(m) Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognized, when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. If the effect of the time value of money is material, the provision is discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation and the unwinding of the discount is recognised as interest expense.
Contingent liabilities are disclosed only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for.
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
Provisions, contingent assets and contingent liabilities are reviewed at each balance sheet date.
(n) Borrowing Costs:
General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets that necessarily takes a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs consist of interest and other costs that the company incurs in connection with the borrowing of funds.
Interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing costs that are not directly attributable to a qualifying asset are recognised in the Statement of Profit or Loss using the effective interest method.
(o) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit/ (loss) before tax is adjusted for the effects of transactions of non cash nature and any deferrals or accruals of past or future cash receipts or payments.
(p) Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Company. These are material items of income or expense that have to be shown separately due to their nature or incidence.
(q) Financial Instruments:
(I) Financial assets
Initial recognition and measurement
Financial assets are recognised when, and only when, the Company becomes a party to the contractual provisions of the financial instrument. The Company determines the classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss directly attributable transaction costs. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Statement of Profit and Loss. However, trade receivables that do not contain a significant financing component are measured at transaction price.
Classification
• Cash and Cash Equivalents - Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
• Debt Instruments - The Company classifies its debt instruments as subsequently measured at amortised cost, fair value through Other Comprehensive Income or fair value through profit or loss based on its business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.
(i) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest. Interest income from these financial assets is included as a part of the Company's income in the Statement of Profit and Loss using the effective interest rate method.
(ii) Financial assets at fair value through Other Comprehensive Income (FVOCI)
Financial assets are subsequently measured at fair value through Other Comprehensive Income if these financial assets are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest. Movements in the carrying value are taken through Other Comprehensive Income, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains or losses which are recognised in the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in Other Comprehensive Income is reclassified from Other Comprehensive Income to the Statement of Profit and Loss. Interest income on such financial assets is included as a part of the Company’s income in the Statement of Profit and Loss using the effective interest rate method.
(iii) Financial assets at fair value through profit or loss (FVTPL)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on such debt instrument that is subsequently measured at FVTPL and is not part of a hedging relationship as well as interest income is recognised in the Statement of Profit and Loss.
• Equity Instruments - The Company subsequently measures all equity investments (other than the investment in subsidiaries, joint ventures and associates which are measured at cost) at fair value. Where the Company has elected to present fair value gains and losses on equity investments in Other Comprehensive Income ("FVOCI"), there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognised in the Statement of Profit and Loss as other income when the Company's right to receive payment is established.
The Company has made an irrevocable election to present in Other Comprehensive Income subsequent changes in the fair value of equity investments that are not held for trading.
When the equity investment is derecognised, the cumulative gain or loss previously recognised in Other Comprehensive Income is reclassified from Other Comprehensive Income to the Retained Earnings directly.
Interest : Interest income is accrued on a time proportion basis using the effective interest rate method.
Dividend : Dividend income is recognised when the Company's right to receive the amount is established.
De-recognition : A financial asset is derecognised only when the Company has transferred the rights to receive cash flows from the financial asset. Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
(II) Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Company becomes a party to the contractual provisions of the financial instrument. The Company determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities not at fair value, through profit or loss directly attributable transaction costs.
Subsequent measurement
After initial recognition, financial liabilities that are not carried at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the Statement of Profit and Loss when the liabilities are derecognised, and through the amortisation process.
De-recognition
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
(III) Impairment of financial assets
The Company assesses, at each reporting date, whether a financial asset or a group of financial assets is impaired. Ind AS 109 on Financial Instruments, requires expected credit losses to be measured through a loss allowance. For trade receivables only, the Company recognises expected lifetime losses using the simplified approach permitted by Ind AS 109, from initial recognition of the receivables. For other financial assets (not being equity instruments or debt instruments measured subsequently at FVTPL) the expected credit losses are measured at the 12 month expected credit losses or an amount equal to the lifetime expected credit losses if there has been a significant increase in credit risk since initial recognition.
(r) Recent accounting pronouncements
(i) New and amended standards adopted by the Company:
The Company has applied the following amendments for the first time for their annual reporting period commencing April 1, 2023:
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
The amendments to Ind AS 8 clarify the distinction between changes in accounting estimates, changes in accounting policies and the correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.
Ind AS 1 - Presentation of Financial Statements
The amendments to Ind AS 1 provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their 'material' accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments have had an impact on the Company's disclosures of accounting policies, but not on the measurement, recognition or presentation of any items in the Company's financial statements.
Ind AS 107 - Financial Instruments: Disclosures - Information about the measurement basis for financial instruments shall be disclosed as part of material accounting policy information.
Ind AS 12- Income Taxes
The amendments to Ind AS 12 Income Tax narrow the scope of the initial recognition exception, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities.
The above amendments did not have any material impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
(ii) New Standards/Amendments notified 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. During the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
Table 2: Fair value hierarchy
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of the following three levels:
(a) Level 1 - Level 1 hierarchy includes financial instruments measured using quoted prices in an active market. This includes
listed equity instrument, traded debentures and mutual funds that have quoted price/declared NAV. The fair value of all equity instruments (including debentures) which are traded in the stock exchanges is valued using the closing price as at the reporting period.
(b) Level 2 - Level 2 hierarchy includes financial instruments that are not traded in an active market (for example, traded bonds/
debentures, over the counter derivatives). The fair value in this hierarchy is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
(c) Level 3 - If one or more of the significant inputs is not based on observable market data, the instrument is included in level
3. 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. Financial instruments such as unlisted equity shares, loans are included in this hierarchy.
Note 35 : Financial risk management
Risk management framework
"The Company's Board of Directors has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board of Directors has established a Risk Management Committee, which is responsible for developing and monitoring the Company's risk management policies. The Committee reports regularly to the Board of Directors on its activities."
"The Company's risk management policies are established to identify and analyse the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company's Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by the internal audit team. The internal audit team undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee."
The Company has exposure to the following risks arising from financial instruments:
• Market risk
• Credit risk
• Liquidity risk
• Currency risk
• Interest rate risk
i. Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company's exposure to market risk is primarily on account of foreign currency exchange rate risk and interest rate risk.
ii Credit Risk
Credit risk arises from the possibility that customers or counterparty to financial instruments may not be able to meet their obligations. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Credit risks arises from cash and cash equivalents, deposits with banks, financial institutions and others, as well as credit exposures to customers, including outstanding receivables.
The Company's policy is to place cash and cash equivalents and short-term deposits with reputable banks and financial institutions
The carrying amount of current financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ^ 3789.32 lakhs and ^ 6438.75 lakhs as of March 31, 2024 and March 31, 2023, respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, unbilled revenue, other financial assets and investments excluding equity and preference investments.
Oriental Hotels Limited exposure to customers is diversified and no outstanding from a single customer is more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2024
Trade and other receivables:
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.
The Company does not require collateral in respect of trade and other receivables.
The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables.
Cash and bank balance:
The Company held cash and bank balance of ^ 1957.58 lakhs at March 31, 2024 (March 31, 2023: ^ 3546.97 lakhs).
iii. Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Company's debt financing plans, covenant compliance and compliance with internal statement of financial position ratio targets.
iv. Currency Risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities.
Considering the countries and economic environment in which the Group operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries.
The risks primarily relate to fluctuations in US Dollar / Hong Kong Dollar against the functional currency of the company. The company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.
v. Interest Rate Risk
The Company adopts a policy to hedge the interest rate movement in order to mitigate the risk with regards to floating rate linked loans based on the market outlook on interest rates. This is achieved partly by entering into fixed rate instruments and partly by borrowing at a floating rate and using interest rate swaps as hedges of the variability in cash flows attributable to interest rate risk.
Exposure to Interest Rate Risk
Company's interest rate risk arises from borrowings and finance lease obligations. Borrowings issued at fixed rates and finance lease obligations are exposed to fair value interest rate risk. The interest rate profile of the Company’s interestbearing financial instruments is as follows:
Note 37 : Capital Management
The Company monitors capital using a ratio of 'adjusted net debt to 'adjusted equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings and obligations under finance leases, less cash and cash equivalents.
Adjusted equity comprises all components of equity other than amounts accumulated in the hedging reserve.
The Company's adjusted gearing ratio is as follows.
Note 43 : Social Security Code
The date of implementation of the Code on Social Security, 2020 ('the Code') relating to employee benefits is yet to be notified by the Government and when implemented will impact the contributions by the Company towards benefits such as Provident Fund, Gratuity etc. The Company will assess the impact of the Code and give effect in the financial statement when the Code and Rules thereunder are notified.
Note 44 : Working Capital
As at the year end, the Company's current liabilities have exceeded its current assets by ^ 6,736 Lakhs primarily on account of current maturities of long term borrowings aggregating ^ 6,816 Lakhs falling due within 12 months following the balance sheet date. Management is confident of its ability to generate adequate cash inflows from operations and also utilize unavailed bank sanction to meet its obligations on due date.
As on the reporting date, the Company has undrawn sanctioned Term loans and working capital limits aggregating ^ 6,087 Lakhs which will be sufficient to meet the estimated operational cash requirements during the next twelve months and the Company is current on all its Debt obligations.
Based on aforesaid assessment, management believes that as per estimates made conservatively, the Company will be able to discharge its liabilities and realise the carrying amount of its assets as on March 31, 2024.
Note 45 : Malabar unit lease renewal
During the previous year, the company won the bid in the tender cum auction proceedings of "Taj Malabar Resort& Spa" held by the Cochin Port Trust and got the allotment of long term lease for a period of 30 years with effect from 22nd September 2022. During the year, company entered into a formal lease deed with Cochin Port Trust for Taj Malabar Resort & Spa.
The unit is temporarily closed from 1st September 2023 on account of ongoing renovations.
Note 46 : Audit Trail
"In the ERP, audit trail at transaction level on application layer has an embedded audit trail in sub-ledger accounting tables which creates unique events for every transaction along with dates of creating and updating transactions with the identity of users. General ledger journals are not allowed to be modified after posting and the date and creator of journals are tracked. This feature cannot be disabled. Additionally, audit trail was enabled for masters and transactions majorly during June, 2023 and July, 2023. Audit trail feature with respect to application layer changes in accounting Software has worked effectively during the year.
PMS and POS (Property Management and Point of Sales software) has inbuilt audit trail feature from 1st April 2023.
Post publication of ICAI implementation guide, direct database level changes was also included in audit trial scope. In respect of ERP, access to direct database level changes is available only to privileged users and for PMS and POS, it is not available to any of the Company personnel. However, the software product owners have confirmed that there is no audit trail enabled for data base level changes."
Explanations to variance in Ratios:
1. Current ratio has decreased due to increase in current maturity of long term borrowings and decrease in Bank balances due to renovation of Malabar unit.
2. Debt-equity ratio has reduced due to principal repayments made during the year which has reduced the outstanding debt as compared to previous year.
3. Debt service coverage ratio has increased due to higher debt repayments in the previous year as compared to current year.
4. Return on capital employed has reduced mainly due to increase in other equity
5. Net capital turnover ratio increased due to net decrease in current assets on account of renovation project
6. As the company is primarily engaged in hospitality sector (Service Industry), Inventory turnover ratio and Return on investment ratio are not applicable to the Company.
Note 49: Transaction with Struck off Companies
The Company has reviewed transactions, to the extent of information available, for the purpose of identifying transactions with
struck off companies.
Basis above review, following are the transactions identified with struck off companies in the current financial year."
Note 51 : Other Statutory Information
1) The borrowings from banks and financial institutions have been used for the purposes for which it was taken.
2) Title deeds, comprising all the immovable properties being Land and Building are held in the name of the Company or Amalgamating company (where amalgamations have happened) as at Balance sheet date.
3) The Company does not have any Benami property, where any proceeding has been initiated or pending against the company to holding and Benami property.
4) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
5) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
6) 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
7) 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 Funded Party (Ultimate Beneficiaries) or
(b) Provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
8) The Company does not have any transaction which is not recorded in the books of accounts that has been surrendered, disclosed as income during the year in the tax assessments under the income tax act,1961 (such as, search or survey or any of the relevant provisions of the Income Tax Act,1961.
Note 52: Dividend
On April 18, 2024, the Board of Directors of the Company have proposed a final dividend of Rs 0.50 per equity share in respect of the year ended 31 March 2024, subject to approval of Shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of Rs 893 lakhs during the financial year 2024-25.
As per our Report attached For and on behalf of the Board of Directors of Oriental Hotels Limited
For PKF Sridhar & Santhanam LLP
Chartered Accountants Pramod Ranjan Gita Nayyar
Firm Registration No 003990S/S200018 Managing Director Director
DIN:00887569 DIN:07128438
Rajeshwari S Nitin Bengani S Akila
Partner Chief Financial Officer Company Secretary
Membership No.024105
Place : Chennai Date : April 18, 2024
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