2.14 PROVISIONS AND CONTINGENCIES
A provision is recognised when an enterprise has a present obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are determined by discounting the expected future cash flows to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Provisions for onerous contracts, i.e., contracts where the expected unavoidable costs of meeting
the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event, based on a best estimate of such obligation.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which 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 a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent assets are neither recognised nor disclosed in the standalone financial statements.
2.15 CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby net profit/(loss) before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
2.16 SEGMENT REPORTING
Based on the "management approach" as defined in Ind AS 108 - Operating Segments, Managing Directors of the Company has been identified as the Chief Operating Decision Maker (CODM). The CODM evaluates the Company’s performance and allocates resources based on single segment approach and accordingly, information has been presented.
2.17 RECENT ACCOUNTING PRONOUNCEMENTS
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
(iii) Rights, preferences and restrictions attached to equity shares.
The Company has a single class of equity shares. Each holder of the equity share, as reflected in the records of the Company as of the date of the shareholder meeting, is entitled to one vote in respect of each share held for all matters submitted to vote in the Shareholders’ meeting. The dividend, if any, proposed by the Board of Directors is 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 residual assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by the shareholders or in line with the terms of the shareholders agreement as the case may be.
Promoters’ contribution and lock-in: Pursuant to Regulations 14 of the SEBI ICDR Regulations, an aggregate of the 20% of the fully diluted Post-Offer Equity Share capital of the Company held by Promoters shall be locked in for a period of three years as minimum Promoters’ contribution ("Minimum Promoters’ Contribution") from the date of Allotment.
Nature and purpose of other equity:
Capital redemption reserve
The capital redemption reserve is created out of undistributed profits for purchase of its own shares.
Capital reserve
Capital reserve of ' 2.39 mn refers to the subsidy received from the Government of Karnataka, Department of Industries and Commerce in the year 1999. This subsidy was received as the Company was a small scale industry in that particular year. It further includes ' 5.61 mn as share of pre-acquisition profit of a subsidiary at the time of acquisition by the Company accounted as capital reserve.
Securities premium
Securities premium account comprises premium on issue of shares. The reserve is utilised in accordance with specific provision of the Companies Act, 2013.
General reserve
The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in general reserve will not be reclassified subsequently to standalone statement of profit and loss.
Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to investors.
Share options outstanding account
The fair value of the equity-settled share based payment transactions with employees is recognised in the standalone statement of profit and loss with corresponding credit to share options outstanding account.
Note A: Pending resolution of the respective proceedings, it is not practicable for the Company to estimate the timings of cash flows, if any, in respect of the above as it is determinable only on receipt of judgements/decisions pending with various forums/authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for wherever required and disclosed as contingent liabilities where applicable, in these standalone financial statements. The Company does not expect the outcomes of these proceedings to have a materially adverse effect on its financial position.
(i) Relating to demand for service tax on labour charges, refund granted on service tax paid under reverse charge mechanism (RCM), disallowance of Excise duty rebate etc.,
(ii) Relating to demand raised by GST authorities on mismatch of GSTR 3B and GSTR 2A.
(iii) Relating to disallowance of certain expenses, additional depreciation and non-consideration of MAT (Minimum Alternate Tax) credit.
** The Company supplied Shifter Forks to American Axle (AAM). American Axle reported failure of the product Shifter Fork and filed a suit with South Carolina Civil Court. The Company appointed a legal firm to handle the civil suit. Following the unsuccessful negotiations with AAM’s counsel, the Company has filed a new motion with the Court requesting to dismiss the lawsuit in entirety because AAM had failed to comply with the contractual terms. Company, further requested the Court to hold all proceedings in abeyance until the ruling on the request to dismiss the suit in entirety comes through. Court entered an order staying all proceedings until such time as the Court can rule on motion.The management is confident of a favorable outcome and expects the settlement to be not exceeding the amount provided for ('15 mn).
Note B: The Company has proposed to provide corporate guarantee/standby letter of credit for the Credit facilities of EURO 5 mn (March 31,2023 - Euro 5 mn ) equivalent to maximum amount approx ' 400 mn, granted to Sansera Sweden AB by the Citi bank NA.
# The Honourable Supreme Court of India, in the month of February 2019 had passed a judgement relating to definition of wages under the Provident Fund Act, 1952. The Management is of the view that there are interpretative challenges on the application of the judgement retrospectively. Based on the legal advice and in the absence of reliable measurement of the provision for earlier periods, the Company has made a provision of ' 0.58 mn for provident fund contribution pursuant to the judgement in the year 2018-19 from the date of Order of the Honourable Supreme Court of India. The Company will evaluate its position and update its provision, if required, on receiving further clarity on the subject. The Company does not expect any material impact of the same.
## As disclosed in note 4.b, the Company has invested in Clean Max Vega Power LLP (i.e., power producer) and entered into an energy supply agreement for a period of 25 years with lock in period of 5 years. Pursuant to such energy supply agreement, the Company has committed to purchase atleast 51% of the total power produced by the power producer.
@@ The Karnataka State Pollution Control Board ("KSPCB") issued a demand order dated February 17, 2020 ("Demand Order") to the Company, demanding an amount of ' 10.00 mn on the grounds that Plant 12 was not compliant with the provisions of the Water (Prevention & Control of Pollution) Act, 1974, Air (Prevention & Control of Pollution) Act, 1981 and rules framed under Environment (Protection) Act, 1986 in relation to noise pollution and LPG storage. Our Company filed a reply dated February 27, 2020 refuting all allegations made pursuant to the Demand Order specifying that the Company is in compliance with all pollution regulations and laws and requesting for an opportunity to be heard in person. KSPCB reassessed the compensation calculation notice dated July 13, 2023 to pay the revised compensation of ' 12.07 mn instead of ' 10.00 mn. The Company has submitted a reply to KSPCB dated August 22, 2023. This matter is currently pending.
The Uttarakhand Pollution Control Board ("UKPCB") issued a demand order dated March 12, 2020 ("Demand Order") to the Company, demanding an amount of ' 10.00 mn on the grounds that Plant 6 was not compliant with regulations in relation to discharge of pollutants, issued by the UKPCB and the order of the National Green Tribunal dated November 14, 2019 ("NGT Order"). The Company filed a writ petition dated May 15, 2020 ("Writ Petition") before the High Court of Uttarakhand to quash the Demand Order. The High Court of Uttarakhand pursuant to order dated May 18, 2020 read with order dated July 06, 2020 noted that the NGT Order has been stayed by the Supreme Court of India, and stayed recovery of the compensation demanded pursuant to the Demand Order until the Supreme Court of India completes adjudication
g) Asset liability matching strategies
The Company has purchased insurance policy, which is basically a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance Company, as part of the policy rules, makes payment of all gratuity liability occurring during the year (subject to sufficiency of funds under the policy). The policy, thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in a increase in liability without corresponding increase in the asset).
h) The Company has purchased an insurance policy to provide for payment of gratuity to the employees. Every year, the insurance Company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company.
42 EMPLOYEE STOCK OPTIONS
The Company has share option schemes for the permanent employees of the Company and its subsidiaries. In accordance with the terms of the plan, as approved by shareholders, permanent employees may be granted options to purchase equity shares.
Each employee share option converts into one equity share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry as per ESOP Schemes.
(a) Sansera Employee Stock Option Plan 2015
On March 12, 2015, the Board of Directors of the Company approved "Sansera Employee Stock Option Plan 2015" ("the Plan") for grant of stock options to the employees of the Company and its subsidiaries which was further ratified by the shareholders on April 13, 2015. Further, the ESOP 2015 has been amended pursuant to resolutions passed by the Shareholders on August 03, 2018, June 02, 2021 and August 31, 2021, respectively. The vested options can be exercised by the option holder and the shares can be allotted by the Board/Committee as specified in the Plan. The plans are as follows:
Program 1: Key management group
Options under this program are granted to certain employees at an exercise price of ' 0.14 per option. All the stock options under this program are completely vested.
The following reconciles the outstanding share options granted under employee share option plan at beginning and at the end of financial year:
(b) Sansera Employee Stock Option Plan 2018
The Company, pursuant to resolution passed by its shareholders dated August 08, 2018 has adopted "Sansera Employee Stock Option Plan 2018" ("the Plan"). Further, the ESOP 2018 has been amended pursuant to resolutions passed by the Board of Directors on April 19, 2021, August 22, 2021 and Shareholders on June 02, 2021 and August 31, 2021. The aggregate number of options, which may be issued under ESOP 2018, shall be decided by the Nomination and Remuneration Committee and shall not exceed such number of options which represents 2.50% shareholding in the Company on a fully diluted basis as on the date of this plan. The plans are as follows:
Options under this program are granted to certain employees at an exercise price in the range of ' 744.00 - ' 934.70 per option. Stock options issued carry different vesting periods. It ranges from 25 to 100 % vesting of total options granted by the end of every one year from the grant date. All stock options shall be fully vested by the end of 4 years from the grant date.
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - 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). The derivative contracts are valued using market approach, determined using forward exchange rates as at the balance sheet date.
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The Company has not disclosed the fair value of financial instruments such as other non-current financial assets, trade receivables, cash and cash equivalents, bank balances, other current financial assets, loans, borrowings, other non-current financial liabilities, trade payables and other current financial liabilities because their carrying amounts are a reasonable approximation of fair value.
Investments in subsidiaries and associate are not appearing as financial asset in the table above, being accounted under Ind AS 27 (At cost), Separate Financial Statements.
The majority of costs and incomes are denominated in local currencies, which is not impacted by currency exchange fluctuations. Some of the contracts with key export customers may not allow for price adjustments in the event of unfavourable currency exchange rate developments. Global footprint exposes the Company to certain currency exchange risks, arising primarily from foreign currency receivables, import of raw materials and capital goods for operations, export of goods. The Company hedges significant portion of the net foreign exchange exposure through forward contracts.
44 FINANCIAL RISK MANAGEMENT
The Company is exposed to the following risks arising from financial instruments:
- Credit risk
- Liquidity risk
- Market risk
(i) Risk management framework
The Company’s Board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyse the risks 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, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
(ii) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and others, foreign exchange transactions and other financial instruments. The carrying amount of financial assets represents the maximum credit exposure.
Trade receivable
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 associated with the industry and country in which customers operate. In respect of trade receivables the Company performs credit assessment for customers on an annual basis and recognises credit risk on the basis of lifetime expected losses. (Refer note 11).
The top 5 customers generated revenues of 47.29% during the year (March 31,2023 : 56.17%), wherein 3 customers (March 31,2023: 3 customers) individually represented more than 10% of the revenue from sale of products for the year. Further, 3 customers accounted for more than 37.67% (March 31,2023: 36%) of the receivables as at March 31, 2024.
Cash and cash equivalents (including bank balances, fixed deposits and margin money with banks):
Credit risk on cash and cash equivalents is limited as the Company generally transacts with banks and others with high credit ratings assigned by international and domestic credit rating agencies.
(iii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial assets. 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.
(vi) Foreign currency risk
The Company is exposed to currency risk on certain transactions that are denominated in a currency other than the entity’s functional currency, hence exposures to exchange rate fluctuations arise. The risk is that the functional currency value of cash flows will vary as a result of movements in exchange rates. The Company uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date.
Foreign currency (FC) risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments. The information on derivative instruments is as follows.
49 SEGMENT REPORTING
Information reported to the chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The Company is in the business of manufacture and sale of automobile/aerospace components, which in the context of Ind AS 108 'Segment Information’ represents single reportable business segment. The entire operations are governed by the same set of risk and returns. Accordingly, these operations represent a single segment. The revenues, total expenses and net profit as per the standalone statement of profit and loss represents the revenue, total expenses and the net profit of the sole reportable segment.
e) The Company has no 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).
f) The Company has complied with the relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and the Companies Act for the above transactions and the transactions are not violative of the Prevention of Money-Laundering Act, 2002 (15 of 2003)
g) The Company has not been declared wilful defaulter by any bank or financial institution or other lender.
52 The Company has used accounting software for maintaining its books of account for the financial year ended March 31, 2024 which has a feature of recording audit trail (edit log) facility, however, the same has not operated throughout the year for all relevant transactions recorded in the software. The Company is in process of implementing the changes inline with the regulation.
53 During the year ended March 31,2024, on account of final dividend for financial year 2022-23, the Company has incurred a net cash outflow of ' 133.32 mn.
The Board of Directors, in their meeting held on May 16, 2024, recommended a final dividend of ' 3 per equity share for the financial year ended March 31,2024. This payment is subject to the approval of shareholders in the AGM of the Company and if approved, would result in a net cash outflow of approximately ' 160.85 mn.
54 The Company evaluated all events or transactions that occurred after March 31, 2024 up through May 16, 2024, the date the standalone financial statements were authorised for issue by the Board of Directors. Based on this evaluation, the Company is not aware of any events or transactions that would require recognition or disclosure in the standalone financial statements.
55 The Board of Directors of the Company have approved these standalone financial statements of the Company in their meeting held on May 16, 2024.
for and on behalf of the Board of Directors of Sansera Engineering Limited
CIN: L34103KA1981PLC004542
S Sekhar Vasan F R Singhvi
Managing Director Joint Managing Director
DIN: 00361245 DIN: 00233146
B R Preetham Vikas Goel
Executive Director and Chief Financial Officer
Chief Executive Officer
DIN: 03499506 Rajesh Kumar Modi
Company Secretary
Place: Bengaluru Date: May 16, 2024
|