For Trade receivable from Related parties (Refer Note 29)
The average credit period on sales is approximately 56 days.
There were two customers namely TTI Partners SPC acting for whose outstanding is ' 798.77 Lakhs & Universal Machinery Stores whose outstanding was ' 202.71 Lakhs (both other than Intercompany balances) who represent more than 5% of the total balance of trade receivables.
In determining the recoverability of a trade receivable, the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated.
Trade receivables of ' 207.47 Lakhs were impaired. The individually impaired receivables were mainly due to unexpected difficult economic situations.
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 ' 10 per share. 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 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.
Description of Reserves
Retained earnings - Retained earnings represent the amount of accumulated earnings of the Company
Other Comprehensive income: Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Ind As.
Capital Reserve on account of the Scheme of arrangement: The diffrerence between Paid up share capital of FCL and Paid up share capital issued by FPTL in terms of scheme of arrangement is considered as negative capital reserve.
Note 1: As per the Scheme of Arrangement, FPTL issued and allotted four fully paid-up equity shares of ' 10/- each for every one fully paid-up equity share of ' 10/- each held by the equity shareholders of the Demerged Company (FCL) as on the Record Date. The issuance and allotment of equity shares took place on 13th March 2024. The total number of issued and allotted equity shares is 5,15,94,464, which has been diluted for a weighted average equity share of 26,85,739. As per IND AS 33, the weighted average of equity shares has been calculated from the acquisition date. Based on the above consideration, the EPS (earnings per share) is calculated to be ' 110.63 per share. However, if the appointed date, which is April 01, 2023, is considered as the acquisition date, then the EPS calculated is '. 5.76 per share.
30. Employee Benefits :
Brief description of the Plans:
The Company has various schemes for long term employees benefits such as Provident Fund, Gratuity, Employees State Insurance Fund (ESIC) and Employees’ Pension Scheme and Compensated absences. The Company’s defined contribution plans are Employees State Insurance Fund,Provident Fund, and Employees’ Pension Scheme (under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952). The Company has no further obligation beyond making the contributions to such plans. The Company’s defined benefit plans include Gratuity.
Gratuity
The Company provides for gratuity payable to employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service.
The gratuity plan is a funded plan. The company having a plan to retail gratuity fund seperately in future.The Company accounts for gratuity benefits payable in future based on an independent external actuarial valuation carried out at the end of the year using the Projected Unit Credit method.
The Company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations, with the objective that assets of the gratuity / provident fund obligations match the benefit payments as they fall due.
Provident Fund
The eligible employees of the Company are entitled to receive post-employment benefits in respect of provident fund, in which both the employees and the Company make monthly contributions at a specified percentage as applicable of the employees’ eligible salary. The contributions are made to the Employees provident fund department.
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
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
The above sensitivity analysis are based on change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
L. The liability for Compensated absences as at year end is ' 178.80 Lakhs (Previous year Nil) (Refer Note 14).
Leave encashment policy has funded by company on 16th April 2024 with a transfer from Forbes & Company Limited as per the Scheme of arrangement. (Ref Note 39)
The Company provides for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year using the Projected Unit Credit method. Leave obligations not expected to be settled in the next 12 months is ' 123.83 Lakhs (Previous year Nil).
During the year, Pursuent to scheme of arrangement the old lease agreements terminated and new agreements are entered into consequently. the difference between the carrying amounts of the right-of-use asset and the lease liability recorded in the statement of profit or loss as a gain or loss and such gain shown under other income.
(iv) Critical judgements in determining the lease term
In determining the lease term, management considers all facts and circumstances that creates an economic incentive to exercise an extension option, or not to exercise a termination option. Extension option (or period after termination option) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The majority of extension and termination options held are exercisable only by the Company and not by the respective lessor.
For the leases of offices premises, the following factors are normally the most relevant:
1. If there is significant penalties to terminate (or not extend), the Company is typically reasonably certain to extend (or not terminate).
2. If any leasehold improvements are expected to have a significant remaining value, the Company is typically reasonably certain to extend (or not terminate)
3. Otherwise, the Company considers the other factors including historical lease duration 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 it. The assessment of reasonably certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within control of lessee.
32. Financial Instruments 32.1 Capital Management
The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of total equity of the Company.
The Company determines the amount of capital required on the basis of annual as well as long term operating plans and other strategic investment plans. The funding requirements are met through non convertible debt securities or other long-term /short-term borrowings. The Company monitors the capital structure on the basis of total debt to equity ratio and maturity profile of the overall debt portfolio of the Company.
*Reasons for Variances are only provided for the change in th ratios by more than 25% as compared to the ratios of Previous year. Pursuant to scheme of arrangement, there were no business operation in FY 2022-23, therefore ratios couldn’t be calculated. (Ref Note 38)
32.3 Market Risk
The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
32.4 Credit risk management Trade receivables
Trade receivables are generally unsecured and are derived from revenue earned from customers. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company uses a provision matrix and forward-looking information and an assessment of the credit risk over the expected life of the financial asset to compute the expected credit loss allowance for trade receivables. Historical experience of collecting receivables of the Company is supported by low level of past default and hence the credit risk is perceived to be low.
Other Financial assets
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are mutual funds and banks with high credit-ratings assigned by credit-rating agencies.
32.5 Liquidity Risk
Liquidity Risk refers to insufficiency of funds to meet the financial obligations. Liquidity Risk Management implies maintenance of sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit lines to meet obligations when due.
The Company manages liquidity risk by banking facilities and by continuously monitoring forecast and actual cash flows, and by assessing the maturity profiles of financial assets and liabilities. The below table sets out details of additional undrawn facilities that the Company has at its disposal to further reduce liquidity risk.
The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the earliest date on which the Company can be required to pay. The tables include both principal and interest cash flows.
32.7 Derivatives Instruments and unhedged Foreign Currency (FC) exposure
The Company is exposed to Currency Risk arising from its trade exposures and capital/Loan receipt/payments denominated, in other than the Functional Currency. The Company has a Foreign Exchange Risk Management policy within which the treasury has to perform and also lays down the checks and controls to ensure the continuing success of the treasury function. The Company has defined strategies for addressing the risks for each category of exposures (e.g. for exports , for imports, for loans, etc.). The centralised treasury function aggregates the foreign exchange exposure and takes prudent measures to hedge the exposure based on prevalent macro-economic conditions.
Note: The Assets are transferred under scheme of arrangement. The company applied for transfer of title deed with statutory authorities. Creation of charge on the said assets are in process.
37. Segment reporting: The Ind AS 108, ‘Operating segments,’ notified pursuant to Companies (Accounting Standards) Rules, 2015, requires management to determine the reportable segments for disclosure in financial statements based on internal reporting reviewed by the Chief Operating Decision Maker (CODM) to assess performance and allocate resources. The company manufactures precision cutting tools and related components. Based on management analysis, the company has only one operating segment, so no separate segment report is provided. The principal geographical area in which the company operates is India.
38. Scheme of Arrangement
The Board of Directors of Forbes Precision Tools and Machine Parts Limited (“FPTL” or the “Resulting Company”) and Forbes & Company Limited (FCL or the “Demerged Company) in their respective meetings held on 26th September 2022, approved the Scheme of Arrangement (“Scheme”) between FCL and FPTL, as well as their respective shareholders, in accordance with Sections 230 to 232 of the Companies Act, 2013, and other applicable provisions and rules. This Scheme entails the demerger of the “Precision Tools business” from FCL into FPTL, with an appointed date of 1st April 2023.
The Honorable National Company Law Tribunal (“NCLT”) of the Mumbai bench approved the scheme via Order No. C.P.(CAA)/303/ MB-V/2023 dated 9th February 2024. The certified true copy of the order was received on 22nd February 2024 and filed with the Registrar of the Company on 1st March 2024. The Scheme became effective / operative from the effective date of March 1, 2024, with this, the Precision Tools business of FCL being transferred to and vested in FPTL with effect from the appointed date i.e., 1st April, 2023.
Upon the coming into effect of the Scheme, the existing share capital of FPTL, amounting to ?5.00 lakhs divided into 50,000 shares of ?10 each, fully paid up, held by the shareholders of the Demerged Company, prior to the Scheme becoming effective, shall stand cancelled without any further application, act, instrument, or deed, as an integral part of this Scheme, with adjustments done through Capital reserve of the Company. As per the Scheme of Arrangement, the Resulting company has issued four fully paid-up equity shares of ? 10/- each for every one fully paid-up equity share of ? 10/- each held by the equity shareholders of the Demerged Company (FCL) as of the Record Date, which was 7th March 2024. The shareholders of FCL are entitled to receive 4 shares of FPTL against each share held by them. Accordingly, the paid-up capital of FPTL is determined as 5,15,94,464 shares of ' 10 each, having a total value of ? 5,159.45 Lakhs. The record date for allotment was fixed as 7th March 2024, and the issuance and allotment of equity shares took place on 13th March 2024.
As per Para 12 of Appendix C of IND AS 103, the diffrerence between Paid up share capital of FCL ' 1289.96 Lakhs and Paid up share capital issued by FPTL amounting to ' 5159.45 Lakhs in terms of scheme of arrangement is considered as negative capital reserve maounting ' 3869.59 Lakhs. The pre-merger equity share capital of ' 5 lakhs of FPTL is cancelled and adjusted against the capital reserve.
From the appointed date, the precision tools business of FCL, including all its assets and liabilities is transferred and vested to FPTL in accordance with this Scheme, Consequently, the deferred tax liability related to those assets and liabilities will be remeasured and will result in a direct charge of ' 234.44 Lakhs to the opening balance of retained earnings of FPTL. Moreover, for the period from April 1, 2023, to March 31, 2024, the incremental deferred tax liability amounting to ' 2.33 Lakhs debited to the Profit and Loss account.
The financial statement of the Company reflects the financial position on the basis of consistent accounting policies.
39. The Scheme of Arrangement for the demerger of the “Precision Tools business” from Forbes & Company Limited (FCL) to the Company has received approval from The Hon’ble National Company Law Tribunal (“NCLT”) of Mumbai benches through Order No. C.P.(CAA)/303/MB-V/2023 dated February 9, 2024, Mumbai Bench. The certified true copy of the order was filed with the Registrar of the Company on March 1, 2024, and the Scheme became operative as of March 1, 2024.
Consequently, the Precision Tools business of FCL has been transferred to and vested in the Company with effect from the appointed date, i.e., April 1,2023. All transactions previously recorded in Forbes & Company Limited pertaining to the Precision Tools business have been transferred to the Company as of the effective date, March 1, 2024.
The impact of Certain assets and liabilities transferred from FCL to the Company is net receivables amounts to ' 881.93 Lakhs presented under note no. 8B as Contractually reimbursable expenses from related parties. Details of this transfer are as follows:
40. The Indian Parliament has approved the Code on Social Security, 2020 (“the code”) which, inter alia, deals with employees benefits during employment and post-employment. The code has been published in the Gazette of India. The effective date of the code is yet to be notified and the rules for quantifying the financial impact are also yet to be issued. In view of this, the impact of change, if any, will be assessed and recognised post notification of the relevant provisions.
41. Additional Regulatory Information as per Schedule III of the Division II of the Companies Act, 2013
i Details of Benami property held
There are not any proceedings that have been initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and the rules made thereunder as at 31st March, 2023.
ii Wilful defaulter
The Company has not been declared wilful defaulter by any bank or financial Institution or other lender who has powers to declare a company as a wilful defaulter at any time during the financial year or after the end of reporting period but before the date when financial statements are approved or in an earlier period and the default has continued for the whole or part of the current year.
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 The Company is in compliance with the number of layers prescribed under clause (87) of section 2 of the Companies Act 2013 read with Companies (Restriction on number of Layers) Rules, 2017.
v (a) The company has not advanced or loaned or invested any funds (either borrowed funds or share premium or any other
sources or kind of funds)during the year to any other person(s) or entity(ies), including foreign entities (intermediaries) with the understanding (whether recorded in writing or otherwise) that the intermediary shall:
i) 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,
ii) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
(b) The company has not received any fund from any person(s) or entity(ies), including foreign entities (funding party) during the year with the understanding (whether recorded in writing or otherwise) that the company shall:
(i) 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
(ii) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
vi Undisclosed income
The company does not have any transaction that are 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), during the year.
vii Details of crypto currency or virtual currency
The group has not traded or invested in crypto currency or virtual currency during the current or previous year.
viii Valuation of PP&E, intangible asset and investment property
The group has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
42. Other regulatory information
i 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.
ii Utilisation of borrowings availed from banks and financial institutions
The borrowings obtained by the company from banks and financial institutions have been applied for the purposes for which such loans were was taken.
iii The Company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India.
The Group has five CICs which are part of the Group
- SP Finance Private Limited,
- SC Finance and Investments Private Limited,
- Hermes Commerce Private Limited,
- Renaissance Commerce Private Limited and
- Shapoorji Pallonji Energy Private Limited (formarly known as Shapoorji Pallonji Oil and Gas Private Limited).
43. The Comparative numbers of the financial statements are not comparable as the Scheme of Arrangement between Forbes & Company Limited and Forbes Precision Tools & Machine Parts Limited has caused an impact. The demerger of the Precision tools business from April 01, 2023 is the appointed date and took effect on March 01, 2024.
44. The Company had filed listing application with BSE limited on April 2, 2024 and received in principle approval on April 26, 2024. We are awaiting SEBI relaxation letter under rule 19(2)(b) of the Securities Contracts (Regulation) Rule 1957.
45. The Managing Director, Chief Financial Officer & Company Secretory were appointed w.e.f April01,2024 and were authorized bythe Board to sign the financial of the Company.
46. The financial statements were approved by the Board of Directors of the Company at their respective meetings held on 06th May, 2024.
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