2.22 Provisions General
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. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is
virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
2.23 Contingent liabilities and contingent assets:
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote.
Contingent Asset
Contingent assets has to be recognised in the financial statements in the period in which if it is virtually certain that an inflow of economic benefits will arise. Contingent assets are assessed continually and no such benefits were found for the current financial year.
2.24 Earnings per share (EPS)
Basic earnings/(loss) per share are calculated by dividing the net profit/(loss) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue and share split.
For the purpose of calculating diluted earnings/ (loss) per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the year, unless issued at a later date. Dilutive potential equity shares are determined independently for each year presented. The number of equity shares and potential dilutive equity shares are adjusted retrospectively for all years presented for any share splits and bonus
shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
2.25 Segment Reporting
The Company operates predominantly in one business segment of Electronics Manufacturing Services and accordingly primary reporting disclosures for business segment, is not applicable.
2.26 Cash flow statement
Cash flows are reported using the indirect method, whereby net profit/ (loss) before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from regular revenue generating (operating activities),
investing and financing activities of the Company are segregated.
2.27 Events after reporting date
Where events occurring after the balance sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of such events is adjusted within the financial statements. Otherwise, events after the balance sheet date of material size or nature are only disclosed.
2.28 Standards issued but not yet effective:
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 31 March, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Group.
Investments in equity instruments - Subsidiary Company
(a) Investment in Kaynes Embedded System Private Limited, 30,000 equity shares of ' 100 each (2023: 30,000 equity shares) of ' 100/- each, constitutes 60% (2023: 60%) of the capital of that company.
(b) Investment in Kemsys Technologies Private Limited 9,912,281 (of this 10 shares held by the nominee) equity shares (2023: 5,000,000) of face value of Re. 1/- each constitutes 100% (2023: 100%) of the capital of that company.
(c) Investment in Kaynes Technology Europe GmbH- 270 equity shares (of this 27 shares held by the nominee) ' 9,241,162/- (2023: ' 9,241,162/-), constitutes 60% (2023: 60%) of capital of that company.
(d) Investment in Kaynes International Design & manufacturing Private Limited 149,990 (2023: 149,990) equity shares '1,499,900/- , constitutes 95.21% (2023: 95.21%) of capital of that company.
(e) Investment in Kaynes Electronics Manufacturing Private Limited, 10,000 equity shares of ' 10 each (2023: 10,000 equity shares) of ' 10/- each, constitutes 100% (2023: 100%) of the capital of that company.
(f) Investment in Kaynes Semicon Private Limited, 250,000 equity shares of ' 10 each (2023: Nil equity shares) of ' 10/- each, constitutes 100% (2023: 0%) of the capital of that company.
(g) Investment in Kaynes Circuits India Private Limited, 250,000 equity shares of ' 10 each (2023: Nil equity shares) of ' 10/- each, constitutes 100% (2023: 0%) of the capital of that company.
(h) Investment in Kaynes Mechatronics Private Limited, 10,000 equity shares of ' 10 each (2023: Nil equity shares) of ' 10/- each, constitutes 100% (2023: 0%) of the capital of that company.
(i) Investment in Digicom Electronics Inc., 100,000 equity shares (2023: Nil equity shares), constitutes 100% (2023: 0%) of the capital of that company.
Investments in equity instruments- Others
a) Investment in Winfoware Technologies Limited 1,487,120 equity shares (2023: 1,487,120) equity shares) face value of '5/- each purchased at a premium, constitutes 18.98% of the capital of that company.
b) Investment in Mysuru ESDM Cluster (Company constituted under section 8 of the Companies Act 2013), 2,500 equity shares of ' 10/- each constitutes 0.18% (2023: 0.18%) of the capital of that company.
(c) Investment in Mixx Technologies Inc., 4,444,444 equity shares (2023: Nil equity shares), constitutes 13.16% (2023: 0%) of the capital of that company.
iii) Terms/rights attached to Preference shares:
The Preference Shareholders shall carry such voting rights as are exercisable by persons holding Equity Shares in the Company and shall be treated pari passu with the Equity Shares on all voting matters. In the event of liquidation, the Preference Shareholders will carry a preferential right over the holder of equity shares for payment of dividend and for payment of capital, in proportion to their shareholding and are also eligible to participate in surplus funds.
Note: For the period of five years immediately preceding 31 March, 2023
During the financial year ended 31 March, 2023;
The Company has issued 616,770 fully paid up equity shares of '10 each during the financial year on conversion of Compulsory Converible Preference Share on approval accorded by the EGM held on 22 October, 2022.
Term Loans from Banks
Term Loans have been availed from various banks. The Company has given primary hypothecation of inventory and Trade Receivables as security for these loans. In addition, the Company has given collateral security of Factory Land and Building situated at Belagola Food Industrial Estate, Mysuru. Interest rates on these loans vary from 8% to 18%. Repayment schedule of these loans vary from 24 months to 72 months.
1 CPC demand of ' 1,737,670/- against the disallowance made by ITO against under 35(2AB) for A.Y. 2016-17 and thereby reducing the MAT credit availed by the Company which was disputed in appeal before CIT(A) and the matter is resolved in FY 2021-22.
2 Income tax authorities Disallowed R& D expenditure and raised a demand for non submission of certificate from DSIR , Delhi. We requested for extension of time and in the process of obtaining the certificate to substantiate the claim.
3 The disallowance on account of delay in payment of employer's contribution to EPF & ESI . Filed appeal against the order and submitted the relevant documentation. Assessing officer is in the process of reviewing supportings provided by us to substantiate our claim.
4 Commissioner of Income tax, Bengaluru has issued a notice on Short deduction of TDS for various years commencing from FY 2009-10 to FY 2023-24 and imposed a Interest and penalty .Demand appearing in the TDS Portal amounts to ' 1.62 Mn. We are in the process of adjusting the demand against the unconsumed challans available. We have already submitted a request to the commissioner for extension of time for reconciliation of TDS.
5 There are 16 cases relating to excise, VAT, Customs and CST amounting to ' 23.95 Mn covering a period commencing from FY 2012-13 to FY 2018-19 pertaining to units located in various states in Uttarakand and Maharashtra. Many of the cases required Information provided to the Concerned authorities and are in progress.
6 The disallowance / add back on account TDS non deducduction wrongly considered by AO in Assessment order. Filed appeal against the order and submitted the relevant documentation. Assessing officer is in the process of reviewing supportings provided by us to substantiate our claim.
>8 RELATED PARTY DISCLOSURES
Disclosure in respect of material transactions with associated parties as required by Indian Accounting Standard
(IND AS) 24 "Related Party Disclosures".
29 SEGMENT INFORMATION
Based on the management approach as defined in IND AS 108 - Operating Segments, the Chief Operating Decision Maker (CODM) evaluates the Company's performance and allocates resources based on an analysis of various performance indicators by geographical segments. Accordingly, the Company has identified India and Outside India as its reportable segment.
As expenses, assets and liabilities are not separately identified for the individual segments, these are considered as common cost and unallocated. Hence, information with respect to revenue alone is provided by the Company for the geographical segments identified.
35 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's principal financial liabilities comprise of short tenured borrowings, trade and other payables. Most of these liabilities relate to financing for working capital requirements. The Company has trade and other receivables, loans and advances that arise directly from its operations.
The Company is accordingly exposed to market risk, credit risk and liquidity risk.
The Company's senior management oversees management of these risks. The senior professionals working to manage the financial risks and the appropriate financial risk governance framework for the Company are accountable to the Board of Directors and the Audit Committee. This process provides assurance that the Company's financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Group's policies and overall risk appetite.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency rate risk. Financial instruments affected by market risk include loans and borrowings, deposits and advances.
i) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's debt obligations with floating interest rates.
The Company has no exposure to financial instruments with an interest rate risk as on 31 March, 2024 and 31 March, 2023.
ii) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company's exposure to the risk of changes in foreign exchange rates relates primarily to the Company's operating activities (when revenue or expense is denominated in a foreign currency) and the Company's net investments in foreign subsidiaries.
Foreign currency sensitivity
The sensitivity analysis has been based on the composition of the Company's financial assets and liabilities at the end of the respective reporting periods. The period end balances are not necessarily representative of the average debt outstanding during the period.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its investing activities, deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
A. Trade Receivables
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. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on exchange losses historical data.
The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers (which are in the nature of reputed banking and financial institutions) are located in several jurisdictions and industries and operate in largely independent markets. The Company creates allowance for all unsecured receivables based on lifetime expected credit loss based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The management makes estimates of the expected losses on receivables taking into account past history and their assumptions. Expected credit loss allowance is calculated by comparing the management estimates with the provision matrix.
B. Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the treasury department in accordance with the Company's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the management on an annual basis, and may be updated throughout the year subject to approval of the Company's Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty's potential failure to make payments.
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company's objective is to, at all times maintain optimum levels of liquidity to meet it cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including loans, debt, and overdraft from both domestic and international banks at an optimised cost.
The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of 31 March, 2024:
36 CAPITAL MANAGEMENT
For the purpose of the Company's capital management, capital includes issued equity capital, convertible preference shares, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company's capital management is to maximise the shareholders 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. The Company includes within net debt, interest bearing loans and borrowings less cash and cash equivalents.
39 BUSINESS COMBINATION
Business combinations have been accounted for using the acquisition method under the provisions of Ind AS 103-(Revised), Business Combinations.
The purchase price in an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition, which is the date on which control is transferred to the Group. The purchase price also includes the fair value of any contingent consideration. Identifiable assets acquired and
(A
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition. Contingent consideration is remeasured at fair value at each reporting date and changes in the fair value of the contingent consideration are recognised in the Consolidated Statement of Comprehensive Income.
The interest of non-controlling shareholders if any is initially measured either at fair value or at the non-controlling interests' proportionate share of the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity of subsidiaries.
Acquisitions during the year ended 31 March, 2024
During the year ended 31 March, 2024 the Group, completed one business combination to complement its business model by acquiring 100% voting interest in Digicom Electronics Inc, Oakland, California which is engaged in the business of electronic manufacturing services. A Share purchase agreement was entered into on 31 December, 2023 with Digicom Electronics and the business combination has been accounted for with effect from 01 January, 2024 ( the closing date).
This acquisition is expected to strengthen the Group's core business and expand its presence across the United States Americas.
42 OTHER STATUTORY DISCLOSURES
1. Benami Property
The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
2. The Struck off Company details
The Company does not have any transactions with struck off companies u/s 248 of companies Act,2013 or u/s 560 of companies act,1956.
3. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
4. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
5. (i) 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.
(ii) 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.
6. The Company has neither declared nor paid any interim dividend or final dividend during the year.
7. 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.
8. The Company has complied with the number of layers prescribed under clause (87) of Section 2 of the Act read with Companies (Restriction on number of layers) Rules, 2017.
9. The Company has not been declared as willful defaulter by any bank or financial institution or other lender.
10. The Company does not have any transactions that are not recorded in books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
11. The Company uses an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the accounting software. There is no instance of audit trail feature being tampered with was noted in respect of the accounting software.
Presently, the log has been activated at the application and the access to the database continues to be restricted to limited set of users who necessarily require this access for maintenance and administration of the database.
Note: The above information and that given in Note 16(b) 'Trade Payables' regarding Micro and Small Enterprises has been determined on the basis of information available with the Company and has been relied upon by the auditors.
45 Previous year figures have been regrouped/ re-classified wherever necessary.
As per our report of even date
For K.P. Rao & Co For and on behalf of the Board of Directors of
Chartered Accountants Kaynes Technology India Limited
Firm Registration Number: 003135S
Mohan R Lavi Ramesh Kunhikannan Jairam P Sampath
Partner Managing Director Whole Time Director & Chief Financial Officer
Membership No.029340 (DIN: 02063167) (DIN: 08064368)
Rajesh Sharma S M Adithya Jain
Chief Executive Officer Company Secretary
Membership No. A49042
Place: Mysuru Place: Mysuru
Date: 16 May, 2024 Date: 16 May, 2024
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