During the year ended March 31, 2025, the Company has entered into the following sale agreements:
1. Sale of Windmills:
Business Transfer Agreement was executed during the year ended March 31,2025, for the sale of 25 windmills. In accordance with the agreement, 7 windmills were sold during the year, and the remaining 18 windmills have been classified as 'Assets Held for Sale' as at March 31, 2025.
2. Sale of Land - Periyampatti:
An agreement has been entered into for the sale of 16 acres of land located at Periyampatti. Pursuant to the agreement, the land has been classified as 'Asset Held for Sale' as at March 31,2025.
Note No. 15(b) Rights, preference and restriction attached to equity shares
The Company has one class of equity shares having a par value of Rs. 10/- each. Each holder of equity shares is entitled to one vote per share. The dividend if any proposed by the Board of Directors will be subject to the approval of the shareholders in the ensuing annual general meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the 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.
Fair value measurements (Ind AS 113)
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The Company has established the following fair value hierarchy that categorises the values into 3 levels. The inputs to valuation techniques used to measure fair value of financial instruments are:
Level 1: Quoted prices in the active market. This level of hierarchy includes financial assets that are measured by reference to quoted prices in the active market.
Level 2: Valuation techniques with observable inputs. This level of hierarchy includes items measured using inputs other than quoted prices included within Level 1 that are observable for such items, either directly or indirectly.
Level 3: Valuation techniques with unobservable inputs. This level of hierarchy includes items measured using inputs that are not based on observable market data (unobservable inputs). Fair value 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 instruments nor based on available market data.
Sensitivity of Level 3 financial instruments are insignificant.
The fair value of the financial instruments are determined at the amount that would be received to sell an asset in an orderly transaction between market participants. The following methods and assumptions were used to estimate the fair values:
Quoted equity investments: Fair value is derived from quoted market prices in active markets.
36.3 Financial Risk Management
Company's principal financial liabilities comprise borrowings, trade payables and Other financial liabilities. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include Investments, Trade receivables, loans, cash and bank balances and other financial assets.
Risk Exposures and Responses
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors reviews policies for managing each of these risks, which are summarised below:
36.3.1 Market Risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and borrowing.
(i) Foreign Currency Risk
The company operates internationally and business is transacted in several currencies. The current year export sales of company comprise around 40% of the total sales of the company. Further the company also imports certain assets and material. The exchange rate between the Indian Rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently the company is exposed to foreign currency risks and the results of the company may be affected as the rupee appreciates/ depreciates against foreign currencies. Foreign exchange risk arises from the future probable transactions and recognized assets and liabilities denominated in a currency other than company's functional currency.
The company measures the risk through a forecast of highly probable foreign currency cash flows and manages its foreign currency risk by appropriately hedging the transactions.
Exchange rate exposures are managed through derivative forward foreign exchange contracts.
(ii) 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.
Sensitivity analysis:
Sensitivity analysis is carried out for floating rate borrowings as at March 31,2025. For every 1% increase in average interest rates, profit before tax would be impacted by loss of approximately Rs. 413 lakhs (Pr.Yr: Rs. 622 Lakhs). Similarly, for every 1% decrease in average interest rates there would be an equal and opposite impact on the profit before tax. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.
36.3.2 Liquidity Risk
Liquidity Risk is the risk that the company may not be able to meet on its financial obligations as they become due. The objective of the liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as and when required.
The finance management policy of the company includes an appropriate liquidity risk management framework for the management of the short-term, medium-term and long term funding and cash management requirements. The company manages the liquidity risk by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast, future cash flows, and by matching the maturity profiles of financial assets and liabilities.
36.3.3 Credit Risk
Credit risk arises when a customer or counterparty does 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 advance for suppliers) and from its financing/ investing activities, including deposits with banks and foreign exchange transactions.
(i) Trade receivables
Trade receivables of the company are typically unsecured and derived from sale made to a large number of independent customers. Customer credit risk is managed by each business unit subject to established policies, procedures and control relating to customer credit risk management. Before accepting any new customer, the company has appropriate level of control procedures to assess the potential customer credit quality. The credit worthiness of its customers are reviewed based on their financial position, past experience and other facts. The credit period provided by the company to its customers generally ranges from 0-90 days. Outstanding customer receivables are reviewed periodically.
The credit related to the trade receivables is mitigated by taking security deposits/ bank guarantee/letter of credit- as and where considered necessary, setting appropriate credit terms and by setting and monitoring internal limits on exposure to individual customers.
There is no substantial concentration of the credit risk as the revenue / trade receivables pertaining to any of the single customer do not exceed 10% of company revenue.
(ii) Cash and Cash Equivalents and Bank Deposits
Credit risk on cash and cash equivalents and balances with Banks is considered to be minimal as the counterparties are all substantial banks and Corporates with high credit ratings. The Directors are unaware of any factors affecting the recoverability of outstanding balances at 31st March 2025.
The expenses incurred on account of the above defined contribution plans have been included in Note 28 “Employee Benefits Expenses” under the head “Contribution to provident and other funds”.
(b) Defined Benefit Plans - Gratuity
The Company sponsors funded defined benefit plan for qualifying employees. This defined benefit plan of gratuity is administered by a separate trust that is legally separate from the entity. The trustees are required by the law to act in the interest of the trust and all the relevant stakeholders i.e. active employees, inactive employees, retired employees and employers, etc. The trust is responsible for investment policy with regard to the assets of the trust. The Company has a gratuity plan wherein every employee is entitled to the benefit equivalent to 15 days salary last drawn for each completed year of service. Gratuity is payable to all eligible employees of the Company on retirement, separation, death or permanent disablement, in terms of the provisions of the Payment of Gratuity Act, 1972 or as per the Company's plan, whichever is more beneficial.
These plans typically expose the Company to actuarial risks such as investment risk, interest rate risk, longevity risk and salary risk.
Investment Risk
The probability or likelihood of occurrence of losses relative to the expected return on any particular investment. Salary Risk
The present value of defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in rate of increase in salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.
Interest Risk
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in value of the liability.
Longevity Risk
The present value of defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after employment. An increase in the life expectancy of the plan participants will increase the plans liability.
The cost of the defined benefit plans and other long term benefits are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These includes the determination of the discount rate, future salary increases and mortality rate. Due to these complexity involved in the valuation it is highly sensitive to the changes in these assumptions. All assumptions are reviewed at each reporting date. The present value of the defined benefit obligation and the related current service cost and planned service cost were measured using the projected unit cost method.
The current service cost, past service cost and the net interest expenses for the year are included in Note 28 “Employee Benefits Expenses” under the head “Salaries and Wages”.
43) Additional regulatory Information required under Schedule III of Companies Act 2013
(i) Details of Benami property held
No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) Borrowing secured against current assets
The Company has borrowings from banks and financial institutions on the basis of security of current assets. The returns or statements filed by the company are in agreement with the books of accounts and there are no material discrepancies.
(iii) Wilful defaulter:
The company has not been declared as Wilful defaulter by any bank or financial institution or government or any government authority.
(iv) Registration of charges:
The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(v) Compliance with number of layers of companies
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(vi) Compliance with approved scheme(s) of arrangements
The group has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
(vii) Utilization of borrowed funds and share premium
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 directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the group (Ultimate Beneficiaries) or provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.
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 group shall 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 provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
(viii) Undisclosed income
There is no income surrendered or disclosed as income during the current or previous financial year in the tax assessments under the Income Tax Act, 1961, and hence requirement to record in the books of accounts does not arise.
(ix) Details of crypto currency or virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
(x) Valuation of PP&E, intangible asset and investment property
The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous financial year.
(xi) Relationship with struck off companies
The company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956 during FY 2023-24.
44) Segmental Information
The Company is primarily engaged in the business of manufacturing, purchase and sale of textiles. The performance evaluation and allocation of resources is based on the analysis of the various performance indicator of the Company as a single unit. Therefore, there is only one reportable segment for the Company.
45) Operational Note
The Company has been incurring losses due to a prolonged global demand slowdown, leading to suboptimal utilization of capacities, which has adversely affected its overall liquidity. In response, the management has undertaken several strategic measures, including the restructuring and consolidation of operations with a focused shift toward high-value technical textile garments, where demand remains resilient and margins are stronger. Cost control efforts and productivity enhancement initiatives have been implemented to reduce costs, streamline operations, and improve efficiency and capacity utilization. Additionally, the Company is planning to monetize non-core assets to generate liquidity and support operational cash flows. Management is confident that these ongoing actions will enable the Company to achieve operational profitability in the coming year.
46) Regrouping
Previous year's figures have regrouped wherever necessary to correspond with the current year's disclosure.
47) Approval of Financial Statements
The financial statements of Loyal Textile Mills Limited were reviewed by Audit Committee and approved by the Board of Directors at its meeting held on May 27, 2025.
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