(i) Land - Leasehold includes lease rights in respect of the land in the possession of the Company under Lease with Industrial Area Development Agency at Baddi, Goa Industrial Development Corporation at Goa and Sri city (P) Limited at Sricity, Andhra Pradesh, Gujarat Industrial Development Corporation (GIDC) at Sanand.
(ii) Buildings include: (a) Factory Building at Sewri and leasehold rights in the land on which the building stands. While the ownership of the Factory Building is in the name of the Company, the Mumbai Port Trust (MPT) has not yet effected formal transfer of lease rights in the said land, in favour of the Company. The value of leasehold rights in the said land is ? Nil. As regards the plot of land adjoining the factory building, MPT has revoked its offer of assignment. The Company has made a representation to MPT in this respect and the matter is pending. Further refer Note 34. The stamp duty and legal costs for such transfer will be capitalised when paid, (b) Research Centre at Powai, Mumbai, (c) Factory Building at Baddi, (d) Factory Buildings at Goa, (e) Factory Buildings at Sanand and (f) Factory Building at Sricity.
(iii) Refer to Note 35 for disclosures of contractual commitments for the acquisition of property, plant and equipment.
(iv) Buildings include investment property with net carrying value of ? 201.55 Lakhs (March 31,2021:? 214.11 Lakhs) and fair value of? 3,213 Lakhs (March 31,2021 : ? 3,166 Lakhs). Fair value is determined based on an annual evaluation performed by an accredited external independent valuer using the sales comparison method of valuation under market approach in which due weightages have been given to factors such as right to sell/transfer the property, demand and prospective buyers for such type of commercial offices etc. The significant unobservable inputs considered includes total of Weighted reconciliation is ? 20,400/- per square feet. The rental income and depreciation expense for the year ended March 31,2022 are ? 248.06 Lakhs (March 31,2021: ? 247.08 Lakhs) and ? 12.56 lakhs (March 31, 2021: ? 12.56 Lakhs) respectively. (Refer Note 17).
(B) Rights, Preferences and Restrictions attached to Equity Shares:
The Company has one class of Equity Shares having par value of Re. 1 per share. Each Shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the Equity Shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013)
As a Lessee
The Company has lease contracts for various items of plant and equipments, vehicles, offices and residential buildings. Leases of plant and equipments has lease terms of 10 years, while other leases have lease terms ranging from 2 years to 9 years. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets. The Company has lease contracts that includes extension option, however the lease term in respect of such extension option is not defined in the contract.
The Company also has certain leases with lease terms of 12 months or less and leases of low value. The Company applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
The carrying amounts of right-of-use assets recognised and the movements during the period are given in Note 3(D)(1).
The effective interest rate for lease liabilities is 6.29% to 8.26%, with maturity between 2022-2029.
The Company had total cash outflows for leases of ' 2,246.67 lakhs in March 31, 2022 and ' 2,501.97 lakhs in March 2021. The maturity analysis of lease liabilities are disclosed in Note 41.
As a Lessor
The Company has given office premise space under non-cancellable operating lease for a period of 1 year. The rental income from the asset given on lease of ' 248.06 lakhs (March 31, 2021 : ' 247.08 lakhs) has been disclosed as “Lease Rentals” under Other Income in Note 27 to the Statement of Profit and Loss.
Description of significant operating lease arrangements in respect of premises:
- The Company has taken refundable interest free security deposit under the lease agreements.
- Agreement contain provision for renewal at the option of either party.
- Agreement provide for restriction on sub lease.
Performance obligation
The Company’s revenue contracts represent a single performance obligation to sell its products to trade customers. Sales are recorded at the time control of the products is transferred to trade customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products. Control is the ability of trade customers to direct the use of and obtain the benefit from our products. In evaluating the timing of the transfer of control of products to trade customers, the Company considers transfer of significant risks and rewards of products and the probability of flowing of future economic benefit to the entity as per the terms of the Contract which usually co-incide with the delivery of the goods. The performance obligation for service income is satisfied as and when the service is performed.
The payment terms include advance payment and credit given to certain customers.
The nature of goods includes personal care (including oral care) and Research and Development service income.
Variable consideration
Variable consideration includes sales returns, trade discounts, volume based incentives, and cost of promotional programs, indirect taxes as may be applicable.
ii) Balance sheet amounts- Provident Fund
The Company has established ‘Colgate-Palmolive (India) Limited Provident Fund’ in respect of certain employees to which both the employee and the employer make contribution. Such contribution to the provident fund for all employees, are charged to the Statement of Profit and Loss. In case of any liability arising due to shortfall between the return from its investments and the guaranteed specified interest rate, the same is provided for by the Company. The actuary has provided an actuarial valuation and the interest shortfall liability, if any, has been provided in the books of accounts after considering the assets available with the Company’s Provident Fund Trust. The guaranteed rate of return (p.a) is 8.10% ( March 31, 2021 - 8.5%).
iii) Balance sheet amounts- Pension (Non-funded Scheme)
The Company operates a defined benefit pension plan. The pension benefits payable to the employees are based on the employee’s service and last drawn salary at the time of leaving. The employees do not contribute towards this plan and the full cost of providing these benefits are met by the Company.
D) Projected Plan Cash flow:
The expected contribution payable to the Gratuity plan for the next year is ' 400 Lakhs. The expected contribution payable to the Provident Fund plan for the next year is ' 1,215.31 Lakhs.
The weighted average duration to the payment of these cash flows for Gratuity is 11.21 years (March 31, 2021 : 11.61 years). The weighted average duration to the payment is for Provident Fund plan is 12.81 years (March 31, 2021 : 13.34 years)
*As per provision of Section 135(5) of Companies Act, 2013 Company is allowed to carry forward any amount spent in relation to CSR activities if it exceeds the minimum expenditure as required by Section 135(5) of the Companies Act, 2013.However, Company has decided not to carry forward excess spent amount in the FY 2021-22 to the next year.
iii) Details of Ongoing Project
There are no amount required to be spent for CSR activities as per requirement of section 135(6) of Companies Act, 2013 in relation to ongoing projects.
iv) There are no amount contributed to a trust, society, section 8 company controlled by the company in relation to CSR expenditures as per Indian Accounting Standard (24) Related Party disclosures.
v) The company does not carry any provisions for Corporate social responsibility expenses for current and previous year.
NOTE 36: SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”) of the Company. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and Finance Director of the Company. The Company operates only in one Business Segment i.e. ‘Personal Care (including Oral Care)’ which primarily includes products such as Soaps, Cosmetics and Toilet Preparations and the activities incidental thereto within India, hence does not have any reportable Segments as per Ind AS 108 “Operating Segments”. The performance of the Company is mainly driven by sales made locally and hence, no separate geographical segment is identified.
Terms and conditions:
Transactions relating to dividends and bonus shares were on the same terms and conditions that apply to other shareholders.
Goods and Services procured or provided from/ to related parties are generally priced at arm’s length. Other reimbursement of expenses to/ from related parties is on Cost basis.
All other transactions were made on normal commercial terms and conditions and at market rates.
All outstanding balances are unsecured and are repayable/ receivable in cash.
NOTE 39 - SHARE BASED PAYMENTS (a) Employee option plan
The Company does not provide any equity-based compensation to its employees. However, the parent company, Colgate-Palmolive Company, U.S.A. (“the grantor”) maintains equity incentive plans that provide for the grant of stock-based awards to its executive directors and certain categories of officers and employees. The Parent’s Incentive Plan provides for the grant of non-qualified and incentive stock options, as well as restricted stock units. Exercise prices in the case of non-qualified and incentive stock options are not less than the fair value of the underlying common stock on the date of grant.
A stock option gives an employee, the right to purchase shares of Colgate-Palmolive Company common stock at a fixed price for a specific period of time. Stock options generally have a term of six years from the date of grant and vest over a period of three years.
A restricted stock unit provides an employee with a share of Colgate-Palmolive Company common stock upon vesting. Restricted stock units vest generally over a period of three years. Dividends will accrue with each restricted stock unit award granted subsequent to the grant date.
Fair Value of options granted
The fair value at the grant date of options granted during the year ended March 31, 2022 was ' 815.97 per option (March 31, 2021 : ' 848.55 per option). The fair value at grant date is determined using the Black-Scholes Model which takes into account the exercise price, expected volatility, option’s life, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The risk free interest rates are determined based on the zero-coupon sovereign bond yields with maturity equal to the expected term of the option. The expected volatility was determined based on the volatility of the equity share for the period of one year prior to issue of the option. Volatility calculation is based on historical stock prices using standard deviation of daily change in stock price. The historical period is taken into account to match the expected life of the option. Dividend yield has been calculated taking into account expected rate of dividend on equity share price as on grant date.
(ii) Assets and Liabilities that are disclosed at Amortised Cost for which Fair values are disclosed and are classified as Level 3.
Current financial asset and current financial liabilities have fair values that approximate to their carrying amounts due to their short-term nature. Non current financial assets and non current financial liabilities have fair values that approximate to their carrying amounts as it is based on the net present value of the anticipated future cash flows.
NOTE 41 - FINANCIAL RISK MANAGEMENT
Inherent to the nature of the Company’s business are a variety of financial risks, namely liquidity risk, market risk and credit risk. Developing policies and processes to assess, monitor, manage and address these risks is the responsibility of the Company’s Management. The Risk Management Committee oversees this risk management framework in the Company and intervenes as necessary to ensure there exists an appropriate level of safeguards against the key risks. Updates on compliance, exceptions and mitigating action are placed before the Audit Committee periodically. Risk management policies and systems are reviewed regularly to reflect changes like major changes in ERP systems or go to market model, changes in organization structure, events denoting material change in the risk environment, etc.
The Company’s Management works closely with its Treasury department and Internal Audit department to ensure there are appropriate polices and procedures governing the operations of the Company with a view to providing assurance that there is visibility into financial risks and that the business is being run in conformity with the stated risk objectives. Periodic reviews with concerned stakeholders provides an insight into risks to the business associated with currency movements, credit risks, commodity price fluctuations, etc. and necessary deliberations are undertaken to ensure there is an appropriate response to the developments.
A MANAGEMENT OF LIQUIDITY RISK
The Company follows a conservative policy of ensuring sufficient liquidity at all times through a strategy of profitable growth, efficient working capital management as well as prudent capital expenditure and dividend policies. The Company has a overdraft facility with banks to support any temporary funding requirements. The Company is cognizant
of reputational risks that are associated with the liquidity risk and the risk is factored into the overall business strategy. The Company’s treasury department regularly monitors the rolling forecasts to ensure it has sufficient cash on an ongoing basis to meet operational needs. Any short term surplus cash generated by the operating entities, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest bearing term deposits and debt investments with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.
The following table shows the maturity analysis of the Company’s financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date.
C MANAGEMENT OF CREDIT RISK
Credit risk is the risk of financial loss to the Company if a customer or other counter-party fails to meet its contractual obligations.
Trade Receivables
Trade receivables are subject to credit limits, controls and approval processes. A majority of customers pay prior to shipment, thereby reducing exposure to trade receivables significantly. Due to a large customer base, the Company is not exposed to material concentration of credit risk. Basis the historical experience supported by the level of default, the credit risk in case of trade receivable is low and so trade receivables are considered to be a single class of financial assets. (Refer Accounting Policy 1 B (i) on trade receivables).
The gross carrying amount of trade receivables is ' 22,812.56 Lakhs as at March 31, 2022 and ' 11,708.44 Lakhs as at March 31, 2021.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks and investments in debt instruments. The Company concentrates its major investment activities with a limited number of counter-parties which have secure credit ratings, to reduce this risk. Individual risk limits are set for each counter-party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Company’s Treasury department.
NOTE 42 - CAPITAL MANAGEMENT
The Company’s objective in managing its capital is to safeguard its ability to continue as a going concern and to optimise returns to our shareholders. The Company considers the following components of its Balance Sheet to be managed capital: 1) Share Capital, 2) Share Premium and 3) Other Reserves comprising of General Reserve and Retained Earnings.
The Company’s capital structure is based on the Managements assessment of the balances of key elements to ensure strategic decisions and day to day activities. The capital structure of the Company is managed with a view of the overall macro economic conditions and the risk characteristics of the underlying assets.
The Company’s policy is to maintain a strong capital structure with a focus to mitigate all existing and potential risks to the Company, maintain shareholder, vendor and market confidence and sustain continuous growth and development of the Company.
The Company’s focus is on keeping a strong total equity base to ensure independence, security, as well as high financial flexibility without impacting the risk profile of the Company.
In order, to maintain or adjust the capital structure, the Company will take appropriate steps as may be necessary. The Company does not have any debt or financial covenants.
* Earnings available for Debt Service = Net profit after taxes Non cash operating expenses like depreciation and amortizations Interest loss on sale of fixed
assets
**Debt Service = Interest Principle payments
*** Working capital = Current assets - Current liabilities
**** Capital Employed = Total Shareholders equity (Other equity Equity Share capital) - Deferred Tax assets
Note 1 - Current ratio depicted higher than previous year, due to unpaid dividend of previous year, paid subsequent to year end.
Note 2 - Debt mainly pertains to lease liabilities which are on reducing balance. Equity is higher compared to previous year since the second interim dividend declared post year end for FY 2021-22.
Note 3 - Second Interim Dividend for FY 2021-22 declared post year end not accounted for the year resulting in higher Net worth and positive working capital compared to previous year. If impact of dividend is excluded, Net Working Capital employed has increased due to credit extended for receivables during year end.
Note 4 - Return on capital employed is similar to previous year excluding impact of dividend declared post year end FY 2021-22.
NOTE 46: OTHER STATUTORY INFORMATION
(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 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).
NOTE 47 : Subsequent to year end, the Company has declared a Second Interim Dividend of ' 21/- per share aggregating to ' 57,117 Lakhs on April 28, 2022 which was paid on and from May 25, 2022. In accordance with the provisions of Ind AS 10, this dividend is not recognised as a liability for the respective year.
NOTE 48 : Previous year’s figures have been regrouped / reclassified, where necessary, to conform to the current year’s classification.
Signature to Notes 1 to 48 are an integral part of these financial statements
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