(f) Provisions (other than for employee benefits)
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are recognised at the best estimate of the expenditure
required to settle the present obligation at the balance sheet date. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and the risks specific to the liability. The unwinding of the discount is recognised
as finance cost.
Expected future operating losses are not provided for.
(i) Warranties
Provision for warranties is recognised when the underlying products or services are sold. The provision is
based on technical evaluation, historical warranty data and a weighing of all possible outcomes by their
associated probabilities. The timing of outflows will vary as and when warranty claim will arise.
(ii) Onerous contracts
A contract is considered to be onerous when the expected economic benefits to be derived by the
Company from the contract are lower than the unavoidable cost of meeting its obligations under the
contract. The provision for an onerous contract is measured at the present value of the lower of the
expected cost of terminating the contract and the expected net cost of continuing with the contract.
(g) Contingent liabilities
A contingent liability exists when there is a possible but not probable obligation, or a present obligation
that may, but probably will not, require an outflow of resources, or a present obligation whose amount
cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the
possibility of outflow of resources is remote.
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of
an inflow of economic benefits to the entity. Contingent assets are recognized when the realisation of income
is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
A contingent asset is disclosed where an inflow of economic benefits is probable.
(h) Commitments
Commitments include the amount of purchase order / contracts (net of advances) issued to parties for
completion of assets. Provisions, contingent liabilities, contingent assets and commitments are reviewed at
each reporting date.
(i) Revenue
(a) Revenue from contract with customers
Sale of goods and rendering of services
Under Ind AS 115, the Company recognizes revenue when or as a performance obligation is satisfied by
transferring a promised good or service to a customer.
Further, revenue is recognized based on a 5-Step Methodology which is as follows:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligation in contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when or as the entity satisfies a performance obligation
The Company disaggregates revenue from contracts with customers by geography.
Use of significant judgements in revenue recognition:
i. The Company’s contracts with customers could include promises to transfer multiple products and
services to a customer. The Company assesses the products / services promised in a contract and
identifies distinct performance obligations in the contract. Identification of distinct performance obligation
involves judgement to determine the deliverables and the ability of the customer to benefit independently
from such deliverables.
ii. Judgement is also required to determine the transaction price for the contract. The transaction price
could be either a fixed amount of customer consideration or variable consideration with elements such as
volume discounts, service level credits, performance bonuses, price concessions and incentives. The
transaction price is also adjusted for the effects of the time value of money if the contract includes a
significant financing component. Any consideration payable to the customer is adjusted to the transaction
price, unless it is a payment for a distinct product or service from the customer. The estimated amount of
variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at
the end of each reporting period. The Company allocates the elements of variable considerations to all
the performance obligations of the contract unless there is observable evidence that they pertain to one
or more distinct performance obligations.
iii. The Company uses judgement to determine an appropriate standalone selling price for a performance
obligation. The Company allocates the transaction price to each performance obligation on the basis of
the relative standalone selling price of each distinct product or service promised in the contract.
iv. The Company exercises judgement in determining whether the performance obligation is satisfied at a
point in time or over a period of time. The Company considers indicators such as how customer
consumes benefits as services are rendered or who controls the asset as it is being created or existence
of enforceable right to payment for performance to date and alternate use of such product or service,
transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
Sale of products
Revenue from sale of products is recognized at the point in time when control of the asset is transferred to the
customer, generally on delivery of the products at an amount that reflect the consideration to which the
Company expects to be entitled in exchange for those goods or services. The Company has generally
concluded that it is the principal in its revenue arrangements, because it typically controls the goods or
services before transferring them to the customer.
Rendering of services
Consideration received for services not yet rendered and for which Company has an obligation to perform is
recognised as revenue received in advance and subsequently recognised as revenue in the Statement of
Profit and Loss over the period of the contract.
Revenue from royalty is recognized on accrual basis as per the terms of agreement entered into with the
respective parties.
Revenue from dealer support services is recognized on accrual basis as per the terms of agreement entered
into with the Dealers.
Contract Liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has
received consideration (or an amount of consideration is due) from the customer. If a customer pays
consideration before the Company transfers goods or services to the customer, a contract liability is
recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are
recognised as revenue when the Company performs under the contract.
(b) Other operating revenue - Export incentives
Export incentives are accounted for on an accrual basis.
(j) Recognition of interest income or expense
Interest income or expense is recognised using the effective interest method.
The ‘effective interest rate’ is the rate that exactly discounts the estimated future cash payments or receipts
through the expected life of the financial instrument to:
- The gross carrying amount of the financial asset; or
- The amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount
of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for
financial assets that have become credit-impaired subsequent to initial recognition, interest income is
calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no
longer credit-impaired, then the calculation of interest income reverts to the gross basis.
(k) Borrowing costs
Borrowing costs includes interest and other costs (including exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to the interest cost) incurred in
connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of
an asset which necessarily take a substantial period of time to get ready for their intended use are capitalised
as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which
they are incurred.
(l) Income-tax
Income tax comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the
extent that it relates to an item recognised directly in equity or in other comprehensive income.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and
any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax
reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty,
if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted
by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the
recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or
simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of the assets
and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
Deferred tax asset is recognised for the carryforward of unused tax losses and unused tax credits to the
extent that it is probable that future taxable profit will be available against which the unused tax losses and
unused tax credits can be utilised. Therefore, the Company recognises a deferred tax asset only to the extent
that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable
profit will be available against which such deferred tax asset can be realized.
Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date and are recognised /
reduced to the extent that it is probable / no longer probable respectively that the related tax benefits will be
realized.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized
or the liability is settled, based on the laws that have been enacted or substantively enacted by the
reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which
the Company expects, at the reporting date, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and deferred tax liabilities are offset only if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to income taxes levied by the same tax authorities.
(m) Leases
The Company's lease asset classes primarily consist of leases for Buildings and Plant and equipment. The
Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the
Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has
substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the
Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use (ROU) asset and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of
12 months or less (short-term leases) and low value leases. For these short-term and low-value leases, the
Company recognizes the lease payments as an operating expense on a straight-line basis over the term of
the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease
term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be
exercised.
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the commencement date. These are subsequently
measured at cost less accumulated depreciation and impairment losses. ROU assets are depreciated from
the commencement date on a straight-line basis over the shorter of the lease term and useful life of the
underlying asset.
The lease liability is initially measured at amortized cost at the present value of the future lease payments.
The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates of the Company. Lease liabilities are remeasured with a corresponding
adjustment to the related ROU asset if the Company changes its assessment of whether it will exercise an
extension or a termination option.
Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
Judgements and estimates:-
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted
with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company
makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether
it is reasonably certain that any options to extend or terminate the contract will be exercised. In assessing
whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an
option to terminate a lease, it considers all relevant facts and circumstances that create an economic
incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate
the lease. The Company revises the lease term if there is a change in the non-cancellable period of a lease.
(n) Financial Instruments
i) Recognition and initial measurement
Trade receivables are initially recognised at their transaction price. All other financial assets and financial
liabilities are initially recognised when the Company becomes a party to the contractual provisions of the
instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value
through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue.
ii) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at:
a. Amortised cost; or
b. Fair value through profit and loss (‘FVTPL’)
Financial assets are not reclassified subsequent to their initial recognition, except if the Company
changes its business model for managing financial assets.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not
designated as at FVTPL:
- the asset is held within a business model whose objective is to hold assets to collect contractual
cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
All financial assets which are not classified as measured at amortised cost or FVOCI as described above
are measured at FVTPL. This includes all derivative financial assets, unless they are designated as
hedging instruments, for which hedge accounting is applied. On initial recognition, the Company may
irrevocably designate a financial asset that otherwise meets the requirements to be measured at
amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
Financial assets: Assessment whether contractual cash flows are solely payments of principal and
interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial
recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic
lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the
Company considers the contractual terms of the instrument. This includes assessing whether the
financial asset contains a contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making this assessment, the Company considers:
- contingent events that would change the amount or timing of cash flows;
- terms that may adjust the contractual coupon rate, including variable interest rate features;
- prepayment and extension features; and
- terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features).
Financial assets: Subsequent measurement and gains and losses
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified
as at FVTPL, if it is classified as held for trading, or it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including
any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently
measured at amortised cost using the effective interest method. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any gain or loss on de-recognition is also recognised
in profit or loss.
iii) De-recognition
Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or if it transfers the rights to receive the contractual cash flows in a transaction in
which substantially all of the risks and rewards of ownership of the financial asset are transferred or in
which the Company neither transfers nor retains substantially all of the risks and rewards of ownership
and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but
retains either all or substantially all of the risks and rewards of the transferred assets, the transferred
assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or
cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under
the modified terms are substantially different. In this case, a new financial liability based on the modified
terms is recognised at fair value. The difference between the carrying amount of the financial liability
extinguished and the new financial liability with modified terms is recognised in profit or loss.
iv) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet
when, and only when, the Company currently has a legally enforceable right to set off the amounts and it
intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(o) Impairment
i) Impairment of financial assets
The Company recognises loss allowances for expected credit loss on financial assets measured at amortised
cost. At each reporting date, the Company assesses whether financial assets carried at amortised cost is
credit-impaired. A financial asset is ‘credit-impaired' when one or more events that have detrimental impact on
the estimated future cash flows of the financial assets have occurred.
The Company measures loss allowances at an amount equal to lifetime expected credit losses for a financial
instrument if the credit risk on that financial instrument has increased significantly since initial recognition. If,
on the other hand, the credit risk on the financial instrument has not increased significantly since initial
recognition, the Group measures the loss allowance for that financial instrument at an amount equal to
12 month ECL.
With respect to trade receivables, the loss allowances are always measured at an amount equal to lifetime
expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all
possible default events over the expected life of a financial instrument. The Company follows ‘simplified
approach' for recognition of impairment loss allowance for trade receivables. The application of simplified
approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss
allowance based on lifetime expected credit loss at each reporting date, right from its initial recognition.
12-month expected credit losses are the portion of expected credit losses that result from default events that
are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is
less than 12 months).
In all cases, the maximum period considered when estimating expected credit losses is the maximum
contractual period over which the Company is exposed to credit risk.
To assess whether there is a significant increase in credit risk, the Company compares the risk of a default
occurring on the asset as at the reporting date with the risk of default as the date of initial recognition.
The Company considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis, based on the
Company's historical experience and informed credit assessment and including forward looking information.
Measurement of expected credit losses
Expected credit losses are a probability- weighted estimate of credit losses. Credit losses are measured as the
present value of all cash shortfalls (i.e. difference between the cash flow due to the Company in accordance
with the contract and the cash flow that the Company expects to receive).
Presentation of allowance for expected credit losses in the balance sheet
Loss allowance for financial assets measured at amortised cost is deducted from the gross carrying amount
of the assets.
Write-off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is
no realistic prospect of recovery. This is generally the case when the Company determines that the debtors do
not have assets or sources of income that could generate sufficient cash flows to repay the amount subject to
the write-off. However, financial assets that are written off could still be subject to enforcement activities in
order to comply with the Company's procedure for recovery of amounts due.
ii) Impairment of non-financial assets
The Company's non-financial assets, other than inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then
the asset's recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash¬
generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that
are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less
costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the CGU (or the asset).
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable
amount. Impairment losses are recognised in profit or loss. Impairment loss recognised in respect of a CGU is
allocated to reduce the carrying amounts of the assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of assets for which impairment loss has been recognised in prior periods, the
Company reviews at each reporting date whether there is any indication that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the
recoverable amount. Such a reversal is made only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(p) Operating segments
An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Company's other components, and for which discrete financial information is available. All operating segments'
operating results are reviewed regularly by the Company's Chief Operating Decision Maker (CODM) to make
decisions about resources to be allocated to the segments and assess their performance.
(q) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash in hand,
demand deposits held with banks, other short-term highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
(r) Statement of Cash flows
Cash flows are reported using the indirect method, whereby profit / (loss) for the period 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 based on the available information.
(s) Earnings per share
Basic earnings per share are calculated by dividing the net profit / (loss) for the year attributable to equity
shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per
share is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding
during the year end, except where the results would be anti-dilutive.
(t) Research and development
Expenditure on research is recognised in the Statement of Profit and Loss under the respective heads of account in
the period in which it is incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production
of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the
product or process is technically and commercially feasible and the Company has sufficient resources to complete
the development and right to use the asset. The expenditure capitalised includes the cost of materials, direct labour
and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use.
Other development expenditure is recognised in the Statement of Profit and Loss as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses.
Property, plant and equipment used for research and development are depreciated in accordance with the
Company's policy as stated above.
(u) Recent accounting pronouncement
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under
Companies (Indian Accounting Standards) Rules as issued from time to time. On 7 May 2025, MCA amended the
Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards)
Amendment Rules, 2025, applicable from 1 April 2025, as below:
Ind AS 21 - The Effects of Changes in Foreign Exchange Rates - This amendment requires entities to assess
currency exchangeability, estimate exchange rates when currencies are not readily exchangeable, and provide
additional disclosures in such cases. The effective date for adoption of this amendment is annual periods beginning
on or after 1 April 2025. The Company has evaluated the amendment and does not expect this amendment to have
any significant impact in its financial statements.
(ii) outstanding term loan - 2 of Rs. 45.70 lakhs (previous year Rs. 594.06 lakhs), carrying variable interest rate of 1 month MCLR 0.15% /
3 months MCLR 0.25%, repayable in monthly instalments commencing from 5 August 2022 and ending on 5 April 2025. The lender has
exclusive charge on movable fixed assets (Plant and Machinery) of the project.
(iii) outstanding term loan - 3 of Rs. 3,531 lakhs (previous year Rs. 4,781 lakhs), carrying variable interest rate of 3 months T bill rate 1.72% for
disbursements upto 30 April 2023 and 3 months T bill rate 1.97% for disbursements from 1 May 2023 onwards, repayable in quarterly
instalments commencing from 1 April 2024 and ending on 1 January 2028. The lender has first charge on movable fixed assets of
the Company, giving a minimum cover of 1.25 times of the loan amount (excluding those movable fixed assets which are exclusively charged
to other lenders).
(iv) outstanding term loan - 4 of Rs. 1,334 lakhs (previous year Nil), carrying variable interest rate of 1 year MCLR 0.10%, repayable in quarterly
instalments commencing from 31 March 2025 and ending on 31 March 2027. The lender has exclusive charge on the fixed assets of the
Company which are created through this term loan specifically. The lender also has negative lien on fixed assets of the Company (excluding
fixed assets exclusively charged for our loan).
(v) outstanding term loan - 5 of Rs. 3,200 lakhs (previous year Nil), carrying variable interest rate of based on Repo rate (presently 8.25%
to 8.50%), repayable in quarterly instalments commencing from 30 September 2025 and ending on 30 June 2028. The lender has first
exclusive charge on the fixed assets of the Company being funded from the term loan of Axis bank.The lender also has negative lien on
fixed assets of the Company (excluding fixed assets exclusively charged for this loan).
(vi) outstanding working capital term loan of Rs. 1,000 lakhs (previous year Nil), carrying variable interest rate of 1 month MCLR without spread
presently 8.35%, repayable in ten quarterly instalments commencing from 20 August 2025 and ending on 20 November 2027. The lender has
equitable mortgage (first and exclusive) of Industrial Unit (Land and Building) located at village Asron, Shahid Bhagat Singh Nagar, Punjab.
(vii) outstanding term loans for vehicles Rs. 158.54 lakhs (previous year Rs. 195.47 lakhs), carrying fixed interest rate ranging from 8.75%
to 9.50% per annum (previous year 8.75% to 9.50% per annum), repayable in monthly instalments commencing from 10 April 2023 and
ending on 5 March 2029. The lender has exclusive charge on vehicle financed by such loan.
(viii) outstanding term loans for vehicles Rs. 104.31 lakhs (previous year Nil), carrying floating interest rate (Repo rate Spread) presently ranging
from 8.80% to 8.85%, repayable in monthly instalments commencing from 15 August 2024 and ending on 15 March 2030. The lender has
exclusive charge on vehicle financed by such loan.
# includes outstanding term loan amounting to Nil (previous year Rs. 193.74 lakhs), carrying variable interest rate of 1 year MCLR 0.15%
repayable in quarterly instalments commencing from 5 October 2021 and ending on 31 March 2025. The lender has a negative lien on fixed
assets of the Company.
35 The Company has established a comprehensive system for maintenance of information and documents as
required by the transfer pricing regulation under sections 92-92F of the Income-Tax Act, 1961. Since the law
requires existence of such information and documentation to be contemporaneous in nature, the Company
continuously updates its documentation for the international transactions entered into with the associated
enterprises during the financial year and expects such records to be in existence latest by the due date as required
under law. The management is of the opinion that its international transactions are at arm’s length so that the
aforesaid legislation will not have any impact on the financial statements, particularly on the amount of income tax
expense and that of provision for taxation.
36 Related parties
A. Related party and nature of related party relationship where control exists:
Controlling Enterprise: Sumitomo Corporation, Japan
B. Other related parties with whom transaction have taken place during the year:
Key management personnel
Mr. Junya Yamanishi - Managing Director & CEO (upto 16 April 2025)
Mr. Yasushi Nishikawa - Managing Director & CEO (w.e.f. 17 April 2025)
Mr. Rakesh Bhalla - Chief Financial Officer
Mr. Parvesh Madan - Company Secretary
Mr. S.K. Tuteja - Chairman, Non Executive and Independent Director (upto 21 September 2024)
Mr. Chandra Shekhar Verma - Chairman, Non Executive and Independent Director *
Mr. Sudhir Nayar - Non Executive and Independent Director (upto 21 September 2024)
Mr. Sanjeev Mehan - Non Executive and Independent Director (w.e.f. 22 September 2024)
Mrs. Atima Khanna - Non Executive and Independent Director
* appointed as Chairman of the Board of Directors w.e.f. 22 September 2024.
Shareholders holding 10% or more share in the Company *
- Isuzu Motors Limited, Japan
- Navodya Enterprises (Acquirer) along with Person Acting in Concert (PAC) - SPV T raders, Anandam Enterprises,
Sapna Gupta and Sachin Bansal.
* As per amended regulation 2(1)(zb) of Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015, vide notification dated 9 November 2021, applicable from 1 April 2023, related
party includes any person or any entity, holding equity shares of ten per cent or more in the listed entity, either
directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, at any time during
the immediately preceding financial year.
(ii) Defined benefit plan - Gratuity
The Company operates a gratuity plan wherein every employee is entitled to the benefit equivalent to 15 days
salary (includes dearness allowance) last drawn for each completed year of service. The same is payable on
termination of service, or retirement, or death whichever is earlier. The benefits vest after five years of
continuous service. Gratuity benefits valued are in accordance with the payment of Gratuity Act, 1972.
The above defined benefit plan exposes the Company to following risks:
Interest rate risk:
The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall,
the defined benefit obligation will tend to increase.
Salary inflation risk:
Higher than expected increases in salary will increase the defined benefit obligation.
Demographic risk:
This is the risk of variability of results due to unsystematic nature of decrements that include mortality,
withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not
straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is
important not to overstate withdrawals because in the financial analysis the retirement benefit of a short
career employee typically costs less per year as compared to a long service employee.
The Company actively monitors how the duration and the expected yield of the investments are matching the
expected cash outflows arising from the employee benefit obligations. The Company has not changed the
processes used to manage its risks from previous periods. The funds are managed by specialised team of
Life Insurance Corporation of India.
a) Funding
This is a funded benefit plan for qualifying employees. The Company makes contributions to Life Insurance
Corporation of India ("LIC of India"). The assets managed by the fund manager are highly liquid in nature and
the Company does not expect any significant liquidity risks.
The Company expects to pay Nil (previous year Rs. 100 lakhs) in contribution to its defined benefit plans in
2025-26.
38 Financial Instruments - Risk Management and Fair Values
(A) Financial risk management
During the course of its business, the Company is exposed to certain financial risks that could have significant
influence on the Company’s business and operational / financial performance. These include market risk
(including foreign currency risk, interest rate risk), credit risk and liquidity risk.
The Board of Directors reviews and approves risk management framework and policies for managing these
risks and has constituted Risk Management Committee to monitor mitigating actions taken by Management,
minimize potential adverse effects and achieve greater predictability to earnings.
The Company uses derivative financial instruments to hedge risk exposures in accordance with the
Company’s policies as approved by the Board of Directors.
The Company has exposure to the following risk arising from financial instruments:
- Market risk (refer (I))
- Credit risk (refer (II)) and
- Liquidity risk (refer (III))
(I) Market risk
Market risk is the risk of any loss in future earnings, realisable fair values or future cash flows that may result
from fluctuations in the pricing of a financial instrument. The Company’s activities expose it primarily to the
financial risks of changes in foreign currency exchange rates and interest rates as future market changes
cannot be normally predicted with reasonable accuracy.
i. Foreign currency risk management:
The Company is exposed to foreign currency risk to the extent that there is a mismatch between the
currencies in which sales and purchases are denominated and functional currency of the Company, i.e.
Indian Rupee (Rs.). The currencies in which these transactions are primarily denominated are US Dollar,
Euro, Pound (GBP) and Japanese Yen (Yen). The Company uses currency swap contracts to hedge its
currency risk as per the approved policy of the Company. The Company's policy is to ensure that its net
exposure is kept to an acceptable level which will not have material effect on the profits of the Company if
there is any fluctuation in the currency rates.
The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary
liabilities at the end of the reporting period, as reported to management, are as follows:
ii. Interest rate risk management :
The Company is exposed to interest rate risk pertaining to funds borrowed at both fixed and floating interest rates.
The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate
borrowings. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite,
ensuring the most cost-effective hedging strategies.
As at year end, financial liabilities (borrowings) of Rs. 32,019.43 lakhs (previous year Rs. 41,370.08 lakhs) were
subject to variable interest rates.
- Sensitivity analysis:
The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the
reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible change in interest
rates.
A reasonably possible change of 1 % in interest rates at the reporting date would have increased / decreased the
profit before tax and equity by the amounts shown below. This analysis assumes that all other variables remain
constant.
The Company's certain long term loans taken from bank carries variable rate of interest, hence, it is subject to
interest rate risk since carrying amount or the future cash flows will fluctuate because of a change in market interest
rates.
(II) Credit risk :
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Company. Credit risk encompasses both the direct risk of default and the risk of deterioration of creditworthiness
as well as concentration risks. None of the financial instruments of the Company result in material concentrations of
credit risks.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets as at
31 March 2025 and 31 March 2024.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings.
Other financial assets measured at amortised cost: Other financial assets measured at amortized cost includes
security deposits and others. Credit risk related to these other financial assets is managed by monitoring the
recoverability of such amounts continuously and there were no indications that defaults in payment obligations
would occur.
(MI) Liquidity risk :
Liquidity risk refers to the risk that 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 working capital borrowing limits of Rs. 80,783.56 lakhs from various banks to meet it's
liquidity needs, out of which Rs. 22,504.43 lakhs has been utilised as at 31 March 2025.
The table below summarises the maturity profile remaining contractual maturity period at the balance sheet date for
its non derivative financial liabilities based on the undiscounted cash flows.
The Company determines the fair value of its financial instruments on the basis of the following hierarchy:
Level 1: The fair value of financial instruments that are quoted in active markets are determined on the basis of quoted
price for identical assets or liabilities.
Level 2: The fair value of financial instruments that are not traded in an active market are determined using valuation
techniques based on observable market data.
Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs
that are not based on observable market data (unobservable inputs).
There are no transfers between Level 1, Level 2 and Level 3 during the year ended 31 March 2025 and 31 March 2024.
40. The Ministry of Corporate Affairs (MCA) has prescribed a requirement for companies under the proviso to Rule 3(1)
of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules 2021 requiring
companies which uses accounting software for maintaining its books of account, shall use only such accounting
software which has a feature of recording audit trail of each and every transaction, creating an edit log of each
change made in the books of account along with the date when such changes were made and ensuring that the
audit trail cannot be disabled.
The Company uses certain accounting software for maintaining accounting records, employee reimbursement
records and dealer expenses/ claims records which have a feature of recording audit trail (edit log) facility and the
same have been operated throughout the year for all relevant transactions recorded in the software. Furthermore,
the audit trail has been preserved by the Company as per the statutory requirements for record retention from the
date the audit trail was enabled for the accounting software.
41 (a) Capital management
The Company manages its capital to ensure that the Company will be able to continue as a going concern, while
maximising the return to stakeholders through efficient allocation of capital towards expansion of business,
optimisation of working capital requirements and deployment of surplus funds. The Company uses the operational
cash flows and equity to meet its working capital requirements. The funding requirements are met through equity,
internal accruals and a combination of both long-term and short-term borrowings. The Company is not subject to
any externally imposed capital requirements.
Management of the Company reviews the capital structure of the Company on a regular basis and uses debt equity
ratio to monitor the same. As part of this review, management of the Company considers risks associated with the
movement in the working capital and capex needs.
The following table summarises the capital structure of the Company:
The Company is required to comply with certain covenants under the agreement executed for some of its long term
borrowings. During the financial year ended 31 March 2024, for borrowings aggregating to Rs. 594.06 lakhs, one of
the financial covenants was not met by the Company and the lenders had the option to recall the said borrowings.
The lender waived off the requirement of meeting the financial covenants for the year ended 31 March 2024 on
borrowing amounting to Rs. 594.06 lakhs, hence, maturities of said loan due after 12 months of the reporting date
had been classified as non-current liability as at 31 March 2024.
43 Final Dividend
The Board of Directors at their meeting held on 30 May 2025, has considered and recommended a final dividend of
180% (Rs.18 per equity share of Rs. 10 each fully paid up) amounting to Rs. 2,604.90 lakhs for the year ended 31
March 2025, subject to approval by the shareholders at the ensuing Annual General Meeting, and it has not been
recognised as liability in these financial statements.
During the year ended 31 March 2025, the Company has paid a final dividend of 160% (Rs. 16 per equity share of
Rs. 10 each fully paid up) amounting to Rs. 2,315.46 lakhs in respect of previous year ended 31 March 2024, which
was considered and recommended by the Board of Directors at their meeting held on 23 May 2024 and was
subsequently approved by the shareholders at the Annual General Meeting, held on 20 September 2024.
44 Subsequent to the year ended 31 March 2025, Sumitomo Corporation, Japan (Promoter shareholder) and Isuzu
Motors Limited, Japan (Public shareholder) have entered into Share Purchase Agreements with Mahindra &
Mahindra Limited ("Acquirer") on 26 April 2025, whereby they have agreed to sell 63,62,306 equity shares
(representing 43.96% of the equity share capital of the Company) and 21,70,747 equity shares (representing
15.00% of the equity share capital of the Company) respectively, of face value of Rs.10/- each, at a price of Rs. 650/-
pershare.
Further, on 5 May 2025, the Acquirer has published a Detailed Public Statement to the public shareholders
announcing the 'Open Offer' for acquisition of upto 37,62,628 fully paid equity shares of face value of Rs.10/- each,
representing 26% of the equity share capital of the Company, at a price of Rs. 1,554.60/- per share.
The aforesaid acquisition and the 'Open Offer' are subject to satisfaction of customary conditions precedent
including, but not limited to, receipt of approval from the Competition Commission of India (“CCI”).
45 The Company has received anonymous complaint alleging that some employees may have financial dealings with
specific dealers. To investigate the matter, the Company, on the directions of Audit Committee, has appointed an
external expert who has submitted their report to the Audit Committee and the Audit Committee has appointed a
sub-committee of two independent directors to look into all aspects and conclude the matter. Based on expert’s
findings, there is no evidence of financial impropriety or fraud against the Company. Management is confident that
this matter is not expected to have any material impact on the accompanying financial statements and
consequently, no adjustment is required to be made to the financial statements for the quarter and year ended 31
March 2025.
48 (a) The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any
other sources or kind of funds) to any other persons or entities, including foreign entities (Intermediaries) with
the understanding (whether recorded in writing or otherwise) that the Intermediary shall (i) 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 (ii) provide any guarantee, security or the like to or on behalf of the
Ultimate Beneficiaries.
(b) The Company has not received any funds from any persons or entities, including foreign entities (Funding
Party) with the understanding (whether recorded in writing or otherwise) that the company shall (i) 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 (ii) provide any guarantee, security or the like on behalf of the
Ultimate Beneficiaries.
(c) There is no income surrendered or disclosed as income during the current or previous year in the tax
assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
(d) The Company has not traded or invested in crypto currency or virtual currency during the current or previous
year.
(e) The creditors covered by Micro, Small and Medium Enterprises Development Act, 2006 ("the MSMED
Act, 2006") have been identified on the basis of information available with the Company.
(f) The Company has no such layers as prescribed under clause (87) of section 2 of the Act read with Companies
(Restriction on number of Layers) Rules, 2017. Hence, the said clause is not applicable to the Company.
(g) The Company has not been declared wilful defaulter by any bank or financial Institution or other lender.
(h) The Company did not have any transactions with companies struck off under Section 248 of the Companies
Act, 2013 or Section 560 of Companies Act, 1956 during the year.
(i) No charges or satisfaction are yet to be registered with ROC beyond the statutory period.
(j) No proceeding have been initiated on or is pending against the Company for holding benami property under
the Benami Transactions Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
As per our report of even date attached For and on behalf of the Board of Directors of SML Isuzu Limited
For Walker Chandiok & Co LLP
Chartered Accountants Rakesh Bhalla Chandra Shekhar Verma
ICAI Firm registration number: 001076N/N500013 Chlef Financial Officer Chaii-man
FCMA: 09442 DIN: 00121756
Sandeep Mehta Parvesh Madan Yasushi Nishikawa
Partner Company Secretary Managing Director & CEO
Membership Number: 099410 ACS: 31266 DIN: 11027072
Place: Chandigarh Place: New Delhi
Date: 30 May 2025 Date: 30 May 2025
|