2.12 Provisions. Contingent Liabilities and Contingent Assets
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. The Expense relating to a Provision is presented in the Statement of Profit or 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.
A Contingent Liability is disclosed when:
(a) A Possible Obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or
(b) A Present Obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the Obligation; or
(ii) the amount of the Obligation cannot be measured with sufficient reliability.
Contingent Asset is a possible Asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.
Contingent Liabilities and Assets are not recognised in Financial Statements but are disclosed in the Notes when it is virtually certain that economic benefits will inflow to the Company.
2.13 Foreign Currency Transactions and Translations
Transactions in Foreign Currency are translated to the Functional Currency i.e., Indian Rupee (INR) at Exchange Rates prevailing at the date of Transactions. Exchange differences arising on Foreign Exchange Transactions settled during the year are recognised in the Statement of Profit
and Loss of the year. Monetary Assets and Liabilities denominated in Foreign Currencies which are outstanding, as at the Reporting Date are translated at the Closing Exchange Rates and the resultant exchange differences are recognised in the Statement of Profit and Loss.
2.14 Impairment
Non - Financial Assets
Non-Financial Assets are evaluated for recoverability whenever events or changes in circumstances indicate that their Carrying Amounts may not be recoverable. For the purpose of Impairment testing, the Recoverable Amount (i.e., the higher of the Fair Value less Cost of Disposal and its Value-in-Use) is determined on an individual basis unless the Asset does not generate Cash Flows that are largely independent of those from other Assets. In such cases, the Recoverable Amount is determined for the Cash Generating Unit to which the Asset belongs.
If such assets are considered to be impaired, the Impairment to be recognised in the Statement of Profit and Loss is measured by the amount by which the Carrying Value of the Asset exceeds the estimated Recoverable Amount of the Asset. An Impairment Loss is reversed in the Statement of Profit and Loss, if there has been a change in the estimates, used to determine the Recoverable Amount. The Carrying Amount of the Asset is increased to its revised Recoverable Amount, provided that this amount does not exceed the Carrying Amount that would have been determined (Net of any Accumulated Amortisation or Depreciation) had no impairment loss been recognised for the Asset in prior years.
Financial Assets
The Company recognises loss allowances, if any, using the Expected Credit Loss (ECL) Model for the Financial Assets which are not fair valued. Loss Allowance for Trade Receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other Financial Assets, ECL is measured at an amount equal to the 12-month ECL, unless there has been a significant increase in Credit Risk from initial recognition, in which case, those are measured at Lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the Reporting Date to the amount that is required to be recognised, is recognised as an Impairment Gain or Loss in the Statement of Profit and Loss.
2.15 Borrowing Costs
Borrowings are initially recognised at Fair Value, net of transaction costs incurred. Borrowings are subsequently measured at Amortised Cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Statement of Profit and Loss over the period of the Borrowings using the Effective Interest Method. Fees paid on the establishment of Loan Facilities are recognised as transaction costs of the Loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the Fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for Liquidity Services and Amortised over the period of the facility to which it relates.
Borrowings are removed from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the Carrying Amount of a Financial Liability that has been extinguished or transferred to another party and the consideration paid, including any Non-Cash Assets transferred or Liabilities assumed, is recognised in the Statement of Profit and Loss as other Gains / (losses). Borrowings are classified as Current Liabilities unless the Company has an unconditional right to defer settlement of the Liability for at least twelve
months after the Reporting Period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the Reporting Period with the effect that the Liability becomes payable on demand on the Reporting Date, the Entity does not classify the Liability as current, if the lender agreed, after the Reporting Period and before the approval of the Financial Statements for issue, not to demand payment as a consequence of the breach.
Borrowing costs directly attributable to the acquisition, construction or production of Qualifying Assets, which are Assets that necessarily take 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. Interest Income earned on the temporary investment of Specific Borrowings pending their expenditure on the Qualifying Assets is deducted from the Borrowing Costs eligible for capitalisation. All other Borrowing Costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
2.16 Earnings Per Share
The Company presents the Basic Earnings Per Share by dividing the Net Profit for the period attributable to the Shareholders by the Weighted Average Number of Equity Shares outstanding during the period. Where the Equity Shares are issued without a corresponding change in resources like Bonus Issue, the Weighted Number of Equity Shares outstanding during the period as well as all periods presented are adjusted for such events.
Diluted Earnings Per Share is computed by dividing the Net Profit After Tax by the Weighted Average Number of Equity Shares considered for deriving the Basic Earnings Per Share and also Weighted Average Number of Equity Shares that could have been issued upon conversion of all Dilutive Potential Equity Shares. Dilutive Potential Equity Shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive Potential Equity Shares are determined independently for each period presented. The Number of Equity Shares and potentially Dilutive Equity Shares are adjusted for Preferential Issue of Equity Shares, Bonus Shares, etc. as appropriate.
2.17 Cash and Cash Equivalents
The Company considers all highly liquid Financial Instruments, which are readily convertible into known amounts of Cash, that are subject to an insignificant risk of change in value with a maturity within three months or less from the date of purchase, to be Cash Equivalents. Cash and Cash Equivalents consist of balances with Banks, which are unrestricted for withdrawal and usage.
2.18 Financial Assets
The Company classifies Financial Assets as subsequently measured at Amortised Cost, Fair Value through Other Comprehensive Income or Fair Value through Profit or Loss on the basis of its business model for managing the Financial Assets and the Contractual Cash Flow characteristics of the Financial Asset.
Initial Recognition and Measurement
All Financial Assets are recognised initially at Fair Value plus, in the case of Financial Assets not recognised at Fair Value through Profit or Loss, Transaction Costs that are attributable to the acquisition of the Financial Asset. Trade Receivables that do not contain a significant financial component measured at Transaction Price. Subsequent measurement of Financial Assets are dependent on initial categorisation. For Impairment purposes, significant Financial Assets are tested on an individual basis and other Financial Assets are assessed collectively in groups that share similar credit risk characteristics.
Classification of Financial Assets
(i) Financial Assets measured at Amortised Cost: Financial Assets are measured at Amortised Cost, when Asset is held within a business model, whose objective is to hold Assets for collecting the contractual Cash Flows and contractual terms of the Asset give rise, on specified dates, to Cash Flows that are solely payments of Principal and Interest. Such Financial Assets are subsequently measured at the Amortised Cost using the EIR Method. The losses arising from Impairment are recognised in the Statement of Profit and Loss.
(ii) Financial Assets at Fair Value through Other Comprehensive Income: Financial Assets under this Category are measured initially as well as at each Reporting Date at Fair Value. Fair Value movements are recognised in the Other Comprehensive Income.
(iii) Financial Assets at Fair Value through Profit or Loss: A Financial Asset which is not classified in any of the above categories is subsequently Fair Valued through Profit or Loss. Financial Assets under this Category are measured initially as well as at each Reporting Date at Fair Value with all changes recognised in the Statement of Profit or Loss.
Derecognition of Financial Assets
A Financial Asset is primarily de-recognised when the rights to receive Cash Flows from the Asset have expired or the Company has transferred its Rights to receive Cash Flows from the Asset.
2.19 Financial Liabilities
Financial Liabilities are recognized when the Company becomes a party to the contractual positions of an instrument. Financial Liabilities are recognized initially at Fair Value. In the case of Financial Liabilities other than those recognized at Fair Value through Profit and Loss (FVTPL), the Transaction Costs attributable to the acquisition of the Financial Liability are added to the Fair Value for the initial recognition. In the case of Financial Liabilities, recognised at FVTPL, the Transaction Costs are recognised in the Statement of Profit and Loss.
Financial Liabilities other than those recognized at FVTPL are subsequently measured at Amortised Cost using EIR method. Financial Liabilities carried at FVTPL are measured at Fair Value with all changes in Fair Value recognized in the Statement of Profit and Loss. The Company measures the following Financial Liabilities under Amortised Cost:
(a) Borrowings
(b) Trade Payables
(c) Other Financial Liabilities
Financial Liabilities held for trading are measured at FVTPL. Financial Liabilities and Financial Assets are off-set and Net Amount is presented in the Balance Sheet when the Company has a Legal Right to offset and intends to settle the same on Net Basis or realise the Asset and settle the Liability simultaneously. A Financial Liability is derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or expires.
Foreign Exchange Gains and Losses for Financial Liabilities that are denominated in a Foreign Currency and are measured at Amortised Cost at the end of each Reporting Period, the Foreign Exchange Gains and Losses are determined based on the Amortised Cost of the Instruments and are recognised in Statement of Profit and Loss under Other Income. The Fair Value of Financial Liabilities denominated in a Foreign Currency is determined in that Foreign Currency and
translated at the Spot Rate at the end of the Reporting Period. For Financial Liabilities that are measured at FVTPL, the Foreign Exchange component forms part of the Fair Value Gains or Losses and is recognised in the Statement of Profit and Loss.
Equity Instrument: An Equity Instrument is any contract that evidences a residual interest in the Assets of the Company after deducting all of its Liabilities. Equity Instruments are recorded at the proceeds received, net of direct issue costs.
2.20 Cash Flow Statement
Cash Flow Statement 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. The Cash Flows from Operating, Investing and Financing Activities of the Company are segregated based on the available information. The Cash and Cash Equivalents includes balances in Current Accounts, Cash-on-hand and Cheques / Drafts on hand. Bank Overdrafts are shown set-off against the Cash and Bank Balances in the Note 13 of the Notes to Accounts.
2.21 Segment Reporting
Operating Segments are reported in a manner consistent with the internal reporting provided to the Senior Management. The Company considers processing of the alloy wheels as its single segment in which the Company operates. The Company has also dealt in some other products, but their volume is nominal hence no reportable segments are there.
For M/s PPKG & Co For Precision Metaliks Limited
Chartered Accountants FRN: 009655S
CA Girdhari Lal Toshniwal Jayanthi Roja Ramani Devarapalli Ramesh Babu
Partner Director Whole-Time Director
Membership No. 205140 (DIN: 05334095) (DIN: 02163058)
UDIN: 24205140BKALIV4588
Date: May 28, 2024 Rakesh Kumar BVV Prakash Rao
Place: Visakhapatnam Company Secretary Chief Financial Officer
14. Contingent Liabilities: Nil
15. Fair Value Measurements
Fair Value of Financial Assets and Liabilities are measured at Amortised Cost. Trade Receivables, Cash and Cash Equivalents, Bank Balances, Loans and other Financial Assets are measured at Carrying Values that approximate Fair Value. Borrowings, Trade Payables and other Financial Liabilities are measured at Carrying Values that approximates the Fair Value. If measured at Fair Value in the Financial Statements, these Financial Instruments would be classified as Level-Three in the Fair Value Hierarchy.
16. Financial Risk Management
The Company's activities expose it to Market Risk (including Currency Risk, Interest Rates, and other Price Risk), Credit Risk and Liquidity Risk. The Company seeks to minimise the effects of these risks by taking various measures. The Company does not enter into or trade Financial Instruments, including Derivative Financial Instruments, for speculative purposes.
17. (a) Market Risk
The Company's activities expose it primarily to the Financial Risks of changes in Foreign Currency Exchange Rates and Interest Rates. The Company manages such risks primarily through natural hedge.
(b) Foreign Currency Risk Management
The Company undertakes Transactions denominated in Foreign Currencies, resulting in exposure to Exchange Rate Fluctuations. The Foreign Currency Transactions primarily relate to Imports and Exports. Considering the volume of Imports and Exports, Exchange Rate Exposures are primarily managed through natural hedge.
(c) Interest Rate Risk Management
The Company's exposure to Interest Rate Risk is limited to the extent of Working Capital funding availed from the Bankers, which is at the External Benchmark Lending rate subject to a periodic reset.
(d) Interest Rate Sensitivity Analysis
The Interest Rate Sensitivity Analysis is being done based on the assumption that the amount of Liability outstanding at the end of the period was outstanding for the whole financial year and all other variables remain constant.
(e) Other Price Risk
The Company's Investments in Equity Instruments are held for strategic purposes rather than for trading. As the purpose of all such investments are strategic rather than for trading, the Company does not recognise any impact of sensitivity in the Equity Prices.
(f Credit Risk Management
The Credit Risk to the Company arises primarily from the customers defaulting on their Contractual Obligations, thus resulting in financial loss to the Company. As part of mitigation process to address the risk, the Management evaluates the credentials of a customer before quoting for their Order. The Management evaluates the potential customers' credentials by considering various factors such as their Financial Position, past experience in payments and other relevant factors. Advance Payments are obtained from Customers in banquets, as a means of mitigating the Risk of Financial Loss from defaults.
The Management makes provision for its Financial Assets, on every Reporting Period, as per the Expected Credit Loss Method. The percentage at which the provision is made is determined on the basis of historical experience of such provisions, modified to the current and prospective business and customer profile.
(g) Liquidity Risk Management
The Liquidity requirements of the Company are met by the Internal Accruals and Working Capital Funding from the Banks. The Liquidity requirements for the Operations are met by allocating the Cash Flows from the customers.
F or Precision Metaliks Limited
For M/s PPKG & Co Chartered Accountants FRN: 009655S
CA Girdhari Lal Toshniwal Jayanthi Roja Ramani Devarapalli Ramesh Babu
Partner Director Whole-Time Director
Membership No. 205140 (DIN: 05334095) (DIN: 02163058)
UDIN: 24205140BKALIV4588
Date: May 28, 2024 Rakesh Kumar BVV Prakash Rao
Place: Visakhapatnam Company Secretary Chief Financial Officer
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