Company could not estimate the liability reliably since the infrastructure for the same was not enabled and hence this obligation was not provided for. In the current year the enabling framework has been established for the Company to reliably estimate the liability and accordingly C 10,720 lakhs has been provided in the books in the current year including C 3,453 lakhs pertaining to FY 22-23 obligations, which has been disclosed as an exceptional item during the quarter and year ended March 31,2024. The obligation pertaining to FY 23-24 has been disclosed as part of Other expenses.

The Company has provided the above on a prudence basis while the matter has been represented to the Government by the Company along with the Industry forum to defer the applicability and proposed for certain changes in the modalities.

Note 37: Post-retirements benefit plan

Refer to note 2.13 for accounting policy on employee benefits

a) Defined contribution plan

Refer note 30 for Company's contribution to the defined contribution plans with respect to provident fund and other funds.

b) Defined benefit plan - Gratuity

Description of plan

The Company has a defined benefit gratuity plan which is funded with an Insurance Company in the form of a qualifying Insurance policy. The Company's defined benefit gratuity plan is a salary plan for employees which requires contributions to be made to a separate administrative fund. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, every employee who has completed five years of service gets a gratuity on separation at 15 days of last drawn salary for each completed year of service.

Governance

The fund has the form of a trust and it is governed by the Board of Trustees, which consists of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy. Each year, the Board of Trustees reviews the level of funding.

Investment Strategy

The Board of trustees have appointed LIC of India, Birla Sun Life Insurance, India First Life Insurance, Kotak Mahindra Life Insurance & HDFC Life Insurance to manage its funds. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise. Every year, the insurance Company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. In case of death, while in service, the gratuity is payable irrespective of vesting.

The following set out the amounts recognized in the Company's financial statements as at March 31,2025 and March 31,2024.

Note 38: Commitments and contingencies a. Contingent Liabilities

Refer note 2.20 for accounting policy on Contingent liabilities and assets (to the extent not provided for)

(C in lakhs)

Particulars

As at

March 31, 2025

As at

March 31, 2024

1.

Direct and indirect taxation matters*

Income tax (refer foot note a)

94

1,074

Excise duty / Service tax / GST / Customs (refer foot note b)

13,298

16,387

Sales tax (refer foot note c)

2,113

2,305

2.

Bills discounted with banks

6,157

21,615

3.

Claims against Company not acknowledged as debts*

In respect of labour matters

1,172

958

Vendor disputes

3,476

294

4.

Other claims* (refer foot note d)

-

3,168

*in respect of above matters, future cash outflows are determinable only on receipt of judgements pending at various forums / authorities.

Note:

a) Income tax cases includes disputes pertaining mainly to disallowance of provision for discount charges and other similar provisions.

b) Excise / Service tax / GST cases include disputes pertaining to availment of CENVAT credit / input tax credit and other matters. Customs case includes dispute pertaining to MODVAT reversal (import under Value based Advance License)

c) Sales tax cases includes disputes pertaining mainly on account of input tax credit mismatch, VAT applicability on royalty / security deposits / octroi and other issues.

d) The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial position.

b.

Commitments

(C in lakhs)

Particulars

As at

March 31, 2025

As at

March 31, 2024

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advance payments)

70,616

67,681

c. Others

The Company has availed the Sales Tax Deferral Loan and Octroi refund from the Directorate of Industries for Nashik Plant. Hence, the Company has to take prior permission of the appropriate authority for removal / transfer of any asset (falling under the above Schemes) from Nashik Plant. In case of violation of terms & conditions, the Company is required to refund the entire loan / benefit along with the interest @ 22.50% on account of Sales Tax deferral Loan and @ 15% on account of Octroi refund.

d. Material demands and disputes considered as "Remote" by the Company

The Company has been served with a Show Cause cum Demand Notice from the DGCEI (Directorate General of Central Excise Intelligence) Mumbai, on the ground that, the activity of making tyre set, i.e. inserting Tubes and Flaps inside the Tyres and tied up through Polypropylene Straps, amounts to manufacture / pre-packaged commodity under Section 2(f)(iii) of Central Excise Act, read with Section 2(l) of the Legal Metrology Act, 2009. Accordingly, the authorities worked out the differential duty amounting to C 27,672 lakhs. i.e., the difference between the amount of duty already paid on the basis of transaction value and duty payable on the basis of MRP under Section 4A, for the period from April 2011 to June 2017. The Company believes that Set of TT / TTF (Tyre and Tube / Tyre, Tube and Flap) is not a pre-packaged commodity in terms of provisions of Legal Metrology Act, 2009 read with Central Excise Act and Rules made thereunder. The Company has a strong case on the ground that, the said issue has been clarified by the Controller of the Legal Metrology Department vide its letter dated May 01, 1991 that 'Tyre with tube & flaps tied with three thin polythene strips may not be treated as a pre-packed commodity within the meaning of rule 2(l) of the Standards of Weights and Measures (Packaged Commodities), Rules, 1977”. The above clarification has been re-affirmed vide letter dated November 16, 1992 by the Legal Metrology authorities.

Note 44 : Financial risk management objectives and policies

The Company's principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include trade and other receivables, cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.

The Company's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company's policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. The Board of Directors through its Risk Management Committee reviews and agrees policies for managing each of these risks, which are summarised below

a) Market risk

The Company's size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:

• Interest rate risk;

• Foreign currency risk;

• Equity price risk; and

• Commodity risk

The above risks may affect the Company's income and expenses, or the value of its financial instruments. The Company's exposure to and management of these risks are explained below.

The sensitivity of the relevant Statement of Profit or Loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31,2024 and March 31,2023 including the effect of hedge accounting.

The movement in the pre-tax effect is a result of a change in the fair value of the financial asset / liability due to the exchange rate movement. The derivatives which have not been designated in a hedge relationship act as an economic hedge and will offset the underlying transactions when they occur. The same derivatives are not covered in the above table.

In Management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

iii. Equity price risk

There is no material equity risk relating to the Company's equity investments which are detailed in note 6. The Company's equity investments majorly comprise of strategic investments rather than trading purposes.

b) Credit risk

Trade receivables Risk:

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

Risk Management:

Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management.

Trade receivables are non-interest bearing and are generally on 27 days to 60 days credit term. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.

Export receivables are against Letter of Credit, bank guarantees, payment against documents. For open credit exports insurance cover is taken. Generally deposits are taken from domestic debtors under replacement segment. The carrying amount and fair value of security deposit from dealers amounts to C 59,130 lakhs (March 31, 2024: C 53,862 lakhs) as it is payable on demand. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.

c) Liquidity risk

The Company prepares cash flow on a daily basis to monitor liquidity. Any shortfall is funded out of short term loans. Any surplus is invested in appropriate mutual funds or bank deposits. The Company also monitors the liquidity on a longer term wherein it is ensured that the long term assets are funded by long term liabilities. The Company ensures that the duration of its current assets is in line with the current liabilities to ensure adequate liquidity in the 3-6 months period. The table below summarizes the maturity profile of the Company's financial liabilities based on contractual undiscounted payments.

Note 45: Capital management

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 of the Company. 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. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, less cash and cash equivalents.

Note 48: Other Statutory Information

(i) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

(ii) The Company do not have any transactions with companies struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.

(iii) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,

(iv) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.

(v) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(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

(vi) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(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,

(vii) The Company have 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.

In order to achieve this overall objective, the Company's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2025 and March 31,2024.

Note 46: Material foreseeable losses

The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.

Note 47: Acquisition of Camso Off-Highway Business

The Group has entered into definitive agreement(s) on December 6, 2024 with associate companies in the Michelin Group for acquisition of Camso brand's Off-Highway construction equipment tyre and tracks business, through one or more subsidiaries to be incorporated by the Group for the deal valued at $225 Mn. The transaction is subject to regulatory approvals, including approvals from local authorities, etc.