(i) Considering the performance over last few years, regular past losses and negative retained earnings of Cygnet Industries Limited (wholly owned subsidiary), the management believes there are no sign of reversal of impairment losses of '635.54 crore in near future. Consequently, on a prudent basis, the management has written off the impairment losses recognised and netted off the same from the cost of investment as at 31 March 2024. Also refer to note 33 on exceptional items.
(ii) The Company has written off the investment in joint venture during the current year considering irrecoverability of the same in near future.
(a) Market value of certain investments listed on Calcutta Stock Exchange are not available. Accordingly, the fair values of these investments have been derived using level III inputs, available with the management.
(b) Cost of these equity instruments have been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
(c) Amount is below the rounding off norm adopted by the Company.
(i) The loan to Gondkhari Coal Mining Limited, joint venture company, has been written off considering the irrecoverability of the amount on prudent basis. The balance was already provided for in the books.
(ii) The loan to Cygnet Industries Limited, a wholly-owned subsidiary company, was given after complying with the provisions of section 186 (4) of the Companies Act, 2013 (as amended). The loan was given in accordance with the terms and conditions as mutually agreed between the parties for use by the recipient in the normal course of business. The loan is repayable on demand and carries an interest rate of 10.50% p.a. (31 March 2023: 10.50% p.a)
(iii) This pertains to loan given to Birla Tyres Limited, a body corporate, which was repayable on demand and carried an interest rate of 5.93% p.a. During the current year, the Company has written off the loan balance on prudent basis, considering it irrecoverable since the body corporate has already been liquidated. Provision had been made against the loan balance in the books in the earlier years.
Loans or Advances are in the nature of loans are granted to promoters, Directors, KMPs and the related parties, either severally or jointly with any other person, that are repayable on demand; or without specifying any terms or period of repayment.
No loans are due from directors or other officers of the Company or any of them either severally or jointly with any other person. Further, no loans are due from firms or private companies in which any director is a partner, a director or a member.
(v) Disclosure as per Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015:
(*) Held as lien by bank against bank guarantees
(**) Pursuant to Circular no. 14 of 2017 (dated 30 March 2017) of the Ministry of Railways, the Company had entered into a Long-term Tariff Contract (LTTC) with the South Central Zonal Railways for a period of 5 years. Since the Company has complied with the terms of the Contract, it has accrued a Freight rebate receivable till the previous year.
(b) No trade receivables are due from directors or other officers of the Company, either severally or jointly with any other person. Further no trade receivables are due from firms or private companies, respectively in which any director is a partner, a director or a member.
(c) There are no unbilled trade receivables, hence the same is not disclosed in the ageing schedules.
(d) The Company is making provision for outstanding trade receivables based on expected credit loss method however since the amount is not material the same has not been disclosed.
(i) During the previous year, the Board at its Meeting held on August 25, 2022, approved allotment of 66,119,874 fully paid-up Equity Shares of the Company having face value of '10 each upon conversion of 42,977,918 Zero Coupon Optionally Convertible Redeemable Preference Shares ("OCRPS") of face value of '100 each, at a pre-determined ratio to the holders of OCRPS who have opted for conversion as on August 24, 2022 (the record date fixed for the conversion). These Equity Shares have since been accorded both, listing and trading approval by the respective Stock Exchanges.
(ii) The Company, during the year ended 31 March 2022, has made a rights issue of 79,997,755 equity shares having face value of '10 each at a premium of ' 40 per share, for cash, aggregating to ' 399.99 crores. Allotment of 79,212,822 partly paid-up equity shares having face value ' 5 each and a premium of ' 20 per share, paid on application, was done during the financial year ended 31 March 2022 itself. Further in previous year ended 31 March 2023, 519,626 shares were alloted on payment of first and final call money of '25 each. However, on account of non-payment of the first and final call, despite several reminders, 265,307 partly paid-up shares, were finally forfeited. These proceeds have been fully utilised and there has been no deviation in use of proceeds from issue objectives as stated in the Rights Issue Offer Document.
(b) Terms and rights attached to shares
The Company has one class of equity shares having a par value of '10 per share each. All shareholders for fully paid up equity shares are entitled to one vote per share and for partly paid up shares the voting rights considered are in proportion to the actual amount paid on those shares. The Company declares and pays dividend in Indian rupees. The dividend proposed by the board of directors is subject to the approval of the shareholders in ensuing Annual General Meeting except in the 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 the proportion to their shareholdings.
Nature and purpose of other reserves
(i) Securities premium
Securities premium is used to record premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Indian Companies Act, 2013 (the "Companies Act").
(ii) Capital reserve
(a) Certain grants of capital nature had been credited to Capital Reserve.
(b) The Company has recognised profit on account of amalgamation in capital reserve.
(iii) Capital redemption reserve
Capital redemption reserve was created on account of reinstatement of certain investments and spares at cost.
(iv) General reserve
Under the erstwhile Companies Act 1956, a general reserve was created through an annual transfer of net profit at a specified percentage in accordance with applicable regulations. Consequent to the introduction of the Companies Act, the requirement to mandatory transfer a specified percentage of net profit to general reserve has been withdrawn.
(v) Revaluation reserve
Revaluation reserve was created on account of revaluation of fixed assets carried out under previous GAAP
(vi) Fair value through other comprehensive income (FVOCI)- equity instruments
The cumulative gains and losses arising on fair value changes of equity investments measured at fair value through other comprehensive income are recognised in FVOCI - equity instruments reserve. The balance of the reserve represents such changes recognised net of amounts reclassified to retained earnings on disposal of such investments.
(vii) Other reserves
Others primarily include:
(a) Amounts appropriated out of profit or loss for doubtful debts and contingencies.
(b) Share buyback reserve has been created as per the Companies Act, 1956.
(c) Reserve which has arisen on forfeiture of shares.
(viii) Fair valuation of Non-Convertible Cumulative Redeemable Preference Shares
Deemed equity on fair value of Non-Convertible Cumulative Redeemable Preference Shares
18. Borrowings (cont'd)
(c) The Company has submitted the quarterly returns or statements of current assets to the bank for the secured working capital loan which is reconciled with the books of account.
(d) The Company has not defaulted in the repayment of borrowings during the current year.
(e) As on March 31,2024 there is no unutilised amounts in respect of any issue of securities and long term borrowings from banks and financial institutions. The borrowed funds have been utilised for the specific purpose for which the funds were raised.
C. The Company has recognised the following revenue-related contract liabilities and receivables from contract with customers:
The Company is primarily in the business of manufacture and sale of cement and cement related products. The product shelf life being short, all sales are made at a point in time and revenue recognised upon satisfaction of the performance obligations which is typically upon dispatch/ delivery. The Company has a credit evaluation policy based on which the credit limits for the trade receivables are established, the Company does not give significant credit period resulting in no significant financing component. The credit period on an average ranges from 15 to 60 days.
(i) Compensated absences
Compensated absences cover the Company's liability for sick and earned leave.
(ii) Defined benefit plan
a) Gratuity
The Company operates a gratuity plan through the "KICM Gratuity Fund". Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier. The benefits vest after five years of continuous service.
b) Provident fund
Provident fund for certain eligible employees is managed by the Company through the "B. K. Birla Group of Companies Provident Fund Institution" and "Birla Industries Provident Fund", in line with the Provident Fund and Miscellaneous Provisions Act, 1952. The plan guarantees interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of their separation from the Company or retirement, whichever is earlier. The benefits vest immediately on rendering of the services by the employee.
The Company has an obligation to fund any shortfall on the yield of the trust's investments over the administered interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and in most cases the actual return earned by the Company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumptions there is no shortfall as at 31 March 2024 and 31 March 2023 respectively.
The Company also pays provident fund contributions to publically administered local fund as per the local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due.
The above sensitivity analysis is based on a 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 methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
(vii) The major categories of plans assets
In the absence of detailed information regarding plan assets which is funded with Insurance Companies, the composition of each major category of plan assets, the percentage or amount for each category to the fair value of plan assets has not been disclosed.
(viii) Risk exposure
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Investment risk:
The defined benefit plans are funded with insurance companies of India. The Company does not have any liberty to manage the funds provided to insurance companies. The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to the Government of India bonds. If the return on plan asset is below this rate, it will create a plan deficit.
Interest risk:
A decrease in the interest rate on plan assets will increase the plan liability.
Life expectancy:
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 at the end of the employment. An increase in the life expectancy of the plan participants will increase the plan liability.
Salary growth risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan liability.
(ix) Defined benefit liability and employer contributions
The weighted average duration of the defined benefit obligation is 12 years (31 March 2023 - 12 years).
a) The Company has carried out an impairment analysis in respect of its investments and loans to Cygnet Industries Limited, its wholly owned subsidiary. Consequently, it has recognised an additional provision for impairment of '15.22 crores (31 March 2023: 'nil) which has been presented as an exceptional item in the Statement of Profit and Loss. The assessment was based on the management's business plans and future projections, approved by the Board of Directors. The key assumptions used for computation of value-in-use were the sales growth rate, gross profit margins, long-term growth rate and the risk-adjusted pre-tax discount rate. The post-tax discount rates were derived from the Company's weighted average cost of capital, taking into account the cost of capital, to which specific market-related premium adjustments are made. The Company had performed sensitivity analysis by changing the aforementioned variables independently, keeping the other variables constant, based upon which, there would be no material increase to the impairment charge which would impact the decision of the user of the Standalone Financial Statements.
b) During the current year, the Company has repaid the entire 16,035 numbers of secured Listed Non-Convertible Debentures (NCDs) having a book value of '1,683.86 Crore on the date of redemption by availing new secured term loans from Financial Institutions bearing lower interest rates. On repayment of the above mentioned NCDs before its scheduled final maturity date, the unamortised issue expenses and upfront interest amounting to '49.62 Crore has been charged off and presented as an 'Exceptional item' in the Statement of Profit and Loss.
c) During the previous year, the Company had decided to dispose off the factory land comprised in its Hindustan Heavy Chemicals ("HHC") unit that has been under suspension of work post requisite approvals. This was in accordance with the requirements of the debenture trust deed entered between the Company and Vistra ITCL ('Debenture Trustee'), dated 10 March 2021, to sell of its non-core assets.
In view of the foregoing and as per the principles of Ind AS 105 'Non-current Assets Held for Sale and Discontinued Operations', the said land was classified in these financial statements as 'Assets held for sale' as on 31 March 2023 amounting to '60 crores and its value has been measured at the lower of its carrying value and fair value less costs to sell, which has resulted in a loss of '173.07 crores. The loss on such remeasurement was recognised and presented as an 'Exceptional item' in the Statement of Profit and Loss in the previous year ended March 31, 2023. During the current year the sale deed was executed and on receipt of full consideration, the asset disposal adjustment was made in the books of account.
(a) As per the provisions of the Income Tax Act, 1961, the unabsorbed depreciation does not have any expiry period.
(b) With effect from 1 April 2021, (Assessment year 2021-22), the Company has opted a new tax regime as per the provisions of Section 115BAA of the Income Tax Act, 1961. Accordingly, reinstated brought forward business losses/ unabsorbed depreciation has been considered while computing deferred tax assets.
(i) In the opinion of the management, no provision is considered necessary for the disputes mentioned above on the ground that there are fair chances of successful outcome of appeals.
(ii) I t is not practicable for the Company to estimate the timings of cash outflows, if any, in respect to the above pending resolution of the respective proceedings.
(iii) The amounts disclosed above represent the best possible estimates arrived at on the basis of available information and do not include any penalty payable.
(iv) During the previous year, the Company received an arbitration award pertaining to a legal dispute with Mintech Global Private Limited which was challenged by both the parties and the matter which is sub judice is being adjudicated upon before the High Court at Kolkata. Based on the facts of the matter, supported by independent legal opinion obtained, the management remains fairly confident of a favorable outcome and therefore, does not foresee any material financial liability devolving on the Company in this respect of the aforementioned litigation and accordingly, no provision has been made in these Standalone Financial Statement.
40 Capital Management (a) Risk management
The capital structure of the Company consists of debt and equity attributable to equity shareholders of the Company which comprises issued share capital (including premium) and accumulated reserves disclosed in the Statement of Changes in Equity. For Debt Equity ratio refer note 47.
The Company's capital management objective is to achieve an optimal weighted average cost of capital while continuing to safeguard the Company's ability to meet its liquidity requirements (including its commitments in respect of capital expenditure) and repay loans as they fall due.
A. Fair value hierarchy
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3, as described below:
Quoted prices in an active market (Level 1): This level of hierarchy includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities. This category consists of investment in quoted equity shares.
Valuation techniques with observable inputs (Level 2): This level of hierarchy includes financial assets and liabilities, measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This level of hierarchy includes Company's over-the-counter (OTC) derivative contracts.
Valuation techniques with significant unobservable inputs (Level 3): This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. This level of hierarchy includes Company's investment in equity shares which are unquoted or for which quoted prices are not available at the reporting dates. There were no significant inter-relationships between unobservable inputs that materially affect fair values.
B. Valuation technique used to determine fair value
(a) The Company does not have any exposure in derivatives.
(b) I nvestments carried at fair value are generally based on market price quotations. However in cases where quoted prices are not available the management has involved valuation experts to determine the fair value of the investments. Different valuation techniques have been used by the valuers for different investments. These investments in equity instruments are not held for trading. Instead, they are held for long term strategic purpose. The Company has chosen to designate this investments in equity instruments at FVOCI since, it provides a more meaningful presentation. Cost of certain investments in equity instruments have been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.
(c) Fair value of borrowings is estimated by discounting expected future cash flows. The carrying amounts of other borrowings with floating rate of interest are considered to be close to the fair value.
(d) The carrying amounts of remaining financial assets and liabilities are considered to be the same as their fair values.
(e) Management uses its best judgement in estimating the fair value of its financial instruments. However, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented above are not necessarily indicative of the amounts that the Company could have realised or paid in sale transactions as of respective dates. As such, fair value of financial instruments subsequent to the reporting dates may be different from the amounts reported at each reporting date.
(f) Market values in cases of some quoted and unquoted investments are not available, hence the fair value has been considered as market values in such cases
In the course of its business, the Company is exposed primarily to fluctuations in interest rates, equity prices, liquidity and credit risk, which may adversely impact the fair value of its financial instruments. The Company has a risk management policy which not only covers the foreign exchange risks but also other risks associated with the financial assets and liabilities such as interest rate risks and credit risks. The risk management policy is approved by the Board of Directors. The risk management framework aims to:
(i) create a stable business planning environment by reducing the impact of currency and interest rate fluctuations on the
Company's business plan.
(ii) achieve greater predictability to earnings by determining the financial value of the expected earnings in advance.
Other receivables as stated above are due from the parties under normal course of the business and as such the Company believes exposure to credit risk to be minimal.
(a) Trade and other receivables
Customer credit risk is managed by the Company through established policy and procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally carrying upto 90 days credit terms. The Company has a detailed review mechanism of overdue customer receivables at various levels within organisation to ensure proper attention and focus for realisation. Trade receivables are consisting of a large number of customers. Where credit risk is high, domestic trade receivables are backed by security deposits. Export receivables are backed by letters of credit.
In determining the allowances for credit losses of trade receivables, the Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the receivables that are due and rates used in the provision matrix.
The Company's exposure to customers is diversified and there is no significant credit exposure on account of any single customer as at 31 March 2024.
(ii) Liquidity risk
Liquidity risk refers to that risk where the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.
The Company has obtained fund and non-fund based working capital lines from various banks. Furthermore, the Company has access to funds from debt markets through commercial paper programs, non-convertible debentures and other debt instruments. The Company invests its surplus funds in bank fixed deposit and in mutual funds, which carry no or low market risk.
(a) Maturities of financial liabilities
The tables below analyse the Company's financial liabilities into relevant maturity groupings based on their contractual maturities:
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
(a) Foreign currency risk
The Company deals with foreign currency loan, advances for goods, trade payables etc. and is therefore exposed to foreign exchange risk associated with exchange rate movement.
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's main interest rate risk arises from borrowings with variable rates, which expose the Company to cash flow interest rate risk. During 31 March 2024 and 31 March 2023, the Company's borrowings at variable rate were mainly denominated in INR.
The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
(iii) Price risk (a) Exposure
The Company's exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet at fair value through OCI. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. In general, these investments are not held for trading purposes.
42 Segment reporting
The Company, at standalone financial statement level, operates in one segment i.e. "Cement". The Company has disclosed segment information in the consolidated financial statements which are presented in the same financial report. Accordingly, in terms of Paragraph 4 of INDAS 108 'Operating Segments', no disclosure related to segments are presented in this standalone financial statement.
43 As per Section 128 of the Companies Act, 2013 read with proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 with reference to use of accounting software by the Company for maintaining its books of accounts, the Company, in respect of financial year commencing on 1 April 2023, has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in the software. Further, the audit trail has been preserved by the Company as per the statutory requirements for record retention. Furthermore, the management has ensured control over maintenance and monitoring of audit trail and its features are designed and operating effectively, except for the following:
(i) The audit trail feature in the accounting software used for maintenance of master records i.e Vendor Master, Customer Master, Freight Master etc. of the Company did not operate throughout the year.
(ii) The audit trail feature was not enabled at the database level for the accounting software to log any direct data changes.
However, the Company's access to the database is through a system support agency who maintain the checks and trail of any request received from the Company for updating the database. The Company is in the process of activation of audit trail features at the database level.
44 During the previous year, the Board of Directors ("the Board") of the Company had approved a Scheme of Arrangement ("the Proposed Scheme") under Sections 230-232 of the Companies Act, 2013 between Kesoram Industries Limited ("Company") and Cygnet Industries Limited ("wholly-owned subsidiary" or "Cygnet") with the appointed date being 1 April, 2022. However, the scheme was withdrawn in the board meeting held on during the current financial year.
45 The Board of Directors ("the Board") of the Company at its meeting held on, November 30, 2023 has approved a Scheme of Arrangement ("the Proposed Scheme") under Sections 230-232 of the Companies Act, 2013 between Kesoram Industries Limited ("Company") and UltraTech Cement Limited ("the Resulting Company") with the appointed date being April 1, 2024. The Proposed Scheme involves demerger of the cement business from the Company and is subject to the shareholders and various regulatory approvals. Pending such approvals, no effect of the Proposed Scheme has been considered in the books of account.
(i) Explanations have been furnished for change in ratio by more than 25% as compared to the preceeding year as stipulated in Schedule III to the Act.
(i) During the current and previous year, the Company has not earned income on the investments held on account of losses incurred by the respective Investee Company. Accordingly, ratio for Return on Investments has not been presented.
48 Other statutory information
(i) The Company does not have any Benami property, where any proceeding have been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any charge or satisfaction of charge, which is yet to be registered with ROC beyond the statutory period.
(iii) The Company has not traded or invested in crypto-currency or virtual currency during the financial year.
(iv) 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.
(v) 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.
(vi) 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).
(vii) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
(viii) 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.
(ix) The Company has no transactions with any struck off companies during the current financial year.
49 The Code on Social Security, 2020 ("the Code") has been enacted, which may impact the employee related contributions made by the Company. The effective date from which the changes are applicable is yet to be notified. The Ministry of Labour and Employment ('the Ministry') has released draft rules for the Code on November 13, 2020. The Company will complete its evaluation and will give appropriate impact in its financial results in the period in which the Code becomes effective and the related rules are published.
50 Figures for the previous year have been regrouped/ reclassified wherever necessary to confirm to current period's classification.
|