The Company has re-measured its long term employee benefits and the corresponding liabilities on the basis of report of an actuary and accordingly movement in OCI during the year is reported. Refer Note-27 for detailed disclosure.
The amount that can be distributed by the Company as dividends to its equity shareholders is determined considering the requirements of the Companies Act, 2013. Thus, the amounts reported above may not be distributable in full.
*The amounts outstanding for various loans as on 31st March, 2024 are as per the terms of the agreement. The amount represents actual amount payable to banks on reporting date excluding accounting effects of Effective interest Rate (EIR) as per Ind AS.
*The Company has re-measured its long-term employee benefits and the corresponding liabilities on the basis of report of an actuary and accordingly gratuity provision classified into current and non-current provisions. Refer Note-27 for detailed disclosure.
No interest has been paid by the Company to the enterprises covered under Micro, Small and Medium Enterprises Development Act, 2006 according to the terms agreed with the enterprises.
The above information regarding micro, small and medium enterprises have been determined to the extent such parties have been identified on the basis of information available with the Company.
# Bad Debts Written Off & Provisions
The Company has debts (Debtors Outstanding against supplies) which are irrevocable and therefore; written off in the books of accounts during the financial year amounting to Rs. 66.21 lacs in accordance with the resolution passed in the meeting of Board of Directors. Amount so debited to Profit and Loss Account was due for more than 3 years and examined as debts not recoverable. Apart from above, provision for doubtful debts of Rs. 54.51 lacs has also been made by debiting the Profit and Loss Account.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumption may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using the Projected Unit Credit Method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.
Fair value hierarchy
Level I - Quoted prices in active markets for identical assets or liabilities such as quoted price for an equity security on Security Exchanges.
Level II - 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).
Level III - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
B. Financial risk management
The Company's activities expose it to variety of financial risks such as credit risk, liquidity risk, and market risk. The Company's focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
(i) Credit risk
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses both the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks.
Credit risk on cash and cash equivalents is limited as the Company makes investment in deposits with banks only.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs. 4236.74 Lacs as at March 31, 2024 and Rs. 3213.14 Lacs as at March 31, 2023, being the total of the carrying amount of trade receivables and loans & advances to employees.
Financial assets that are neither past due nor impaired
None of the Company's cash equivalents, including time deposits with banks, are past due or impaired. Regarding trade receivables and other receivables, and other loans or receivables that are neither impaired nor past due, there were no indications as at March 31, 2024, that defaults in payment obligations will
occur.
In addition, exposure to credit risk is also in relation to financial guarantee contracts for which the company has created a liability for potential exposures.
The ageing of trade receivables as of Balance Sheet date is given below. The age analysis has been considered from the due date.
Trade Receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.
(ii) Liquidity risk
Liquidity risk arises from the Company's inability to meet its cash flow commitments on time. 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 asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
The Company's principal sources of liquidity are cash and cash equivalents and other bank balances. The Company has signed Rupee Loan Facility Agreement for variable rate borrowing facility amounting to Rs.1975.00 Lacs to meet the cash flow commitments.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted.
(iii) Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.
Interest rate risk includes risk that the future cash flows of floating interest bearing borrowings fluctuate because of fluctuation in the interest rates. The cash flows of the Company is sensitive to higher/lower interest expense from borrowing as a result of change in interest rates. A reasonable possible change of 50 basis points (bp) in interest rates at the reporting date would have impact by the amount shown in sensitivity analysis as below:
The functional currency of the Company is Indian Rupees. The Company do not use derivative financial instruments for trading, speculative or other purposes.
(a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the Statement of Profit and Loss and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency.
Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in U.S. dollar, against the respective functional currencies of Somi Conveyor Beltings Limited.
The Company, as per its risk management policy, generally uses natural hedge towards set off of financial liabilities by available financial assets. For it, the company operates an account in foreign currency (US$) and pool the respective realization amount and the same has been utilized towards financial liabilities as on date in order to reduce the exchange loss. Furthermore, any movement in the functional currencies of the various
operations of the Company against major foreign currencies may impact the Company's revenues from its international operations. Any weakening of the functional currency may impact the Company's cost of imports and cost of borrowings and consequently may increase the cost of financing the Company's capital expenditures.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.
The foreign exchange rate sensitivity is calculated for each currency by aggregation of the net foreign exchange rate exposure of a currency and a simultaneous parallel foreign exchange rates shift in the foreign exchange rates of each currency by 10%.
The following analysis is based on the gross exposure as of the relevant balance sheet dates, which could affect the Statement of Profit and Loss. There is no exposure to the Statement of Profit and Loss on account of translation of financial statements of consolidated foreign entities.
The following analysis is based on the gross exposure as of the relevant balance sheet dates, which could affect the Statement of Profit and Loss. There is no exposure to the Statement of Profit and Loss on account of translation of financial statements of consolidated foreign entities.
10% appreciation/depreciation of the respective foreign currencies with respect to functional currency of the Company would result in decrease/ increase in the Company's profit/(loss) before tax by approximately Rs. 9.10 Lacs for financial assets for the year ended March 31, 2024.
10% appreciation/depreciation of the respective foreign currencies with respect to functional currency of the Company would result in decrease/ increase in the Company's profit/(loss) before tax by approximately Rs. 8.97 Lacs and Rs.12.34 Lacs for financial assets and financial liabilities respectively for the year ended March 31, 2023
(b) Interest rate risk
Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. Any movement in the reference rates could have an impact on the Company's cash flows as well as costs.
The Company is subject to variable interest rates on some of its interest bearing liabilities. The Company's interest rate exposure is mainly related to debt obligations. The Company also uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like short term loans.
As at March 31, 2024 and 2023, financial liability of Rs. 1,520.40, Rs.1760.32 Lacs respectively, was subject to variable interest rates.
Increase/decrease of 100 basis points in interest rates at the balance sheet date would result in an impact (decrease/increase in case of profit/(loss) before tax of Rs. 15.20 Lacs and Rs. 17.60 Lacs on income for the year ended March 31, 2024 and 2023 respectively.
Company has filed MSME Form l for the half year ended 31st March, 2024 along with the reasons for delay in payments due.
31. SEGMENT INFORMATION
The Company is mainly engaged in manufacturing activities in India. All the activities of the Company resolved around this main business. The Board of Directors of the Company allocate the resources and assess the performance of the Company, thus are the Chief Operating Decision Maker (CODM). The CODM monitors the results of the business as a once, hence no separate segment needs to be disclosed.
32. CAPITAL MANAGEMENT
The Company's objectives when managing capital are to:
— safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
— maintain an optimal capital structure to reduce the cost of capital.
The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.
33. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company faces claims and assertions by various parties. The company assesses such claims and assertions and monitors the legal environment on an ongoing basis, with the assistance of external legal counsel, wherever necessary. The company records a liability for any claims where a potential loss is probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the company provides disclosure in the financial statements but does not record a liability in its accounts unless the loss becomes probable.
LITIGATIONS
The company is involved in legal proceedings, both as plantiff and as defendant. There are claims which the company does not believe to be of material nature, other than those described below.
A. Income Tax
(i) Company has deposited an amount of Rs. 19,50,000.00 as 20% of demand raised u/s 143(3) towards assessment of AY 2015-16 as per CBDT Circular and file an appeal to CIT (A) which is pending with same jurisdiction.
B. Custom Duty
(i) Company has applied for refund towards pre deposit of an amount of Rs. 2,78,879.00, which was being 7.5% of demand raised u/s 28(4) of Custom Act towards differencial Custom Duty upon deciding of the respective cases by the appellant authority and remand back to adjudicated authority, Refund order has been issued along with 6% interest and realization is awaited.
C. GST
Intimation of Liability under RGST / CGST Act 2017 for the period 2018-19 pertaining to RCM payable on Personal Guarantee to Bank given by the directors of company for loan to company has not been in existence in view to board clarification vide its recent circulation to non levy of RCM on Personal Guarantee of Directors hence no liability exist for the same.
D. Others
(i) M/s Nawa Engineers & Consultants Pvt Ltd is client of Somi Conveyor Beltings Ltd. who had issued cheque in favour of Somi Conveyor Beltings Limited on 16.10.2014 of Rs 200000.00 which was dishonoured and Company has sued under section 138 of Negotiable Instruments Act in the Court of the Hon'ble XVII ADDL Chief Metropolitan Magistrate at Hyderabad.
(ii) Case No. C.P. (IB) - 15/2020 filed by an Ex- Employee before National Company Law Tribunal (NCLT)-Jaipur on 6th January, 2020, has been decided in the favour of company and the same has been dismissed and disposed off as per NCLT order dated 22.02.2024. Hence no liability exits as on balance sheet date.
34. As at the balance sheet date, the Company has reviewed the carrying amount of its assets and found that there is no indication that those assets have suffered any impairment loss. Hence, no such impairment loss has been provided.
35. Other Notes:
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have granted any loan or advance in the nature of loan to promotors, KMP, Directors and related parties where it is repayable on demand or without specifying any terms of repayment.
(iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
(iv) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the company (Ultimate Beneficiaries).
(v) The company has not received any fund from any party(s) (Funding party) with the understanding that the company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on
behalf of the company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(vi) The company has not any 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, 13 1 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
(vii) The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come in to effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period when the Code become's effective.
(viii) The Company does not undertake any transactions with respect to crypto currency / assets.
(ix) Provisions of section 135 of the Companies Act, 2013 with respect to CSR are not applicable to the Company for the year ended 31st March, 2024.
36. Sundry Debtors, Creditors, Loans and Advances balances as shown in the balance sheet are subject to confirmation from the parties concerned and consequential adjustments, if any.
37. Previous year figures have been re-grouped, re-arranged and re-casted wherever it is considered necessary to make them comparable with those of current year.
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